INTERNATIONAL TRADE LAW WEEK 1

Summary: INTERNATIONAL TRADE LAW

This summary focuses on international trade law specifically Everything from the book complete + all lectures 2024 (Maastricht University Netherlands)

Based on:

The Law and Policy of the World Trade Organization Peter van den Bossche 5 th edition

9781108747103  1 / 5

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INTERNATIONAL TRADE LAW – WEEK 1

Economic globalization and the law of the WTO, Chapter 1 -One of the defining features of today’s world is the process of economic globalization -Economic globalization: gradual integration of national economies into one borderless global economy. Encompasses both (free) international trade and (unrestricted) FDI (Foreign Direct Investment) -Economic globalization, in general, and international trade in particular offer an unprecedented opportunity to reduce poverty worldwide significantly -Economic globalization and international trade have to be accompanied by good governance in developing countries and more development assistance from developed countries -Management and regulation at the international level -If not; problems might arise (economic inequality, social injustice, environmental degradation, cultural dispossession) What are the driving forces behind economic globalization?Technology makes globalization feasible and liberalization of trade and FDI makes it happen -Due to technological innovations resulting in a dramatic fall in transport, communication and computing costs, the natural barriers of time and space that separate national markets have been coming down -Over the last 60 years, most developed countries have gradually but significantly lowered barriers to foreign trade and allowed free movement of capital -Reasons for not reversing the current globalization process: (1): new technology has created distribution channels for services, (2): liberal international trade policies have a firm institutional basis in multilateral trading systems of the WTO, (3): the price to be paid in terms of economic prosperity for withdrawing from the global economy would be very high Changing nature of International Trade in the Global Economy -For many centuries, trade was mostly about products manufactured in country A being exported to country B. Nowadays, trade in the globalized economy is increasingly trade in tasks and in value- added -Today, products/services are often not produced in a single location or by a single producer. Instead they are the end result of a highly coordinated series of steps carried out in many countries around the world by many people with many different skills  made in the world

Economic globalization: a blessing or a curse?

-Opponents of the current economic globalization:

oExcessie emphasis on the economic interests of transnational corporations oSocial, cultural, environmental interests and the interests of developing countries are not sufficiently taken into account oResponsible for world poverty and hunger (?) oEnvironmental disasters, unemployment… oMalignant force that is destroying the livelihood of millions of workers Problems of current economic globalization -War on Want wants to see the benefits of globalization more evenly spread across the world -Opposition against “corporate globalization” -Are developing countries forced to open up their markets too far and too fast?-Rich countries are conspiring to keep their markets closed to products from developing countries?-Developing countries lack the resources to negotiate effectively? 3 / 5

Free trade versus restricted trade Arguments for free trade

-Adam Smith: Argument for specialization and international trade

-David Ricardo: Why do countries even the poorest can and do benefit from international trade?Theory of comparative advantage p. 18 (a country does not have to be best at anything to gain from trade)  Both would still benefit from trade -Absolute advantage : E.g. A is better than country B at making automobiles and B is better than A at making bread. Both would benefit -Man of the complexities of the modern economy are not taken into account in the Ricardo model -Heckscher-Ohlin Model: refines the former models, confirmed basic conclusions from Ricardo and the gains from trade via specialization -International trade has the potential for bringing economic benefits, there may also be considerable non-economic gains. It increases both the incentives for not making war and the costs of going to war. Further, it intensifies cross-border contacts and exchange of ideas, which may contribute to better mutual understanding. In a free-trading world, other countries and their people are more readily seen as business partners, less as enemies.-Trade protectionism is a festering source of conflict -Important contribution to peaceful and constructive international relations -Promotion of democracy Arguments for restrictions on trade -(1): Protection of a domestic industry and employment in that industry from competition arising from imported products, foreign services

-(2): Infant industry protection

 Argument may be of particular relevance to developing countries, which may find that while they have a potential comparative advantage in certain industries, new producers in these countries cannot compete with established producers in the developed countries  Temporary protection is given to the national producers to allow them to become strong enough to compete with well-established producers

-(3): Strategic trade policy – government intervention

 In an industry with economies of scale, a country may, by imposing a tariff or a quantitative restriction and thus reserving the domestic market for a domestic firm, allow that firm to cut its costs and undercut foreign competitors in other markets  Can provoke retaliation

-(4): Generate revenue for government

 While taxation of trade for revenue is no longer significant for developed countries, for many developing country governments customs duties remain a significant source of revenue.

-(5): Protection of National security and ensuring of self-sufficiency

A country should be able to rely on its domestic industries and farmers to meet its basic needs for vital material and food, because it will be impossible to rely – in times of crisis and conflict – on imports from other countries.-(6): Protection and promotion of non-economic societal values and interests (public morals, public health, consumer safety, clean environment, cultural identity) -Globalization is one of the defining features of today’s world -Economic globalization  high levels of international trade and FDI -International trade offers an unprecedented opportunity to reduce poverty worldwide significantly -To ensure this opportunity, economic globalization and international trade have to be “accompanied” by good governance in developing countries and more development assistance from developed countries -Regulation and management at international level -If economic globalization is not managed, it is likely to be a curse  aggravating economic inequality, social injustice, environmental degradation, cultural dispossession 4 / 5