INT’L TRADE LAW INTRODUCTION Prof David K. Linnan USC LAW # 665 Unit One

ADMIN I COURSE PAGE AT READING ASSIGNMENTS IN BOOK, POSTED ON COURSE MATERIALS LINK WITH PARALLEL DOC CITES

ADMIN II YOU MUST SIGN UP FOR LISTSERV laws665 (INSTRUCTIONS AT CLASS ADMINISTRATION LINK ON COURSE PAGE), SEE INDONESIANS WILL JOIN US IN EARLY FEBRUARY 2005 & PROJECTS

ECONOMIC ACTIVITY WHAT DOES THE BELOW MAP TELL YOU ABOUT COUNTRIES AND ECONOMIC ACTIVITY AS AN UNDERLYING REALITY OF INT’L ECONOMIC LAW?

IEL CONCEPTS WHAT & WHY IS INTERNATIONAL ECONOMIC LAW? IFIs and monetary law International trade law ULTIMATE PROB OF STRONG MIXING OF ECONOMIC CONCERNS/ISSUES

PIL CONCEPTS WHAT ARE PUBLIC INT’L LAW CONCEPTS BEHIND INT’L TRADE LAW Idea of no obligation to even trade internationally because of sovereignty over borders Idea of no rights of establishment in terms of foreign investment (make versus import/export) Parallel in idea of monetary sovereignty, but that is other part of IEL

TREATY CONCEPT PUBLIC INT’L LAW ASPECTs IN NUTSHELL Sources of law in treaty, customary law, general principles of law IEL on trade law side is largely treaty law, specifically GATT/WTO since 1947 (history later), plus modern regional agreements & FTAs

INTEGRATION WHAT ARE ECONOMIC AS OPPOSED TO LEGAL CONCEPTS BEHIND INT’L TRADE LAW? Issues of economic versus political integration, examples: US EU NAFTA APEC

TRADE MODELS KEY ECONOMIC MODELS FOR INT’L TRADE LAW PURPOSES Multilateral trading system (GATT/WTO) Regional or bilateral economic arrangements (integration), traditionally customs unions now FTAs like EU or NAFTA Further behind cooperative mechanisms like APEC

ECON CHANGES WHAT IS HIDDEN ECONOMIC PICTURE & HOW DOES IT DIFFER BETWEEN ECONOMIES? 1.Goods versus services 2.Changing nature of economies at different levels of development 3.Does IEL under trade branch track these changes? So what? 4.Changing patterns of production (intra- industry trade)

GATT/WTO HISTORY Idea immediate post-WW II of economic & political causes of the war (1930s economic crisis, rise of fascism as indirect result of trade wars, etc.) General Agreement on Tariffs & Trade 1947 temporary protocol as part of still-born post-WW II remake of int’l law system Int’l monetary system mostly made through with Bretton Woods institutions (IMF, World Bank), but ITO effectively cratered leaving only 1947 GATT

GATT/WTO PRIN GATT ORGANIZING PRINCIPLES & ASSUMPTIONS Most Favored Nations (MFN, all WTO member foreigners get same deal) National Treatment (foreigners get same deal as locals) Negotiated Tariff Concessions (incremental rounds practice) Hidden assumptions on market based economies (were in failed ITO Havana Charter, matter in Cold War idea of non-market economies or Socialists out so China & Russia only now, could be discriminated against)

GATT/WTO ASSUMP GATT ORGANIZING PRINCIPLES & ASSUMPTIONS CONT’D Unanimity rules essentially made dispute resolution voluntary As a result GATT was more an economic diplomacy forum than a legal system in normal sense However, not atypical for public int’l law

GATT TIME GATT ORGANIZING PRINCIPLES & ASSUMPTIONS CONT’D Repetitive round structure for next 35 years Over time, movement from tariff barriers to non- tariff barriers (NTB) to tarification (meaning converting quota or other NTBs to a reducable number for subsequent rounds, etc end of Uruguay Round WTO formation effective second birth of post WW II concept

1994 WTO SHIFT DISTINCTIVE WTO ASPECTS AS OF 1994 POST- URUGUAY ROUND For general WTO character see document at atis_e.htm Effort to “legalize” int’l trade law, in part by reversing the procedural presumptions on dispute resolution side so that a country could no longer effectively impede adoption of unfavorable dispute settlement reports

GATS DISTINCTIVE WTO ASPECTS CONT’D Expansion from GATT focus solely on trade in goods to new focus to include trade in services under the General Agreement on Trade in Services (GATS) As a structural matter, industrial country economies moving increasingly to services, so high economic interest in GATS Using trade law as enforcement mechanism as for broader legal areas (intellectual property, TRIPs in Uruguay Round now pressure growing in environmental area)

CHANGING PLAYERS DISTINCTIVE WTO ASPECTS CONT’D Traditionally, trade negotiations were moved by Big Three (US, Japan & EU), now developing country blocks too as they advance economically Post-1980s the Socialist world has moved from state directed economies to market directed economies, so in change from 1940s GATT direction the former Communist world is now lining up to join the club (China before, now Russia, all major economies with China affecting trade in goods worldwide)

LEGALIZATION CONSEQ DISTINCTIVE WTO ASPECTS CONT’D As part of legalization trend, the dispute settlement reports are now rapidly developing a kind of interpretive caselaw for WTO treaty provisions As a result, much focus now on exceptions to MFN or National Treatment kinds of obligations as interpretation counts Still tension in shift from older economic diplomacy in non- binding GATT to legalized system under WTO, since issue is really what happens if a major player ignores a dispute settlement (e.g., if the Europeans rejected an unfavorable decision on GMO coverage or hormone beef what next)

DOHA ROUND DISTINCTIVE WTO ASPECTS CONT’D Now we are in the early stages of Doha Round, focused on items like trade in agricultural goods, “Singapore principles,” government procurement, trade in services For general Doha background see WTO document at /dda_e.htm /dda_e.htm

FTAs ECONOMIC INTEGRATION’S LEGAL SIDE Regional, expressly discriminatory and considered a sometimes alternative to multilateral trading system Export-led development model & Asia (political economy) NAFTA in North America, which may be extended further down into South America within 5 years But note also things like Singapore-US FTA, so this is not just NAFTA Bottomline, the clients demand it so the lawyers must learn how to function not only under the UCC but also the framework the clients see on business side

FTAs & ECON TENSION ANTI-GLOBALIZATION If globalization is the business model behind free trade or trade liberalization, winners & losers plus social resistance too (WTO Seattle meeting cratered in protest) In legal sense FTAs permit more addressing of social issues as with NAFTA environmental principles, tension re proper balance in Doha

REGIONAL TRADE AGMTS ECONOMIC ARGUMENTS 1.Second best, but achievable 2.Pre-NAFTA idea was countries at similar level of development (but Mexico changed) & customs union tradition 3.What is difference between FTA & regional communities

TRADE LAW MODELS MODERN TRADE LAW NOW GOES BEYOND GATT/WTO ALONE IN PRACTICE TO ENCOMPASS 1. Multilateral trading system (GATT/WTO) 2.Regional agreements & law like NAFTA or EU law, often including investment rights 3.FTAs, but again what is difference between FTA & regional communities 4.Changing emphasis beyond goods to include new areas like services & TRIPs, differences now in areas like investment & competition policy, changing trade & production patterns