The Development of the Regulation of International Trade: The Past and the Future
The Development of the Regulation of International Trade: The Past and the Future
Abstract
International trade regulation based on agreement and the MFN principle has developed from bilateral FCN agreements to a multilateral arrangement under the GATT with diverse ancillary decisions, understandings, and agreements, to its modern form of comprehensive multilateral agreement under the WTO. A critical part of trade regulation has been the role of dispute settlement where under the WTO the Appellate Body became the authoritative decision-maker on the scope or ambit of the obligations under the WTO agreements. However, since the WTO, preferential trade agreements have proliferated at the bilateral, regional, and plurilateral levels, often deepening the areas of obligation from those under the WTO or expanding to new areas not covered by the WTO agreements. Most recently, this has taken the form of a mega-regional arrangement, the TPP, transformed into the CPTPP, characterized by the number of parties and the size of markets and coverage of areas not found in the WTO or other trade agreements, and without a constitutional role being granted to dispute settlement. The future of international trade regulation, given the present economic and political conditions, is uncertain. The comprehensiveness of mega-regulation is a model, but a reinvigoration of the WTO is unlikely. Retrenchment to traditional bilateral or small-scale regional forms of regulation of much narrower scope cannot be ruled out.
One. Introduction
One. Introduction
In the first edition of this handbook, the international trading system's evolution was dealt with by Gil Winham, who provided the economic and political context, and John Jackson, who provided the legal and institutional context. Professor Winham traced the development of international trade law from the early economic analyses of Adam Smith and David Ricardo to bilateral treaties of the nineteenth century, the negotiation of GATT nineteen forty-seven and then the Uruguay Round and the WTO. Professor Jackson focused more specifically on the Uruguay Round and the institutional and legal innovations that emerged with the WTO.
The present chapter will not go over the ground covered in the two earlier contributions of the first edition, although it will come back to some of the essential material and issues dealt with by Winham and Jackson. Instead, it will focus less on the institutional development of an international trading regime and more on the phenomenon of regulation in international trade. In doing so, it will go beyond the WTO and look at the way the regulation of trade has developed since the advent of the WTO. If the period before the GATT nineteen forty-seven and the WTO can be seen as a period of bilateralism and the GATT nineteen forty-seven, and the WTO, as the apogee of multilateralism, the period since the WTO has been characterized by a return to bilateralism but at the same time a new form of plurilateralism, sometimes described as 'mega-regionalism'.
A description of the history of international trade regulation cannot focus solely on the form in which trade regulation is embodied. The full picture is much more complex. There are other questions about trade regulation that have to be canvassed in order to gain a proper understanding of the development of international trade regulation. This includes looking at how regulation is put in place, what is being regulated, and the reasons for regulation. All of these matters together enable a full appreciation of the history of the regulation of international trade and where the regulation of international trade stands today.
The Cambridge English Dictionary defines regulation as the 'act of controlling something'. While the idea of control reflects one aspect of the legal regulation of international trade, there is much more in trade regulation than control. The regulation of international trade encompasses a myriad of mechanisms and institutions designed to facilitate trade, to enhance opportunities for exchange, to resolve disputes that arise between States or claims against States, and to protect the interests of participants in the activity of exchange-all under the rubric of the regulation of international trade. In short, to understand how the regulation of international trade began and has continued and to consider prospects for the future, these many aspects of trade regulation have to be considered.
Three C2.P4
The history of international trade regulation is a history of managing the cross-border movement of goods and products-things that a person in one State seeks to sell in another State-even if trade has expanded into manifestations that go well beyond the movement of goods. Cross-border movements, however, are the essence of international trade. In the absence of any arrangement to the contrary, the goods that are moved across borders would be governed completely by separate legal regimes. This includes the laws of the place of origin and the laws of the place of destination and, if they transit a third State, the laws of that State as well. Two. The origins and content of international trade regulation C2.S2
Before the development of the modern State, trade was regulated by empires: ancient Persia, and China. The historian Peter Frankopan provides a picture of trade within the Persian empire and the trade between China and Persia. There were revenue implications-trade was important for ancient Persia to finance military expeditions. And there were regulatory implications-China had a strict regime for controlling foreign merchants and their goods. However, this meant that foreigners trading in China were at the whim of China. But national control in this way was not attractive to States that wished to protect the interests of their trading nationals. This led to a move beyond national regulation to the international regulation of trade.
The fundamental mechanism for trade regulation was agreement. By the seventeenth century, States were seeking commitments from other States regarding the treatment of their nationals engaged in commerce. The
One six five four Treaty of Peace and Commerce between Great Britain and Sweden provided:
The people, subjects, and inhabitants of both confederates shall have, and enjoy in each other's kingdoms, countries, lands, and dominions, as large and ample privileges, relations, liberties and immunities, as any other foreigner at present doth and hereafter shall enjoy.
This was essentially a guarantee of non-discrimination, which became known as the MFN clause, and was a staple of treaties of friendship, commerce and navigation throughout the eighteenth and nineteenth centuries.
While the basic instrument of trade regulation was agreement, non-discrimination was the core principle of regulation. Under the MFN principle, States agreed to grant to the nationals of their trading partner treatment as favourable as that granted to the nationals of other States. In part, non-discrimination was an effort by States to ensure a level playing field for their nationals engaged in trade, but it also served an economic function. Non-discrimination was the vehicle for giving effect to the comparative advantage principle according to which countries would benefit if they exported their least cost products (those in which they had a comparative advantage) and imported their higher cost products (those in which they had no comparative advantage). Non-discrimination through the MFN principle served such a goal, and thus its inclusion in FCN agreements had an economic objective as well.
The move from conditional MFN-MFN treatment granted in exchange for some other concession-to unconditional MFN-where MFN was granted without restriction-laid the basis for a common acceptance of MFN in international trade relations and opened the way for MFN to be the organizing principle for a multilateral system regulating international trade. Non-discriminatory trade liberalization was the common goal of the United States and the United Kingdom in discussions both during and after the War. Those two States played the principal role in the negotiation of the GATT nineteen forty-seven.