INTERNATIONAL ECONOMIC LAW
INTERNATIONAL ECONOMIC LAW .......................................................................................... 1
Link with other courses? .................................................................................................................................. 9
Course overview .............................................................................................................................................. 9
Agreements on international economic activity ................................................................................................ 9
A first introduction to the WTO … .................................................................................................................... 10
Current hot topics in IEL ................................................................................................................................. 10
US - China trade conflict ................................................................................................................................... 10
Post-Brexit EU - UK relationship ....................................................................................................................... 10
WTO DSB crisis and beyond .............................................................................................................................. 10
Legitimacy of ISDS ............................................................................................................................................. 11
Sustainability (climate change) ......................................................................................................................... 11
THE ECONOMICS OF FREE TRADE ..........................................................................................11
1. Why? ..................................................................................................................................................... 11
Classical free trade theory ................................................................................................................................ 12
THEORY OF COMPARATIVE ADVANTAGE ......................................................................................................... 13
Factor proportion theory .................................................................................................................................. 13
Product life cycle theory ................................................................................................................................... 14
Economies of scale ........................................................................................................................................... 14
2. challenges to free trade ......................................................................................................................... 16
A. Examples of protectionist measures ........................................................................................................ 16
Bans .............................................................................................................................................................. 16
Tariffs ............................................................................................................................................................ 17
Subsidies ....................................................................................................................................................... 17
Other barriers ............................................................................................................................................... 17
B. (justified?)Arguments for protective measures ....................................................................................... 18
The infant industry argument ...................................................................................................................... 18
The optimal tariff concept ............................................................................................................................ 18
Revenue raising in LCD’s (less/least developed countries) .......................................................................... 19
National security .......................................................................................................................................... 19
1
, Health, safety and environmental concerns ................................................................................................ 19
C. Prisoner’s dilemma .................................................................................................................................. 20
3. Objections to free trade ......................................................................................................................... 20
4. What is the WTO .................................................................................................................................... 20
Observers .......................................................................................................................................................... 20
5. WTO’s institutional structure ................................................................................................................. 21
Highest authority: MINISTERIAL CONFERENCE ................................................................................................. 22
2nd level: GENERAL COUNCIL ........................................................................................................................... 22
3th level: COUNCILS (+ COMMITTEES) ............................................................................................................. 22
4th level: SUBSIDIARY BODIES .......................................................................................................................... 24
The WTO secretariat ......................................................................................................................................... 24
6. Core principles of WTO law .................................................................................................................... 25
A. WTO core principles ................................................................................................................................. 25
I. Non discrimination .............................................................................................................................. 25
Most-favoured nation (MFN) principle .................................................................................................... 25
National treatment principle ................................................................................................................... 30
II. Freer trade ........................................................................................................................................... 35
Reducing & binding tariffs ........................................................................................................................ 35
Quantitative restrictions .......................................................................................................................... 37
III. Transparancy ....................................................................................................................................... 38
IV. Development ....................................................................................................................................... 40
7. WTO exceptions ..................................................................................................................................... 41
A. General exceptions .................................................................................................................................. 42
Article XX: General Exceptions (GATT) ......................................................................................................... 42
(b) necessary to protect human, animal or plant life or health ............................................................... 43
(d) necessary to secure compliance with laws or regulations which are not inconsistent with the GATT
................................................................................................................................................................. 44
(g) relating to the conservation of exhaustible natural resources if such measures are made effective in
conjunction with restrictions on domestic production or consumption ................................................. 45
Double condition...................................................................................................................................... 46
B. Regional trade agreements (RTAs) .......................................................................................................... 47
Legal basis .................................................................................................................................................... 48
Internal + external conditions: very strict conditions................................................................................... 49
Internal condition .................................................................................................................................... 49
External condition .................................................................................................................................... 49
2
, + "Transparency Mechanism for Regional Trade Agreements” (2006) ........................................................ 50
Examples ...................................................................................................................................................... 50
C. The enabling clause (1979) ...................................................................................................................... 50
D. Balance of payments ................................................................................................................................ 51
Legal basis .................................................................................................................................................... 51
Strict conditions............................................................................................................................................ 51
Temporary ................................................................................................................................................ 51
Absolutely necessary................................................................................................................................ 51
Avoid sectoral specificity.......................................................................................................................... 52
Transparent .............................................................................................................................................. 52
E. Security exceptions .................................................................................................................................. 52
Measures necessary for the protection of essential security interests ................................................... 52
Non-disclosure of information contrary to essential security interests .................................................. 53
Actions in pursuance of obligations under UN Charter for int. peace & security .................................... 53
Legal basis .................................................................................................................................................... 53
F. Trade Remedies ....................................................................................................................................... 53
“trade defence” → temporarily shielding vulnerable sectors ..................................................................... 53
Legal basis? ................................................................................................................................................... 53
Dumping ....................................................................................................................................................... 54
Price discrimination ................................................................................................................................. 54
DUMPED IMPORTS (art. VI, 1 GATT) ........................................................................................................ 56
Art. 2.6 Anti-dumping Agreement ........................................................................................................... 56
Material Injury (art. 3.1 Anti-dumping Agreement) ................................................................................. 57
Causal link (Art. 3.5 Anti-dumping Agreement) ....................................................................................... 57
a. Anti-dumping measures ...................................................................................................................... 57
Procedure → Anti-dumping Agreement .................................................................................................. 57
Increased customs duties (> bound rate) on products/producers at stake ............................................. 57
b. Subsidies and countervailing measures ............................................................................................... 58
Subsidies → ............................................................................................................................................. 58
Article 1 SCM Agreement: Definition of a Subsidy ................................................................................... 59
MS confronted with actionable s. can ..................................................................................................... 60
c. Safeguard measures ............................................................................................................................ 60
G. Waivers .................................................................................................................................................... 61
8. Dispute settlement ................................................................................................................................ 61
A. basic concepts .............................................................................................................................................. 61
I. Dispute Settlement Understanding (DSU) ................................................................................................. 61
a. Goal? ............................................................................................................................................... 62
3
, b. Interpretation .................................................................................................................................. 62
II. Players?................................................................................................................................................ 62
a. Dispute Settlement Body (DSB) = General Council ......................................................................... 62
b. Parties.............................................................................................................................................. 63
c. Panels .............................................................................................................................................. 64
d. Appellate body ................................................................................................................................ 64
III. DSB: negative consensus rule .............................................................................................................. 65
IV. Covered agreements ........................................................................................................................... 65
V. Complaints ........................................................................................................................................... 65
B. Dispute procedure ................................................................................................................................... 66
I. Consultations ....................................................................................................................................... 67
United States — Tariff measures on certain goods from China I, II & III ................................................. 67
II. Adjudication by a Panel ............................................................................................................................ 68
III. Adoption of panel report by DSB............................................................................................................. 69
IV. Appellate body..................................................................................................................................... 69
V. Adoption of appellate body report by DSB.......................................................................................... 69
VI. Implementation ................................................................................................................................... 69
VII. In case of non-compliance .............................................................................................................. 69
Voluntary compensation .......................................................................................................................... 69
Request for suspension of concessions ................................................................................................... 70
C. Dispute settlement body ......................................................................................................................... 71
D. Actual DSB deadlock ................................................................................................................................ 71
US refuses (re-)appointment of Appelate Body members....................................................................... 71
2018: substantive US criticism on AB functioning ................................................................................... 71
2018-19 EU DSU proposal ........................................................................................................................ 72
2020 only 1 AB member left .................................................................................................................... 72
What now? ............................................................................................................................................... 72
9. TRIPS...................................................................................................................................................... 73
10. International investment law ............................................................................................................ 73
A. International economic law ..................................................................................................................... 73
I. Concept................................................................................................................................................ 73
II. Investor protection ................................................................................................................................... 74
National law (national courts).................................................................................................................. 74
Contract law ............................................................................................................................................. 74
International law ...................................................................................................................................... 74
B. FDI & WTO? .............................................................................................................................................. 74
Only if within GATT scope ............................................................................................................................ 75
4
INTERNATIONAL ECONOMIC LAW .......................................................................................... 1
Link with other courses? .................................................................................................................................. 9
Course overview .............................................................................................................................................. 9
Agreements on international economic activity ................................................................................................ 9
A first introduction to the WTO … .................................................................................................................... 10
Current hot topics in IEL ................................................................................................................................. 10
US - China trade conflict ................................................................................................................................... 10
Post-Brexit EU - UK relationship ....................................................................................................................... 10
WTO DSB crisis and beyond .............................................................................................................................. 10
Legitimacy of ISDS ............................................................................................................................................. 11
Sustainability (climate change) ......................................................................................................................... 11
THE ECONOMICS OF FREE TRADE ..........................................................................................11
1. Why? ..................................................................................................................................................... 11
Classical free trade theory ................................................................................................................................ 12
THEORY OF COMPARATIVE ADVANTAGE ......................................................................................................... 13
Factor proportion theory .................................................................................................................................. 13
Product life cycle theory ................................................................................................................................... 14
Economies of scale ........................................................................................................................................... 14
2. challenges to free trade ......................................................................................................................... 16
A. Examples of protectionist measures ........................................................................................................ 16
Bans .............................................................................................................................................................. 16
Tariffs ............................................................................................................................................................ 17
Subsidies ....................................................................................................................................................... 17
Other barriers ............................................................................................................................................... 17
B. (justified?)Arguments for protective measures ....................................................................................... 18
The infant industry argument ...................................................................................................................... 18
The optimal tariff concept ............................................................................................................................ 18
Revenue raising in LCD’s (less/least developed countries) .......................................................................... 19
National security .......................................................................................................................................... 19
1
, Health, safety and environmental concerns ................................................................................................ 19
C. Prisoner’s dilemma .................................................................................................................................. 20
3. Objections to free trade ......................................................................................................................... 20
4. What is the WTO .................................................................................................................................... 20
Observers .......................................................................................................................................................... 20
5. WTO’s institutional structure ................................................................................................................. 21
Highest authority: MINISTERIAL CONFERENCE ................................................................................................. 22
2nd level: GENERAL COUNCIL ........................................................................................................................... 22
3th level: COUNCILS (+ COMMITTEES) ............................................................................................................. 22
4th level: SUBSIDIARY BODIES .......................................................................................................................... 24
The WTO secretariat ......................................................................................................................................... 24
6. Core principles of WTO law .................................................................................................................... 25
A. WTO core principles ................................................................................................................................. 25
I. Non discrimination .............................................................................................................................. 25
Most-favoured nation (MFN) principle .................................................................................................... 25
National treatment principle ................................................................................................................... 30
II. Freer trade ........................................................................................................................................... 35
Reducing & binding tariffs ........................................................................................................................ 35
Quantitative restrictions .......................................................................................................................... 37
III. Transparancy ....................................................................................................................................... 38
IV. Development ....................................................................................................................................... 40
7. WTO exceptions ..................................................................................................................................... 41
A. General exceptions .................................................................................................................................. 42
Article XX: General Exceptions (GATT) ......................................................................................................... 42
(b) necessary to protect human, animal or plant life or health ............................................................... 43
(d) necessary to secure compliance with laws or regulations which are not inconsistent with the GATT
................................................................................................................................................................. 44
(g) relating to the conservation of exhaustible natural resources if such measures are made effective in
conjunction with restrictions on domestic production or consumption ................................................. 45
Double condition...................................................................................................................................... 46
B. Regional trade agreements (RTAs) .......................................................................................................... 47
Legal basis .................................................................................................................................................... 48
Internal + external conditions: very strict conditions................................................................................... 49
Internal condition .................................................................................................................................... 49
External condition .................................................................................................................................... 49
2
, + "Transparency Mechanism for Regional Trade Agreements” (2006) ........................................................ 50
Examples ...................................................................................................................................................... 50
C. The enabling clause (1979) ...................................................................................................................... 50
D. Balance of payments ................................................................................................................................ 51
Legal basis .................................................................................................................................................... 51
Strict conditions............................................................................................................................................ 51
Temporary ................................................................................................................................................ 51
Absolutely necessary................................................................................................................................ 51
Avoid sectoral specificity.......................................................................................................................... 52
Transparent .............................................................................................................................................. 52
E. Security exceptions .................................................................................................................................. 52
Measures necessary for the protection of essential security interests ................................................... 52
Non-disclosure of information contrary to essential security interests .................................................. 53
Actions in pursuance of obligations under UN Charter for int. peace & security .................................... 53
Legal basis .................................................................................................................................................... 53
F. Trade Remedies ....................................................................................................................................... 53
“trade defence” → temporarily shielding vulnerable sectors ..................................................................... 53
Legal basis? ................................................................................................................................................... 53
Dumping ....................................................................................................................................................... 54
Price discrimination ................................................................................................................................. 54
DUMPED IMPORTS (art. VI, 1 GATT) ........................................................................................................ 56
Art. 2.6 Anti-dumping Agreement ........................................................................................................... 56
Material Injury (art. 3.1 Anti-dumping Agreement) ................................................................................. 57
Causal link (Art. 3.5 Anti-dumping Agreement) ....................................................................................... 57
a. Anti-dumping measures ...................................................................................................................... 57
Procedure → Anti-dumping Agreement .................................................................................................. 57
Increased customs duties (> bound rate) on products/producers at stake ............................................. 57
b. Subsidies and countervailing measures ............................................................................................... 58
Subsidies → ............................................................................................................................................. 58
Article 1 SCM Agreement: Definition of a Subsidy ................................................................................... 59
MS confronted with actionable s. can ..................................................................................................... 60
c. Safeguard measures ............................................................................................................................ 60
G. Waivers .................................................................................................................................................... 61
8. Dispute settlement ................................................................................................................................ 61
A. basic concepts .............................................................................................................................................. 61
I. Dispute Settlement Understanding (DSU) ................................................................................................. 61
a. Goal? ............................................................................................................................................... 62
3
, b. Interpretation .................................................................................................................................. 62
II. Players?................................................................................................................................................ 62
a. Dispute Settlement Body (DSB) = General Council ......................................................................... 62
b. Parties.............................................................................................................................................. 63
c. Panels .............................................................................................................................................. 64
d. Appellate body ................................................................................................................................ 64
III. DSB: negative consensus rule .............................................................................................................. 65
IV. Covered agreements ........................................................................................................................... 65
V. Complaints ........................................................................................................................................... 65
B. Dispute procedure ................................................................................................................................... 66
I. Consultations ....................................................................................................................................... 67
United States — Tariff measures on certain goods from China I, II & III ................................................. 67
II. Adjudication by a Panel ............................................................................................................................ 68
III. Adoption of panel report by DSB............................................................................................................. 69
IV. Appellate body..................................................................................................................................... 69
V. Adoption of appellate body report by DSB.......................................................................................... 69
VI. Implementation ................................................................................................................................... 69
VII. In case of non-compliance .............................................................................................................. 69
Voluntary compensation .......................................................................................................................... 69
Request for suspension of concessions ................................................................................................... 70
C. Dispute settlement body ......................................................................................................................... 71
D. Actual DSB deadlock ................................................................................................................................ 71
US refuses (re-)appointment of Appelate Body members....................................................................... 71
2018: substantive US criticism on AB functioning ................................................................................... 71
2018-19 EU DSU proposal ........................................................................................................................ 72
2020 only 1 AB member left .................................................................................................................... 72
What now? ............................................................................................................................................... 72
9. TRIPS...................................................................................................................................................... 73
10. International investment law ............................................................................................................ 73
A. International economic law ..................................................................................................................... 73
I. Concept................................................................................................................................................ 73
II. Investor protection ................................................................................................................................... 74
National law (national courts).................................................................................................................. 74
Contract law ............................................................................................................................................. 74
International law ...................................................................................................................................... 74
B. FDI & WTO? .............................................................................................................................................. 74
Only if within GATT scope ............................................................................................................................ 75
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