International Law: Unit 6 Economic Law Prof. Fred Morrison Fall 2006

International Law: Unit 6Economic Law

Prof. Fred MorrisonFall 2006

Fall 2006 Unit 6: Economic Law 2

Topics for this week

International Trade Law Protection of Investments International Financial Law

International Trade Law


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)


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


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


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


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.


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


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


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”


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


Issues in GATT

“Safeguards.” Temporary measures to protect an industry particularly hard hit. Art. XIX


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


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


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)


New with WTO

GATS. General Agreement on Trade in Services. Opens trade in services (banking, insurance, legal services) across national boundaries


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


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

Protection of Investments


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


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


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)


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


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

InternationalFinancial 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


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


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


World Bank Group Issues

Decision-making. Similar to IMF Relationship of development to

other international law goals (environment, human rights, etc.)


Regional Development Banks

Provide loans for development within particular geographic areas

Documents

International Law: Unit 6 Economic Law Prof. Fred Morrison Fall 2006