Introduction
Internal Economic Government and International Law have witnessed massive growth over the past two centuries with changes that have impacted the scholarly, political, legal, and economic fields. The three ages of ILIEG have been immensely distinct but lead to a common goal; reconciling national and international financial and legal governance.[1] However, overcoming the illusion of establishing a framework that satisfies every global actor is critical. The basic concept of economics is utilizing scarce resources to achieve an aim. Rodrik postulates that international laws should adopt a mechanism that optimizes the advantages and limits the shortcomings.[2] Otherwise, there will never be one formula that solves all the domestic and international economic and legal issues. This paper will examine the advantages and disadvantages of governments allocating financial functions to the international arena. The former will consist of free trade and increased association, while the latter will analyze the issues of national sovereignty and democracy.
Advantages
Trachtman introduced the age of hybridity, which embraces globalization and aims to reconcile the various factors that create contention between domestic and international laws.[3] The 21st century has witnessed heightened interaction and global movement of goods, knowledge, people, and services. Improved technology and communication have facilitated this change. Consequently, nations thrive from foreign labor and investments. For instance, the United States harbors millions of people from across the world. These individuals have invested their knowledge in developing advanced infrastructure that propels the nation forward. However, this change was not possible a few decades earlier, given the restrictions that international and domestic laws imposed on states. Scholars and political figures perceived legal and economic aspects as two distinct. However, the age of hybridity has shown that these fields are more interconnected than many believed.[4] Politics governs the laws and policies of a nation that influence the standards and restrictions of imports and exports. These standards will determine whether the country will benefit from foreign investment in terms of labor, technology, goods, services, and knowledge. Transferring national economic functions to the international stage has allowed various nations to thrive economically, socially, and politically. For instance, members of the North Atlantic Treaty Organization (NATO) received an increased advantage in trade and commerce, unlike non-members.[5]
Free trade is the second benefit of relocating national economic functions to the international level. Free trade allows an uninterrupted flow of goods and services across nations. The opposite of this is enhanced restrictions that limit organizations from establishing subsidiaries in new countries, people from gaining access to other governments, and investors from directing their funds to economic activities of different states. Ultimately, nations thrive and suffer in isolation. Separationism grows to limit international agencies from protecting fundamental human rights from authoritarian governments. The liberal age sought to establish an open global society but created a separation between domestic and international economic and legal laws.[6] This notion stated that international laws only recognized states and not individuals independent from their nations. Consequently, change became hard to adopt because states would have to embed rules into their domestic framework for them to be applicable. This situation was time and resource-consuming to the extent that it paralyzed growth. The Westphalian Model did not foresee the emergence of critical sectors such as banking that sold services instead of tangible goods.[7] Therefore, nations intentionally or unintentionally developed non-tariff constraints that limited trade. These barriers, including different national standards, limit free trade. However, the age of hybridity allowed the transfer of national economic functions to enable states to work harmoniously and develop similar quality standards that would facilitate free trade.
Disadvantages
Transferring economic functions from the national to the international has interfered with the sovereignty of nations. Each nation is unique and dynamic in different aspects. A country’s cultural, economic, legal, and political norms vary significantly from another. Highly industrialized nations such as Britain and the United States of America are lead players in international finance and commerce laws. They dictate the behaviors of other nations and often impose rules and regulations that undermine the sovereignty of these states. The Washington Consensus demonstrates this point in how it created an economic genocide in Chile.[8] The Consensus established a mechanism that worked in developed countries and then imposed it on developing states. The result was increased poverty, unemployment, and a worsening economy. Ha-Joon Chang, a South Korean political economist, argues that international organizations such as World Bank and World Trade Organization provide developing countries with policies that do not apply to developed countries.[9] These countries used protectionist policies to ensure the growth of domestic industries before allowing foreign investments to dominate the economy. However, these organizations have denied developing the same opportunity for growth. Members must abide by the rules established by international bodies regardless of their views and unique circumstances.
The conflict has resulted from the national transfer of economic functions to the international stage. Multinational organizations from developed countries establish their operations in developing countries to exploit cheap labor, resources, and less stringent environmental and labor laws.[10] These organizations take advantage of developing countries to pay low wages to workers and transfer their income to their mother nation. Developing nations welcome these corporations with the hope that they will provide employment, alleviate poverty, increase government revenue and open the country up to foreign direct investments (FDI). The companies understand the desperation in these countries to boost economic activities. Therefore, they threaten to divert their operations to other countries if the host nation fails to abide by their conditions. Consequently, the government continues to wallow in child labor, environmental pollution, violation of democracy, and poverty.[11] Secondly, highly industrialized countries establish policies that favor their growth and development more than other nations. Given their significant influence in establishing international laws, they exploit ‘weaker’ nations to follow the rules or risk economic sanctions and other punitive actions. These actions often undermine a nation’s currency and divert investors into other countries. These nations adopt established policies to avoid risking the economic downturn of their people.
Conclusion
In conclusion, international law and international economic guidance are more alike than attributed to some scholars. Law, politics, and economics are related fields that influence the national and global environment. The evolution of beliefs and norms of international law has led to the transfer of national economic functions to the international arena. This transfer has had positive and negative effects on economic activities. On the one hand, globalization and free trade has considerably benefited nations. Globalization has increased the flow of people, goods, and services across borders without restrictions and with reduced costs. States have established mechanisms to co-exist and achieve economic goals. However, this growth has not been short of hiccups. International laws have undermined national sovereignty and democracy, particularly in developing countries. Industrialized nations have a more significant share in international institutions and, thus, more power to influence decisions.[12] They vouch for laws that will bring significantly higher impact to their land than the well-being of others. For instance, they promote free trade in developing countries, which end up being excessively reliant on foreign investment and operations. Consequently, domestic industries die, and employees receive wages insufficient to support a respectable living. Secondly, the transfer leads to conflict that arises between developed and developing countries, particularly when the latter fails to curve under the coercion of the former.
Bibliography
Brown, Chester, and Kate Miles, eds. Evolution in investment treaty law and arbitration. Cambridge University Press, 2011.
Chang, Ha-Joon, ed. Rethinking development economics. Anthem Press, 2003.
Narlikar, Amrita. “Law and legitimacy: the world trade organization.” Routledge Handbook of International Law (2009): 320-328.
Rodrik, Dani. The globalization paradox: Democracy and the future of the world economy. WW Norton & Company, 2011.
Röpke, Wilhelm. Economic order and international law. Martinus Nijhoff, 1954.
Sattorova, Mavluda, Mustafa Erkan, and Ohiocheoya Omiunu. “How do host states respond to investment treaty law? Some empirical observations.” In New Voices and New Perspectives in International Economic Law, pp. 133-151. Springer, Cham, 2020.
Schneiderman, David. “NAFTA’s Takings Rule: American Constitutionalism Comes to Canada.” The University of Toronto Law Journal 46, no. 4 (1996): 499-537.
Tarullo, Daniel K. “Law and governance in a global economy.” In Proceedings of the ASIL Annual Meeting, vol. 93, pp. 105-113. Cambridge University Press, 1999.
Trachtman, Joel P. “The international economic law revolution.” U. Pa. J. Int’l Econ. L. 17 (1996): 33.
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[1] Tarullo, Daniel K. “Law and governance in a global economy.” In Proceedings of the ASIL Annual Meeting, vol. 93, pp. 105-113. Cambridge University Press, 1999.
[2] Rodrik, Dani. The globalization paradox: Democracy and the future of the world economy. WW Norton & Company, 2011.
[3] Trachtman, Joel P. “The international economic law revolution.” U. Pa. J. Int’l Econ. L. 17 (1996): 33.
[4] Tarullo, Daniel K. “Law and governance in a global economy.” In Proceedings of the ASIL Annual Meeting, vol. 93, pp. 105-113. Cambridge University Press, 1999.
[5] Schneiderman, David. “NAFTA’s Takings Rule: American Constitutionalism Comes to Canada.” The University of Toronto Law Journal 46, no. 4 (1996): 499-537.
[6] Narlikar, Amrita. “Law and legitimacy: the world trade organization.” Routledge Handbook of International Law (2009): 320-328.
[7] Trachtman, Joel P (1993)
[8] Röpke, Wilhelm. Economic order and international law. Martinus Nijhoff, 1954.
[9] Chang, Ha-Joon, ed. Rethinking development economics. Anthem Press, 2003.
[10] Brown, Chester, and Kate Miles, eds. Evolution in investment treaty law and arbitration. Cambridge University Press, 2011.
[11] Sattorova, Mavluda, Mustafa Erkan, and Ohiocheoya Omiunu. “How do host states respond to investment treaty law? Some empirical observations.” In New Voices and New Perspectives in International Economic Law, pp. 133-151. Springer, Cham, 2020.
[12] Wouters, Jan, and Jed Odermatt. “Comparing the ‘four pillars of global economic governance: A critical analysis of the institutional design of the FSB, IMF, World Bank, and WTO.” Journal of International Economic Law 17, no. 1 (2014): 49-76.
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