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Introduction The managing director of the Four X Company is concerned about the implications concerning the issues mentioned below. As a legal advisor, I have been asked to address the issues in terms of research and analysis of GATT/WTO principles and structure. My purpose is to advise the Four-X company on the action that the country of Fargo may take against the country of Narnia under GATT/WTO Law, specifically, whether it can challenge the Designer Tax. I think that the Four X company does can challenge the Designer Tax, because it is was introduced in contradiction with the theories of international trade.
Besides, the government of the country of Narnia did not have the sovereignty to impose this tax on imported products, and ignore it with similar products produced locally. In this paper I am going to discuss the concepts of international trade and the implications of corresponding law in order to find the appropriate decision that could help the Four X company to cope with the problem. Trade Theories Theories other than comparative advantage have been advanced to explain why nations trade. During the past twenty years, a new trade theory has been hypothesized by economists. The new position is referred to as the theory of increasing returns. This term is short for increasing returns to scale and is synonymous with economies of scale. 1 This theory holds that trade happens in order to take advantage of economies of scale.
Industries in two trading countries can achieve lower unit costs by producing large volume and spreading the high start-up expenses over the entire volume produced. If the countries did not trade with each other and relied on the domestic markets only, they might not be able to reach the highest level of scale economies. International trade will result in the volume, which will produce greater economies of scale. Such a theory explains why nations trade the same product with each other. Location results in the higher economies of scale.
For example, the Japanese and the United States trade automobiles with each other, but the Japanese locate their factories in the United States because of the larger market and better economies of scale. Similarly, car companies locate their production in Germany instead of France because the German automobile market is larger than the French market. Other Reasons for International Trade Kim and Kim discuss a number of reasons why such specialization increases production and, thus, national and personal income. 2 Among these are: (1) since natural skills among peoples are different, if each specialized in his or her natural skill, the total of their output would be greater than if both tried to do the other person's skill; (2) even if the skills of each person are identical, specialization is still better because it increases production and so each person's skills will improve from repetition; (3) specialization results in the simplification of tasks because it can lead to mechanization and the advent of large-scale machinery; (4) specialization by each person saves time because neither person loses time by shifting from one skill to another. Other motives for international trade include economies of scale from the synergistic effect when the whole becomes worth more than the individual parts.
In addition, the differences in tastes among the citizens of different countries lead to trade that can satisfy these various tastes. International trade has become increasingly important to the world economy. Trade accounts for about 25 percent the world gross domestic product (GDP). It is growing at twice the rate of any other economic sector. In short, the international flows of goods and capital that underlie international finance are critically important to the well-being of the world's nations. United Nations statistics show that the ratio of world exports to total gross domestic product has consistently increased since 1970.
Much of this growth in world trade can be attributed to the liberalization of trade and investment because of reductions in tariffs, quotas, currency controls, and other restrictions on the flow of international payments. In addition, the advances in communications and transportation facilities and their concomitant reductions in cost have also facilitated the growth in international trade. Much of the trade liberalization has been accomplished by the implementation of several regional economic agreements and organizations. Regional Economic Agreements Several regional economic agreements or organizations have been established since the end of World War II for the purpose of facilitating an expansion of trade.
The governments involved in these efforts have recognized the value of expanded trade. Some of these blocs have committed to the major objective of reducing or eliminating trade barriers such as tariffs and quotas. Others have gone further and have established political as well as economic institutions. Many of the regulatory measures are in an evolving state. Some are in the stages of development or negotiation - in the form of "advisory resolutions" or "voluntary guidelines. " But in many instance, the regulations are legally binding treaties.
The form in which they currently exist is often an indication of the next step to be taken in the international regulatory process. Yesterday's studies lead to today's "voluntary guidelines, " which, in turn, become the basis for the treaties and directives of tomorrow. The most ambitious effort so far is the draft code of conduct for multinational corporations, which is being developed by a commission of the Economic and Social Council. About two-thirds of the code's 71 provisions have been agreed upon.
The language of the code would make any sensible company think twice before investing overseas. An example is the provision that multinational corporations should "avoid practices, products, or services which cause detrimental effects on cultural patterns and socio-cultural objectives as determined by government. " Where is the historical perspective of the authors of the code? Over the centuries, civilization has been advanced by the transnational (to use that deadly term) flow of science, art, music, literature, and -- yes -- culture and commerce. Moreover, should the UN encourage the governments of its member nations to set "socio-cultural objectives" and require private enterprise to follow the "cultural patterns" set by government? This is not a traditional function of government regulation in a free society: It is a mechanism used by totalitarian rules to enforce their power. Key concepts of sovereignty What I intend to do is to examine certain key concepts of sovereignty, and discuss their roles in the context of international law generally, international relations, other disciplines, and, of course, with a focus on the relationship to international economic law which often means the WTO.
National government leaders and politicians as well as special interest representatives too often invoke the term's sovereignty to mislead needed debate. Likewise, international elites of ten assume that international is better, and this, we can also say, is not always the case. What is needed is a close analysis of the policy framework that can get us away from these preconceived mantras. (Jackson, 2001) My objective is to try to shed some light on these policy debates, or in some cases, policy dilemmas, and to describe some of the policy framework that needs to be addressed. The subject has been extensively addressed in different kinds of frameworks, or academic disciplines. For example, I have been educated by a number of books from political science and international relations disciplines, many of which have important insights and have helped me in my thinking. (Listing, 1998) However, in many of those works, I have found the focus was on how to describe the concept of sovereignty and how it operated in the past and present in international relations.
I intend to address a somewhat different question, namely, I want to consider the question of what, if any, are the valid issues raised in so-called sovereignty debates, and how can we analyze those issues for future impact on policy. There has already been a considerable amount of literature concerning the issue of sovereignty, and various concepts to which it might refer. Most of this literature is very critical of the idea of sovereignty as it has generally been known. For example, one eminent scholar has described the concept as organized hypocrisy. (Jackson, 2000) This same author writes that there are at least four different meanings of sovereignty (some of which overlap). He describes: domestic sovereignty, referring to the organization of public authority within a state and to the level of effective control exercised by those holding authority; interdependent sovereignty, referring to the ability of public authorities to control trans-border movement; international legal sovereignty, referring to the mutual recognition of states or other entities; and Westphalian sovereignty, referring to the exclusion of external actors from domestic authority configurations. (Jackson, 2000) Some other authors have described sovereignty as being more valuable for aims of oratory and persuasion than of law and science. Still others have explored sovereignty as a social construct, saying numerous practices participate in the social construction of a territorial state as sovereign, including the stabilization of state boundaries, the recognition of territorial states as sovereign, and the conferring of rights onto sovereign states.
The approach of these authors seems to be that there are no particularly inherent characteristics in the concept of sovereignty, but it depends very much on the custom and practices of nation-states and international systems. Thus, the concept of sovereignty seems quite often to be extremely, and perhaps purposefully, misleading, and a crutch to politicians and media to avoid the tough and very complex (as we see below) thinking that should be taken up about real policy issues that are involved. In the area of trade policy, many specific instances can be cited as use of constructs to avoid some of the implications of sovereignty concepts. Perhaps a striking example is the General Agreement on Tariffs and Trade (GATT) and now, WTO, criteria for membership, which do not focus on a sovereign entity, but instead on an independent customs territory. How the law of GATT and WTO help in resolving the issue Three basic principles therefore in GATT tariff negotiations: (1) such negotiations are to be on a reciprocal and mutually advantageous basis; (2) concessions are to be bound; and (3) they are to be applied on an MFN basis (through Article I of the GATT). The fir...
Free research essays on topics related to: socio cultural, increasing returns, economies of scale, gross domestic product, multinational corporations
Research essay sample on Gross Domestic Product Economies Of Scale
