GATT, WTO and the Regulation of International Trade in Textiles

Claudia Jiménez Cortés

• Publisher: Taylor & Francis
• Year: 2018
• Print ISBN: 9781138315020
• eBook ISBN: 9780429852190
• Edition: 1
• Topic: Law
• Subtopic: International Law
• Index: Law

Published in 1997, in this book an attempt has been made to analyze the legal structure of GATT and the WTO as well as those agreements which control trade in textiles. One of the GATT's major failures was its inability to come into line with the new economic reality and the needs of those states who created this system for controlling international trade. Trade in textiles was an excellent example of this. Now, the WTO aims to overcome this problem thanks to its greater pragmatism and its search for solutions to free trade difficulties. The WTO is not, however, the perfect solution. Its highly political character allows room for improvement even though the key to its success still lies with the effective cooperation of member states. As for the textile sector, this new panorama for trade in goods provides it with a new opportunity to finally return to the general legal framework in the year 2005.

Part I
The Background to International Trade in Textiles

1 The Historical and Legal Framework for International Trade

International Commercial Law as the background to the systems to be studied

The use of law as an instrument of order for maintaining the status quo among those who hold power is a constant feature in history and one in which International Public Law (IPL) plays its part. In this respect, SEIDL-HOHENVELDERN has written that:

"Law reflects the interests of the ruling class and international law, in particular, reflects the interest of the most prominent (hegemonical) powers of the period concerned."¹

One of those areas of law where this is most obviously the case is International Economic Law (IEL). In this regard, CARREAU, FLORY and JUILLARD have commented:

"Qu'il soit d'origine privée ou publique, l'ordre international economique n'est pas neutre. En matière énomique, il n'existe pas d'ordre qui soit naturel. Tout ordre international économique suppose une conception politique globale pour le soustendre et celle-ci ne saurait que refléter l'intérêt des puissances dominantes."²

and that in this sense:

"...le droit international 6conomique constitue la formalization et la règlementation opèrationnelle des concepts économiques et politiques sur lesquels l'ordre international économique est fondé."³

This order was based on the exchange of goods between " Western trading civilizations"⁴ and, after the Second World War, was based on a global political conception of a neoliberal character, imposed by the victonous Western nations, and made to measure for their convenience, making out of this an order "par et pour des pays développés a économie de marché."⁵

This attempt to make International Economic Law another weapon with which to perpetuate this political and economic system was carried out both through the drawing-up of rules through negotiations as well as through their contents, application and dispute-settlement mechanisms.⁶

Within this framework, International Commercial Law (ICL) characterized for being a branch of law with its own special features has been defined by LONG as a whole made up of rules and proceedings which govern trade relations or more precisely, the exchange of goods.⁷ It rejects the notion of autarchy given that its aim has always been that of furthering exchange and, as such, involves the fostering of international cooperation in a wide sense through the common goal of trading although agreement as to the way in which this exchange must be carried out cannot necessarily be reached as would be the case of an economic model based on the free market system.⁸

In order to carry out these goals, ICL as with any legal construction is provided which, as in other areas of law, is designed in accordance with a final goal towards which norms should be directed and immediate objectives reached. On the basis of this goal the legal mechanisms charged with setting out its corresponding objectives should include structural principles as well as positive norms, dispute settlement mechanisms and means for their execution.

In order to be slightly more flexible, such a legal construct must also be accompanied by some safeguard mechanisms which allow the subjects to adapt the system (both to its needs as well as to changing circumstances) without challenging the coherence of the existing legal system.⁹

Its distinguishing characteristic would be determined therefore more by the character of the norms than by the structure of the system, many of which are based more on opportunism than on their binding character. The importance given to timeliness and a real wish on the subjects' part to respect the established order over and above the contents and the obligatory character of the norms themselves means that, in IEL, legal techniques requiring a consensus have always dominated over common rules. In this respect, imprecise regulations typical of soft law are preferred as these lend a greater margin of discretion to the parties.¹⁰

The dispute-settlement mechanisms typical of IEL also share these characteristics. In this way the litigous and legalist route, leading to a judicial or quasijudicial solution, ss rarely used preferring instead to look for a compromise among all parties in order to assure the continuity of the system.

On the other hand, the most frequently-used mechanisms for application and execution are economic and/or psychological pressures which tend to dissolve into a process of consultation and depend largely for their effectiveness on the states in question. Only in those cases where a real desire to settle a difference exists is supervision or control on behalf of international institutions permitted. In general, those international economic organizations charged with solving disputes have to:

"observer l'évolution de la coryoncture et qui s'efforcent de faire prévaloir les intérêts àa long ou a moyen terme des Etats sur les intéerêts à court terme: les intérêts à long et moyen terme étant convergents alors que les intèrêts à court terme au contraire font apparaître des oppositions ou des divergences, et par consequént des difficultés d'application."¹¹

and admit the need to adapt, not only to the conduct of states but also to law itself and especially to those extra-legal needs depending on those interests which always predominate.

It is for this reason that the control exercised in the field of ICL centres itself on looking for the solution to the specific problem, even in those cases where the rules have been breached. For example, in the GATT system, the mechanism for dispute settlement has always been that of negotiation leaving to one side a legal judgment of the eventual violation of rules and the resulting demand for international responsibility which it involves.

For this reason it is said that International Economic Law in general and International Commercial Law in particular, has a "realistic", adaptable and informal character. This informal character means, on the one hand, that the regulatory system turns out to be more manageable and therefore more adaptable to reality but, on the other, makes the distinction between formal rules and mere recommendations very difficult. All this without entering into the debate that the fact that this system is easily adaptable is a double-edged sword given that it means that its rules are also more manageable depending as they do on the interests of the parties and justified according to what WEIL calls "the dynamism of economic facts."¹²

In spite of all this, this approach to IEL is defended by several authors in the belief that thanks to the afore-mentioned "adaptability" of norms in the economic field, maximum possible freedom is preserved which allows them to keep their sovereignty intact,¹³ a position which has provoked a debate between pragmatics and legalists in the field of ICL and which will be dealt with later.

The Principles of International Commercial Law in the light of economic reality

The dichotomy between free access to markets and protectionism, represented at a legal level by the principles of free trade and sovereignty respectively, has been a constant feature throughout the history of trade exchanges and has determined the content of this sub-division of International Public Law.¹⁴

As regards free trade we are dealing here with a principle which has served for commercial exchanges since international classical law through the fixing of standards which became operative for example through the Most-Favoured Nation (MFN) and the National Treatment (NT) clauses and their use at a bilateral as well as a multilateral level. The main goal of this principle is to increase cooperation between states in order to eliminate or reduce the obstacles which conflicts can create.

This means, according to DINH, that

"la faculté, en pnncipe illimitée, de se hvrer à toute activité commerciale, que celle-ci ait pour objet le négoce proprement dit, c'est-à-dire la vente et l'achat de marchandises, ou qu'elle s'applique à l'industrie (...) qu'elle s'exerce à l'intérieur ou qu'elle s'exerce avec l'extérieur par importation ou exportation."¹⁵

We are dealing therefore with a political principle which has been limited, extended or reinterpreted in terms of the social changes which have taken place in international society and which some states have incorporated using mechanisms typical of IEL such as unilateral acts and the reaching of agreements without these constituting a customary norm. A fundamental step in the decision to adopt one or another model for regulating international trade was that taken at the end of the eighteenth century with the appearance of Adam Smith's economic theories which coincided with the beginning of the Industrial Revolution in which the textile sector played a crucial role with its accompanying potential for massive consumption and the low investment it required.

Set against this free market model which requires the greater interdependence of states through the development of commercial exchanges in an open fashion, we can find the principle of sovereignty applied to the trade sector which defends the protection of goods and industries of the States whilst reaffirming their independence and competence in matters of international trade.¹⁶

States have used this principle of sovereignty (which does not necessarily imply a counterposition to that of free trade) in order to create certain national policies of a protectionist nature designed to react against massive imports. This defensive posture is normally adopted by those States lacking in competitivity in a certain sector of the market or which have seen their hegemonic position threatened. In this sense LIST back in 1841 showed how the theory of free exchange applied to states of different economic power was converting itself into an instrument for the submission of the weak and for that reason advocated protectionism and preferential treatment as an axis for international trade, an argument which had little success in those days but which would reappear in moments of crisis. Such a line of argument was a challenge to the free market theory set out by Adam Smith and continued by David Ricardo and John Stuart Mill. These two currents of opinion each led to different ways of seeing trade relations on an international level sparking a debate that would be systemmatically reproduced in the future, alternating between one and another criteria depending on the type of state which defended it and the periods of crisis or economic windfall in which the debate took place. The latest resurgence of this debate took place in the Sixties and Seventies and was led by the developing countries with the aim of creating a "New International Economic Order" in which they aired the same complaints as LIST had done over a century earlier. Today, however, in the Nineties, the subject is put forward by economic theorists from the perspective of market imperfection.¹⁷

Historically speaking, the choice between these different options of foreign trade policy (free market or protectionism) has always been made in relation to the control the states in question may have over the market and has been repeated from the Middle Ages up to the present day. The textile or cloth sector has always been one of its most important exponents owing to the fact that, as a rule, this sector goes hand in hand with both the beginning of the industrial development of a State as well as of its industrial outphasing in certain sectors brought about by a loss of competitivity when faced with new exporters.

A perfect example of this was the fourteenth century conflict between the major textile power, the Netherlands, and its main wool supplier, England. The result was an order dictated by Edward III in 1337 which prohibited the import of wool into England.¹⁸ Another similar case previous to the Industrial Revolution is that o...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Contents
• Acknowledgements
• Introduction
• PART I: THE BACKGROUND TO INTERNATIONAL TRADE IN TEXTILES
• PART II: THE COMPATIBILITY BETWEEN THE OBJECTIVES AND PRINCIPLES OF THE MFA WITH THE GATT LEGAL SYSTEM
• PART III: A COMPARISON OF THE MECHANISMS FOR TRADE WITHIN BOTH LEGAL FRAMEWORKS
• PART IV: THE CAPACITY OF GATT AND THE MFA TO REACT TO CHANGING CIRCUMSTANCES
• PART V: THE URUGUAY ROUND: REINTEGRATION OF TEXTILES INTO THE GENERAL SYSTEM THROUGH THE WTO
• Overview