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International Law: Unit 6 Economic Law. Prof. Fred Morrison Fall 2006. Topics for this week. International Trade Law Protection of Investments International Financial Law. International Trade Law. Three principal periods.

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international law unit 6 economic law

International Law: Unit 6Economic Law

Prof. Fred Morrison

Fall 2006

topics for this week
Topics for this week
  • International Trade Law
  • Protection of Investments
  • International Financial Law

Unit 6: Economic Law

three principal periods
Three principal periods
  • Pre-1948: States could set tariffs and limits on trade as part of their sovereignty
  • 1948: GATT (General Agreement on Tariffs and Trade)
  • 1993: WTO (World Trade Organisation)

Unit 6: Economic Law

pre 1947 law
Pre 1947 law
  • States imposed tariffs and quotas to protect local industry
    • Reduced international trade
    • Higher costs
  • States generally had three tariff rates
    • General rate (high)
    • Preferential rate (through bilateral agreements)
    • “Colonial” rate (Ottawa preference; French Community rate, etc.)
  • This system still functions for States that are not WTO members

Unit 6: Economic Law

slide6
GATT
  • Adopted 1947
    • Protocol of Provisional Application (pending ratification of ITO, which never happened)
  • GATT provided substantive rules
    • ITO was supposed to provide procedures, but never came into being
    • GATT (as amended in 1994) is still in force

Unit 6: Economic Law

gatt principles
GATT Principles
  • 1. Generalized Most-Favored-Nation treatment GATT, art. I
    • All GATT members give all other GATT members the “best” tariff rate available
      • Only non-GATT members pay regular rate
    • Exception:
      • Customs unions
        • Common external tariff; no internal tariffs
      • Free Trade areas
        • Separate external tariffs, no internal tariffs

Unit 6: Economic Law

gatt principles1
GATT Principles
  • Progressive reduction of tariffs
    • This was accomplished largely through various “rounds” of negotiations, in which all member countries “gave up” some tariff rates in order to achieve benefits from other countries.

Unit 6: Economic Law

gatt principles2
GATT Principles
  • 2. National treatment. Once goods are admitted to a country, they are entitled to be treated the same as domestic goods of like kind. GATT art. III

Unit 6: Economic Law

gatt principles3
GATT Principles
  • 3. Elimination of Quantitative Restrictions. The only means of limiting imports is tariffs; no quotas.
    • States could prohibit goods, if they prohibited like goods domestically (e.g., alcoholic beverages)
    • Toleration of mutually agreed export quotas

Unit 6: Economic Law

further developments in the gatt era
Further developments in the GATT era
  • Less developed countries could be given a favorable rate (“better than the best rate”) without triggering a rate cut for other developed countries
    • In a sense, this replaced the old “colonial rate”

Unit 6: Economic Law

issues in gatt
Issues in GATT
  • “Dumping” (Export of goods at less than their value) prohibited. Anti-dumping duties permitted to counteract dumping. GATT Art. VI
  • “Subsidies” Countervailing duties authorized to offset government subsidies of production. GATT Art. XVI

Unit 6: Economic Law

issues in gatt1
Issues in GATT
  • “Safeguards.” Temporary measures to protect an industry particularly hard hit. Art. XIX

Unit 6: Economic Law

disputes in the gatt era
Disputes in the GATT era
  • Since GATT was an “informal” organization, dispute resolution was not formally organized.
    • Initial decisions by “panels” of trade diplomats (possibly including lawyers)
    • Adoption of those decisions by consensus of all of the GATT members
      • Any member (including losing party) could block creation of panel or adoption or report

Unit 6: Economic Law

wto 1994 and beyond
WTO—1994 and beyond
  • “Uruguay round” of trade negoiations led to adoption of World Trade Organisation.
    • WTO provides organizational structure
      • And a few new codes
    • GATT continues to provide substantive law
      • Subject to a few amendments. GATT 1994

Unit 6: Economic Law

new with wto
New with WTO
  • More elaborate “codes” about many of the foregoing issues
  • TRIPS. Trade-related Intellectual Property agreement
    • Requires certain protection of intellectual property throughout WTO system
      • Expands protection previously offered by multilateral treaties (Berne, Paris conventions)

Unit 6: Economic Law

new with wto1
New with WTO
  • GATS. General Agreement on Trade in Services. Opens trade in services (banking, insurance, legal services) across national boundaries

Unit 6: Economic Law

new with wto2
New with WTO
  • Shift in dispute resolution
    • Automatically considered by panels
    • Possibility of appeal to Appellate Body
    • Elimination of possibility of “veto” of report
      • Report is automatically adopted unless rejected by consensus

Unit 6: Economic Law

current issues
Current issues
  • Interplay of trade law with other parts of international law
    • Environmental law; human rights law; etc.
  • Look at Article XX exceptions
    • Look to chapeau: “not . . . A means of arbitrary or unjustifiable discrimination”
    • Specific exceptions

Unit 6: Economic Law

the traditional law
The traditional law
  • Western view
    • Property of a foreigner could only be taken for a public purpose, and on payment of compensation that was
      • Prompt (payable immediately; cash)
      • Adequate (full market value before the taking)
      • Effective (convertible currency)
    • Diplomatic efforts to obtain compensation
      • Foreigner must pursue local remedies first

Unit 6: Economic Law

other views
Other views
  • Communist (Soviet) view
    • Property was created by State and can be abolished by State. No compensation
  • Calvo (Latin American) view
    • Foreigner is only entitled to same compensation that a domestic citizen gets
    • No international intervention to seek payment

Unit 6: Economic Law

means of protection
Means of protection
  • Treaty protection. Takings clauses in--
    • Treaties of Friendship, Navigation, and Commerce (FCN) and Treaties of Amity
    • Usually have no procedures
  • Bilateral Investment Treaties
    • Include procedures (arbitration between investor and state)
  • Some multilateral treaties (e.g., NAFTA)

Unit 6: Economic Law

other means of protection
Other means of protection
  • ICSID. International Centre for the Settlement of Investment Disputes.
    • Arbitration between investor and State
      • NOTE: Break from State-State claims
    • Arbitration award enforceable as an international award. (Waiver of sovereign immunity)
    • Note: ICSID is subsidiary of World Bank

Unit 6: Economic Law

other means of protection1
Other means of protection
  • Investment insurance.
    • Investor buys insurance from Ex-Im Bank or similar institution.
      • If property is nationalized (or certain other events, such as inconvertibility of currency occur), Ex-Im Bank pay investor, takes subrogation of claim
      • Claim is then a State-to-State international claim

Unit 6: Economic Law

major global institutions
Major Global Institutions
  • International Monetary Fund
    • Stabilizing exchange rates
  • World Bank (International Bank for Reconstruction and Development)
    • Investing in development projects
    • World Bank Group

Unit 6: Economic Law

international monetary fund imf
International Monetary Fund (IMF)
  • Member States deposit funds in bank
  • Bank uses funds to stabilize exchange rates
  • Bank can lend hard currency to States which have payments problems
    • First “tranche” of loans fairly simple
    • Subsequent “trances” subject to “conditionality”
  • Decision-making based on contributions
    • Developed countries control the IMF in fact

Unit 6: Economic Law

world bank group
World Bank Group
  • World Bank
    • Loans to governments for development
  • International Development Association
    • Low (or no)-interest, long-term loans to the poorest countries
  • International Finance Corporation
    • Loans for development to private entities in developing countries
  • Also ICSID

Unit 6: Economic Law

world bank group issues
World Bank Group Issues
  • Decision-making. Similar to IMF
  • Relationship of development to other international law goals (environment, human rights, etc.)

Unit 6: Economic Law

regional development banks
Regional Development Banks
  • Provide loans for development within particular geographic areas

Unit 6: Economic Law

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