International Trade: Law and Institutions - Essay Example

International Trade: Law and Institutions Critically assess and compare and contrast the dispute resolution procedures used by the World Trade Organization (WTO) with those used by the International Chamber of Commerce (ICC) in its arbitration procedures. This should include reference to the types of cases that the WTO and ICC would deal with, the methods by which a dispute is referred to each of them, the process/methodology for the dispute resolution and the mechanisms for redress. Abstract Due to the ever increasing complexity of the global economy, as well as the need for checks and balances to ensure that international business and trade are conducted in an ethical and beneficial manner, international organizations have rose to prominence which were created in an effort to serve as arbiters in commerce and trade disputes that cross the boundaries of nations, oceans and continents. In this paper, the dispute resolution procedures used by two of the most prominent global arbiters, the World Trade Organization (WTO) and the International Chamber of Commerce (ICC) will be compared and contrasted in terms of the types of cases that each respective organization would deal with, the methods by which disputes are referred to them, the process/methodology for the dispute resolution and the mechanisms for redress. In addition, reference will be made, where appropriate, to relevant sources of law. Structural Overview of the WTO and ICC In order to accurately evaluate and understand the various aspects of these organizations that will soon be presented, an adequate understanding of the structure of the WTO and the ICC both need to be explained briefly. The WTO has its origins in the words of a man who lived and studied economics centuries before the WTO ever existed. Considered by many to be the father of modern economics, Adam Smith put forth the original theory that the key to true economic progress and prosperity for all nations is international trade. He theorized that by making a wide variety of goods and services available anywhere in the world, not only would the country of origin benefit, but also the receptions of these goods would benefit due to the improvement of their quality of life through the utility of the goods themselves (Miller, 2003). With the idea of free international trade already very popular, the WTO was formed not only in an effort to promote free international trade, but also to attempt to police the international marketplace to prevent violations of trade laws. Like, the WTO, the ICC seeks to serve as an advocate for, and protector of international trade. Possessing a similar mindset to that of the WTO, the ICC also tries to peacefully resolve international trade disputes through an arbitration process, promote free trade in every corner of the globe, and seek ways to improve world commerce, much as one’s local chamber of commerce promotes the interests of a given city or town (International Chamber of Commerce, 2006). Having given a brief overview of the origins, goals, and mindsets of these two organizations, it is now possible to properly analyze them as was detailed at the outset of this paper. Types of Cases Speaking in the broadest of terms, both the WTO and the ICC handle cases of a non-criminal nature; both organizations, in the course of evaluating a case, will refer any criminal matters to the appropriate law enforcement agency anywhere in the world. The types of cases that these organizations handle would best be described as non-criminal civil matters in that the cases usually involve some sort of business or trade dispute that centers on financial gain or loss, and the disputes of both organizations can often be resolved by the use of monetary reparations for the injured party or parties. However, there are some fundamental differences in the ways that the WTO and ICC handle their respective responsibilities. In general, the WTO is more of a reactive organization, which is to say that the organization handles the disputes that are referred to them as they are presented. This is not to say that the WTO is negligent in any way or less valuable than the ICC, but rather it serves in a more limited and concentrated capacity than does the ICC. In contrast, the ICC not only reacts by handing the matters referred to them, they also take a proactive role in the assurance of fair and free international trade by seeking ways to make international trade more fair and to protect the rights of organizations large and small in an effort to divert disputes before they happen, and also to make it more difficult for organizations to deliberately violate the rights of others. Therefore it is fair and accurate to say that in contrast to the WTO, the ICC is more of an advocate for the prevention of disputes, but of course, and both organizations serves a vital function in international commerce regulation and mediation. Referral System for Disputes Both the WTO and ICC, of course, resolve disputes at the behest of other nations, individual companies, or individual people within the scope of the best interest of international trade. Interesting to consider are the referral systems that these organizations utilize to have disputes brought before them for consideration and ultimate resolution. The WTO takes preventive measures in an effort to avert disputes in the first place by the composition, negotiation and enforcement of international trade agreements that not only serve the best interests of the nations with whom the agreements are made, but also ultimately serve as a blueprint for valid and successful global trade practices going forward. However, even with the existence of these agreements, there are disputes, whether they are due to agreements being outright violated or abused, or brand new disputes from totally new areas of international commerce. This has been especially true in recent years, as the proliferation of the Internet has brought forth new issues and challenges in terms of international commerce, given the popularity of the Internet as a global marketplace. When these or any other disputes exist, they can be brought before the WTO as any grievance would be brought before a regulatory body or court; the dispute put before the WTO typically begins as a formal complaint that is filed by a licensed attorney on the behalf of a client. This client, of course, could be an individual or a group of individuals in a class action dispute, or a business or group of businesses in a sort of business class action filing. With the filing completed, the process by which the dispute will be addressed begins, which is discussed in the subsequent portions of this paper. The ICC, because of its proactive and preventative stance on trade violations globally, is able to prevent many grievances to reach the stage where they must be formally brought before the body, but in many cases, unfortunately, grievances have to be formally presented to the ICC for processing and action. In these instances, much as in the case of the WTO, those who wish to seek remedy against a given violation of their rights under national or international law, present their grievances to the ICC for consideration, and ultimately, resolution and/or mediation (Miller, 2003). The ultimate goal, of course, is to reach an equitable resolution that is satisfactory to both parties and hopefully avoid future disputes or set an example that will discourage future disputes or violations that may clog the system. This being said, the ICC receives requests to resolve given disputes that are presented, but also due to the proactive nature of the organization, many times disputes are discovered and explored thereafter. Speaking in terms of both the WTO and ICC, both are approached with many disputes, as are other tribunals, and these disputes must be handled in the most expedient and fair way possible (Moberg, 1998), as international disputes can actually threaten the peace of the nations involve, and sometimes, billions of dollars and the fate of huge companies hangs in the balance. Regardless of the way that disputes make their way to either organization, both have a process and methodology for dispute resolution that once again is designed to fairly resolve issues in a timely fashion. Process/Methodology for Dispute Resolution Dispute resolution within the WTO is cumbersome, difficult to explain, and the end result is often ambiguous. To make this point, a direct quote from the WTO procedures themselves is presented, and then explained: “The objective the dispute resolution process is to help disputing countries reach a mutually agreeable settlement or, if that is not possible, to remove the measures inconsistent with the WTO agreement.” (Vazquez, et al, 2002). Expanding upon this objective, simply stated, the violator of a given regulation, treaty or agreement, is given a set period of time in which to address the issue, make reparations, or face consequences. However, the thought occurs that there is a huge gap in this regulation, as it gives the violator the choice of whether or not to accept the judgment of the WTO, showing that the WTO seems to have a lack of teeth with which to enforce rulings. Another tantalizing possibility exists in that it may be possible that the WTO does not wish to bite the hand that feeds it; in other words, the large and powerful members of the WTO are unlikely to receive an unfavorable ruling from the WTO, lest that nation or group take offense and retaliate. An example of this is the seeming lack of actions taken against economic powerhouses like China. Overall, China, some critics have complained, has been allowed to violate international trade policies with little consequence (Nolt, 1999). In fairness, however, international trade organizations like the WTO and ICC have some tough decisions to make, but the fact that some degree of influence exists among the larger and powerful members is noteworthy. The ICC has a set system for dispute resolution that differs from that of the WTO somewhat, but is similar in principle, if not different in mechanics. In order to fairly and swiftly resolve disputes or grievances, the ICC gives both parties the opportunity, or rather the ICC strongly suggest that, mediators be appointed for both sides of a dispute to allow for a civil examination of issues and objections without emotions or anger getting the upper hand in the deliberations. Both sides are allowed to have several mediators in a team setting if they wish, which could also ultimately aid the process. While it is suggested that attorneys be used, there is no express language in the regulations that require this, although in fairness, it would be in the best interests of the parties involved to retain competent legal counsel. The ICC has a tribunal board, made up of legal and business experts from around the globe, who consider all of the facts and previous precedent and make a judgment based on such. The parties do not have the opportunity to refuse the judgment, lest they lose the support of and membership in the ICC, giving the ICC somewhat of a means of enforcement of its decisions. However, the ICC does give some lenience in that if parties are able to resolve a dispute on their own, without the need of the ICC’s involvement, neither party is obligated to keep the ICC involved in the dispute process, thereby avoiding complicated entanglements in cases that really are unnecessary to mediate as they have already been resolved unofficially. This also saves undue abuse of valuable resources for the organization, thereby allowing it to serve the interests of more parties who need their help desperately. Mechanisms for Redress In considering the mechanisms for redress by both the injured parties and the defendants in cases brought before the WTO and ICC respectively, there are some general commonalities that need to first be presented. In fairness, both of these organizations make an honest attempt to be fair in judgments, not to violate the best interests of all parties involved, and to serve the best interest of international trade, of course. With this in mind, the redress mechanisms can now be objectively discussed and examined. In terms of redress actions in common, both the WTO and ICC utilize monetary reparations as a method of literally compensating those who were damaged by the improper acts of another party, much like one would pay a fine for littering or driving above a posted speed limit. The monetary damages serve two important purposes: first, the violators are taught an expensive lesson as to the consequences of violations of rules or principals, and those who are injured not only are extended a gesture of good will, but they are also in many cases totally compensated for their losses as a result of unfair trade practices on the part of someone else. Secondly, the fines serve as an example to discourage additional violations. Once again, however, it must be understood that enforcement of damages is another issue altogether. If a party chooses to disregard the penalty, in the case of the WTO, not much can be done. The ICC has some mechanisms in place, but nothing remarkable either. However, both the ICC and WTO are growing and evolving organizations that are likely to continue to grow and change as the dynamics and needs of the international economy likewise grow and change. Relevant Legal Issues for the Organizations Because of the global influence and impact of both the WTO and ICC, there are some relevant cases in recent years that have raised some interesting issues and set legal precedent in the area of global commerce. One of the most remarkable examples of this was the Beef Hormone dispute of 1996, which basically was a ruling that attempted to ban American beef from sale in the European Union because of the fact that American beef contained what were alleged to be hormones that were hazardous for humans who consumed the beef. When the EU filed a grievance in an effort to ban American beef from their markets, the United States, as was alluded to earlier, used its influence and economic clout to ensure that the beef would stay in European markets (Wallach, 2000). This case raised many questions as to the best interest of the public versus profit motivations, unfair influence from powerful opponents, showing a clear necessity for the organizations to protect the greater good of the world economy. Summary In this paper, two very important organizations have been presented, analyzed, and in some cases, critiqued. However, in closing, a perhaps more important point needs to be reinforced- organizations like the WTO and ICC need to exist in order for the world economy and trade arena to have some sort of order, lest chaos reign and the economy become a free for all with no winners and lots of losers. As with so many other areas where abuse is possible, global trade must be closely monitored on a constant basis for the good of all nations. References International Chamber of Commerce (2006). Website of the ICC. http://www.iccwbo.org/policy/arbitration/id1784/index.html Miller, C. (2003). The WTO: Biting the Hand That Fed It. William and Mary Law Review, 44(5), 2319+. Moberg, D. (1998, March). Power Grab: Big Business Wants to Tighten Its Hold with a New Global Trade Pact. The Progressive, 62, 24+. Nolt, J. H. (1999, December 16). China in the WTO: The Debate. Foreign Policy in Focus, 4, 1. Vazquez, C. M., & Jackson, J. H. (2002). Some Reflections on Compliance with WTO Dispute Settlement Decisions. Law and Policy in International Business, 33(4), 555+. Wallach, L. (2000). Transparency in WTO Dispute Resolution. Law and Policy in International Business, 31(3), 773. Read More