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International Trade
University of Kansas School of Law
Bhala, Raj

 
BHALA – INTERNATIONAL TRADE LAW – FALL 2013
 
PART 1
HISTORICAL FUNCTIONS OF FREE TRADE
 
CHAPTER 1 – MULTILATERAL TRADE NEGOTIATIONS THROUGH THE 1970S ✓
I.       Ancient and Medieval Philosophical and Theological Views of Trade and Traders
A.     Ancient Trade Philosophies
                                                              i.      For Trade
1.      Plutarch of Delphi – “God created the sea to promote interaction and to facilitate commerce between the various people of the earth…With the exchanges made possible by the sea…man would be savage and destitute”
a.       Movement of goods helps countries get to know other countries and live peacefully through trade agreements
                                                            ii.      Against Trade
1.      Horace – “the sea brought contact with strangers who could disrupt domestic life by exposing citizens to the bad manners and corrupt morals of barbarians”
a.       Commercial transactions with strangers interrupt domestic life and expose us to bad manners and corrupt morals. Assumption that other countries are barbarians.
2.      Plato
a.       Retail trade was an inferior occupation best left to a foreign resident in a Greek city-state
b.      Only import was cannot be supplied autonomously and what is absolutely necessary
3.      Aristotle
a.       Only import necessities
b.      Ban export of necessities
c.       Keep ports separate from cities to keep vices out
4.      Xenophon – Merchants and their loyalties can’t be trusted
5.      Cicero – Vulgar to profit from trade unless the exchange brings great benefit or enhances intelligence of the Romans
6.      St. Augustine – “Let Christians amend themselves, let them not trade”
B.     Doctrine of the Universal Economy
                                                              i.      Turned tide in favor of free(r) trade
                                                            ii.      Espoused by Seneca, Philo, Origen, Saint Basil the Great, Saint John Chrysostom, Saint Theoderet
                                                          iii.      4 Elements:
1.      Belief in universal brotherhood of man
2.      Benefits to mankind arising from trade and exchange of goods
3.      Economic resources are distributed unequally around the world
4.      Divine intervention of God to promote commerce and peaceful cooperation among men
C.     Medieval Scholastic Era (1100-1500 A.D.)
                                                              i.      St. Thomas Aquinas was integral to the shift in attitude toward trade. Pecuniary gain was no longer seen as inherently evil, matter of balance and proportion. 3 kinds of useful economic activity:
1.      Storing goods
2.      Importing necessities
3.      Transporting goods to regions of scarcity
                                                            ii.      Martin Luther did not agree with the positive view
                                                          iii.      John Calvin helped continue to merge the Doctrine of Universal Economy with moral precepts
D.     Trade and Morality in International Law
                                                              i.      Spread by jurists like Francisco de Vitoria, Francisco Suarez, Alberico Gentili, and Hugo Grotius
                                                            ii.      Urged right of countries to trade
                                                          iii.      Presumption of free trade in Law of Nations
II.    The Birth of GATT and Stillbirth of the ITO
A.     Origins of General Agreement on Tariffs and Trade (GATT)
                                                              i.      Historical Context: WWII before the US entered the war. Post-Depression Era US was primarily isolationist and protectionist with regard to foreign interaction, trade, and consumerism.
1.      Trade barriers in the US were extremely high as a result of the Tariff Act of 1930 (Smoot – Hawley)
2.      The Reciprocal Trade Act of 1934 allowed bilateral trade agreements with individual countries, but did not accommodate widespread import/export (Cordell Hull – Former US Sec. of State – Create Peace through Trade)
                                                            ii.      Origins in the Atlantic Charter (document 1, p. 3) – answers the question: how will the victorious Allied powers organize things after the Axis is defeated
1.      Atlantic Charter Paragraph 4 addresses trade and raw materials
2.      Atlantic Charter Paragraph 5 addresses labor standards, economic advancement, and social security
                                                          iii.      Created by Department of State working closely with the UK
1.      Laid the groundwork for a multi-lateral trade forum
2.      Approved in July 1941 by FDR and Churchill
B.     Drafting – Intended as a provisional accord between WWII and the Charter for the International Trade Organization (ITO) by delegates from many countries in two sets of meetings:
                                                              i.      There was fear of another economic downturn post-WWII because of all the soldiers returning to the civilian sector job market. This, in turn, created fear of stronger protectionist attitudes.
                                                            ii.      Thus, the GATT was formed as an instrument by which the contracting parties would immediately negotiate lower trade barriers and agree to keep them down post-WWII.
1.      London Preparatory Conference (11/20/1946)
2.      Geneva Preparatory Conference (10/30/1947)
a.       Official publication of the agreement
b.      24 countries met
c.       Signed by 23 countries (Russia didn’t ratify)
C.     Failure of the ITO
                                                              i.      Drafting Conferences from 1946-48 in London, NY, Geneva, and Havana
1.      Finalized in Havana in 1948
2.      Also called the Havana Charter
                                                            ii.      Still an important legal document
1.      Express references to it in GATT
2.      Helped form the WTO
                                                          iii.      Truman did not submit it to the Senate for advice and consent because he knew there were many political reasons to object
1.      Too many exceptions to trade-liberalizing rules
2.      Ideological arguments against unnecessary entanglements with foreign powers
3.      US felt like it was joining too many international organizations (UN, etc.)
                                                          iv.      Instead, Truman replaced all references to the ITO in the GATT and changed the language to “CONTRACTING PARTIES” (anytime all the parties are in agreement on an issue).
1.      When one individual party or smaller group does something, it is referenced as a “contracting party” or “contracting parties.”
2.      General denial that there was a formal organization.
D.     World Trade Organization Agreement
                                                              i.      Went into effect on 1/1/1995 as a result of the 1994 Uruguay Round
                                                            ii.      Now takes precedent over GATT in terms of conflict
                                                          iii.      But is influenced heavily by GATT
III. Trends in the Rounds
A.     Since 1947 there have been 9 sets/rounds of multilateral trade negotiations (MTNs) the purpose of which was to reduce trade barriers
                                                              i.      1947 – Geneva Tariff Conference (original GATT negotiations)
1.      Signed on 10/30/1947. Went into effect on 1/1/1948.
2.      23 original parties
3.      45,000 tariff concessions
4.      $10 billion of trade
                                                            ii.      1948-49 – Annecy Round
1.      33 countries
2.      5,000 tariff concessions
                                                          iii.      1950-51 – Torquay Round
1.      34 countries
2.      8,700 concessions
3.      Tariff reductions of 25% compared to 1948
                                                          iv.      1955-56 – Geneva Round
1.      22 countries
2.      $2.5 billion of trade
                                                            v.      1960-62 – Dillon Round
1.      23 of 37 countries offered concessions
2.      Entrance of the EEC (EU)
3.      4,400 con

eralization in the agricultural sector
2.      Acknowledged need to tackle the trade and development needs of LDCs
F.      Dillon Round
                                                              i.      Two threats:
1.      Common external tariff of the European Economic Communities (EEC)
2.      Trade-distorting agricultural policies
                                                            ii.      Disappointing overall:
1.      Effective participation was limited
2.      Nothing was done to combat non-tariff borders
3.      Tariff cuts could have been deeper
V.     The Kennedy Round (1964-1967)
A.     Trade Expansion Act of 1962 gave Americans authority to pursue tariff cuts of ≥ 50% across the board
B.     Negotiations were about consensus and reciprocity between the members (except the non-linear LDCs)
C.     Six Factors that made this round important:
                                                              i.      Change from product-by-product method to across-the-board/linear method. Achieved 35% tariff cut across the board.
1.      Problem: Continuous pressure to exempt certain products from the linear cuts.
2.      About 30% of all products were exempt from cuts in this Round to ensure that no individual members would block forward movement of the cuts
                                                            ii.      Coverage of agricultural goods as well as industrial goods
1.      Did not use linear approach. Stayed product-by-product
2.      Special treatment based on high frequency of quantitative restrictions and other non-tariff barriers
3.      “Acceptable conditions of access” – US sought guarantee of a certain % share of EEC market
                                                          iii.      The US was no longer the only driving force of negotiations (Japan and the EEC took on bigger roles)
                                                          iv.      Discussion of interests of LDCs
1.      Tried to take down barriers
2.      More developed countries cannot expect reciprocity
3.      Resulted in International Trade Center and Committee on Trade and Development
                                                            v.      Worked to reduce non-tariff barriers as well as tariffs
1.      Non-tariff barriers include restricting imports to certain ports, requiring certain treatment of products before they may be imported, quotas, licenses, etc.
2.      Non-tariff barriers are the protectionist response to tariff concessions
                                                          vi.      Identification of issues that remain on the multilateral trade negotiating agenda (e.g., agriculture and special treatment)
1.      Next tool of protectionism would be trade remedies
2.      This Round actually produced an anti-dumping policy, but the US didn’t ratify it. It was a plurilateral agreement by a subset of the members.
VI.  The Tokyo Round (1973-1979)
A.     Negotiations on non-tariff measures were given equal, if not greater, importance than tariff negotiations
B.     First round after Nixon closed the gold standard. The fixed exchanged rate was no longer in effect.
C.     Results: Brings down higher tariffs with deeper % of cuts. Lower tariffs don’t get that high of a % cut.
                                                              i.      Decrease in customs duties and weighted average tariff on manufactured goods