World Trade Law
Abstract and Keywords
After World War II, a body of rules and institutions have emerged for the purpose of regulating global flows of goods and services. These are known as world trade law, classified under international economic law, an expanding body of transnational regulatory treaties and institutions. World trade law has evolved within the global trading system following the Second World War, beginning with the General Agreement on Tariffs and Trade (GATT), which came into force in 1948. The most-favored nation and national treatment principles are the most prominent principles that give world trade law its distinctive form. The World Trade Organization (WTO) provides a vast store of literature, which covers the waterfront of legal and political issues that animate the global political economy of trade. The WTO’s predecessor, the GATT, also contributed extensively to the growing body of literature on world trade law. The WTO’s inclusion of agreements on the liberalization of services, investment, and intellectual property have begun lively debates about the possible trajectories of governance in new issue areas, such as anti-dumping and intellectual property rights. In addition to the issues raised by the inclusion of many small economies in the institutions of global trade governance, the rise of world trade law has simultaneously highlighted the many areas of importance to national publics in developed economies where trade overlaps with social priorities.
World trade law refers to the body of institutions and rules that have been created and nurtured following the Second World War to create an orderly legal environment with which to regulate global flows of goods and services (Charnovitz, 2011). While regional trade arrangements predate the 20th century, the current multilateral system is a more recent phenomenon, made possible by the postwar geopolitical context (Mazower, 2012). This article provides an overview of the most relevant interdisciplinary and international literature engaging with the study of world trade law (Barton, Goldstein, Josling, & Steinberg, 2006). The first section offers a brief review of the literature, locating international economic law in an increasingly globalized world and answering the question of where trade law belongs in this larger sphere (McRae, 2009). The second section examines literature pertaining to the sources and functions of world trade law (Trebilcock & Howse, 2005). This includes work on the history of the postwar international legal system, the principles that underpin its organization, its major functional parameters, and a number of important institutional functions of the world trade institutions.
The third section continues this discussion of institutional development, reviewing key literature on governance issues at the WTO, examining the legal issues of antidumping and the enforcement of intellectual property rights alongside the political issue of integrating developing countries into the multilateral trade governance system (Nottage, 2009). Finally, the article reviews some of the most important literature that examines social priorities in the context of trade law. It is increasingly apparent to national governments and their voting constituencies that trading rules cannot be considered in isolation from social priorities, the most prominent of which are health, environmental standards, and cultural rights (Howse, 2002; Bartels, 2009). The article concludes with a brief discussion of the future of world trade law with respect to trade liberalization, dispute settlement, and the place of trade regulation in the larger context of international law. As the world trading system continues to evolve, so does the need for effective governance (Trachtman, 2018). The World Trade Organization has not become the engine of liberalization that it was designed to be. Furthermore, its position as an essential legal arbiter in the regulation of international trade has been called into question by the nationalist policies of a plurality of the largest trading powers. With the waning of the American Century, the future of world trade law is once again being called into question (Shaffer, 2018).
Relevant Literature Locating Trade Law in the International System
We may better understand the place of trade law in the more comprehensive system of international law by thinking of bodies of law as Russian nesting dolls. These bodies of law are not actually subsumed within one another, but rather they exist alongside each other. Sometimes they overlap, and in other places their relationship is only now beginning to be defined (Charnovitz, 2002). However, the nesting doll metaphor is appropriate because it allows us to think about law deductively, moving from the largest sphere of international law to the most specific forms that law may take. The largest doll may be considered the system of public international law. Public international law is the entire system of legal rules and customary practices that govern interactions between states (Kennedy, 2006). Currie (2001) suggests that “it may be useful to think of it as a legal system that applies where national legal systems leave off” (p. 1).
Within this broad, incomplete, and sometimes fragmented international system lies a body of law frequently referred to as international economic law (Koskenniemmi, 2006). This expanding body of transnational regulatory treaties and institutions includes trade law; global and regional investment law; commercial law; and law pertaining to taxation, financial regulation, competition, and intellectual property (Guzman & Sykes, 2008). Much of this body of law exists beside (or perhaps overlaps with) domestic regulatory authority of states and offers a matrix of subnational, national, and international regulation that has grown more complex with the continuing pace of international economic integration. There is no consensus on the exact location of international economic law. In an instructive discussion, Charnovitz (2011) concluded that the place of international economic law in relation to other bodies of law, “namely, whether it is distinct from or overlapping with related bodies of law,” remains one of the “core doctrinal puzzles” that animates the study of international economic law (p. 22).
To complete the metaphor, the smallest doll is world trade law. Johnson (1998, p. 1) defines it as a body of law that evolved within the global trading system following the Second World War, beginning with the General Agreement on Tariffs and Trade, which came into force on January 1, 1948. Lester, Mercurio, and Davies (2012, p. 3) agreed, noting that the term itself is somewhat difficult to define because it is often used to refer to the larger body of international economic law as well as the agreements pertaining directly to the flow of goods and services across national borders. Most introductory legal textbooks therefore focus on the law as it relates to the “legal instruments that regulate trade flows.” Lester et al. (2012, p. 91) went on to suggest that trade law has historically been considered distinct from international law because it has been practiced by lawyers concerned with domestic regulation or by specialists on the General Agreement on Tariffs and Trade (GATT) based in Geneva. These practitioners formed what Howse (2002) called a technocracy, operating below the radar, in a complex legal terrain seldom understood by outsiders.
Even so, with the rise in prominence of trade law following the creation of the World Trade Organization (WTO), an emerging epistemic community of scholars has been increasingly interested in the possible ways in which international law may be interpreted in WTO law and vice versa (Bartels, 2001; Pauwelyn, 2001; Trachtman, 2004). Lester et al. examined a number of approaches to theorizing the place of trade law in the broader system of international law, concluding that there continues to be a general lack of clarity about the scope of international law in the trading system, which does not keep members from referring to international law “whenever they believe it helps their arguments” (Lester et al., 2012, p. 109). Ultimately, the relative novelty of the legal system for trade, with its single undertaking for membership, its reverse consensus mechanism for the acceptance of dispute settlement panels, and its expanded scope, which now includes governance mandates in services, investment, and intellectual property, makes for a thicket of complexity that legal scholars are analyzing, even as the system continues to evolve in the real world of trade governance (Lamy, 2006).
In the broad context of the social sciences, world trade is a multidisciplinary and highly pluralistic field of study with deep roots in the philosophical commonalities shared by politics and economics (Cropsey, 1960). While it is difficult to distill simplicity from the many theories and methods used to analyze the domestic and international goals, processes, and outcomes of trade law, three significant and timely issues ought to be mentioned here. The first is the importance of trade law to the cause of global development (Wilkinson, 2014). Over the past several decades, scholars have begun to develop a more nuanced understanding of the domestic forces that drive international trade. Traditionally, economists identify comparative advantage as the key driver behind the expansion of trade flows. However, as Helpman and Krugman have shown, “economies of scale provide an additional incentive and will give rise to trade even if countries are identical in tastes, technologies and factor endowments” (1999, p. 261).
Much has been made of these “spillover” effects of domestic markets, but the basic takeaway from the new trade theory of the 1980s is that market forces present within industrialized societies may intensify the incentive to trade, although significant incentives in terms of growth and development are also present in less industrialized societies. Political scientists and legal scholars have taken seriously the economic consensus on the benefits of trade in the postwar system (Aaronson, Abouharb, & Wang, 2015). Particularly in the study of trade law, the compatibility of open markets with economic development remains a major piece of the intellectual infrastructure that undergirds the multilateral project (Bhagwati, 2008; Dollar & Wade, 2009).
The second closely related issue concerns the impact of trade law upon global political interdependence. Much of the literature minimizes the possibility of an incommensurable fit between popular democracy and international trade regulation, while emphasizing the economic benefits of technological and economic integration (Abbott & Snidal, 1998). In much of the literature, national governments stand as an intervening variable between civil society and inter-governmental organizations, and this raises questions about the changing nature of the relations between national governance and trade regulation (Jackson, 2009). Previously, critics emphasized issues such as investor-state dispute settlement (Choi, 2007), but scholarship has evolved to include discussions of the impact of juridical mechanisms on participation in multilateral trade governance (Shaffer, 2009), the causes and consequences of regional trading arrangements (Krugman, 2013), and the impact of a hyperglobalized trading system on a number of issues, ranging from climate change to currency wars and food security (Rodrik, 2018; Subramanian & Kessler, 2013).
The third point of discussion is about the place of trade law in global economic regulation (Hudec, 1999). Some scholars wonder if the WTO is a constitution for world trade. Petersmann (2011, p. 53) defined a constitution as “a coherent set of long-term principles and rules of a higher legal rank constituting the basic order of a political community . . . or a functionally limited community.” In particular, do the current matrix of agreements and institutional processes embodied in the WTO comprise a constitutional order for global trade (Cass, 2005)? This question is fraught with definitional and conceptual pitfalls, as the literature aptly demonstrates (Dunoff, 2006). Is the WTO part of a political project by which trade rules are rendered legitimate (Pauwelyn, 2005)? This may indeed be the case, yet scholars are uncertain about whether it serves as an organizational frame for future liberalization and legalization processes (Howse & Nicolaidis, 2003; Lee, 2018). Certainly, as Trachtman (2006) points out, the WTO has a constitution in the legal sense of the term, but it remains unclear whether it operates as a constitution for legal activity in the global economic system, broadly defined.
The American legal scholars McGinnis and Movsesian (2000) offered another way to think about constitutionalism, arguing that the WTO does for its membership much of what the American constitution was designed to do for its states—repress factionalism, allow the free flow of goods, and set up the legal parameters for effective economic relations. The comparison between Madisonian constitutionalism and 21st-century trade governance is controversial, yet somewhat apt, at least if we do not stretch the comparison too far. Another way to consider the constitutionalism debate is in the critical context of Gramscian/Marxist discourse, which views the World Trade Organization as an organizing rubric for the continued globalization of neoliberal economic policy (Gill, 1995; Gill & Cutler, 2014). Critical social scientists argue that capitalist power relations are reified through legal systems, and the institutionalization processes underway represent the globalization of a neoliberal economic order with outsize benefits for wealthy nations and their transnational firms (Cutler, 2003).
In certain functional ways, the WTO does offer centralizing, aggregating and legitimizing functions (Evans, 2000). Slaughter (2003) has proposed an alternative to the constitutionalism metaphor by imagining a world of interconnected legal systems, in which the network of legal communities ought not to be considered an exemplary template, but rather a guide for future change. However, like the constitutionalism debate, the community of courts thesis suffers from a paucity of positive evidence, which does not invalidate the observation, but certainly calls for more research (Drezner, 2013).
Literature on the Principles of World Trade Law and the Creation of the WTO
Scholars of world trade law begin their studies of the trading system with the principles that give the law its distinctive form, namely the most-favored nation (MFN) and national treatment principles. These conceptual touchstones form the basis of much of the scholarship about trade governance and animate much discussion about the developmental trajectory of the multilateral trading system (Bosco, 2017; Heiskanen, 2004). The MFN principle dates back to the medieval period in the 12th century; in the 18th and 19th centuries, its inclusion in treaty arrangements occurred as a conditional clause, in which “benefits granted by one State were dependent on the granting of the same concessions by the beneficiary State” (UNCTAD, 2010, p. 10). Traditionally, MFN treatment required certain conditions to be met to trigger its benefits, and its inclusion in treaty arrangements required a substantial level of good will on the part of treaty signatories. As VanGrasstek noted, the granting of MFN was more often an exception rather than the rule of trade governance (2013, pp. 18–21).
Following the Second World War, MFN was defined to make the unconditional granting of MFN status the basis for membership in the GATT (Cottier, Mavroidis, & Blatter, 2000). Article I of the GATT 1947 declares that “any advantage, favour, privilege or immunity granted by any contracting party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties” The benefits of a multilateral application of MFN status are particularly important for developing countries and include transparency in the application of tariffs across all member jurisdictions, which gives smaller economies a trading advantage they would have otherwise been unlikely to negotiate with large trading partners (Aggarwal, 2006; Dhingra, Ottaviano, Rappoport, Sampson, & Thomas, 2017).
The second principle is national treatment. The principle of national treatment states that nations must treat imported goods the same way that they treat domestic goods for regulatory and taxation purposes. GATT 1947, Article III, paragraph 1 states “The contracting parties recognize that internal taxes and other internal charges, and laws, regulations and requirements . . . should not be applied so as to imported or domestic products to afford protection to domestic production.” Like the MFN principle, the principle of national treatment is difficult to apply in the real world because, while some protectionist regulations are obvious, much of what the state does to protect and enhance economic output occurs in the domain of business regulation. Even so, members have an obligation and must maintain law and policy in such a way as to minimize (and hopefully eliminate) substantive differences in the way domestic and imported goods are regulated (Ortino, 2005). These two principles give some sense of the complexity of bringing together the priorities of national governments and the demands of citizens with the multilateral standards for fair treatment of goods for trade.
Literature on the Creation of the WTO
In the closing days of the Second World War, questions of global economic coordination were largely considered within the context of international security and the orderly development of a system for global monetary relations (Eichengreen, 2008, pp. 91–100). This is not to say that the rehabilitation of global trade was not a distinct priority, but rather to emphasize the embedded nature of trade within a geopolitical context that emphasized security as the lynchpin of postwar growth and thereby foreshadowed the slow development of world trade law as it emerged as a body of law distinct from other forms of international economic law (Froese, 2018; Steil, 2013).
As the world’s leading economic power, the United States signed the GATT yet failed to ratify the International Trade Organization, which would have served as the governing institution for the world trading system, much as the World Bank and International Monetary Fund were designed to preside over postwar reconstruction and economic development (Irwin, Mavroidis, & Sykes, 2009). Without an institutional home, the GATT remained, in Jackson’s words, something of a “country cousin” to the international financial organizations in that it did not have the same profile upon the global political stage (Jackson, 1992, p. 11). Even so, the GATT was not without boosters, and its small secretariat hosted a number of liberalization rounds in the late 1940s and 1950s (Marceau, 2015).
Winham (2009) noted that the first four rounds did not reduce tariffs as much as expected due to the slow European recovery, but that the United States did make several significant tariff concessions (p. 16). The Kennedy (1963–1967), Tokyo (1973–1979), and Uruguay Rounds (1986–1994) made significant gains in the liberalization of trade and culminated in the creation of a multilateral institution for the governance of trade, inaugurated on January 1, 1995 (Croome, 1995; Ostry, 1997). The development of world trade law was driven by geopolitics and a high-minded belief that the principle of comparative advantage was the lynch pin for connecting wealth creation with peaceful global development, a dual economic and political rationale that has been discussed in Winham (1992) and Steger (2004).
The WTO was created to develop an institutional frame in the form of the secretariat to deal with the complexity of an international trading system in which more than a hundred countries had signed on to the GATT (McRae, 2009). A legal and institutional frame was necessary for the administration of new agreements brought into the trading system in the Uruguay round, in particular the General Agreement on Trade in Services (GATS), the Agreement on Trade Related Investment Measures (TRIMS), and the Agreement on Trade-Related Intellectual Property Rights (TRIPS). It was also increasingly apparent that the GATT’s dispute settlement measures were inadequate to the growing task of managing trade-related legal conflict, so a more robust legal system for the resolution of disputes was also needed (Horn & Mavroidis, 2006; Weiler, 2000; WTO, 2013).
VanGrasstek (2013, pp. 54–73) described in great detail the negotiations that took place in the run up to the WTO’s birth. Professor John Jackson put forward a series of proposals part way through the Uruguay Round negotiations calling for a “World Trade Organization,” and describing its potential uses. His proposals were met with tepid support but were later championed by Debra Steger, a Canadian diplomat who had studied under Jackson and believed in the necessity of a new institutional mechanism for the administration of trade governance (Steger, 2004). The Canadian trade minister raised the issue with the European Union, which then championed the concept of a “multilateral trade organization,” which contrasted with the less formal mechanisms proposed by the United States for the administration of the new agreements currently under negotiation. In the final months of the Uruguay Round, horse-trading between the United States and the European Union saw the creation of a new institution with robust dispute settlement mechanisms in exchange for a wider mandate for trade governance and the understanding that the United States would stop using domestic courts to determine damages in international trade disputes, a practice that began as a stopgap measure but that was increasingly considered to be a conflict of interest by the international community. A description of the powers is contained in Section 301 of the Trade Act of 1974.
Literature on Dispute Settlement at the WTO
With the creation of the WTO, a series of literatures quickly developed that studied its institutional structure, the effectiveness of its processes, and mechanisms and the implications of its governance decisions (Shell, 1995; Koh, 1997). The largest of these literatures by far is the one dealing with the juridical mechanisms for the settlement of disputes. The Dispute Settlement Understanding (DSU) is the most distinctive legal mechanism to come out of trade multilateralism in the post-Cold War period (Bello, 1996). Dispute settlement at the GATT was nonbinding, and by the late 1980s, large trading powers such as the United States were turning to domestic courts to settle trade disputes. Such a move highlighted the need for a more robust set of rules for the settling of disputes at a forum that would remain free of the perception of political interference.
The DSU outlines a binding dispute settlement process, in which trade policies and practices are challenged before panels, which render a binding decision (Horn & Mavroidis, 2006; WTO, 2012). The panel’s final report may be appealed to an Appellate Body, which rules upon the substance and process of the original panel’s decision. More than 400 disputes have been remitted to the Dispute Settlement Body. As Leitner and Lester (2011, p. 197) showed, in the first 15 years of dispute settlement, 132 panels were circulated to the membership and 90 of those, or 68%, were appealed. Several issues face the dispute settlement mechanism. One problem highlighted early on is the fact that dispute settlement is expensive, and its uptake happens much more quickly among industrialized nations with large trading volumes and significant experience with an adversarial court system modeled at least in part on the common law experience of Anglo-American members (Gao, 2007; Pauwelyn, 2003).
Dispute settlement raises the issue of conflicts between domestic authority and the authority of intergovernmental judicial panels. By adopting an appropriate standard of review, panels attempt to walk a fine line between the obligation of states to maintain their treaty obligations and the autonomy of governments to reflect in policy and law the interests of constituent voters (Croley & Jackson, 1996; Guzman, 2009; Spamann, 2004). Pauwelyn (2003) has been one of the leading figures in this emerging field of scholarship with an important book examining this “conflict of laws.” Particularly in the first decade of governance, members worried that the broad scope of WTO governance would create a dynamic in which dispute settlement panels, whose decisions are binding for members, would delve too deeply into domestic regulation while rooting out protectionist policies.
To date, a minority of the WTO membership has used the dispute settlement mechanism—this may simply reflect the reality of global trade flows, or it may represent a significant gap in the skill sets or priorities of small economies (Bohanes & Garza, 2012). Much research has been conducted examining usage patterns (Froese, 2011; Hoekman, Horn, & Mavroidis, 2009), and the potential benefits and drawbacks of usage (Keck & Schropp, 2007; Shaffer, 2009), and the possible implications for nonusage (Bown & Hoekman, 2007; Bown & McCulloch, 2010; Mosoti, 2006). Perhaps the most important finding highlighted by this research is the fact that legal capacity, measured in terms of access to knowledge, legal talent, and money, may account for some of the lack of uptake among poor countries (Busch, Reinhardt, & Shaffer, 2009). Other important questions remain about the ability of the DSM to effectively resolve disputes (Alter, 2003; McRae, 2008), in terms of brokering an effective compromise as well as enforcing compliance with the binding decisions rendered by panels and the Appellate Body (Sullivan, 2003; van den Broek, 2003; Wilson, 2007).
Literature on Legal and Governance Issues at the WTO
The literature on the WTO’s governance is vast, covering the waterfront of legal and political issues that animate the global political economy of trade. At its most basic, the GATT is an agreement to lower tariffs, and the literature on tariffs, border measures, and the use of quota systems for the regulation of imports has grown exponentially over the 20th century (Irwin, 2009; Schattschneider, 1935; Shonfield, 1976; Viner, 1952). With the intensification of trade and the increasing recognition of global economic interdependence, the literature began to address a number of high-profile nontariff issues, such as dumping, subsidies, and safeguards (Vermulst & Graafsma, 2005). Trade in agricultural goods, which had been placed to one side in the GATT system because of its political sensitivity, has gained prominence at the WTO, if only because a development round that avoids agriculture is sidestepping one of the biggest trade issues facing exporters in developing economies (Clapp, 2006).
The WTO’s inclusion of agreements on the liberalization of services, investment, and intellectual property have begun lively debates about the possible trajectories of governance in these new issue areas (Banerji & Jain, 2007; Blouin, Drager, & Smith, 2005; Mercurio, 2004). For the sake of simplicity, two issue areas that exemplify the ongoing debates about the possibilities and limits of multilateral trade agreements will be discussed briefly—the literatures on antidumping and intellectual property rights.
Dumping occurs when a producer in Country A sells their product in Country B for less than the cost of production. This practice is usually used to clear a surplus without driving down the price in the home jurisdiction (Sykes, 1998). The primary defense against dumping is countervail—a set of escalating tariffs that may be implemented if a determination of dumping has been made. The main controversy surrounding the practice pertains to with the way in which determinations of dumping are made, and the subsequent employment of countervailing measures (Bourgeois, 1998). Critics of American antidumping laws argue that the Department of Commerce uses narrow windows of empirical evidence or controversial statistical methods to determine whether a product has been dumped on the American market (Froese, 2010). Of course, domestic producers and their powerful lobby groups also use dumping determinations to protect embattled domestic industries, such as American softwood producers (Devadoss & Roman, 2004). On the other side, producers and politicians frequently argue that the United States is one of the world’s largest and wealthiest markets, and foreign producers frequently use underhanded tactics to gain a share of this lucrative market (Mankiw & Swagel, 2005).
Globally, charges of dumping and the levelling of countervailing duties have become a basic strategy by which members of the WTO deal with the increasing intrasectoral competition faced by domestic producers (Drope & Hansen, 2006). As tariffs fall, nontariff barriers become an important tool for sheltering domestic industry. Dumping disputes are frequently brought to the WTO, where they are litigated under the Agreement on Anti-Dumping and the GATT. According to WTO statistics, 97 cases have cited the Article VI (Antidumping) of GATT 1994 in their requests for consultations, making dumping one of the most significant issues dealt with in dispute settlement. (Statistics related to the GATT dumping issue are available online.) There is a basic consensus among scholars and policy practitioners that excessive use of countervail protections is an unfortunate side effect of lower tariffs (Bown, 2013; Hudec, 1999). But there is little consensus on how to reduce the use of these and other nontariff barriers, and the extensive use of antidumping legislation continues to be one of the most significant features of the global trading system, one that was exacerbated by the 2008 financial crisis (Fritz & Wermelinger, 2009). Furthermore, it is important to note that the most basic defensive response to intrasectoral competition—tariffs—has again become a tool of strategic trade policy in the United States, with significant predicted impacts on both global exports and global income (Freund, Ferrantino, Maliszewska, & Ruta, 2018). This development virtually guarantees a continued increase in the use of both tariff and nontariff barriers by industrialized and developing economies alike.
The Trade-Related Intellectual Property Rights Agreement (TRIPS)
One of the main political trade-offs that typified the creation of the WTO was the tacit understanding, between the United States on the one hand and the European Union and Canada on the other, that if the United States wished to enlarge the scope of the GATT system’s governance of trade, it would have to accept an enlargement of the institutional governance arrangements as well (VanGrasstek, 2013). Intellectual property rights were one of the highest-profile issue areas within this expanded governance domain (Drahos & Braithwaite, 2002). The rationale for the global protection of intellectual property is theoretically sound. If producers of intellectual property are to have an incentive to produce the processes, formulas, and ideas that drive innovation, they must have a way to realize the profits of their efforts, and this has traditionally been through a time-limited monopoly. National governments have traditionally governed the terms of this monopoly, and they have largely policed their own efforts through organizations such as the World Intellectual Property Organization (WIPO).
As Sell (2003) and others have noted, the placement of intellectual property inside the legal system for trade governance has resulted in a basic shift from national policing of intellectual property rights to multilateral policing, and from a negative (thou shalt not) form of rulemaking, to a positive (thou shalt) form of rulemaking for the global governance of intellectual property rights. As many scholars have noted, these changes have significant implications for the governance of trade in intellectual property (Mercurio, 2004). Most notably, the TRIPS Agreement is one of a select few treaties under the WTO umbrella (the others being the Agreement on Trade Related Investment Measures and certain aspects of the Technical Barriers to Trade Agreement) that supplement the principles of nondiscrimination with a set of positive regulatory requirements. For example, TRIPS mandates the minimum length of time that a patent must be protected at 20 years.
Several scholars have pointed out the complications that arise from this form of multilateral policing (Drahos, 2003). They note that, historically, the appropriation of intellectual property has been a major factor in economic development, pointing to ways in which American creators pirated patented material in the 19th and early 20th centuries, just as Chinese entrepreneurs do today (Lessig, 2004). Leaving aside the moral and economic implications of intellectual property theft, other scholars examine the institutional complications that arise from a trade agreement designed to protect industrial property, which now has significant implications for access to medicines in the world’s poorest countries (Curtis, 2012; Park, 2002). Issues such as compulsory licensing of patented drugs and parallel importation for drugs produced outside the country have complicated the intellectual property rights issue and have made a relatively obscure aspect of regulation into a flashpoint for public anger over the perceived unfairness of the TRIPS Agreement for developing countries (George, 2011).
Literature on Trade Governance and Developing Countries
Perhaps the biggest single issue facing the trading system has been the inclusion of scores of developing countries that bring very different concerns about the place of trade in development strategies than do the industrialized members who first created the GATT (Trommer, 2013). The discussions on the principles underpinning the trade system, new institutional mechanisms such as dispute settlement, and the complications arising from new areas of governance such as intellectual property have significant implications for developing economies, as the literature adequately demonstrates. Nevertheless, we have not yet touched upon the issues directly related to the inclusion of developing country members in the WTO. This literature is specifically concerned with the development of “special and differential treatment” for developing countries, the use of dispute settlement by small economies, and the Doha Round of negotiations (Hoekman, 2004). The rise of regional forms of trade governance are also of significant importance for developing economies and have been covered in the entry “Formal International Institutions and the Regulation of Flows of Goods and Services.”
Special and differential treatment is the term used to identify the bundle of exceptions and differential timelines for liberalizations created for less developed and least developed nations at the WTO. Recognizing that most of the membership is not fully industrialized, certain aspects of WTO negotiations divide the membership according to wealth and then apply trade discipline accordingly. In negotiation, the issues facing developing countries involve both order and magnitude (Clapp, 2006). In dispute settlement, the issues facing developing countries pertain to institutional access both in terms of financial and professional factors and in terms of legal capacity (Bohanes & Garza, 2012). A minority of members use the DSM, and political scientists and trade lawyers examine the implications of nonuse of legal mechanisms (Smith, 2004). Successfully defending public policy and successfully challenging the protectionist policies of trading partners depends to a great extent upon the skilled use of the DSM (Shaffer, 2009). Trade lawyers note that effective use of dispute settlement mechanisms begins with continued use, which may aid in the development of professional standing and legal capacity on the part of civil servants (Hoekman, Horn, & Mavroidis, 2009).
Finally, the Doha Round of liberalization negotiations was supposed to place the issues of developing economies front and center at the WTO. However, after 12 years of negotiation, most negotiations remain far from complete. There is significant political legitimacy to be lost in the failure of the first trade round to prioritize developing country issues in the trading system (Akyuz, Milberg, & Wade, 2006). However, the failure of the Doha negotiations has resulted in the migration of many trade issues to the regional level, where agreements have proliferated (Stephenson, 2008). Even so, a multilateral approach to trade issues, from the liberalization of agriculture markets to the easing of barriers for trade in services, would pay significant dividends because most developing country members do not have any other direct access to trade negotiations with the United States and the European Union outside the multilateral forum.
Literature Linking World Trade Law and Social Priorities
In addition to the issues raised by the inclusion of many small economies in the institutions of global trade governance, the rise of world trade law has simultaneously highlighted the many areas of importance to national publics in developed economies where trade overlaps with social priorities. In particular, the literature most often highlights issues relating to the environment, culture, labor standards, human rights, and health. Several of these issue areas—health, the environment, and cultural goods—are reviewed.
Trade Law and Public Health
National responsibilities for population health intersect with trade law in three basic areas. The first pertains to state regulatory autonomy. States may according to the law of the GATT limit trade in certain goods if the action is taken to protect human health. Even so, the protection of health through the limiting of trade is difficult because if the state is challenged in dispute settlement, it must show (among other factors) a clear chain of causation between its trade-limiting action and the health of the national population (McGrady, 2011, p. 164). France was able to show this chain of causation when it banned the importation of Canadian asbestos (Castleman, 2002), but the United States was not able to do so when it banned the importation of clove cigarettes from Indonesia for public health reasons, partly because the panel found that clove cigarettes are a similar product to menthol cigarettes produced in the United States. (A summary of the clove cigarettes case is provided online.)
The second has to do with new areas of multilateral regulation that broadened the WTO’s governance mandate after the Uruguay Round. In particular, scholars and policy makers have closely examined the implications of the General Agreement on Trade in Services (GATS) for public health (Blouin et al., 2005). Health provision historically has been largely unaffected by trade, but with the birth of the GATS, it appeared as if the globalization of health service provision was upon us. This has not been the case, partly because member states have been unwilling to liberalize in these areas and partly because of low demand for cross-border medical service provision, although information and communication technologies have driven demand for some off-shoring in the information and communication technology (ICT) sector (Blouin, Gobrecht, Lethbridge, Singh, Smith, & Warner, 2006).
Finally, there is the issue of intellectual property rights as they relate to public health. The TRIPS Agreement attempts to strike a balance between the needs of consumers and the rights of inventors to collect a fair return on their intellectual property. This balance has proven difficult to maintain, and the TRIPS Agreement is often considered to be one of the many stumbling blocks to equitable provision of medicines in countries facing health pandemics, such as that posed by HIV/Aids to countries in Africa (George, 2011). At the time it was drafted, TRIPS contained provisions to allow countries facing pandemics to temporarily suspend certain intellectual property rights to manufacture (at public expense) life-saving medicines—a process known as compulsory licensing (Wilson, Cawthorne, Ford, & Aongsonwang, 1999). But the basic problem was that most of the countries facing the HIV pandemic did not have any pharmaceutical manufacturing capacity.
With great difficulty, the TRIPS Agreement was eventually amended on December 6, 2005, to allow members with manufacturing capacity to fulfill the terms of the license. The amendment entered into force and became a permanent piece of the agreement when two thirds of the membership finally ratified it on January 23, 2017—more than 11 years later. The first and only test of the new rules came in 2007, when Rwanda notified the WTO that it would seek the production of generic anti-retroviral medications from Canada. In institutional terms, the collaboration was a successful test of the new flexibilities. However, in practical terms, the legal, bureaucratic, and economic hurdles that must be surmounted to improve access to medicines are significant (Amollo, 2009). Although in fairness, many of these hurdles are not the purview of world trade alone.
Trade Law and the Environment
Even before the WTO came into being, national publics had begun to question the impact of multilateral trade regulation on environmental protection. In particular, the dolphin-tuna dispute, in which the GATT struck down as discriminatory an American dolphin-safe labeling initiative for canned tuna, seemed to signal a new impatience within the multilateral trading order for domestic regulation protecting environmental priorities (Schoenbaum, 1997). The concern was then, and remains today, that environmental measures will be considered solely in terms of their potential trade distorting effects, rather than in terms of their possible impact upon environmental sustainability. A number of disputes have arisen in which WTO panels have attempted to apply an appropriate standard of review that maintains the principles of MFN and national treatment while simultaneously leaving room for national approaches to social priorities (Vranes, 2009).
Trade Law and Cultural Goods
Much has been made of the incommensurate differences between cultural products and industrial goods (Mas-Colell, 1999). Advocates of a cultural distinctiveness model for the treatment of cultural goods and services argue that a film cannot be treated in the same way as softwood lumber for example, both in the flow of the product in question across national borders and in the basic form of regulation of the product behind the border (Throsby, 2001). There are three reasons for this. First, most cultural goods are increasingly digital, making their movement more similar to financial flows than the import/export movement of commodities (Wunsch-Vincent, 2008). The preservation of intellectual property is an issue in this regard (Helfer, 2004). Second, the endless replication of these cultural goods raises concerns for the cultural producers in smaller economies, that their industries will be swamped by high-quality, low-cost iterations from large economies, where cultural producers recoup the cost of production in their home jurisdiction and reap large profits in foreign markets (Grant & Wood, 2004). Examples include the sale and distribution of American cultural content such as films and magazines abroad. A number of disputes between Canada the United States have targeted this issue (Acheson & Maule, 1999).
Finally, cultural goods embody identities and social values in a way that industrial goods do not, contributing a number of complex sociocultural and political implications to their consumption (Drache & Froese, 2008). The WTO’s membership is deeply divided on these issues, with producers in the United States arguing that consumers treat cultural goods much like any other product, consuming according to their tastes with little regard for national origins. A film may portray American social values, but many other products may be identified by the distinctive features and symbolic properties as well (Aageson, 2008). Even so, the cultural distinctiveness thesis has gained significant traction and provides a useful counterpoint to intellectual property when considering the relationship between trade governance and the global cultural economy (Sundara Rajan, 2008).
Conclusion: The Future of World Trade Law
The terrain of trade law is complex, and prognostication is inherently risky, but it is possible to identify a number of potential trajectories for the development of international economic law (Petersmann, 2011). In particular, possible futures are identified in the literature regarding regional trade agreements, multilateral trade negotiation, dispute settlement, and the future role of the WTO in the larger system of international law.
Regional trade agreements have proliferated exponentially in the years following the birth of the WTO, and while the trend has peaked in numerical terms, the future of integration likely lies at the intersection of the regional and multilateral levels (Crawford & Fiorentino, 2005; Hofmann, Osnago, & Ruta, 2017). This is not to deny the significance and rising juridical importance of the WTO but rather to point toward the number of increasingly large and complex arrangements recently signed or currently under negotiation at the Transpacific Partnership (TPP), the EU-US negotiations known as the Trans-Atlantic Trade and Investment Partnership (TTIP), the new North American free trade agreement known variously as the CUSMA or the USMCA, and the Regional Comprehensive Economic Partnership (RCEP) involving India and China (Steger, 2012; Wignaraja, 2018). The literature is split on the implications of the new regionalism, with some commentators seeing the rise of a particularism that undercuts the multilateral liberalization project (Bhagwati, 2007), while others see a compliment to the current trading system (Summers, 1991). They further argue that regionalism may offer a way to bypass the deadlock in the Doha Round while simultaneously offering multiple platforms upon which to test new institutional and legal mechanisms for governance (Stephenson, 2008). Critically minded scholars see the growing complexity of regional agreements as part of a neoliberal agenda that places the gains from trade ahead of workers’ rights and health, welfare, and environmental standards (De Ville & Siles-Brugge, 2015).
The future of multilateral trade negotiation is murky as scholars and practitioners move beyond debates about whether the Doha Development Round is beyond revival and begin to ask whether the multilateral order will survive the turbulent early decades of the 21st century (Bhagwati, 2011; Shaffer, 2018). In December 2013, one of these smaller deals was reached at the Bali Ministerial Conference, where negotiators came to an agreement on trade facilitation (Koopman & Wittig, 2014). Like the TRIPS amendment discussed earlier, the Trade Facilitation Agreement formally entered into force on February 22, 2017, once two thirds of the membership had ratified it. Ultimately, negotiators may be able to salvage a much smaller final package, and perhaps some negotiations may be spun off and completed as plurilateral agreements. But the big-tent form of trade multilateralism practiced immediately after the end of the Cold War is perhaps best understood as the unique product of a historical moment. At least two reasons for this are explored in the literature. First, the geopolitical dynamics of trade governance have shifted many new developing country members and the rising economic power of the so-called BRICS: Brazil, Russia, India, China, and South Africa (Narlikar, 2010; Hopewell, 2016; Mahrenbach, 2013). Second, the gains predicted at the end of the Uruguay Round (both in terms of governance effectiveness and economic advantage) have yet to fully materialize. This is partly because of turbulence in the global economy and is also due to ongoing complications related to internalizing and capitalizing upon disciplinary agreements, such as the TRIPS and new arenas of liberalization, such as the GATS.
Scholars are perhaps more sanguine about the future of the dispute settlement processes institutionalized in world trade law over the past 20 years (WTO Secretariat, 2012). In terms of volume, the number of cases brought to the WTO peaked by 2000 (VanGrasstek, 2013, p. 54). But the dispute settlement mechanism continues to enjoy broad-based multilateral basis for support. Daemmrich (2011) suggested that a shift has taken place in which the trading system used to derive a great deal of its legitimacy from its expanding membership base now derives a similar legitimacy from its dispute resolution abilities. The novelty of binding rules and an appellate body have been replaced by debates about how to make dispute settlement more transparent and by discussions about how to integrate the interests of civil society into the process, which suggest a maturing organization.
However, storm clouds of populism are gathering. Concerns about the loss of sovereignty represented by a new international court have not been mollified even as new concerns about the effective rates of compliance and the reach of dispute settlement beyond the borders of the sovereign state have been articulated (Plasai, 2007; Hillman, 2018). In the final balance, the WTO’s developmental trajectory is trending away from liberalization negotiation and toward juridical and information gathering functions, suggesting a future in which the institution functions as a highly legitimate court, a lens for trade policy transparency, and a negotiating body with potential, but little kinetic energy (WTO, 2013). But even here, it seems that new challenges arising from geopolitical power transition dynamics threaten the stability of the current multilateral order.
The future of trade law within the broader system of public international law is likely to be one in which the many small challenges, conflicts, and overlaps within and between these bodies will continue to be addressed as they arise in the processes of treaty negotiation and dispute settlement (Baldwin, Kawai, & Wignaraja, 2013). Scholars and policy makers hope that despite populist threats, compromise will continue to be the rule, and now that a rationalization process is underway, it will continue to knit together the many disparate legal strands that compose the body of international economic law (Guzman & Sykes, 2008; Lester, 2013; Trachtman, 2018). The final outcome is likely to be a more coherent and focused body of trade law with a stronger understanding of its own strengths and limitations within the growing body of public international law that exists beyond the state. But nobody knows what the turbulent 21st century will bring for world trade law.
Links to Digital Materials
The World Trade Organization produces statistical databases on global trade trends, reports on the state of trade policy around the world, and documentation relating to trade dispute settlement.
The WTO and Stanford University maintain an important cache of documents pertaining to the history of post-war trade governance at the GATT Digital Library: 1947–1994.
For UN reports and statistical databases relevant to developing country trade visit the United Nations Conference on Trade and Development.
Governmental and Region-Specific Resources
The United States Department of Commerce maintains records for public access.
The Canadian Department of Foreign Affairs and International Trade maintains an online presence.
The Trade Law Centre for Southern Africa offers a number of country briefs and working papers.
University and Independent Research Sources
The Trade Law Guide.
For commentary on dispute settlement, go to WorldTradeLaw.net.
Harvard University maintains a portal for research on global trade negotiations.
The Fletcher School at Tufts University maintains The Multilaterals Project, a full text database of international commercial treaties.
The Peterson Institute for International Economics maintains a large archive of research relating to trade law, investment, and competition.
The Cato Institute maintains material on a wide range of research relating to the globalization of international economic law.
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