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International Trade and Investment
Villanova University School of Law
Gordon, Ruth

International Trade and Investment

Professor Gordon

Fall 2011

1) The Law of International Trade and the International Trading System

a) Economic or commercial activities that cross national boundaries or have an affect across such boundaries

(1) Different than International Business Transaction – private, choice of law, contracts, structuring a deal to protect a client’s interests

ii) Four Channels

(1) Goods – tariffs at the border, quotas, etc. dealing with import/export (GATT)

(2) Services (GATS)

(a) provided to user who travels to territory of provider (tourist abroad)

(b) provider and recipient remain in home territories (legal advice by phone, fax, or mail)

(c) service provider establishes a commercial presence in foreign territory (bank with branch abroad)

(d) natural person travels to territory of user

(3) IP (Technology transfer) – Registering patents abroad, standards of IP protection, etc. (TRIPS)

(4) FDI – lasting ownership investment in entity in foreign country, wholly or partially owned subsidiary (TRIMS, not a comprehensive agreement)

iii) Levels of Analysis

(1) International rules created by the multi-lateral trading system

(a) Treaties, WTO jurisprudence

(2) Public law regulations at the national level

(a) Tariffs, quotas, anti-dumping regulation, export controls

(b) Implementing obligations that have roots at the international level

(3) Customary international law

(a) Consistent and widespread state practice that states recognize as law

(i) Not as prevalent in international trade arena

(b) US treaties are supreme law of the land and equal to federal statutes

(i) All trade treaties passed through the Senate are non-self-executing, so they need implementation at the domestic level

b) Global Economic Institutions

i) Bretton Woods Agreement (1944) begets World Bank, IMF, and Int. Trade Org. failed so we have the GATT until the WTO (1995)

(1) World Bank – International Bank for Reconstruction and Development (page 21)

(a) Loans and grants used for development

(b) Voting shares based on percent of contribution to the budget

(c) There are several subsidiary groups – Int. Center for Settlement of Investment Disputes arbitrates fights between state and foreign companies

(2) IMF – trying to ensure stability of the international monetary system

(a) Balance of Payment issues

(i) A buys from B and must pay in B’s currency, but A lacks foreign exchange reserves or just doesn’t have the money

(ii) Can reduce spending, sell government bonds, print money

1. But decreased spending causes hardship, no one might want your bonds, and printing money is inflationary

(b) Provides low cost loans to address balance of payment and development issues w/conditions, usually to adopt economic policies and get technical assistance on fiscal policy, banking, monetary policy, regulations

(3) WTO – emerged from Uruguay Rounds (negotiations to reduce tariffs primarily)

(a) GATT was a treat, not an organization, so it dealt with contracting parties rather than members

(i) Side agreements entered into during GATT became part of the WTO, and parties had to sign onto all of them b/c it was incorporated into one document

(b) Sections (Generally, see page 7 of supplement for Agreement Establishing WTO)

(i) Art. 8 – headquarters

(ii) Art. 6 – secretariat (bureaucracy)

(iii) Art. 7 – organizational status so has legal personality, etc.

(iv) Annex 1(A) goods (GATT 1994)

1. 1(B) GATS

2. 1(C) TRIPS

3. 2 Dispute Settlement Understanding (DSU)

a. What makes WTO different

4. 3 Trade Policy Review Mechanism

a. Doe national policy comply with WTO agreement obligations?

5. 4 Plurilateral Trade Agreements (voluntary)

a. Trade in civil aircraft, Government procurement

(c) Article IV Organizational Structure (page 28)

(i) General Council is the chief decision making body when ministerial conference isn’t meeting (which it rarely it)

1. Also meets as Dispute Settlement Body and Trade Policy Review Body (GATS, etc. have their own councils)

(ii) Governed by consensus, “Green Room” meetings develop ideas to present to the rest

2) The Case for Free Trade

a) Specialization in areas believed to have a competitive advantage

i) International trade increases the size of the market where you can realize advantage

(1) Trade more of what you make best to get more of everything else, allowing you to meet demand you wouldn’t be able to otherwise (page 30 problem)

ii) Makes domestic firms more competitive overall b/c it creates domestic competition

iii) Political and social gains can come from contact between peoples

(1) Trade destroys some jobs but it creates them too (like technology) – low wage jobs out first

b) Trade Deficits and Surplus

i) US/China Trade Issues

(1) RMB is pegged to dollar, keeping it and Chinese goods artificially cheap

(2) China doesn’t use earning from exports to purchase US goods

ii) Floa

g decrease in imports

(1) There is a presumption a violation of GATT causes Nullification and Impairment

(a) Presumption has never been rebutted

c) EEC Oilseeds – non-violation case (page 64)

i) Subsidies to domestic producers are exception to national treatment (Art. III:8(b)), but US had negotiated for tariff reduction that was being negated by these subsidies

(1) EEC gave benefit and took it away by other means, undermines confidence in WTO system

d) Japan Film (page 66) – market barriers for Kodak

i) Non-violation provisions

(1) Application of a “measure”

(a) Does not have to be enforceable law, if government controls private behavior that’s enough

(2) Benefit accruing under WTO/GATT

(a) Legitimate expectations of improved market access from tariff or other concessions

(b) Reasonable expectation improved access will not be undermined by other actions of country providing concessions

(i) If measure introduced subsequent to tariff negotiations there’s a presumption US could not have anticipated them, which Japan must rebut

(ii) If measure existed when concessions were negotiated, country US here) must rebut presumption they should have anticipated measures

(3) Nullification or Impairment – must show (Japanese) measure upset competitive relationship between imported and domestic products (film, here)

(a) Degree of Causation – requires clear correlation between measures and adverse effects

(i) Measures must be attributable to government, not just restrictive private actors, and more than a de minimus contribution

(b) Origin Neutral

(i) Can show de jure (facially discriminatory) or de facto (disparate impact on imports) discrimination

(c) Intent

(i) No need to show intent, but could appear origin neutral with intent to restrict imports

(4) Here, vertically integrated industry but single brand film distribution was happening before and after “measures” in question

(a) So as long as government can’t be proved to have caused it, WTO won’t interfere