A General Introduction to

International Economic
Law
 Introduction to the unit

This unit is an introduction to the subject of International Economic

Law. It includes a historical development of the subject and refers to
the principal organisations related to International Economic Law.
In general, international economic law (IEL) is concerned with the
governance of international economic relations between states as they
affect individuals in a state, including in particular their relations inter
se across national boundaries. As such, the principal preoccupations of
IEL involve international trade, international investment, international
monetary and financial law, and international development law. A
traditional drive for this normative framework has been the facilitation
of the optimal allocation and use of national and international
resources for the development of all the people of the world.
Defining IEL is a complex process involving a bundle of questions that
need to be understood at the outset before any firm definition is
articulated. The process involves first and foremost the “is” question:
What is IEL? This question involves a consideration of the legal sources
of IEL, the subject matter that is the object of IEL disciplines, and the
subjects that are subject to IEL. Second, the process involves the
“ought” question: How should IEL be redefined? This can be in terms of
its sources, its subjects, and subject matter, even in terms of its very
objectives. 
 Third, the process involves refocusing from a global perspective to a
closer, microlevel scrutiny of the subject. At this level, the questions
focus on defining the sets of regimes that make up the international
economic system and configuring them in relation to each other and
the international economic system as a whole, including the system of
IEL in the wider international order. Fourth, another subtext of the
process of defining IEL involves inquiring into how international
economic governance should be allocated among the state, region,
and multilateral levels
 Finally, the process of defining IEL is a dynamic process and involves a
constant appraisal of whether international economic relations are
developing in such a manner that corresponding adjustments to the
definition of IEL are called for. The process of defining IEL in this
manner elevates the question from a mere academic discourse to one
of the most profound inquiries in international economic relations, one
that is highly relevant to informing our responses to contemporary
international economic problems and that is ubiquitous in all manner
of national, regional, and multilateral economic governance.
The approach to IEL herein is from the perspective of public
international law, with a focus on the traditional preoccupations with
world trade, money and finance, investment and taxation, and
international development law.
 General Overviews

Historically there have been very few general textbooks in IEL. This
remains the case. This is to be contrasted with public international law,
wherein there have been and continue to be more established
textbooks worldwide, including many from the same jurisdiction, that is
to say, the United Kingdom. Those general textbooks that have
emerged have generally mirrored the phenomenal development of the
subject, with the preoccupations of the dominant states driving
developments in international economic relations.
Moreover, because of the growth of the subject, generalists in IEL are
becoming rare, even though the modern exigencies of the subject call
for a “global” perspective to it. Thus, trade specialists and writings on
world trade law have become abundant while monetary and
development specialists are fewer. Be that as it may, the generalist
treatment of the subject can either be relatively neutral or from a
particular perspective. 
 Nature of International Economic Law

International Economic Law deals with the regulation of economic affairs

between two or more different States. This is its main function. If such
regulation applies to two States only, we then speak
of bilateral economic regulation. If, on the other hand, such regulation
applies to more than two States, we speak of multilateral economic
regulation.
Beyond this, International Economic Law is seen to increasingly deal with
the regulation of traders from different countries. As a result,
International Economic Law has a dual character nowadays, as it deals
both with the regulation of economic relations of different States but
also with the regulation of traders from different countries.
 The Bretton Woods Agreement

The foundations for the organisations relating to modern International

Economic Law were laid in 1944 with the Bretton Woods Agreement.
The Agreement was concluded by 44 Allied States.

The Bretton Woods Agreement grew out of the desire to eradicate the
causes that led to the Second World War, the ultimate goal being the
creation of a new world economic order.
 The Three Regulatory Pillars of the World Economic Order

The Bretton Woods system gave birth to three international organizations

of paramount importance for International Economic Law.
These are:
• The World Trade Organization (WTO) (the successor of the General
Agreement on Tariffs and Trade)
• The International Monetary Fund (IMF)
• The World Bank Group
• These are generally perceived as the three main organisations regulating
the international economic order.
 Benefits of Bretton Woods Currency Pegging

All of the countries in the Bretton Woods System agreed to a fixed

peg against the U.S. dollar with diversions of only 1% allowed.
Countries were required to monitor and maintain their currency pegs
which they achieved primarily by using their currency to buy or sell
U.S. dollars as needed. The Bretton Woods System, therefore,
minimized international currency exchange rate volatility which
helped international trade relations. More stability in foreign currency
exchange was also a factor for the successful support of loans and
grants internationally from the World Bank
 KEY TAKEAWAYS
1. The Bretton Woods Agreement and System created a collective
international currency exchange regime that lasted from the mid-
1940s to the early 1970s.

2. The Bretton Woods System required a currency peg to the U.S. dollar
which was in turn pegged to the price of gold.

3. The Bretton Woods System collapsed in the 1970s but created a

lasting influence on international currency exchange and trade through
its development of the IMF and World Bank.
The Bretton Woods Agreement created two Bretton Woods Institutions,
the IMF and the World Bank. Formally introduced in December 1945
both institutions have withstood the test of time, globally serving as
important pillars for international capital financing and trade activities.
 The IMF and World Bank

The Bretton Woods Agreement created two Bretton Woods Institutions,

the IMF (International Monetary Fund ) and the World Bank. Formally
introduced in December 1945 both institutions have withstood the test
of time, globally serving as important pillars for international capital
financing and trade activities.
The purpose of the IMF was to monitor exchange rates and identify
nations that needed global monetary support. The World Bank, initially
called the International Bank for Reconstruction and Development, was
established to manage funds available for providing assistance to
countries that had been physically and financially devastated by World
War II.1 In the twenty-first century, the IMF has 189 member countries
and still continues to support global monetary cooperation. Tandemly,
the World Bank helps to promote these efforts through its loans and
grants to governments
 The Bretton Woods System’s Collapse

In 1971, concerned that the U.S. gold supply was no longer adequate to

cover the number of dollars in circulation, President Richard M. Nixon
devalued the U.S. dollar relative to gold. After a run on gold reserve, he
declared a temporary suspension of the dollar’s convertibility into gold
By 1973 the Bretton Woods System had collapsed. Countries were then
free to choose any exchange arrangement for their currency, except
pegging its value to the price of gold. They could, for example, link its
value to another country's currency, or a basket of currencies, or simply
let it float freely and allow market forces to determine its value relative
to other countries' currencies
The Bretton Woods Agreement remains a significant event in world
financial history. The two Bretton Woods Institutions it created in the
International Monetary Fund and the World Bank played an important
part in helping to rebuild Europe in the aftermath of World War II. 

Subsequently, both institutions have continued to maintain their

founding goals while also transitioning to serve global government
interests in the modern-day.