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Unit I

Nature and Scope of International Trade Law and its Traditional relationship with International Law

Definition of International Economic Law International economic law in its widest meaning refers to those rules of public international law which directly concern economic exchanges between the subjects of international law. Peaceful relations between subjects of international law are, after all, to a very large extent directly concerned with economic exchanges. Seen from this angle, international economic law thus covers only a part, albeit an important one of the discipline of public international law as a whole. This argument will be unwelcome to those who maintain that international economic law is or should be a discipline of its own, separate from public international law. Whatever may be the argument regarding the subject as a separate discipline it is necessary to touch upon all aspects of international economic law. International economic law includes monetary law, competition anti!trust law, intellectual property and law and development. It embraces alternative perspectives, such as Third World and feminist criti"ue and interdisciplinary approaches and concerns itself with the distribution of wealth and justice and with preservation of culture, the environment and peace. Professor #eorg Schwar$enberger defined international economic law as %a branch of public international law that encompassed such matters as the ownership and exploitation of natural resources, the production and distribution of goods, invisible economic or financial transactions and currency and finance&. International economic law was to be found in treaties and to a limited extent in customary international law and so called general principles of law and was evidenced in the same way as public international law generally through treaties, decisions of international and domestic courts as well as in the views of writers. That international economic law was fundamentally no different than the rest of public international law was an axiom for Schwar$enberger, %economic sovereignty remains the starting point of International 'conomic (aw as is sovereignty that of International law at large&. )ustrian jurist Professor Igna$ Seidl!*ohenveldern defined international economic law as +those rules of public international law which directly concern economic exchanges between the subjects of international law. *e also tried to come to terms with the fact that economic exchanges involve not only states but also +multinational enterprises,, or

arrangements between states and nationals of other states. *e did this by adopting the +modern doctrine which extends the categories of subjects of international law, that is by broadening the traditional concept of international law. *e also found the sources of international economic law to be the traditional sources of international law treaties, customary international law, general principles and subsidiary sources but unli-e Schwar$erberger he did not place economic sovereignty at the foundation of international economic law. *e had a somewhat more nuanced view of sovereignty, considering that the concept of +relative sovereignty, reflected more accurately the reality of international economic relations. The common feature of the Schwar$enberger and Seidl!*ohenveldern approaches, as well as that of the .ollo"ue d& /rleans, is that they all located international economic law in the +economic relations of states,. That of course justifies treating international economic law within a traditional international law framewor-. )fter all, international law is all about the relations of states0 and if international economic law is about the economic relations of states, it goes without saying that international law are of the same genus. Sovereignty of States Reality of International Trade 1ut when we turn to international trade law, we face a dilemma. )lthough the process of international trade regulation may give the appearance of being about the relations of states, in reality international trade is not about the relations of states at all. There is enormous scope for debate about the economic activity of buying and selling where the transaction crosses a border. ) simple model of international trade is a cross!border sale of goods. ) seller in one state 2State )3 sells goods to a buyer in another state 2State 13. The goods are shipped from ) to 1 and money to pay for the goods is transferred from 1 to ). This exchange is, in essence, no different from a sale of goods from one individual to another ta-ing place solely within one state alone. It constitutes international trade only because the transaction involves the transfer of something of value across a border. .ross!border exchanges are, of course, not limited to the sale of commodities or of manufactured goods, what is being purchased may not be goods but rather services, or the transaction may involve the movement of capital from State to another through loans or investment. Such international transactions are no more than cross!border examples of transactions that ta-e place every day within States. This subject is concerned with the

movement of goods, services, capital, and in some circumstances, labour, across borders. This mirrors the reality of international economic activity 4 trade in services is substantial part of international trade and trade and trade in services and investment are often inextricably tied to trade in goods. International trade law, then, is about the impact of borders and of nation States on economic exchanges. If borders did not exist, the activity of buying and selling would nevertheless still go on. Transactions would continue between individuals 2firms, corporations3, involving the movement of goods, services and capital. 'conomic exchanges would occur regardless of the existence of States. International trade law is about getting rid of the impediments to economic exchange that borders and nation States impose. The regulation of international trade is concerned with limits on the ability of states to interfere with the cross!border exchanges. In other words, the starting assumption of modern international regulation of trade is that border and other barriers to cross!border economic exchanges must be limited if not eliminated. International trade law is concerned with removing the impediments that sovereignty places in the way of trading across borders n one sense, international trade law is about the irrelevance of the sovereignty of States. )nd this stands in contrast to international law for, as Professor .arreau noted at the .ollo"ue d& /rleans, the starting assumption and defining characteristic of international law is the sovereignty of States. In international trade regulation, the role and functions of States ta-e on a somewhat different character from those traditionally perceived in international law. States are relevant to international trade law because of their regulatory functions on either side of borders, because they can facilitate or impede international trade, and can implement international trade rules, and because in some instances they engage in trade themselves. 1ut the concept of +economic sovereignty, on which Professor Schwar$enberger founded international economic law 4 the idea that States are autonomous, independent, territorially based political units, is not the foundation of international trade law. Indeed, as will be seen, in the light of what is commonly termed +globalisation,, today it can be "ueried whether +economic sovereignty, can even be said to exist. Thus, it can be said the field of international trade and economic law have not been considered part of the mainstream of international law. The traditional approach to international law, that had little place for international trade law, is no longer ade"uate for

international society today. In this regard, there are two major areas one has to focus on, first the end of the .old War, and second +economic globalisation., Developments in International Trade End of the old !ar With the end of the .old War, a defence or peace and security based rationale for States or for international law is less compelling. Today, #overnments! States are concerned with economic welfare. Indeed, one of the, if not the, most important expectations that citi$ens have of their #overnments, at least in democratic States is the enhancement and preservation of, their economic, social and cultural welfare. In doing this, issues of defence and of peace and security in relation to threats from other States are a small 4 an important but nevertheless increasingly small 4 part. 5oreover, since the .ollapse of .ommunism in the former Soviet 6nion and 'astern 'urope, and the movement of these countries, and now of .hina, towards varying forms of mar-et economies, there is no longer any significant challenge at the level of States to the mar-et economy system of which contemporary international trade is a part. )lthough there are divergent views on the precise direction, pace and necessary instruments to achieve mar-et economies, as well as how far down the road particular States should go, and how other values in society , such as distributional goals are to be dealt with, there is simply no competing political vision amongst States to economic liberalisation. )nd as a conse"uence, there is no suggested alternative to an international economic regime in which international trade is an essential part. Independently of the end of the .old War, although perhaps influenced it, the results of the 6ruguay 7ound of multilateral trade negotiations and creation of the WT/, have led to a new dynamic in the regulation of trade. It can be said that just as the 6nited 8ations .harter was the defining regime for post!War peace and security, the WT/ may be the defining regime for multilateral trade in its broadest sense in the post! .old War era. Economic "lo#alisation The +national economy, involved capital and labour that was used within each State or society to exploit primary resources and to manufacture goods. The resulting products were sold within the mar-ets of the State or available for export. 7esources or goods from

other States were imported for direct sale or utili$ed in manufacturing. 6nder the model of a +national economy,, the international part of the economic process 4 trade 4 constitutes an addition to domestic production 4 it remedies a shortfall in that production. This image of +national economies, implies the existence of independent, self!contained economic systems that intersect at the point at which their nationals trade with each other. This is a common image of economies of states, and the +international economy, is seen as the aggregation of these national economies. 1ut the image is misleading. The picture is "uite different. Since the liberali$ing of capital mar-ets in the 9:;<s, capital is no longer domestic, it moves freely across borders. Whereas #overnments used to control how much money their nationals could ta-e out or bring into the country, i.e., exchange controls, have disappeared in many countries. =oreign exchange transactions encompass investment and speculation as well as financing of trade in goods. =urther, manufacturing is no longer a domestic process. )s a result of the liberali$ation in the movement of capital, manufacturers are able to move to where they can produce most efficiently, ta-ing advantage of economies of scale, labour costs, and the use of technology. The substantial reduction in transportation and communications costs and advances in technology have facilitated this. )s a result, products are assembled from components that may be manufactured in a variety of countries, so that the end!product exported may be put together from services and components derived from several other countries. Thus, what might appear to be a domestic manufacturing process, designed to produce goods for domestic consumption, is in fact, a complicated international transaction. It can be seen that there has been an internationalisation of production, of investment and of distribution systems0 with the result that economic activity in one State which contributes to that State&s domestic economy is inextricably lin-ed with economic activities in other States, each contributing to the domestic economies of those States. Thus, the domestic economies of the States themselves are inextricably lin-ed. This is what is often popularly referred to as +globali$ation,. The idea of a national economy, controlled and regulated by central government authorities is becoming less and less realistic. The idea of a +national economy, becomes little more than a convenient accounting mechanism.

+'conomic globalisation, is not just a developed, Western State phenomenon. 8or is it limited to common mar-ets, such as the 'uropean 6nion, or to free trade areas such as 8)=T). 5ar-et economies, which in their various manifestations have become the predominant economic systems in States, are demonstrating these characteristics throughout the world. In short, the international economic environment in which States function has fundamentally changed. =rom the above discussion it can be deduced that the scope of international economic law is very wide and the regulation of international trade is concerned with limits on the ability of States to interfere with the cross!border exchanges. =urther, international trade law has been seen as marginal to the field of international law. )ttempts by scholars to explain that international economic law is really the same as the rest of international law have generally been unconvincing. ) +peace and security, starting point for international law ignores the reality of the post! .old War era where for many States economic welfare is a more fundamental concern than is fear of aggression from other States. ) +peace and security, situation for international law also ignores the fundamentally different economic reality of a globalised and globalising economy.