Posner and Sykes Book Symposium: Comments by Steve Charnovitz

[Steve Charnovitz is Associate Professor of Law at GW Law]

Economic Foundations of International Law is an introduction to and reference work on the economic approach to analyzing and understanding international law. The book seeks to summarize and highlight the existing literature and to provide an intellectual framework for future scholarship.  In my view, this book succeeds in its purposes.

The book is to be commended for its synoptic coverage of the entire spectrum of public international law. While some interesting topics are underemphasized (e.g., constitutional issues of international law), the book covers issues that I had not expected (e.g., such as exchange rate manipulation). I like the way that the issue of the intersection between international law and domestic law is included as one chapter in Part II “General Aspects of International Law” and the way in which the authors include a Part V on “international economic law” although I would have been happier to see a definition of that term.  The authors included the law of the sea chapter in the same part as their strong chapter on international environmental law, even though some parts of maritime law could have been placed under Traditional Public International Law.

In any event, the broad scope of the book in itself enables the authors to achieve their purpose of providing a valuable reference work on public international law.  Although the book includes an index and a moderate amount of footnotes, the authors missed an opportunity to present a bibliography of sources so that one can see the whole of the body of  literature that the authors seek to promote. The book also suffers in not presenting a conclusion.

Let me now address a few substantive weaknesses:  One is that the book is too state-centric (p. 6) for modern international law and curiously so in a book providing an economic perspective.  “Interest groups” are mentioned here and there, and private investors are treated under investment law, but no effort is made to consider how the multiplicity of actors shapes expectations for international law.  The influence of globalized markets on international law is discussed, but that topic could benefit from more systematic treatment.  A second problem regards externalities.  Although the book quite rightly points to “international externalities” as a core problem that brings into play international cooperation and law (p. 17), the traditional economic distinction of pecuniary/nonpecuniary is not very helpful for building theory and is not nuanced enough to deal with other issues like human rights — which the authors designate as one of the “externalities” (p. 19) — or with the challenge of global public goods.

The lengthy chapter on international trade is well done and had I seen it in draft, I would have offered the following comments:  Authors ought to be careful not to pretend to be offering analytical predictions for phenomena that have already occurred. For example, after noting that bilateral trade agreements can injure non-parties (p. 269), the book “wonders whether a prohibition on discrimination may be valuable” for the GATT even though such a prohibition had already been enshrined as GATT Article I 65 years earlier.

The discussion about the WTO’s  EC  – Hormones case is inaccurate in suggesting that the dispute centered on the question of whether the European ban was “really a pretense for measures to protect the European beef industry” (p. 273).  This was not a case of US worries about disguised EC protectionism; the EC already had a GATT and later WTO-legal quota on meat that was handily serving protectionist needs.  Rather, the case was about declaring the EC measures illegal under the new WTO/SPS rules that the US had championed in the Uruguay Round negotiations.  US trade officials were interested in enabling US meat exports, but for third countries that might have been tempted to use a hormone ban for protectionist purposes if the US had not won the WTO case and imposed a SCOO on European exporters.  This policy background would actually make a more interesting economic story.

The discussion of WTO subsidy rules misses some important nuances.  Domestic subsidies do not have to cause injury to be WTO-illegal (p. 276); they can also be illegal if they impede exports to a third country market. In addition, domestic subsidies are WTO-illegal if they are contingent on domestic content.

The discussion of TRIPS errs in suggesting that TRIPS requires governments to afford property rights to domestic nationals (p. 280), but the book’s discussion does raise some important economic questions about the rationale TRIPS.  In addition, while it may be true that some developing nations may have accepted TRIPS because of their ability to obtain market access concessions on textiles and agriculture (p. 281), the other important reason was that TRIPS was part of the single WTO undertaking for which developing countries could either join or not join, but could not join without TRIPS.  Because major industrial powers planned to quit the original GATT 1947, the cost of not joining the WTO meant that developing countries would have lost their protections under GATT law.  So it is not clear that the cost of TRIPS was outweighed by the benefits of new trade access.

The discussion of WTO dispute resolution is good, but contains a few errors:  WTO Appellate Body members are not constrained against hearing cases involving their home country (p. 283) and are appointed for four-year terms, not a six year term (p. 282).  The books states that sanctions are measured by “substantially equivalent” trade concessions (p. 283), but does not explain where the term “substantially” comes from as it is not a term from the treaty or the jurisprudence.  In addition, the book posits that the WTO dispute system provides gap fillers for an incomplete bargain that approximate what WTO members would have negotiated had they been able to address the contingency in the treaty text (p. 284).  But the book fails to note that the WTO judges do not describe their decisions as filling in the bargain, but rather as clarifying what the original bargain was.  Moreover, the book does not take account of the criticism of WTO jurisprudence on some cases for diverging from what WTO members would have negotiated or thought that they had negotiated.

Finally, the authors explain that governments are given a reasonable time to comply with WTO rulings (p. 285), but note that there is no explanation for sanctions being authorized only after that compliance time has elapsed.  One explanation may be that rational governments sought to improve on ICJ processes by recognizing that compliance with international law rulings should not be expected to be immediate.