Summary: INTERNATIONAL TRADE LAW
This summary focuses on international trade law specifically
Everything from the book complete + all lectures 2024 (Maastricht University Netherlands)
Based on:
The Law and Policy of the World Trade Organization
Peter van den Bossche
5th edition
9781108747103
,
,INTERNATIONAL TRADE LAW – WEEK 1
Economic globalization and the law of the WTO, Chapter 1
- One of the defining features of today’s world is the process of economic globalization
- Economic globalization: gradual integration of national economies into one borderless global
economy. Encompasses both (free) international trade and (unrestricted) FDI (Foreign Direct
Investment)
- Economic globalization, in general, and international trade in particular offer an unprecedented
opportunity to reduce poverty worldwide significantly
- Economic globalization and international trade have to be accompanied by good governance in
developing countries and more development assistance from developed countries
- Management and regulation at the international level
- If not; problems might arise (economic inequality, social injustice, environmental degradation,
cultural dispossession)
What are the driving forces behind economic globalization?
Technology makes globalization feasible and liberalization of trade and FDI makes it happen
- Due to technological innovations resulting in a dramatic fall in transport, communication and
computing costs, the natural barriers of time and space that separate national markets have been
coming down
- Over the last 60 years, most developed countries have gradually but significantly lowered barriers to
foreign trade and allowed free movement of capital
- Reasons for not reversing the current globalization process: (1): new technology has created
distribution channels for services, (2): liberal international trade policies have a firm institutional
basis in multilateral trading systems of the WTO, (3): the price to be paid in terms of economic
prosperity for withdrawing from the global economy would be very high
Changing nature of International Trade in the Global Economy
- For many centuries, trade was mostly about products manufactured in country A being exported to
country B. Nowadays, trade in the globalized economy is increasingly trade in tasks and in value-
added
- Today, products/services are often not produced in a single location or by a single producer. Instead
they are the end result of a highly coordinated series of steps carried out in many countries around
the world by many people with many different skills made in the world
Economic globalization: a blessing or a curse?
- Opponents of the current economic globalization:
o Excessie emphasis on the economic interests of transnational corporations
o Social, cultural, environmental interests and the interests of developing countries are not
sufficiently taken into account
o Responsible for world poverty and hunger (?)
o Environmental disasters, unemployment…
o Malignant force that is destroying the livelihood of millions of workers
Problems of current economic globalization
- War on Want wants to see the benefits of globalization more evenly spread across the world
- Opposition against “corporate globalization”
- Are developing countries forced to open up their markets too far and too fast?
- Rich countries are conspiring to keep their markets closed to products from developing countries?
- Developing countries lack the resources to negotiate effectively?
,Free trade versus restricted trade
Arguments for free trade
- Adam Smith: Argument for specialization and international trade
- David Ricardo: Why do countries even the poorest can and do benefit from international trade?
Theory of comparative advantage p. 18 (a country does not have to be best at anything to gain from
trade) Both would still benefit from trade
- Absolute advantage: E.g. A is better than country B at making automobiles and B is better than A at
making bread. Both would benefit
- Man of the complexities of the modern economy are not taken into account in the Ricardo model
- Heckscher-Ohlin Model: refines the former models, confirmed basic conclusions from Ricardo and
the gains from trade via specialization
- International trade has the potential for bringing economic benefits, there may also be considerable
non-economic gains. It increases both the incentives for not making war and the costs of going to
war. Further, it intensifies cross-border contacts and exchange of ideas, which may contribute to
better mutual understanding. In a free-trading world, other countries and their people are more
readily seen as business partners, less as enemies.
- Trade protectionism is a festering source of conflict
- Important contribution to peaceful and constructive international relations
- Promotion of democracy
Arguments for restrictions on trade
- (1): Protection of a domestic industry and employment in that industry from competition arising
from imported products, foreign services
- (2): Infant industry protection
Argument may be of particular relevance to developing countries, which may find that while they have a
potential comparative advantage in certain industries, new producers in these countries cannot compete with
established producers in the developed countries
Temporary protection is given to the national producers to allow them to become strong enough to compete
with well-established producers
- (3): Strategic trade policy – government intervention
In an industry with economies of scale, a country may, by imposing a tariff or a quantitative restriction and
thus reserving the domestic market for a domestic firm, allow that firm to cut its costs and undercut foreign
competitors in other markets
Can provoke retaliation
- (4): Generate revenue for government
While taxation of trade for revenue is no longer significant for developed countries, for many developing
country governments customs duties remain a significant source of revenue.
- (5): Protection of National security and ensuring of self-sufficiency
A country should be able to rely on its domestic industries and farmers to meet its basic needs for vital
material and food, because it will be impossible to rely – in times of crisis and conflict – on imports from
other countries.
- (6): Protection and promotion of non-economic societal values and interests (public morals, public
health, consumer safety, clean environment, cultural identity)
- Globalization is one of the defining features of today’s world
- Economic globalization high levels of international trade and FDI
- International trade offers an unprecedented opportunity to reduce poverty worldwide significantly
- To ensure this opportunity, economic globalization and international trade have to be “accompanied”
by good governance in developing countries and more development assistance from developed
countries
- Regulation and management at international level
- If economic globalization is not managed, it is likely to be a curse aggravating economic inequality,
social injustice, environmental degradation, cultural dispossession
, International trade to the benefit of all?
James Wolfensohn
- It can either be a globalization of development and poverty reduction
- Or globalization of conflict, poverty, disease, and inequality
- To ensure that economic globalization and trade liberalization contribute to economic development,
equity and well-being of all people, Wolfensohn advocated a four-point agenda for action p. 27:
1) Better governance
2) Reduction of trade barriers
3) More development aid
4) Better international cooperation and global governance of economic globalization and international trade
Acting according to these four priorities, one will create the conditions to achieve true global integration
and reach the MDGs of halving extreme poverty by 2015.
Oxfam
- International trade can realize its full potential only if rich and poor countries alike take action to
redistribute opportunities in favor of the poor
- According to Oxfam, international trade is at present badly managed, both at the global level and, in
many countries, at the national level
International trade and economic openness are necessary but not sufficient conditions for economic
development and prosperity.
The law of the WTO
- Why is there a need for rules in international trade?
1) To restrain countries from taking trade-restrictive measures
2) To give traders and investors a degree of security and predictability regarding the trade policies of other
countries “most gain”
3) To cope with challenges presented by economic globalization with respect to the protection of important
societal values such as public health, clean environment, consumer safety, cultural identity, minimum labor
standards
4) To achieve a greater measure of equity in international economic relations
Importance of rules recognizing the special needs of developing countries – How to integrate these countries
to the world trading system?
Basic rules of WTO law
- (1) Rules of Non-Discrimination: MFN treatment and national treatment
- (2) Rules on Market Access
- (3) Rules on Unfair Trade
- (4) Rules on the conflict between trade liberalization and other societal values and interests
- (5) Institutional and Procedural Rules
These rules make up what is commonly referred to as the multilateral trading system
Sources of WTO law
- Marrakesh Agreement Establishing the WTO (WTO Agreement); Art. II(2),(3) principal source of
law
- General Agreement on Tariffs and Trade (GATT 1994; Annex 1A of the WTO Agreement): basic
rules for trade in goods
- Other multilateral agreements on trade in goods (Annex 1A of the WTO Agreement): Relationship
between GATT and others Argentina – Footwear (2000): “must a fortiori be read as representing
an inseparable package of rights and disciplines which have to be considered in conjunction”
