Unit 1 - Problems & Exercises

Consider the following statistics in the readings concerning the distribution of economic activity within various countries among the industrial, agricultural and service sectors.

One definitional requirement to comprehend the statistical table in the readings is the composition of “industry” and “services.”  Industry is not identical to manufacturing, since it includes things like extractive or primary industries (e.g., mining, oil and gas, or digging commodities out of the ground) as well as traditional heavy industries (e.g., making steel), traditional light industries (e.g., making textiles, garments, or shoes), or advanced/research intensive manufacturing (e.g., making airplanes or pharmaceuticals).  Services similarly is a catch-all including professional services (e.g., law, accounting and IT), as well as distinct sectors like financial services (e.g., banking, capital markets and insurance) or hospitality (tourism and restaurants).

When you try to follow the talking heads, in the US economy using 2011 statistics professional services were 12.2% of GDP, and manufacturing was 11.91% of GDP.  What does it mean when accountants, lawyers and IT people represent a bigger share of the economy than folks involved in manufacturing?  From a business (client) perspective, what about those robots affecting manufacturing employment (so increasing manufacturing activity does not necessarily increase employment)?

From a legal point of view, is there a regulatory scheme for manufacturing as opposed to services?  FYI, the AEC is distinctive in that it is trying much more so than either the WTO/GATS or NAFTA to liberalize services.  If you look at the services numbers in the statistics above, why are US talking heads so excited about manufacturing, meanwhile services is typically 2-3 times larger as share of the economy, not to mention agriculture as a very small share of the modern US economy, albeit strategically concentrated in a limited number of states?  If we really are going to renegotiate FTAs, should we be focused for economic reasons on opening up more services opportunities as a larger share of the economy, or rather on manufacturing and agriculture as the Trump Administration did presumably 2016-2020 for strategic political reasons (the electoral college issue)?  And is it possible to adopt a politically neutral approach to the question, once you realize that manufacturing was traditionally the gateway to the middle class for people with not more education than high school diplomas, while outside of tourism, services often assume higher education levels (think engineers, doctors, lawyers and CPAs)?

Note that manufacturing is less than 12% of the US economy.  While you do not know enough trade law yet for these purposes, understand that GATT/WTO law is largely about trade in goods, since trade in services liberalization was only introduced in a very preliminary sense in the 1994 Uruguay Round under the General Agreement on Trade in Services or GATS.  We have not succeeded really in making much progress in the Doha Round on services liberalization, with the result that services liberalization has been pursued chiefly in the FTA track for the past 25+ years.  Go back and read carefully what the AmCham Singapore release says about trade liberalization in various sectors under the TPP-11 (hint, the shadow discussion here is like Harley Davidson seeking to build motorbikes overseas to sell to foreign customers in order to escape US tariffs).  Global businesses sell in global markets, meanwhile only for high value/low weight products like semiconductor chips, or for digitally delivered products, are logistics and transportation costs minimal concerns.

There is also a hidden assumption to work against, that US or industrialized country attitudes now lead in developing trade policy and law.  In fact, the Southeast Asians are really on the cutting edge in a trade law sense in pursuing medical services liberalization under the AEC.  So rather than focusing on telemedicine per se, their version of the “medicare for all” debate to broaden access to healthcare is to enable medical services across borders by allowing for licensed provider reciprocity within the AEC (not unlike the NAFTA 1.0 approach to liberalization of engineering services within North America).

Should you care?  Well, locally, telemedicine is how rural hospitals can still provide sophisticated medical services 24 x 7.  The question is whether such a county hospital could procure in rural areas such services as radiology following a 2:00 am motorcycle accident from within SC (from Charleston or Columbia hospitals?), from another US state (maybe Duke or Emory hospitals in NC or GA?), perhaps from a Canadian provider in the same time zone (Toronto?), or whether it goes further afield, in geographic and time zone terms, such as to Bangkok where the Thais have established a high quality, relatively inexpensive medical services industry drawing patients worldwide based upon foreign-trained and qualified physicians?  What about state regulation?  Will changing regulation be a particularly difficult issue for legislators, if the professional standard is reasonable and the price is right, meanwhile the other choice is closing down the function at their local county hospital for lack of service providers?  The whole of telemedicine was looked at somewhat skeptically pre-Covid Pandemic, but what about now?

So how do you think medical and other professional services can work in a modern setting? NAFTA 1.0 liberalized trade in engineering services, so that there have been a lot of Canadians since 1994 engaged in US-oriented STEM work, either Canadian graduates working in US professional engineering firms, or bidding on US projects by Canada-based engineering firms.  This is not just an optional immigration skilled labor question, but rather the Canadians have a treaty right to do so (and vice-versa).

What do you make of the balance between goods and services sectors within specific economies, and how it interacts the GATT/WTO and FTA law and structures?  Concerning the digital economy, that is only really beginning to be addressed in cross-border trade through the most current trade agreements like TPP-11, also in Asia, as they relate particularly to e-commerce and open internet structures (including cloud services).  And agriculture itself is largely still excluded from GATT/WTO coverage, instead being treated typically only under FTAs.  That is why all those Midwestern farm states held their breath hoping initially that the NAFTA 1.0 renegotiation succeeded, and later that the Trump Administration could convince the Chinese to buy more US agricultural goods like soy beans under what is referred to as the Phase 1 Agreement entered into finally in early 2020.

How should we have ordered the US’ priorities and concerns on trade law as of January 21, 2021?  Could you start by listing what would have been your top three priorities, and explaining why we should make those particular choices?  Try to tie those choices to specific legal and policy choices, rather than stating more political aspirations.  How do you think your choices tracked those the Biden Administration seems to be making?  Do you think foreign law students would make the same choices, why or why not?

We shall later go into the details of trade law, but for now please just read the below Bangkok Mango Problem and be ready to opine on what you see to be the likely issues and potential resolutions.  This is the idea that any lawyer with a modicum of experience should be able to look at a situation even before they know the details of the law and be able to focus in on issues and explore facts that they will later take back to the research exercise of finding detailed legal provisions and applying them to the facts.  Some may see this as the opposite of your training to discern legal rules from reading appellate opinions, or applying statutes, but in most complex matters you see the facts before focusing on the law.  Since the kinds of situations and fact patterns behind trade law problems are beyond most law student’s prior experience, we work first on you even understanding the factual predicates.