INTRODUCTION

International economic law is a relatively new and an additional component of public

international law. The concept is still striving towards increased recognition and definition. Some
international law scholars restrain the definition of international economic law to embrace only
economic relations between nations. Such restriction, however, often proves too confining.
Nevertheless, legal luminaries traditionally defines international economic law as that broad
collection of laws and customary practices that govern the relations between actors in different
nations. It includes the examination of both law and policy issues on multiple levels, including
private law, local law, national law, and international law.1 Stated differently, international
economic law is the public international law of economic relations between states and, to some
extent, between states, individuals, and firms, together with the treaty-based institutions (such as
the World Trade Organization, International Monetary Fund, and World Bank) created to carry
out, scrutinize, and adjudge the body of law. Some would say that international economic law
modifies the dominion reserve of traditional public international law, wherein economic
integration, supra, is its motivation and basis.
In order to clearly understand the concept of international economic law, it is but
imperative to understand its essential component that is, economics. Economics deals with the
study of human behaviour in properly allocating scarce resources to gratify human wants.2 Like
any other field of social science, the field of economics has become more extensive. Applied in
public international law, economics refers to the allocation of economic resources amongst
countries. It acknowledges that the jurisdiction of business and trade is a social construct
vulnerable to appraisals. The application of economics in public international law also recognizes
the pressing situation of business, wherein the incorporation of markets and firms is a question of
institutional design rather than a fact of nature.
At any rate, international economic law regulates the international economic relations of
states enhancing their sovereign equality, promoting reciprocity, and ensuring economic
sovereignty, supra. It is concerned with the development of states through trade, investment, and
economic legal policies.
What is more, international economic law is most visible in the sphere of economic
integration, supra. With respect to Philippine set-up, international economic law is incorporated
in treaties and conventions signed by it. The Philippine government has resorted to these economic
agreements to maintain its status in foreign trade and investment and further improve its
international economic relations. On this note, it can be inferred that, in Philippines, international
economic law is entirely treaty-based.
The reality of globalization is also crucial in the discussion of international economic law.
It has become a system involving obligations and standards vis--vis foreign trade which are
binding, encroaching, and at times, mandatory in nature. Such being the case, it has evolved into
1
2

Zamora, p. 63-64; Vijayasri, p. 112.

Bolivar-Tolentino, p. 4.

something that can be considered as international law or more precisely, international economic
law. Globalization occurs at a time when the shared appreciation of economic sovereignty, as one
of the traditional principles of international economic law, remains oriented around international
concepts of non-intervention and domestic autonomy. In which case, foreign affairs and commerce
powers, as the primary modalities for international economic law, remains perplexed and
confounding.
All told, economic activities are deemed significant in international economic law that even
the General Assembly of the United Nations, in its resolution3, outlined the economic rights and
duties of the states in a more concrete manner. Although the said resolution (or formally speaking,
Charter) was not a hard law instrument having binding legal effect, many of the principles
embodied in it have been regarded as the basis for the continuous progress of international
economic law as distinct field of public international law. It reiterates some of the principles that
were already widely accepted as representing customary rules of international law.

Principles of International Economic Law

As a component of international law, international economic law is based on the traditional
principles of the former, namely: (1) pacta sunt servanda, (2), sovereign equality, and (3)
economic sovereignty. Furthermore, it is also founded on modern and evolving principles such as
(1) permanent sovereignty over natural resources and (2) preferential treatment for developing
countries, in general, and the least-developed countries, in particular.
Moreover, to properly implement the objectives of the new international economic order4
and to establish the norms of international economic relations, the United Nations General
Assembly adopted, as part of its resolutions, the Charter of Economic Rights and Duties of States
(CERDS) of 1974, infra. The first chapter of said resolution provides the following principles that
shall govern the economic relations among states:
a.
b.
c.
d.
e.
f.
g.
h.

Sovereignty, territorial integrity, and political independence of States;

Sovereign equality of all states;
Non-aggression;
Non-intervention;
Mutual and equitable benefit;
Peaceful coexistence;
Equal rights and self-determination of peoples;
Peaceful settlement of disputes;

Charter of the Economic Rights and Duties of States, adopted and proclaimed on December 12, 1974.
The United Nations, at its Special General Assembly on Natural Resources held in April, 1974, adopted "A
Declaration and a Programme of Action on the Establishment of a New International Economic Order". The
Declaration stated that the present international economic order is a product of the age of colonialism and is
designed to help the industrially advanced countries only to gain profits. It stressed the need to establish a new
international economic order to achieve fairness and equality for all the countries of the world, including the
developing countries.
4

i. Remedying of injustices which have been brought about by force and which deprive a
nation of the natural means necessary for its normal development;
j. Fulfilment in good faith of international obligations;
k. Respect for human rights and international obligations;
l. No attempt to seek hegemony and spheres of influence;
m. Promotion of international social justice;
n. International co-operation for development; and
o. Free access to and from the sea by land-locked countries within the framework of the
above principles.

Pacta sunt servanda

The principle of pacta sunt servanda, which means that contracts and clauses are laws with
binding force between parties, requires that every contracting party-state must keep its promise
and fulfil its obligation vis--vis its contract with the other contracting party-state. Hence, nonfulfilment of respective obligations is a breach of the law.
With respect to international economic law, the principle of pacta sunt servanda is related
to good faith in the practice of international trade which warrants states to require that obligations
be respected and to rely upon the obligations being respected. Moreover, it implies that a party to
an international economic law cannot invoke trade and economic provisions of its municipal law
as justification for a failure to perform.
However, inevitable, economic activities demonstrate that there exists event or change or
peremptory norms or compelling laws (jus cogens), which may result in performance being
impossible or pointless. In such situations, the rigid application of the principle of pacta sunt
servanda will lead to the opposite of justice and generate unfairness the principle of clausula
rebus sic stantibus.

Sovereign equality
The principle of sovereign equality is a fundamental norm that regulates the demeanour of
states in the international community. It is very basic that it is even stipulated in the United Nations
Charter.5 By way of example, all members of the United Nations, regardless of their size or
influences have the same vote in the General Assembly.

Economic sovereignty
When states began to perform as politically and sovereign functions, they realized that of
the most important attribute of state sovereignty is economic sovereignty. Without this, political
sovereignty is incomplete. Upholding economic sovereignty meant having control over the
economic activities of both juridical and natural persons conducting business and trade within the
country.

Art. 2, United Nations Charter.

When states wish to undertake a policy of economic development, they first consider
harnessing its natural resources in accordance with its economic policies. In many countries, it is
difficult to assert economic sovereignty without doing away with the rights, concessions, and
privileges enjoyed by foreign individuals and companies over the countrys natural resources.

Permanent sovereignty over natural resources

Newly independent developing countries assert their complete economic sovereignty by
proclaiming that they had complete and permanent sovereignty over their natural resources. In this
light, a resolution was introduced in the UN General Assembly. Paragraphs 1 and 2 of the 1962
UN General Assembly Resolution 1803 of 19626 state:
1. The right of peoples and nations to permanent sovereignty over their natural wealth
and resources must be exercised in the interest of their national development and
of the well-being of the people of the state concerned;
2. The exploration, development and disposition of such resources, as well as the
import of the foreign capital required for these purposes, should be in conformity
with the rules and conditions which the peoples and nations freely consider to be
necessary or desirable with regard to the authorisation, restriction or prohibition of
such activities.
The provisions of Resolution 1803 of 1962 have been held widely as representing
customary international law because of the undisputed and overwhelming support it received at
the United Nations General Assembly.

Preferential treatment
Being the latest development in the field of international law, international economic law
is still in a state of flux, with many of its rules still to achieve the permanence of the more settled
principles in its allied disciplines. Its boundaries are as yet undefined. It is still undergoing a
process of experimentations. In this regard, international economic and commercial activities
continue to get bigger. By and large, the primordial international economic agenda in the postSecond World War period involved stimulating the free movement of goods and capital across
borders. International economic law tried to catch up with this expansion of international economic
and commercial activities and regulate whatever aspect possible.
More recently, developments taking place within international environmental law have
influenced the development of international economic law. The international environmental law
principle of sustainable development, a relatively new principle, has had a profound impact on
international economic law. With the introduction of the concept of sustainable development, a
significant swing in emphasis in the theory of economic development began in 1987, which
imposes some restraints on economic development in favour of the need to protect the
environment. It also sought to bring together both the developing and developed countries in

United Nations General Assembly Resolution on the Permanent Sovereignty over Natural Resources.

pursuit of a common agenda that is, to achieve sustainable economic development vis--vis
environmental concerns.

Sources of International Economic Law

The sources of international economic law are the same as those sources of international
law. Thus, referring to Article 38 of the Statute of the International Court of Justice, the sources
of international economic law may be generally classified as primary or secondary. On one hand,
the primary sources are (1) international conventions, (2) international customs, and (3) general
principles of law recognized by civilized nations. The secondary sources, on the other hand, are:
(1) judicial decisions and (2) teachings of the most highly qualified publicists of the various
nations.

International conventions
Conventions and treaties, in order to become a primary and direct source of international
economic law, should be concluded by a sizable number of states and thus reflect the will or, at
the very least, the consensus of the family of nations. More so, even if originally agreed upon only
by a minuscule number of states, a convention or treaty may still become binding upon the whole
world if it is intended to lay down rules for observance by all and it is, afterwards, signed or
acceded to by other states. Moreover, conferring to Art. 2 of the United Nations Charter, even nonmembers are covered by the obligations imposed by the Charter for the maintenance of
international peace and security.
Some of the notable examples of conventions or treaties as regards international economic
law is the Charter of Economic Rights and Duties of States, infra.

International customs
In his book entitled International Law, Fenwick (1948) defined customs as practice which
has grown up between states and has come to be accepted as binding by the mere fact of persistent
usage over a long period of time. Most of these customary rules of law have been expressly
affirmed and embodied in treaties and conventions. Significantly, as discussed earlier, these rules,
on account of their potency as international customs and their express recognition as generally
accepted principles of international law, bind even those states which have not signed these
conventions.

General principles of law

The general principles of law are mostly derived from the law of nature and are observed
by the majority of states because they are believed to be good and just. Although no international
convention was necessary to bring them into existence, the general principles of law have become

universal in application because of the unilateral decision of a considerable number of states to

adopt and observe them in recognition of their intrinsic merit.7

Judicial decisions
Chief Justice John Marshall, in Thirty Hogshead of Sugar v. Boyle8, held that the decisions
of the courts of every country, so far as they are founded upon a law common to every country,
will be received, not as authority, but with respect. As the doctrine of stare decisis does not lie,
the decision of the court are mere cogent authorities but are not controlling.

Teachings of highly qualified publicists

In order that teaching and/or writings of publicists qualify as a secondary or
indirect/subsidiary source of international economic law, it must be a fair and substantial
representation of international economic law. It must be taught and/or written by an acknowledged
authority (individual, entity, or group) in the field of international economic law.

Actors of International Economic Law

Being a component of public international law, international economic law has, in some
way, the same actors as that of the former, except that it only reaches beyond international legal
subjects. In his book Principles of International Economic Law, Matthias Herdegen (2013)
identified the following as the actors of international economic law: (1) states, (2) state enterprises,
(3) international organizations, (4) non-institutionalized forums, (5) international inter-agency
cooperation, (6) international non-governmental organizations, and (7) private corporations.

States
The primary legal subjects in international law have always been the states. As an
international actor, it is capable of possessing international rights or duties and of bringing
international claims. Also, it may have full control or qualified status, depending upon the degree
of its control over its external affairs.9 Likewise, from the viewpoint of international law, a state
may be defined as a community of persons, more or less numerous, permanently occupying a
definite portion of territory, independent of external control, and possessing an organized
government to which the great body of inhabitants render habitual obedience.

State enterprises
State enterprises owe their creation due to specialization and expertise necessary in the
sustenance of the status of a particular state in the global arena. More so, it should be noted that
7

Cruz, p. 24.
9 Cranch 191, 198.
9
Cruz, p. 29.
8

state enterprises are legally independent of the state. Hence, they are capable of having rights and
obligations under their own name since state enterprises have legal autonomy, their acts cannot
be attributed to the state. Nevertheless, despite being autonomous, state enterprises act as an
extension of the state and exercise or possess public power or assets intended for sovereign
purposes.

International organizations
As pointed out earlier, the scope of actors of international economic relations reaches well
beyond international legal subject in its strict sense. International non-government organizations,
transnational corporations, non-formal governmental forums, and inter-agency corporations affect
todays international economic scene most especially, in the formulation of rules and standards.
As of today, their direct involvement in the market of commodities has given way to softer
mechanisms of influencing foreign trade.
Even though some of these organizations existed as early as the 19th century, the majority
of them has been established in the second half of the 20th century. These organizations were
created on account of the limited influence of states and the demand to augment international
cooperation, as well as the complexity of economic relations and activities of transnational
corporations.

Non-institutionalized forums
Side-by-side with international organizations, non-institutionalized forums coordinate
monetary and other economic policies, formulate standards, or channel common interests without
a firm institutional structure and without strictly binding mechanisms.
These forms of inter-state cooperation have emerged as a response to the closer integration
of the countries and the people around the world. This globalization, which non-institutionalized
forums seek to answer, has been brought about by the gargantuan decline of costs of transportation
and communication and the breaking down of artificial barriers to the flow of goods, services,
capital, and knowledge, among others. By responding to the persisting economic globalization,
non-institutionalized forums affect not only the daily lives of people, as it also lead to far-reaching
structural changes of the world economy

International inter-agency cooperation

Inter-agency cooperation has been understood as the cooperation between national
authorities of participating states. It has registered a significant impact on domestic legislation and
administrative practices. This practice of cooperation between states has contributed to the
management of administrative practices beyond legally binding standards. Such cooperation
provides national authorities with institutional independence.

Among the international inter-agency cooperation of todays era are the following: Bank
for International Settlements, Financial Stability Board, International Organization of Securities
Commissions, and International Competition Network.

International non-governmental organizations

As we know it today, non-governmental organization (NGO, for brevity) refers any nonprofit, voluntary citizens group which is organized on a local, national, or international level.
Task-oriented and driven by people with a common interest, NGOs perform a variety of service
and humanitarian functions. It brings citizen concerns to governments. They also advocate and
monitor policies to encourage political participation through provision of information. Some are
organized for specific issues, such as human rights, environment, economic, or health, among
others. Aside from these functions, NGOs also provide analysis and expertise which helps
monitors and implement policies and agreements. Furthermore, in the international arena, the
relationship of NGOs with offices and agencies of the United Nations system differs depending on
their goals, their venue, and the mandate of a particular institution.
NGOs working in the field of international economic law include established economic
NGOs such as the International Chamber of Commerce, International Air Transport Association,
International Federation of Consulting Engineers, and several international trade unions and
employers associations. These NGOs have proven their ability to exert a considerable
international pressure and to influence both state and non-state actors.

Private corporations
The international exchange of goods, services, and payments are primarily lodged on
transactions by private corporations. They have the nationality of the state in which they are
incorporated or in which they have their registered office.
Todays private companies continue to shape the national and international global
economic arena on account of their marketing and business prowess. Scholars from the fields of
economics and business administration consider private companies as a significant mainstay in
capitalism.10

Importance of international trade in International

Economic Law
Nations need to trade. Its significance is discussed in the light of exports and imports. To
import means to create supply needed like raw materials in production, whereas to export means

10

Capitalism is defined as an economic system characterized by private or corporate ownership of capital goods, by
investments that are determined by private decision, and by prices, production, and the distribution of goods that
are determined mainly by competition in a free market.

to create outlets for the surplusage of goods. Imports represent the gain of country, while exports
are for the payment of imports.
Meanwhile, foreign trade, from the viewpoint of labourers, means more income in
agriculture, mining, forestry, fishing, transportation, distribution, finance, and processing. It adds
to economic efficiency because of comparative advantage and economies of scale.
In his study, Vijayasri (2013) noted the following importance of international trade,
namely:
1. Commodities are made available, thus making taking the consumer to a high
level of satisfaction;
2. Compensates for a what country does not produce;
3. Gives rise to the economy of the world;
4. Allows the countries to use their resources effectively;
5. Injects global competitiveness;
6. Countries reap the fruits of an open trade regime;
7. Reduces the level of poverty; and
8. Countries profit by importing or exporting products at an escalated world price.

REGIONAL ECONOMIC INTEGRATION

Economic integration is both a process and an international practice wherein two or more
states interact to advance or protect a set of economic goals. It connotes that nations of a geographic
region come together to foster trade and development. The level of integration involved in an
economic regionalist project varies from loose association to a polished, deeply integrated, transnationalized economic space. The desire to use a wider, trans-nationalized sense of space to
advance national economic interests is the coalescent in the different forms of economic
regionalism.11
It can be inferred that a geographically discriminatory trade policy is the defining
characteristic of a regional economic integration. This is so because in economic integration, firms
and companies of separate states merge in larger entities making it appear that larger entities eat
up small entities, so to speak.12
Furthermore, the global economic space is one in which firms reciprocate with global and
economic integration entities. This increased interaction adds a level of complexity in doing
international trade. It also bring business firms under the scrutiny of global and regional regulators
as well as scrutiny from host-country regulators. In addition to this complexity and increased
scrutiny, global and regional economic integration brings other challenges for business firms.
Among the known economic integration organization all around the world are: North
America Free Trade Agreement (NAFTA), Mercado Comn del Sur (MERCOSUR), Carribean
Community and Common Market (CARICOM), Andean Community, European Union (EU),
Asia-Pacific Economic Cooperation (APEC), Association of Southeast Asian Nations (ASEAN),
Gulf Cooperation Council (GCC), and Common Market for Eastern and Southern Africa
(COMESA), among others.

Forms of economic integration

There are many different forms of economic integration perhaps, the most convenient
way to order the concept is to think of a continuum that ranges from loose association at one end
to an almost complete merging of national economies at the other end. On one hand, simpler forms
of economic integration will lead to a deepening of the process to increasingly integrated shared
economic spaces. Complex forms, on the other hand, just incorporated substantive elements of the
earlier forms.
The following are the recognized forms of economic integration: (1) free-trade area, (2)
customs union, (3) common market, (4) monetary union, and (5) economic community or union.

11

Encyclopdia Britannica, Economic Integration, http://www.britannica.com/topic/economic-integration (October

19, 2015).
12
Ibid.

10

Free-trade area
According to Kehoe, there are two distinguishing characteristics of a free-trade area: (1)
the liberalization of trade regulation for members and (2) the removal of barriers placed against
members through removal of tariffs, quotas, and various non-tariff barriers, or a pledge to remove
such barriers by a date certain in the future.13
As a form of economic integration, free-trade area is further divided into two types: simple
free-trade area and second-generation free-trade area. The former is focused exclusively on the
tariffs and quotas that restrict trade. The accent is placed almost entirely on increasing the exchange
of goods. The latter, on the other hand, expands the basic nature of simple free-trade to include
trade in non-goods such as services. The trade in services and a widening trade in goods raise
questions of regulatory convergence and the harmonization of rules of operation and governance.
The increased reciprocal relations between the participating economies that comes with expanded
trade in all economic areas and a measure of regulatory convergence can lead to an increased
distribution of production chains across national boundaries.

Customs union
In customs union, member-countries pledge to liberalize trade regulations, remove trade
barriers placed against members, in addition to agreeing to impose a common tariff against nonmember countries. This imposition of common tariff on non-member countries sets customs union
apart from the typical free-trade area. It can also be said that the imposition of a common tariff
implies a convergence of trade policy across member countries and a pooling of national
sovereignty.
Customs union cuts down the challenges of monitoring and taxing external inputs that are
used to produce goods and services that circulate within the region. Implicit in the adoption of a
common external tariff is a further harmonization of national rules and regulations, particularly
those relating to the control and flow of external trade into the regional economic space.

Common market
A common market encompasses all characteristics of a free-trade area and of a customs
union and adds mobility of factors of production as a fourth distinguishing characteristic. In this
form of economic integration, member-countries will develop common policies to harmonize
standards, have mutual recognition of each others standards, or agree on minimum standards.
The idea of a common market grows from the possibilities presented by the adoption of a
common external tariff. As trade flows increase and factor inputs imported into the integrating
economies begin to circulate freely, production chains crossing the intra-regional national
boundaries begin to form. This results in sustained pressure to reduce the costs of transporting
finished and semi-finished goods between the states participating in the integration project.

13

Kehoe, p. 1

11

Monetary union
The sensitization of a common market and the concurrent billow in intra-regional trade
gave birth to a new source of expenses for business: the costs of transnational transactions.
Notwithstanding borders being open to the free transit of food and services, the need to engage in
foreign exchange operations to settle payments and the differing relative costs caused by different
national economic policies impose a constant financial and administrative expense on firms
operating within the region. This is what monetary union tries to solve.
Adoption of common currency or monetary policy by all members of a monetary union
requires a strong convergence in macroeconomic policy, which imposes external restraints on the
domestic fiscal and expenditure policies that a government may pursue. What is more, monetary
unions ipso facto blurs political and economic lines which, at the onset, separate the participating
states in the integration.

Economic community or union

Economic community or union seeks economic integration through consorting fiscal and
monetary policies, creating a common currency, and establishing supranational governing
authority14. All of the characteristics previously discussed is taken to its full conclusion through
the construction of an overarching governance framework (i.e., supranational governing authority)
that imposes a common economic policy system on all countries in a particular region.
In effect, the member-states gives up a significant degree of their respective economic
sovereignty to the whole in the expectation of significantly expanded opportunities presented by a
much larger, fully integrated economic space facilitating the full mobility of finished products,
factors of production, and labour.

Justifications of regional economic integration

Sean Burges identified four broad factors for pursuing economic integration: (a) reactive
regionalism, (b) peace and security, (c) efficiency, (d) externalization, and (e) political
motivation.15 These factors further deepen regional economic integration as it adopt the
characteristics of a supranational state, infra.

Reactive regionalism
Reactive regionalism can also be referred to as defensive regionalism as it suggests that
states choose to pursue economic integration to defend their shared interests from external threat.
Throughout history, reactive regionalism is viewed by developing countries as a technique for
14

An example of a supranational governing authority is the European Parliament which is established by European
Union countries.
15
Encyclopdia Britannica, Economic Integration, http://www.britannica.com/topic/economic-integration (October
19, 2015).

12

providing the large internal markets needed to support promising industrial sectors.
Notwithstanding the decline of import-substitution industrialization strategies and the rise of
neoliberalism which greatly reduced the protectionist aspect of reactive regionalism, the idea of
providing a common level of shelter for internal producers does remain in integration projects.
Participating states in this form are reacting to perceived threats in the international
economic environment. For instance, the Canadian participation in the North American Free Trade
Agreement was pursued to help Canadian business embrace commercial opportunities around the
world.16 Participating states in regional economic integration are seeking to use their combined
economic mass and density to protect shared interests and to mitigate external vulnerabilities.

Peace and security

Globalization has been one of the most salient features of world economy over the last
century. Emerging markets and developing countries continue to integrate into the global trading
system. In this respect, there is a current study whether or not the increase of economic integration
contributes to world peace and security. True enough, the paper presented by Jong Wha-Lee and
Ju Hyun Pyun in the Asian Development Bank Working Paper Series on Regional Economic
Integration empirically shows that an increase in bilateral trade interdependence and global trade
openness significantly reduces the probability of military conflict between countries17. The greater
trade interdependence appears to bring about a considerably larger peace-promotion effect for
neighbouring countries.18
In fine, economic integration not merely results in economic gains as it can also bring about
significant political gains as well i.e., peace and security between trading partners. It also
explains why regional or global economic integration are often initiated to satisfy political and
security motives for instance, the formation of European Union was anchored on the idea of
reconciling the differences between Germany and France following World War II.

Efficiency
Economic integration desires to reduce transaction costs within a regional economic space.
For instance, the Association of Southeast Asian Nations created a pressure in its regional space
for increased logistical and regulatory cooperation to facilitate the exchange of production factors.

Externalization
Economic integration has always been a device used on the domestic political stage.
Developing countries with democratic government orientation have also used the need to adhere
16

Encyclopdia Britannica, Economic Integration, http://www.britannica.com/topic/economic-integration (October

19, 2015).
17
The papers includes the cases of Falkland Wars (between Argentina and United Kingdom), Lebanon War (between
Syria and Israel), Indo-Pakistani War (between India and Pakistan), and Cambodian Civil War (between Cambodia
and Vietnam).
18
Wha-Lee & Pyun, p. 18-19.

13

to regional commitments as the justification for the advancement of neoliberalism. Externalization

cuts down state support for local industries, the lowering of high tariff walls, and the privatization
of state-owned firms. The projects of economic integration, in terms of externalization, has always
been presented as the source of long-term and sustainable economic advantages as well as a
collectively improved insertion into the international economy.19

Political motivation
The science of politics, through Aristotle, has always been consistent when it says that
everything is political. The same is true with regard to international economic law as it defends
individual state ethics, especially its liberty and its responsibility to realize the goods in its internal
sovereignty. Although regional economic integration is founded on and discussed in terms of the
technocratic language of economics, the power relations and equations typically found in
international relations remain to be very much political. States do not fall into economic
regionalism by accident. Rather, they engage in long, sustained, and highly technical discussions
to carefully delimit the policy and geographical boundaries of the region.
The formation and pursuit of economic integration can also present new international
challenges for participating states. Developing states engaged in a defensive regionalist project to
improve their collective negotiating power with predominant states in the global political
economy. This places additional strains on the anchor state to maintain the solidity of the region.20

Assets and liabilities of regional economic

integration
Regional economic integration is not a perfect economic scheme. The annals of history
would tell us that regional economic integration, just like any other dynamic concepts within the
purview of international law and economics, has its assets and liabilities.

Assets of regional economic integration

1. Trade creation These agreements create more opportunities for countries to trade with
one another by removing the barriers to trade and investment. Due to a reduction or
removal of tariffs, cooperation results in cheaper prices for consumers in the bloc
countries.
2. Employment opportunities By removing restrictions on labour movement, economic
integration can help expand job opportunities.

19

Encyclopdia Britannica, Economic Integration, http://www.britannica.com/topic/economic-integration (October

19, 2015).
20
Encyclopdia Britannica, Economic Integration, http://www.britannica.com/topic/economic-integration (October
19, 2015).

14

3. Consensus and cooperation Member states may find it easier to agree with smaller
numbers of countries. Regional understanding and similarities may also facilitate closer
political cooperation.21

Liabilities of regional economic integration

1. Trade diversion Member states may trade more with each other than with nonmember nations. This may mean increased trade with a less efficient or more expensive
producer because it is in a member country. In this sense, weaker companies can be
protected inadvertently with the bloc agreement acting as a trade barrier. In essence,
regional agreements have formed new trade barriers with countries outside of the
trading bloc.
2. Employment shifts and reductions States may move production to cheaper labour
markets in member states. Sudden shifts in employment can tax the resources of
member states.
3. Loss of national sovereignty With each new round of discussions and agreements
within a regional bloc, states may find that they have to give up more of their political
and economic rights.22

21
22

Carpenter & Dunong (2011).

Ibid.

15

ECONOMIC INTEGRATION AND

COOPERATION ALL AROUND THE
WORLD
There are more than one hundred regional trade agreements in place, a number that is
continuously evolving as countries reconfigure their economic and political interests and priorities.
Paradoxically, however, the expansion of the global trade agreements has caused smaller regional
agreements to become out of fashion. Nevertheless, some of the regional blocs created side
agreements with other regional groups leading to a web of trade agreements and understandings.

Asia-Pacific Economic Cooperation

The Asia-Pacific Economic Cooperation (APEC, for brevity) was established in 1989. It
started as an informal ministerial level dialogue group with twelve members: Australia, Brunei
Darussalam, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, Philippines, Singapore,
Thailand, Canada, United States of America, and Vietnam.23 The APEC was initiated as an annual
meeting of foreign and trade ministers to sustain the momentum of market opening and economic
cooperation. The meeting is annually held to cater to the enhancement of economic condition of
states as it entail the facilitation of economic growth, promotion of cooperation among states,
liberalization of trade, and creation of opportunities for investment in the Asia-Pacific region.
APEC has been positioning itself in the realm of international economic law. In this
respect, APEC remarkably paved the way in conjoining economic and technical cooperation to
trade and investment liberalization in the Asia-Pacific region.
A number of factors are likely to come together to keep APEC alive: the economic
dynamism of the Asia-Pacific region, the growing importance of cross trade and investment, and
the shared interest of political leaders and business executives from the APEC region in enhanced
access to each other's and global markets. In contradiction to these premises, however, APEC was
born as an outcome of economic factors; it has not been the vehicle that generated the growth of
cross-trade and investment.

Goals of APEC
As discussed earlier, the goal of APEC is to maintain economic activities which are vital
to the growth and prosperity of the Asia-Pacific region. APEC provides an avenue in creating and

23

Today, the initial 13 member-economies are joined by Chile, Peoples Republic of China, Hong Kong, Mexico, Papua
New Guinea, Peru, Russia, and Chinese Taipei.

16

maintaining these activities. This vision was translated to the Bogor Goals of 199424. APEC aimed
at attaining this goal by 2010 (with respect to industrialized economies) and 2010 (with respect to
developing countries). Moreover, to achieve these goals, the APEC member economies developed
a framework in Osaka, Japan in 1995 which sets out three key areas of cooperation. Known as the
Three Pillars of APEC, Osaka Action Agenda includes the areas of (1) trade and investment
liberalization25, (2) business facilitation26, and (3) economic and technical cooperation27. The three
pillars serve as a guiding instrument in attaining the overall goal of free trade and investments in
the Asia-Pacific region.

Benefits of membership
As a multilateral forum, APEC provides its 21 member economies, together with the
business community and other parties, an avenue to discuss issues that impact the Asia-Pacific
region. It provides these stakeholders an arena to exchange designs, views, interests, and tactics
towards the solidification of the regions future growth. Businesses also gain an advantage and
benefit from participating in APEC.28
Developing and developed economies benefit significantly from APEC. It provides
developing economies additional information and guidelines relating to areas such as development
of procedures, policy frameworks, and other systems that deal with contemporary issues29. With
the various APEC forums ranging from working group meetings, seminars, up to the leaders
meetings, deputies from each member economies are given the occasion to learn new proficiencies
and acquire the best practices from other member economies.30
Interestingly, both developed and developing member economies have the opportunity to
set APECs agenda. APEC reinforces both the individual and collective capacity of its member
economies as accomplices for economic analysis. It also facilitates as an effective consultative
24

The Bogor Goals are a set of targeted goals for realizing free and open trade in the Asia-Pacific agreed by member
economies in 1994 in Bogor, Indonesia. The Leaders agreed to adopt the long-term goal of free and open trade and
investment in the Asia-Pacific. This goal will be pursued promptly by further reducing barriers to trade and
investment and by promoting the free flow of goods, services and capital among APEC economies. The 2014 progress
report shows that the progress has been uneven across APEC economies and across areas.
25
The trade and investment liberalization pillar aims to gradually reduce and eventually eliminate tariff and nontariff barriers to trade and investment. This pillar opens markets, thereby increasing the volume of trade and
investments among countries.
26
Business Facilitation aims to reduce business and trade transaction costs. This pillar also aims to facilitate faster
means of accessing and acquiring trade information. It aligns its policies and strategies towards the facilitation of
economic growth and an open and free trade environment.
27
Through the economic and technical cooperation pillar, APEC intends to provide training and cooperation through
capacity-building projects and activities among its member economies. It prioritizes regional economic integration,
addressing inclusive growth, improving and protecting peoples quality of living through sustainable growth,
structural reform, and human security.
28
Such advantages and benefits include the reduction of barriers and obstacles to trade across borders.
29
APEC has facilitated conferences and training sessions on timely and significant topics and issues, such as, but not
limited to, transparency, corporate governance, financial sector reform, customs procedure, competition policy,
electronic commerce, educational reforms, and efficient energy production, among others.
30
APEC, APEC Primer, http://apec2015.ph/about-apec/primer/ (October 19, 2015).

17

forum, allowing participants to promote their common interests and be able to push through these
interests in larger multilateral forums.31

Operations and scope of work

The APEC operates as a cooperative, multilateral economic and trade forum. Considered
as the only international intergovernmental grouping in the world, APEC is committed to reducing
barriers to trade and investments sans the need to enter into legally binding obligations.
Participation in APEC is voluntary in nature and decisions are non-binding. Furthermore, APEC
promotes dialogue and consensus-building, thus upholding egalitarianism. As discussed earlier,
APEC conducts activities on the basis of open dialogue and equal respect for the views of all the
participants.
The activities of APEC are guided by the Economic Leaders and Ministers of APEC
member economies who meet throughout the year to mould the future of trade and investment
cooperation in the Asia-Pacific region.32 APEC promotes the involvement of developing and
developed countries, small and large in its decision-making process.33

Association of Southeast Asian Nations

The Association of Southeast Asian Nations (ASEAN, for brevity) was established on
August 8, 1967 in Bangkok, Thailand, with the signing of the ASEAN Declaration (or the socalled Bangkok Declaration) by the founding members of ASEAN, namely: Indonesia, Malaysia,
Philippines, Singapore and Thailand. Since then, other Southeast Asian nations joined in the
league, like Brunei Darussalam (joined on January 7, 1984), Vietnam (joined on July 28, 1995),
Lao PDR and Myanmar (both joined on 23 July 1997), and Cambodia (joined on 30 April 1999).
With the positive acts of joining of the aforementioned Southeast Asian nations, ASEAN presently
has ten member-states.

Goals and purposes of ASEAN

As set out in the ASEAN Declaration, the goals and purposes of ASEAN are the following:

31

APEC, APEC Primer, http://apec2015.ph/about-apec/primer/ (October 19, 2015).

In the APEC Economic Leaders Meeting which is held at the end of each year, a declaration enumerating the
priorities of APEC for the following year is issued. Ministers representing various portfolios, Senior Officials and
members of various APEC forums meet throughout the year to launch new initiatives, track the progress of existing
programmes and implement directives from economic leaders. APECs working level activities and projects are
guided by the APEC Senior Officials from the 12 APEC member economies. Such activities and projects are being
carried out by four high level committees: (1) Committee on Trade and Investment; (2) Senior Officials Meeting
Committee on Economic and Technical Cooperation; (3) Economic Committee; (4) Budget and Management
Committee. The various sub-committees, experts group, working groups and task forces all support the activities
and projects led by these high level committees.
33
APEC, APEC Primer, http://apec2015.ph/about-apec/primer/ (October 19, 2015).
32

18

1. To accelerate the economic growth, social progress and cultural development

in the region through joint endeavours in the spirit of equality and partnership
in order to strengthen the foundation for a prosperous and peaceful community
of Southeast Asian Nations;
2. To promote regional peace and stability through abiding respect for justice and
the rule of law in the relationship among countries of the region and adherence
to the principles of the United Nations Charter;
3. To promote active collaboration and mutual assistance on matters of common
interest in the economic, social, cultural, technical, scientific and administrative
fields;
4. To provide assistance to each other in the form of training and research facilities
in the educational, professional, technical and administrative spheres;
5. To collaborate more effectively for the greater utilisation of their agriculture
and industries, the expansion of their trade, including the study of the problems
of international commodity trade, the improvement of their transportation and
communications facilities and the raising of the living standards of their
peoples;
6. To promote Southeast Asian studies; and
7. To maintain close and beneficial cooperation with existing international and
regional organisations with similar aims and purposes, and explore all avenues
for even closer cooperation among themselves.34

Fundamental principles of ASEAN

In their relations with one another, the ASEAN member states have adopted the following
fundamental principles35:
1. Mutual respect for the independence, sovereignty, equality, territorial integrity,
and national identity of all nations;
2. The right of every State to lead its national existence free from external
interference, subversion or coercion;
3. Non-interference in the internal affairs of one another;
4. Settlement of differences or disputes by peaceful manner;
5. Renunciation of the threat or use of force; and
6. Effective cooperation among themselves.36

ASEAN Charter
The ASEAN Charter is the component document of ASEAN. It was adopted at the 13th
ASEAN Summit held on November 2007 in Jakarta, Indonesia. It serves as a solid groundwork in
achieving the ASEAN Community by providing legal status and institutional framework for
ASEAN. It codifies ASEAN norms, rules, and values; sets clear target for ASEAN; and presents
34

http://www.asean.org/asean/about-asean.
As contained in the Treaty of Amity and Cooperation in Southeast Asia of 1976.
36
http://www.asean.org/asean/about-asean.
35

19

accountability and compliance. Moreover, through the ASEAN Charter, ASEAN rightfully
establishes a number of new organs to boost its community-building process. The Charter is legally
binding among 10 ASEAN member states.37 In a pronouncement made by Ambassador Don
Pramudwinai, Thailands permanent representative to the United Nations, with the passing of the
ASEAN Charter, It (referring to ASEAN) will be a rule-based and people-oriented organization
with its own legal personality.
The principles set out in the Charter includes:
1. Emphasis on the centrality of ASEAN in regional cooperation;
2. Respect for the principles of territorial integrity, sovereignty, non-interference
and national identities of ASEAN members.
3. Promoting regional peace and identity, peaceful settlements of disputes through
dialogue and consultation, and the renunciation of aggression.
4. Upholding international law with respect to human rights, social justice and
multilateral trade.
5. Encouraging regional integration of trade.
6. Appointment of a secretary-general and permanent representatives of ASEAN.
7. Establishment of a human rights body and an unresolved dispute mechanism,
to be formalized at ASEAN Summits.
8. Development of friendly external relations and a position with the UN (like the
EU)
9. Increasing the number of ASEAN summits to twice a year and the ability to
convene for emergency situations.
10. Reiterating the use of the ASEAN flag, anthem, emblem, and national ASEAN
day on 8 August.

ASEAN Community
The ASEAN Vision 2020, adopted by the ASEAN Leaders on the 30th Anniversary of
ASEAN, settled on a shared vision of ASEAN as a concert of Southeast Asian nations, outward
looking, living in peace, stability and prosperity, bonded together in partnership in dynamic
development and in a community of caring societies.38 In line with this vision, the ASEAN Leaders
resolved that an ASEAN Community shall be established.
The ASEAN Community is consists of three pillars, namely: the ASEAN Political-Security
Community (APSC), ASEAN Socio-Cultural Community, (ASCC) and ASEAN Economic
Community (AEC). Each pillar has its own blueprint. For one, APSC aims to ensure that countries
in the Southeast Asian region live at peace with one another and with the world in a just,
democratic, and harmonious environment. On the other hand, ASCC aims to contribute to realizing
an ASEAN Community that is people-oriented and socially responsible with a view to achieving
solidarity and unity among the peoples and member states of ASEAN.

37
38

ASEAN Charter.
ASEAN Vision 2020.

20

As one of the goals of the ASEAN with respect to regional economic integration and
international economic law, AEC envisions the following key characteristics: (a) single market
and production based, (b) highly competitive economic region, (c) a region of equitable
development, and (d) a region fully integrated into the global economy.

ASEANs role in Southeast Asian economic integration

The Southeast Asian region has been positioning itself as one of the primary drivers of
global growth on account of different aspects such as, but not limited to, politics, arts and culture,
and economics, among others. However, despite this international significance, the region has a
limited number of institutions to facilitate economic integration that will, in turn, guarantee that
territorial and diplomatic differences do not preclude said integration. This is where ASEAN will
come in.
No member of the ASEAN is a major power in the region, yet its history of working handin-hand with the major powers like United States of America, China, and Japan is seen as a neutral
broker by most major powers. Nonetheless, to maintain this neutral role, ASEAN has to
significantly transform its internal affairs that is, revamping its secretariat39, its decision-making
style, and its scope. By doing so, ASEAN would put itself in a position to lead Asian integration.
In the Southeast Asian region, ASEAN has been very consistent with its focus on regional
economic integration while others have already shifted their focus on other areas of concern. It has
been very triumphant in incorporating the principles and ideas of trade integration and creating
regional forums to be a venue where member states can discuss security issues. Despite these little
victories, ASEAN still fails to promote concrete security or economic integration in terms of open
borders, joint development of resources, and common currencies compared to other regional
economic integrations that have transpired in Europe. These failures, as noted by Kurlantzick, may
be blamed on the intrinsic structural weaknesses of the ASEAN itself. In other respects, these
failures are simply due to the fact that Southeast Asian nations have wide-ranging levels of
development, political cultures, and political systems, which makes regional economic integration
more challenging.40
ASEANs willingness to sign free trade agreements (FTAs) within and across borders
facilitated in the maintaining of its status in the global trade liberalization. By and large, these
FTAs boost trade liberalization and do not preclude the future possibility of a new multilateral
round of negotiations through other forums all around the world. What is more, it can be said that

39

Since ASEANs founding in 1967, the organization has been dominated by the powerful, often autocratic leaders
of its member states, who at times served for decades as heads of their governments: Mahathir Mohamad, Lee Kuan
Yew, Ferdinand Marcos, Suharto, and Prem Tinsulanond. They purposefully made ASEAN strong enough to help
prevent more Southeast Asian wars, but also ensured that the secretariat would never become strong enough to
dictate policy to individual member states and that a secretary-general would not overshadow national leaders.
Although the current secretary-general, former Thai foreign minister Surin Pitsuwan, is more accomplished and
better known than most of his predecessors, he still does not wield the international clout of other Southeast Asian
leaders.
40
Kurlantzick, p. 4-5.

21

ASEAN has been conscientiously utilizing various types of regional economic integration aside
from reduction of tariffs across the region.
As pointed out earlier, ASEANs structure is weak and underdeveloped due to structural
limitations. Regional powers, like China and Japan, seem to concur that using ASEAN as the
convener and centre of future regional security architecture makes sense since ASEAN is primarily
consists of weaker and relatively smaller states and, thus, is not likely to dominate any potential
regional security architecture.41

North American Free Trade Agreement

The North American Free Trade Agreement (NAFTA, for brevity) is an international
agreement between and among the United States of America, Canada, and Mexico. It came into
effect on January 1, 1994 creating one of the worlds largest free trade zones and laying the basis
for strong economic growth and rising prosperity in the said countries. Since then, NAFTA has
demonstrated how free trade increases affluence and the aggressive willingness to compete in term
of economic and trade relations, delivering real benefits to its enfranchised constituents. Aside
from economic integration, NAFTA concerns about liberalization of labour and environmental
regulations.
NAFTA is the brainchild of former US President Ronald Reagan who actively campaigned
on a North American common market. By 1984, the US Congress passed the Trade and Tariff Act
which authorizes the president to negotiate free trade agreements, while only allowing the
Congress the ability to approve or disapprove negotiating points. The then Canadian Prime
Minister Brian Mulroney agreed with Reagan to begin negotiations for the Canada-US Free Trade
Agreement42. Meanwhile, then Mexican President Carlos Salinas de Gortari and then US President
George Bush began negotiations for a liberalized trade between two countries. By 1991, Canada
requested a trilateral agreement, which then led to the creation of NAFTA43.
NAFTA influenced other free trade agreements that the United States of America later
negotiated and also influenced multilateral negotiations. NAFTA initiated a new generation of
trade agreements not only in the western hemisphere but also in other parts of the world hence,
influencing negotiations in areas such as market access, rules of origin, intellectual property rights,
foreign investment, dispute settlement procedures, workers rights, and environmental protection,
among others.
Furthermore, NAFTA discards certain investment barriers, protects NAFTA investors, and
provides process for settlement of disputes between investors and NAFTA member economies.
One of the most significant aspects of NAFTA is that it minimizes and/or eliminates many
41

Kurlantzick, p. 6.
Signed in 1988, went into effect in 1989. Today, it was already superseded since it is no longer needed by said
participating countries.
43
It was finally signed into law by former US President Bill Clinton on December 8, 1993 and entered force January
1, 1994. Although it was signed by former US President George Bush, it was a priority project of President Clinton,
and its passage is considered one of his first successes.
42

22

requirements of foreign government approval which posed significant barriers to investment. In

this light, NAFTA includes provisions on anti-competitive practices by monopolies and state
enterprises, as well as on such practices by privately owned businesses. It also sets out principles
to guide regulation of financial services44. The advantage of this for investors is that they are able
to use the same financial service providers for both domestic and international transactions.
In fine, NAFTA is facilitating an unprecedented level of economic integration in North
America. It is creating opportunities for investment and growth by private business, and it is
promoting a more stable relations between and among the United States of America, Mexico, and
Canada.

Goals and purposes of NAFTA

A reading of the agreement provides the following objectives of the NAFTA:
1. Eliminate barriers to trade in, and facilitate the cross-border movement of,
goods and services between the territories of the Parties;
2. Promote conditions of fair competition in the free trade area;
3. Increase substantially investment opportunities in the territories of the Parties;
4. Provide adequate and effective protection and enforcement of intellectual
property rights in each Party's territory;
5. Create effective procedures for the implementation and application of this
Agreement, for its joint administration and for the resolution of disputes; and
6. Establish a framework for further trilateral, regional and multilateral
cooperation to expand and enhance the benefits of this Agreement.45
The state parties to the agreement are obliged to interpret and apply the provisions of the
said agreement in accordance with the applicable rules of international law.46

Economic effects of NAFTA

NAFTA ignited an explosion in cross-border economic and investment activity. Trade
relations among Canada, Mexico, and the United States have broadened substantially since the
implementation of NAFTA. According to data from the office of the US Trade Representative
(USTR)47, the overall value of intra-North American trade has more than tripled since the
agreement's inception. The USTR adds that regional business investment in the United States rose
117% between 1993 and 2007, as compared to a 45% rise in the fourteen years prior 1993. Trade

44

Financial service providers from one NAFTA member economy may establish banking, insurance, securities
operations, and other types of financial services in another NAFTA member economy.
45
Art. 102, Chapter One, Part One, North American Free Trade Agreement.
46
Ibid.
47
The United States of Americas chief negotiator in foreign trade and a major booster of NAFTA and other free trade
accords.

23

with NAFTA partners now accounts for more than 80% of Canadian and Mexican trade, and more
than a third of U.S. trade.48
For all three member countries, the central purpose of NAFTA is to increase trade with one
another specifically, to attract more foreign direct investment. During 1993, the year before
NAFTA went into effect, and 2002, intra-NAFTA trade grew by 106%. In those years, NAFTA
trade with the world grew by 42%. Merchandise exports from Mexico to the United States of
America grew by an annual 14% over this period almost double the amount of Mexicos trade
growth with the rest of the world. On the other hand, US merchandise exports to Mexico grew by
10% per year and only 4% per year with the rest of the world. Mexico over this period surpassed
Japan as the second largest trader with the United States of America, second only to Canada.49
With respect to employment, many economists see a positive impact on US employment
and noted that new export-related jobs in the United States of America pay 15-20% more on
average than those focused on domestic production.50 However, conferring to the Council of
Foreign Relations, wages have not kept pace with labour productivity and that income inequality
in the US has risen in recent years, in part due to pressures on the US manufacturing base. On the
adversarial side, critics opposes NAFTA and lobbies against other free trade agreements unless
they include provisions that raise labour and environmental standards. They claimed that grand
promises made by NAFTA remain unfulfilled 20 years after implementation and even resulted in
the loss of one million US jobs by 2004.51 Notwithstanding, most economists claim that it is a
stretch to blame these shift on NAFTA. Manufacturing in the US was under stress decades before
the treaty and job losses in that sector are viewed as part of a structural shift in the US economy
toward light manufacturing and high-end services.52

European Union
The European Union (EU, for brevity) is a political and economic partnership that
represents a unique form of cooperation among sovereign countries in the European continent. EU
is the latest stage in a process of integration begun after the Second World War, initially by six
Western European countries53. Its founders hoped that by creating specified areas in which
member agreed to share their sovereignty initially in coal and steel production, economics and
trade, and nuclear energy it would foster interdependence and make another war in Europe
unthinkable.

48

Sergie, M.A. (2014). NAFTAs Economic Impact. Accessed on October 20, 2015, retrieved from
http://www.cfr.org/trade/naftas-economic-impact/p15790.
49
Ibid.
50
Hills, C.A. (2014). NAFTAs Economic Upsides. Accessed on October 20, 2015, retrieved from
https://www.foreignaffairs.com/articles/canada/2013-12-06/naftas-economic-upsides.
51
Public Citizens Global Trade Watch. (2014). NAFTAs 20-Year Legacy and the Fate of the Trans-Pacific Partnership.
Washington: Public Citizens Global Trade Watch.
52
Ibid.
53
The six founders are Belgium, France, Germany, Italy, Luxembourg and the Netherlands.

24

Going over its historical accounts, the EU has been built through a series of binding treaties.
Over the years, EU member states have sought to corroborate laws and espouse communal policies
on an increasing number of social, economic, and political issues. Furthermore, EU member states
work together through several institutions to set policy and to promote their collective interests.
Key EU institutions include the European Council54, European Commission55, the Council of
Ministers56, and the European Parliament57.
Today, at the core of the European Union are its 28 strong member states.58 Together, these
member states helped in promoting peace, stability, and economic prosperity through the
continent. Terse and clear, the EU has come a long way from being an anti-fascist resistance group
during the regime of Nazis.

Goals and purposes of EU

Upon the merger of the European Union Treaty and European Communities Treaty, EUs
Constitutional Treaty now provides that the main objectives of EU are to promote peace, the EUs
values59, and the well-being of its peoples.60 These general objectives are supplemented by a list
of more detailed objectives, to wit:
1. An area of freedom, security, and justice without internal frontiers;
2. An internal market where competition is free and undistorted;
3. Sustainable development, based on balanced economic growth and price
stability, a highly competitive social market economy, aiming at full
employment and social progress, and a high level of protection and
improvement of the quality of the environment;
4. The promotion of scientific and technological advance;
5. The combating of social exclusion and discrimination, and the promotion of
social justice and protection, equality between women and men, solidarity
between generations and protection of the rights of the child;
6. The promotion of economic, social and territorial cohesion, and solidarity
among Member States.

54

Composed of EU Heads of State or Government which acts as the strategic guide and driving force for EU policy.
Upholds the common interests of EU as a whole and functions as the EUs executive.
56
Represents the national governments of EU member states.
57
Represents the citizens of the EU.
58
The following are the 28 member states of the European Union: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech
Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania,
Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and United
Kingdom.
59
As set out in Article I-2 of the EU Constitutional Treaty, EU is founded on the values of respect for human dignity,
liberty, democracy, equality, the rule of law, and the respect for human rights, including the rights of persons
belonging to minorities.
60
Art. I-3, EU Constitutional Treaty.
55

25

EUs role in regional economic integration

One of the advisory bodies of EU is the European Economic and Social Committee
(hereinafter referred to as EESC). It is made up of representative organizations of employers, of
the employed, and of other civil society representatives, notably in socio-economic, civic,
professional, and cultural areas. Representing the general interest of the EU, EESC presents
opinions to the European Commission and the European Parliament. The members of the EESC
are not bound by any mandatory instructions and work in EUs general interests. What is more,
EESC acts as a bridge between the EU institutions and citizens, promoting a more participatory,
more inclusive, and more democratic society in the EU.
EESC fulfils three key missions, to wit:
1. Helping to ensure that European policies and legislation tie in better with
economic, social, and civic circumstances on the ground by assisting the
European Parliament, Council, and European Commission, making use of
EESC members experience and representativeness, dialogue, and efforts to
secure consensus serving the general interest;
2. Promoting the development of a more participatory EU which is more in touch
with popular opinion, by acting as an institutional forum representing,
informing expressing the views of and securing dialogue with organized civil
society; and
3. Promoting the values on which European integration is founded and advancing,
in Europe and across the world, the cause of democracy and participatory
democracy, as well as the role of civil society organizations.
The EU is the worlds biggest trader, accounting for 16.5% of the worlds imports and
exports. Free trade among its members was one of EUs founding principles, and it is committed
to liberalizing world trade as well.
Interestingly, while the world trade is grounded on rules set out by the World Trade
Organization (WTO), EU trade policy is made exclusive at EU level. The European Commission
confabulates agreement on behalf of the EU with WTO rules and works closely with national
government and the European Parliament to maintain the global system and enable it to adapt to
worldwide changes. It engages with a huge range of partners, mostly through free trade
agreements. These partnerships seek to create growth and jobs for Europeans by opening new
markets with the rest of the world.
EUs trade policy is an integral ingredient to boost employment and create a more modern,
viable, and sustainable economy. A vibrant domestic economy requires the EU to be increasingly
competitive abroad. Likewise, EUs free trade agreement aims to:
1. Open new markets for goods and services;
26

2. Increase protection and opportunities for investment;

3. Make trade cheaper by cutting customs duties and red tape;
4. Speed up trade by making customs clearance easier and setting compatible
technical and sanitary standards;
5. Creating greater certainty through clear rules on intellectual property rights,
competition, and public procurement; and
6. Support sustainable development by fostering cooperation, transparency, and
dialogue on social and environmental issues.61
The EU remains committed to completing its ambitious, so to speak, trade agenda. It really
considers open markets and trade as part of the resolution to the economic crisis. It is also in the
best interest of the EUs individual and regional trading partners to complete negotiations since
the EU represents the worlds biggest markets for their export.

61

European Union, p. 7.

27

INTERNATIONAL COORDINATION
United Nations
The United Nations (UN, for brevity) emerged out of the travail of the Second World War
as a symbol of mans undaunted sentiment to launch for all nations a rule of law that would forever
exterminate war as means of solving international disputes.62 In 1945, representatives of 50
countries met in San Francisco, United States of America at the United Nations Conference on
International Organization to frame the UN Charter. This came into force with the filing of the
instruments of ratification by members of the Big Five63 and a majority of the other signatories.
Cruz (2003) intensively outlined the annals of giving birth to the UN, to wit:

Forward-looking statesmen and jurists have proposed and nurtured plans for a
world government to which national sovereignties would be subject and under
which all nations would work together in pursuit of their common purposes.
However, it was only after the First World War that the first concrete steps was
taken with the organization of the League of Nations.
As early as June 12, 1941, several members of the British Commonwealth and a
number of governments-in-exile had already agreed in the London Declaration to
work together toward economic and social progress.
On August 14, 1941, former US President Franklin D. Roosevelt and former British
Prime Minister Winston Churchill signed the Atlantic Charter.
By January 1, 1942, the purposes and principles embodied in the Atlantic Charter
were reaffirmed by a number of countries in the Declaration by United Nations.
The first formal step towards the creation of the UN was the Moscow Declaration,
signed by the representative from China, Union of Soviet Socialist Republics
(USSR), United Kingdom (UK), and United States of America (USA) on October
30, 1943.
In December 1943, Roosevelt and Churchill, now joined by Josef Stalin,
acknowledged the responsibility of making peace in the Tehran Conference.
The initial blueprint of the UN, known as the Dumbarton Oaks Proposals, was
prepared at a conference in Washington by the representative of USSR, UK, UK,
and China in August to October of 1944.

UN Charter
The UN Charter is a verbose document incorporating the rights, duties and responsibilities,
and structure of the UN. In a sense, it may be considered as a treaty because it derives its binding
force from the agreement of a parties to be bound by it. In another sense, it may be regarded as a

62
63

Cruz, p. 45.
The Big Five is composed of China, France, United Kingdom, Russia, and United States of America.

28

constitution as it provides for the organization and operation of the different organs 64 of the UN
and for the adoption of any change in its provisions through a formal process of amendment.
The chapter applies not only to the members of the UN but also to non-member states so
far as may be necessary for the maintenance of international peace and security.65 What is more,
in the event a conflict between the obligations of the members of the United Nations under the
present Charter and their obligations under any other international agreement, their obligations
under the present Charter shall prevail.66

Purposes of the UN
Article 1 of the UN Charter provides the purposes of the UN that constitutes it raison
detre, to wit:
1. To maintain international peace and security, and to that end: to take effective
collective measures for the prevention and removal of threats to the peace, and for
the suppression of acts of aggression or other breaches of the peace, and to bring
about by peaceful means, and in conformity with the principles of justice and
international law, adjustment or settlement of international disputes or situations
which might lead to a breach of the peace;
2. To develop friendly relations among nations based on respect for the principle of
equal rights and self-determination of peoples, and to take other appropriate
measures to strengthen universal peace;
3. To achieve international cooperation in solving international problems of an
economic, social, cultural, or humanitarian character, and in promoting and
encouraging respect for human rights and for fundamental freedoms for all without
distinction as to race, sex, language, or religion; and
4. To be a centre for harmonizing the actions of nations in the attainment of these
common ends.

Role of UN in International Economic Law

As discussed earlier, one of the most relevant actors in international economic law
nowadays is the international organizations UN, obviously, belongs to this group. UN plays a
vital regulatory role both by creating legally binding rules for their member states and by
formulating non-binding standards and recommendations.
Some important forums of cooperation in international economic law have been established
within the framework of the UN. In 1964, the UN General Assembly established the UN
Conference on Trade and Development to promote the integration of poorer countries into the
world economy with due regard for their development. The UN Commission on International
64

The six principal organs of the UN are (1) the General Assembly, (2) the Security Council, (3) the Economic and
Social Council, (4) the Trusteeship Council, (5) the International Court of Justice, and (6) the Secretariat.
65
Art. 2(6), UN Charter.
66
Art. 103, UN Charter.

29

Trade Law, set up in 1966, shall elaborate an improved legal framework for the facilitation of
international trade and investment.67
Furthermore, the responsibility for the promotion of international economic and social
cooperation is vested in the General Assembly and, under its authority, the Economic and Social
Council (ECOSOC).68 Specifically, these organs should exert efforts towards:
1. Higher standards of living, full employment, and conditions of economic and
social progress and development;
2. Solutions of international economic, social, health and related problems, and
international, cultural, and educational cooperation; and
3. Universal respect for, and observance of, human rights and fundamental
freedoms for all without distinction as to race, sex, language, or religion.
In the performance of its duties, the ECOSOC is assisted by certain subsidiary organs of
the UN and regional economic commissions. It also collaborates and may enter into agreements,
subject to the approval of the General Assembly, with specialized agencies thus, bringing them
into relationship with the UN.69 Among the specialized agencies rank a number of international
organizations whose activities, directly or indirectly, relate to international economic relations:

International Labour Organization

Food and Agricultural Organization
UN Educational, Scientific, and Cultural Organization
World Health Organization
World Bank Group
o International Bank for Reconstruction and Development
o International Development Association
o International Finance Corporation
o Multilateral Investment Guarantee Agency
o International Centre for the Settlement of Investment Disputes
International Monetary Fund
International Civil Aviation Organization
International Maritime Organization
International Telecommunications Union
International Trade Commission
Universal Postal Union
World Meteorological Organization
World Intellectual Property Rights Organization
International Fund for Agricultural Development
UN Industrial Development Organization

67

In the past decades, UN Commission on International Trade Law has presented several model laws e.g., Model
Law on International Commercial Arbitration (1985), Model Law on International credit Transfer (1992), Model Law
on Cross-Border Insolvencies (1997), Model Law on Electronic Commerce (1996), Model Law on Electronic Signatures
(2001), and Model Law on International Commercial Conciliation (2002).
68
Art. 55, UN Charter.
69
Arts. 57 and 63, UN Charter; Cruz, p. 66.

30

World Tourism Organization

World Trade Organization

The World trade Organization (WTO, for brevity) was established on January 1, 1995,
under an agreement reached during the Uruguay Round of Multilateral Trade Negotiations.70 It
was born out of table battles and negotiations, and everything the WTO does is the result of
negotiations. It can be said that the formation of the WTO is the most important development in
the history of international economic law. The foundation of the WTO vested the world trade order
with a new and solid institutional basis.71 WTO religiously deals with the international rules of
trade amongst nations.
The WTO provides a forum for negotiating agreements aimed at reducing impediments to
international trade and ensuring a level playing fields for all thus, contributing to economic
growth and development. The WTO also provides a legal and institutional framework for the
implementation and monitoring of these agreements, as well as for settling disputes arising from
their interpretation and application.
Today, WTO has 150 member states and 31 observer governments. The members represent
over 95% of world trade.

Operations and scope of work

The WTO is headed by a ministerial conference of all members that meet at least once
every two years. Art. II of the Marrakesh Agreement72 charges the WTO with providing a common
institutional framework for the conduct of trade relations amongst its members in matters to which
agreements and associated legal obligations apply.
The WTO is charged with facilitating the implementation and operation of multilateral
trade agreements, providing a forum for negotiations, administering the dispute settlement
mechanisms, exercising multilateral surveillance of trade policies, and cooperating with the World
Bank and International Monetary Fund to achieve greater coherence in global economic
policymaking.73
With respect to trade negotiations, the WTO agreements cover goods, services, and
intellectual property. WTO agreements require governments to make their trade policies
transparent by apprising the WTO about laws in force and measures adopted. As regards dispute
settlement, the WTO, through Dispute Settlement Understanding, enforces the rules and ensures
that trade flows smoothly, predictably, and freely. What is more, the WTO organizes hundreds of
technical cooperation missions to developing countries annually. As an outreach program, the
70

The Uruguay Round of Multilateral Trade Negotiations was the last of a series of periodic trade negotiations held
under the auspices of the General Agreement on Tariffs and Trade.
71
Herdegen, p. 32
72
The agreement that established the World Trade Organization.
73
Art. III, World Trade Organization

31

WTO maintains regular dialogue with non-governmental organizations, parliamentarians, other

international organization, the media, and the general public, with the aim of enhancing
cooperation and increasing awareness of WTO activities.
Aside from the aforementioned works, WTO has the following scope of work:
a.
b.
c.
d.

Provide framework for administration and implementation of agreements;

Provide forum for further negotiations;
Provide trade policy review mechanisms; and
Promote greater coherence among members economic policies.

Principles of WTO
As discussed earlier, the WTO establishes a framework for trade policies that is, it is
concerned with setting the rules of trade policy game, not with the results of the game. Five
principles are of particular significance in understanding both the pre-1994 General Agreements
on Tariffs and Trade and the WTO, namely: (1) non-discrimination, (2) reciprocity, (3) binding
and enforceable commitments, (4) transparency, and (5) safety valve.

International Chamber of Commerce

In 1919, a group of bourgeois, financiers, and merchants resolved to bring into existence
an organization that would represent business all around the world. These group of people were
determined to bring economic boom to a world that was still suffering from the desolation of the
First World War. Hence, the International Chamber of Commerce (ICC, for brevity) was founded.
Cleverly, the founders called themselves the merchants of peace. Today, the ICC is the largest,
most representative business organization in the world. Over the years, the ICC has taken a central
role in international trade and business. At the moment, ICC prides its hundreds of thousands
member companies in over 180 countries. ICC was the first organization granted general
consultative status with the UN Economic and Social Council.
The preamble enshrined in the ICC Constitution gives rise to three principal aims: (1) the
promotion of international trade, services, and investment, while eliminating obstacle and
distortions to international commerce, (2) the promotion of a market economy system based on
the principle of free and fair competition among business enterprises, and (3) the fostering of the
economic growth of developed and developing countries alike, particularly with a view to better
integrate all countries into the world economy. These aims are met through (1) political advocacy
and lobbying directed at national government and at international organizations and (2) the
provision of a range of practical services to business.74
Without a doubt, ICC is an organization whose actions are steeped in the liberal tradition
of political economy. In this light, it is not surprising to know that ICC has always been a staunch

74

Kelly, p. 259.

32

defender of globalization as a force for and source of both prosperity and peace. Conversely, ICC
has vehemently opposed protectionism of any sort.

Purposes of ICC
ICC Constitution stipulates the purposes of the ICC, to wit:
1.
2.

3.

4.
5.

Represent trade, industry, finance, transport, insurance and, in general, all

sectors of international business;
Ascertain the views of corporations, companies, organisations, firms and
individuals involved in international trade and related business operations and
voice them to the relevant intergovernmental institutions and, through its
National Committees, Groups and Direct Members, to their governments and
other bodies in their respective countries;
Assure effective and consistent action in the economic and legal fields in order
to contribute to the harmonious growth and the freedom of international
commerce;
Provide practical and expert services to the international business community;
and
Encourage effective rapprochement and cooperation among businessmen.75

Activities of the ICC

ICC has three main activities: (1) rule setting, (2) dispute resolution, and (3) policy
advocacy. Since its member companies and associations are themselves engaged in international
business, ICC has unrivalled authority in making rules that govern the conduct of business across
borders.

International Monetary Fund

Created in July 1945 at a UN conference in Bretton Woods, New Hampshire, United States
of America, the International Monetary Fund (IMF, for brevity) is the worlds central organization
for international monetary cooperation. With 188 member countries, IMF works to foster global
monetary cooperation, secure financial stability, facilitate international trade, promote high
employment and sustainable economic growth, and reduce poverty around the world. It is run by
the government of its member countries, represented through a Board of Governors.76
Initially, the 44 countries present in the aforementioned conference sought to build a model
for economic cooperation to avoid the occurrence of the Great Depression of the 1930s. It should
be noted that the IMF was established in the aftermath of the disasters of the Great Depression to
overcome perceived market failures of the 1930s, including destabilizing short-term capital flows,

75
76

Art. 2(2), ICC Constitution.

The Governor for each country is usually the Minister of Finance (or the Central Bank Governor).

33

breakdown of capital markets, consequent inability to finance payments deficits, widespread

imposition of exchange controls, competitive devaluation, and a turn to trade protection.77

Purposes of the IMF

Primarily, IMF aims to defend the stableness and endurance of the international monetary
system78. By 2012, this purpose was expanded to include all macroeconomic and financial sector
issues that affect global stability with respect to economic cooperation as it is deemed, by the
IMF, essential for achieving sustainable economic growth and raising the living standards. In
attaining this purpose, IMF employs three ways: (1) keeping track of the global economy and the
economies of member countries, (2) lending to countries with balance-of-payments difficulties,
and (3) giving practical help to members. For one, the IMF watches and directs the international
monetary system and supervises the economic and financial policies of its member countries. As
part of this process, the IMF plays up potential hazards to stability and advises on needed policy
accommodations.
Secondly, it is a core responsibility of the IMF to provide loans to member countries facing
actual or potential balance-of-payments difficulties. This financial assistance enables countries to
reconstruct their international reserves, stabilizes their currencies, continue paying for imports, and
restore conditions for strong economic growth, while undertaking policies to correct underlying
problems.
Lastly, IMF helps its member countries plan economic policies and deal their pecuniary
transactions in an effective manner by intensifying their human and institutional capacities through
technical assistance and training.
Nonetheless, as outlined in the IMF Articles of Agreement, IMF has six purposes, namely:
(1) promoting international monetary cooperation, (2) expanding the balanced growth of
international trade, (3) facilitating exchange rate stability, (4) eliminating restrictions on the
international flow of capital, (5) ensuring confidence by making the general resources of the IMF
temporarily available to member states, (6) adjusting balance-of-payments imbalances in an
orderly manner.79

77

Bordo & James, p. 4; Weiss, p. 1.

International monetary system has been defined as the system of exchange rates and international payments that
enable countries (and their citizens, as well) to transact with each other.
79
Art. 1, IMF Articles of Agreement.
78

34

SELECTED JURISPRUDENCE ON
INTERNATIONAL ECONOMIC LAW
International jurisprudence
The World Trade Organization (WTO), supra, deals with the global rules of trade between
nations. Its main function is to ensure that trade flows as smoothly, predictably, and freely as
possible. Trade disputes are resolved under the Dispute Settlement Understanding. Member states
may bring disputes to the WTO if they think their rights under the agreements are being infringed.
The Dispute Settlement Body (DSB) is the body responsible for the dispute settlement mechanism.
The DSB is the ultimate arbiter of whether a member state has broken any rules enacted under the
WTO Agreement or one of the multilateral trade agreements. Judgments of the DSB are made by
specially-appointed independent experts based on interpretations of the agreements and member
states commitments. The mechanism involved in dispute settlement under the WTO-DSB
involves: (1) the request for consultation by the state aggrieved by the economic practices of
another state, with the respondent state, (2) a panel report is circulated which contains the DSB
findings on the questions and issues raised in consultation, (3) the findings of the panel may be
appealed to the Appellate Body, which may sustain or reverse in whole or in part, the findings of
the DSB Panel. Under the current set-ups, disputes are resolved by mutual agreement of the stateparties involved, who voluntary engage to modify their policies to conform to findings of the
appellate body, or upon other acceptable terms agreed upon by said state parties.
In US Tuna II (Mexico)80, the panel rejected Mexico's first claim by finding that the US
dolphin-safe labelling provisions do not discriminate against Mexican tuna products and are
therefore not inconsistent with Article 2.1 of the Technical Barriers to Trade (TBT) Agreement.
Despite finding that Mexican tuna products are like tuna products originating in the United States
or any other country within the meaning of Article 2.1 of the TBT Agreement, the Panel concluded
that Mexican tuna products are not afforded less favourable treatment than tuna products of US
and other origins in respect of the US dolphin safe labelling provisions on the basis of their origin.
According to the Appellate Body, the measure at issue modified the competitive conditions in the
US market to the detriment of Mexican tuna products and the United States did not demonstrate
that this stemmed solely from legitimate regulatory distinctions. The Appellate Body, therefore
found that the US dolphin-safe labelling measure was inconsistent with Art. 2.1 and reversed
the Panels contrary finding.
In Thailand Cigarettes (Philippines)81, the Philippines requested consultations with
Thailand concerning a number of Thai fiscal and customs measures affecting cigarettes from the
Philippines. Such measures include Thailand's customs valuation practices, excise tax, health tax,
80

United States of America Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products,
WTO Doc WT/DS381/AB/R.
81
Thailand Customs and Fiscal Measures on Cigarettes from the Philippines, WTO Doc WT/DS371/AB/R.

35

TV tax, VAT regime, retail licensing requirements and import guarantees imposed upon cigarette
importers. The Philippines claims that Thailand administers these measures in a partial and
unreasonable manner and thereby violates Article X:3(a) of the General Agreement on Tariffs and
Trade (GATT) 1994. Furthermore, the Philippines claimed that Thailand's dual license
requirement that requires that tobacco and/or cigarette retailers hold separate licenses to sell
domestic and imported cigarettes is inconsistent with Article III:4 of the GATT 1994, because it
provides less favourable treatment for imported products than for like domestic products.
The Appellate Body also upheld the Panel's finding that Thailand acts inconsistently with
Article III:4 of the GATT 1994 by according less favourable treatment to imported cigarettes than
to like domestic cigarettes. The Thai measure at issue consists of an exemption from three sets of
VAT-related administrative requirements for resellers of domestic cigarettes, together with the
imposition of these requirements on resellers of imported cigarettes. The Appellate Body found
that the Panel properly analysed this measure and its implications in the marketplace, and therefore
agreed with the Panel that this measure accords less favourable treatment to imported cigarettes
by imposing the additional administrative requirements only on resellers of imported cigarettes.
In Japan Apples82, the United States of Americas complaint arose from the maintenance
by Japan of quarantine restrictions on apples imported into Japan, said to be necessary to protect
against introduction of fire blight. Among the measures the United States complained of were the
prohibition of imported apples from orchards in which any fire blight was detected, the
requirement that export orchards be inspected three times yearly for the presence of fire blight and
the disqualification of any orchard from exporting to Japan should fire blight be detected within a
500 meter buffer zone surrounding such orchard. The Appellate Body upheld the Panel's finding
that the measure was maintained without sufficient scientific evidence inconsistently with SPS83
Art. 2.2, as there was a clear disproportion (and thus no rational or objective relationship) between
Japan's measure and the negligible risk identified on the basis of the scientific evidence.
In Philippines Distilled Spirits84, the United States requested consultations with the
Philippines with respect to the taxation of imported distilled spirits by the Philippines. The United
States considered that the Philippines' taxes on distilled spirits discriminate against imported
distilled spirits by taxing them at a substantially higher rate than domestic spirits. The United
States cites a number of specific measures in its request. The measure at issue is an excise tax on
distilled spirits, whereby a low flat tax is applied by the Philippines to spirits made from certain
designated raw materials, while significantly higher tax rates are applied to spirits made from nondesignated materials. The Appellate Body upheld the Panels finding that each type of imported
distilled spirit at issue in this dispute gin, brandy, vodka, whisky, and tequila made from nondesignated raw materials was like the same type of domestic distilled spirit made from
designated raw materials, within the meaning of Art. III:2

82

Japan Measures Affecting the Importation of Apples, WT/DS245/AB/R.

Agreement on the Application of Sanitary and Phytosanitary Measures (Marrakesh, Morocco, 15 April 1994),
Marrakesh Agreement Establishing the World Trade Organization, Annex 1A, THE LEGAL TEXTS: THE RESULTS OF THE
Uruguay Round of Multilateral Trade Negotiations, 59 (1999), 1867 U.N.T.S. 493.
84
Philippines Taxes on Distilled Spirits, WT/DS403/AB/R.
83

36

In the Philippines, all domestic distilled spirits (mostly gins, brandies, rums, vodkas,
whiskies and tequilatype spirits) are made from one of the designated raw materials, cane sugar,
whereas the vast majority of imported spirits are made from nondesignated materials (e.g. cereals
or grapes). Consequently, all domestic spirits are subject to the low flat tax, while the vast majority
of imported spirits are subject to one of the higher tax rates. Domestic distilled spirits made from
designated raw materials and imported distilled spirits made from other raw materials were found
to constitute directly competitive or substitutable products. The Philippines was thus found to have
applied dissimilar internal taxes in a manner so as to afford protection to the Philippine domestic
production of distilled spirits in violation of Art. III:2. The Panel found that because imported
spirits are taxed less favourably than domestic spirits, the Philippine measure, while facially
neutral, is nevertheless discriminatory and thus violates the obligations under the first and second
sentences of Article III:2 of the GATT 1994, which to wit state that:
The products of the territory of any contracting party imported into the
territory of any other contracting party shall not be subject, directly or indirectly,
to internal taxes or other internal charges of any kind in excess of those applied,
directly or indirectly, to like domestic products. Moreover, no contracting party
shall otherwise apply internal taxes or other internal charges to imported or
domestic products in a manner contrary to the principles set forth in paragraph 1.

Local jurisprudence
WTO-GATT and state sovereignty
In Tanada v. Angara85, a suit was filed to nullify the concurrence of the Philippine Senate
to the Presidents ratification of the agreement establishing the World Trade Organization (WTO).
It was contended that the agreement places nationals and products of member countries on the
same footing as Filipinos and local products in contravention of the Filipino First Policy.
Petitioners in that case argued that (1) that the WTO requires the Philippines to place nationals and
products of member-countries on the same footing as Filipinos and local products and (2) that the
WTO intrudes, limits and/or impairs the constitutional powers of both Congress and the Supreme
Court, the instant petition before the Court assailed the WTO Agreement for violating the mandate
of the 1987 Constitution that is, to develop a self-reliant and independent national economy
effectively controlled by Filipinos86, to give preference to qualified Filipinos87, and to promote the
preferential use of Filipino labor, domestic materials and locally produced goods88. The
imputations of the petitioners further specified the Constitutional grounds upon which the petition
is raised, specifically citing Sec. 19, Article II, and Secs. 10 and 12, Article XII, of the Constitution.
Petitioners maintained that this Agreement was an assault on the sovereign powers of the
Philippines because it meant that Congress could not pass legislation that would be good for
85

G.R. No. 118295, May 2, 1997.

Sec. 19, Art. II, 1987 Constitution.
87
Sec. 10, Art. XII, 1987 Constitution.
88
Sec. 12, Art. XII, 1987 Constitution.
86

37

national interest and general welfare if such legislation would not conform to the WTO Agreement,
since The WTO Agreement provides that each member shall ensure the conformity of its laws,
regulations and administrative procedures with its obligations as provided in the annexed
Agreements.89 Respondents for their part answered said allegations, contending that (1) such
Charter provisions aforementioned, are not self-executing and merely set out general policies, (2)
that these nationalistic portions of the Constitution invoked by petitioners should not be read in
isolation but should be related to other relevant provisions of Art. XII, particularly Secs. 1 and 13
thereof, (3) the cited WTO clauses do not conflict with the Constitution, and (4) the WTO
Agreement contains sufficient provisions to protect developing countries like the Philippines from
the harshness of sudden trade liberalization.
The court was clear to mention that the Constitution, while not encouraging the unlimited
entry of foreign goods, services or investments, does not prohibit them either. What is inimical to
the law, are those practices that constitute unfair competition from the entry of foreign goods or
services. In denying the petition of the petitioners, the Supreme Court held that reciprocity
characterizes the Philippine commitments under WTO-GATT. Sovereignty, while absolute on the
domestic level, is still subject to those limitation assumed by the state, expressly or impliedly as a
consequence if its membership in the family of nations. Treaties by their nature as creating
obligations for states to comply with under international law, restrict the absoluteness of a states
sovereignty. States, under the principle of auto-limitation, are not precluded from limiting their
own sovereignty in exchange for certain benefits. The court held that the provisions in the WTOGATT were not one-sided to the detriment of the Philippines. The GATT itself has provided builtin protection from unfair foreign competition and trade practices including anti-dumping
measures, countervailing measures and safeguards against import surges. Where local businesses
are jeopardized by unfair foreign competition, the Philippines can avail of these measures.

International Economic Law and Intellectual Property Rights

A perusal of Intellectual Property related cases in our domestic jurisdiction has revealed
the close interconnection between international economic law (IEL) and our domestic Intellectual
Property Law90 (IPL). IEL, as applied to our domestic jurisdiction is most profoundly expressed
in IPL cases dealing with patents, copyright, and trademark law.
The WTO seeks to advocate trade without discrimination. International trade and the
interconnectedness of the global economic system have necessitated the development and the
strengthening of the protection of intellectual property rights. The counterfeiting of industrial
products and trademarks has had adverse effects on trade revenues, and, ultimately, it is the public
consumer who is most at risk, since in the ordinary course of business, trademarks and tradenames
have significance in guaranteeing to the purchasing public a certain standard or quality upon which
one can rely on. Moreover, the protection of intellectual property rights is imbued with public
interest, as their protection encourages confidence in doing business in the country which translates
to increases in much needed investments that aid in the development of the national economy.
89

Par. 4, Article XVI (Miscellaneous Provisions), WTO Agreement, p.146, Vol. 1, Uruguay Round of Multilateral Trade
Negotiations.
90
Republic Act No. 8293.

38

In Mipuri v. CA91, at issue was the application for the registration of the Trademark,
Barbizon for use in brassieres and ladies undergarments applied for by a certain Lolita Escobar,
who claimed to have been using the mark in business since the 1970s. Private respondent Barbizon
Corporation, a corporation organized and doing business under the laws of New York, United
States of America, opposed the application. Barbizon (USA), anchored it argument on the
confusing similarity of its trademark with Escobars and that the registration of Escobar's similar
trademark will cause damage to private respondent's business reputation and goodwill. Barbizon
(USA) further contends, that its trademark is an internationally well-known mark, within the
contemplation of the law and under the Paris convention is thus entitled to protection in the
Philippines.
The Supreme Court held in the affirmative that the Paris Convention affords protection to
a foreign corporation against a Philippine applicant for the registration of a similar trademark. The
court was clear to mention that the Philippines and the United states have both acceded to the Paris
Convention.
According to the Supreme Court, The Convention of Paris for the Protection of Industrial
Property, otherwise known as the Paris Convention, is a multilateral treaty that seeks to protect
industrial property consisting of patents, utility models, industrial designs, trademarks, service
marks, trade names and indications of source or appellations of origin, and at the same time aims
to repress unfair competition. The Convention is essentially a compact among various countries
which, as members of the Union, have pledged to accord to citizens of the other member countries
trademark and other rights comparable to those accorded their own citizens by their domestic laws
for an effective protection against unfair competition. In short, foreign nationals are to be given
the same treatment in each of the member countries as that country makes available to its own
citizens. Nationals of the various member nations are thus assured of a certain minimum of
international protection of their industrial property.
Specifically under Article 6bis of the Paris Convention, each country is bound to undertake
to refuse or cancel the registration, and prohibit the use of a trademark which is a reproduction,
imitation or translation, or any essential part of which trademark constitutes a reproduction, liable
to create confusion, of a mark considered by the competent authority of the country where
protection is sought, to be well-known in the country as being already the mark of a person entitled
to the benefits of the Convention, and used for identical or similar goods. It is a self-executing
provision and does not require legislative enactment to give it effect in the member country.92
On the other hand, The Trade Related Aspects of Intellectual Property Rights Agreement
seeks to grant adequate protection of intellectual property rights by creating a favorable economic
environment to encourage the inflow of foreign investments, and strengthening the multi-lateral
trading system to bring about economic, cultural and technological independence.93

91

G.R. No. 114508, November 19, 1999.

Art. 6bis(1), Paris Convention for the Protection of Industrial Property.
93
Speech of J. Antonio Buencamino, Director, DTI-BITR, DTI-BITR Primer, cited in Mipuri v. CA, supra.
92

39

In Converse Rubber Corp. v. Universal Rubber Products94, at issue was that respondent
Universal Rubber Products, Inc. filed an application with the Philippine Patent office for
registration of the trademark UNIVERSAL CONVERSE AND DEVICE used on rubber shoes
and rubber slippers. Petitioner Converse Rubber Corporation filed its opposition to the application
for registration on grounds that:
a. The trademark sought to be registered is confusingly similar to the word
CONVERSE which is part of petitioners corporate name CONVERSE
RUBBER CORPORATION as to likely deceive purchasers of products on
which it is to be used to an extent that said products may be mistaken by the
unwary public to be manufactured by the petitioner; and
b. The registration of respondents trademark will cause great and irreparable
injury to the business reputation and goodwill of petitioner in the Philippines
and would cause damage to said petitioner
Article 8 of the Convention of the Union of Paris for the Protection of Industrial Property
(Paris Convention), to which the Philippines became a party on September 27, 1965, provides that
a trade name [corporate name] shall be protected in all the countries of the Union without the
obligation of filing or registration, whether or not it forms part of the trademark. The object of
the Convention is to accord a national of a member nation extensive protection against
infringement and other types of unfair competition.95
The mandate of the aforementioned Convention finds implementation in Section 37 (Rights
of Foreign Registrants) of Republic Act No. 166, otherwise known as the Trademark Law, which
provides that persons who are nationals of, domiciled in, or have a bona fide or effective business
or commercial establishment in any foreign country, which is a party to an international
convention or treaty relating to marks or tradenames on the repression of unfair competition to
which the Philippines may be a party, shall be entitled to the benefits and subject to the provisions
of this Act. Tradenames of persons described in the first paragraph of this section shall be
protected without the obligation of filing or registration whether or not they form parts of marks.
Against the argument by respondent that petitioner was not licensed to do business in the
Philippines or actually doing business in the Philippines, and so could not have any name to protect
The supreme court held that Foreign corporations not licensed to do business and not actually
doing business have the right to maintain action in the Philippines. In La Chemise Lacoste, S.A. v.
Fernandez96, the Supreme Court, reiterating Western Equipment and Supply Co. v. Reyes97, stated
that a foreign corporation which has never done any business in the Philippines and which is
unlicensed and unregistered to do business here, but is widely and favorably known in the
Philippines through the use therein of its products bearing its corporate and tradename, has a
legal right to maintain an action in the Philippines to restrain the residents and inhabitants thereof
from organizing a corporation therein bearing the same name as the foreign corporation, when it
appears that they have personal knowledge of the existence of such a foreign corporation, and it
94

G.R. No. L-27906, January 8, 1987.

Vanity Fair Mills, Inc. vs. T. Eaton Co., 234 F. 2d 633
96
129 SCRA 373, May 21, 1984.
97
51 Phil. 115, 1927.
95

40

is apparent that the purpose of the proposed domestic corporation is to deal and trade in the same
goods as those of the foreign corporation.
The court further held that petitioners were not here seeking to enforce any legal or
control rights arising from, or growing out of, any business which it has transacted in the
Philippine Islands. The sole purpose of the action is to protect its reputation, its corporate name,
its goodwill, whenever that reputation, corporate name or goodwill have, through the natural
development of its trade, established themselves. Its rights to the use of its corporate and trade
name is a property right, a right in rem, which it may assert and protect against all the world, in
any of the courts of the world even in jurisdictions where it does not transact business.

41

ASSIMILATION OF INTERNATIONAL
ECONOMIC LAW IN PHILIPPINE LAWS
The Philippines has been administering trade relations with foreign countries even before
the arrival of the Spaniards. Filipino historiographers have transcribed Chao Ju Kua, a Chinese
chronicler who came to the Philippines during the 13th century to conduct trade with Filipinos.
Aside from China, Philippines also had trade relations with Japan, Thailand, and Borneo. It was
all conducted through barter.98
During the Spanish times, the Philippines signified trade relations with Mexico through the
Acapulco trade. It was not only Manila that was the trade centre of commerce but also Iloilo,
Zamboanga, Cebu, Legaspi, and Tacloban, among others. It was an advantage to the Philippines
to open many centres of trade. Production, trade, and standard of living were raised so much that
it created the middle class. The opening of the Suez Canal in 1860 also influenced our trade
relations. A small flow of European immigrants came with the opening of the Suez Canal, which
cut the travel time between Europe and Philippines by half.99
By the end of the 19th century, the Philippines has been conducting trade relations with
countries in Europe, America, and Asia. The Philippines rose rapidly and its local industries
developed to satisfy the rising demands of an industrializing foreign trade. New ideas about
government and society, which the friars and colonial authorities in the Philippines found
dangerous, quickly found their way into the Philippines, notably through Freemasons, who, along
with others, spread the ideals of the Americans, French, and other revolutions, including Spanish
liberalism.100
During the American period, foreign trade started to flourish. Free trade relations between
the Philippines and the United States of America started on August 5, 1909.
At present, all goods from the Philippines entering the United States of America are taxed
100%. This drove the Philippines to look for other markets like Japan, Germany, United
Kingdom, Netherlands, and other countries in Europe and Asia, including socialist countries like
China, Russia, and Bulgaria, among others.

Economic and trade fiats in the Constitution

The verbose 1987 Philippine Constitution is replete with many provisions with respect
economic and trade. These constitutional provisions are instantaneous directives to secure that
economic and trade are not left at the whims and caprices of the duty-bearers that is, the
98

Bolivar-Tolentino, p. 207.
Ibid.
100
Ibid.
99

42

government or any of its branches, subdivisions, agencies, or instrumentalities particularly tasked

with trade relations. Specifically, the 1987 Constitution enumerates these guaranteed benchmarks.
Among these provisions are:
1. By reason of its membership in the family of nations (or regional integrations,
for that matter), the Philippines is bound by the generally accepted principles
of international law, which are considered to be automatically part of its laws
under the doctrine of incorporation.101
2. In its relations with other states, the Philippines shall pursue an independent
foreign policy and the paramount consideration shall be national sovereignty,
territorial integrity, national interest, and the right to self-determination.102
3. Treaties of international agreements shall only be valid and effective upon the
concurrence of at least 2/3 of all the members of the Senate.103
4. The goals of national economy are a more equitable distribution of
opportunities, income, and wealth; a sustained increase in the amount of goods
and services by the nation for the benefit of the people; and an expanding
productivity as the key to raising the quality of life for all.104
5. The State shall pursue a trade policy that serves the general welfare and utilizes
all forms and arrangements of exchange on the basis of equality and
reciprocity.105
6. Social justice as a means and an end of economic activities.106
The abovementioned provisions only serve to exhibit the desire of the framers to clog the
highest law of the land, which should be limited only to general statements couched in concise and
clear language, with detailed rules on economic and trade, which are better embodied in
implementing statutes.

Philippine
countries

trade

agreements

with

other

In recent years, the world economy has witnessed the proliferation of bilateral and regional
free trade agreements (FTAs); the increasing count of multilateral trade commitments; the
increasing relevance of trade facilitation measures amidst the persistence and, in certain cases, the
rise of non-tariff measures; the growing number of bilateral foreign direct investment flows
between developed and developing regions as well as between economies within developing
regions; the growing significance of trade in services; and progress in better ascertaining the
potential role of international trade and investment in economic growth and development. FTAs,

101

Sec. 2, Art. II, 1987 Constitution.

Sec. 7, Art. II, 1987 Constitution.
103
Sec. 27(2), Art. VI, 1987 Constitution; Sec. 28(2), Art. VI, 1987 Constitution; Sec. 21, Art. VII, 1987 Constitution.
104
Sec. 1, Art. XII, 1987 Constitution.
105
Sec. 13, Art. XII, 1987 Constitution.
106
Secs. 1 and 2, Art. XIII, 1987 Constitution.
102

43

at both the regional and bilateral levels, have expanded worldwide over the past two decades of
stepped-up foreign trade.
The Philippines has been involved in a number of FTAs, including the ASEAN Free Trade
Area, ASEAN-China Free Trade Agreement, and the Japan-Philippines Economic Partnership
Agreement, among others.
In addition, Bown (2010) provides three key services of multilateral trading system,
namely: (1) a venue for multilateral trade negotiations, (2) a tool for mediating trade disputes
between its member countries, and (2) a source of information on member countries policy
changes that affect commercial interests. Since 1994, when it entered the World Trade
Organization, the Philippines made commitments that are consistent with the most-favoured
nation principle107 and national treatment.
In a research conducted by Taningco (2010), it was pointed out that the Philippines needs
to heighten the economic gains and extenuate the economic costs associated with international
trade in goods and services; more memberships in bilateral and regional FTAs; greater flows and
volatility in foreign direct investment; and a more liberal trading and investment environment. This
postulates greater cognizance and more conversancy on the potential economic consequence of
these trends in international trade and investment amongst the stakeholders in the country.

Philippine foreign trade policies and practices

Our industry has become dependent upon our imports to the detriment of our economy.
This resulted in a deficit in our balance of trade108. In responding to this balance of trade, the
following policies have been adopted by the Philippines:
1. Exchange control scheme To ensure balance between dollar payments and
dollar receipts there is a need to resort to exchange control scheme. The Central
Bank supervises the dollars earned by licensing import projects. A license has
to be secured from the Central Bank.
2. Decontrol of the Peso When one imports, he simply buys dollars in the
market. The result is that the imports become more extensive than the exports.
3. Devaluation Decontrol is followed by the peso becoming less valuable in
relation to other currencies. This move is called devaluation where there is
decrease in imports and increase in exports.109

107

The most-favoured nation principle requires member states to accord the most favourable tariff and regulatory
treatment given to the product of any one member at the time of import or export of like products to all other
members. This is a bedrock principle of the World Trade Organization.
108
Balance of trade has been understood as the difference between our imports and exports of goods and services.
In other words, there is excess of imports over exports. It is not good for a country to have more imports than exports
or to have more exports than imports. (Bolivar-Tolentino, 2004).
109
Bolivar-Tolentino, p. 204-205.

44

In any case, policy reforms pursued by the Philippines over a protracted period have
resulted in a more open, competitive economy which was able to resist relatively the Asian
financial crisis. Policy reform has continued to open the Philippine economy, going a long way to
correcting the misallocation of resources with earlier trade and industrial policies. Non-tariff trade
barriers have been largely removed and tariff protection has been sharply reduced. More liberal
investment policies and the privatization programme have widened the choice of sectors for
domestic and foreign private investors, and together with sound macroeconomic policies were
instrumental in boosting real gross domestic products growth to an average annual rate of 5%
between 1994 and 1997. Nevertheless, the reform process is not yet through; its continuation is
desirable for the Philippines to establish a more outward-looking, rather than export-oriented,
environment that could well support higher, sustainable rates of economic growth.
Export growth has been closely linked to rapid increase of inward foreign direct
investment. Although limitations to foreign equity participation remain in various key sectors,
these have been gradually reduced through sound macroeconomic policies, privatization, a stable
business environment, and a skilled labour force. The government also offers a comprehensive
package of tax and non-tax investment incentives which, however, has ipso facto become
composite and onerous to administer on account of the proliferation of regulatory measures,
circumstances, and requisites.
Progress in the privatization of state corporations, a neoliberal policy of the state, has
reduced the degree of state intervention in the economy yet, the Philippine economy is still
characterized by a high degree of market concentration.
Furthermore, the Philippines continued liberalization of its trade and investment regimes
has resulted in a more neutral incentive structure. Imposing and reductions of tariff rates over the
past years have gone a long way towards compensating the traditional anti-export bias in the
Philippine import regime.
In fine, trade and investment reforms in the Philippines have been carried out within the
framework of stable political and institutional environment. Disciplined macroeconomic policies
have underlain a fiscal balance and lower inflation. If it still persists, the Philippines my now finally
bid its farewell to its third world status.

45

REFERENCES
BOOKS
Bolivar-Tolentino, J. (2004). Economics. Quezon City: St. Bernadette Publications, Inc.
Bordo, M.D. & James, H. (2000). The International Monetary Fund: Its Present Role in Historical
Perspective. Massachusetts: National Bureau of Economic Research.
Carpenter, M. & Dunung, S.P. (2011). International Business: Opportunities and Challenges in a
Flattening World. Washington: Flat World Knowledge.
Desierto, D. (2015). Public Policy in International Economic Law: The ICESCR in Trade,
Finance, and Investment. Oxford: Oxford University Press.
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Fenwick, C. G. (1948). International Law. New York: The Century Co.
Garcia, F.J. & Ciko, L. (2011). Theories of Justice and International Economic Law. Boston:
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Kehoe, W.J. (n.d.). Regional and Global Economic Integration. Virginia: University of Virginia.
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Kurlantzick, J. (2012). ASEANs Future and Asian Integration. New York: Council of Foreign
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Leviter, L. (2011). The ASEAN Charter: ASEAN Failure or Member Failure. New York: New
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Raustiala, K. (2003). Rethinking the Sovereignty Debate in International economic Law. Oxford:
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Sanchez, A.M. (2010). Assessing the Evolving Convergence and intersection of International
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Subedi, S.P. (2006). International Economic Law. London: University of London.
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Tansoo, A. (1979). New International Economic Order and International Economic Laws.
Hokkaido: Hokkaido University Collection of Scholarly and Academic Papers.

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Trachtman, J.P. (1996). International Economic Law Revolution. Pennsylvania: University of

Pennsylvania Journal of International Economic Law.
VanGrasstek, C. (2013). The History and Future of the World Trade Organization. Geneva: World
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ONLINE MATERIALS
Burges, Sean. (n.d.). Economic Integration. Accessed on October 19, 2015, retrieved from
http://www.britannica.com/topic/economic-integration.
Department of Foreign Affairs-Foreign Service Institute. (2015). APEC Primer. Accessed on
October 19, 2015, retrieved from http://apec2015.ph/about-apec/primer/.
Hills, C.A. (2014). NAFTAs Economic Upsides. Accessed on October 20, 2015, retrieved from
https://www.foreignaffairs.com/articles/canada/2013-12-06/naftas-economic-upsides.
Sergie, M.A. (2014). NAFTAs Economic Impact. Accessed on October 20, 2015, retrieved from
http://www.cfr.org/trade/naftas-economic-impact/p15790.

STATUTES AND TRADE AGREEMENTS

1987 Constitution.
ASEAN Charter.
ASEAN Vision 2020.
Charter of Economic Rights and Duties of States.
European Union Constitutional Treaty.
General Agreement on Tariff and Trade 1994.
International Convention on Economic, Social, and Cultural Rights.
International Chamber of Commerce Constitution.
International Monetary Fund Articles of Agreement.
Marrakesh Agreement.
North American Free Trade Agreement.
Paris Convention for the Protection of Industrial Property.
Statute of the International Court of Justice.
Republic Act No. 8293. An Act Prescribing the Intellectual Property Code and establishing the
Intellectual Property Office, Providing for its Powers and functions, and for Other
Purposes.
Republic Act No. 166. An Act to Provide for the Registration and Protection of Trademarks,
Tradenames, and Servicemarks, Defining Unfair Competition and False Marking, and
Providing remedies Against the Same, and for Other Purposes.
Technical Barriers to Trade Agreement.
47

Trade Related Aspects of Intellectual Property Rights Agreement.

United Nations Charter.
United Nations General Assembly Resolution on the Permanent Sovereignty over Natural
Resources.
Uruguay Round of Multilateral Trade Negotiations.
World Trade Organization Agreement.

JURISPRUDENCE
Converse Rubber Corp. v. Universal Rubber Products, G.R. No. L-27906, January 8, 1987.
Japan Measures Affecting the Importation of Apples, WT/DS245/AB/R.
La Chemise Lacoste, S.A. v. Fernandez, 129 SCRA 373, May 21, 1984.
Mipuri v. Court of Appeals, Director of Patents, and the Barbizon Corporation, G.R. No. 114508,
November 19, 1999.
Philippines Taxes on Distilled Spirits, WT/DS403/AB/R.
Taada vs Angara, G.R. No. 118295, May 2, 1997.
Thailand Customs and Fiscal Measures on Cigarettes from the Philippines, WTO Doc
WT/DS371/AB/R.
Thirty Hogshead of Sugar v. Boyle, 9 Cranch 191, 198.
United States of America Measures Concerning the Importation, Marketing and Sale of Tuna
and Tuna Products, WTO Doc WT/DS381/AB/R.
Vanity Fair Mills, Inc. v. T. Eaton Co., 234 F. 2d 633
Western Equipment and Supply Co. v. Reyes, 51 Phil. 115, 1927.

48