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International Trade
University of Kansas School of Law
Bhala, Raj

INTERNATIONAL TRADE LAW (Vol. 1 Fundamental Obligations)
Professor Raj Bhala Fall 2016
Customs Broker Exam….
WTO – Universal Law, hard law, has like 20 different treaties a country must agree to
One way to review for exam, go over acronyms and describe what they mean
Table 1-1 – Forecasting the business world through the next 50+ years – hence the subtitle non-western inter-disciplinary
Europe is shrinking, Asia is growing
Interdisciplinary and Technical
Interdisciplinary: most importantly, law and economics
How and why do govts interact/not interact
Human behavior in a global framework of law that changes
Technical: not easy
Global, regional, country-specific, and sector-specific natures
Not Geneva-Centric – international trade law is about far more than WTO
Trade existed long before Jan. 1, 1995 (beginning of WTO)
Trade includes the whole world, the “western” world is only 12% of population
The mulit-lateral trading system faces an existential threat
Increasing appeal to FTAs (FTAs and CUs grew from 70 to 300 from ’90 to 2010)
Today, about 50% of export of top 30 exporting countries go to FTA or CU partner country – this suggests countries integrated through FTA share chains of production (imports into the U.S. from mexico (NAFTA) contain an average of 40% American content, while china imports containaverage 4% American content)
Death of doha round made WTO (besides dispute settlement and monitoring and research) a “marketplace for different kinds of agreement” wherein member attempt “coalitions of the willing to negotiate opening up their own economies without assuming that everyone has to do that or will travel at the same speed”
Export controls, trade sanctions, and other remedies that go beyond traditional TDIs authorized under GATT and WTO accords (these will be important as long as members care about, their sovereignty, seek to preserve policy space, and national security)
Time to look at Non-western World (asia, Africa, middle east, latin America), see GATT-WTO system from perspectives of BRICS, emerging and developing countries like Malaysia, and least dev countries like Bangladesh; trade is not (or should not be) euro-centric
India is the largest free market democracy in the world; by 2050, 9 out of top 10 most populated countries will be non-western
Roughly 20 GATT-WTO agreements, nearly 2 dozen U.S. FTAs, US Customs law, trade sanctions, export control rules; TPP, T-TIP, TPA, TISA, and EGA are unsettled
INTRODUCTION: 10 PROPOSITIONS (what intl trade law is/oughtta be, about)
Proposition 1: Promote Growth and Alleviate Poverty
If international trade law does not achieve these fundamental goals, then it cannot be justified under a utilitarian calculus of economic efficiency – the second is important b/c the poor lack resources
Catholic social justice theory proposes giving preferential option to the poor (international trade law ought not to make the deprived even more so, and if it does, its rules aren’t sustainable)
Developing countries account for 48% of global trade output (on PPP terms), their share of agricultural trade is roughly 36%; emerging countries are primarily poor countries with large numbers of rich people, as india and china have 600-700 million of 1.2 billion poor, and 700-800 million of 1.3 billion rural poor, respectively (to say they are rich countries that happen to have large number of poor people trivializes the scale and plight of the poor
Least developed countries per capita income is 4% of developed countries
Trade rules that do not both promote growth and alleviate poverty will evoke suspicion from emerging countries
Theres general agreement/economic research affirms that trade liberalization boosts economic growth (narrowly defined as gains in per capita GDP), but not agreed that this alleviates poverty, but can also exacerbate socioeconomic stratifications
Consensus among economists is globalization (cross-border flows of trade, investment, finance, and IP) has increased income inequality; 1% of world’s population owns 50% of world’s wealth – top 80 billionaires own as much wealth (1.9 trillion) as the bottom 50% of rest of world; richest 10 percent of americans account for over 50% of national income – where b/t ’93 and 2012, top 1% of americans(families with income of $394000 or more) received more than 2/3 of nation’s income growth – during which time u.s. signed nafta and urugauy round (birth of WTO) – since NAFTA, share of trade that makes up American gdp doubled to 28% (2013) – b/t ’90 and ’07, Chinese imports surged, leading to increased unemployment, lower wages, higher disability claims, and lower labor force participation – when NAFTA entered force (’94), int. trade supported 1 of 10 american jobs – 2 decades later, trade accounted for 1 of 5 jobs – so for understandable reasons, the bedrock of American society, its middle and working classes, do not champion aggressive trade liberalization; Chinese import competition is blamed for 20-25% of manufacturing job losses, with low-skilled workers especially injured
Did NAFTA corporatize trade policy? – free/freer trade isn’t only cause – technology, education, and English literacy play a significant role; rules of GATT-WTO and FTA regimes can be/have been bent by the uber rich to favor themselves economically
INTRO – idea behind all 10 propositions is: what is international trade all about?
Prop. 1 – Trade is supposed to be about growing per capita GDP and alleviating poverty
1% of world holds 50% of world’s wealth
7 billion people, 3 billion are in fragile middle class – b/t 2 and $20 US per day (really the 2 and 10 important) – just out of a slum or off of a farm – 1 calamity away from falling back into poverty – looking to trade to enhance their opportunites (also, if tourism burgeons, their business does better) – their kids have a chance at college – that’s what they’re looking for globalization to do for them; whats my role in helping that fragile middle class
Proposition 2: Secure New Fragile Middle Class
Fall of Berlin Wall brought the rise of the fragile middle class – half worlds population, 3 billion people – just above line of absolute poverty ($1.25 US per day) – but lack financial security – roughly $2-20 per day, managing on $2-10.
Came from poverty, arose thanks to of globalization, market capitalism, open trade and investment, better governance, and rule of law – includes women and religious and ethnic minorities
From American perspective, our suppliers/customers are the new fragile middle class and vice versa – interdependence (powerful beauty of world trading system) – we need them for cheaper better goods, they need us to enjoy a better life
Capitalist free trade logic is about

evant, but along with it, so does sovereignty
Proposition 7: See Dichotomies
Tension b/t multilateral and RTAs – on avg., each WTO member belongs to 13 different FTAs or CUs (essentially 14 different intl trade law regimes including WTO/GATT) – evident in ROOs
Any non-mutli-lateral trade agreement can be seen as sub-optimal (termites in the global trading system)
Value of GSP treatment, which developing countries are relying on for market access, is reduced by more/deeper FTAs
Prop. 6 and 7 – lotta schisms – rich and poor, west and non-west, within non-west, b/t sectors (e.g. steel vs google), 1st world 3rd world, old industry vs new industry
Proposition 8: National Security Matters
Int’l trade is an instrument of national power.
90% of all world trade conducted across oceans – must keep these channels safe
Int’l trade ought to be power employed for common good; peace through trade, reduce fear and anxiety, and thereby enhance national security
Cant police all of the world’s oceans, must forge relationships and rely on them (not zero-sum mercantilism, but win-win mutually beneficial open trading environment)
Prop. 8 – what is trade all about? – national security – securing our nations future, economically and physically, by strengthening/stabilizing ties w/ other countries and ostracizing enemies; and provides promise for hope, greater peace through greater trade – no major trade decision is made w/out approval by national security council and economic advisors
Proposition 9: Pay Special Attention to India and China
Roughly 1/3 of world population
China and India are 1st and 3rd largest economies in the world;
India is world’s largest free market democracy and has 3rd largest middle-class consumer market, but still struggles with infrastructure and corruption
China has 12% of world trade in tangible goods; largest holder of U.S. treasury securities, and second to Canada as America’s largest trading partner – largest source of American imports and 3rd largest market for U.S. exports (broadly and deeply interdependent) – America and China are also 1st and 2nd for FDI; china has pulled many chinese out of poverty, but at great human rights costs – i.e. china is greatest opportunity for importers/exporters, but also the greatest threat to multilateral trading system – fear of competition from china on an MFN basis is a causal factor in the failure of WTO member to conclude successfully the DOHA round.China violates many of GATT principles/pillars, including being accuses of manipulating its currency (under-valuing) for at least a decade to boost exports; whether china embodies the values appropriate for full, honest participation in the world trading system is in question.