Law and Institutions of International
Trade
Class 12
MGT 3860Z
Daryl Hanak
Agenda
1. Trade & Environment
2. Trade & Labour
3. Private international law aspects
MGT 3860Z -- Fall 2006
Trade and Environment
Trade and Environment
•
International environmental policy
development and international trade
policy development on different tracks -until the early 1990’s
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Tuna-Dolphin GATT Case (1991)
Rio Earth Summit (1992)
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Framework Convention on Climate Change
Convention on Biological Diversity
“Precautionary Principle” recognized
Trade provisions in environmental agreements
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Banning trade in “environmentally harmful” products
MGT 3860Z -- Fall 2006
Trade and Environment
Tuna Dolphin Case
•
Successful challenge of US laws aimed at
protecting dolphins who are killed as a
“by-catch” of tuna harvesting techniques
•
GATT case (pre-WTO), so never formally
adopted
•
Caused a great deal of concern among
environmental groups and inspired them
to action on trade matters
MGT 3860Z -- Fall 2006
Trade and Environment
•
In this context of rising environmental concern
and activity, there is the negotiation of the
NAFTA, with its significant debates in the US
Environmental issues:
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•
•
•
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Trade agreements call for harmonization, so there will
be a race to the bottom
Firms, employment will move to where costs
(including environmental regs) will be lower
Lack of will by governments to enforce the
environmental laws on the books – attracting
investment and promoting competitive advantage
Environment ultimately found its way into the
NAFTA
MGT 3860Z -- Fall 2006
Trade and Environment
•
NAFTA environmental features
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Reference to “sustainable development”
“Grandfathering” of existing environmental
agreements if there is a conflict
Environment article in investment chapter –
don’t relax environmental laws in order to
attract investment
Parallel side accord on environmental
cooperation – North American Agreement on
Environmental Cooperation (NAAEC)
MGT 3860Z -- Fall 2006
Trade and Environment
NAAEC
•
Obligation to effectively enforce your
environmental laws – government-government
dispute settlement
•
Citizen “submission process” to allow
complaints about failure to “effectively enforce”
•
Innovative structure – quasi-independent
Secretariat; Public advice institutionalized
•
Development of the institution has been
remarkable, although the attitude of the three
governments has not been consistent
MGT 3860Z -- Fall 2006
Trade and Environment
Post NAFTA
•
As in many other areas, NAFTA still stands as a
high water mark in the incorporation of
environment into trade agreements
•
Canada and US bilateral trade agreements
incorporate ideas from the NAAEC to a greater
or lesser degree
•
Many other countries remain suspicious of the
potential for protectionism that may be “hidden”
in environmental language
MGT 3860Z -- Fall 2006
Trade and Environment
WTO
Includes references to sustainable development
Committee on Trade and Environment (CTE) established
with a work program that allows countries to at least talk
about issues like:
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•
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Relationship between Multilateral Environmental Agreements
(MEAs) and WTO obligations (conflicts, parties/non-parties
issues)
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–
–
–
•
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Kyoto Protocol (Framework Convention on Climate Change)
Biosafety Protocol (Convention on Biological Diversity)
Montréal Protocol (Convention on Ozone Depleting Substances)
CITES (Convention on International Trade in Endangered Species)
Basel Convention onn Transboundary Movement of Hazardous Wastes
Eco-labelling programs
“coherence” between international environmental negotiations
and international trade negotiations
MGT 3860Z -- Fall 2006
Trade and Environment
Development of Environmental Assessment of
Trade Agreements
•
So, how can we look at trade agreements
and decide what effects they may have
•
•
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Extrapolation from Trade Theories
CEC project on the assessment of the NAFTA
Strategic Environmental Assessments of Trade
Agreements
MGT 3860Z -- Fall 2006
Trade and Environment
•
The environmental effects of trade
agreements can be classified as follows:
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Scale Effects
Composition Effects
Technique Effects
Input Mix Effects
Wealth Effects
All based on trade theories that we looked
at earlier
What does the evidence show?
MGT 3860Z -- Fall 2006
Trade and Environment
•
NAAEC -- Commission for Environmental
Cooperation (CEC) -- project on trade and
environment since 1996
•
CEC sponsored academic work resulting in a
framework for the analysis of environmental effects
•
Does NAFTA “perhaps”, “it depends”
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•
In the NAFTA context, even though there has been a
number of years of experience with the NAFTA and the
three countries keep relatively good statistics both on
trade numbers and on environmental factors, the
empirical evidence is not overwhelming.
Trade and Environment Symposia -- October 2000,
March 2003, December 2005
MGT 3860Z -- Fall 2006
Trade and Environment
• Example of the difficulties in drawing conclusion about
environmental effects of a trade agreement:
• removal of tariffs on agricultural products should
reduce the cost of the imported product and demand
for that, should go up.
• However, it has been extraordinarily difficult to isolate the
effect of the tariff reduction from things like:
•
•
•
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•
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normal economic growth that would have occurred anyway,
good marketing on the part of the exporters,
changes in consumer tastes,
increase in income levels in the importing country,
technological changes
etc. etc. etc..
MGT 3860Z -- Fall 2006
Trade and Environment
• Governments careful to avoid making any claims to say that a certain
reduction in tariffs has caused a certain level of trade in a particular product,
or even all overall an increase in exports to our trading partners.
• In Alberta's context, it is difficult to say that the NAFTA energy chapter
"caused" the remarkable growth in the export of petroleum and natural gas
to the US over the past 10 years. We can, however, say that trade
agreements did contribute to this. How much it contributed to the growth is
an open question.
• From the environmental perspective, the same problem arises. In a general
sense, trade liberalization is assumed to contribute to the increased trade in
a particular product, but the extent to which that trade agreement "cause" a
particular environmental effect is not at all easy to determine.
• it would appear that the existence of a domestic environmental regulatory
environment is probably be a better indicator of how the environment
welfare under a trade agreement. In fact, "sustainable development"
theories suggest that a high standards and environmental régime is a
prerequisite for country to obtain the benefits from an international trade
agreement
MGT 3860Z -- Fall 2006
Trade and Environment
Strategic Environmental Assessment of Trade Agreements
• Governments have struck upon the idea that they could make an
"environmental assessment" of a trade agreement, modeled on
environmental impact assessment of physical , commercial project.
• “Ex ante” instead of “ex post” assessments that were done with the NAFTA
and the Uruguay Round
• Canada has been a strong promoter. Using the same sort of concept as and
environmental impact assessment for an industrial project, Canada
attempts to look at the future environmental effects of a trade agreements.
Currently, the federal government has in place a process that is supposed to
provide advice on trade negotiations as they are under way. Joined by the
US and the EU
• Unfortunately, the difficulty establishing the linkage between a trade
agreement and environmental effect is multiplied when trying to estimate
the environmental effects of a trade agreement that has not yet been
completely negotiated. Speculation about the outcome of negotiations on
top of difficulty of assigning causality to the trade agreement
MGT 3860Z -- Fall 2006
Trade and Labour
Trade and Labour
• Some groups and individuals argue that trade agreements
must address labour issues because
• It is unfair to compete against produced from “low-cost” labour
• Rich Western countries and their industries should not be allowed
to exploit workers in developing countries, and trade agreements
tend to promote this exploitation
• On the other hand, developing countries are suspicious of
these types of statements because
• labour is one of the few competitive advantages of that many
countries have, and this should not be artificially be removed
• Even developed countries are unwilling to submit to some
sort of external review of their labour policies because
• countries have the sovereign right to establish their own labour
standards
MGT 3860Z -- Fall 2006
Trade and Labour
• There is a basic question about the existence of empirical evidence of
the impact of labour standards on trade, and the impact of trade
agreements on individual country labour standards and laws
• Consider the example of Bangladesh or Haiti – do low labour
standards for nonexistent labour laws and result in trade & economic
success?
• Other basic economic considerations are involved when firms make a
choice about locating manufacturing facilities in particular countries,
or engaging in economic activities with those countries:
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Distance to market
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Infrastructure (roads, telephones, water, electricity)
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Workforce education
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Taxation
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Rule of law
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Certainty of contract
MGT 3860Z -- Fall 2006
Trade and Labour
• OECD conducted a landmark study on the relationship
between trade and labour standards
– Lack of a strong correlation, with possible positive linkage between
high labour standards and better international trade performance
International Labour Organization (ILO)
• Old organization, predates the GATT, WTO – established in
1919 to deal with international labour issues
• Involves government, business and unions (tripartite
structure)
• Many labour conventions adopted by the organization
• Review mechanism and complaint process. Complaints may
be brought by unions, businesses and other governments.
• Problem? Effectiveness of enforcement– leading back to
consideration of possible linkages to WTO
MGT 3860Z -- Fall 2006
Trade and Labour
•
The ILO is “patient”, willing to wait for
formalized cooperation with WTO
•
ILO has been conducting a study on the “social
aspects of globalization”
•
No consensus within WTO to begin any kind of
study of labour issues within the WTO
organization
MGT 3860Z -- Fall 2006
Trade and Labour
Possible linkages between trade agreements and labour standards include:
• Trade sanctions, such as
– Antidumping-like remedy for “social dumping”– the workers in the
importing country (e.g. Canada) should not suffer the consequences of the
policy choices in the exporting country (e.g. China)
– “social countervailing duty” to level the playing field --since firms in the
low labour standard jurisdiction would benefit from something that could
be considered to be equivalent to a subsidy
but –
– Opens possibility/incentive, for harassment of exports by importing
countries
– Burdens the WTO, or other dispute settlement processes in other trade
agreements, with topics for which it/they has no expertise
– Trade sanctions only indirectly, if at all, address main concern
– Trade sanctions may be counterproductive (Already discussed economic
criticisms of countervailing duties in trade in goods
– Plus problems of sovereignty and the indirect elimination of a competitive
advantage
MGT 3860Z -- Fall 2006
Trade and Labour
• Possible linkages between trade agreements and labour
standards include:
• Labour cooperation agreements
– Contain a general obligation to enforce existing labour laws, along
with a commitment to support and enforce “core labour
standards” (as included in the ILO conventions)
– This approach has the benefit of preserving each country’s
sovereignty, while still providing a forum to discuss labour matters
– The continuing issue is how to address enforcement -- Alternative
methods have been considered – could be a “fine”, could be
“sunshine”, could be intergovernmental cooperation and capacity
building
– Canada promotes labour cooperation agreements in association
with its bilateral trade agreements that it is currently negotiating.
These agreements contain minimal obligations, but highlight
potential areas of concern with respect to labour laws
MGT 3860Z -- Fall 2006
Trade and Labour
• Possible linkages between trade agreements and
labour standards include:
Consumer boycotts
– “sweatshops” and celebrities may be vulnerable
to these kinds of a highly publicized activities -Puff Daddy, Martha Stewart, NIKE
Labelling
– Mandatory?
– Who sets the standards for the label?
MGT 3860Z -- Fall 2006
Private International Law
Private International Law
1. Corporate contract law
2. Business transactions
3. International contract law
4. Shipping terms
MGT 3860Z -- Fall 2006
Private International Law
• Law of the relationship between private parties, as opposed
to relationships between governments
• Sources -- the court cases involving international
transactions, results of international arbitrations,
conventions, treaties, model laws, domestic law
• legal framework composed of conventions, protocols,
model laws, legal guides, uniform documents, as well as
other documents and instruments, which regulates
relationships between individuals in an international
context (OAS)
MGT 3860Z -- Fall 2006
Private International Law
•
Sovereignty causes problems when transactions
cross borders
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Which country’s laws apply
Which courts can take jurisdiction
“conflicts of laws”
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Domestic courts useful, but there are efficiencies
from finding common principles
•
Need to bridge different legal traditions,
cultures, history
MGT 3860Z -- Fall 2006
Private International Law
International organizations and harmonization
• The public intenational institutions we have been
discussing so far (WTO) are primarily
intergovernmental organizations, where
governments are the main parties, governing the
relationship between governments
• In the private international law context the
international institutions are often a
government/private sector mixture
• There are also purely private sector initiatives
• Overlapping initiatives, but aiming at
international harmonization
MGT 3860Z -- Fall 2006
Private International Law
United Nations Commission on International Trade Law
(UNCITRAL)
•
“core legal body” within the UN system in the field of
international trade law
•
Develops conventions and model laws to be adopted by
countries
• Conventions --Come into force when a sufficient
number of countries ratify the convention
• Model laws – international harmonization of domestic
laws, can be done by countries individually or adapted
to specific needs
http://www.uncitral.org/en-index.htm
MGT 3860Z -- Fall 2006
Private International Law
Topics covered by UNCITRAL include:
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Arbitration – convention on recognition awards,
arbitration and conciliation rules, model law on
international commercial arbitration
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International sale of goods
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Cross-border Insolvency
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International payments
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International transport of goods
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Electronic-commerce
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Public procurement and infrastructure development
MGT 3860Z -- Fall 2006
Private International Law
The International Institute for the Unification of Private Law
(UNIDROIT)
• “independent” intergovernmental organization,
headquartered in Rome
• originally established in 1926 under the League of Nations
and re-established in 1940. Currently 59 member states
• studies needs and methods for modernising, harmonising
and coordinating private -- particularly commercial law -as between States and groups of States -- negotiates
conventions
http://www.unidroit.org
MGT 3860Z -- Fall 2006
Private International Law
Topics covered by UNIDROIT include
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Uniform Law & Convention on the formation of contracts
for the international sale of goods (1964)
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Conventions on international financial leasing,
international factoring (1988)
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Principles of international commercial contracts (1994)
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Convention on international interests in mobile
equipment (2001)
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Model franchise disclosure law (2002)
MGT 3860Z -- Fall 2006
Private International Law
Hague Conference
•
intergovernmental organization
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work for the progressive unification of the
rules of private international law
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negotiation and drafting of multilateral
treaties
http://www.hcch.net/e/
MGT 3860Z -- Fall 2006
Private International Law
Topics covered by the Hague Conference include:
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Convention on the law applicable to international
sales of goods (1955)
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Convention on the Recognition and Enforcement
of Foreign Judgments in Civil and Commercial
Matters (1971)
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Convention on the Law Applicable to Products
Liability (1973)
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Convention on the Law Applicable to Certain
Rights in respect of Securities held with an
Intermediary (2000)
MGT 3860Z -- Fall 2006
Private International Law
World Bank Group
•
The World Bank is not a “bank” in the
common sense.
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It is one of the United Nations’ specialized
agencies, and is made up of 184 member
countries.
•
These countries are jointly responsible for
how the institution is financed and how its
money is spent.
MGT 3860Z -- Fall 2006
Private International Law
There are several related elements in the World Bank Group:
• The "World Bank" is the name for the International Bank for
Reconstruction and Development (IBRD) and the International
Development Association (IDA). Together these provide lowinterest loans, interest-free credit, and grants to developing
countries.
• The International Finance Corporation (IFC) promotes private
sector investment by supporting high-risk sectors and countries.
• The Multilateral Investment Guarantee Agency (MIGA) provides
political risk insurance (guarantees) to investors in and lenders to
developing countries.
• International Centre for Settlement of Investment Disputes
(ICSID) settles investment disputes between foreign investors
and their host countries.
MGT 3860Z -- Fall 2006
Private International Law
International Centre for Settlement of Investment Disputes (ICSID)
• established under the Convention on the Settlement of Investment Disputes
between States and Nationals of Other States (the Convention) which came
into force on October 14, 1966.
• provides facilities for the conciliation and arbitration of disputes
between member countries and investors who qualify as nationals of
other member countries.
• Recourse to ICSID conciliation and arbitration is entirely voluntary.
However, once the parties have consented to arbitration under the
ICSID Convention, neither can unilaterally withdraw its consent.
• Moreover, all ICSID Contracting States, whether or not parties to the
dispute, are required by the Convention to recognize and enforce ICSID
arbitral awards.
• NAFTA Chapter 11 cases have been conducted under the ICSID rules
• Canada is not a Party to the ICSID Convention
http://www.worldbank.org/icsid/
MGT 3860Z -- Fall 2006
Private International Law
Organization of American States (OAS)
•
Department on International Law, plays a central role in
the harmonization and codification of Private
International Law in the Western Hemisphere.
•
Conferences on Private International Law, which are held
approximately every four to six years. Known by its
Spanish acronym -- CIDIP
•
Ultimately develops conventions for the members of the
organization
http://www.oas.org/
MGT 3860Z -- Fall 2006
Private International Law
Some topics covered by the OAS include:
• Inter-American Convention on the Law applicable to
International Contracts.
• Inter-American Convention on Conflicts of Laws
Concerning Commercial Companies.
• Inter-American Convention on Contracts for the
International Carriage of Goods by Road.
• Inter-American Convention on Conflict of Laws
concerning Bills of Exchange, Promissory Notes and
Invoices.
MGT 3860Z -- Fall 2006
Private International Law
Uniform Law Conference of Canada (ULCC)
•
founded in 1918 to promote harmonization
of laws in Canada
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Commercial Law Strategy to modernize
and harmonize commercial law in Canada,
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Recommendations for incorporation of
international conventions into Canadian
law – model laws
MGT 3860Z -- Fall 2006
INCOTERMS
INCOTERMS
•
First published in 1936 by the International Chamber of
Commerce (ICC) Since that time, there have been six
different revisions and updates to the Incoterms.
•
ICC -- “voice of world business championing the global
economy as a force for economic growth, job creation and
prosperity”
•
INCOTERMS -- “Rules at the core of world trade”
•
"Incoterms" -- abbreviation of “International Commercial
Terms”
•
13 standardized terms for when the property and the risk
transfer from the seller to the buyer
MGT 3860Z -- Fall 2006
INCOTERMS
• Intended to alleviate or reduce confusion over interpretations of
shipping terms, by outlining exactly who is obliged to take control of
and/or insure goods at a particular point in the shipping process,
including obligations for the clearance of the goods for export or import,
and requirements on the packing of items.
• Incoterms are used quite frequently in international contracts, and a
specific version of the Incoterms should be referenced in the text of the
contract.
• they are not meant for every type of contract. Incoterms define the
respective roles of the buyer and seller in the arrangement of
transportation and other responsibilities and clarify when the ownership
of the merchandise takes place. They are used in conjunction with a sales
agreement or other method of transacting the sale.
• the terms used in a contract state exactly when the shipper unloads and
relinquishes obligation, and when the buyer takes over for carriage and
insurance. They are not meant to replace statements in a contract of sale
that outline transfers of ownership or title to goods. Therefore, the
Incoterms may not be of use when looking to resolve disputes that may
arise regarding payment or ownership of goods.
MGT 3860Z -- Fall 2006
INCOTERMS
1. XW -- EX WORKS (…named
place)*
2. FCA -- FREE CARRIER (…named
place)
3. FAS -- FREE ALONGSIDE SHIP
(…named port of shipment)*
4. FOB -- FREE ON BOARD
(…named port of shipment)
5. CFR -- COST AND FREIGHT
(…named port of destination)
6. CIF -- COST, INSURANCE AND
FREIGHT (…named port of
destination)*
7. CPT -- CARRIAGE PAID TO
(…named place of destination)
8.
CIP -- CARRIAGE AND
INSURANCE PAID TO
(…named place of destination)*
9.
DAF -- DELIVERED AT
FRONTIER (…named place)*
10. DES -- DELIVERED EX SHIP
(…named port of destination)
11. DEQ -- DELIVERED EX QUAY
(…named port of destination)*
12. DDU -- DELIVERED DUTY
UNPAID (…named place of
destination)*
13. DDP -- DELIVERED DUTY
PAID (…named place of
destination)*
MGT 3860Z -- Fall 2006
INCOTERMS
•
“ex works” means that the seller delivers when
he places the goods at the disposal of the buyer at
the seller’s premises or another named place and
(i.e. works, factory, warehouse, etc.) not cleared
for export and not loaded on any collecting
vehicle
–
Minimum obligation for the seller, and the buyer has
to bear all costs and risks involved in taking the goods
from the seller’s premises
MGT 3860Z -- Fall 2006
INCOTERMS
•
“Free on Board” means that the seller delivers
when the goods pass the ship’s rail at the named
port of shipment
–
Buyer bears all costs and risks of loss or damage to the
goods from that point.
–
Seller must clear the goods for export
–
only used for sea or inland waterway transport
MGT 3860Z -- Fall 2006
INCOTERMS
•
“delivered duty paid” means that the seller
delivers the goods to the buyer, cleared for
import, and not unloaded from any arriving
means of transport, at the named place of
destination.
–
–
Seller bears all the costs and risks involved in bringing
the goods to the buyer, including any customs
formalities, customs duties, taxes and other charges for
import in the country of destination
Represents maximum obligation on the seller
MGT 3860Z -- Fall 2006
INCOTERMS
• EXW - Ex Works -- Title and risk pass to buyer including payment of all transportation and
insurance cost from the seller's door. Used for any mode of transportation.
• FCA - Free Carrier -- Title and risk pass to buyer including transportation and insurance
cost when the seller delivers goods cleared for export to the carrier.Seller is obligated to
load the goods on the Buyer's collecting vehicle; it is the Buyer's obligation to recieve the
Seller's arriving vehicle unloaded.
• FAS - Free Alongside Ship --Title and risk pass to buyer including payment of all
transportation and insurance cost once delivered alongside ship by the seller. Used for sea
or inland waterway transportation. The export clearance obligation rests with the seller.
• FOB - Free On Board and risk pass to buyer including payment of all transportation and
insurance cost once delivered on board the ship by the seller. Used for sea or inland
waterway transportation.
• CFR - Cost and Freight -- Title, risk and insurance cost pass to buyer when delivered on
board the ship by seller who pays the transportation cost to the destination port. Used for
sea or inland waterway transportation.
• CIF - Cost, Insurance and Freight -- Title and risk pass to buyer when delivered on board
the ship by seller who pays transportation and insurance cost to destination port. Used for
sea or inland waterway transportation.
• CPT - Carriage Paid To -- Title, risk and insurance cost pass to buyer when delivered to
carrier by seller who pays transportation cost to destination. Used for any mode of
transportation.
MGT 3860Z -- Fall 2006
INCOTERMS
• CIP - Carriage and Insurance Paid To --Title and risk pass to buyer when delivered to
carrier by seller who pays transportation and insurance cost to destination. Used for any
mode of transportation.
• DAF - Delivered at Frontier -- Title, risk and responsibility for import clearance pass to
buyer when delivered to named border point by seller. Used for any mode of
transportation.
• DES - Delivered Ex Ship -- Title, risk, responsibility for vessel discharge and import
clearance pass to buyer when seller delivers goods on board the ship to destination port.
Used for sea or inland waterway transportation.
• DEQ - Delivered Ex Quay (Duty Paid) -- Title and risk pass to buyer when delivered on
board the ship at the destination point by the seller who delivers goods on dock at
destination point cleared for import. Used for sea or inland waterway transportation.
• DDU - Delivered Duty Unpaid -- Title, risk and responsibility of import clearance pass to
buyer when seller delivers goods to named destination point. Used for any mode of
transportation. Buyer is obligated for import clearance.
• DDU - Delivered Duty Unpaid -- Seller fulfills his obligation when goods have been made
available at the named place in the country of importation
• DDP - Delivered Duty Paid -- Title and risk pass to buyer when seller delivers goods to
named destination point cleared for import. Used for any mode of transportation.
• Note: EXW, CPT, CIP, DAF, DDU and DDP are commonly used for any mode of transportation.
FAS, FOB, CFR, CIF, DES, and DEQ are used for sea and inland waterway.
MGT 3860Z -- Fall 2006
INCOTERMS
•
Here are three examples of correct use of
Incoterms:
•
•
•
FCA Kuala Lumpur Incoterms 2000
FOB Liverpool Incoterms 2000
DDU Frankfurt Schmidt GmbH Warehouse 4
Incoterms 2000
MGT 3860Z -- Fall 2006