Virginia State Bar

International Practice Section

Spring 1997 Newsletter

 

Spring 1997

 

QUARTERLY

 

Vol. 15, No. 2

 

 

 

 

Contents

 

Asia: APEC: Cultural Aspects of International Conflict Resolution.........6

 

Globalism: For It, Against It or Forget It............................................................18

 

North America: Trade-Finance Policy in America..............................................21

 

 

Chair’s Column..........................................................................................................................3

 

Membership.................................................................................................................................5

 

May CLE: Advising the Client Who Is "Going International"........................17

 

Member Input............................................................................................................................22

 

Professional Announcements................................................................................................22

 

Calendar................................................................................................................................24

 

 

 

 

9th Annual International Business Law Seminar

 

Advising the Client Who Is "Going International"

 

Page 17

 

 

Virginia State Bar

 

International Practice Section

 

Officers

 

Charles V. McPhillips......................Chair

Patrick O. Gottschalk...............Chair Elect

John B. Sternlicht.......................Secretary

 

Board of Governors

 

William J. Benos......Immediate Past Chair

Silvia N. Martínez-Cazón..........Past Chair

Eliot Norman............................Past Chair

Elliott P. Park................Newsletter Editor

Charles W. Best, III

George J.A. Clemo

Thomas J. Fadoul, Jr.

George L. Hiller

John M. Huddle

Michael P. Kelley

Michael J. Lockerby

Robert G. McElroy

Robert R. Merhige, III

Jeffrey D. Nuechterlein

Edward R. Slaughter, Jr.

Charles L. Williams, Jr.

 

Ex-Officio Board Members

 

Clyde E. Ellis, Jr.

Thomas B. McVey

Kevin D. Pomfret

Stuart S. Malawer

Professor Raj Bhala

Rosann Bocciarelli

Douglas M. Nabhan

John M. Weisner

Keith C. Cuthrell, Jr.

Henry P. Bouffard

 

Diana L. Balch......................VSB Liaison

 

 

Submissions

 

The International Practice News welcomes the submission of articles and notices of events from International Practice Section members. Submissions should pertain to international law and practice. They should be original, typed, double-spaced, and no longer than ten pages. The International Practice News reserves the right to edit the submissions it chooses to use.

 

Please send submissions to the following address:

 

International Practice News

c/o Elliott P. Park, Esquire

The Ironfronts

1011 East Main Street

Suite 300

Richmond, VA 23219

U.S.A.

Tel: 804.648.7565

Fax: 804.648.7567

E-Mail: ellipark@richmond.infi.net

 

 

 

 

Copyright © 1997, International Practice Section, Virginia State Bar.

 

The information published in this newsletter is intended to inform members of the International Practice Section of the Section’s news and events, and to provide them with general information about current issues in international law and practice. It is not to be used or relied upon by anyone in connection with a specific legal problem, nor is it to be used by nonmembers as a substitute for consultation with an attorney.

 

Comments, expressions of opinion, or statements made in this newsletter are those of the editor and/or the contributors and are not necessarily those of the Virginia State Bar or the International Practice Section.

 

Chair’s Column

 

by Charles V. McPhillips, Chair

Kaufman & Canoles, PC

Norfolk, Virginia

 

Spring 1997

 

Greetings from Tidewater, where Virginia and America were given birth! Please allow your humble scrivener to report briefly on the activities of your Section.

 

In October, the Section hosted a most provocative lecture by Professor William Lovett, the Director of the International Law, Trade and Finance Program at Tulane Law School. Dr. Lovett addressed an audience in the Moot Court Room of the T.C. Williams School of Law on the various "asymmetries" plaguing the international trade regime. He challenged the free-traders amongst us to consider the punitive impact on the US economy of massive trade deficits that accumulate year after year. Although the causes of these deficits are varied, Dr. Lovett persuasively argued that a contributing factor was the tendency of the US to have her pockets picked during multilateral trade negotiations.

 

Although no proponent of autarky as espoused by Pat Buchanan and his ilk, Dr. Lovett challenged the Section to consider some of the detrimental consequences of the current international trade regime, as embodied in GATT and other agreements, on the US economy in general and the US dollar in particular. The massive US trade and current account deficits suffered over the past twelve years lead Dr. Lovett, for example, to predict the collapse of the US dollar as the world's reserve currency, not to mention its loss of exchange rate value.

Beginning in the late 1970s, the US began to incur significant, intractable trade deficits with its trade partners, culminating in a 1995 trade deficit of $174.5 billion. From 1977 through 1995, the US accumulated deficits of almost $2 trillion. An anticipated 1996 deficit looms in excess of $200 million. Our trading position with Western Europe and Canada has declined over the last several years, but much of this deficit arises from our worsening trade relationship with Japan, East Asia and Latin America.

 

Over the same period, the US dollar has steadily declined in value from, 294 Japanese yen and 2.4 German deutsche marks per dollar in December 1976 to approximately 120 yen and 1.5 marks per dollar, respectively, today. In this regard, the US dollar has been treated relatively gently. Other countries experiencing trade deficits of similar magnitude have witnessed the devastation of their currencies in world markets. Only through the centrifugal force of international dependency on the dollar as the reserve currency and extraordinary interventions by various governments has the US dollar avoided a more precipitous fall.

 

These persistent trade deficits and the long-term decline of the US dollar have paralleled the erosion of the United States' share of world-wide wealth. No longer is the US the world's richest nation. Based on current exchange rates, the per capita GDP of Japan was $34,630 in 1994, compared to $25,860 in the US. By the same measure, the US eked out a very slight lead over western Germany in per capita wealth production, but both fell behind Switzerland and Norway.

 

Dr. Lovett argued that the lesson was simple: continuing trade deficits cause a loss of wealth, a phenomenon that can be confirmed anecdotally by visiting the often desolate

 

 

 

 

 

 

 

 

 

 

 

[PHOTO]

 

 

 

 

 

 

 

 

 

factory centers of the former US industrial heartland. A visitor to the major urban areas around the world cannot help but notice that US cities seem dispirited and decaying in contrast to prosperous international counterparts such as Tokyo, Singapore, Seoul,

Santiago and Frankfurt.

 

In Dr. Lovett's view, a significant portion of this US decline can be attributed to "asymmetries" in the international trading regime. Put more simply, the US has too frequently practiced unilateral disarmament in the international marketplace, opening our market to almost all of our trading partners without receiving reciprocal advantages from them. The average trade-weighted tariff in the US is 3.5%, compared to 30.9% in Argentina, 27% in Brazil, 33.7% in Mexico, 28.1% in Taiwan, 22.5% in the Philippines and 4.5% in Canada. Of course, these tariff barriers are reinforced and sometimes extended by numerous non-tariff barriers, such as import quotas and unfair distribution practices.

 

Dr. Lovett was especially critical of the US approach to GATT, which failed to relieve many of the asymmetries in tariff and non-tariff barriers erected worldwide, while further exposing the US market to unfair trade practices by other nations. He also criticized the creation of a World Trade Organization that gives the US no greater voting power than much smaller economies, following the format of the United Nations General Assembly. In other words, the US has the same one vote that Sri Lanka has.

 

Dr. Lovett's prescriptions for these ailments are not easily dispensed. He advocates, for example, re-instituting moderate US tariffs designed to raise an additional $70 billion in annual tax revenue. He would also favor devaluation of the US dollar in order to place the US in a more competitive position. He further espouses more muscular trade negotiations by the US government, which thus far has shied away from addressing bilateral imbalances with countries such as China.

 

Although I disagree with Dr. Lovett in some of his analysis, and fear that the political maturity necessary to implement his proposed solutions responsibly is simply implausible, our Section did welcome the challenge to our received wisdom on the virtues of free trade.

 

 

Elsewhere in the newsletter is information on the 1997 Directory of Foreign Attorneys being published by our Section. This second edition of this useful guide, which roughly doubles the length of the first edition, will be distributed as a door prize to all attendees at the Ninth Annual Institute on International Business Law to be held on Friday, May 9, 1997 in Reston. Copies will also be distributed at the Section's CLE seminar during the Virginia State Bar Annual Meeting in Virginia Beach this June. My thanks to all the Section members who have contributed names and data for this second edition.

 

 

Co-chairs Ned Slaughter and Sonny Ellis have done an outstanding job planning and organizing our annual CLE production, this year to be held on Friday, May 9, 1997 at the Hyatt Regency in Reston, Virginia. More information on this program is provided elsewhere in this newsletter. As someone who has attended seminars in international business law in many different venues, I can assure you that this program is as good as one can find, and at a much less expensive price. Please make plans to join us at the Hyatt Regency on Friday, May 9, 1997.

 

 

Keith Cuthrell and Rob McElroy are working together on a very interesting program exploring the important tax issues bedeviling foreign businesses investing or otherwise doing business in the US. This seminar will be presented at the VSB Annual Meeting on Friday afternoon, June 20, 1997 in Virginia Beach. Any Virginia lawyer advising foreign-owned clients needs to attend this program.

 

 

 

See you in Reston in May and Virginia Beach in June!

 

 

 

 

 

 

 

Membership

 

Current Membership: 327

 

The Board of Governors invites you to become a member of this dynamic Section and to participate in a rapidly changing and growing field of law. Annual dues are twenty dollars for Active and Associate members; annual dues are ten dollars for Law Students. Dues include a subscription to the International Practice News. Membership in the Virginia State Bar is not a prerequisite to enrollment in the International Practice Section.

 

To become a member in the International Practice Section contact:

 

Virginia State Bar-- Membership

Eighth & Main Building

707 East Main Street, Suite 1500

Richmond, VA 23219-2803

U.S.A.

804.775.0500

 

 

 

­­Revised Edition­­

 

CONNECTING VIRGINIA LAWYERS WITH THE WORLD:

1997 Directory

of

Foreign Attorneys

 

Second Edition

 

To request the International Practice Section’s Directory of Foreign Attorneys, or to propose a foreign attorney for inclusion in the International Practice Section’s next Directory of Foreign Attorneys, contact:

 

Charles V. McPhillips

Kaufman & Canoles

One Commercial Place

P.O. Box 3037

Norfolk, VA 23514

U.S.A.

Telephone: 757.624.3178

Facsimile: 757.624.3169

 

 

Asia Pacific Economic Cooperation (APEC):

 

Cultural Aspects of International Conflict Resolution

 

 

by

 

John N. Paden

George Mason University

Fairfax, Virginia

 

This essay will provide an overview of the following issues: (l) key characteristics of Asia Pacific Economic Cooperation (APEC); (2) approaches to conflict resolution; (3) APEC and conflict resolution; (4) APEC v. World Trade Organization (WTO) approaches to conflict resolution; and (5) cultural perspectives on conflict resolution.

 

1. Key Characteristics of APEC

 

The APEC was established in l989 to "advance common economic interests and foster constructive interdependence by encouraging the flow of goods, services, capital and technology". It is not intended to be a regional trade bloc but to "strengthen an open, multilateral trading system". This goal of free trade and investment in the Asia Pacific region is targeted for the year 20l0 by the industrialized economies and 2020 for developing economies.

 

The eighteen current members of APEC include the American Pacific Rim countries of the United States, Canada, Mexico and Chile; Asian trading entities such as China, Hong Kong, Chinese Taipei (Taiwan), Singapore, South Korea, Thailand and Japan; plus such Asian Pacific countries as Brunei, Indonesia, Malaysia, the Philippines, Papua New Guinea, Australia and New Zealand. In all, APEC represents over 40% of the world’s people and one half of the world’s economy.

 

APEC has not yet defined its exact relationship with the WTO, the North American Free Trade Agreement, the European Union, the Association of Southeast Asian Nations (ASEAN) and the Australia-New Zealand Closer Economic Relations pact. Yet, the significance of developments within APEC in the fields of economics, politics, conflict resolution, cross-cultural negotiations, and trade policy will have enormous impact on the emergence of a global trading system.

 

APEC is by definition cross-regional, and does not fit easily into the standard administrative or academic units. It links together countries which are historically western, Confucian and Islamic. APEC is "deeply concerned" by trade disputes in the region-- e.g. US and Japan in automotive parts trade-- and has noted that "more disputes between the United States and Japan clearly lie ahead", and "so do disputes between the United States and other economies in the region, and between others and Japan". Dispute settlement mechanisms, especially Asian approaches to "mediation", will be increasingly important.

 

The decision-making process in APEC is by consensus, and to a large extent, based on voluntary initiatives. The professional staff at the Secretariat in Singapore consists of one seconded civil servant from each of the eighteen countries-- i.e. a minimalist approach to structure. The annual summit meetings, usually held in November, tend to establish broad guidelines which are then followed up by working groups and "expert" committees. The Directorship of the Secretariat rotates each year, and is appointed by the country hosting the next summit meeting. The last summit was in Subic, the Philippines, in November, l996.

 

The second last summit meeting was held in November, 1995 in Osaka, Japan. One of the key issues raised by the Japanese at the Osaka meeting was "dispute settlement". This was partly in response to the Third Report of the Eminent Persons Group (EPG), "Implementing the APEC Vision"1, which had a number of suggestions regarding mechanisms for dispute settlement, several of which will be reviewed in this essay.

 

2. Approaches to Conflict Resolution

 

There are four main approaches to conflict resolution which characterize trade disputes in the APEC context: (l) bilateral governmental negotiations; (2) binding arbitration, especially the new WTO panels in Geneva; (3) adversarial litigation within an appropriate legal jurisdiction; and (4) third party non-binding mediation.

 

Bilateral negotiations often have some threat of sanctions if they fail to reach agreement. The most dramatic recent example of this was the US-China negotiation over intellectual property rights (IPR) which was concluded on June l7, l996, just in time to avert a trade war which threatened to impose punitive tariffs on $2 billion worth of goods in each direction. Afterwards, US and Chinese delegations put a good face on these negotiations. According to the Chinese accounts:

 

"China and the United States reached a deal on intellectual property rights (IPR) yesterday in Beijing, narrowly avoiding a trade war between the two nations. The three days of intense talks ended last night with both sides backing away from threatened sanctions and counter-measures. Acting US Trade Representative Charlene Barshefsky announced that the US would not go ahead with trade sanctions against China, and would cross China off its list of ‘Special 30l’ targeted countries. In response, Shi Guangsheng, vice-minister of the Ministry of Foreign Trade and Economic Cooperation (Moftec) said China would not retaliate with planned counter-measures...A Moftec spokesman said the talks had been ‘active and constructive’. He said a satisfactory result was reached this time ‘through the efforts of both sides. This proves that the only effective way to settle disputes between countries is negotiation on an equal footing. Sanctions and retaliation cannot help solve problems but can only make them more complicated’".2

 

In a meeting with Barshefsky after the negotiations, President Jiang Zemin is reported as commenting:

 

"We believe that both countries should handle our relationship from a strategic view and from the perspective of the 2lst century...Dialogue is better than confrontation and mutually beneficial cooperation better than sanctions."3

 

The follow up on these bilateral negotiations took place this autumn. US Secretary of Commerce, Mickey Kantor, invited Moftec Minister Wu Yi to visit the US and co-chair the l0th session of the Sino-US Joint Commission on Commerce and Trade (JCCT), which was intended as a regular means of maintaining communication on trade matters before they reached a critical level of conflict.

 

Although bilateral negotiations are a standard means of conflict resolution in trade disputes, they have the disadvantages of brinkmanship and ultimata, in that they can escalate to the point of souring a whole range of unrelated bilateral issues and might lead to trade wars in which everyone loses.

 

In contrast, an arbitration approach is fairly standard in international trade disputes. What is new is the fact that the WTO will now utilize this mechanism to settle trade disputes as standard operating procedure. The arbitration panels in Geneva have already ruffled some feathers on issues of "sovereignty", since they seem to preclude unilateral sanctions as a means of conflict resolution. Yet, the threat of WTO arbitration panels may actually bring trading partners, such as the US and Japan, to resolve differences before reaching the highly emotive drama which would be involved in a WTO court case.

 

A current example of the WTO approach is the Fuji Photo Film Co. v. Eastman Kodak case. In June, l996, the US Trade Representative accused Japan of hindering competition and said it would take the matter to the WTO. In retaliation, according to press reports:

 

"Japan may file a complaint against the United States with the World Trade Organization (WTO) over photography products as a counter-measure against a similar move by Washington...Prime Minister Ryutaro Hashimoto said ‘All we have to do is proceed with discussions at WTO’...Chief Cabinet Secretary Seiroku Kajiyama, the Government’s top spokesman, praised the US move, saying it showed the US side’s intention to follow WTO rules. ‘Japan will also follow WTO rules’ he said, adding that Tokyo would decide after consideration whether to file a counter complaint against the US. Minister of International Trade and Industry, Shunpei Tsukahara, said the US decision to take its complaint over the camera film market to the WTO was a ‘meaningful development’...‘The US government’s decision to seek resolution of this issue in accordance with the WTO rules can be regarded as a constructive step’, said Mr. Tsukahara. ‘Japan will act in accordance with the WTO rules’".4

 

It is beyond the scope of this essay to elaborate the WTO arbitration process5, except to establish it as an alternative to what is coming to be called the APEC mediation model, or "the Asian model". Needless to add, since China and Taiwan are not yet members of the WTO, this arbitration model would not yet be inclusive of all APEC members.

 

A third approach, litigation within a relevant jurisdiction, is undergoing such rapid transformation at present, especially in Japan and China, that it is difficult to characterize. In an earlier period (prior to the Betamax case), when the President of Sony could say that "friends don’t sue friends", and all business was based on personal relations, there were many cultural mechanisms (including a "wise men" approach) to resolve conflict besides law suits.6

 

Today, the rules for foreign attorneys practicing in Japan have changed considerably, and it is now easier to put together bi-national teams of attorneys.7 Also, in China, a whole new generation of young attorneys is emerging, and it is easier for attorneys licensed in one jurisdiction to practice in other jurisdictions. A number of US law firms are sponsoring Chinese lawyers with trade and investment specialities to be trained in US law.8 In short, trade litigation will increase in particular cases. Whether justice will be seen to be blind in such cases is another matter. The political appointment of judges, and basic differences in jurisprudential concepts will continue to make this a risky route to dispute settlement and the enforcement of judgments.

 

The fourth approach, third party mediation, is coming to be known as "the Asian way". According to a speech by Singaporean Ambassador-at-large, Tommy Ko, at a news conference in Manila ahead of the inaugural meeting of the private sector APEC Business Advisory Council (ABAC):

 

"APEC, partly at the bidding of its private sector advisers, [is] developing ‘softer modalities’ to settle disputes, including conciliation mechanisms. This very much coincides with the cultural preferences and the genius of Southeast Asia, which is to avoid conflict and to seek consensus whenever that is possible."9

 

This APEC mediation approach will be elaborated below.

 

3. APEC and Conflict Resolution

 

The l995 report of the Eminent Persons Group (EPG) to the APEC summit at Osaka included a major section on "A Dispute Mediation Service", including elaboration of the need for mediation and of the mediation process. In addition, Annex l to their report is entitled "Details of the Mediation Process".10 Some of the key elements of these recommendations are summarized in the Executive Summary:

 

"...The second question facing APEC Leaders is why, if they are committed to creating a community of Asia Pacific economies, are they involved in so many disputes? What can they do to reduce the incidence of conflict in the region?

 

We believe there is a two-fold answer to this question. One part is to reduce the causes of conflict by removing impediments to trade and investment. The steps just outlined will help APEC move in this direction.

 

In addition, the Leaders should immediately install an APEC Dispute Mediation Service. Such a facility would provide APEC members with a multilateral means to address economic disputes that are not covered by the World Trade organization (WTO) or other existing international arrangements. It would offer a technique, mediation, which would supplement the practices of the WTO (which emphasize arbitration). It could thereby help resolve trade conflicts in the region. It could also help counter the tendency to resist multilateral action in favor of unilateral steps."11

 

The Eminent Persons Group further elaborate the need for mediation:

 

"As Indicated by the Leaders at Bogor, any new APEC dispute settlement mechanism should avoid duplicating or competing with the arrangements already in place at the WTO. We endorse the use of WTO dispute settlement procedures to resolve disputes that fall within the ambit of WTO rules and would not want an APEC DMS to frustrate or delay member economies’ recourse to those procedures.

 

Our proposal for APEC, however, differs in two important aspects from the agreed global devices. First, the WTO procedures can address only issues that are covered by the WTO itself. Despite the increased coverage afforded by the Uruguay Round, the rules of the WTO still exclude a number of trade problems (including those related to competition policy and environmental policy, most aspects of investment policy and government procurement for the numerous countries that have not signed the relevant WTO Code). Some of the issues that underlie recent disputes in the region, including between the United States and Japan, continue to lie outside the scope of the WTO.

 

Second, the dispute settlement mechanism of the WTO relies heavily on procedures that are highly legalistic. The WTO rules do provide a mediation option. But that option has been used infrequently, given the tendency of a rules-based regime to move immediately toward definitive procedures to resolve conflicts. This tendency will probably be even more pronounced with the successful effort of the Uruguay Round to improve the prospect the WTO procedures will resolve such conflicts effectively, most notably by eliminating the previous right of any member country to veto a finding that ran against it.

 

Hence, APEC should focus on mediation rather than arbitration. This approach would be in keeping with the growing sense of community in the region. It would offer an intermediate channel between bilateral negotiation and the "win or lose" confrontations of the WTO.

 

...The distinguishing feature of mediation is that all of the interested parties to a dispute come together voluntarily, preferably in one place at one time, with an outside mediator to act as a catalyst for settlement. Instead of the parties presenting their viewpoints face-to-face, the mediator acts as a buffer by allowing each to make his initial proposals to the mediator in confidence. In this way, each party is given the opportunity to make a presentation that allows all of the important issues to be fully emphasized.

 

...It must be emphasized that, for the mediation to be effective, the mediator is required not to disclose to the other party information revealed in confidence during a private meeting or "caucus" between the party and the mediator to encourage the type of productive discussion that leads to settlement; it is essential that the parties understand that all communications during a caucus with the mediator will remain confidential unless disclosure is authorized. Details of the mediation process are outlined in Annex l."12

 

During the Osaka meeting, there was considerable discussion of the dispute settlement process, but no concrete resolution of the issue. It was decided that APEC’s Committee on Trade and Investment (CTI) would further work on issues of dispute mediation. The CTI agreed that an Experts Group would make further recommendations after the Subic meeting in November l996. The Experts Group is scheduled to meet this spring.

 

The actual summary that came out of the Osaka Action Agenda regarding dispute mediation is contained in the "Update on Activities within APEC" in l996.13 Regarding collective actions, it was agreed that APEC economies will:

 

"a. with respect to resolution of disputes between APEC economies:

i) promote dialogue and increased understanding including exchange of views on any matter that may lead to a dispute, and cooperatively examine on a voluntary basis disputes that arise, utilizing policy dialogue such as the "Trade Policy Dialogue" of the CTI;

ii) give further consideration as to how the above Trade Policy Dialogue or similar functions of other fora may be used by APEC economies for the exchange of information, enhanced dialogue and mediation; and

iii) examine the possible future evolution of procedures for the resolution of disputes as the APEC liberalization and facilitation process develops.

b. with respect to resolution of disputes between private parties, and between private parties and APEC economies;

i) provide CTI with a listing of arbitration, mediation, and conciliation services available to private entities of other APEC economies, including a description of any such service which might provide a useful model for private-to-government dispute resolution in the Asia-Pacific region, and make such information widely available to the business/private sector in the Asia-Pacific region;

ii) provide CTI with comments regarding experiences with above services;

iii) accede where appropriate by l997 to international agreements for the settlement of disputes between governments and private entities such as the Convention on the Settlement of Investment Disputes between States and Nationals of Other States; and

iv) accede where appropriate by l997 to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).

c. with respect to transparency;

i) promote transparency on an APEC-side basis, through, for example, publication of a guide book on arbitration, mediation, and conciliation services available in each APEC economy; and

d. with respect to the above collective actions, prepare a report on progress, with recommendations by the end of l996.14

 

In short, the consensus at the Osaka summit was to gather more information about mediation options, and to request further reports from "experts". Such an approach probably masks deeper divisions within APEC regarding the merits of a "softer" mediation mechanism versus the "tougher" arbitration approach of WTO. This potential split in APEC over approaches to conflict resolution will be considered in the next section.

 

Yet, there was one other initiative from the Osaka meeting which is worth noting with regard to dispute mediation. It was the proposal by the Pacific Business Forum (PBF) to set up an ombudsman for trade and investment issues in each APEC economy. In the Report of the Pacific Business Forum on "The Osaka Action Plan: Roadmap to Realising the APEC Vision" the specific suggestion is made to set up an Office of Trade and Investment Ombudsman (OTO) on the Japanese model. According to the report:

 

"APEC’s political and economic diversity suggests that progress towards binding dispute settlement procedures will be a lengthy process. Although some economies are undertaking extensive legal reforms to sustain economic growth, much work remains. Laws and regulations are sometimes unavailable to foreign companies or are interpreted in an arbitrary manner.

 

To help address such problems and improve the commercial environment, Japan has established an office of a Trade and Investment Ombudsman service (OTO). The office’s purpose is to bolster commercial certainty and spur the pace of trade and investment liberalization. Issues addressed by the OTO include the following:

 

-Requests for clarification of domestic laws, regulations, and administrative guidance

-Complaints concerning nonenforcement, or misuse of domestic laws and regulations

-Complaints regarding market access issues, including procedures surrounding the import of goods and services, direct investment, and government procurement policies.

 

The Trade and Investment Ombudsman is not a court of law. It is an administrative remedy. A complainant’s legal interests and rights to seek redress under the laws of each APEC member economy and the WTO will not be compromised. The OTO is an institution which has worked well in Japan.

 

The PBF recommends that each APEC economy should study the merits and desirability of establishing a Trade and Investment Ombudsman institution in each of the APEC member economies based possibly on the Japanese model, with appropriate modifications to suit local circumstances."15

 

Whether the APEC dispute resolution model will evolve in a mediation format, including some component of ombudsman, or tend to follow more in the WTO arbitration model, to some extent depends on the perspectives of the eighteen member units. The fact that Japan, China, and the ASEAN countries (to some extent) have argued for an "Asian way" in conflict resolution which is based more on mediation than legalism, raises the question as to a possible cultural basis to perspectives on conflict resolution within APEC. This issue will be examined in the next section.

 

4. APEC v. WTO Approaches to Conflict Resolution

 

Various forms of alternative dispute resolution (ADR) are increasingly common in the U.S., and non-litigation techniques have advanced well beyond previous cultural norms.16 In international diplomacy, the idea of "Track II", or non-governmental "back channels"-- as distinct from "Track I", formal diplomacy-- is practiced routinely by all countries.17 Yet, there is little doubt that the US Office of Trade Representative (USTR) over the years has favored a tougher, more legalistic approach to trade disputes than many of its Asian counterparts.18 Will an APEC approach to dispute settlement emerge which can accommodate both ADR and more legalistic traditions? Will the differences between jurisprudential systems allow for a common approach even within a legal track?19 What kinds of mediation systems may emerge? Will the WTO arbitration model become truly global?

 

The actual politics of negotiating a dispute settlement model within APEC are beyond the scope of this essay. Those who are intimately involved in the process tend to emphasize points of agreement rather than disagreement, and the process by which these issues will be resolved. Yet, most observers agree that the US, Canada, New Zealand and Australia tend to favor a "WTO arbitration approach". The smaller ASEAN economies, including Singapore, Thailand, Indonesia and Malaysia, tend to favor an "APEC mediation approach". Japan seems to be somewhere in the middle, with a strong commitment to the WTO approach, but with a strong sense that an "Asian mediation approach" is more suitable to the emerging APEC community.

 

China, likewise, is ambiguous, but sees support for a WTO approach as having two advantages. (l) For the WTO approach to be successful, China must be admitted to the WTO. This is a high priority for Chinese policy, although it insists on admission terms as a "developing economy" rather than as a "developed economy". (Note: within APEC, China is defined as a developing economy, and hence has until 2020 to set up freer trade, rather than the 20l0 target date for the developed economies.) (2) China would prefer multilateral approaches to trade disputes rather than what it sees as the common pattern of unilateral action by the US. China would like to link into the global economy, but sees its APEC links-- which account for 70% of Chinese trade-- as the means of linking into the WTO system. In particular, China sees the need for a slower, more cautious pace of liberalizing trade in the area of financial services, and other services. (While the US, Japan and Australia would like China to speed up these processes.) China does have arbitration processes within the commercial realm, rather than mediation committees, but sees no harm in moving to a mediation model. At the same time, the conflict resolution system at the grassroots level in China is very much based on neighborhood mediation committees.20 Yet, as mentioned earlier, China’s commitment to developing a legal training system linked to international trade is a high priority, and may be seen as trying to "play by the prevailing rules" of the international economic system. More than 200 colleges or universities in China have established law departments, which are able to train about 5,000 graduates each year.21 This number will increase, and the focus will be client centered international business.

 

Yet, APEC members are quick to point out that there is no necessary contradiction between a WTO and an APEC approach. Part of the solution in general is greater transparency of regulations, and in this realm, an ombudsman option may serve to reduce the number of international business complaints that become litigious. For reasons mentioned earlier, the Pacific Business Forum, reflecting business perspectives, prefers the Japanese model, which it describes as follows:

 

"Japan: Office of Trade and Investment Ombudsman. The Office of Trade and Investment Ombudsman (OTO) was established for the purpose of opening the Japanese market and of improving market access to Japan, through processing complaints concerning market opening problems. These problems include procedures for import of goods and services, direct investments in Japan, and government procurement. The OTO has two components: (l) the Office of Market Access, an organisation composed of the Prime Minister and sixteen ministers, and (2) the Market Access Ombudsman Council, a distinguished group of scholars, business leaders, and others. It plays a key role in the OTO process to ensure rapid resolution of complaints by reflecting impartial opinions outside the government."22

 

In fact, the emergence of Internet technology has changed many of the issues of transparency within APEC in general. Most efforts of APEC professional staff members are focused on information gathering, analysis, and coordination. At present, 70% of all APEC information is available on internal, electronic linkage, and of this material approximately 20% is directly available to the general public. (APEC now has its own home page.) All of the APEC economies are linked by Internet, except Brunei and Papua New Guinea. (China is on the Internet, but access is restricted.) This computer linkage also allows the specialized working groups and expert groups to maintain regular contact.23

 

The APEC Dispute Mediation Experts Group is especially relevant to this essay. The professional staff member at the Secretariat working with this group is from New Zealand24, and the chair of the Experts Group is from Canada, based in Ottawa25. The eighteen economies represented on the DM Experts Group each select a contact person or persons who will prepare the report on mediation and arbitration options open to APEC members. The pattern of career affiliations of this Experts Group, as of June l996, is shown in Table l.26 In general, the "experts" come from a legal unit, an economics unit, a regional organizations unit, a policy planning unit or a foreign affairs unit. Often, there is a balance between foreign affairs and international trade units. Only Mexico has a distinctive "dispute resolution" unit under their Secretary of Commerce. Only the Philippines has a private sector attorney as representative.

 

The patterns in Table l provide a clear picture of governmental agencies participating in the Dispute Mediation Experts Group. As a balance to this profile, the role of the Pacific Business Forum (PBF) and the newly formed APEC Business Advisory Council (ABAC) may emerge as more business oriented approaches to issues of dispute resolution. The theme of the November l996 summit in the Philippines, "APEC Means Business", was meant to shift the focus from government agencies to actual business participants in Asia Pacific trade and investment. It remains to be seen whether this will affect approaches to conflict resolution.

 

5. Cultural Perspectives on Conflict Resolution

 

There seem to be two schools of thought among APEC watchers as to whether "cultural factors" affect orientations toward conflict resolution. On one hand, some of the more legally attuned observers suggest that there has emerged a unified interlinked global economy approach to dispute settlement. Thus, whether a business person is from Shanghai, Sydney, Bangkok, Manilla, Singapore, San Francisco or northern Virginia, there is an increasingly common approach now to international business, including multiple modes of dispute resolution.

On the other hand, there is increasing theoretical debate and empirical research which point to the centrality of cultural perspectives on precisely such issues as decision making and conflict resolution. The theoretical perspectives include (1) the globalist/economic approaches of Kenichi Ohmae, which emphasize the emergence of a post-nation state international business culture27; (2) the civilizational approaches of Samuel Huntington, which distinguish seven or eight major civilizations which are reemerging into post cold war significance;28 (3) the levels of development (or "wave theory") approach of Alvin and Heidi Toffler, which distinguishes between the cultures of agrarian societies (wave l), industrial societies (wave 2), and electronic/information based societies (wave 3)29; and (4) a fusionist/diffusionist approach, illustrated by Kishore Mahbubani30.

 

At the empirical level, especially within comparative business management studies, there is considerable evidence that managers in the US or Germany operate under different cultural norms than, say, those in Japan or China.31 Since APEC contains at least three or four culture zones-- western (e.g. US/Canada/Mexico/Chile), Confucian (e.g. China, Hong Kong, Taiwan, Singapore, Japan, Korea), and Muslim (e.g. Brunei, Malaysia, Indonesia)-- it remains to be seen whether empirical research will yield significant variations in approaches to such issues as conflict resolution. It should be mentioned that the "official" and dominant language of APEC is English, although Chinese has become a second informal working language, reflecting the location of the Secretariat in Singapore, and the fact that four of the eighteen economies are Chinese speaking, and many of the business sectors in the ASEAN countries are predominantly Chinese.

 

The fact remains that many in APEC believe there is an Asian way of conflict resolution, and that third party mediation and informal negotiation is central to that approach. Since APEC is still evolving, there are more questions than answers with regard to this belief.

 

Conclusions

 

The economies of the Asia Pacific region will be central to the global economy in the decades to come. There are some obvious barriers to cross-cultural communication as US business people interact more fully with this part of the world. As international transactions focus more on the Asia-Pacific economic zone, the issue of conflict resolution is central. With alternative dispute resolution (ADR) coming on stream in the West, and with an articulated "Asian approach" which is based on third party mediation the stated objective of APEC, the Western legal community and the academic community will have to work together more closely to prepare ourselves for a whatever emerges in regional variations of dispute resolution. The WTO vs. APEC approaches to conflict resolution which have been highlighted in this essay are not mutually exclusive, but may both prove to be alternatives to more unilateral political actions, or to the proliferation of "legal actions" in which no one wins or in which there is a constant struggle for jurisdictional positioning. The maturing of the economies of China and Japan, in particular, will prove to be challenges to our existing means of conflict resolution.

 

Notes:

 

Editor’s note: The following notes pertaining to Professor Paden’s article have been published as submitted.

 

1 The EPG consisted of one distinguished delegate from each of the eighteen countries. See "implementing the APEC Vision: Third Report of the Eminent Persons Group", APEC Secretariat, (APEC #95-EP-01, 438 Alexandra Road #19-01/04, Alexandra Point, Singapore 0511), August 1995. After the Osaka meeting, the EPG was disbanded, for various reasons. The Pacific Business Forum (PBF), created in 1994, has come to play an ever more important role in assisting APEC to define and meet its goals.

2 "IPR talks avert trade war", China Daily, June 18, 1996, p.1.

 

3 "Jiang says dialogue better than confrontation", China Daily, June 18, 1996, p.1. The author of this essay arrived in Beijing on June 16, and had an opportunity to discuss these negotiations with a number of Chinese colleagues.

 

4 "WTO action threatened in Fuji dispute", South China Morning Post, June 15, 1996, p.4.

 

5 For details on the WTO dispute settlement process, see Jeffrey Schott, The Uruguay Round: An Assessment, Washington, D.C., Institute for International Economics, November 1994.

 

6 For background, see Robert March, The Japanese Negotiator: Subtlety and Strategy Beyond Western Logic, Tokyo and New York, Kodansha, 1988, esp. Chp. 6, "Japanese attitudes toward contracts" (the Betamax lawsuit).

 

7 For background, see Tanaka Hideo, "The role of law and lawyers in Japanese society" in Daniel Okimoto and Thomas Rohlen, eds., Inside the Japanese System, Stanford University Press, 1988, p.88.

 

8 See "Wanted: More Lawyers: China reforms its legal profession", Window, February 10, 1995, p.18-19. "Like other walks of life in China, the legal profession is feeling the repercussions of market reforms. Late last year, the Ministry of Justice announced a series of measures to establish a new legal framework over the next five years. Central to the reforms are measures governing the legal profession itself. Under the new regulations, expected to go into effect this year, law firms will act as independent agencies to serve clients, and a bar association will be established to be responsible for providing supercision....Statistics from the Ministry of Justice show that while state-run law offices still make up 90% of the 6,000 or so law offices across the country, more than 500 non-governmental law firms have been established in the past ten years. Of those, 80 to 90% are partnerships, the remainder being under a sole proprietorship. Beijing and Shanghai are setting the trend. Figures from the Beijing Bureau of Justice show that there are more than 206 law firms in the city of which eleven are either partnerships or individuals. In Shanghai, there are more than 3,600 lawyers working in 143 firms. The Shanghai Bureau of Justice estimates that the city needs 10,000 lawyers by the year 2000..."

 

9 "Official sees influence on US unilateral actions", South China Morning Post, June 15, 1996, p.4.

 

10 Third Report of the Eminent Persons Group, op.cit., p.10-12 and 53-54.

 

11 Ibid., p.iii.

 

12 Ibid., p.10-11.

 

13 Asia Pacific Economic Cooperation, "Update on Activities within APEC", section on "Disputes Mediation", p.21-24, 1996.

 

14 Ibid., p.23-24.

 

15 Pacific Business Forum, The Osaka Action Plan: Roadmap to Releasing the APEC Vision, Singapore, APEC, 1995, p.24.

 

16 See Dennis Sandole & Hugo van der Merwe, eds., Conflict Resolution: Theory and Practice, New York, St. Martin’s Press, 1993.

 

17 For example, see William Zartman and Maureen Berman, The Practical Negotiator, New Haven, Yale University Press, 1982.

 

18 For analysis of the legal-political culture of the USTR, see Steve Dryden, Trade Warriors: USTR and the American Crusade for Free Trade, New York, Oxford University Press, 1995.

 

19 For an example of comparative legal systems, see John Barton, et al, Law in Radically Different Cultures, St. Paul, West Publishing, 1983; (this includes a discussion of China and western legal systems on certain issues of family law, e.g. inheritance, which are related to some issues in commercial law).

 

Even within the European Union the integration of jurisprudential systems has been challenging, especially linkages between British Common Law, French Civil Codes, and Dutch-Roman law.

 

20 See Alasdair Clayre, The Heart of the Dragon, Boston, Houghton Miflin, 1985, esp. Chp.4, "mediating".

 

21 See Windows, op.cit., p.18. According to this account: "The number of lawyers is still low in China-- 0.06 per thousand compared to an estimated three per thousand in the United States. Minister of Justice Xiao Yang says that China expects to have 75,000 lawyers in 1997 and 150,000 by the end of the century. Partly the demand for lawyers has come about as China’s economy and relations with the outside world developed. To qualify more lawyers to deal with international legal affairs, a training centre was opened at Shanghai’s East China College of Political Science and Law last October. The other side of changes in the legal profession is that 41 foreign law firms have opened offices in China, mainly in large cities like Beijing, Shanghai, Guangzhou, Shenzhen, and Hainan. Nineteen of these firms are from Hong Kong."

 

22 The Osaka Action Plan, op.cit., p.24.

 

23 Information regarding the internet is from APEC secretariat staff members. The internal APEC system-- APEC Communication Data-base System/ACDS-- provides secure lines, but increasingly information is publicly made available. The APEC Secretariat internet home page is: www.apecsec.org.sg.

 

24 Mr. Brian T. Wilson, APEC Secretariat Program Director, 438 Alexandra Road, Singapore 119958.

 

25 Mr. Jonathan T. Fried, Director General, Trade Policy Bureau and Coordinator for NAFTA, Dept. Of Foreign Affairs and International Trade, Lester Pearson Building, 125 Sussex Drive, Ottawa, Ontario, K1A 0G2, Canada. Also, Mr. John Klassen, Director, Asia Pacific Regional Coordination Division, Dept. of Foreign Affairs and International Trade, Ottawa.

 

26 All data in Table 1, with further details on contact numbers, is from the APEC Secretariat in Singapore.

 

27 Kenichi Ohmae, "Putting Global Logic First", Harvard Business Review,. Jan.-Feb., 1995, p.119 ff.; also, Ohmae, The Borderless World, 1990, and Ohmae, The End of the Nation State, 1995.

 

28 Samuel Huntington, The Clash of Civilization: The Debate, New York, Foreign Affairs, 1993. Huntington identifies the following civilizations: Western, Confucian, Japanese, Islamic, Hindu, Slavic-Orthodox, Latin American and possibly African. He sees a possible coalition of Islamic and Confucian civilizations confronting the West in the future.

 

29 Alvin and Heidi Toffler, Creating a New Civilization: The Politics of the Third Wave, Washington, D.C., Progress & Freedom Foundation, 1994.

 

30 Kishore Mahbubani, "The Pacific Way", Foreign Affairs, Jan.-Feb. 1995, p.100 ff. Mahbubani argues, "The significant difference between the 21st century and the preceding centuries is that there will be three centers of world power (Europe, North America, and East Asia) as opposed to two in the twentieth (Europe and North America) and one before that (Europe)...The difficulty that Western minds face in grasping the arrival of East Asia arises from the fact that we are witnessing an unprecedented historicial phenomenon: a fusion of Western and East Asian cultures in the Asia-Pacific region. It is this fusion, not a renaissance of ancient Asian glories, that explains the explosive growth of the Pacific and provides the possibility of continued peace and prosperity in the region." (p.102).

 

31 See Charles Hampden-Turner & Fons Trompenaars, The Seven Cultures of Capitalism, 1993; also, Fons Trompenaars, Riding the Waves of Culture: Understanding Diversity in Global Business, New York, Oxford University Press, 1995; also, R. Peterson, Managers and National Culture: A Global Perspective, New York, Quorum, November, 1994.

Table 1: APEC Dispute Mediation Experts Group, June (1996)

 

 

Economy

 

DM Expert Group Member(s) (by Title)

 

1. Australia

 

(1) Director, Trade Strategy Trade Negotiations Division, Dept. of Foreign Affairs and Trade

(2) Executive Officer, APEC Branch, Dept. of Foreign Affairs and Trade

 

2. Brunei Darussalam

 

(1) Head of International Relations and Trade Development, Ministry of Industry and Primary Resources

 

3. Canada

 

(1) Counsel, Trade Law Division, Dept. of Foreign Affairs

 

4. Chile

 

(1) Legal Adviser, Chile Pacific Foundation

(2) Head of APEC Dept., Ministry of Foreign Affairs

 

5. People’s Republic of China

 

(1) Division Director, Dept. of Treaties and Laws Ministry of Foreign Trade & Economic Cooperation

 

6. Hong Kong

 

(1) Assistant Director-General of Trade, Multilateral Division, Trade Dept. (2) Principal Trade Officer, Multilateral Division, Trade Dept.

 

7. Indonesia

 

(1) Economist, Trade and Management Development Institute

(2) Director, Multilateral and Regional Trade Relation, Ministry of Industry and Trade

 

8. Japan

 

(1) Coordinator for APEC, Developing Economies Division, Economic Affairs Bureau, Ministry of Foreign Affairs

(2) Deputy Director, APEC Promotion Office, International Trade Policy Bureau, Ministry of International Trade and Industry

 

9. Republic of Korea

 

(1) Deputy Director, WTO Division, Ministry of Trade, Industry and Energy

(2) Research Fellow, International Economics Studies, Korea Institute for International Economic Policy

 

l0. Malaysia

 

(1) Head of Research Unit, Advisory & International Division, Attorney General’s Chambers

(2) Director, Multilateral Trade Relations,

Ministry of International Trade and Industry

 

ll. Mexico

 

(1) General Counsel, Secretariat of Trade & Industrial Development

(2) Director, North America and Dispute Resolution, General Counsel for Trade Negotiations, Secretariat of Commerce

(3) Assistant Director, International Organizations, Secretariat of Trade and Industrial Development

(4) Under Director, International Law, Office of the Legal Advisor, Ministry of Foreign Affairs

 

l2. New Zealand

 

(1) Head, Trade and Economic Analysis Unit,

Ministry of Foreign Affairs and Trade

(2) Deputy Director, Economic Division, Trade and Economic Analysis Unit,

Ministry of Foreign Affairs and Trade

(3) Manager, Business Policy Division,

Ministry of Commerce

 

l3. Papua New Guinea

 

(l) Director, APEC Directorate, Dept. of Foreign Affairs and Trade

(2) Assistant Secretary, Industry Assistance, Incentives and Import Regulations, Dept. of Commerce and Industry

(3) Dept. of Attorney General

 

l4. Philippines

 

(l) Attorney and Counselor at Law, Cudala, Pecson, Bengzon & Jimenez Law Offices

(2)Assistant Division Chief, Dept. of Trade and Industry

 

l5. Singapore

 

(1) Director, Trade Policy Division, Trade Dept. Board

 

l6. Chinese Taipei

 

(1) WTO Section, Trade Specialists, Board of Foreign Trade

(2) Director, 3rd Department, Board of Foreign Trade,. Ministry of Economic Affairs

 

l7. Thailand

 

(1) Director, Treaty Division, Dept. of Treaties and Legal Affairs, Ministry of Foreign Affairs

(2) Director, Multilateral Trade Division, Dept. of Business Economics

 

l8. U.S.A.

 

(1) Office of General Counsel, Office of U.S. Trade Representative

(2) Office of General Counsel Department of Commerce

 

John N. Paden is Clarence Robinson Professor of International Studies at George Mason University (GMU). He is Co-Director of the Center for Asia Pacific Economic Cooperation (CAPEC) at GMU, and teaches the foundation course in the Master of International Transactions (MAIT) program on "Culture and International Transactions". As a Rhodes Scholar, he did his M.A. at Oxford in philosophy, politics and economics , and his Ph.D. at Harvard in politics. In June-July l996, he interviewed professional staff at the APEC Secretariat in Singapore, and met with senior officials and academics in Beijing and Tokyo on matters related to dispute resolution in APEC.

 

 

The International Practice Section of the Virginia State Bar Presents Its 9th Annual International Business Law Seminar

 

Advising the Client Who Is "Going International"

 

Featuring Robert A. Kapp, President, United States-China Business Council

 

Friday, May 9, 1997

 

Hyatt Regency, Reston, Virginia

 

Contact Virginia CLE:

 

CLE Registrations

P.O. Box 4468

Charlottesville, VA 22905

Telephone: 800.979.VCLE/Facsimile: 804.979.3147

 

 

Topics Include:

 

Export Regulations

Foreign Corrupt Practices

Antiboycott Regulations

Trade Sanctions/Foreign Asset Controls

Tax Planning

 

The following topics will be addressed from European,, Far Eastern, Latin American, and Middle Eastern perspectives:

 

Requirements of Local Agent/Distributor (A/D)

Issues in Negotiating the A/D Agreement

Government Registration Requirements

Terminating the A/D Relationship

Dispute Resolution in a Foreign Country

Licensing Requirements for Foreign Investments

Formation of a Local Entity

Investment Incentives for Foreign Companies

Local Taxation

Local Government Procurement

Application of Local Labor Laws

Banking and Finance

Intellectual Property

 

6.0 Hours MCLE Credit

 

Globalism

 

For It, Against It or Forget It

 

 

by

 

Stuart S. Malawer

George Mason University

Fairfax, Virginia

 

Douglas A. Irwin, AGAINST THE TIDE-- An Intellectual History of Free Trade (Princeton University Press, 1996).

 

Jerry Mander and Edward Goldsmith, THE CASE AGAINST THE GLOBAL ECONOMY and for a Turn Toward the Local (Sierra Club Books, 1996).

 

Joseph E. Pattison, BREAKING BOUNDARIES-- Public Policy vs. American Business in the World Economy (Peterson’s/Pacesetter Books, 1996).

 

More than any other term, "globalism" is the magical one that is often used to characterize the 1990s. Politicians are busy building bridges to the global economy, businesses are busy competing in the global environment, states are busy attracting global investors, workers are busy updating their competitive skills for the global marketplace, and universities are trying to deal with it.

 

What exactly is globalism and what are its implications? These are the questions posed by three recent works on globalism. Although none of the publications defines globalism explicitly, they all refer to it as the emerging international system in the late 1990s in which economies and societies are more intricately linked today than ever before by a wide variety of cross-border transactions. This system is being shaped by dramatic advances in technology and telecommunications, and is bolstered by worldwide deregulation and trade liberalization.

 

Douglas Irwin, a professor of business economics at the University of Chicago, traces the historical development of the doctrine of free trade as the bedrock concept underlying today’s globalism. AGAINST THE TIDE: An Intellectual History of Free Trade (1996) describes the free trade doctrine from the English mercantilist, Adam Smith, and the classical economists, and reviews doctrinal controversies such as the "mill and infant industry argument" and the more recent "strategic trade theory". The author avoids the multitude of noneconomic arguments for protection that are a perennial feature of trade policy debates.

 

Irwin notes that the intellectual case for free trade did not originate with Adam Smith; however, as he indicates, it became strongly established and generally accepted after Smith gave particular force to the economic arguments in its favor in the Wealth of Nations. In particular, Adam Smith established the advantages of specialization and a strong presumption in favor of the general benefits of free trade. The classical economists solidified this argument with the theory of comparative advantage. Historically, from that point on, the burden of proof in economic debates has been on those attacking the theory of free trade.

 

Irwin concludes that the debate over the economic merits of free trade is never ending, and the doctrine of free trade will continue to experience changes and challenges. He further concludes that "free trade will remain one of the most durable and robust propositions that economic analysis has to offer for the conduct of economic policy." What? Did you expect a different conclusion to emanate from the University of Chicago?

Unfortunately, Irwin focuses only on tracing the intellectual history of the economic doctrine of free trade. His book is limited in that it is something akin to reviewing the literature, a mandatory exercise before undertaking any extensive analysis or further study. This assessment is divorced from any political, historical, or economic context. It is not an interdisciplinary study, but a typical traditional political theory or political economy treatise. In the late 1990s, it is the relation of the free trade theory to the technology-driven transformation in trade that is the burning public policy issue in domestic and global politics. This issue is of great significance to both lawyers and nonlawyers in formulating or participating in the deregulation and liberalization of global trade. No attempt is made by the author to address this issue, whatsoever.

 

Joseph Pattison, an attorney working for a large global corporation headquartered in the US, catalogues what he considers to be the antiglobal bias of US legislation and policies impacting global transactions of US firms. BREAKING BOUNDARIES-- Public Policy vs. American Business in the World Economy (1996) views the American mind set in government and much of US business as that of modern Luddites of the "Flat Earth" variety. "Far too many officials and managers treat global issues as little more than a fad." He then notes the unfortunate view that "For many managers, the global economy is a topic properly reserved for consultants, professors, and diplomats."

 

Pattison defines globalism by stating that there is no ready framework for explaining the new economy. He contends that the only paradigm of the new global economy is its lack of one. The author asserts that the economy that exists today is different from the traditional trading economy that focuses on merchandise movements. It is one involving services, which is a far more efficient multiplier of economic activity than merchandise trade. Today’s global system is an economy based upon knowledge and innovation. By focusing on mind set and the multivariate nature of today’s system, the author makes an interesting start in defining the system and problems today.

 

Pattison often overstates his case. He argues that American enterprise has not adapted to the global economy, and that the Uruguay Round made negligible impact on investment, technology, and services. Any examination of the global landscape today disclosed American industry as more competitive that ever before. Simply put, for the first time, the Uruguay Round incorporated investment, technology, and services as proper issues for trade negotiations, thus submitting them to the same disciplines and rules as merchandise trade. This was an historical achievement. The new trade rules now refer to such areas as intellectual property rights; state and local procurement regulations; and to sectors such as finance, insurance, and telecommunications. However, I agree with other observations by the author that it is the small and mid-size firms in the US that need to be more integrated into the new global economy, that it is the liquidity of ideas that is driving firms today, and greater foreign investment into US firms would ensure even greater growth.

 

The author identifies various global trends: from bilateralism to multilateralism in international relations, from the importance of hard assets to knowledge assets in today’s global economy, and from national control to interdependence of international transactions. As a consequence, the author suggests the following legal changes are required to update existing legislation: loosen export control legislation, restrict import relief laws, narrow the national security definition in the legislation concerning regulating foreign investment into the US, adjust the notion in antitrust law that business combinations are often harmful, liberalize the SEC’s listing requirements relating to a foreign firm’s accounting practices, reformulate telecommunication rules, and reduce unilateral trade actions of the US by restoring more to the WTO’s dispute resolution procedures.

 

By and large, Pattison’s suggestions are similar to those that have emanated from the large number of competitive studies, often supported by multinational companies, that have been conducted since the late 1980s. Did I say Pattison works for a large global corporation headquartered in the US? It is interesting to note that some of the author’s suggestions are now being implemented, such as reformulation of telecommunication regulation and greater submission of trade disputes to the WTO.

 

Jerry Mander and Edward Goldsmith, co-founders of the International Forum on Globalization, edited an extensive work composed of essays describing the multiple impacts of globalization, most of which they consider bad for the Earth and its people. THE CASE AGAINST THE GLOBAL ECONOMY and For a Turn Toward the Local (1996) is an anthology of essays. This extensive volume is devoted to the single theme that the rush toward globalization must be stopped and reversed.

 

The book proclaims the destructive effects of economic globalism. For example, it contains essays on the subversion of the democratic process by trade agreements, the inability of governments to control financial markets, free trade and environmental degradation, the atavistic nature of free trade theory, the global job crisis, and the multiple harms caused by global computer networks. It decries further the homogenization of global culture, GATT/NAFTA, newer technologies, and the mythic victory of market capitalism, and calls for greater local control via use of state corporation laws.

 

Two dominant themes often emerge from the various essays. One, advances in technology, primarily computer technology and global computer-satellite linkups, have made globalization possible. Two, globalism and particularly free trade has had terrible consequences on the global environment and on most people’s lives.

 

The most law-oriented essay is by Ralph Nader. He points out that recent international trade cases concerning US gas-guzzler taxes and protection of the dolphins demonstrate how US environmental laws are under attack by international trade lawyers. Nader is critical of the WTO procedures that treat most pleadings as confidential. Nader, as do many of the other authors, views the GATT and WTO as being the most visible evils of the 1990s globalization.

 

The book concludes with a plea and suggestions for turning power back to the local community. As you may have guessed by now, this anthology was published by the Sierra Club. It is the best example of arguing the noneconomic reasons for protectionism.

 

It is necessary for lawyers engaged in international transactions as well as those just trying to make sense out of the dramatic changes in today’s world to examine a range of works on globalism, especially its underpinning; its challenges to traditional corporate transactions and organization; and its implications to the environment, jobs, culture, and larger society. These three books present the reader with a wide range of opinions.

 

If you add the earlier works of Pat Choate (Ross Perot’s number two), comments emanating from the Right such as Pat Buchanan, and John Naisbitt’s recent work on global trends (Megatrends Asia), you will have a broad range of the popular and academic views of today’s globalism. Together, these works make for good reading. Hopefully, future treatises will more rigorously assess globalism and more objectively confront the business, legal, societal, and public policy implications of the global economy. At this point, it is clear that some people are for globalism, others against it, and, as I suspect, many would just like to forget it.

 

 

Stuart S. Malawer, J.D., Ph.D., is the Distinguished Service Professor of Law & International Trade at George Mason University and Director of the Center for International Trade Policy at The Institute for Public Policy. Dr. Malawer is a former Chair of the International Practice Section.

 

 

 

 

 

 

The Past, Present and Future of Trade-Finance Policy

 

Special Lecture by Dr. William A. Lovett Held at T.C. Williams School of Law

 

 

by

 

Matthew DeVries

T.C. Williams School of Law

Richmond, Virginia

 

Dr. William A. Lovett, a Joseph Merrick Jones Professor of Law and Economics at Tulane Law School, received a warm welcome from members of the International Practice Section and Richmond law students on October 22, 1996. Dr. Lovett, on sabbatical from Tulane, spoke in the T.C. Williams School of Law Moot Court Room for one of several lectures around the country.

 

Dr. Lovett’s lecture at T.C. Williams School of Law this past October focused on the development of trade-finance policy. Primarily an historical report of the international policy regime, Dr. Lovett explained how the development of trade policies can help determine future financing trends. According to Dr. Lovett, the key to the success of America’s future trade policy is to maintain an annual trade balance and an annual account balance. To achieve these goals, Dr. Lovett suggested that Americans need to live "within their means".

 

The financing policies during the Reagan-Bush era are a prime example. "Reaganomics" and rising deficits were responsible for both financial and trade imbalances during the 1980s. Americans generally were not living within their means, and many extended themselves beyond their ability to pay. Dr. Lovett argued that if we had lived within our means, the annual GNP would have been approximately 15% higher and approximately five to ten million jobs could have been saved. Dr. Lovett concluded by stressing the importance of financial and trade balance. By maintaining an overall trade balance and account balance, both interest rates and inflation would be lowered, the country’s GNP would markedly increase, and millions of jobs would be saved. This conclusion is based upon the historical development of trade-finance policy and, as offered by Dr. Lovett, may only be attained by living within our means.

 

Dr. Lovett received his B.A. degree from Wabash College in 1956, his J.D. degree from New York University in 1959, his A.M. degree from Harvard in 1964, and his Ph.D. from Michigan State University in 1969. Prior to joining the faculty at Tulane Law School, Dr. Lovett was a trial attorney at the Department of Justice, Antitrust Division, and staff economist for the Federal Trade Commission. His areas of specialty include antitrust, banking and financial institutions, torts, economic regulation, and international trade policy.

 

Dr. Lovett’s most recent books are Inflation and Politics: Fiscal, Monetary and Wage-Price Discipline, a study of comparative anti-inflation policies; World Trade Rivalry: Trade Equity and Competing Industrial Policies, a study of modern trade policy controversies; and Banking and Financial Institutions Law, a standard textbook on contemporary financial developments. Dr. Lovett has taught in the United Kingdom, Ireland, France, Germany, Sweden, Finland, and Greece. He has written many articles on the theory and practice of antitrust and regulation, together with a study of profit sharing and employee stock ownership plans.

 

Dr. William A. Lovett, Tulane Law School, New Orleans, Louisiana 70118. 504.865.5960

 

 

Matthew DeVries, T.C. Williams School of Law, University of Richmond, Richmond, Virginia 23173.

 

 

 

 

 

Member Input

 

The International Practice News encourages all members to submit articles and announcements for publication in the newsletter.

 

Also, the IPN encourages members to submit comments, corrections, ideas, and most importantly, suggestions to improve our newsletter.

 

Please forward all information to:

 

International Practice News

C/O Elliott P. Park

The Ironfronts

1011 East Main Street, Suite 300

Richmond, Virginia 23219

U.S.A.

Telephone: 804.648.7565/Facsimile: 804.648.7567/E-Mail: ellipark@richmond.infi.net

 

All input from our members is valuable to us. Thank you for your time and cooperation.

 

Professional Announcements

 

JOHN B. STERNLICHT

 

John B. Sternlicht, Secretary of the International Practice Section of the Virginia State Bar, has been named Policy and Legislation Director of the Virginia Economic Development Partnership. In this new position, Mr. Sternlicht is responsible for economic development policy and legislation, as well as various administrative matters. He will also be involved in international marketing.

 

Mr. Sternlicht, a graduate of the Georgetown University School of Foreign Service and the University of North Carolina School of Law, speaks French, German and Spanish. After a judicial clerkship with the North Carolina Supreme Court, he practiced with the multinational law firm of Graham and James, where he represented foreign companies doing business in the US and domestic companies doing business abroad.

 

In 1990, Mr. Sternlicht joined the Commerce and Trade Section of the Virginia Attorney General’s Office, where he served as chief counsel to the Department of Economic Development and the Virginia Employment Commission, as well as other agencies. Mr. Sternlicht has been involved in all aspects of economic development for the Commonwealth, negotiating with companies considering locating or expanding in Virginia, concluding agreements, forming public-private partnerships, consulting with local and regional developers, and supporting various other facets of Virginia’s efforts.

 

Mr. Sternlicht is also a member of the Board of Advisors of the Center for International Trade Policy at George Mason University.

 

 

 

 

 

 

Summer Study at Oxford

 

GLOBAL TRADE STRATEGIES: Overcoming Obstacles

 

The Global Trading System & New Transactions with Europe & Asia

July 18, 1997-July 27, 1997

 

Stuart S. Malawer, J.D., Ph.D., Director

 

A distinguished, international faculty will address the following topics:

 

The Global System: New Strategies for Investment, Trade, Intellectual Property

Trade & Financial Strategies for Japan & East Asia

Cross-Cultural Agreements and Comparative Dispute Resolution in Europe and the Far East

US-Asia Trade Relations: Growing Opportunities

Utilizing International & Regional Trade Institutions in Overcoming Obstacles

Private Strategies for Competing in Deregulating Service Industries in Europe & Asia: Telecommunications, Finance and Transport

 

Program

This is an introductory, intensive program. It focuses on the public policy, legal and practical issues concerning trade, finance and politics in conducting new and existing transactions in the global marketplace, in Europe, and in the vital regions of East, South, and Southeast Asia. Emphasis is on financial services, telecommunications and information technology. A Special Session is presented on the Internet and global trade sites. Guest Lectures focus on the unique British experience in Europe, Asia, and on the role of the City of London in global trade and finance. Guest Lecturers are from Oxford University and firms located in the City of London. On-site visits are scheduled to various institutions in London.

 

Sponsor & Oxford Certificate

This program is organized by the new Center for International Trade Policy at The Institute of Public Policy at George Mason University in cooperation with the Center for Asia-Pacific Economic Cooperation (APEC) at George Mason University, the Virginia Economic Development Partnership (Dept. Of International Trade & Investment), and the International Practice Section of the Virginia State Bar. Upon completion of this program a Certificate is awarded by Oxford University (St. Peter’s College) and George Mason University (The Institute of Public Policy).

 

This program is open to member of the private and public sectors. It is available for three (3) graduate credits (additional credits are available upon completion of a research essay). The Virginia State Bar has approved this program for twenty-four (24) CLE credits, including four (4) ethics credits. Cost for this one week program is $2,850. This includes tuition and room and board in St. Peter’s College, Oxford University. Information assistance is available with travel arrangements. For further information contact: Dr. Stuart S. Malawer at 703.790.0235. Fax: 703.790.8263. E-mail: smalawer@msn.com.

 

 

 

 

 

DATE

 

EVENT

 

LOCATION

 

04.18.97

 

Board of Governors’ Meeting (1400)

 

McGuire Woods in Charlottesville, DC, Norfolk, Northern VA, and Richmond

Gentry Locke in Roanoke

 

05.02.97

 

Deadline for Housing Needs for Annual Meeting

 

 

 

05.08.97

 

Spring CLE Program-- Board and Speakers’ Dinner

 

Reston, Hyatt Regency

 

05.09.97

 

Spring CLE Program

 

Reston, Hyatt Regency

 

05.16.97

 

Deadline for Submitting MCLE Outlines for VSB Annual Meeting

 

 

 

06.19.97

 

Annual Meeting Board and Speakers’ Dinner

 

Virginia Beach

 

06.20.97

 

Board of Governors’ Meeting; Summer MCLE; IPS Annual Section Meeting

 

Virginia Beach

 

06.27.97

 

Deadline for Submission of Annual Section Report to VSB