Tag Archive | "international trade"

The Hidden Cost of Shrimp: Forced Labor in Thailand’s Fishing Industry

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A Thai fishing boat along Koh Samet, an island in the country’s eastern seaboard. Source: Mongabay, Lies, Deceit And Abduction Staff Thailand’s Fishing Industry. Photographer: Philippe Gabriel.

Imagine a pirate boat, surrounded by miles of unending water. Exhausted, scared people trapped aboard that floating prison, forced to work up to twenty-four hours nonstop for little or often no pay. They are living in inhumane conditions only on rice, parts of fish that no one else would touch, and unclean, unhealthy water. They are held in a cages, regularly beaten, forced to take methamphetamines to keep them working long hours, and sometimes killed for working not fast enough or for trying to escape. These execution-style killings are done in a variety of horrifying ways including electrocuting or tying the slave “by his limbs to the bows of four vessels, so that the ocean waves [will] tear the worker’s body apart.” Having no glimpse of hope to be ever free, they are desperate because even risky escapes are rarely successful: corrupt law enforcement officials often return fleeing slaves back to the ships for a fee. Imagine the dark and chilling refrigeration area on this pirate ship where caught fish are stored along with the corpses of killed slaves. Now imagine a shrimp farm in Thailand, where the farmers raise shrimp feeding them slave-caught fish that pirate ship supplied. Once the shrimp grow, they are exported to food manufacturers and retailers around the world, including the United States’ major food chain distributors such as Santa Monica Seafood, Stavis Seafoods, Thai Union and end up in supermarkets such as Costco, Wal-Mart, Kroger, Safeway, and Albertsons. Did you buy shrimp lately? The price for that “plate of seafood” on your table costs more than the dollar value you paid for it. The price is horror, the desperation of forced laborers, the tears of their mothers and children. As Hlaing Min, a runaway slave, one of a few who have successfully fled from a pirate boat, expressed: when Americans are eating seafood, “they should remember” the slaves, the slaves whose bones could easily form a mountain – “an island, it’s that many” – of bones of forced laborers that are under the sea.

It is not a fictional horror story. It is a reality, the reality of modern-form slavery in Thailand. Thailand, one of the world’s major seafood exporters and a key seafood supplier of United States, is remarkable in its forced labor practices. Human rights abuses in the Thai fishing sector are not a new phenomenon; deeply embedded in a commercial global supply chain, these abuses did not receive required attention up until recently. Unsurprisingly, Thailand is the only country in the world that voted against a U.N. international treaty intended to stop forced labor. Thailand’s current fishery laws, including the Fisheries Act, B.E. 2490 (1947); the Act Governing the Right to Fish in Thai Waters, B.E. 2482 (1939); and the Thai Vessel Act, B.E. 2481 (1938) are all woefully outdated.

Despite the Thai government’s numerous assurances to the international community to clean up its fishing industry from human rights abuses and its boosted legislative efforts in regards to protection of workers employed within the fishing industry (including Thai Anti-Trafficking in Persons Act, B.E. 2551 (2008); Labor Protection Act, B.E. 2541 (1998); the Recruitment and Job-Seekers Protection Act, B.E. 2528 (1985); the establishment of more strict labor regulations on fishing vessels; the requirement of national registry for illegal migrant workers; and the establishment of shelter facilities for victims of human trafficking), uninterrupted exploitation of forced laborers is still present in the fishing sector. “The reality is [that] the Thai government’s high-sounding rhetoric to stop human trafficking and clean up the fishing fleets still largely stops at the water’s edge,” Phil Robertson, deputy director of Human Rights Watch’s Asia division explained.

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Former slaves on Thai-run ships wait processing after being rescued. Source: Mongabay. Photo courtesy of the Labour Rights Promotion Network.

Corruption that remains among government and law enforcement officials creates an environment of impunity, especially around human rights abuses of migrant laborers, discouraging the rare surviving victims from pursuing charges against their abusers. Due to virtually inexistent legal protection for undocumented workers and fear of arrest or deportation, most migrant fishers choose to be abused rather than seek out protection from the Thai authorities. Making human rights abuse even worse, there is a history of political and cultural conflict between Thailand and its neighboring countries and, as a result, people in Thailand have little or no concern for the lives of migrants; some of them even “see the abuse as justified.” The exploitation of laborers in the Thailand fishing industry already is “one of the worst examples of human rights abuse in the world today.” Yet the International Labor Organization stressed in its 2015 Report that countless cases of human trafficking and forced labor that were already uncovered are only “the tip of the iceberg in terms of the real prevalence of such abuses” in Thailand.

Abusive practices of overfishing have ravaged the marine ecosystems of Thailand, depleting fish stocks, and pushing fishing boats to move farther offshore, traveling as far as Eastern Indonesia and East Africa in search of a profitable fish catch. They often stay at sea for months or even years at a time. Not many Thai residents want to take these low-paid, dangerous jobs as fishermen; legal labor migration is limited through Thailand’s government policies, and it is not even economically viable for fishing companies to use a paid workforce. Yet Thailand seafood exports generate near $7 billion in annual earnings and to meet this demand a network of human traffickers and brokers has emerged. These brokers regularly recruit men and sometimes even children from poor neighboring countries, coercing, tricking and often drugging and kidnapping people to work in the fishing-related industry. When forced laborers become unable to work, die, or escape from sea slavery, the brokers can easily replace them with new recruits. Each slave, who is bought and sold like an animal, costs around $1,000, in some cases even less than $400 and is often subjected to forms of debt bondage, told to work off the “debt.”

As the U.S. State Department noted in its annual Trafficking in Persons Report (TIP), there are approximately three to four million migrant laborers in Thailand, most of them from Burma, Cambodia, Laos, Vietnam, India, China, and Uzbekistan. According to the Environmental Justice Foundation, more than ninety percent of people working in Thai fishing industry are migrant workers. Yet the total population of fishermen is unknown because most migrants do not go through a registration system. In its 2014 report, the U.S. Bureau of International Labor Affairs has reported that shrimp in Thailand is produced by both child and forced labor. TIP puts Thailand at Tier 3, the lowest level of its report, meaning that Thailand does not comply with the Trafficking Victims Protection Act’s minimum standards and is not making substantial efforts to comply.

Even though U.S. companies have become increasingly aware of slavery and human trafficking in the Thailand supply chain, as of 2015, United States shrimp demand has increased its production in Thailand by twenty percent from the last year, expecting to import at least 250,000 metric tons of shrimp. Though the United States has a large domestic shrimp industry in the Gulf of Mexico, U.S. shrimp are more expensive than the shrimp from Thailand. Thus, driven by the goal of keeping their prices for shrimp low and so to obtain more profits, U.S. retailers import shrimp. In fact, ninety four percent of the shrimp consumed in U.S. is imported farmed shrimp.

Some advocates of ending human rights abuses suggest that retailers should simply boycott suppliers who engage in slavery practices. Yet corporations have pointed out that this would not solve the problem because less-ethical buyers would line up to take their place or pointed to a lack of alternative sustainable seafood. Furthermore, because of the complicated nature of the global seafood chain, the use of trafficked labor is easily hidden in the process. As Huw Thomas, head of seafood procurement at Wm Morrison Supermarkets explains, tracking the source of seafood products is very difficult because the seafood industry is incredibly complicated and it may sometimes require tracing more than ten steps that separate the corporation, which bought the farmed seafood products, from the origins of fishmeal that go into the shrimp. Still some human rights organizations have already simplified that tracking for corporations: “[i]f you buy prawns or shrimp from Thailand, you will be buying the produce of slave labour,” Aidan McQuade, director of Anti-Slavery International, explains.

Only a few resources and programs currently exist that help to identify links in the seafood supply chain where slavery occurs. Humanity United (HU), a San Francisco-based foundation, recently designed a campaign to combat slavery and human trafficking. The campaign includes four aspects: (1) focusing on targeting a single industry in a single country (HU chose Thailand fishing industry as a target); (2) chartering a coordinated strategy by cultivating a network of partners (HU encourages its partners to engage in work and not just simply sign checks to the organization); (3) interacting with the corporate business interests (HU confronts human rights abuses and helps companies to improve labor conditions of Thai workers); and (4) monitoring and confirming whether labor conditions in the seafood industry are actually improving (HU plans to pursue certification platforms and incorporate its assessments of work conditions into the certification process).

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On Costco shelves as of August 18, 2015. Source: Case3:15-cv-03783.

Everyone in Thailand and every corporation doing business with Thailand is keenly aware of slavery and human trafficking issues in the seafood industry supply chain. Indeed, all leading retailers “have factored these issues into their social responsibility approaches.” For example, in 2014, several corporations, including Costco and Tesco, announced publicly that they do not tolerate human trafficking and slavery and promised to scrutinize their supply chains, avoiding suppliers that engage in human rights abuses. Yet, violating its own public statements and its Supply Chain Disclosure, Costco continued to sell slavery-tainted shrimp to consumers until fall of 2015. Frozen shrimp and shrimp in wonton soup that Costco was selling were supplied to Costco by Thailand company Charoen Pokphand Foods Public Company Limited (Charoen Pokphand Foods) or C.P. Food Products, Inc. (C.P. Foods). Those Thailand-based companies, as Guardian reported in June, 2014 after its six-month investigation, bought processed fish from suppliers that operated or, in turn, bought from pirate fishing vessels manned with slaves; C.P. Foods fed that processed fish to the shrimp it farmed prior to selling it to Costco. Furthermore, in 2014, Bob Miller, C.P. Foods’ UK managing director, already admitted that the company knew “there’s issues with regard to the [raw] material that comes in [to port].” However, Costco’s corporate practice of dealing with bad actors remained intact.

While activists alone cannot eradicate human rights abuses in the seafood industry, when the local Thai authorities fail to rein them in and U.S. corporations remain passive in cleaning up or monitoring their supply chains, U.S. consumers, who are unwilling to support slave labor practices, can help. On August 19, 2015, Monica Sud, one of Costco’s customers, commenced a California consumers’ class action against Costco and its Thai shrimp suppliers. Sud filed three claims for relief. The first claim is against Costco, Charoen Pokphand Foods, and C.P. Foods for unlawful business acts and practices. In regards to Costco, the lawsuit alleges that Costco for several years knowingly sold shrimp from Thai suppliers that farmed those shrimp on fish obtained from slave laborers and Costco was aware that the shrimp were directly derived from a supply chain that depended upon human trafficking and slavery. The second claim is against Costco for misleading and deceptive advertising practices, such as despite Costco’s knowledge of human rights abuses in its supply chain, Costco did not advise its customers that its farmed shrimp was tainted by the use of forced labor. The third claim is against Costco for violation of the Consumer Legal Remedies Act, seeking an injunction to bar Costco from selling forced labor produced products, requiring Costco to disclose products in its supply chain that have been tainted by slave labor, and alleging that Costco’s use of forced labor is inconsistent with its California Transparency in Supply Chains Act disclosure. The lawsuit also seeks to compensate shrimp products’ purchasers. The complaint does not allege Costco’s corporate liability for complicity in human rights violations, yet it does so against C.P. Foods, stating that the corporation is directly complicit in the use of forced labor practices and has profited from those practices.

After the commencement of Sud lawsuit, Richard Galanti, a spokesman for Costco, responded that Costco is doing all it can “to address the issues that have surfaced,” working with the Thai retailers, the fishing industry, and the Thai government. Acknowledging the existence of slave labor in Thailand’s fishing industry, Galanti noted that unsatisfied customers “can return [Costco]’s item for a full refund.” As of November 15, 2015, Costco removed all seafood products made in Thailand from its Colorado stores and its website. Anne Marie Murphy of Cotchett, Pitre & McCarthy, LLP, one of the attorneys representing Sud, stated that the lawsuit pursues goals of corporate reform and publicity; it is aimed to raise consumers’ awareness as to the issue of slavery; and hopefully will influence U.S. corporations’ practices, bringing long needed “change through the marketplace.”

Sud is the first consumer class action alleging inadequate disclosures and it set an example, started a new wave of class action litigation against other corporate defendants that have similar issues with forced labor produced products. Class actions already have been filed against Hershey, Iams, Mars, and Nestle. It is also expected that the attorney general, who has authority to enforce the California’s Transparency in Supply Chains Act, will begin filing civil suits against corporations, forcing them to fix their disclosures in compliance with the Act. Furthermore, keeping up with this movement, the Business Supply Chain Transparency on Trafficking and Slavery Act of 2015 was recently introduced into the U.S. House of Representatives and the Senate. The new law will require large corporations nationwide to report any measures they have taken to identify and address human rights abuses within their supply chains.

While according to Satasap Viriyanantawani, general manager for the Thai business of Siam Canadian Foods, shrimp buyers in United States can even dictate the price they want to pay to suppliers, giant purchasers, such as Costco, can challenge the system of human rights abuses, forcing change by dictating terms to its suppliers and ensuring the products they buy are not derived from or otherwise created through the use of slavery or human trafficking. However, instead of using its market power to stop slavery in its supply chain, Costco had facilitated it, fueling the cycle of human trafficking and slavery through its purchases of tainted shrimp. If Costco, a corporation with total revenues of $116,199,000 for 2015, does not have the resources to monitor and control its suppliers, then who does?

Eliminating human trafficking and slavery from the global seafood supply chain is not an easy task. Yet it is well possible if everyone – including international and national communities, the private sector, and consumers – gets involved and presses for change. As a long-term solution for making a real impact, getting corporations to change their policies and combatting slavery in their supply chains, the international community should create an enforcement mechanism of one model standard to monitor, audit, and certify the integrity of global supply chains. All information regarding each individual country should be required to be shared with the international community. Given the fact that U.S. corporations have “dominant market share” in the world, the corporations should use their position to influence and pressure their suppliers to join an “accountability revolution,” meaning to uphold standards of the international community, enforcing norm-conforming conduct, performing audits of their supply chains, and preventing the cycle of human trafficking and forced labor. It is in the best interest of everyone in the international and national communities to ensure that the price for a “plate of seafood” is the monetary amount and not its current real cost of the desperation and horror of people who were lured into a life of slavery until they meet their watery grave.

Ilona Starchak is a 3L law student at the University of Denver Sturm College of Law and the Staff Editor on the Denver Journal of International Law & Policy and the Denver Criminal Law Review.

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The Trans-Pacific Partnership: Exploring concerns over an Investor-State Dispute Settlement mechanism

find more at https://curiousmatic.com/trans-pacific-partnership

After years of negotiations, this week saw the conclusion of the Trans-Pacific Partnership agreement (“TPP”). The TPP unites eleven pacific-rim nations and the United States–a collection of 40% of global gross domestic product and one-third of world trade–making it the largest regional trade agreement in history.

Although the terms of the agreement have not been released yet, it has been a divisive topic throughout negotiations. The Obama administration and TPP’s proponents point toward the elimination of more than 18,000 tariffs in place on American exports by the other participating countries as one of the key benefits of the deal. One of the sticking points for opponents to the deal is the inclusion of an investor-state dispute settlement (ISDS) mechanism. Critics of this ISDS provision claim it undermines state sovereignty by creating a supra-national tribunal where global corporation’s may sue member-states and receive taxpayer compensation.  On the surface, the critics concern is a real one–state sovereignty will be undermined–but states cede sovereignty each time they enter into an international agreement. The real issue at play is whether the obligations the TPP allows global corporations to enforce against the United States are so egregious as to make the cession of the United State’s sovereignty unacceptable.

An accurate answer to this issue cannot be had until the final terms to the TPP are released to the public. Although WikiLeaks published an alleged text of the Investment Chapter of the TPP in March of this year, which is said to create the ISDS. This post will wait to evaluate the obligations of the TPP until it is released. However, two of the rumored grounds for suit, “expected future profits” and indirect expropriation, are provisions found in many of the 3,000-plus trade agreements in place around the world. A look at corporations’ use of these provisions in other trade agreements provides positive arguments for both sides of the TPP ISDS debate.

Under NAFTA, Methanex, a Canadian corporation sued California for loss of $970 million in expected future profits after California banned the chemical MTBE from gasoline sold in the state. The NAFTA ISDS tribunal dismissed the claims against California. TPP supporters say the ruling prove that domestic regulations for the public good will win out under any ISDS regime. Opponents, on the other hand say that those companies from larger countries that are set to gain access to similar rights against the United States will not lose such cases. The ongoing dispute between the United States tobacco company Phillip Morris and Australia for mandating plain packaging of tobacco products on public health grounds is cited as an example of a suit TPP will allow against the United States to the potential detriment of taxpayers.

Opponents also fear “indirect expropriation” will be interpreted broadly by a TPP ISDS tribunal to oppose regulations that may diminish a foreign corporation’s investment expectations in the United States. An example of a corporation successfully suing a state for indirect expropriation is the 2012 Occidental Petroleum’s award of $2.3 billion from Ecuador for its expropriation of oil drilling. The Office of the United States Trade Representative has dedicated an entire website to dispelling critic concerns over a TPP ISDS tribunal issuing similar judgments against the United States. It cites investor burden of proof and a state’s ability to seek expedited review of frivolous claims brought against it as key mitigating factors.


TPP protests

In the near future the final terms of the TPP will be released to the public. The agreement has the potential to change the United States’ strategic position in Asia and increase its exports in certain struggling industries. It also has the potential of opening the vault to the United States’ taxpayer money. I believe that in order for the TPP to pass congressional approval, ISDS provision must contain the mitigation mechanisms necessary to prevent foreign corporations from impeding the United State’s sovereign right to regulate trade within its borders. Whatever the outcome, the TPP ISDS tribunal will likely influence a similar ISDS provision in the Transatlantic Trade and Investment Partnership currently being negotiated between the United States and the European Union.

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Critical Analysis: The Lime Crisis of 2014

The other day, I walked into a bar and ordered a gin and tonic. Instead of the customary lime wedge or wheel, my gin and tonic came equipped with a slice of orange. In response to my confused look, the server mumbled something about Mexican cartels. This piqued my interest and led me to discover that Mexican cartels, while a key ingredient, are not solely to blame for the current lime shortage. Flooding, disease, and a domestic lime shortage are also contributing to low lime supply and elevated prices.

Conflict in Mexico is contributing to the shortages of limes and the increase in prices. Image Source: Huffington Post

Conflict in Mexico is contributing to the shortages of limes and the increase in prices. Image Source: Huffington Post

Lime prices in Denver are currently set to a troubling high of $.50 each at Safeway, and $.89 each at King Soopers. Large-scale orders are faring even worse, with 40-pound cases going for a whopping $100, compared to just $15 last year. The graph to the right is a U.S. Department of Agriculture graph, republished by the Huffington Post, which demonstrates the price spike.

This price elevation is mainly due to the age-old relationship between supply and demand. Supply is down because of a disease, huang long bing, also called “Yellow Dragon,” that has hit lime trees in the Yucatan and is spreading to other regions, such as the high export state of Veracruz. Unusually harsh rains in November and December also diminished lime yields because of damage inflicted to lime blossoms. Demand, however, has remained stable and is even increasing, particularly with the Americanized Cinco de Mayo holiday just around the corner.

The panic, however strong in Denver, seems all the more real in New York City, where some people are growing their own in order to avoid the shortage and even profit from it. Things are getting even scarier in the Mexican state of Michoacán, where the conflict is coming to a head. The violent Knights Templar Cartel has been threatening and attacking local farmers, taking their limes and their lands hostage in order to take advantage of elevated lime prices.

Image Source: Latin Post/Getty Images/Joe Raedle

Forty pound cases of limes are selling for $100 each. Image Source: Latin Post/Getty Images/Joe Raedle

An interesting twist to this story is that a handful of farmers and laborers in Michoacán have taken up arms to protect their families and their livelihoods, forcing the Knights Templar to retreat out of the area. Some speculate that this could lead to revolution on a larger scale, particularly as people who had migrated to the United States return home to combat the cartel. Hopefully, this conflict will demonstrate to Americans that even the seemingly inconsequential decision of garnishing their beverage of choice with a lime wedge can lead to striking consequences abroad.


Katie McAuley is a 2L, a Staff Editor for the Denver Journal of International Law and Policy and the incoming Candidacy Editor.

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wind farm

Aligning International Trade with Sustainable Development

The New York Times Editorial Board recently published an article explaining the need for greater transparency and stricter environmental regulations in trade agreements. The Times missed the opportunity to explain the history of international trade and investment agreements and their tenuous relationship to sustainable development.

With globalization has come greater intergovernmental cooperation, increased trade, and a widening global middle class. However, globalization has also created greater environmental degradation, increased emissions of greenhouse gases, and the exploitation of labor in developing countries. Given the positive and negative consequences associated with globalization, governments and non-governmental organizations have acknowledged the need to align global trade with sustainable development. Recent bilateral investment treaties and model investment treaties have acknowledged sustainable development as a primary objective. Yet the trend towards large multilateral trade agreements has cast doubt on whether sustainable development will remain a priority.

wind farm

Meeting the world’s rising energy demand through sustainable means will require strategic global investment (UN)

Bilateral investment treaties proliferated during the 1970s through 1990s. Developing nations entered into these treaties under the theory known as the Washington Consensus: that allowing foreign investment and lowering trade barriers would ultimately lead to economic growth, raise quality of life, and reduce poverty. Developing nations became wary of this logic once the perils of a free-market became apparent and investors pulled out of regions following a rise in wages. These countries have begun incorporating greater protections on human rights and the environment in addition to acknowledging the right of the State to legislate in the best interest of the public.

There is some doubt as to the efficacy of bilateral investment treaties for attracting investment. There is scant data showing that they increase investment, and little that they do to enforce obligations. The Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (TTIP) illustrate the trend towards homogenizing trade regulation through multilateral agreements. While this is generally positive for international trade, concerns remain.

The TPP has been negotiated in secret, and what has leaked has caused concern for many observers. It seems that a predominant goal is to lower trade barriers while protecting the interests of large companies. Investor protection provisions demonstrate how companies may challenge legitimate regulations made for environmental or ecological concerns. Additionally, while environment and human rights have been addressed in negotiations, those issues have not been a priority and there is little to suggest that they will get the robust enforcement needed.

For sustainable development to remain a priority in international trade, there must be a concerted effort to weave the principles of sustainability into the purpose of multilateral trade agreements. However, this is not sufficient to ensure sustainable development will continue. Local governments must hold businesses accountable to their communities and resist a race to the bottom. Most importantly, businesses must commit to sustainable development in practice and not simply pay it lip service. Such action will result in a mutually beneficial relationship between businesses and the communities in which they operate.


Alex Milgroom is a 3L at the University of Denver and the Online Editor-in-Chief of the Denver Journal of International Law and Policy


This article is based on an academic paper by the author available here.


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Critical Analysis: Economic Espionage and International Law

Economic espionage involves a state’s attempts to covertly acquire trade secrets held by foreign private enterprises. Many countries have long considered economic espionage important to national security and economic development. Several economic trends have escalated the risk and prevalence of trade secret theft, including the globalization of trade and interconnected supply chains, the growing important of innovation and information technology to competitiveness, and the rise of overseas markets as a critical source of production and economic opportunity. Advancements in technology, increased mobility, rapid globalization, and the anonymous or pseudonymous nature of the Internet create growing challenges in protecting trade secrets. This is a cause for concern in countries worldwide, and is increasingly a point of contention in diplomatic and trade relations between countries. General Keith Alexander has said that the bleeding of industrial information and intellectual property via cyber espionage represents the “greatest transfer of wealth in history.”

Firms feel that China poses one of the highest threats of IP theft

Firms feel that China poses one of the highest threats of IP theft

Worldwide, cyber espionage cost an estimated $1 trillion in expenses last year alone. On average, trade secrets are worth two-thirds of a company’s information portfolio. For knowledge-intensive industries, trade secrets are worth even more—up to 70 to 80 percent more, on average. Intellectual property theft costs American companies $250 billion annually, while cyber crime rings in at more than $338 billion total. That means, on a yearly basis the annual theft of intellectual property from U.S. businesses is worth nearly the same amount as the current value of exports to Asia. A European Commission study shows that over the past ten years, approximately twenty percent of responding European companies has experienced at least one attempted or successful theft, and nearly forty percent of responding companies believe that they are more at risk in the past ten years than ever before. In 2007, Japan’s Ministry of Economy, Trade, and Industry conducted a survey of 625 manufacturing firms and found that more than thirty five percent of those responding reported some form of technology loss. South Korea approximates economic espionage damage has more than tripled from 2004 to 2008. Sixty percent of these victims are reported to be small- and medium-sized businesses. Germany’s Federal Office for the Protection of the Constitution appraises the value lost by German companies to be between $28 billion-$71 billion annually due to foreign economic espionage. Economic espionage also costs Germany between 30,000 and 70,000 jobs per year. A Canadian report claimed in 2010 that eighty six percent of large Canadian corporations had been victimized, and that cyber espionage against the private sector had doubled in the past two years. The United Kingdom estimates that attacks on computer systems, including industrial espionage and theft of company trade secrets, cost the private sector $34 billion annually, of which more than forty percent represents theft of intellectual property such as designs, formulas, and company secrets.

There is no international treaty specifically governing economic espionage. The desire to combat economic cyber espionage confronts a lack of international law on espionage and economic espionage. Although a victim country could assert that spying violates the principles of sovereignty and non-intervention, state practice has accepted state-sponsored espionage such that these appeals are not serious claims. International trade law, however, does provide a minimum for protection of trade secrets as an intellectual property right. In particular, trade negotiations and dialogues can offer effective means to elevating the importance of trade secrets protection, raising global standards, and promoting more effective deterrence. Under the World Trade Organization’s (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement), WTO members are required to protect intellectual property rights, which include trade secrets. TRIPS Article 39 requires WTO members to protect undisclosed information that is secret, is commercially valuable because it is secret, and has been subject to reasonable steps to be kept secret. The TRIPS Agreement also requires that members make available civil judicial procedures concerning the enforcement of any intellectual property right covered by the Agreement. Also, TRIPS allows  “criminal procedures and penalties to be applied in other cases of infringement of intellectual property rights, in particular where they are committed willfully and on a commercial scale.” Aside from failing to enforce its own laws, a government may be pursuing an “indigenous innovation policy,” in which tech handovers are a prerequisite to market entry. For example, the Chinese government has measures and policies that condition market access or investment in China on the transfer of intellectual property from foreign to domestic entities.

Global firms feel that the threat of cyber espionage and trade secret theft are higher coming from China, Pakistan, Russia, and India than from the rest of the world because of corruption and inadequate protections for intellectual property. According to a survey by the U.S. International Trade Commission (ITC), only 0.6 percent of U.S. firms that reported material losses due to trade secret theft between 2007 and 2009 in China pursued any trade secret misappropriation proceedings in China due to imprecise standards, a lack of deterrent penalties, and a host of procedural difficulties. Only an average of thirty percent of trade secret cases brought in Shanghai Higher People’s Court reach conclusions and fewer than half of those result in findings of infringement. The most troubling form of economic espionage is state-sponsored espionage that obtains information from private-sector companies located outside their territories.

Even if there were a clear rule that a victim could show was being violated, the victim nonetheless has to establish the identity of the responsible party. WTO cases have yet to involve accusations against government-sponsored espionage, so the difficulty of doing so is untested, and therefore unpredictable. It is not clear that a WTO member could satisfy this burden by relying on evidence from private-sector entities such as The Mandiant Report and without revealing counter-intelligence means and methods. This is why the state privilege justification of “national security” can sometimes be a bigger burden than a benefit. It is invoked often, and the public has no way of determining the feasibility of the claim. The general public has no idea what their government is doing in the name of national security because it is classified. Therefore, challenging a government’s cyber espionage is particularly difficult because a government will be reluctant to hand over classified information that can be used as evidence against it, and it will claim national security as the basis for withholding such information. Additionally, a government’s participation in spying sends the message that economic espionage is acceptable and lawful in that country, which companies think means that there can be no state responsibility under international law.

The U.S. is currently negotiating two major trade agreements. The Trans-Pacific Partnership Agreement (TPP), which involves 11 other countries in the Asia-Pacific region, and The Trans-Atlantic Trade and Investment Partnership (T-TIP) with the EU both afford opportunities for cooperative advancements in the protection of trade secrets that would help to establish a stronger and more uniform standard worldwide. The U.S. has also been talking with China about a Bilateral Investment Treaty, which allows equitable standards, a better market access for investors, and a forum for dispute resolution between countries. These kinds of talks are definitely a step in the right direction, but it is going to take more than that to establish a norm workable on a widespread level. Time is not something that the economy can afford though, with the ever-increasing expenses caused by escalating cyber snooping and violations of intellectual property rights.

Katelynn Merkin is a 2L at the University of Denver and staff editor on the Denver Journal of International Law and Policy

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Critical Analysis: U.S. Federal Government Shutdown Impact on International Exports

As we wrap up week one of the federal government shutdown, impacts on international exports are being felt in a major way.  Visit the Department of Commerce’s Bureau of Industry and Security (BIS) website and you find the following disclaimer:

The Federal Government is currently shut down due to a funding lapse. As a result, the Department of Commerce’s Bureau of Industry and Security (BIS) is no longer accepting export license applications, classification requests (CCATS), encryption reviews, encryption registrations, or advisory opinion requests. Similarly, BIS will not be issuing any final determinations. The SNAP-R application on BIS’s Website is not available and will not reopen until the Federal Government shutdown ends. All pending export license applications, commodity classification requests, encryption reviews, encryption registrations, and advisory opinion requests will be held without action by BIS until the shutdown ends.

A similar notice appears on the State Department’s Directorate of Defense Trade Control (DDTC) website.

The Federal Government shutdown is having a significant impact on U.S. trade with foreign countries.  Photo: Bloomberg

The Federal Government shutdown is having a significant impact on U.S. trade with foreign countries.
Photo: Bloomberg

The two agencies process various types of export licenses for military and dual-use goods (goods with both a military and commercial use).  These goods include everything from military vehicles and ammunition to composite structures and computer processing chips.  Given the large military/dual-use industry in Colorado, Ball Aerospace, Lockheed Martin, Jeppesen, etc., it seems appropriate to look at the potential impact the shutdown will have on international trade and local Colorado companies.

The grant of export licenses is nearly at a standstill with the exception of those “emergency licenses” needed to support ongoing combat and contingency missions.

In 2012, BIS processed 23,229 export licenses requests and the DDTC processed 89,650 between September 2012-September 2013; equating to 112,879 licenses total.  Based on these numbers, the two departments process approximately 2,170 licenses a week.  On average, it takes both the agencies 12-15 business days to process and respond (grant, return without action, or deny) the requests.  Each day that the government remains shutdown, the number of license requests sitting in the backlog grows.  In turn, companies are unable to ship goods until a budget is passed, funds are appropriated, and the backlog is depleted.

International customers are becoming frustrated because U.S. companies cannot provide accurate lead times for the shipment of goods.  These customers, who are arguably already frustrated by the high level of regulation of military and dual-use items, will start looking outside of the U.S. for companies who can ship a competing product in a timely fashion.  Further, this standstill has created a significant slow down in sales of military/dual-use products.  U.S. companies struggling to obtain export licenses during the shutdown have expressed concern for profitability and stock prices, especially as many companies are wrapping up their final fiscal quarter.

Exports make up $2.196 trillion of the $15 trillion U.S. economy.  If the government remains shutdown for much longer, it will have a significant impact on companies’ bottom line, the U.S. economy, and international market relations.  In the short term, companies’ final quarter will experience a decline in their international exports, which will ultimately affect a large portion of the U.S. economy.  In the long term, companies risk losing international customers who have found competitors outside of the U.S. and the international opinion of the U.S. military/dual-use market will be further compromised.

Alicia Guber is a 2L and the Alumni Editor on the Denver Journal of International Law and Policy.

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Critical Analysis: The Trans-Pacific Partnership and its Discontents

Not everyone likes trade agreements

President Obama is touting the Trans-Pacific Partnership (TPP) as a 21st Century trade agreement, a model for everything from industrial goods to Internet services. The principal purpose of which, like the North American Free Trade Agreement (NAFTA), is to increase trade and remove restrictions on the flow of goods and capital between member states. So far, the negotiations include the U.S., Australia, New Zealand, Malaysia, Brunei, Singapore, Chile, Peru, and Vietnam. Last week, President Obama and U.S. Trade Representative Ron Kirk announced to Congress that Canada and Mexico, the U.S.’ largest trading partner and second largest export market respectively, will join the negotiations as well.

The 13th round of talks concluded this week on July 10th in San Diego after a week of negotiations, with many officials lauding “significant progress” on issues from copyright protection, agriculture products, state-owned enterprises, and financial services. Once an agreement is reached, it is poised to become a trading bloc representing 686 million people and with a total GDP of $20.5 trillion.

The prospect of increased profits and jobs notwithstanding, 132 Congressmen wrote to U.S. Trade Representative Ron Kirk expressing their concern that the negotiations lack transparency. Congressman Darrell Issa, a Republican from the San Diego area and Chairman of the House Oversight and Government Reform Committee, sought to attend the talks in San Diego (a rare request from a Congressman) but was denied access to anything beyond generic public events. As with most trade agreements, the negotiations occur behind closed doors with very few given access to the agreement’s text until it is finished. Congress, however, believes that in such a large and unprecedented trade agreement, too much is left in the hands of negotiators and the 600 special interest lobbyists who do, in fact, have access to and influence over sensitive negotiations materials.

A “Stop TPP” demonstration was organized to bring attention to the treaty negotiations through an ambitious array of protest marches, rallies, press conferences and teach-ins. The coalition included union leaders, Occupy San Diego, Public Citizen, and Global Trade Watch. The AFL-CIO has also voiced its opposition to the TPP. Their concern? Again, that special interests and corporate lobbyists are selling America’s future (and their jobs) across the Pacific for the sake of increased profits.

Although the TPP is far from finished, it is gaining notoriety especially since Canada and Mexico became negotiating partners. At the moment, Japan and South Korea have observer status, however; it is likely these two countries will also join in the near future. The TPP may one day encompass the entire pacific-rim with the exception of – you guessed it – China. China has not been invited to join the talks, nor do the current negotiating parties plan on extending one. Many see this is an American move to contain China economically. Whatever the motive, China’s absence does give one pause. And it does make one think that profits are not the only motive involved.

 Michael Cox is a rising third-year law student at the University of Denver, a Senior Editor for the View From Above, and a Candidacy Editor for the Denver Journal of International Law and Policy.

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Critical Analysis: Welcoming Russia to the WTO

Presidents Putin and Obama (CBS)

By the end of the summer, Russia will become the newest member of the World Trade Organization (WTO) after nearly twenty years of negotiations.  This presents tremendous opportunities for American businesses, exporters, and innovators. Russia is the 7th largest economy in the world and trade between the United States and Russia is far from realizing its full potential. U.S. exports to Russia totaled almost $9 billion last year, and some studies indicate this could double within 5 years of Russia joining the WTO. Furthermore, when it does become a member, Russia will “be required—for the first time ever—to establish predictable tariff rates, ensure transparency in the publication and enactment of laws, and adhere to an enforceable mechanism for resolving disputes.” This means added protections for American agricultural exports and intellectual property rights. Ever hear of pirated DVDs you can buy for a dollar on the streets of Moscow? This will, sadly, become a thing of the past.

This all sounds too easy. And it is. First, both countries, in order to take advantage of the WTO agreement, must grant each other Permanent Normal Trade Relations (PNTR). Second, the U.S. Congress must lift trade restrictions contained in the 1974 Jackson-Vanik law. This targeted the former Soviet Union for blocking Jewish citizens from emigrating during the Cold War. Since this law prevents favorable trade relations with American businesses, the U.S. cannot grant Russia PNTR without also lifting Jackson-Vanik. In other words, unless the U.S. lifts Jackson-Vanik, the rules of the WTO will not apply between the two countries. If the rules of the WTO do not apply, American business will not benefit from the advantages that come with Russia’s WTO membership. IPR protections will not apply nor the lower tariff rates on U.S. products. And, to make matters worse, American business will have to sit and watch Chinese, Japanese, Canadian, and European businesses cash in on the freshly opened Russian market.

As if this could not become any more complicated, members of Congress are concerned that lifting Jackson-Vanik excuses Russia’s uninspiring human rights record. In Jackson-Vanik’s stead, many Congressmen on both sides of the aisle, including Senate top dogs John McCain and Joe Lieberman, support a new bill named after the late Russian lawyer, Sergei Magnitsky. Beaten to death while in prison, he was arrested after exposing massive tax fraud by officials within the Russia Interior Ministry. This bill would block individuals involved in human rights abuses in Russia from traveling to, studying in, or living in the United States. Congressmen want to make sure that if we grant PNTR to Russia (along with lifting Jackson-Vanik), we also communicate our disgust with how they treat their own citizens, their support of the Assad regime in Syria, and so on.

Recently, Secretary of State Hillary Clinton reassured us that granting PNTR is not a gift to Russia, as some may feel. Instead, “it is a smart, strategic investment in one of the fastest growing markets for U.S. goods and services. It’s also an investment in the more open and prosperous Russia that we want to see develop.” The Obama Administration, as well as Russian President Vladimir Putin, share this view.

The situation is compelling: creating jobs through international trade on the one hand versus supporting human rights on the other. Congress, of course, wants to have their cake and eat it too. After all, why can’t we, after engaging in some hard-nosed politics, bring both hands together? Perhaps, in 2012, engaging in trade with a fast-growing and modernizing Russia is the best option to foster human rights protections. Or perhaps, that is just a convenient excuse to put our wallets before our values.

Michael Cox is a rising 3L, a Candidacy Editor on the Denver Journal of International Law and Policy, and a Senior Staff Editor for The View From Above

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The United States Announces Updated Model Bilateral Investment Treaty

State Department at Foggy Bottom (Wikipedia)

On April 20, 2012, the U.S. Department of State and the Office of the United States Trade Representative announced the posting of a revised Model Bilateral Investment Treaty (BIT).  The new document, 42 pages in length, updates the 2004 Model BIT.  Additional background materials can be found here and here.

A BIT provides binding legal rules for the treatment of one country’s investors by a foreign jurisdiction and aims to protect the interests of the overseas investor.  Their general aims are to protect the interests of a country’s investors when making investments in countries where investors’ rights may not be sufficiently protected by existing treaties or international agreements.  BITs cover topics such as fair and equitable treatment of foreign investors compared to domestic investors, issues of compensation if/when expropriations take place, questions concerning management personnel, and can be helpful when they address funds transfers (possibly stipulating market rates), and may also include a stipulation concerning the form of dispute resolution to be used.  BITs can promote transparency and are generally seen as supporting the development of international law standards.

According to the State Department press release: “[t]he Administration made several important changes to the BIT text so as to enhance transparency and public participation; sharpen the disciplines that address preferential treatment to state-owned enterprises, including the distortions created by certain indigenous innovation policies; and strengthen protections relating to labor and the environment.”

Here is a link to the USTR page on the 40 current US BITs.  Some non-U.S. BITs are here and additional investment treaty information, including other model BITs is here.  BITs for OAS countries can be found here.

And, to relate this to indigenous peoples, the Chevron / Ecuador dispute is currently under review by the Permanent Court of Arbitration in The Hague.  There is debate over whether it is appropriate for a case that has been fully litigated in a domestic court to then be subject to a BIT arbitration clause.  So, for another column . . . how do/should domestic court decisions interact with decisions of international tribunals? This was also one of the questions raised during the ASIL 2012 Annual Meeting’s program, “Confronting Complexity.”

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