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International Trade
University of Iowa School of Law
Rossi, Christopher R.

International Trade
Rossi Fall 2015
–          International Trade Course
–          Money Matters
Fundamental Concepts
History of International Regimes
International Law of Trade
–          Goods
–          Services
–          Ideas (Intellectual Property)
Current issues in the international trade: Chinese devaluing their money – Chinese exports become attractive – the rest of the world exporting less (other export driven countries are not happy!) vice versa
–          Indicative of fundamental systematic problem
–          The value of money will affect trade!
China (the largest export) – European Union (the largest import)
Southeast Asia – Indian Ocean – Suez Canal – Europe: takes 48 days
Hugo Grotius: famous international lawyer, poet
–          MARE LIBERUM (1609): free sea by Grotius
o   For commerce, Sea must be free
o   Sharing of the sea and the start of the trade
o   What did he mean when he labeled the seas a res communis, the use of which was reserved for humanity’s benefit?
o   Subtitle: for the right of Holland to trade with Asia
–          MARE CLAUSUM by John Selden from England
o   Closed Seas
–          Grotian Tendency: states acting individually or in concert to appropriate emerging resources to the exclusion of other states and to the detriment of a global common use doctrine
o   But his idea of mare liberum remains multi-textured, as does his idea of common use. (Particular Kind of Dominium by Christopher Rossi)
–          The history of international law teaches that capable states, through cupidity and curiosity, through emergent technology and change, through innovation, derring-do, and good fortune, continue to validate the historical tendency to territorialize common space when means and interests allow, leaving international legal scholars to wonder in their wake, whatever did Grotius mean by, and whatever remains of, his common use doctrine, introduced in a small pamphlet on the Free Sea many year ago?
–          Dutch’s interest in commercial power
–          Shipbuilding
Constantinople (Istanbul)
–          Between Europe and Asia
–          Controlling the trade
–          Largest Navy
–          Trade made them rich
–          Closed Trade
Greeks and Romans
–          Controlling the sea by closing it
–          Spices
–          Obstructed by the Venetians
16th Century
–          Trying to control Mediterranean
–          Dutch never had a chance
–          So Dutch hires Grotius to publicize and politicize about the free sea
–          Holland: Dutch East India Company (monopoly) = VOC
Vasco De Gama (15C-16C) from Portugal
–          Atlantic Waves, Coast of East Africa
–          The very first to sail from Europe to Asia finding a route going around the Africa
–          Atlantic Waves in the East Africa: Roaring 40s parallel
–          Indian Ocean to Malayasia
–          The opening of the age of global imperialism and for the Portuguese to establish a long lasting colonial empire in Asia
–          Circumnavigating right back
–          Portuguese controlling the sea and trade
–          Grotius is hired to break this monopoly
o   Later, Dutch finds out new way
o   Holland is the new rising power
o   Except the Macau; Malaysia; Goa, Dutch takes over
–          Roaring 40s, winds change
o   40th Parallel
o   Sling-shots you to the Indian Ocean
–          Ways to come and back
–          Portuguese controlling the sea and trade
–          Grotius is hired to break this monopoly and he succeeds
o   Dutch follows Portuguese way
o   The Dutch India Company
Holland; Dutch
–          Within 100 years
–          Dutch-East-India Company figures out what the Portuguese
–          Now the Dutch is controlling the access
–          VOC, the Dutch United East India Company
–          Boxed into the new rising power
–          World-view with supplies to beat up the Portuguese
o   Except in Macau, East Timor, Goa
–          Quickest rise in international trade
–          Spices
Now the Dutch is controlling
–          The Dutch East India Company was a corporation
–          Global Corporation; shares were held by the people
–          Holland and Grotius also a part of Dutch-East-India Company
Trade is all about trade, strategy, politics, and power. About control over resources.
The # 1 trade resource is the access: the route itself is the resource. Controlling.
–          The resource to control: the Corridor = Access
–          Controlling the status of the route
End: Historical development of modern trade
–          International Trade perhaps results in wars and problems
–          Problems resulting in war
Why do nations trade?
–          It is an easy question but profound and multiple answers
–          There is no one reason
–          Politically, countries want to secure choke points. Dominate and earn money
–          Controlling resources
–          To control chokepoints = dominating resources, money (ex: silkroad)
–          Emotional reasons: Prestige
o   Nation wants to have all the finer things
o   Savior the world power
o   Presentation of image
–          Cultural reasons (religious)
o   To make known of a state’s religion

alue – basis for trade requires that each producer migrate towards to in which they are best able to produce
–          Criticisms on Page 44-45;
o   Unfair, advances material values over other values, no concern for environment, undermines democracy
Heckchter-Olin – factor endowment theory (Labor & Capital)
–          Builds on Racardo’s theory of comparative advantage by predicting patterns of commerce an production base on the factor endowments of a trading region
–          Model essentially says that countries will export products that use their abundant and cheap factor(s) of production and import products that use the countries’ scarce factor(s)
o   Factor Endowment is commonly understood as the amount of land, labor, capital, and entrepreneurship that a country possesses and can exploit for manufacturing
o   Countries with large endowment of resources tend to be more prosperous than those with a small endowment, all other things being equal
o   The new world economies inherited attractive endowments such conducive soils, ideal weather conditions, and suitable size and sparse populations that eventually came under the control of institutionalizing European colonists who had a marginal economic interest to exploit and benefit from these new discoveries
–          Comparative advantage (ratios between capital and labor)
–          Countries need to specialize in their relative strengths
o   Ex: China – commodities
Heckscher-Ohlin Model
General equilibrium mathematical model of international trade
–          Partial Equilibrium Theory
–          Blind people touch an elephant cannot see the big picture
–          Does not and cannot explain everything
–          Explains comparative advantage
o   Factor endowments = Land; Labor; Capital
o   Land is held constant
o   Ratios between labor and capital
–          Criticism
o   is this theory skewed to the powerful countries? (problems?)
o   no transportation costs incorporated
o   capital immobility
o   There are winners and losers
§  Everyone has prospect of winning, not that everyone will win
–          These power countries throw barriers