Ratification of the Comprehensive Code Governing International Trade - Essay Example

Would it be conceivable for all nations to agree upon and ratify a comprehensive to govern international trade in the not too distant future? Examine all aspects of the attendant problems and propose possible directions for international legal reform in this field Introduction The development of international trade policies has been a priority for states around the world mostly because in this way the national interests (of each of the countries involved in the relevant schemes) would be promoted. However, in practice, the creation of a code that will be accepted from all countries around the world (with no differentiations suggested) is a quite challenging task; each country within the international community has its own priorities and interests and the satisfaction of all these interests around the world is not feasible. As an example, referring especially to the issue of ethics in businesses worldwide, it has been proved that ‘cultural differences often limit the effectiveness of a uniform international code of ethics because they create a lack of consensus within a profession as to what constitutes acceptable behaviour’ (Vanasco, 1994, 12). In other areas also the development of a text that will be accepted by all participants (referring to the trade transactions globally) is not easy to be achieved. However, intensive efforts have been made by states internationally in order to develop a code of international trade that will be acceptable by all countries around the world (no matter their social, political or cultural characteristics). The potential feasibility of the above target is examined in this paper referring to similar efforts made between specific states within the international community. Moreover, the terms of success of these efforts are being examined trying to identify the key elements of applicability of the relevant plans either in the short or the long term. The leaders of states have been proved to have a critical role in the success of these projects; however other criteria, like the position of the countries globally (in political and financial terms) as well as its power to support its policies have been found to have a role in the success of these plans internationally. 2. International Trade – general aspects and characteristics International trade has many different aspects. Its effects on the economy of each country globally can be significant. For this reason, in the literature and the empirical research the potential chances for success of relevant schemes (based on a code applied internationally) have been extensively examined. In order to develop a code of international trade that will be applied internationally a series of parameters have to be taken into consideration. Referring to a specific aspect of international trade, the exports, Jin et al. (2008, 132) notices that ‘engaging in exporting provides firms, especially firms in technologically lagging industries, the opportunity to benefit disproportionately from knowledge spillovers’. In the above study, international trade is related with the financial growth of organizational operating in the private sector; however international trade can have significant benefits also for the public sector organizations. However, despite the fact that this study is primarily related with the private sector, it can be also used in order to evaluate the potential chances for success of similar schemes that will refer to the a country’s public sector. In general, it has been proved that ‘industry heterogeneity matters to knowledge transfer, and stands to play a substantial role in reducing knowledge gaps’ (Jin et al., 2008, 132). Heterogeneity as used above can be also included in relevant plans referring to the development of international trade across organizations that belong to the public sector. In both the above cases, i.e. for organizations of the private and the public sector, the appropriate regulation of international trade is necessary in order to ensure the feasibility and the effectiveness of the relevant schemes. At a first level, it could be noticed that the development of international trade can be achieved only within specific framework: particular terms need to exist in order to ensure that the suggested plans will not offer benefits to just a few of the participants (referring to states); instead all (or even most) of the states participating in the relevant effort should be benefited from the relevant schemes. Various models and theories have been suggested supporting the effectiveness of international trade plans. In accordance with the ‘‘trade promotes peace’ hypothesis’ (Anderton et al., 2001, 445) the following issues should be taken into consideration when having to develop a specific international trade scheme: ‘(1) Societies achieve salient economic gains from their trading relationships; (2) serious conflict among societies disrupts trade; and (3) premises 1 and 2 enter the calculus of political decision makers; if any one of the three premises does not hold, the liberal linkage between trade and peace is broken’ (Anderton et al., 2001, 445). In other words, if the above terms cannot be met then it is quite possible that the development of a code of international trade (or other similar text) will be not feasible. The conflict that will be possibly exist between specific countries within the international community is also proved to have a significant power in influencing the effectiveness of relevant efforts (leading to the unsuccessful completion of the projects involved). On the other hand, despite the fact that many legal texts have been developed around the world aiming to regulate the various aspects of international trade, all these texts have been ineffective while no common effort on their application has been observed across the states globally. Indicative examples of these texts are the following ones: a) The Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS, Uruguay, 1994); the application of this agreement is monitored by the WTO; b) the various Bilateral Investment Treaties (BITs) signed between states within the international community in accordance with their interests and their targets both in the short and the long term; c) the Agreement on the South Asian Free Trade Area (2004); d) NAFTA or else the North American Free Trade Agreement signed in 1994 and so on. 3. Regulation of international trade – description and issues for consideration As noticed above, different approaches have been used in order to regulate the various aspects of trade worldwide; the agreements presented above are an indicative example of this trend; despite the fact that the development of a commonly accepted code of international trade is absolutely necessary (it could support the reduction of turbulences within the markets worldwide), in practice its realization is not easily feasible. On the other hand, the support of states in the relevant efforts is not the expected; even if the active participation of governments around the world would be required for the success of such an effort, in practice the above plans are not appropriately supported by the states for a series of reasons that have been identified in the literature and the empirical research. Indicatively, we can refer to the study of Leeson (2008, 61) who supported that ‘while state enforcement appears to enhance trade, it does so less impressively than its status as essential for flourishing trade tends to suggest’ (Leeson, 2008, 61). In other words, the support of efforts made worldwide for the development of a code of international trade is rather limited (referring both to the governments as well as the individuals – especially those that have strong interests on the international marketplace). However, the design and the development of a code of international trade cannot be achieved without the active participation of states worldwide. The specific issue is highlighted in the study of Finger (2007) who refers especially to the potential influences of the Uruguay Round on the development of the various aspects of international trade. Towards this direction it is noticed that ‘the Uruguay Round agreements impose bound obligations to implement, but provide only unbound promises of assistance; the international community has provided extensive trade-related assistance through bilateral and multilateral development agencies’ (Finger, 2007, 440). In accordance with the above, the effectiveness of the Uruguay Round can be strongly doubted especially if taking into account the needs of the international community regarding the increase of safety in the various commercial transactions but also the guarantee for equal opportunities to all participants (firms/ entrepreneurs) within the global marketplace. Another issue that needs to be taken into consideration when designing and developing specific plans of international trade is the fact that in some cases the principles regulated the various international commercial transactions can be a threat for specific entrepreneurial activities (the example of the tobacco industry can be regarded as an indicative one). In this context, the study of Shaffer et al. (2005, 19) led to the following findings: ‘international covenants establish a role for governments in ensuring the conditions for human health and wellbeing, which has been recognised as a central human right; international trade agreements, conversely, prioritise the rights of corporations over health and human rights; the tobacco industry has used trade policy to undermine effective barriers to tobacco importation’. In other words, business interests can be a constraint towards the development of an appropriate international trade framework. Of course, as noticed above international trade agreements focus primarily on the promotion of business interests (or the interests of a state regarding the completion of specific business agreements); the protection of human rights although possibly incorporated within the relevant plans is not likely to influence the development of commercial agreements worldwide. However, because governments internationally have a crucial role in the design and the development of appropriate international trade schemes, all proposals made towards the improvement of conditions of international trade (including the ‘merger’ of all existing regulations into a code) should take into consideration the need for the protection of human rights – even such an issue is not directly related with the commercial activities worldwide. The current regulation of international trade is based on a series of agreements signed between states that are ‘bounded’ with common political or financial interests. We could refer as an example to the following international trade agreements/ associations: ‘the North American Free Trade Agreement (NAFTA), South American Common Market (MERCOSUR), the Association of Southeast Asian Nations (ASEAN), the South Asian Association for Regional Cooperation (SAARC)’ (Ozawa, 2000, 31) and so on. All the above agreements/ associations have been developed in order to support the development of commercial activities within a specific geographic area (see also the case of European Union). However, apart from the potential consequences of international trade agreements on the commercial development of the countries involved there are also other issues that need to be taken into consideration when designing and ratify a particular international trade agreement; existing conflicts at the political level could possibly affect the development of cooperation in the area of trade. An indicative example is the existing commercial framework between India and Pakistan. The two countries face severe problems regarding their cooperation in various industrial sectors due to their conflict in a series of political issues. The specific case has been examined by Kastner (2007, 664) who came to the conclusion that ‘the effects of international political conflict on trade are less severe in cases where internationalist economic interests have relatively strong political clout domestically’. The consequences of political conflicts for the financial development of a specific country cannot be precisely estimated; in the area of commerce political conflicts can lead to the cancellation or the delay of completion of specific projects, especially if the relevant conflicts are of crucial importance for the country’s economy. The wars that periodically developed worldwide are the most severe form of conflict between states (or between specific political powers within a particular state). In fact, in accordance with the study of Bayer et al. (2004, 699) ‘civil wars decrease bilateral trade between states by one-third; the effects of civil wars on trade are not limited to countries where the civil wars are occurring but also affect joiners’. Under these terms, it is quite important for all states around the world to proceed to the development of appropriate schemes of cooperation with other countries of the greater geographical region but also with states around the world in case that there could be potential benefits on various social, financial or political issues. 4. Applicability of a common framework (code) of international trade worldwide The development of a code of international trade could support the increase of commercial activities of many countries worldwide; however, the viability of such a project should be carefully reviewed in advance. Various aspects of the above project have been examined in the literature; in accordance with Vanasco (1994, 12) ‘since one single universal code of ethics may not meet the needs of an international group, international professional societies may wish to consider alternatives to incorporate in their codes of ethics, especially the cultural dimensions of other countries’. The above study refers specifically to the case of ethics and their promotion within the international community; in the same context commercial agreements could be promoted within the international market using a specific regulatory framework – under specific terms and conditions. On the other hand, even in cases that codes have been developed for the regulation of specific issues involving in the international community the applicability of these codes in the long term has been proved to be problematic. Indeed, the study of Pearson et al. (2001) led to the conclusion that ‘the processes through which codes have been developed has brought positive impacts in terms of highlighting the needs and voices of hitherto excluded groups of workers (women export workers, homeworkers, casual workers) in social policy and labour regulation debates’ (Pearson et al., 2001, 49). The above study focuses on the consequences of codes of conduct on the regulation of a specific geographic or commercial environment; these codes have been considered as necessary in order for the behaviour of employees within specific industrial sectors (in the above case the voluntary work in corporations is under examination) to be regulated. However, the establishment of these codes cannot guarantee the improvement of the conditions involving in a specific social, business or political environment; for this reason the design of coders within various social, financial and political sectors should be carefully evaluated in advance (issue of feasibility of the relevant project) while it should be also appropriately monitored throughout its application (from its initial stages). On the other hand, the increase of a particular type of international commercial agreement towards other similar agreements can lead a specific market into severe delays – referring to the transactions made and the development of cooperations/ strategic alliances. The above issue has been examined by Burton et al. (2008) who tried to identify whether ‘the dramatic rise of the number of preferential trade agreements (PTAs) worldwide make economic sanctions more likely through increasing the leverage of the powerful and pitting states against each other in competition (power) or less likely through increasing the benefits of trade’ (Burton et al., 2008, 213). Indeed, the above study showed a relationship between the bilateral trade and the sanctioning behaviour. More specifically, it was found that ‘increases in bilateral trade do decrease sanctioning behavior’ (Burton et al., 2008, 213). Under these terms, it would be extremely valuable for firms within the international market to develop a specific framework of action regarding their strategic cooperation in various commercial transactions; such a cooperation would support the improvement of the local (national economy) – apart from the enhancement of the firm’s performance within the international market. The only problem regarding the potential development of such a scheme (common regulatory framework for various commercial activities worldwide) would be the identification of the principles on which this scheme would be primarily based. More specifically, because the priorities of firms around the world can be differentiated, the alignment of business targets with the interests of the public cannot be easily achieved; the continuous changes in the terms and the conditions of the global market make the development of commonly accepted rules of commercial behaviour a target that is difficult to be achieved. Moreover, because international trade is related not only with the public sector but also with the private sector, the views of governors worldwide should be considered taken into account the interests of entrepreneurs and the support available to them by the state (in order to realize a specific project of international trade); moreover, the views of entrepreneurs should be also examined and evaluated trying to identify the problems that lead to delays on the development of the relevant projects around the world. The impact of the private sector on the realization of a series of projects in the international community cannot be doubted: in fact, without the active participation of entrepreneurs in the development of business activities worldwide (an entity that will have right of presence at a specific area) no particular progress in the formulation of codes in various social and political sectors would not be achieved. The importance of organizations of the private sector in the development of various international trade agreements is highlighted in the study of Xiaohong (1998, 15) who noticed that ‘firms are social and economic entities, whose intra-organizational, cross-border trade and production networks coevolve with their multilocal competitive environments; the growing trends in intra-firm transactions and intra-firm division of labor on global basis present a challenge to national governments’ (Xiaohong, 1998, 15). In accordance with the above the development of a code in the area of international trade cannot be easily achieved without the active participation of entrepreneurs/ firms of the private sector. The role of the state is – in any case – crucial in the success of the relevant project. In both cases, the successful completion of the relevant project is depended on a series of criteria: interests of the parties involved, methods available for the realization of the relevant targets, monitoring tools that will be used in the supervision of the project, position of third parties towards a possible agreement in the specific sector (commerce) and the consequences of such an agreement to the following two ‘stakeholders’: the public and the environment. In order to understand the potential consequences of such an agreement to the international community but also to the states involved, Warf et al. (1994) refer specifically to the U.S.-Canada Free Trade Agreement (1989) noticing that ‘the output and employment gains attributable to the Free Trade Agreement indicate that while the largest increases are likely to occur in the traditional manufacturing cores of both nations, relative export gains will be dispersed in a complex patchwork of regions in both nations’ (Warf et al., 1994, 99). In other words, the benefits of such agreements cannot be easily identified (in most cases) especially in the short term. The effectiveness of these plans is likely to be proved after the application of the specific plans in practice (i.e. after the ratification of these agreements by the parties involved); the practical consequences of the specific agreements may be different from those initially estimated (issues of potential damages to third parties or violations of rights and so on). It should be noticed that various methods have been developed in order to evaluate the effectiveness of specific international trade agreements; the evaluation of their consequences can often lead to the assumption that the existence of these agreements can be justified only regarding the interests of specific parties; for the third parties (referring to the parties that do not participate in a specific trade agreement) a particular international trade agreement is may considered as having no value or – instead – to be a threat for the national or the institutional (private sector) interests. Regarding this issue it is noticed by O’Reilly (2005, 652) that ‘large numbers of institutional veto points are associated with smaller percentage changes in both tariffs and nontariff barriers; these relationships hold even after controlling for the effects of international institutions and for domestic pressures to change tariff and nontariff-barrier levels’. The above study involves in a specific ‘strategic tool’ through which a party can declare its opposition towards a specific international trade agreement. In fact, the right of veto exists also in non-commercial agreements, most commonly in international agreements with a clear political content. In this case, the veto is used by one of the parties of a specific agreement as a means for prohibiting the development of a specific agreement – at least to gain time for a more effective reaction to a specific proposal. 5. Conclusion As noticed above international trade agreements are initiated and promoted by well established international bodies and associations – indicative reference has been made to European Union, the WTO (world trade organization) and other international bodies with specific missions and interests. All these agreements when been ratified they have to be accepted by all their parties no matter of their potential consequences to third parties. Another issue that should be highlighted here is the fact that these international trade agreements usually include rights and obligations for a specific number of states/ institutions that are characterized by particular ‘attributes’ (sited in a specific geographic region, involving in specific activities and so on). In other words, there are issues and states/ organizations that are not regulated from specific rules even if there is a need for such regulation. The study of Ghigliani (2005) led to the conclusion that the development of a commonly accepted framework in the area of labour rights internationally is not feasible yet even if it would be particularly valuable. Within the same context, the development of a code that would regulate all issues referring to international commercial transactions commonly for all members of the international community (states and institutions) would not be feasible – at least under current social and political conditions around the world. The significant political and cultural differences among the states would be the major reasons for the failure of such a scheme (if developed) while the lack of appropriate monitoring mechanisms – referring to the application of the rules of such a code in practice - would be also another issue for consideration. On the other hand, governments internationally do not seem ready to participate in such a scheme; even in existing international trade agreements the problems regarding the acceptance of their rules by their members are many and cannot be easily faced unless specific initiatives are made including the establishment of an independent principle/ organization for the behaviour of members of international organizations – referring to the level of acceptance of the rules and the plans of international bodies by their members. References Anderton, C., Carter, J. (2001) The Impact of War on Trade: An Interrupted Times-Series Study. 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