Regional Trade Agreements and Global Justice

May 1, 2020 | Comment, Online Scholarship

Regional Trade Agreements and Global Justice

By: Damjan Kukovec

Introduction

Regional trade agreements (“RTAs”) have become a fundamental mode of international trade negotiation and regulation. The further reduction of tariff and non-tariff barriers and general collaboration between nations in trade matters is now primarily negotiated within the setting of RTAs. Therefore, the number and the scope of RTAs since the early 1990s is unparalleled, due to the stalling of worldwide trade negotiations.

RTAs include the North American Free Trade Agreement (“NAFTA”), the Regional Comprehensive Economic Partnership (“RCEP”) between the Association of Southeast Asian Nations (“ASEAN”), the envisaged Trans-Pacific Partnership (“TPP”) between twelve Pacific-rim countries, the Canada-EU Comprehensive Economic and Trade Agreement (“CETA”), the envisaged Transatlantic Trade and Investment Partnership (“TTIP”) between the United States and the European Union, which would account for almost half of global GDP, and others. TTIP and CETA involve only advanced economies whereas RCEP and TPP are trade agreements between developed and developing countries.[1]

RTAs’ potential beneficial effects for national economies are highly contested.[2] Because of their immense scope and depth, RTAs have been termed “mega-regional agreements” and raise concerns of democratic governance, legality, and economic distribution. Moreover, RTAs exclude third parties, which poses concerns from the perspective of global justice. Market actors, including entire countries, excluded from deals struck by other parties can suffer economic hardship as a result of trade diversion caused by these agreements.

Daniela Caruso’s outstanding article, “Non-Parties: The Negative Externalities of Regional Trade Agreements in a Private Law Perspective,”[3] addresses the need for remedies from trade diversion by RTAs through the lens of private law. Contracts by their nature exclude third parties. Private law limits to contractual freedom thus offer analytical insights into possible remedies for harm to non-parties of RTAs. This analysis argues, however, that Caruso’s contentious starting point, that participation in an RTA is beneficial and an exclusion from an RTA harmful, puts into question the subsequent exploration of remedies based on this assumption.

After addressing the various challenges raised by RTAs and avenues for non-parties to challenge their legality, this analysis focuses on constructing remedies for harm resulting from trade diversion in view of “global justice.” It draws on lessons from antitrust law, another field of law foreseeing limits to freedom of contract in addressing global inequality, to show that remedying concerns understood as “social” does not necessarily contribute to the progressive distribution of resources. It concludes by arguing that the hierarchical structure of global production needs to be considered when addressing inequality perpetuated by trade diversion by RTAs as well as by the existing multilateral WTO trade regime.

Challenges of Regional Trade Agreements

Regional trade agreements historically played the role of an exception to the rule of multilateral trading negotiations. Today, instead, they are the driver of international trade liberalization. This raises several challenges of democracy and legality.

Historical Perspective

Trade policy under the WTO used to be agreed on in a multilateral negotiation setting. The WTO’s establishment in 1995, coupled with the Uruguay Round, maintained a profound impact because of the “single package” idea, whereby each WTO member accepts almost the entire package of trade rules.[4] Today, the commitment to multilateralism is now fading worldwide.[5] The largest trading powers, such as the United States and European Union, are abandoning multilateralism in international trade policy. While the United States and the European Union called for the conclusion of the Doha Round, the latest round of multilateral trade negotiations, developing countries expressed a desire to keep the agenda alive.[6]

The rise of China has been argued to have contributed to the demise of multilateralism and the WTO dispute settlement system.[7] The WTO possesses limited ability to resolve frictions between trading partners stemming from the specificities of the Chinese internal economic system.[8] Thus, the advanced economies that set up the multilateral WTO system have turned elsewhere to cope with the rise of China.[9] For example, one of the goals of the TPP was to address the perceived trade imbalances between China and the United States.[10]

While RTAs do not pursue the goal of political integration,[11] they can have clear political and geostrategic goals. For the Obama administration, one of the main goals of the TPP was limiting Chinese influence in regional trade.[12] By imposing a single legal regime on trade throughout a region, RTAs offer incentives to firms to partner with others in the region. As the dominant party in the TPP, the United States would have controlled future access to that zone. In comparison, those not participating in these large trading blocks are marginalized. Besides promotion of free trade, other parties’ marginalization can thus be one of the most important goals, or unintended consequences, of RTAs.

Recent RTAs: Mega-regionals’ Purpose and Critiques

Recent RTAs, which have been, due to their scope and geographical breadth, called ‘mega-regionals’, are not only free trade agreements entailing tariff reductions. The desire to write new rules is also an important driver of these agreements. As United States Vice President Joe Biden candidly said, the general aim is “to help shape the character of the global economy.”[13] These more recent RTAs, therefore, aim at harmonizing regulation, customs, and e-commerce. Additionally, they can address a range of other issues, including labor standards, environmental protection, foreign investment, and government procurement.

The new common rules also cover topics that include public health and product safety standards and setting limits to state-owned enterprises.[14] Amid rising concerns over intellectual property protection and cybercrime, one of the most important elements of RTAs may be their new rules for digital trade.[15]

According to Noah Chomsky, RTAs have little effect on reduction of tariffs, which are, in his words, already low between major trading partners.[16] Instead of promoting free trade, he argues RTAs are highly protectionist, cementing the rights of investors and effectively raising tariffs by recognition of patents with enormous impact on economies.[17]

RTAs are expected to have a major effect on the regulatory powers of the participating states, as they touch almost all elements of economic life.[18] Hence, challenges to democracy by RTAs have been highlighted and resulted in calls for transparent processes that will ensure that the institutions set up by these agreements are sufficiently sensitive and accountable to all relevant stakeholders.[19]

RTAs’ Potential Legal Concerns

Furthermore, the breadth and scope of RTAs have also raised concerns about their legality. RTAs could be understood as a form of monopolized trading, due to the furthered collaboration that increases productivity internally between the contracting parties, simultaneously excluding other trading partners. The WTO system has traditionally been permissive of arrangements that provide more advantageous market access in the form of lower tariffs or related border measures to parties in a free trade area (like NAFTA) or in a customs union (like the European Union).[20] Specifically, Article XXIV of the General Agreement on Tariffs and Trade (“GATT”) provides an exception to the Most Favored Nation (“MFN”) obligation, with respect to border measures when it is necessary to create and maintain such preferential arrangements.[21]

Despite the general permissiveness, there have been, however, cases when the WTO/GATT ruled that some arrangements went too far in excluding others when extending tariff reductions to a closed circle of members. In the case Turkey-Textiles, India filed a complaint against Turkey’s reinstatement of quotas on their textiles in light of Turkey’s entrance into the customs union with the European Community.[22] The Appellate Body ruled that quota reinstatement was not necessary for Turkey’s privilege to enter the customs union.[23] Similarly, in the EC-Tariff Preferences case, India complained about being unduly left out of the European Community’s scheme granting special preferences to some developing countries in exchange for their collaboration in the fight against international drug trafficking.[24] The Appellate Body ruled that discrimination among similarly situated beneficiaries is not in line with the Enabling Clause 1979, which provides for preferential arrangements for developing countries.[25] Legal limits, therefore, currently exist under the WTO/GATT system to RTAs’ freedom to set up preferential tariff systems.

Furthermore, Robert Howse questions the legality of the elimination of non-tariff, i.e. regulatory, barriers by RTAs. He argues that Article XXIV of GATT, which sets out the requirement of an MFN, does not permit a regional trade agreement to result in an overall increase in trade restrictiveness by non-tariff barriers toward third parties who are WTO members outside of the preferential arrangement.[26] This occurs when such an agreement shuts out third country producers who do not meet a certain standard and who, prior to the exercise of regulatory cooperation by an RTA, might have been able to sell their products to one or more countries within the free trade area.[27]

Non-tariff barriers would generally need to be justified based upon objective policy considerations for any differences in regulatory treatment.[28] Howse concludes that to be consistent with WTO norms, avenues of enhanced regulatory cooperation, specifically with regard to the Agreement on the Application of Sanitary and Phytosanitary Measures (“SPS Agreement”) and Agreement on the Technical Barriers to Trade (“TBT Agreement”), must be opened up to all WTO members where the conditions are appropriate for their participation.[29]

There are two broad avenues open to potential litigants who wish to challenge the legality of trade diversion. The first avenue would be a claim for violation of WTO rules, as described by Howse. The second would be the so-called “non-violation” clause, which allows one GATT/WTO member government to seek compensation from another for adverse trade effects of the other’s policies; even though such policies would not violate specific GATT/WTO treaty obligations, there would be an “adverse change in competition.”[30] In other words, the latter pathway, the “non-violation clause,” can be invoked in case of the violation of legitimate expectations held by harmed trading partners.[31] General trade conditions pre-dating the respondent’s conduct would be used as a measure to determine the existence and scope of the harm resulting from the change in patterns of trade. The analysis of the negative distributional impact of RTAs, the adverse change in competition, would then come to the foreground.

Distributional Concerns and Participation in RTAs

RTAs create winners and losers and thus raise important overtly distributional concerns. The concern that third parties, especially developing countries, suffer harm from trade diversion caused by recent RTAs warrants an exploration of a more robust protection than currently envisaged by the WTO system, notably by creating new remedies or by increased participation of third parties in RTAs.[32]

RTAs’ Potential Distributional Concerns

In her article, Daniela Caruso is concerned that RTAs’ exclusive reduction of tariff- and non-tariff barriers vis-à-vis a limited number of countries may lead to trade diversion and, therefore, harm third parties. Should the legal system foresee remedies which would allow third parties to request internalization of costs by the contracting parties?[33] Looking outside the article, Ronald Coase’s reply would be that internalization of costs by contracting parties may not be necessarily the most socially desirable; instead, an assessment of the total social arrangement needs to be made.[34]

Yet, maximization of overall wealth is not Caruso’s goal. Caruso’s aim is global justice and increased global equality. She fears that trade diversion may be antithetical to the “progressive distribution of resources.” She argues for remedies to harm from trade diversion from the perspective of the global South.[35] Developing countries excluded from RTAs are likely to suffer losses in trade and competitiveness. Should RTAs redirect trade flows, these countries could also have a harder time accessing capital and technology.[36]

There have been several suggestions for risk management of RTAs. Bohnenberger has called for an extension of mutual recognition of norms and technical standards to non-member country producers. [37] Companies from third countries would thus be allowed to sell throughout the mega-regional provided they meet the standard of any member in the agreement.[38] He also suggests that the threshold at which inputs are considered domestic to contracting parties should be set as low as possible.[39] This would enable third countries to keep participating in existing value chains.[40]

How does private law analysis add to the discussion addressing the negative externalities of RTAs? Caruso argues that when fully articulated, the analogy with private law calls for a heightened focus on contracts’ negative externalities and on the crucial policy questions that are involved in letting a system of discrete contracting replace multilateralism in world trade.[41] She contends that from a global justice perspective, the negative externalities suffered by struggling economies as a result of new RTAs are a worthwhile subject of investigation, and private law allows for some progress in this line of inquiry.[42]

As a starting point of her analysis, Caruso uses the private law assumption that each sale of goods—a contract between a given seller and her customers—takes wealth away from that seller’s competitors in the context of regional trade agreements.[43] In short, they divert trade from non-participant to participant countries.[44] The resulting harm is assumed to be antithetical to justice concerns and to progressive distribution of resources.[45] Remedies, therefore, need to be found to accommodate non-parties.

The starting point of the analysis is contentious, however, which puts into question the subsequent exploration of remedies based on this assumption. Under this private law assumption, a transaction is deemed beneficial and exclusion from a transaction is understood as harmful. Harm, however, does not only result from non-participation in the free trade system, but also from participation in the system.[46] Harm arguably always results from creative destruction in a capitalist economic system.[47] For example, innovation and new practices destroy the old, employment patterns change, and productivity is increased.[48] It is a never-ending process of destruction and creation that should allegedly weed out the sluggish and the inefficient. Every competitive practice has victims and every free trade change or preservation of status quo has winners and losers. Creative destruction and consequential trade diversion thus occurs constantly in the global trading system. It occurs by opening up markets to competition as well as, though differently, inside closed markets. It occurs in an inclusive multilateral as well as in an exclusive regional trading system.

There are benefits and costs for developing and developed economies to both joining and not joining RTAs. President Trump pulled out of the TPP because of its alleged potential for damage to the United States manufacturing industry and its workers.[49] That said, Welch’s grape juice, Tyson’s pork, and California almonds will remain subject to tariffs from participants in the TPP, while competitors’ products from participating countries will eventually be duty-free.[50] There are absolute and relative winners and losers of trade regulation and consequential diversion within countries and between countries.[51]

Whether trade diversion and its consequences makes for good policy also depends on decision-makers’ view of economic development. Scholars from the Global South might not assume that participation in any trading regime is necessarily beneficial.[52] Many scholars have been critiquing the global free trade system for not being attuned to the needs of the developing world. This scholarship has often understood free trade as empowering Global North multinational corporations to continue—with minimal interference and tacit approval from Global South governments—the unequal trade they developed with the Global South during colonialism.[53]

Dangers From Participating in RTAs

There are several specific dangers of participation in RTAs. Developing countries that do not want to be left behind their export competitors may feel increasing pressure to agree to liberalization in more areas covered in mega-regional agreements.[54] RTAs confront developing countries with commitments on intellectual property rights, state-owned enterprises, investor protection, and e-commerce. Some of the developing countries, such as Pakistan or Bangladesh, affected by Vietnam’s improved market access to the US—should Vietnam and the US both join the TPP—could seek to join the TPP to protect their export competitive industries, despite not being ready to adopt many of the agreement’s provisions and having had no opportunity to help shape it.[55] The haste of negotiators to conclude such deep agreements could impose ill-conceived constraints on domestic regulators’ access to policies such as domestic taxes, subsidies, and regulations which are frequently the first policies to address local externalities and market failures.[56]

The WTO system already recognizes the potentially negative consequences of participating in the free trade regime by providing for a special regime for less developed countries. There are provisions in some WTO agreements, for example, which provide developing countries with longer transition periods before they are required to fully implement the agreement, further proving that trade liberalization may not always benefit them.

A country or a company from the developing world may thus be better off not transacting on the terms of the regional free trade agreement. It may be preferable not to join an RTA and to continue trading on existing terms of the multilateral WTO rules. In other words, what matters from the perspective of progressive distribution of resources are the specific terms of a transaction, not participation in an RTA, as Caruso suggests. Consequently, participation in a particular trade regime does not automatically work toward the aim of progressive distribution of resources.

This assumption helps to explain why Caruso’s focus on private law as an aid to weaker parties does not necessarily achieve its purpose. Caruso explores two traditional private law approaches to address social inequality: first, the expansion of contractual autonomy of weaker parties, as suggested by Oliver Wendell Holmes in the context of labor organization; second, constraining the contractual autonomy of stronger actors, as suggested by Angelo Sraffa.[57] However, she concedes that the expansion of the contractual autonomy of the Global South in the context of RTAs may not adequately protect it against the harm of the regional trade agreements of powerful countries.[58] The reasons for the limits of this particular analysis are not provided. These reasons should, however, be traced back to the basic underlying assumption of the debate—that non-participation is harmful and participation in a transaction is beneficial.

For the purposes of progressive distribution of resources, the starting point of the analysis cannot be a distinction between beneficial participation and harmful non-participation,[59] or between beneficial multilateralism of the WTO and harmful unilateralism of RTAs.[60] Every participation in RTAs entails rights and obligations and it cannot be considered as a priori beneficial to weaker parties. Hence the limits of Caruso’s suggestion that private law principles could aid the Global South through expansion or reduction of contractual freedom.

Lessons from Antitrust Law

Caruso’s exploration of limiting contractual freedom of stronger parties or of providing remedies for violations of social interests for purposes of equality in private and trade law mirrors similar arguments made in antitrust law.[61] Several economists and lawyers have suggested that stronger, consumer-oriented antitrust law enforcement, limiting contractual freedom and thus the market power of corporations, would lead to increased social equality.[62] Jonathan Baker and Steven Salop, for instance, argued, relying on Thomas Piketty’s analysis, that because the exercise of market power tends to raise the return to capital, it can contribute to the development and perpetuation of inequality.[63]

Yet, increased limitation of contractual freedom does not necessarily lead to increased equality or progressive distribution of resources.[64] Analysis based on the relationship between abstract producers who contract to the detriment of abstract consumers fails to account for the fact that “consumers” and “producers” find themselves in diverse situations in the global production of goods and services.[65] By challenging abstract “market power” without specifically addressing the concentration and reproduction of power in society, the discussion remains at a purely conceptual level. Such a discussion never addresses the necessary economic, social, and ethical issues, which lawyers should engage in the pursuit of advocacy for the most vulnerable.[66]

It is far from certain that antitrust violations systematically redirect wealth from the poor to the rich. Monopoly rents do not only end up in the hands of the wealthy executives; they are distributed in various complex ways throughout the firm, including workers.[67] Endowing a remedy to rich consumers against poorer and structurally disadvantaged corporations would thus be antithetical to progressive distribution of resources.[68]

A deeper jurisprudential lesson for the analysis of RTAs and progressive distribution of resources follows from discussion of inequality in antitrust law. Many have assumed that a stronger enforcement of social claims, such as of consumer protection and limitation of contractual freedom of stronger parties for the sake of the weaker parties, would contribute to equality. Similarly, Caruso engages with Ian Smits, who considers interests worthy of a legal remedy as “social.” He mentions labor rights in sweatshops and concludes that judges should prevent enforcement of contracts when they would cause egregious humanitarian harm.[69]

The distinction between economic and social considerations, however, is tenuous,[70] and Smits’ net could catch only exceptional cases of harm. Moreover, while the emphasis on enforcement of social considerations may hold an important moral valence, remedies for social claims alone do not necessarily lead to increased equality.[71] Reliance on “social” or “protectionist” considerations of seemingly unprivileged consumers, as opposed to contractual freedom of corporations in antitrust law, does not guarantee change for the benefit of those who find themselves in structurally unprivileged positions in society.[72] Likewise, in the context of trade diversion by RTAs, honoring the social, protectionist claim at the expense of contractual autonomy claim risks reinforcing existing asymmetries, rather than leading to equitable results.

Hierarchical Structure of Global Production

The legal profession has only started to grasp law’s contribution to the perpetuation of the divide between included and excluded groups in society.[73] A remedy provided to all third parties might only strengthen existing exclusions. The focus of regulation aimed at greater equality should not be the type of the claim, but the hierarchical structure of global production.

The analysis proposed below, based on my previous exploration of law and inequality in EU law and antitrust law,[74] is necessarily a sketch. The task is articulating the harm inflicted on unprivileged actors in the global hierarchical structure of production, including the global value chains,[75] and offering them a remedy for this harm against privileged actors.[76]

It should first be explained why extending a general, universal remedy for trade diversion may not contribute to global equality. One of the reasons for this phenomenon is that trade diversion very often, though not exclusively,[77] occurs between countries on a similar level of economic development. For example, in the wake of the establishment of the European Economic Community’s (“EEC”) customs union in 1957, the EEC purchased wine from Southern Italy instead of Algeria.[78] Diversions of trade from India to Turkey,[79] or from India to Pakistan in the textile cases before the WTO confirm the same pattern.[80] Actions for trade diversion may thus pit developing countries against each other rather than contribute to progressive distribution of resources.

Trade diversion also distributes between equally developed advanced economies. Howse’s often-cited example of Japanese goods driven out of the European Union market due to TTIP’s proposed changes in technical standards indicates that trade in advanced electronic equipment could be diverted from Japan to the EU or to another equally-developed participating country producing such advanced electronic goods; yet, developing countries may not be able to create such products.[81] Moreover, in the Citrus case, trade in the product was diverted from the United States to poorer Mediterranean countries.[82] Offering remedies for trade diversion to all countries may thus work counterproductively in terms of progressive distribution of resources and may breed new disputes between equally (un)developed countries without contributing to global equality.

There are several reasons why specific protection should be given to those lower on the hierarchical value chain of production – developing societies – who are producing less complex goods or services with smaller added value. The developing world suffers differently than developed economies with regard to free trade, creative destruction, and changing global trading patterns. Gunnar Myrdal has argued that market forces tend to produce an upward spiral of economic development in developed regions and a downward spiral in less advanced regions with people leaving as a consequence of job losses and tax increases.[83] Furthermore, Roberto Unger has argued that in a relatively more advanced economy, it will be in principle easier to compensate workers and firms for the loss imposed on them by freer trade than in a developing economy.[84] More importantly, he argues that a loss of trade can elicit a productive response in advanced economies, turning a short-term loss into a long-term gain, due to their wealth of human capital, education, and clusters of firms and networks of production.[85] Developing economies suffer from opposite developments. There is no entrance of firms and workers in emerging economies into lines of production in which relatively more advanced economies enjoy entrenched positions.[86]

Moreover, developing countries may be less diversified than advanced economies and, thus, likely more reliant on a particular industry, such as the textile industry or on a particular agricultural product.[87] Trade diversion, just as changes to multilateral trading relationships, could have serious negative consequences for national economies. In the context of international trade, it could be argued that a concentrated externality on a predominant industry of a developing country makes for a stronger case for a remedy for trade diversion.[88]

Finally, because participation in RTAs does not necessarily alleviate harm, developing countries’ engagement in them should not be considered by definition as a sufficient remedy. Nor should the adequate remedy be a reduction of contractual freedom of the strong and expansion of the contractual freedom of the weak. An emphasis on social considerations is equally unpromising. From the perspective of progressive distribution of resources, the global trading regime should generally endow actors from developing countries or regions with remedies that match the specific harm imposed on them due to multilateral international trade regulation or RTAs.

Law does not provide ready-made conceptual solutions for global justice,[89] including in the context of RTAs. At this crucial step of analysis, private law is silent in identifying particular situations that would warrant a cause of action in cases of trade diversion as well as in other instances of harm imposed by existing multilateral WTO trade arrangements. Identification of potential new trade remedies requires engagement of political theory, political economy, and other sciences.[90] New tools need to be continually constructed to address the ever-changing harm sustained in the process of creative destruction.[91] Harm and justice in international trade needs to be articulated casuistically and detached from conceptual distinctions of existing legal fields.[92]

Conclusion

RTAs have now largely replaced negotiations within the WTO framework, with unprecedented consequences for world trade and for global social life. There is no legal panacea in the struggle for global justice – no legal field, no concept or theory alone could be adequate in the pursuit of progressive distribution of resources. As analyses of antitrust law, international trade, and private law theory show, these fields of law have not been devised with a hierarchical structure of society in mind. Moreover, they were conceived based on the idea of law as a medium to solve disputes, not of law as a vehicle for a progressive distribution of resources.[93]

Nor should one’s thinking be guided by an assumption that participation in a transaction such as an RTA is beneficial and exclusion from participation harmful. Harm to the Global South in international trade should not be considered as exceptional, and not exclusive to trade diversion. Addressing the specific harm caused by RTAs and the multilateral trading regime requires further work of articulating the unjust harm sustained by actors from developing countries in the global economy. This endeavor needs involvement of legal voices from the world’s periphery who will experience and challenge existing understandings of harm. It requires the legal profession to play a fundamental role in the struggle for global justice.[94]

Damjan Kukovec (L.L.M., S.J.D., Harvard) is a Senior Lecturer at Middlesex School of Law in London.

[1] See Christian Riffel, Mega-regionals, in Max Planck Encylopedia of International Law (2016), https://opil.ouplaw.com/view/10.1093/law:epil/9780199231690/law-9780199231690-e2177.

[2] Dani Rodrik is most concerned with rent-seeking consequences of the regional trade agreements. See generally Dani Rodrik, What do Trade Agreements Really Do?, 32 J. Econ. Persp. 73 (2018). Adam Davidson argues that both adherence and retreat from the TPP results in a minor distributional impact on the United States economy. Adam Davidson, What the Death of the TPP Means for America, The New Yorker (Jan. 23, 2017), https://www.newyorker.com/business/adam-davidson/what-the-death-of-the-t-p-p-means-for-america.

[3] Daniela Caruso, Non-Parties: The Negative Externalities of Regional Trade Agreements in a Private Law Perspective, 59 Harv. Int’l L.J. 389 (2018).

[4] See Richard Pomfret, The Economics of Regional Trading Arrangements 156 (1997).

[5] There is a general tendency of failing commitment to international law on both sides of the Atlantic, if not worldwide. The European Union’s and European powers’ proverbial commitment to multilateralism has also been questioned in international legal scholarship. See Gráinne de Búrca, The European Court of Justice and the International Legal Order After Kadi, 51 Harv. Int’l L.J. 1 (2010).

[6] See Fabian Bohnenberger, Mega-regional Agreements and Global Trade Governance: Ensuring Openness and Inclusiveness in an Increasingly Complex System, Bridges Afr., May 2016, at 21, https://www.ictsd.org/bridges-news/bridges-africa/news/mega-regional-agreements-and-global-trade-governance-ensuring.

[7] See Mark Wu, The “China, Inc.” Challenge to Global Trade Governance 57 Harv. Int’l L.J. 261 (2016).

[8] See id. at 300–14.

[9] See id. at 314–22.

[10] For this reason, some analysts argue that leaving the TPP may be “the biggest strategic mistake the United States has ever made.” Olivia Gazis, Top China Expert: U.S.’ “Biggest Strategic Mistake” Was Exiting TPP, CBS News (Oct. 3, 2018), https://www.cbsnews.com/news/top-china-expert-u-s-biggest-strategic-mistake-was-exiting-tpp/.

[11] See Riffel, supra note 1, at 6.

[12] See Kevin Granville, What is TPP? Behind the Trade Deal That Died, N.Y. Times  (Jan. 23, 2017), https://www.nytimes.com/interactive/2016/business/tpp-explained-what-is-trans-pacific-partnership.html.

[13] Eyal Benvenisti, Democracy Captured: The Mega-Regional Agreements and the Future of Global Public Law (Institute for Law and Justice, Working Paper No. 2016/2, 2016).

[14] See Chad P. Bown, Mega-Regional Trade Agreements and the Future of the WTO, Council on For. Rel. (Sep. 2016).

[15] See, e.g., Katie Lobosco, Trump Pulled Out of a Massive Trade Deal. Now 11 Countries Are Going Ahead Without the US, CNN (Dec. 30, 2018), https://edition.cnn.com/2018/12/29/politics/tpp-trade-trump/index.html.

[16] See Channel 4 News, Noam Chomsky Full Length Interview: Who Rules the World Now?, YouTube (May 14, 2016), https://www.youtube.com/watch?v=P2lsEVlqts0.

[17] See id.

[18] See Jan Klabbers, Megaregionals: Protecting Third Parties? 3 (Institute for Law and Justice, MegaReg Forum Paper 2016/1, 2016), http://iilj.org/wp-content/uploads/2016/08/Klabbers_IILJ-MegaRegForumPaper_2016-1.pdf.

[19] See Benvenisti, supra note 13, at 23.

[20] Peter Van Den Bossche and Werner Zdouc, The Law and Policy of the World Trade Organization  673-74 (2017).

[21] See Robert Howse, Regulatory Cooperation, Regional Trade Agreements, and World Trade Law: Conflict or Complementarity?, 78 L. & Contemp. Probs. 137 (2015).

[22] See Appellate Body Report, Turkey — Restrictions on Imports of Textile and Clothing Products, ¶ 63, WTO Doc. WT/DS34/AB/R (adopted Oct. 22, 1999).

[23] See id.

[24] See Panel Report, European Communities — Conditions for the Granting of Tariff Preferences to Developing Countries, WTO Doc. WT/DS/246/R (adopted Dec. 1, 2003).

[25] See Appellate Body Report, European Communities — Conditions for the Granting of Tariff Preferences to Developing Countries, WTO Doc. WT/DS246/AB/R, 76 (adopted Apr. 7, 2004).

[26] See Howse, supra note 21, at 142.

[27] Howse gives an example of Japanese producers selling certain advanced electronic equipment to the United States but not to Europe, where interconnectivity standards are inconsistent with Japanese products. If under TTIP, the standard were harmonized to match Europe’s, Japanese producers would lose access to the U.S. Id.at 142.

[28] See id. at 150.

[29] See id. at 151.

[30] The “non-violation” clause has not been without its critics. Sung-joon Cho has argued its arbitrariness undermines the WTO dispute settlement process. See Sung-joon Cho, GATT Non-Violation Issues in the WTO Framework: Are They the Achilles’ Heel of the Dispute Settlement Process?, 39 Harv. Int’l L.J. 311, 318 (1998).

[31] Marion Panizzon, Good Faith in the Jurisprudence of the WTO: The Protection of Legitimate Expectations, Good Faith Interpretation and Fair Dispute Settlement 127–96 (2006).

[32] See Klabbers, supra note 18, at 2.

[33] This question is at the heart of Caruso’s article. See Caruso, supra note 3, at 1.

[34] See Ronald H. Coase, The Problem of Social Cost, 3 J.L. & Econ. 1 (1960).

[35] See Caruso, supra note 3, at 391.

[36] See Bohnenberger, supra note 6, at 2; Caruso, supra note 3, at 402.

[37] See Bohnenberger, supra note 6, at 2.

[38] See id. at 3.

[39] See id.

[40] See id.

[41] See Caruso, supra note 3, at 394.

[42] See id.

[43] See id. at 390.

[44] See id.

[45] See id.

[46] See Damjan Kukovec, Hierarchies as Law, 21 Colum J. Eur. L. 131, 192 (2014).

[47] See Joseph Schumpeter, Capitalism, Socialism, and Democracy 81 (1942).

[48] See id.

[49] See Trump Executive order Pulls Out of TPP Trade Deal, BBC News (Jan. 24, 2017),  https://www.bbc.com/news/world-us-canada-38721056.

[50] See Lobosco, supra note, 15.

[51] See Damjan Kukovec, Law and the Periphery, 21 Eur. L. J. 406 (2015); Damjan Kukovec, A Critique of the Rhetoric of Common Interest in the EU Legal Discourse (2012), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2178332.

[52] See Bhupinder S. Chimni, Capitalism, Imperialism and International Law in the Twenty-First Century, 14 Or. Rev. Int’l L. 17 (2012).

[53] Chimni, for example, argues that the principle contention of Global South legal scholarship is that there is an intimate relationship between capitalism, imperialism, and international law that accounts for the fact that it has always disadvantaged Global South peoples. See id.; see also Geoff Gilbert, Enough “Free Trade.” We Need Solidarity Economies and Reparations (2019), https://www.resilience.org/stories/2019-02-27/enough-free-trade-we-need-solidarity-economies-and-reparations/.

[54] See Bohnenberger, supra note 6.

[55] See id.

[56] See Bown, supra note 14.

[57] See Caruso, supra note 3,. at 404–08.

[58] See id.

[59] See Kukovec, supra note 46, at 192.

[60] See Jose E. Alvarez, Multilateralism and its Discontents, 11 Eur. J. Int’l L. 393 (2000).

[61] See Damjan Kukovec, Economic Law, Inequality, and Hidden Hierarchies on the EU Internal Market, 38 Mich. J. Int’l L. 1 (2016).

[62] Joseph Stiglitz has called for “stronger and more effectively enforced competition laws” to help address inequality. Joseph E. Stiglitz, The Price of Inequality: How Today’s Divided Society Endangers Our Future 40 (2012).  Luigi Zingales has argued that “the most powerful argument for antitrust law” is that “it reduces the political power of firms.” Luigi Zingales, A Capitalism for the People: Recapturing the Lost Genius of American Prosperity (2012). Paul Krugman and Anthony Atkinson have also claimed that monopoly and anticompetitive market conditions are among the root causes of wealth inequality. See id at 3–4.

[63] See Kukovec, A Critique, supra note 51, at 6.

[64] See id. at 6–14.

[65] See id.

[66] See id. at 7.

[67] See Daniel A. Crane, Antitrust and Wealth Inequality, 101 Cornell L. Rev. 1171, 1174 (2016).

[68] The same dilemmas are present in the European Union’s internal market. Remedies available to actors from countries and regions higher on the hierarchical chain of production have to be matched by remedies available to those lower on the value chain to produce more equitable results in the market. See Kukovec, supra note 53; Kukovec, supra note 46, at 192. The “weaker party” cannot be posited as an abstraction of a “worker” or “consumer” or “a country suffering from trade diversion,” but needs to be constructed every time anew along the hierarchical structure of society. Damjan Kukovec, Taking Change Seriously: The Rhetoric of Justice and the Reproduction of the Status Quo, in Europe’s Justice Deficit 319 (Kochenov, de Búrca and Williams eds., 2015).

[69] See Jan Smits, The Expanding Circle of Contract Law, 27 Stellenbosch L. Rev. 227 (2016).

[70] See Kukovec, supra note 61; Damjan Kukovec, Whose Social Europe? The Laval/Viking Judgments and the Prosperity Gap (Apr. 2010), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1800922.

[71] See id.

[72] See Kukovec, A Critique, supra note 51, at 7.

[73] For the argument that global governance and law should be understood as a set of hierarchical relationships, which should serve as a starting point of social transformation, see Kukovec, supra note 46.

[74] See id.; Kukovec, supra note 51.

[75] See, e.g., Bernard Hoekman, Supply Chains, Megaregionals and Multilateralism: A Road Map for the WTO (2014); Gary Gereffi and Karina Fernandez Stark, Global Value Chain Analysis: A Primer, Duke Center for Globalization, Governance and Competitiveness (2016).

[76] See Kukovec, supra note 61; Kukovec, supra note 51.

[77] See Report of the Panel, European Community — Tariff Treatment on Imports of Citrus Products from Certain Countries in the Mediterranean Region, L/5776 (Feb. 7, 1985).

[78] See Caruso, supra note 3, at 418.

[79] See Turkey — Restrictions on Imports of Textile and Clothing Products, supra note 22.

[80] See European Communities — Conditions for the Granting of Tariff Preferences to Developing Countries, supra note 24.

[81] See Howse, supra note 21, at 142.

[82] See European Community — Tariff Treatment on Imports of Citrus Products from Certain Countries in the Mediterranean Region, supra note 77 at 13.

[83] See Gunnar Myrdall, Economic Theory and Underdeveloped Regions (1957).

[84] See Roberto Mangabeira Unger, Free Trade Reimagined, 124­–48 (2007).

[85] See id.

[86] See id.

[87] The United Nations Conference on Trade and Development reports that 67% of developing countries (91 out of 135 countries) are dependent on commodities, a situation that has changed little in the last two decades. Commodity-Dependent Countries Urged to Diversify Exports, UNCTAD (2019), https://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=2058. For the argument that developing countries are less diversified and rely on a limited set of products or industries, see Ozzie G. Simmons, Perspectives On Development and Population Growth in the Third World (1988).

[88] Bagchi argues that the smaller the number of persons affected by some private action, the more concentrated the externality and the stronger the case for a private law remedy. See Aditi Bagchi, Other People’s Contracts, 32 YALE J. REG. 211, 229 (2015). In the context of trade diversion, a concentrated externality should be understood as an externality which disproportionately affects a particular economy. See Caruso, supra note 3, at 413–14.

[89] See Kukovec, supra note 46.

[90] See id.

[91] For the argument that law and life should be understood as a constant struggle and that new tools need to be constructed to address it, see Kukovec, supra note 46.

[92] See Kukovec, supra note 68.

[93] See Kukovec, supra note 46.

[94] See Mark Galanter, More Lawyers than People: The Global Multiplication of Legal Professionals, in The Paradox of Professionalism: Lawyers and the Possibility of Justice 68–89 (Scott L. Cummings ed., 2011);  Damjan Kukovec, The Legal Profession’s Responsibility for Brexit, in On Brexit (E. Fahey and T. Ahmed eds, 2019).