Discipline of International Economic Law

Definitions
Economic law: laws underlying the functioning of international markets
Global Governance: internal rules governing global organisation: e.g. WTO, IMF, World
Bank

Central Themes
1. Protectionism v Liberalisation
2. International Commitments v Sovereignty

Protectionism
In a nutshell: A protectionist trade policy allows the government of a country to promote
domestic producers, and thereby boost the domestic production of goods and services by
imposing taxes or otherwise limiting foreign goods and services in the market. Types of
protectionist policies include:
1. Tariffs: they increase the price of imported goods in the domestic market, which,
consequently, reduce the demand for them.
2. Quotas: are restrictions on the volume of imports for a particular good or service
over a period of time. A constraint on the supply causes an increase in the prices of
imported goods, reducing the demand in the domestic market.
3. Subsidies: are negative taxes that are given to domestic producers by the
government. They create a discrepancy between the price faced by the consumers
and the price faced by producers.
4. Standardisation: The government of a country may require all foreign products to
adhere to certain guidelines. Standardisation measures tend to reduce foreign
products in the market.
Reasons for protectionism: An economy usually adopts protectionist policies to encourage
domestic investment in a specific industry. The idea is to provide more growth
opportunities, lower imports, more jobs, and a higher GDP. The disadvantages of such
polices are however, stagnation of technological advancements, limited choices for
consumers, increase in prices due to a lack of competition, and economic isolation.

Liberalisation
Economic liberalisation is the lessening of government regulations and restrictions in an
economy in exchange for greater participation by private entities; the doctrine is associated
with classical liberalism. Thus, liberalisation in short is the removal of controls in order to
encourage economic development. This allows for partial or full privatisation of
government institutions and assets, great labour market flexibility, lower tax rates for
businesses, less restriction on both domestic and foreign capital, and open markets.

International Obligations v Sovereignty

One of the issues international legal theory has struggled with has been how to reconcile
state sovereignty with international obligations. The theoretical debate has been
dominated by proponents of natural law(natural requirement for specific behaviour) and
positivism(consensual theory). While international law, arguably, undermines the notions
of state sovereignty, such a hard-line stance is not compulsory.

The existence of a plurality of of sovereign states justifies the binding character of

international law. International obligations viewed as a logical consequence of sovereignty
serves to correct the, otherwise polar, perspective. (Spiermann)
In practice, all states accept that they are members of a society of states and that they all
benefit from the rules required for maintaining peaceful coexistence within the society they
form. While violations of international law are rare, when a state does violate an
international law, it does not argue that the law does not apply to it, rather, it argues that
the allegation is incorrect and that it was somehow justified in violating the prohibition.

Welfare v Warfare
International Economic Law is oriented towards the promotion of higher living standards
and the creation of wealth. But a key purpose of the Bretton Woods Institutions was the
avoidance of further armed conflict as well as ensuring global economic integrity. The idea
being that, the more deeply engaged states are in multilateral organisations, the less likely
they are to go to war because:
1. they rely on each other
2. there are sufficient resources to be enjoyed by all
There was an added emphasis on diplomatic solutions and avoiding isolationism.

Economic Independence and Globalisation

Due to globalisation there is no longer such a thing as national economy or domestic
banking. Economic activity is becoming increasingly international. When you enter the
international sphere, some degree of loss of governmental control is ancillary, i.e. the
erosion of nationalism. The focus has shifted towards the balancing of international
obligations and a desire to ensure proper functioning markets against national sovereignty
and public interest.

International Trade: Principles

International trade tends to be regulated domestically but supervised by international
rules. It consists of both at the border and behind the border measures. These rules are
characterised by treaty based rules and case law. Rooted in pragmatism, including legalism
and diplomacy, rather than a rigid adherence to rules, there is emphasis on granting access
to internal markers on a concessionary, reciprocal basis; harmonising regulations and
doing so transparently with a recognition for non-economic values.

Rationale for Trade

Theory of comparative advantage: a state should specialise and export that product
in which it has a cost advantage and import that second product where its cost advantage is
relatively smaller.

International Investment: Principles

Foreign Direct Investment (FDI): foreigners manage the operation of the business in
another state. Multinational enterprises locate in foreign states as part of their business
strategy. States seek to attract multinational enterprises for economic growth. However,
tensions may arise between the foreign investor and the host country resulting in the
inability of state to regulate, resulting in the loss of profitability of the investor. There is no
central organisation or body of law governing international investment, these regulations
can however be found in a network of bilateral and regional treaties.

Rationales for FDI – Profit and Development

The primary motivation for forms in engaing in FDI is profit, ideally be strengthening a
firms marker share. Multinationals can be characterised as either:
• Cost Oriented: motivated by a desire to cut costs by establishing a foreign presence,
e.g. oil companies
• Market Oriented: motivated to expand market and increase sales abroad, e.g. car
companies
Internationalisation is seen as gradual process, although some firms are born global. The
primary motivation for states seeking FDI is economic advancement including capital as
well as know how.

The main topics of international economic law are as follows:

1. International Trade (WTO and regional trade agreements)
2. International Monetary System (IMF)
3. International Investment (international investment treaties)
4. International Development (World Bank, regional development banks and New
Development Bank)

Sources of International Law

• Art 38, Stature of the International Court of Justice
◦ international conventions
◦ customary international law
◦ general principles of law (jus cogens)
◦ judicial decisions
◦ academia
• Art. 31, Vienna Convention on the Law of Treaties
◦ treaties shall be interpreted in good faith in accordance with ordinary meaning
in light of its purpose

Sources of International Economic Law

• State – State Agreements
◦ Bilateral
◦ Regional
◦ Mega-Regional
◦ Multi-lateral
• Custom
◦ limited role of custom in IEL, lack of consensus among states, in part due to
cultural and political diversity, e.g. full compensation for expropriation
• Judicial Decisions
◦ No system of precedent in international law
◦ ICJ has not played a significant role in IEL
◦ WTO panels and Appellate Body Decisions
◦ Investor-State arbitration through many tribunals

Problems exist regarding the coordination of a multitude of agreements and typically

internalised mechanisms for interpretation and dispute resolution.