International Trade Law - Introduction PDF

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International Trade Law - Introduction...

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Lecture 1 – Trade Law

Focus on trade and economic policy as well as rules of trade between nations at global level. Focus on WTO, serves many functions. Forum for governments to negotiate trade agreements, trade rules and a place to settle disputes. What makes trade possible and lucrative for all countries? Planet Money makes a T-shirt Make a t-shirt and follow it around the world as it gets made. 

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Cotton: cotton farm in Mississippi. US explorts more cotton than any other country in the world. Most American cotton seeds are made in a lab in Wisconsin. Genetically modified to make it more resistant. All this technology has an impact, cotton yields have tripled since the 50s. Machines: cotton leaves to go around the world where it goes from plant to fabric. Machines do most of the work. E.g. Colombia, Indonesia. Then yarn is turned into fabric. People: men’s shirt made in Bangladesh – she makes one of the lowest wages in the month (80 dollars a month). 4 million people there work in the industry. Women’s in Colombia. Her salary is almost 4x what it is in Bangladesh. Boxes: t-shirts come back from Columbia and Bangladesh to Miami. Containers. Made shipping more efficient. Then from Miami to North. This whole journey cost 0.07 dollars. The material cost 60p. Design 0.90. Final leg 2.70 from warehouse to customer. To what extent is the world trade order power-based, and to what extent is it rule-based? How does the construction of international trade law as a technical discipline reduce opportunities for political engagement? To what extent can or should WTO law acknowledge, accommodate, and engage with human rights, environmental, public health, and development concerns, among others? E..g with reference to the tshirt video, like helping working standards. Whose interests are served by current international trading rules?

Is trade good or bad? Concept of eco globalisation = increasing international eco integration of national eco in one borderless global eco. Idea that everything is integrated. Initial established view that globalisation would raise us all up together. But reality is there are winners and losers from eco integration. Is trade bad? Why would Trump say so? Because depending on normative position, you would interpret it differently. Also depending on where you are from. Even before Covid-19, trade restrictions were on the rise. In March 2020, majority of governments entered lockdowns and unprecedented shuttering of trade for personal protection and for food. Governments became protective and insisted on allocating their own supplies for their own people. E.g. medical supplies. What impact does this have on other countries who rely on these goods? Before this, the WTO had recorded that in 2018, the G20 economies had implemented 28 new trade-restrictive measures, covering USD 460.4 billion worth of goods. This represents a 37% increase compared to the previous period in 2018. Changing nature of trade?

Changing way of thinking about trade.  Old style: products produced in one country and exported to another. E.g. made in US and sent to Mexico.  Changing style, now we trade in tasks and in value added. Production of components are fragmented across many countries and pulled together. See airplane example. Production is unbundled. Why do economists say that liberalising trade flow is a good thing? If so, why is it so politically controversial? How do we balance trade with other public policy issues like human rights? Can international trade be an engine for eco growth and poverty reduction etc? have to find the optimal balance. Economics of trade: Comparative advantage Key definition: when states open borders to trade, they increase production possibilities open to them, allowing them to specialise in production of these goods and services and then have a comparative advantage. Nations will tend to specialise in production of goods in which they have comparative advantage. So, they exchange the goods over which they have comparative advantage for other goods over which they do not. See Ricardo’s example:  England can produce X amount of cloth with labour of 100 men  England can produce Y amount of wine with labour of 120 men  Portugal can produce X amount of cloth with labour of 90 men  Portugal can produce Y amount of wine with labour of 80 men So, Portugal has absolute advantage over England regarding production of cloth and wine. The idea here is that trade is still mutually advantageous. When E exports the cloth in exchange for wine, she imports wine that would have required labour of 120 to produce. Portugal gains by 80 labour it used to produce wine instead of having to produce its own cloth. Both countries end off better off if they concentrated on what they did best. This is true even if Portugal is more efficient than England at both producing wine and cloth. Key here is that each country should specialise in producing and exporting goods in which its comparative disadvantage is greatest and should import goods of which its comparative disadvantage is greatest. Trade has made everyone more productive. This relates to eco liberalisation, idea of opening up global economy. Rising tide that will lift all boats. It can boost GDP. Globalisation and trade liberalisation reduce cross country wealth disparity and absolute poverty in low income countries. Trade has led to greater eco growth and welfare, access to markets of developed nations can provide stimulus in developing countries. Not all developing countries have seen trade as positive contribution. So generally, there has been a positive contributor. So generally, trade is good but cannot be considered a substitute for other development strategies. We know that not all states liberalise completely. So why do some states not liberalise it completely? Arguments for free trade

If governments are trading together, they would be more peaceful. Because trade was a main source of friction for many countries prior to development of international institutions. E.g. many in US suggested trade would lead to peace. i.e. if trade was open governments would be less inclined to fight.  So why would they restrict trade? Why do they use protectionism? Because there are arguments external to economics. They are value judgments. Economic arguments against trade and noneconomic. o Economic arguments:  Domestic failure, if it is not working properly you might seek to fix it by limiting trade;  Distribution arguments: goes to basic comparative advantage model – realistically production can’t just shift from cloth to wine  Effects on steel workers: hard to reemploy them after so you impose tariffs to engage  Protecting young industries: e.g. clean energy – but how do we know when the industry no longer needs protection, but why not use subsidies  Strategic trade policy o Non-economic:  National security: trump administration, economic security is national security  Ensuring self-sufficiency: controlling what comes in and out e.g. with respect to Covid Do arguments for trade-restrictive measures to protect national security and ensure self-sufficiency hold up with careful scrutiny? How do you establish when in peace time, needs are needed to promote NS? And what happens in situations of crises? What is the role of law in ensuring that eco globalisation and international trade benefits the most amount of people? So, you should be constantly asking, why do we need international trade rules? governments are always going to want to take restrictive measures. International law is both a sword and a shield that governments can use. Sources of WTO law 

Marrakesh Agreement establishing the WTO o Annex 1: It has three parts covering goods, services and IP. o Annex 2 is for dispute settlement. o Annex 3 is TPRM. o Annex 4 is plurilateral agreements (e.g. agreement on government procurement). o Other sources:  Dispute settlement reports  acts of WTO bodies  Agreements concluded in the context of the WTO o Customary IL o General principles of IL o Preferential trade agreements and international agreements

History of the multilateral trading system

WW1 had shattered channels of trade with intense eco nationalism and desire to create international trade institution (ITO) was meant to put an end to tit for tat retaliatory protectionism. It was to create a pathway for govs to identify common interests and manage international pressures. The US state dept worked with British and Canadians to develop the ITO. In 1946 a group of governments came together to discuss this US drafted charter. US decided not to ratify it and therefore it was the end of the ITO. What survived was the general agreement on tariffs and trade. Provisional agreement among govs relating to tariffs. The GATT lacked binding dispute settlement and was created before intended ratification of ITO. GATT continued to operate alone until creation of WTO.  Many of the provisions in GATT were transplanted from ITO charter because the ITO was thought to be going to exist. When ITO ceased to exist, those rules remained.  GATT’s system and development continued to form even though there was no institution representing it. GATT legal system and trade diplomacy Informal organisation which focused on trade in goods. Began to serve as backbone of international trading system even though it was only a provisional agreement. General rules were that it would block all trade barriers other than tariffs, limit and bind those tariffs, included principle of non-discrimination. Remember they are GATT contracting parties, not members. This was a movement very much advocated by the US at the time, but this is not to say all other countries agreed with this. Of course many countries challenged this idea of no blocks to trade. For some govs trade liberalisation wasn’t the goal (e.g. there were other trade controls they needed for example to promote employment and way of living). GATT filled the hole by the absence of international trade organisation. GATT = not institutional. There were only 2 provisions setting out how to commence disputes . Nothing to say what happens in the event, no system in place. So, it had to grow naturally. The GATT secretariat. So, it grows into an entity even though there are no real procedures on how to handle conflict etc. So, it grows because there was a need for it to grow. WTO Organisation Chart Main function of the establishment of WTO is to facilitate implementation of the WTO agreements. What do these agreements do?  Negotiate new trade rules  Help gov to settle disputes with a formal process  Trade policy reviews  Coop with other organisations  Technical assistance to developing countries These are all things that weren’t operating formally with the GATT but were with the WTO. Emphasis on WTO as forum for government negotiation. It is run by its member governments. All major decisions are made by membership as whole. Either by ministers or their ambassadors or Geneva. Decisions normally taken by consensus. Objectives:

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Increasing of standards of living Obtaining full employment Sustaining eco dev

WTO rules impose disciplines on countries policies. Rules are enforced by the members themselves. Consensus taken amongst 164 members. Main advance is that decisions are more acceptable to all members. Obvious challenges to consensus. WTO organisation chart

Ministerial Conference: Highest body, they can make decisions on all matters under any of the agreements Councils: day to day work Appellate Body: dispute settlement from Annex II Trade Policy Review

Key function is negotiation of new trade rules. So, when WTO was created, GATT was terminated and included within the WTO agreement. GATT 1947 becomes GATT 1994. Same rules from the GATT in 1947 but incorporated into WTO agreements as 1994. Uruguay round: when WTO was created. New sector subjects came up for liberalisation. Policy where treaty was taken as single package. All members are obliged to take all undertakings or none. What else happened in this round?  So, single undertaking (including all additions, no agreement on anything unless you agree on everything)  Ministerial conference which saw global protests / no new round was launched  Then the Doha Round – 2001 (a few years later). Doha Dev agenda was extremely ambitious in its agenda. Big problems. Too many. In addition, WTO members wanted work programme for new subjects. Round never concluded successfully.  Members seemed willing to get rid of single undertaking. o Single undertaking – negotiation technique, every item is part of a whole. WTO decision-making -

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WTO Agreement Article IX:1 – Decided by consensus if no member present at the meeting when the decision is taken formally objects to the proposed decision o This system respects sovereignty but makes it harder to agree. Informal consultation plays a vital role in bringing membership to agreement. If no consensus is agreed, they move to voting. But most decisions are by consensus. So, each member has veto. WTO Agreement Article IX:2 – Authoritative Interpretations WTO Agreement Article IX:3 – Waivers WTO Agreement Article IX:4 - Amendments...