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In the late 1920s, scratch farmers and loggers in the remote forests of America’s inland Pacific Northwest faced an invisible threat. Crops were scarred and burned. Timber yields were stunted. The culprit turned out to be a massive zinc smelter in Trail, British Columbia that was bellowing sulfurous fumes from across the Canadian border. The smelter was silently laying waste to livelihoods, communities, and ecosystems in the affected areas of the United States. Ultimately, the U.S. State Department took up the cause of affected citizens. The Canadian government – desiring mutually beneficial economic relations with its southern neighbor – stepped in for the smelter and agreed to have the questions of responsibility, damages, and compensation settled by international arbitration.
Today, law students around the world study the Trail Smelter Arbitration as a foundational case in contemporary international law. In its judgments, the arbitration panel announced two ground-breaking legal principles regarding transboundary harm. First, that no country has the right to use or permit the use of its territory to cause injury to the territory of another or the properties or persons therein. Second, that a polluting state must pay for the damage caused from relevant polluting activities on its own territory. Ultimately, Canada was ordered to pay reparations to the United States.
The world is now grappling with an unprecedented case of transboundary harm that originated in China: the still-growing global COVID-19 pandemic. This essay considers how the international law principles established in the Trail Smelter case suggest China’s legal responsibility for the harm associated with this pandemic. China should not view this as a threat. It is an opportunity to make things right, grow into the role of a world leader, and reboot the world economy on which it depends for its prosperity.
Situating China’s Responsibility for the COVID-19 Pandemic
Over a 35-year period, the People’s Republic of China has achieved remarkable economic growth, exponential reductions of poverty, and complete integration into the world economy. China has used the wealth accumulated from such integration to build-up the country’s infrastructure and grow into the world’s second largest economy. But all the kilometers of new high-speed rail lines and the glistening new cities erected helped to obscure the fact that the governing Communist Party was not modernizing the fundamentals of China’s regulatory framework, including in the food and drug sectors, but also involving labor standards and the rule of law. China remained far behind the standards of the West when it came to public health regulations, even as its economy and social life became further enmeshed with those of the West. This matters because, as a globalized economic juggernaut, China’s products reach every corner of the globe; its citizens, as business-people and tourists, travel to every part of the planet; and China’s booming economy draws foreigners for work and tourism, all of whom participate in the country’s Dickensian food and drug markets before moving on around the world.
China’s poorly regulated food market has produced one health crisis after the other. Before Deng Xiaoping’s economic reforms, China suffered mightily during the Asian pandemics of 1957 and 1968. In the years since China carried out its “reform and opening up” policies and its 2001 entry into the World Trade Organization, the 2002 SARS crisis, the 2008 milk production scandal, and the 2009 H1N1 crisis have beset China and countries around the world. The Chinese people might have preferred life-saving health and food safety regulations over infrastructure baubles, but the ruling Party’s political stranglehold on society permits it to ignore or stifle the kinds of popular demands for reform that have produced dramatic, life-saving changes in the democratic world over the past century.
The strategic negligence of China’s leaders helped make the coronavirus pandemic possible – it has brought the world economy to the brink of collapse and it is filling hospitals and cemeteries all over the globe. It is widely accepted that the unregulated sale of wildlife at open wet markets – like the Wuhan wet market – was the original cause of humans contracting the novel coronavirus. The journal Scientific American reports that “independent teams have suggested in preprint studies that pangolins may have been an intermediate host” of the virus that most likely originates in the region’s bats. And, to compound the crisis, China’s leadership suppressed evidence of the virus, allowed New Year’s celebrations to continue and did not restrict travel from Wuhan until months after the outbreak began. Italy recently traced its globally televised national agony to two tourists from Wuhan who visited in mid-January. Forced public apologies and the death of Dr. Li Wenliang, whose early warnings triggered reprimands by the Chinese government, remind the world that when called on to be the world leader it aspires to be, China’s Communist Party willfully chose secrecy and self-interest over saving lives.
China’s Potential Legal Exposure
Over the past weeks, in response to the threat of COVID-19, the industrialized economies in North America and Europe have committed economic suicide in the hopes of sparing lives. Even so, the worst projections suggest that they will largely fail in that ambition. We can expect tens, if not hundreds of thousands of fatalities, particularly among society’s most vulnerable. When the virus reaches less affluent countries, new and more cataclysmic problems are sure to arise.
It is not too early to begin to discuss China’s liability for this transboundary nightmare. As such discussions begin, the Trail Smelter case holds several important lessons for the world community to consider.
The Trail Smelter arbitrators imposed liability on Canada for the transboundary harm caused by the smelter because the “case [was] of serious consequence and the injury … established by clear and convincing evidence.” In the context of the COVID-19 pandemic, with the global death toll rising and economic destruction cascading, there can be little doubt of the seriousness of the transboundary harm emanating from Wuhan. Additionally, there is clear and convincing evidence that this harm was caused – and exacerbated by – the negligence, omissions, and decisions of the Chinese government.
In the Trail Smelter dispute, Canada saw that it was in its own interests to assume responsibility for the harm the smelter had done to American farmers and loggers. Not only did acceptance of responsibility help maintain peaceable relations with its neighbor, but it also served Canada’s direct economic interests. After all, Canada was determined to mitigate the smelter’s harm in order to keep it operational as an important economic contributor to Canada and the British Empire. Will China reach the same conclusion?
Initial evidence is not encouraging, as the Chinese government has obfuscated its responsibility for the ongoing pandemic and endorsed internet conspiracies seeking to do the same. But China will not be able to hide from this bill forever. The bill is coming, it will be enormous, and the sooner the Chinese government gets in front of this issue, the better.
What Would a Reasonable Settlement Look Like?
First, in the short term, China could give assurances that it will reverse its pattern of neglect with respect to food safety regulations. To do this, President Xi Jinping would have to commit to establishing a European Union-quality food safety regime by January 1, 2021. He would also have to commit to providing immediate, transparent notice to the world community if another wildlife-based virus arises in China’s countryside. He also would have to immediately end threats to withhold medicines to a world reeling from a Chinese-born contagion. Without conditions, China would need to share information with the world to aid the global effort to develop a vaccine as soon as possible. Lives must be saved.
Second, in the medium-term China should compensate the world for the personal and economic damage its policies have caused. The global economic disaster already underway due to the COVID-19 pandemic is widespread and indeterminable; estimates of $10 trillion or more in losses may prove to be optimistic. Today, the Chinese government holds over $3 trillion of bonds from the world’s major economies. These could be abandoned or put to the issuers at no cost. These bond savings could be used to fund a massive stimulus to reboot the global economy as well as to aid those in industries hardest hit by this avoidable catastrophe. Additionally, China should commit the same amount over the next decade to establish food regulatory regimes in low and middle-income countries to prevent another similar pandemic from arising in a different part of the world. These funds also could be used to build trauma hospitals in those countries and to train the medical personnel needed to cope with future pandemics and health crises. Finally, China should dedicate significant resources to lead the research and development of vaccines and antiviral treatments – made available to the whole world – as a contingency against another outbreak.
In exchange for China’s economic concessions, the world must be prepared to pass legislation to quash private litigation against China with respect to the coronavirus. These cases will multiply exponentially in the coming months. On March 12, the first federal class action lawsuit seeking to hold the Chinese government, the province of Hubei, and the city of Wuhan liable for torts related to the coronavirus outbreak was filed in the Southern District of Florida. Suits in Nevada and Texas have followed. The theories behind these cases are shaky. The most permissive interpretations of the Foreign Sovereign Immunity Act and the Alien Tort Statute do not seem to point the way toward liability for another country’s sovereign acts. Still, there are examples that suggest that the threat of civil liability can be part of the mix of tools that bring a sovereign around to embrace its responsibility for transboundary harm in public international law. That was the case in the Trail Smelter dispute, in which failed private lawsuits pushed Canada into inter-state arbitration. More recently, attempts at establishing Libya’s civil liability for the Lockerbie Bombing led Congress to enact controversial amendments to the Foreign Sovereign Immunity Act and the Anti-Terrorism and Effective Death Penalty Act. Fearing the effects that regime might have on its foreign relations, the American government refused to honor and enforce the Lockerbie civil judgements but leveraged the threat of those suits, alongside United Nations Security Council sanctions, to bring Libya around to a large inter-state settlement for its role as a domestic sponsor of transboundary terror. More importantly, COVID-19 lawsuits against China will soon be a global affair – with sovereign liability litigated in multiple jurisdictions. All the more reason for China to accept its responsibility for the pandemic and to embrace inter-state arbitration as a way to determine its liability and the scope of the damages it must pay.
For those who think that $6 trillion is a disproportionate calculation of the global damage that will ultimately be done by the coronavirus pandemic, it is important to note that this immense figure is likely to be just a fraction of the global economic harm resulting from China’s negligence. Indeed, this amount will be closer to the aggregate amount of global fiscal stimulus packages enacted by the world simply to avoid the worst scenario of a second Great Depression. More importantly for Beijing, a settlement of this magnitude is in China’s immediate and long-term interest. As Canada recognized in the Trail Smelter case, infuriated partners do not trade. Nor do devastated economies purchase goods. Xi Jinping is a student of history and he knows that the Marshall Plan returned economic benefits to the United States in the form of a revived European economy for American goods and services.
China craves recognition as a great power and a world leader. If the Chinese government fails to acknowledge its negligence and accept its responsibility for the spread of the coronavirus, and does not offer compensation for the resultant ongoing pandemic’s dire worldwide consequences, then it will continue to be viewed as a pariah rather than a partner.
Editor’s Note: Readers interested in additional perspectives on the issue of China’s potential responsibility for COVID-19 pandemic-related harms, please see Just Security articles by Chimène Keitner and David Fidler.
Image – A nearly empty Times Square is seen on March 23, 2020 in New York City. Wall Street fell early March 23, 2020 as Congress wrangled over a massive stimulus package while the Federal Reserve unveiled new emergency programs to boost the economy including with unlimited bond buying. About 45 minutes into trading, the Dow Jones Industrial Average was down 0.6 percent at 19,053.17, and the broad-based S&P 500 also fell 0.6 percent to 2,290.31 after regaining some ground lost just after the open. (Photo by Angela Weiss / AFP) (Photo by ANGELA WEISS/AFP via Getty Images)