- Email: [email protected]
The world trading system: Law and international economic relations
Book reciews
193
made countries adapt their macroeconomic policies, with more or less difficulty (and in the case of France, especially more) to their balances of payments. In his Foreword, Alexandre Lamfalussy, Managing Director of the Bank for International Settlements, in succession, with a lag, to Giinter Schleiminger, states that the EPU was a pioneering forerunner of the European Monetary System working to promote international policy coordination within Europe, if not, as yet, among Europe, Japan and the United States. This reviewer was especially interested in seeing the early foreshadowing of the swap arrangements that burst into full bloom in the Basle Agreement of March 1961 - beginnings that were bilateral, ad hoc, and small, but beginnings (pp. 220, 226). To sum up: an excellent book, written with clarity and even style, suggesting that macroeconomic policy coordination requires large diplomatic inputs by financial experts, but can, with luck, produce important economic outputs. Charles P. Kindleberger M.I.T.
John H. Jackson, The World Trading System: Law and International Economic Relations (The MIT Press, Cambridge and London, 1989) pp. xi+417, $45. Most textbooks and professors of international economics consider the national and international framework of trade law to be irrelevant to the understanding of actual policies and their likely future evolution. At best, the existence of the legal framework is acknowledged, but almost always its importance is dismissed on the grounds that, in the longer run, the legal framework is adjusted to serve the dictates of economists’ findings and recommendations. The book by John Jackson shows that this treatment of the legal environment of international trade is too facile. He admits the importance of economic principles in the long run, but he shows persuasively, and in great detail, how the historic evolution of the legal framework has interacted with economic principles in producing the system and levels and forms of protection in today’s world. Jackson has outstanding qualifications for writing this book. He is a professor of law at the University of Michigan, where he has taught international trade law for many years. Perhaps most important, he has
194
Book rrriws
acted as a General Counsel to the U.S. Office of the Trade Representative and has been an adviser to congressional committees on trade policy. He indicates in his acknowledgements that he has benefited from his contacts with Alan Deardorff, Professor of Economics at the University of Michigan. The entire book is anchored soundly in the modern economics of international trade. The book is very scholarly and treats the subject almost like an encyclopedia. There are 100 pages of footnotes and 300 pages of text. Many readers will find it distracting that these footnotes are placed at the end of the text rather than on the bottom of the relevant text pages. Furthermore, lacking is an alphabetical listing of the cited works. As a result. it is frustrating to find precise references as one is forced to wade through many ‘supras’ and ‘ibidems’. Otherwise, the book has been edited and produced flawlessly, a characteristic found only rarely in today’s world of instant books. The study devotes a chapter to a history of GATT and shows how its legal framework has evolved precariously in a setting of many national and international constraints. The next chapter discusses the interaction between GATT and national laws, especially those of the United States and the European Community. These two chapters provide information that is extremely useful in understanding the difftculties that the world family of nations faces in the resolution of a number of important obstacles to free international trade. The following chapters of the book consider in detail the nature of these obstacles, the economic arguments and the legal-constitutional framework within which they have to be overcome. A chapter each is devoted to Tariffs and Non-tariff Barriers, the Most-Favored-Nation Policy, Safeguards and Adjustment Policies, National Treatment, Unfair Trade and Dumping and Subsidies. Two chapters deal with the special problems for GATT that have arisen from the existence of developing countries and planned economies. The author makes it clear that there are no ‘solutions’, legal or economic, to the problem of reconciling legitimate national interests with the interests of the collective. National standards of product safety, the payment of ‘subsidies’, and the need to assure national security, for example, have resulted in rules and regulations that have implications for protection that are clearly only incidental to the pursuit of legitimate goals of national economic policy. GATT will probably, for the rest of its life, be occupied with facilitating the creation of appropriate trade-offs between national interests and those of the collective. At the same, however, it may be expected to continue its role as the only institution to which governments can go for the resolution of complaints about the restrictive trade practices of other countries. Readers with a special interest in law will find much useful information
195
Book recirws
about the legal framework within which GATT operates and the U.S. government and European Economic Community shape their international trade policies and settle disputes. After an exhaustive list of the difficulties facing GATT, which reduce its effectiveness as an instrument of international trade liberalism, the author concludes: ‘All in all, however, the system does work...’ (p.302). The author then goes on to indicate the difftcult task faced by the world to assure the retention of it as an instrument of liberalism under the constant challenge of economic nationalism and technical and legal complications. This book will be a useful work of reference for lawyers, economists, and political scientists. I also recommend it to professors and graduate students in economics as an antidote to the excessive amounts of theory and technique that characterize their programs of teaching and research. I am convinced that at the margin, substituting a study of this book for that of a few more theoretical papers will result in a significant jump in the stock of human capital and the relevance and quality of research. Herbert G. Grubel Simon Fraser University
Peter B. Kenen, Managing 128, $14.95
Exchange Rates (Routledge,
Peter B. Kenen, Exchange Rates and University Press, 1989) pp. 135, f 15.
Policy
London,
Coordination
1989) pp.
(Manchester
A generation ago, international policy coordination was the subject of much less theory but much more practice than it is today. The elegant gametheoretic models that now dominate academic research had yet to emerge; but in an age when economists could still write and politicians could still read, theory had a remarkably direct impact on policy. International meetings - most notably those at Bellagio - brought academics and policymakers together for discussions that, for better or worse, did much to shape the response to growing strains on the Bretton Woods system. These two related books, while containing some new material, are in large part an effort to restate some of the insights of that time in a modern idiom. In the 1960s Peter Kenen was a wise youth among wise men; today he is a youngish elder statesman, and a repository of institutional memory. Managing Exchange Rates is an elegant essay on the rationale for and process of exchange rate management. It is part primer, part hortatory tract. Exchange Rates and Policy Coordination is a narrower, denser work, based on two lectures given in 1988; the first half of the book presents a critique of
193
made countries adapt their macroeconomic policies, with more or less difficulty (and in the case of France, especially more) to their balances of payments. In his Foreword, Alexandre Lamfalussy, Managing Director of the Bank for International Settlements, in succession, with a lag, to Giinter Schleiminger, states that the EPU was a pioneering forerunner of the European Monetary System working to promote international policy coordination within Europe, if not, as yet, among Europe, Japan and the United States. This reviewer was especially interested in seeing the early foreshadowing of the swap arrangements that burst into full bloom in the Basle Agreement of March 1961 - beginnings that were bilateral, ad hoc, and small, but beginnings (pp. 220, 226). To sum up: an excellent book, written with clarity and even style, suggesting that macroeconomic policy coordination requires large diplomatic inputs by financial experts, but can, with luck, produce important economic outputs. Charles P. Kindleberger M.I.T.
John H. Jackson, The World Trading System: Law and International Economic Relations (The MIT Press, Cambridge and London, 1989) pp. xi+417, $45. Most textbooks and professors of international economics consider the national and international framework of trade law to be irrelevant to the understanding of actual policies and their likely future evolution. At best, the existence of the legal framework is acknowledged, but almost always its importance is dismissed on the grounds that, in the longer run, the legal framework is adjusted to serve the dictates of economists’ findings and recommendations. The book by John Jackson shows that this treatment of the legal environment of international trade is too facile. He admits the importance of economic principles in the long run, but he shows persuasively, and in great detail, how the historic evolution of the legal framework has interacted with economic principles in producing the system and levels and forms of protection in today’s world. Jackson has outstanding qualifications for writing this book. He is a professor of law at the University of Michigan, where he has taught international trade law for many years. Perhaps most important, he has
194
Book rrriws
acted as a General Counsel to the U.S. Office of the Trade Representative and has been an adviser to congressional committees on trade policy. He indicates in his acknowledgements that he has benefited from his contacts with Alan Deardorff, Professor of Economics at the University of Michigan. The entire book is anchored soundly in the modern economics of international trade. The book is very scholarly and treats the subject almost like an encyclopedia. There are 100 pages of footnotes and 300 pages of text. Many readers will find it distracting that these footnotes are placed at the end of the text rather than on the bottom of the relevant text pages. Furthermore, lacking is an alphabetical listing of the cited works. As a result. it is frustrating to find precise references as one is forced to wade through many ‘supras’ and ‘ibidems’. Otherwise, the book has been edited and produced flawlessly, a characteristic found only rarely in today’s world of instant books. The study devotes a chapter to a history of GATT and shows how its legal framework has evolved precariously in a setting of many national and international constraints. The next chapter discusses the interaction between GATT and national laws, especially those of the United States and the European Community. These two chapters provide information that is extremely useful in understanding the difftculties that the world family of nations faces in the resolution of a number of important obstacles to free international trade. The following chapters of the book consider in detail the nature of these obstacles, the economic arguments and the legal-constitutional framework within which they have to be overcome. A chapter each is devoted to Tariffs and Non-tariff Barriers, the Most-Favored-Nation Policy, Safeguards and Adjustment Policies, National Treatment, Unfair Trade and Dumping and Subsidies. Two chapters deal with the special problems for GATT that have arisen from the existence of developing countries and planned economies. The author makes it clear that there are no ‘solutions’, legal or economic, to the problem of reconciling legitimate national interests with the interests of the collective. National standards of product safety, the payment of ‘subsidies’, and the need to assure national security, for example, have resulted in rules and regulations that have implications for protection that are clearly only incidental to the pursuit of legitimate goals of national economic policy. GATT will probably, for the rest of its life, be occupied with facilitating the creation of appropriate trade-offs between national interests and those of the collective. At the same, however, it may be expected to continue its role as the only institution to which governments can go for the resolution of complaints about the restrictive trade practices of other countries. Readers with a special interest in law will find much useful information
195
Book recirws
about the legal framework within which GATT operates and the U.S. government and European Economic Community shape their international trade policies and settle disputes. After an exhaustive list of the difficulties facing GATT, which reduce its effectiveness as an instrument of international trade liberalism, the author concludes: ‘All in all, however, the system does work...’ (p.302). The author then goes on to indicate the difftcult task faced by the world to assure the retention of it as an instrument of liberalism under the constant challenge of economic nationalism and technical and legal complications. This book will be a useful work of reference for lawyers, economists, and political scientists. I also recommend it to professors and graduate students in economics as an antidote to the excessive amounts of theory and technique that characterize their programs of teaching and research. I am convinced that at the margin, substituting a study of this book for that of a few more theoretical papers will result in a significant jump in the stock of human capital and the relevance and quality of research. Herbert G. Grubel Simon Fraser University
Peter B. Kenen, Managing 128, $14.95
Exchange Rates (Routledge,
Peter B. Kenen, Exchange Rates and University Press, 1989) pp. 135, f 15.
Policy
London,
Coordination
1989) pp.
(Manchester
A generation ago, international policy coordination was the subject of much less theory but much more practice than it is today. The elegant gametheoretic models that now dominate academic research had yet to emerge; but in an age when economists could still write and politicians could still read, theory had a remarkably direct impact on policy. International meetings - most notably those at Bellagio - brought academics and policymakers together for discussions that, for better or worse, did much to shape the response to growing strains on the Bretton Woods system. These two related books, while containing some new material, are in large part an effort to restate some of the insights of that time in a modern idiom. In the 1960s Peter Kenen was a wise youth among wise men; today he is a youngish elder statesman, and a repository of institutional memory. Managing Exchange Rates is an elegant essay on the rationale for and process of exchange rate management. It is part primer, part hortatory tract. Exchange Rates and Policy Coordination is a narrower, denser work, based on two lectures given in 1988; the first half of the book presents a critique of