The Genesis of the GATT Irwin, Douglas A.; Mavroidis, Petros C.; Sykes, Alan O.
06/2008
eBook
This book is part of a wider project on the economic logic behind the General Agreement on Tariffs and Trade (GATT). This volume asks: What does the historical record indicate about the aims and ...objectives of the framers of the GATT? Where did the provisions of the GATT come from and how did they evolve through various international meetings and drafts? To what extent does the historical record provide support for one or more of the economic rationales for the GATT? This book examines the motivations and contributions of the two main framers of the GATT, the United States and the United Kingdom, as well as the smaller role of other countries. The framers desired a commercial agreement on trade practices as well as negotiated reductions in trade barriers. Both were sought as a way to expand international trade to promote world prosperity, restrict the use of discriminatory policies to reduce conflict over trade, and thereby establish economic foundations for maintaining world peace.
This Article argues that international investment agreements (IIAs) serve a dual economic function—to discipline host country policies that impose international externalities on foreign investors, ...and to curtail inefficient risks associated with agency costs, risk aversion, asymmetric information, and time inconsistency problems that uneconomically increase the cost of imported capital in host countries. It draws on the economic analysis to explain central features of IIAs and their evolution over time, and to address various controversial issues in international investment litigation.
The COVID-19 pandemic has been accompanied by shortages and potential shortages of products critical to the public health response. Many nations have responded with export restrictions on these ...products, restrictions that are permitted under international trade law as a temporary response to short supply conditions generally and to public health emergencies in particular. This Essay argues that such export restrictions are economically counterproductive from a global efficiency perspective, and that governments acting unilaterally will nevertheless employ them due to international externalities that propagate through the “terms of trade.” This observation raises a puzzle as to why international law should facilitate rather than curtail them. The most plausible answer is that legal authority for such measures is a politically necessary “escape clause” in trade agreements, akin to safeguard measures.
Exigent circumstances can extinguish or suspend a wide range of legal obligations. They may empower governments to seize property or quarantine individuals. They may excuse the nonperformance of ...private or public contractual obligations. And, of especial interest here, they may permit governments to deviate from their obligations under treaties or customary international law (CIL).
International investment agreements employ dispute settlement procedures that differ markedly from their counterparts in trade agreements. A prominent and controversial difference arises with respect ...to the issue of “standing”: Who has the right to complain to adjudicators about a violation of the agreement? While trade agreements limit standing to the member governments (state-to-state dispute settlement), investment agreements routinely extend standing to private investors as well (investor-state dispute settlement). We develop parallel models of trade and investment agreements and employ them to study this difference. We find that the difference in standing between trade and investment agreements can be understood as deriving from the fundamentally different problems that these agreements are designed to solve. Our analysis also identifies some important qualifications to the case for including investor-state dispute settlement provisions in investment agreements, thereby offering a potential explanation for the strong political controversy associated with these provisions.
Abstract
“Forced technology transfer” is a central issue in the ongoing U.S.–China trade row. The phrase encompasses a number of different practices, but the most significant according to various ...commentators involve measures that require foreign investors in China to partner with domestic entities as a condition of making an investment, either by forming a joint venture or affording Chinese investors a controlling equity stake. These “corporate structure requirements” empower prospective Chinese partners to bargain for technology transfer as a condition of forming a new venture or otherwise enable them to learn the details of foreign technology through participation in the business enterprise. Foreign investors are free to reject such requirements and forego the associated investment opportunities, and in this sense any technology transfer pursuant to China’s requirements is “consensual.” For ease of reference, this essay refers to these corporate structure requirements as CSR. The analysis to follow examines the economics of CSR from both the national and global welfare perspectives. It indicates how CSR may undercut the national welfare of the USA even if it is profitable for U.S. investors. The global welfare implications of CSR, however, are much less clear, which offers an explanation for the absence of any constraints on CSR in typical trade agreements. A clear role for restrictions on CSR does emerge, however, in investment agreements that seek to eliminate investment protectionism by requiring “pre-establishment national treatment” for foreign investors. This analysis has immediate policy implications for the ongoing trade dispute with China.
The existing economics literature on international trade agreements focuses on tariff agreements covering trade in goods and explains core features of the General Agreement on Tariffs and Trade ...(GATT). Tariffs play almost no role in services markets, however, and the literature cannot account for the strikingly different approach to trade liberalization in agreements such as the World Trade Organization’s General Agreement on Trade in Services (GATS). We develop a model through which key features of GATS, including its emphasis on “deep integration” can be understood. And we use this model to suggest that there may also be a middle ground for services trade liberalization between the GATS deep-integration approach and the traditional “shallow-integration” approach of GATT.
...it embraces what has been called the “single taxation principle,” which seeks to curtail tax planning and avoidance strategies by MNEs and ensure that their income does not escape taxation ...altogether. ...BEPS creates multilateral legal instruments with a variable structure, including some obligations from which participants can opt out, and certain “fiscal fail safes” to ensure that if one state neglects to tax the income of an MNE, another state will. ...Wolfgang Alschner of the University of Ottawa undertakes to draw broader lessons from recent developments in international taxation for the future of international cooperation on other matters such as trade.8 He notes the recent challenges facing the World Trade Organization (WTO), including the breakdown of the Doha Round of negotiations and the partial stasis of the dispute settlement system due to the refusal of the United States to approve Appellate Body judges.
Since the Great Depression of the 1930s, international economic cooperation has flourished on many issues. The Reciprocal Trade Agreements program of the United States laid the groundwork for the ...General Agreement on Tariffs and Trade (GATT), now subsumed within the World Trade Organization (WTO). Trade liberalization under WTO/GATT auspices has reduced tariffs on dutiable goods imports in developed countries from an average of 30 to 40 percent in 1947 to an average of around 4 percent today. The WTO General Agreement on Trade in Services has made significant initial progress in opening national services markets to companies based abroad. The WTO Agreement on Trade-Related Aspects of Intellectual Property Rights has, for better or worse, produced international harmonization in many aspects of patent, copyright, and trademark law. Bank regulators in the developed economies have cooperated through a series of Basel Accords. For roughly a quarter century, the International Monetary Fund orchestrated multilateral cooperation on exchange rates under the Bretton Woods system. And at the bilateral and plurilateral level, hundreds of investment agreements-standalone bilateral investment treaties and investment provisions in preferential trade agreements-afford a variety of protections to foreign investors in developed and developing countries.
Central bank intervention in foreign exchange markets may, under some conditions, stimulate exports and retard imports. In the past few years, this issue has moved to center stage because of the ...foreign exchange policies of China. Numerous public officials and commentators argue that China has engaged in impermissible ‘currency manipulation’, and various proposals for stiff action against China have been advanced. This paper considers the relationship between exchange rate policy and international trade, and addresses the questions of whether and how currency manipulation should be addressed by the international trading system. Our conclusions are at odds with much of what is currently being said by proponents of multilateral or unilateral actions against China. In particular, we question whether China's practices can be adjudicated to be ‘manipulation’ under international law, and doubt that their trade effects can be identified with the degree of confidence necessary to ascertain whether the practices ‘frustrate the intent’ of WTO/GATT commitments. The difficulty of identifying the trade effects of currency practices undermines the ability of the WTO dispute resolution system to address them, and calls into question the wisdom and legitimacy of unilateral countermeasures that have been proposed in various quarters.
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