Borrowing the title from a Stephen Colbert segment, this blog post is going to be about trade disputes not involving America. Given recent trade rhetoric, you might think that all trade disputes are about the U.S. and China, but that’s not the case. Other countries have disputes, too, and some of them are very interesting, getting into the core issue of what international trade rules should be about.

First up is a complaint by Canada and Norway against the EU related to a ban on “seal products.”  According to the EU regulation at issue, seal products means “all products, either processed or unprocessed, deriving or obtained from seals, including meat, oil, blubber, organs, raw fur skins and fur skins, tanned or dressed, including fur skins assembled in plates, crosses and similar forms, and articles made from fur skins.”  Under the regulation, with limited exceptions, seal products may not be imported or sold in the EU.

Canada and Norway have a significant seal harvest, and are concerned about lost sales in the EU market (as well as the spread of the EU policy to other countries).  The main legal claims (a very rough version, anyway) are that the EU Regulation discriminates against Canadian/Norwegian seal products in favor of competing EU products, and that the regulation is more trade-restrictive than necessary.

This case helps illustrate the scope of international trade rules.  Writing about the case a couple years ago, blogger Matt Yglesias wondered

why the seal issue is being handled as a trade policy matter in the first place. In other words, why ban the import of seal products rather than simply ban selling seal products? Clearly the EU’s concern here is with the existence of a commercial market for dead seals rather than with the transnational flow of seals per se.

In fact, the law involves both an import ban and a general sales ban.  (Why separately ban imports when you have already banned sales?  Most likely for administrative convenience.  Importation is a good place to catch these things.)  But regardless, even if the law had not mentioned imports, a general sales ban could have been challenged at the WTO.  This is an important point that Yglesias doesn’t seem to realize, and if he missed this, I suspect others might miss it as well.  In what way are general product bans covered by WTO rules?  For one thing, even facially neutral measures may in fact be cases of disguised protectionism, having a disparate impact on foreign products.  For another, as noted, there are rules that prohibit domestic laws from being more trade restrictive than necessary.  Such rules go beyond simple protectionism, and provide another way to challenge a general product ban.  Do some of these rules intrude too far into domestic affairs?  There is lot of debate about that in trade circles.

A second case has been brought by Ukraine against Australia, involving Australia’s “plain packaging” rules for cigarettes (the Dominican Republic and Honduras are likely to join the case), which require cigarettes to be sold in plain packages with no logos and a uniform font for the brand name.  Here, there are the same trade arguments as in the seal products case:  the measure is discriminatory, and more trade-restrictive than necessary.  Also, there are claims that plain packaging interferes with the tobacco companies’ trademarks, in violation of the WTO’s rules on intellectual property.

I thought it was worth mentioning these cases here for the following reason.  If international trade rules can be used to challenge any government law or regulation that affects trade, even if the measure is facially non-discriminatory, these international rules are going to be quite broad, and could have an impact on much, if not all, domestic governing.  It may be worth thinking about these issues to make sure we properly balance international governance and domestic policymaking, and these cases provide a good opportunity to do so.  (I wrote more about this in an op-ed for The Jurist on the plain packaging case.)  The cases are at an early stage, and it’s not clear how they will turn out.  But the mere fact that they are being tried in an international court is noteworthy.

One final point:  Just to be clear, I don’t mean to defend the laws at issue—the seal products ban and plain packaging for cigarettes—as a matter of policy.  Rather, I’m just focusing on whether they should be found in violation of international trade rules.

Today the Free Trade Agreement between the United States and Panama went into effect. The United States now has FTAs with Canada and eleven Latin American countries stretching from Mexico to Chile. My colleague Bill Watson has a less enthusiastic view of the FTA with Panama here.

Last week during the third presidential debate, Mitt Romney talked about how the United States has not taken full advantage of trade opportunities with Latin America. Some experts, such as Ted Piccone at the Brookings Institution, were quick to point out that Romney’s call for expanded trade with Latin America isn’t very realistic since Washington already has in place FTAs with all the Latin American countries that want trade agreements with the United States while those who don’t, such as Brazil and Argentina, aren’t interested in one. However, that doesn’t mean that there’s no room for a substantial hemispheric trade agenda.

As we can see in the table below, the countries Washington has free trade agreements with in the Americas also have similar FTAs among themselves. There are some missing links here and there, but overall these countries have created a fragmented version of a free trade area of the Americas. One obvious problem of this is what Jagdish Bhagwati has called the “spaghetti bowl effect” of so many trade agreements with different rules of origin, tariff schedules and non tariff regulations.

There are some efforts underway to tackle this problem. For example, Mexico has individual FTAs with five Central American countries, but it’s now negotiating with them to merge all these trade agreements into one. Mexico has also announced the creation of the Pacific Alliance, a trade bloc that will also include Colombia, Peru and Chile.

The United States should lead an effort to merge all these regional FTAs into one single Free Trade Area of the Americas for these nations willing to be part of it. The negotiations could also help to complete those missing links in the hemispheric trade jigsaw puzzle. And once achieved, this FTAA would leave the door open for other Latin American countries that might want to join in the future (the most likely candidates would be Uruguay and Paraguay given their growing dissatisfaction with Mercosur).

Even though the United States wouldn’t gain much in terms of market access from such an FTAA, harmonizing trade rules along the continent would certainly help boost trade in the Americas. Moreover, the political cost would be minimal since Washington already has FTAs in place with all these countries.

Bill Clinton proposed the idea of a Free Trade Area of the Americas in 1994, though he quickly abandoned it despite wide interest in Latin America. The negotiations were finally launched in 2001 but fell apart in 2005 after it became obvious that countries such as Brazil, Argentina and Venezuela weren’t interested anymore. But this must not mean that the goal isn’t worth pursuing in a different way. There is a good case to be made for building an FTAA of the willing.

Governor Romney’s economic advisers (Glenn Hubbard, Greg Mankiw, John Taylor, Kevin Hassett) have a short post about his economic plan.  In it, they sort of talk about trade issues:

Advancing international trade is another part of the plan. A recent study by the International Trade Commission concluded that reducing intellectual property violations [in] China could produce about 2 million jobs in the United States.  While that is, of course, an estimate, Governor Romney has made reducing barriers to trade with China []  a primary focus of his trade opening policy, and this advancement of trade clearly would be a large net positive for the successful idea-intensive firms that drive economic growth.

What’s important to note here is that these prominent, well-respected economists are not talking about free trade, despite their best efforts to make it seem like they are.  Free trade means reducing protectionism, both at home and abroad.  That means removing protectionist barriers to imports and exports, resulting in specialization of production and greater efficiency, among other things.  But that’s not what they are saying here.  Instead, they want to “advance” international trade by increasing exports to China, mainly through forcing China to strengthen intellectual property laws and enforcement.

Now, I’m not going to argue that there should be no intellectual property protection.  But I do question the notion that U.S. intellectual property standards are precisely where they should be, and that the rest of the world should do exactly what we do.  That may in fact be the case; however, nobody ever bothers trying to show it. And if I had to guess, I would say we probably over-protect intellectual property in a number of areas.

But the larger point here is that we shouldn’t let political advisers confuse the issues with deceptive rhetoric.  Free traders are not interested in “advancing” international trade by simply pushing for more exports.  If we were, we would support export subsidies.  Real free traders don’t!  What we want instead is the removal of protectionist barriers to trade (“ours” and “theirs”):  Tariffs, quotas, many subsidies, to name a few.

(To be fair, later they talk vaguely about how President Obama is not doing enough to promote trade agreements.  However, they never say anything positive about actual free trade, which is a bit strange because they all probably do support free trade.)