1. RULES-BASED TRADE: THE BASIS FOR STRONG AND SUSTAINABLE TRADE TIES AND THE BEST ANTIDOTE TO PROTECTIONISM University of International Business and Economics Beijing, China 9 December 2009 Timothy M. Reif General Counsel Office of the U.S. Trade Representative Executive Office of the President

2. I. Introduction Office of General Counsel, Office of U.S. Trade Representative  33 Attorneys  Experienced  Advice on Negotiating of New Trade Agreements  Enforce Existing Trade Agreements

3. Office of General Counsel, Office of U.S. Trade Representative Reif as example  1985 graduate of law school (Columbia Law School in New York City)  Practiced international trade law since 1987 (22 years)  Experience includes:  USTR staff attorney  U.S. House of Representatives - Committee  U.S. International Trade Commission  Private law firms  17 years teaching at Princeton and Georgetown Universities, mostly on dispute settlement  Written many articles about international trade subjects, especially about dispute settlement  Took office February 2009. Focus on evolution of dispute settlement system, role of system in advancing US-China trade relationship

4. II. Summary of Presentation  Sustainability of increased global economic integration depends on effective functioning of the international trading system  Effective functioning of international trading system in turn depends on rule of law  Effective functioning of rule of law increasingly critical to commercial development of societies internally (China, US), as well as externally (WTO, bilateral trade agreements)  Effective functioning of rule of law depends on 1)Consistency, 2) Adherence to written texts - end juridical adventurism 3) Effective transparency in development and application of laws and measures

5.  In sum, rule of law is the glue that holds the ever more integrated global economy together  WTO system of rules calls all WTO Members to meet agreed standards, as enumerated in rules. No more and no less  Goal of this brief presentation is to illuminate how that works

6. III. Design of the WTO Rules-Based Trading System A.4 Key Goals of System Preamble to GATT states: “Recognizing that their relations in the field of trade and economic endeavour should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, developing the full use of the resources of the world and expanding the production and exchange of goods.” “Being desirous of contributing to these objectives by entering into reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international commerce.”

7.  4 Key Goals of System 1)Raising Standards of Living 2)Ensuring Full Employment...Large and Steadily Growing Volume of Real Income and Effective Demand 3)Developing Full Use of Resources 4)Expanding Production and Exchange of Goods  These goals are also reiterated in the 1995 Marrakesh Agreement.  Marrakesh Agreement adds a 5 th goal: sustainable development 5) “while allowing for the optimal use of the world's resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development,”  Not “Zero-Sum”: all can gain - one party’s gain does not have to come at expense of another party IF rules are applied and followed

8. B. Means of Achieving 4 Goals — GATT/WTO Rules 1.History  GATT established 1947, 23 Contracting Parties  WTO established 1995, 100+ Members  WTO in 2010, 150+ Members 2. Bind and Reduce tariffs and quotas under structure of WTO rules 3. 4 Key Types of Rules (A) Nondiscrimination (1) Nondiscrimination among countries — “Most Favored Nation” (“MFN”), GATT Article I, GATS Article II (2) Nondiscrimination between domestic and imported products and services “National Treatment” (“NT”), GATT Article III, GATS Article XVII

9. (B)Make trade related regulations more transparent  GATT Article X, GATS Articles III & VI  GATT dispute settlement decision: Italian Tractors (1958)  GATT/WTO negotiations: Uruguay Round Agriculture tariffication  SPS/TBT Agreements: notice and comment rulemaking, inquiry points Logic:  Transparent barriers are harder to sustain  Transparency and due process in development and application of laws and measures strengthens rules of law, reduces likelihood of disputes

10. (c) Fair Competition and Fair Trade  Ensuring fair trade — fair rules of competition — among countries with different economic policies  Trade Remedies key: antidumping, countervailing (anti-subsidy), safeguards  GATT Article VI fundamental aspect of GATT rights and obligations as established in 1947  Article VI “condemns” injurious dumping  Availability of trade remedies can permit a Member to undertake more trade liberalizing commitments since can explain that there is recourse in the case of injury  Legitimate application of trade remedies enables a rules-based trading system to function  Misuse of remedies does not contribute to, detracts from, functioning of system, undermines credibility of system, creates danger of “protectionism”

11. (c) Fair Competition and Fair Trade  Protection of Intellectual Property  TRIPs  GATT and GATS - distribution of articles (d) Addressing Non-Tariff Barriers (NTBs)  Next Frontier  Addressing NTBs has two major benefits  Opens markets  Reduces Export Platforms

12. IV. Operation of the Rules Based System  Vigilance: proactively identifying problems and potential problems to avoid them or allow early resolution  Note constructive role that this element plays in US-China trade relationship  Hard Dialogue: proactively resolving problems before they fester into disputes  Note constructive role that this element plays in US-China trade relationship  Dispute Settlement: formal invocation of rules to address disputes  Note constructive role that this element plays in US-China trade relationship