Int'l Trade Law Flashcards
Int’l Trade Law Fundamentals
GATT (General Agreement of Tariff and Trade) roots in Adam Smith/David Ricardo’s idea of self-actualization through free decision of contracts: best product attracts best response, incentivizes creation of good wares => should specialize in what we do best.
Libertarian free trade theory includes everyone and everyone is allowed a chance.
Main idea: national boarders are distorting, discriminatory that deny consumers and manufactures free choice => system set up to give access. The more inclusion, the less disruption/fights/friction.
Two Doctrines in Int’l Trade Law
Two main doctrines:
1. Doctrine of National Treatment
2. Doctrine of Most Favorite Nation
⇨ Increasingly judicalized through trade agreements dispute resolution clauses.
Doctrine of National Treatment
You cannot discriminate between you nationals and others when it comes to importing/exporting like products [Anti-discrimination].
Doctrine of Most Favorite Nation
You have to treat your most favorite trading partner like everyone else [Aspirational].
Economic Challenges to Free Trade
Tension between individual self-maximization and the public good (externalization of cost: labor, environment, generations. In theory these costs should be included in the price) ⇨ Treaties try to account for this.
Emotional Challenges to Free Trade
Everyone loves free trade until they loose. Two ways to respond to competition:
1. Improve
2. Complain to the government to use protective measures
Protectionism leads to those that were loosing appealing to government to keep competition out.
Keeping competition out through
- Tariffs
- Non-tariff Barriers: (1) Quotas on imports and sales OR (2) Subsidies
- Process Based Concerns: requires prove that the good has been produced a certain way (no toxic chemicals, good pay) => may be unable to conform.
⇨ Disguised protectionism will not survive judicialization.
Principles of Trade Policy
Transparency: limits on trade have to be transparent: give notice, explain rational, give trade partners technology, resource etc. so that they can rise to the standard.
(Most Favorite Nation and National Treatment)
Other trade related concepts that have emerged
All of them are rooted in the idea that it improve the economic life of all:
- Customs Union
- Free Trade Zone
- Currency Unions
- Free Movement of People and Goods
- Trade Associations trying to built and trade zones
⇨ All involves economic skepticisms of protectionism.
Free Trade Zone vs Customs Union
Customs Union has a deeper integration, may share open boarders, currency, and a common external trade policy. Free trade zone ensures cooperation, but countries still have their own trade relationships with external countries.
Challenge a domestic trade measure
Is the measure a tariff or non-tariff barrier (Chapter 5 of NAFTA)?
- Show it’s discriminatory (discriminates between nationals of the state and non-nationals) -> Direct discrimination or disparate impact discrimination (color, size, process of goods). AND
- Show that the discrimination is between like products.
Discrimination: burden on plaintiff to show, then flips and state has to show rational.
Trade Litigation Fundamentals
Trade litigation is like ICJ litigation in that its state vs state w/o private remedy under NAFTA (Exception: Chapter 11: Investments) => Has to invoke the NAFTA dispute resolution framework.
Trade Litigation Steps
Step 1 Allegation of Breach
Step 2 Defense
Step 3 Remedy in Trade Litigation
Trade Litigation Step 1
Allegation of Breach: The measure is a tariff or non-tariff trade barrier [Chapt. 5].
Major legal test: tariff or non-tariff barrier is if it violates the national treatment doctrine (is is discriminatory against out of country market sectors).
Trade Litigation Step 2
Defenses: Two options
- Measure ≠ a tariff or non-tariff barrier. Classify it as a Sanitary Measures or Standards.
- Admit measure = tariff measure and invoke emergency action etc. Under the GATT Chapt. 20 there are exceptions that can withhold a legal challenge.
Trade Litigation Measure ≠ a tariff or non-tariff barrier = Sanitary Measures
Chapter 7: Sanitary Measures: measure sets health-based standards to keep out products that may be linked to disease or pest => lower level of scrutiny.
- Sanitary measures = people
- Phytosanitary measures = plants
Trade Litigation Measure ≠ a tariff or non-tariff barrier = Standards
Chapter 9: Standards: broader category than sanitary measures relating to safety, protection of plant-live, the environment, and consumers.
This will apply to legislation that restricts trade if it can be shown that:
1. There is a scientific/empirical viability of the measure.
2. Has to be in line with int’l standards.
3. 9.04 It applies to everyone.
4. 9.09 It invokes the principle of transparency
Trade Litigation Step 3
Remedy in Trade Litigation: usually not termination or suspension of benefits.
- First and foremost, specific performance or injunction against the measure.
- Retaliation: calculate amounts of harm of measures and adopt a measure that has a similar amount of damages; this can be any market sector.
Political/Economic Dilemma in Trade Litigation
- Major factor whether state pursues specific performance depends on the domestic power of affected market sector.
- Not everyone can afford to sue.
- Conflict of nations correlates with trade barriers.
GATT allows deviation from most favorite nation standard in a regional integration, like NAFTA.
Dispute Resolution in NAFTA
Chapter 20
Step 1 State can demand consolation (most resolved here) if that doesn’t work => Step 2.
Step 2 20.07 Request meeting? If that doesn’t work => Step 3.
Step 3 20.08. Request Arbitration Panel
Step 4 20.18 implementation of final report
Step 5 20.19 remedies
20.21 = no private right of action
Arbitration Panel Process NAFTA
Step 3 20.08. Request Arbitration Panel
- Panel issues an interim report (is there an inconsistency b/w the measure and favorite nation doctrine).
- States get to comment one the interim report
- The panel passes a final report.
Chapter 11 Fundamentals
UMNCA (modeled after of NAFTA) trade investments => Chapter 11: individual investors may directly challenge a regulatory framework of another state if it directly influences their investments (private right of action) => controversial.
Chapter 11 gives foreign (not domestic!) investors in the US a legal remedy.
Canada withdrew from NAFTA Chapter 11.
Chapter 11 Protections for Investors
- National treatment;
- Most favorite nation treatment;
- Minimum standard of treatment (11.05) => no investor can be treated in a way that departs from fair treatment of customary int’l law. Cannot treat foreign investors in ways that are “egregious, outrageous, and shocking in conduct;”
- Standards;
- 11.10 bars direct of indicted nationalization, taking, or expropriation OR measures that are de facto expropriations (indirectly) with EXCEPTIONS
Chapter 11 Expropriation Regulations
- 10 bars direct of indicted nationalization, taking, or expropriation OR measures that are de facto expropriations (indirectly) => impermissible UNLESS:
- It’s for a public purpose;
- On a non-discriminatory basis;
- Involves a level of due process (notice etc.); AND
- Have to compensate fair market value.
NAFTA Side Agreements
Trade integration may democratize and uplift the assertion of human rights.
At NAFTA conclusion different constituencies feared a race to the bottom, especially environmental and labor groups => two side-agreements:
1. Labor Agreement
2. Environmental Agreement
⇨ Environmental agreement pushes (1) transparency and (2) proceduralism, does NOT set any substantive rules.
Enviro. Side Agreement
Heart: effectively enforce the environmental laws that are already in place (domestically). Creates a remedy when a party “engages in a persistent pattern of failure to enforce their domestic environmental law.” All three NAFTA states are federal; small “s” states are responsible for enforcing the laws; but fed gov’t is accountable to the other members.
Side agreement operates through private actors filing submissions w. Secretariat pointing out when the local gov’t does not effectively enforce environmental law.
Enviro. Side Agreement Steps
Step 1 Art. 14: Triggers measure allowing anybody to file a submission.
Step 2 Art. 15: Permits if the NAFTA Secretariat believes that the submission warrants a fact finding record.
Step 3 Exceptions.
Step 4 Art 22: Consultation => Council session => Arbitration panel.
Step 5 State responds to allegation of non-compliance.
Step 6 Half a year later: Fine.
Step 7 Not paid => Suspension of benefits.
Enviro. Agreement Step 1
Art. 14: Triggers measure allowing anybody to file a submission that a gov’t agency is failing to enforce environ’l law. High number of submission (people submit b/c they care about environmental issues OR profits).
Enviro. Agreement Step 2
Art. 15: Permits if the NAFTA Secretariat believes that the submission warrants a fact finding record -> they make it publicly available.
=> Remedial approach based on shame, embarrassment, exposure: a bureaucratic, unelected, administrative body can publish submission it thinks meritorious to encourage compliance.
Remedy for “persistent pattern of failure to effectively enforce environmental law” => best evidence = repeated submission and publication involving a specific gov’t agency. The secretariat can request consultations.
Enviro. Agreement Step 3
Exception:
State can show that decision not to enforce an environmental regulation was based on good faith budgetary, resource, or investigative limitation.
Art. 45: Def “persistent pattern” = sustained or recurring action or inaction; “effectively enforce” = enforce law in the books.
Enviro. Agreement Step 4
Art 22: triggers consultation requirement: if not successful? => Council session: law and third party decision making. An arbitration panel may be established = adjudicative decision on “persistent pattern:”
1. Initial report;
2. State can reply and comment;
3. Final report.
=> If it identifies “persistent failure” has to remedy it and enforce the law on the books. If it doesn’t lead to compliance => Art. 35.
Enviro. Agreement Step 5
Art. 35:
1. State agrees that it is what non-compliance looks like but does not do it (passive aggressive); OR
2. State doesn’t agree that’s what compliance looks like.
=> Arbitration panel reconvenes and issues an action plan.
Enviro. Agreement Step 6
Half a year later: no compliance => Fine can be issued: monetary enforcement assessment 0.0007% of total benefit of NAFTA.
Enviro. Agreement Step 7
Not paid? => Suspension of benefits in amount equivalent to monetary assessment.
WTO Litigation re Environment Fundamentals
GATT foundational institution of Post-WWII order. It was run by WTO; initially issued non-binding decisions.
1994 -> Marrakesh Round Table created WTO, made arbitration mandatory and binding.
The structure of the GATT is similar to the structure of the NAFTA:
Tariff and non-tariff barriers and
Transparency
WTO Litigation re Environment Art. 20 Components
Art. 20 of GATT has two components:
- Chapeau (Hat): To qualify for exceptions for barrier the measure cannot be arbitrary or unjustifiably discriminatory or a disguised discrimination; cannot discriminate between domestic and non-domestic producers.
- Exceptions:
(b) environmental measures necessary to protect plants and animals
(g) protection of exhaustible natural resources
Critique of Trade Dispute Resolution Process
Who are the dispute resolver (people on the panels)?
- Virtually all int’l lawyers who believe in the ideology of free trade.
- Dominate principle: trade liberalization.
- Submissive principle: environment (as an exception).
- All schooled the same way.
