The Legal and Moral Aspects of International Trade

Freedom and Trade: Volume Three

Geraint Parry, Geraint B Parry, Asif Qureshi, Hillel Steiner

• Publisher: Taylor & Francis
• Year: 2002
• eBook ISBN: 9781134731886
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

This collection of essays by international lawyers and moral philosophers arises from a prestigious multi-disciplinary conference to commemorate the 150th anniversary of the repeal of the Corn Laws in 1846. It examines the legal, moral and political dimensions of free trade. Contributors explore issues such as:
* the ethics and rules of competition
* the idea of global justice
* the problem of international exploitation
* the protection of the environment
* the regulation services
* international taxation and the justifications for barriers to trade.
This book provides an important insight into the continuing debates surrounding free trade. It is an important text for experts across the fields of economics, politics and law as well as to those with an interest in international trade.

1 INTRODUCTION

Geraint Parry, Asif Qureshi and Hillel Sterner

This volume consists of two component elements. First, it includes the set of presentations made to a full plenary session of the conference. And second, it contains the contributions and discussants’ comments prepared for the conference’s Law and Political Theory workshop.

The multi-disciplinary nature of the conference provided an especially opportune and appropriate occasion to hold a common plenary session at which a panel of prominent representatives of each of the four contributing disciplines was invited to address the subject of: ‘The Feasibility and Desirability of Global Free Trade’.

Accordingly, the presentations of Brian Barry (Political Theory), Paul Krugman (Economics), and Ernst-Ulrich Petersmann (Law) are reproduced here. (Regrettably, we were unable to include Deirdre McCloskey’s historical contribution in this volume.) As the reader will quickly discover, there is by no means any consensus amongst the panellists in their views on that issue. Moreover, the lively general discussion provoked by their presentations bore ample witness to the presence of widely differing positions within, as well as between, these academic disciplines. The underlying reasons for this are, perhaps, not all that difficult to discern.

The campaign against the Corn Laws and in favour of free trade represented, from its inception, a moral as well as an economic programme. It claimed to offer to the British population a remarkable combination of economic improvement and social justice. By liberating trade, serious fetters on industrial growth would be removed and the injustice of the ‘bread tax’ on the very necessities of life abolished. More universally, free trade would bring about a new manner of conducting affairs between nations. The pursuit of narrowly conceived national advantage, by protection coupled with warfare, would gradually give way to an appreciation of the mutual advantages of international commerce in conditions of peaceful competition. It is thus entirely comprehensible that Cobden, in championing free trade, also conceived of it as an instrument for educative enlightenment and sought to promote it through the establishment of international schools in which pupils of different nations would learn together the virtues of international cooperation.

At the same time, protection, though castigated by free traders as a doctrine of short-sighted national interest, had, and continues to have its defenders, whose arguments similarly deploy moral considerations of undeniable significance. Protection, it has been urged, may be regarded as safeguarding those groups who are especially vulnerable to the fluctuations of world markets. It is seen as a means of providing less developed societies and industries with a breathing space in which to catch up with those first in the field. Equally important, it may sometimes be advanced as a necessary means for sustaining local ways of life endangered by powerful foreign and homogenizing influences. And increasingly nowadays, protectionism may be invoked to preserve valued aspects of the global environment.

These issues are all touched upon in a number of ways in the chapters devoted to political theory. And they are also central to the problems addressed by the international lawyers. What was distinctive about the Repeal of the Corn Laws was that it was a unilateral national measure, though one with significant international repercussions. In the present day, however, the typical approach to trade regulation is through the creation and development of international agreements and institutions. Thus as we enter the twenty-first century, it falls increasingly to a global community of negotiators to interpret the underlying principles and establish the detailed regulations of a new economic order which must seek to reconcile the liberalization of trade, in agricultural commodities and manufactures as well as services of an everchanging nature, with the still deep-rooted desire for the preservation of domestic cultures and the growing recognition of the need for conservation.

The coupling together of Law and Political Theory in a single conference workshop was seen from the outset as being in the nature of a worthwhile intellectual experiment. Of course, the relation between scholarship in these two fields possesses a long historical pedigree: political and legal theorists have been addressing many similar questions for centuries. Our aim in this workshop, however, was to achieve some complementarity of analytical focus between the more practical concerns of lawyers and the characteristically abstract concerns of political theory. Evidently, questions about the desirability of certain institutions and policies cannot be satisfactorily answered in the absence of soundly distilled information about their feasibility. Conversely, whether and in what circumstances realistic prospects for trade liberalization ought to be pursued must depend upon coherent assessments of their relative merits— assessments that need to be anchored in a set of broader theoretical frameworks.

That said, the pairing of legal and political theory papers at each session confronted the discussants with the formidable challenge of bridging often very divergent ways of looking at similar phenomena. This task they discharged admirably, managing to draw illuminating contrasts and parallels even in those instances where the papers’ perspectives differed quite markedly.

Some commentators on public affairs have dubbed the first Ministerial Meeting of the World Trade Organization (WTO) in Singapore ¹ as beinghigh on rhetoric but short on results. But rhetoric, one might suggest, can often be a prelude to achievement in the long run. There is thus some merit in mentioning that meeting, which was focused inter alia on further expanding and strengthening the system of international trade regulation, since this was also a central theme of the Law and Political Theory workshop. Indeed it is to the credit of the contributors that their chapters closely mirror and predict the concerns and outcomes of the Ministerial Meeting.

Simon Caney distinguishes two dominant theoretical approaches to the general question of what norms ought to govern states’ dealings with one another in regard to trade as well as other matters: cosmopolitanism and realism. The former is universalistic and does not discriminate among human beings in taking a policy’s impact on their respective interests as the measure of its justifiability. Realism, in all its various forms, rejects this as Utopian and insists that national interest is the paramount consideration determining the moral obligations by which any state’s policies can or should be judged. Caney carefully examines the three principal types of objection mounted by realists against cosmopolitanism and finds them unsuccessful.

John Hunt integrates a historical and political perspective with a significant breadth of realism. He rightly points out the influence of political structure on trade policy, and the need to create new disciplines, emphasizing particularly competition and investment. His realism leads him to suggest liberalization as an incremental process and not as an immediate fiat. One can but note his accurate prediction that the Singapore Ministerial Meeting would be a premature forum to launch another new round of negotiations for trade liberalization.

Owen McIntyre challenges some of the assumptions underlying Caney’s dichotomy between the cosmopolitan approach and that of realism. He suggests that national interests can be realized through cosmopolitanism. Drawing on Hunt’s paper, he illustrates the point by suggesting that the primary benefit sought by the Anti-Corn Law League was cheap food for the British consumer rather than any universal benefit for the world at large.

Peter Ingram argues that, historically, international law has been chiefly focused on adversarial features of interstate relations, and has not balanced this concern with one for the regulation of those extensive non-conflictual transactions that constitute and advance international economic interdependence. Indeed the voluntaristic character of international legal obligations, as well as the world s plurality of value systems, represent substantial obstacles to the adequate formation of such a regulatory framework. However, Ingram finds the development of international institutions along with the growth of their procedural powers—and the stake nations acquire in their continuing membership of such organizations—to hold out some promise of overcoming the longstanding problems posed by both voluntarism and the purely formal equality of states.

Ulick Bourke emphasizes the strengthening of multilateral disciplines. He advocates the direct applicability of international trade norms in nationalsystems and interestingly calls for direct access, for private parties, to international judicial processes in the field of trade.

Responding to Ingram and Bourke, William Lucy queries the plausibility of any strongly unified explanation of developments in international law, and suggests that the notion of ‘trust’ may have an important role in understanding aspects of interstate cooperation.

Jonathan Wolff contends that, in so far as the moral case for freer trade rests on (various conceptions of) the desirability of competition, it may be weakly grounded. These several conceptions are each identified and subjected to critical assessment. Wolff argues that, although it may be true that competition advances social utility, neither that consideration nor any other of these conceptions precludes the possibility that competitive exchanges are exploitative. And he therefore concludes that competition and the trade deregulation that may be needed to bring it about must, to be justifiable, be accompanied by systems of compensation for those who would otherwise be the resultant losers.

Ernst-Ulrich Petersmann offers a detailed exposition of the relationship of trade and competition rules. His perspective on competition rules is defined in terms of access to markets. As such, competition policy is conceived both in terms of governmental as well as private anticompetitive activities. Petersmann, however, points out the need for strengthening the competition rules as they relate to private activities. He explains how the seeds for integrating such rules have to some degree already been sown in the international regulation of trade— particularly the WTO. Petersmann concludes by advocating a progressive integration of competition rules in the WTO system through, initially, the establishment of a WTO Committee on Trade and Competition. Thereafter, it is suggested, a subsequent WTO round of trade negotiations should integrate competition rules into the WTO code. Parallel to this effort, Petersmann advocates a Plurilateral Agreement² on Trade and Competition.

Despite their diverging assessments of the merits of international competition, Ian Carter argues that several of the caveats respectively offered by Wolff and Petersmann imply significant points of convergence on the kinds of circumstance in which liberalized trade is warranted.

Avner de-Shalit outlines four types of international exploitation and contends that, as standardly interpreted, both Marxist and liberal theories of exploitation provide deficient explanatory accounts of them. However these theories fare better when revised to include consideration of the autonomyeroding effects of inferior bargaining positions. De-Shalit thereby draws attention to the possibility that free trade between rich and poor nations may be exploitative, by virtue of fostering manipulation of the latters’ preferences through the displacement of their indigenous cultural values.

Michael Johnson aptly describes the General Agreement on Trade in Services (GATS) as ‘work in progress’ and, in that context, traces the influences which led to its establishment. Some of these resulted in limited market accesscommitments, in a list of exemptions from the most-favoured-nation (MFN) standard and the postponing of negotiations for liberalization of trade in parts of the services sector. Further, he highlights some of the difficulties in the current structure of GATS: for example, the problem of quantifying commitments in the services sector and identifying market access problems. Finally, in looking to the future, he notes the difficulties of defining a subsidy in the services sector and of formulating a safeguard agreement.

David Milman concludes that exploitation is indeed a common theme between what de-Shalit explains and what Johnson examines in the field of trade in services, the former being concerned with constructing a viable theory of exploitation and the latter with the operation of practical realpolitik in the field of trade in services. But Milman observes that the new GATS has some way to go before it can be assessed in terms of equity and exploitation.

Bhaskar Vira explores the substantive conflict between economic deregulation, such as trade liberalization, and environmental regulation. Acknowledging both the strength and limitations of the efficiency argument for deregulated trade, he argues that economic growth by itself is insufficient to mitigate the environmental impact of much human activity. The fact that both environmentalists and free trade advocates support full cost internalization does not imply invariable compatibility between their positions since, in some circumstances, optimal environmental policies must include quantitative controls on resource extraction and product and technology use—controls which directly affect the volume and composition of international trade.

James Cameron comprehensively surveys recent developments in the international trade and environment debate—particularly in the context of conflicting interests in trade and the environment. This is done by considering inter alia some GATT/WTO cases and the agenda of the WTO Committee on Trade and the Environment. Essentially he advocates the balancing of trade and environmental concerns in the WTO forum. He is firmly of the view that there need to be changes in the WTO code: for example, by the amendment of Article XX of the GATT, ³ and through a presumption of compatibility between national measures conforming to multilateral environmental agreements (MEAs) and provisions of the WTO code. He concludes by noting the need for some demonstrable success at the Ministerial Meeting in Singapore.

Strongly endorsing central points in the accounts offered by Vira and Cameron, Brian Barry argues that trade-restricting measures must have a role to play in the economic system of any society that seeks to balance considerations of consumer satisfaction with those of producer satisfaction and environmental protection.⁴

Asif Qureshi focuses on the trade-related aspects of international taxation. He traces fiscal sovereignty under General International Law and under the GATT/WTO framework in the light of the trade-distortive effects of taxation. He concludes by making a proposal for a WTO code of conduct on the trade-related aspects of international taxation.

Reflecting on Qureshi’s chapter, Anthony Carty draws attention to the German conviction that perpetual peace requires consideration of not just the removal of trade barriers but also effective political structures.

Hillel Steiner claims that, although it seems certain that some kinds of international trade are morally undesirable and that persons ought not to engage in them, this fact is insufficient to justify their enforced restriction on grounds of justice which requires that they be legally permitted. Identifying several broad types of morally objectionable trade, he argues that legal restriction of only one of them—trade with regimes that countenance domestic rights violations—can be so justified and may, perhaps, be morally mandatory.

Edmond McGovern supplies an interesting exploration of how standards and technical regulations can operate as barriers to trade. In particular, he considers the existing opportunities within the WTO system to deal with the capacity of national technical regulations and standards to create problems for international trade. Four strategies are identified for dealing with standards and technical regulations from the perspective of liberal trade: namely, nondiscrimination, control of trade-restrictive regulations, harmonization and integration, and procedural and institutional improvements.

Commenting on Steiner’s and McGovern’s papers, Peter Jones finds moral consequentialism to be the normative approach underpinning the EC’s and WTO’s official ideology and its capacity to accommodate important social values threatened by free trade—a capacity which is absent in rights-based conceptions of justice.

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Notes

1 Held in December 1996.

2 That is, an agreement binding only on the parties to the agreement.

3 Article XX lists the general exceptions to the GATT prohibitions against the imposition of trade-restrictive measures.

4 Barry’s comments on the papers by Vira and Cameron are incorporated in his plenary panel presentation, pp. 12–25.

2 THE FEASIBILITY AND DESIRABILITY OF GLOBAL FREE TRADE

Ernst-Ulr`ich Petersmann, Paul Krugman and Brian Barry

I Is global free trade desirable and feasible?

Ernst-Ulrich Petersmann

I have been asked to stimulate the general debate on this subject by a few personal ideas. Let me just mention three problem areas on the long and winding road to global liberal trade.

First, global liberal trade is desirable because it enhances not only economic consumer welfare but also individual freedom and peaceful cooperation among countries. Empirical research into the relationship between economic freedom and economic growth of 102 countries over the period 1975–95 has confirmed that the more economic freedom and open markets a country had, the more economic growth it achieved and the richer its citizens became.¹ It is also no coincidence that liberal trade regimes, like European integration law and the GATT/WTO Agreements, have more effective systems for the protection of the rule of law and for the peaceful settlement of disputes than most other international organizations. This seems to confirm the long-standing emphasis in political philosophy (e.g. of I.Kant and D.Hume) and economic theory (e....

Table of contents

• COVER PAGE
• ROUTLEDGE STUDIES IN THE MODERN WORLD ECONOMY
• TITLE PAGE
• COPYRIGHT PAGE
• ABOUT THE EDITORS AND CONTRIBUTORS
• GENERAL EDITORS’ PREFACE
• 1 INTRODUCTION
• 2 THE FEASIBILITY AND DESIRABILITY OF GLOBAL FREE TRADE
• 3 COSMOPOLITANISM, REALISM AND THE NATIONAL INTEREST
• 4 PERSPECTIVES ON LIBERALIZING INTERNATIONAL TRADE
• COMMENTARY ON CANEY AND HUNT
• 5 PROCEDURAL JUSTICE AND THE PROBLEM OF VOLUNTARISM
• 6 LIBERALIZING INTERNATIONAL TRADE: WHAT IS TOFAY’S CHOICE OF WEAPONS?
• COMMENTARY ON INGRAM AND BOURKE
• 7 THE ETHICS OF COMPETITION
• 8 THE NEED FOR INTEGRATING TRADE AND COMPETITION RULES IN THE WTO WORLD TRADE AND LEGAL SYSTEM
• COMMENTARY ON WOLFF AND PETERSMANN
• 9 TRANSNATIONAL AND INTERNATIONAL EXPLOITATION
• 10 DEVELOPMENTS IN THE SERVICES SECTOR: THE GATS
• COMMENTARY ON DE-SHALIT AND JOHNSON
• 11 ENVIRONMENTAL REGULATION AND ECONOMIC DEREGULATION: IS THERE A CONFLICT?
• 12 ‘WHAT NOW?’ TRADE AND ENVIRONMENT: AN OVERVIEW OF THE CURRENT DEBATE
• 13 TRIT—A NEW WTO CODE OF CONDUCT ON TRADE-RELATED ASPECTS OF INTERNATIONAL TAXATION?
• COMMENTARY ON QURESHI
• 14 TRADING WITH THE ENEMY
• 15 STANDARDS AND TECHNICAL REGULATIONS AS BARRIERS TO TRADE: REGULATING REGULATIONS
• COMMENTARY ON STEINER AND MCGOVERN