Transcript International Law: Unit 8 Economic Law

International Law: Unit 6
Economic Law
Prof. Fred Morrison
Fall 2006
Topics for this week
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International Trade Law
Protection of Investments
International Financial Law
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International Trade Law
Three principal periods
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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)
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Pre 1947 law
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States imposed tariffs and quotas to protect
local industry
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States generally had three tariff rates
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Reduced international trade
Higher costs
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
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GATT
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Adopted 1947
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Protocol of Provisional Application (pending
ratification of ITO, which never happened)
GATT provided substantive rules
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ITO was supposed to provide procedures,
but never came into being
GATT (as amended in 1994) is still in force
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GATT Principles
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1. Generalized Most-Favored-Nation
treatment GATT, art. I
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All GATT members give all other GATT members
the “best” tariff rate available
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Only non-GATT members pay regular rate
Exception:
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Customs unions
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Free Trade areas
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Common external tariff; no internal tariffs
Separate external tariffs, no internal tariffs
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GATT Principles
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Progressive reduction of tariffs
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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.
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GATT Principles
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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
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GATT Principles
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3. Elimination of Quantitative
Restrictions. The only means of limiting
imports is tariffs; no quotas.
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States could prohibit goods, if they
prohibited like goods domestically (e.g.,
alcoholic beverages)
Toleration of mutually agreed export
quotas
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Further developments in the
GATT era
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Less developed countries could be given
a favorable rate (“better than the best
rate”) without triggering a rate cut for
other developed countries
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In a sense, this replaced the old “colonial
rate”
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Issues in GATT
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“Dumping” (Export of goods at less
than their value) prohibited. Antidumping duties permitted to counteract
dumping. GATT Art. VI
“Subsidies” Countervailing duties
authorized to offset government
subsidies of production. GATT Art. XVI
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Issues in GATT
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“Safeguards.” Temporary measures to
protect an industry particularly hard hit.
Art. XIX
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Disputes in the GATT era
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Since GATT was an “informal”
organization, dispute resolution was not
formally organized.
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Initial decisions by “panels” of trade
diplomats (possibly including lawyers)
Adoption of those decisions by consensus
of all of the GATT members
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Any member (including losing party) could
block creation of panel or adoption or report
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WTO—1994 and beyond
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“Uruguay round” of trade negoiations
led to adoption of World Trade
Organisation.
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WTO provides organizational structure
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GATT continues to provide substantive law
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And a few new codes
Subject to a few amendments. GATT 1994
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New with WTO
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More elaborate “codes” about many of
the foregoing issues
TRIPS. Trade-related Intellectual
Property agreement
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Requires certain protection of intellectual
property throughout WTO system
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Expands protection previously offered by
multilateral treaties (Berne, Paris conventions)
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New with WTO
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GATS. General Agreement on Trade in
Services. Opens trade in services
(banking, insurance, legal services)
across national boundaries
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New with WTO
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Shift in dispute resolution
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Automatically considered by panels
Possibility of appeal to Appellate Body
Elimination of possibility of “veto” of report
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Report is automatically adopted unless rejected
by consensus
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Current issues
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Interplay of trade law with other parts
of international law
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Environmental law; human rights law; etc.
Look at Article XX exceptions
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Look to chapeau: “not . . . A means of
arbitrary or unjustifiable discrimination”
Specific exceptions
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Protection of Investments
The traditional law
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Western view
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Property of a foreigner could only be taken
for a public purpose, and on payment of
compensation that was
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Diplomatic efforts to obtain compensation
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Prompt (payable immediately; cash)
Adequate (full market value before the taking)
Effective (convertible currency)
Foreigner must pursue local remedies first
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Other views
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Communist (Soviet) view
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Property was created by State and can be
abolished by State. No compensation
Calvo (Latin American) view
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Foreigner is only entitled to same
compensation that a domestic citizen gets
No international intervention to seek
payment
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Means of protection
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Treaty protection. Takings clauses in-
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Bilateral Investment Treaties
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Treaties of Friendship, Navigation, and
Commerce (FCN) and Treaties of Amity
Usually have no procedures
Include procedures (arbitration between
investor and state)
Some multilateral treaties (e.g., NAFTA)
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Other means of protection
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ICSID. International Centre for the
Settlement of Investment Disputes.
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Arbitration between investor and State
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NOTE: Break from State-State claims
Arbitration award enforceable as an
international award. (Waiver of sovereign
immunity)
Note: ICSID is subsidiary of World Bank
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Other means of protection
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Investment insurance.
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Investor buys insurance from Ex-Im Bank
or similar institution.
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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
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International
Financial Institutions
Major Global Institutions
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International Monetary Fund
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Stabilizing exchange rates
World Bank (International Bank for
Reconstruction and Development)
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Investing in development projects
World Bank Group
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International Monetary Fund
(IMF)
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Member States deposit funds in bank
Bank uses funds to stabilize exchange rates
Bank can lend hard currency to States which
have payments problems
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First “tranche” of loans fairly simple
Subsequent “trances” subject to “conditionality”
Decision-making based on contributions
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Developed countries control the IMF in fact
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World Bank Group
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World Bank
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International Development Association
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Low (or no)-interest, long-term loans to the
poorest countries
International Finance Corporation
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Loans to governments for development
Loans for development to private entities in
developing countries
Also ICSID
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World Bank Group Issues
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Decision-making. Similar to IMF
Relationship of development to other
international law goals (environment,
human rights, etc.)
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Regional Development Banks
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Provide loans for development within
particular geographic areas
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