International Trade and Investment Outline

International Trade and Investment Law Outline – Fall 2013 – Joyner
 
Introduction
·         Free trade
o   No standardized tariffs
o   Imported goods on the same level as domestic goods (leveling the playing field):
§  Leveling effect
·         all players on the same level of the competition
§  Problems
·         Collective action problems – free rider problem
·         Free trade combats these problems by making the entities join the group
·         Regulatory barriers to trade:
o   Outright bans
§  Substances, goods, services
§  Cannot be traded internationally
§  Example: asbestos
o   Tariff
§  What is a tariff?
·         A tax on imports and exports
·         At the border when goods come into the country
·         Fundamentally revenue raisers
·         Have also been used in a discriminatory fashion to implement policy – can be by country or product
o   Custom duties
o   Non-tariff Barriers
§  Limited only by custom officials
§  Anything that increases the cost of getting the good to market
·         Unfair trade practices
o   Subsidies
o   Dumping
§  Flooding foreign market with cheap goods
§  For less than the cost of production or cost to sell in the domestic market
·         All of these trade practices have the same effect:
o   Used to artificially effect marketability in that sector
o   Have a significant effect of flow of a product because it effects prices and competitiveness
·         GATT
o   1947: did not have a number of administrative entities when it was born
o   fixed during the Uruguay Rounds in 1986 (created the WTO)
o   suppose to focus on trade rules: tariffs and non-tariff barriers
o   purpose was to make countries interdependent
o   why would you want to channel all trade barriers into tariffs?
§  Easily quantifiable (in numbers)
·         WTO
o   Administrative layer
§  The law is found in the underlying treaties (that has been amended to the WTO administrative body)
·         most important the GATT of 1994
·         GATS
·         TRIPS
·         DSU (dispute settlement understanding)
§  The most important thing is the dispute resolution
·         The DSB is the dispute settlement mechanism of the WTO
·         Suppose to be three institutions
o   World bank
§  For long maturity
o   International monetary fund
§  For short maturity
o   General agreement on trade and tariffs (GATT)
§  Regulate tariffs
·         Three fundamental purposes of GATT: essentially “leveling the playing field”
1.     Channel all trade barriers into tariffs
2.     Bind tariffs in a transparent manner
3.     Through non-discrimination, lower tariffs generally
a.       Generalized MFN
b.      National treatment
·         Comparative Advantage
o   People do what they are best at and rely on others for the things that they don’t do well
o   More efficient to allow entities to do what they are good at (synergy)
o   The leveling effect of free trade facilitates the interdependence of comparative advantage
·         Race to the bottom
o   When on manufacturer moves to the lower labor cost areas and the rest race to the bottom to compete with the manufacturer
o   If you lower tariffs across the board where is that capital going to?
§  The one with the least, that is why there is a race to the bottom
·         International Investment Law
o   Hybrid between public and private law
o   When you have an investment, one company or person committing their assets into jurisdiction of another country, you are losing a lot of control over those assets – so countries have been placing barriers on themselves – bilateral investment lobotomy
 
I.       Fundamentals of International Trade Law
a.       3 Fundamental purposes of General Agreement on Tariffs and Trade
                                                               i.      Channel all trade barriers into tariffs (Art. XI)
·         Why?
o   Because tariffs are transparent and quantifiable
·         Language:
o   “no prohibitions or restrictions, other than duties, taxes, or other charges… shall be instituted or maintained.. “
                                                             ii.      Bind tariffs in transparent manner (Art. II)
·         Accomplished through tariff bindings
                                                           iii.      Through application of non-discrimination rules, lower tariffs across the board (Art. I & Art. III)
1.      MFN – Article I
a.       Exceptions
                                                                                                                                       i.      Preferential trade agreements
b.      Agricultural subsidies
c.       TRIPS
                                                                                                                                       i.      Intellectual property
2.      National Treatment – Article III
a.       GATT III:2
                                                                                                                                       i.      Internal taxes
b.      GATT III:4
                                                                                                                                       i.      Internal regulations
b.      Definitions of “LIKE PRODUCT”
                                                               i.      GATT Art. I – MFN
·         Greater discretion to states
·         (1) you have to treat imported products no less favorably than you treat similar domestic goods
·         panel will generally defer to classification of the importing state in the form of rebuttable presumption
o   however, you can be rebutted if classification has been diverted from its normal purpose to become a means for discriminat