Outline[1] - TRADE LAW OUTLINE I International Economic...

TRADE LAW OUTLINE
I. International Economic Relations
A)
Bretton Woods System  three components designed to help advanced industrial countries achieve multiple
objectives of full employment, freer and expanding trade, and stable exchange rates
1)
IMF  intended to repair disintegration that had befallen int’l monetary system prior to WWII
2)
World Bank  designed to stimulate and support foreign investment
3)
GATT  intended to reverse protectionist and discriminatory trade practices that had flourished during pre-
war depression years
4) Policy tradeoffs naturally occur
B) Three Components of Law of Int’l Transactions
1)
Private law of transaction  contract and sales laws of the two nations involved, conflict of laws rules
(private int’l law), insurance law, corporate law, maritime law, and options for dispute resolution
2)
National government regulation of the transaction  law of customs tariffs, export and import controls,
quality and packaging standards, internal taxes, special mixing or purchasing requirements
3) International law, or law of international economic institutions
C) Economic Theory
1) Law of Comparative Advantage
(a)
Labor Theory of Value  older theory since discarded; led to development of concept of comparative
advantage, which survived labor theory of value
(i) Within a country, a region produces the goods it can make cheaper than other regions; if a product
can be sold for more than the value of the labor it contains, additional labor will transfer into that
industry; supply will expand until price is brought down to value of the labor it contains
(ii) Tendency of wages toward equality within a country results in prices of goods equal to their labor
such as to equalize the return to labor in all occupations and regions
(iii)
Failure of theory  tendency for return of labor to be equal throughout a country was weak
(a) There is not one great class of labor with a single wage but a series of noncompeting groups
among which tendency for equalization of wages is weak or nonexistent
(b) Goods are not produced by labor alone but by combination of all factors of production (land,
labor, capital) in varying proportions
(b)
Theory of Absolute Advantage (Adam Smith)  after labor has spread itself among several regions to
equalize wages, these regions will produce and sell to each other what each region can make the
cheapest; its advantage in such commodities over other regions will be absolute
(i) Law of Scarcity = not enough resources for everyone, so they must specialize
(c)
Comparative Advantage (David Ricardo)  country would export product in which it had greatest
advantage (comparative advantage), and import the commodity in which its advantage was less
(comparative disadvantage)
(i) Nations trade because the amount of a good that must be sacrificed internally to produce a unit of
another good varies across countries