Lecture 3 ib 404 institutional framework for international business
THE LAW AND THE ECONOMY: THE LEGAL TOOLBOX FOR INTERNATIONAL
ECONOMIC RELATIONS AND REGIONAL INTEGRATION
The International Economic Law (IEL) has different types of
rules at its disposal to create the legal frameworks of the
different sub-systems of international economic relations,
including regional integration processes.
There are three main types of rules
o Market access rules
o Rules of uniform law
o Rules of treatment
The art is to know how to combine these rules in order to
achieve the objectives pursued in each case. For this, it is
also essential to analyze the problems to be dealt with and to
know how to distinguish between them without confusing their
nature so as to be able to find the type of international rule
which is more suitable to solve them.
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How can the law contribute to the increase in
economic flows between two or more states?
Law can foster international economic flows by
eliminating, or at least reducing, those norms that restrict
access of economic flows to respective domestic
o Market access liberalization may not always bring the expected
results. This would respond primarily to the fact that economic
flows are determined to a large extent by economic conditions.
These economic conditions will remain unchanged,
notwithstanding transformations in the rules governing access to
different national markets. Still, the inability of market access
liberalization to deliver is also closely related to strictly legal
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The analysis of rules as instruments must be related to
the three main approaches of international rules
1. The first is to impose obligations on liberalization and access to
2. The second is to impose certain obligations of non-
discrimination on the legal framework applicable to transactions
and operations covered by the agreements such as MFN status
or national treatment obligations.
3. The third is to create uniform legislation establishing a common
legal framework for transactions and operations covered by the
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The obligations that accompany liberalization are strictly
limited in scope to international transactions.
Obligations with regards to treatment as well as uniform
or harmonized rules, apply essentially to internal
transactions. They are much more intrusive politically,
but experience seems to prove that integration cannot
rely solely on liberalization obligations in order to make
sense in legal terms.
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Uniform rules serve integration goals extremely well, but
are very difficult to set up for at least three reasons.
o First, they are technically difficult to agree on because of
different legal traditions and contexts of parties, making it difficult
to agree even on terminology and definitions.
o Second, they are intrusive in relation to the internal political
process in so far as they are locked-in by international law, which
precludes policy changes in internal regulation that may follow a
switch of domestic governments and political majorities.
o Third, they threaten the adaptability of the international scheme
because they are more difficult to change than domestic rules
since they require a consensus among all parties.
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The first compartment of the essential “legal toolbox”
used in the regulation of international economic relations
comprises three types of rules, two of which are
relatively simple to draft (those on access and
treatment), and one which is considerably more complex
Any of them will be insufficient in itself to achieve certain
policy goals, rather, the three categories of rules need to
be combined. The art of international economic law thus
lies in adapting the legal toolbox to policy objectives.
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The expression “NTBs” encompasses two concepts that
differ from the political, legal and economic perspectives.
1. It refers to direct barriers to trade (measures applicable at the
border) that apply exclusively to imports and exports but are not
tariffs (quotas, import related taxes, anti-dumping measures,
2. The concept of NTBs refers to indirect barriers to trade (both
domestic and international), which result from the application of
domestic rules that will most likely vary from country to country.
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It would seem advisable to distinguish between “non-tariff
barriers applied to international trade” and “indirect barriers to
international trade resulting from the application of internal
o Non-Tariff barriers to trade refer to domestic rules of market access.
Thus, such rules can be eliminated or their applicability can be
narrowed, by international market access liberalization rules.
o Indirect barriers to trade coming from the application of domestic
laws, in turn, refer to the problem of different domestic laws
governing the production and distribution of both national and
foreign goods. This discrepancy generates "barriers" or
“hindrances” and can result in a situation where products that are
manufacturated and traded in country A, in accordance with its
legislation, might not be able to be sold in country B. In principle,
this difference can only be tackled at the international level with the
implementation of uniform law.
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Two different techniques are used for enacting
international economic rules necessary for conducting
international economic relations:
1. To insert rules on substance into the treaty that must be
complied with by the parties
2. To institute some mechanism for creating new legal rules on
substance within the framework of the treaty
We can refer to rules enacted by means of the first
technique as “primary law” and to rules enacted by
means of the second as “secondary law”.
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All legal rules have the same effect and may be equally
invoked by any person thereby affected.
o Laws have different attributes and effects. Individuals
are not in the same position before them. While these
attributes and effects are important, they are not
crucial when examining the degree of effectiveness
that the law has to mould reality.
o The observance of the law relies on many factors; to
a great extent, it depends on “civic and political
culture” which, in turn, depends on many factors and
on the evolution of these factors over time.
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