International Economic Law

Historical Background

Making of GATT (8 Rounds, especially 8th Round)

Specialised Agencies- IMF, Word Bank, WTO- Intro

Relevance of Economics with International Law

• Economic law is connected with consumption, production, exchange and distribution

of goods and services
• Example: international trade, international sales, contracts and dispute settlement
• Article 13(b) of the UN Charter- General Assembly shall initiate studies and make
recommendation for the purpose of promoting international co-operation in
economics
• Article 62 of the UN Charter- ECOSOC- function and role
• UNCTAD- principle organ of UNGA (1964) for trade and development
• UNCITRAL- codified the rules of international economic law relating to goods,
international payment

Theories of IEL

• Adams Smith – Absolute Cost Theory

Trade between two countries would be mutually beneficial if one country could
produce one commodity at an absolute advantage over the other country and the
country could, in turn, produce another commodity in an absolute adv over the first.
Example: France and England.

• David Ricardo- Comparative Cost Theory

General Agreement on Tariff and Trade (GATT)

• Signed in 1947, Multilateral agreement regulating trade among 153 countries.

• Functions as De-facto organisation
• Preamble – substantial reduction of tariff and other trade barriers
• Conducted eight rounds of talk addressing various trade issues and resolving trade
dispute.
• Birth of GATT- Question – whether GATT can be considered to be treaty under IEL
or merely a contract? A protocol
• U.S issued invitation to 15 countries to enter into negotiation to create multilateral
trade agreement. (fail to survive)
• ECOSOC took initiative for an International Conference on Trade and Employment in
1946. appointed a preparatory committee to draft a charter.

Eight Rounds
 • 1st round - Geneva round – 1947

Governing body should meet regularly to talk about reducing tariff. Drafting GATT.

• 2nd round - France – modest tariff cutting

Unified code for implementing tariff regime

• 3rd round – England round

Major task was to include those countries which could not be part of Geneva round.

• 4th round and 5th round – Geneva and Dillon round

Multi-layer tariff cut.

• 6th Kennedy Round

Proposed by John F Kennedy, 48 countries. 11 Industrial countries decided upon

giving a 30% reduction offer in industrial tariff.

• 7th Tokyo round – 1979

Biggest achievement was unity and consistency of GATT system in the face of
strenuous differences expressed during the six years negotiation and outside pressure
(recession, collapse of monetary system, oil crisis)

• 8th Uruguay round

Uruguay Round

• 8th round
• Most ambitious round
• Added other trade related aspect of investment regulation, banking accounting IPR
• Made reforms in agriculture and to reduce the system of subsidies and over
production.
• Finally, under the Uruguay round world trade organization was established and a
system of binding dispute settlement

Important Aspects of GATT

1. Most favoured nation status – exceptions to EU, free trade areas established by U.S,
Canada free trade agreement and Tokyo round code on anti-dumping policies,
subsidies and govt. procurement.
2. National Treatment- GATT members must give imported goods the same treatment
given to domestic goods. No restriction such as taxes.
3. Protection through tariff – transparent system on tariff and subject to negotiation
4. Dispute settlement – Uruguay round

Salient features of GATT

 • Embraced WTO with 150 members which were also parties of:

 GATS (general agreement on trade in services)

 Inclusion of TRIPS- brought IPR with in the ambit of public law of international trade
 Build a dispute settlement mechanism
 Agreement requires the elimination of certain restrictive measure that violate GATT
principle of National treatment and MFNT.

World Trade Organization

• Established in 1995, was agreed by 125 countries in April 1994 at a conference in

Marrakesh which concluded the Uruguay Round.
• WTO differs from GATT, as GATT was a flexible institution, bargaining was its core.
In contrast WTO rules apply to all members and need to follow binding Dispute
Settlement procedure.

Objective

• Raising standard of living

• Ensuring full employment
• Expanding the production of trade while allowing optimal use of resources i.e.
Sustainable development.
• Non-discrimination in terms of MFN (product made in one country treated no less to
similar product originates from other country) NT- goods of foreign origin circulating
in the country must be subject to same taxes)
• Transparency – basic pillar
• It is the legal obligation that WTO member are required to publish their trade
regulation under article 3 and 10 of GATT and GATS.
• Safety valves- WTO can restrict trade for non-economic objective and unfair
competition.

Structure of WTO

• The Ministerial conference – composed of International trade ministers. Meet once in

every two years
• General council
• Trade policy review body
• Dispute settlement body
• Secretariat

WTO and DSU

• Consultation- if fail to respond in 10 days or to enter into consultation then matter go

to the panel.
• Good offices, conciliation and mediation- voluntary procedures
• Panel
• Appellate body review
• Arbitration
UNCITRAL

• Created by UNGA in 1966

• GA considered it desirable to the process of harmonization and unification of law of
ITL
• Developing countries were left outside in taking key decision
• Proposal for new UN organ

Birth of UNCITRAL

• UNCITRAL come to be the body of UN in field of International trade law.

• Originally had 27 member states
• Commission has established six working group based on geographic region
• Carry out legal research towards unification of ITL and commentaries on draft legal
text.

Work of UNCITRAL

• Identify legal issue

• Recommendation to government and International organization.
• Provide updated info on case laws
• Technical assistance to law reform projects.
• Publishing year book – work of the commission, an attempt to unify private law on an
international scale

GA and UNCITRAL

• Little resistance shown by GA in adopting the recommendation of UNCITRAL

• State were free to follow or adopt
• No restriction to NON-UN in implementation of the recommendation
• UNCITRAL through GA launched International commerce i.e. UNCITRAL model on
Arbitration rules 1985, UNCITRAL model on Conciliation rule 1980.

Aim of UNCITRAL

• Drafted model law to assist state in designing dispute resolution processes

• To reduce cost of dispute settlement
• Foster maintaining cooperative atmosphere btw trading partners
• Bring certainty into international trade
• Educating parties engaged in International commerce
• Encourage conciliation
• Foster economy and efficiency of IT

UNITED NATION CONFERENCE ON TRADE AND DEVELOPMENT (UNCTAD)

• Established in 1964 as permanent inter-governmental body.

• Principle organ of UNGA deals with trade, investment and development.
• During 1970-1980’s closely associated with NIEO
  A revision of the international economic system in favour of Third World countries
 Replacing Breton woods system which favoured leading nation i.e. US
 Restructure the world economy- greater participation of DEVELOPING NATION
(known as north – south dialogue)
 Developing countries must be entitled to regulate and control the activities of
multinational corporations operating within their territory.
 They must be free to nationalize or expropriate foreign property on conditions
favourable to them.
 They must be free to set up associations of primary commodities producers similar to
the OPEC; all other States must recognize this right and refrain from taking economic,
military, or political measures calculated to restrict it
 A forum where developing countries could discuss the problem relating to IT
 Development of GSP (generalised system of preferences) to promote export of
Developing nation

IMF

World Bank