Introduction

The discipline of economic sociology is primarily concerned with situating economic activity within a wider social context rather than studying it as a standalone activity. It was a reaction to what some scholars labelled as a “grievous misunderstanding”¹ by others who studied economic phenomenon in manner removed from the social sciences² . According to this sociological view of economics, economic relations and activity are affected by and affect the wider environment in which they exist, and hence cannot be studied in a vacuum.

An important part of the study of the international economic system involves the study of the rules that govern global economic activity, otherwise known as International Economic Law (IEL). While what exactly this subject covers is widely contested³ , for the purpose of this essay I shall employ David Bederman’s definition when referring to IEL. According to Bederman, IEL includes, “(i) the background rules of private international commerce, (ii) the architecture of the global trading and monetary systems, and (iii) the principles for international development and investment”⁴ .

The study of IEL has been approached through a wide range of theoretical and methodological angles⁵ , including that employed by the discipline of economic sociology. Scholars who employ this approach study the law in conjunction with the contexts in which it is embedded. For instance, Morshe Hirsch argues, “IEL often reflects and affects societal factors (such as values and norms) and processes (such as socialization, conformity and social exclusion)”⁶ . According to scholars who take such a socio-legal approach⁷ , any examination of IEL should be holistic, seeing law as more than simply text or the rules, but occupying a certain real-life context, and communicating a deeper, moral meaning or subtext⁸ .

Although the socio-legal approach towards IEL is helpful in providing a broader contextual understanding of the law and showing how the law is shaping and being shaped by its environment, this method cannot help us fully understand the dynamics of IEL. For example, in their writing on bankruptcy law reform, Halliday and Carruthers present a model detailing the recursivity of bankruptcy law reforms. Through their contextual analysis of global financial crises and the pressures of domestic law reform, they present the international legal system as a dynamic system of feedback between the global realm of norm-making and the domestic arena of the implementation and subsequent reactions to these norms.⁹ Although their argument explains how the law is shaped and implemented: through its interaction with the wider social context, it does not address the causes behind such interaction.

Therefore, this essay argues that introducing a political dimension into the socio-legal approach would strengthen our understanding of whether and how IEL works. It does so through demonstrating how political struggle permeates all areas of IEL, showing that the text, context and subtext of IEL should be viewed as causes, sites and results of a political struggle for power. It introduces the power that IEL has to influence state and non-state actors’ behaviour, arguing that affected actors have an incentive to harness that power by shaping IEL in such a way that reflects and protects their interests. This results in power struggles between actors with competing interests. It then proceeds to examine how such struggles take place in the crafting and implementation stages of IEL. Throughout this article, the interplay between the text, context and subtext of IEL is referenced to highlight how IEL is in a constant state of flux and dynamism as a consequence of a struggle for power.

Setting out the Power of International Economic Law

One of the most basic roles of law is to regulate behaviour. The law is a set of rules that are meant to guide the conduct of individuals and other legal entities subject to the law¹⁰ . As such, scholars of law are often interested in how law fulfils that regulatory role through influencing subjects’ behaviour. Speaking specifically about international law, Andrew Guzman observes that discussions of mere compliance to the law add little to our understanding of the relevance and impact of the law generally unless it can be demonstrated that this compliance results in behavioural changes and “generates a marginal increase in compliance”¹¹ among actors who would otherwise not have acted in such a manner. To demonstrate his argument, he distinguishes between simple cooperation games and difficult cooperation scenarios. He points out that there exist many cases in which cooperation is easy when both actors have shared interests, such as the United States and Canada who have an interest in maintaining their peaceful relationship and thus are dis-incentivised to attack each other. As such, even though they may sign and comply with a treaty affirming such interests, the treaty itself has not actually achieved anything since it merely reflects preferences rather than impacts them¹² . However, he is not primarily concerned with these circumstances but with situations in which cooperation is less likely. For instance, if and how the law will influence behaviour should the relationship between the United States and Canada shift from one of amiability to hostility. Addressing those situations of difficult cooperation, he argues, “The greatest value of international law, after all, is its ability to facilitate cooperation in an anarchic world, and this is especially true when cooperation is difficult to achieve in any other way”¹³ . To that end, international law is most valuable when it has the greatest impact on behaviour in situations where both parties have an incentive to violate the agreement rather than cooperate.

Extending that logic, the value and substance of IEL thus lies in its power, which, according to traditional definitions of the term in political writing, is its ability to affect the behaviour of actors to get the desired outcome¹⁴ . The question that then arises is: from where does IEL receive this power? Antonio Gramsci provides an instructive explanation in his discussion about hegemonic authority. He argues that power is derived from coercive power and the consent of the dominated actors who have internalised and accepted the dominant ideology¹⁵ . Ideologies are accepted and carried out in the subject’s life through social practice, thus perpetuating the values and norms of the authority and becoming hegemonic¹⁶ . In the case of IEL, its coercive power comes from threats of sanctions when one does not adhere to the norms and rules set out by IEL, perhaps best epitomised by the fear that states will not receive much needed developmental aid from the World Bank if they do not liberalise their economies¹⁷ . An example of the internalisation of IEL norms would be the use of mechanisms such as the World Trade Organisation (WTO) dispute tribunal to resolve conflicts between two parties. By going through such legal proceedings, the parties validate the power of IEL to influence their choice of how their dispute is to be settled¹⁸ .

However, IEL’s power should not be considered as one that is exercised automatically over those subject to it. One of the unique characteristics of IEL, and the international legal system in general, is that it is completely reliant on states to create, enforce, comply and observe the law¹⁹ . In short, the main actors engaged in IEL, both state and increasingly non-state actors, are both subject to and creators of the law. This means that these actors have an incentive to shape IEL in such a way to employ the IEL’s power for their own interests, whether they are ideological or material. Subsequently, to paraphrase Hutchinson and Monahan, IEL is “simply politics dressed in a different garb”²⁰ . Since these actors often have varied and competing interests, they are engaged in a constant struggle in and over shaping IEL. More specifically, state and non-state actors are engaged in struggles over the content of IEL’s authority in the crafting process of IEL and their consequent subjection to its authority in its implementation and application.

The Politics of Crafting International Economic Law

Political scientists have long been concerned with how individuals with particular interests seek to create a policy that reflects their interests. In many situations of conflicting interests between different “policy entrepreneurs”²¹ , there is the inevitable result of winners and losers from a policy²² . Since no actor desires to lose from a policy or law, there is often much conflict over how the policy is formulated and thus whose interests it protects and represents.

The formulation of IEL is similarly fraught with conflicting interests; hence one should view the context of the crafting of the text of IEL as a site for competing claims. This competition often takes place between states that are the primary actors in IEL. There has been frequent and often fierce competition between developed and lesser-developed states as to the substance and values enshrined in IEL, with the latter seeing IEL as prioritising the interests of the former at the expense of poorer nations. This was epitomised by the revolt in the mid-1970s led by the Group of 77, which forwarded the prospect of a New International Economic Order (NIEO) that proposed greater debt relief amongst other measures²³ . This movement was seen to forward a challenge the liberal economic theories that are seen to be IEL’s raison d'être²⁴ .

Moreover, in the wider context of the rapid emergence of transnational advocacy networks over the last four decades, there has been a rise in the role of non-state actors who have sought to “advocate and instigate changes in the institutional and principled bases of international action”²⁵ . Non-state actors, such as NGOs and civil society groups, have thus brought their voices to the crafting of the rules to regulate international economic interactions and behaviours. At the “Battle of Seattle” in 1999, country representatives to the WTO were met by 30,000 to 40,000 protesters who were protesting the lack of concern that the WTO had exhibited towards labour, environmental and human rights standards in its push for free trade and economic liberalisation²⁶ . While this particular confrontation did not result in concrete change to IEL, it certainly indicates that non-state actors have begun to lend their voices to the already existing cacophony of conflicting interests at play in the formation of IEL.

The crafting of the text of IEL is a forum for struggles over what is codified in IEL. This occurs within a wider context of conflicts of interest amongst a wide array of state and non-state actors. How fierce the conflicts are affects how and what rules are set out to regulate economic activity on the global sphere. When a topic is highly contested or politically sensitive, soft law mechanisms are often chosen over more formal coercive enforcement measures, which often pose impediments to cooperation between actors. This is because soft law is often perceived as flexible, adaptable and having a deliberately vague status that makes states more willing to agree to them than more tightly worded rules²⁷ . An example of the effect of conflict within IEL on the resulting text would be the debate over possible linkage between trade and labour rights, with some scholars, activists and politicians calling for the WTO to adopt a social clause that ensures the better protection of labour standards²⁸ . However, the issue of tying trade to labour standards is an extremely sensitive topic, since developing nations have often felt that core labour rights could be used as a guise by developed countries for protectionist purposes. Hence, even tentative proposals, such as Bill Clinton’s in 1999 to create a working group to explore the possible application of some core labour standards to free trade, have been shot down²⁹ . Instead, the issue of labour rights was sent back to the ILO on the grounds that it was the organisation best suited to take the appropriate measures³⁰ . It is no coincidence in this case that the politically sensitive issue was eventually redirected to the organisation which does not have any enforcement capability but relies on member states to voluntarily comply with core labour standards³¹ , since it was highly improbable that a stricter rule would have been passed on such a divisive topic. Therefore, it is vital to consider the intensity of the conflict of interests as a major factor in the crafting of IEL since it affects the ability for IEL to have any substantive power to change actors’ behaviour and the form that this power takes.

Apart from considering the intensity of the political struggle in the crafting of IEL, the power dynamics in play also has ramifications for how IEL is crafted. Evidently, when there is a power imbalance between two sets of actors, such as a poorer and richer state, the probability of a piece of IEL protecting the more powerful actor is higher. The case of China’s accession to the WTO is a case in point. China accepted extremely extensive and onerous terms of accession, many of which were discriminatory since they only applied to Chinese trade³² . The government did so because it realised that Chinese companies would encounter obstacles when exporting their goods if the Chinese government was not a member to the WTO³³ . Hence, it was vital that China accede to the WTO even if it meant that it had to take on such onerous obligations. On the other hand, countries that were already members of the WTO faced no such disadvantage from China’s absence in the WTO. In short, China needed WTO more than the WTO needed its membership. Hence, this imbalance led to the crafting and acceptance of the onerous terms of China’s accession into the WTO. In sum, while one must view the creation of the rules of IEL as set within a wider context of conflicting interests, it is also important to see that these conflicting parties are not equally matched, but a power imbalance often exists, affecting the nature and substance of the rules themselves.

Deeper Ideological Struggles in Law Making

Although it is vital that we consider the text of IEL as a frequent point of clash between state and non-state actors with competing interests, this struggle over the formulation of IEL should not merely be seen as seemingly pedantic disagreements over wording. Apart from having major material effects on individuals in a nation, such as the vital provision of aid or the reconstruction of a country, the outcome of such a struggle is more than simply a certain set of rules, but a reification of a particular ideology. As mentioned earlier, IEL is often perceived as championing neoliberal ideologies regarding international economic interactions³⁴ . However, with the rise of civil society actors, such as those comprising the World Social Forum, a counter-hegemonic movement is beginning. Much like the Battle of Seattle, these civil society organisations “refuse the idea that there is no alternative to neoliberal globalization, consider themselves anti-capitalistic, and advocate alternative economies, alternative models of development, or alternatives to development”³⁵ . State actors have forwarded similar challenges to the dominant ideology of neoliberalism, such as those who proposed under the New International Economic Order³⁶ . Hence, the conflicts between actors in the formulation of IEL should not merely be seen as conflicts over words or material interests, but of deeply held ideological stances.

The specific rules and text of IEL are the most evident results of the struggle over its crafting, and one could examine the text to see which actors’ interests the text upholds. However, in order to know which ideology prevailed, the subtext of IEL must be examined. The subtext is often the assumptions and moral meaning of the text³⁷ . For instance, the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) has often been criticised as prioritising intellectual property rights at the expense of ethnic communities. It is argued that the Western conception of the rights of the atomistic individual has allowed the individual to appropriate knowledge traditionally belonging to the community³⁸ . In short, the subtext of the TRIPs agreement indicates a Western ideological conception of individual rights, which in turn affects how the text itself has been crafted, effectively side-lining alternative ideologies and value systems.

But why is it important to be aware of the subtext underlying the text of any piece of IEL? We must return to Gramsci’s conception of hegemony for an answer. He viewed ideology as perpetuated through lived, social practice ³⁹ . As such, once a particular ideology has been captured in the text of IEL, it has the potential to be reified as law moves from mere text on a page to its application and implementation in a real world context⁴⁰ . However, the operative word in this case is “potential.” It cannot be assumed that once the text of IEL has been crafted the struggle is over. Actors continue to struggle over the implementation of the now-crafted IEL and it is the struggle at this stage that the next section is primarily concerned with.

Implementing International Economic Law

Since the value and substance of IEL is its power or ability to influence behaviour of affected actors, it is important to examine how it can actually do so when it is implemented on the ground. In other words, does it achieve the desired behavioural change when states take the already formulated text and ensure compliance through its implementation at the domestic level? Returning to Guzman’s discussion on difficult cooperation games, the authority of the IEL texts is only meaningful if they are complied with, especially in cases where parties have a disincentive to comply⁴¹ . This is especially important when one considers that many states often engage in crafting, signing and ratifying international treaties this simply out of a desire to window dress and appear as legitimate and cooperative actors rather than a genuine aspiration to change their non-compliant behaviour⁴² .

Of course, it could be observed that the likelihood of window dressing under IEL is low since market forces ensure compliance, unlike under human rights regimes. For instance, governments are often aware that disrespecting IEL principles of protecting property rights will have a negative effect on their reputation and appeal as venues for future foreign investment⁴³ , and hence will enforce the relevant IEL covenants. Hence, it is very likely that states will comply with IEL after they ratify the IEL text. Simply put, under IEL, difficult cooperation games are unlikely. States may disagree on the substance of coordination but prefer to coordinate rather than not. Therefore, once the “focal point (meaning a solution that seems nature or relevant for the parties) is chosen” at the end of the crafting process, states do not have an incentive to not comply⁴⁴ and the translation of IEL into domestic law and practice⁴⁵ through its implementation should occur fairly smoothly.

The Complicating Role of Competing Interests

While the author does recognise that this theory of market-enforced rule compliance present under IEL is compelling, it does not gel with reality. In fact, there is often a great deal of conflict in the translation of the IEL text into its application in a real-life context. This is because there are often different sets of actors who negotiate the crafting of IEL at the global level and those who implement it after it has been formulated, signed and ratified. These actors and their interests differ according to the issue at hand⁴⁶ . Hence, there is often tension between these groups. An example would be the application of the TRIPs agreement with regards to drug patents to deal with the AIDS epidemic in South Africa. While the WTO intended to foster a pharmaceutical industry that ensured both the quality and accessibility of drugs through the TRIPs agreement⁴⁷ , various actors had different ideas. The TRIPs agreement protects the intellectual property and market share of big pharmaceutical companies to such an extent that much-needed AIDS medication costs over US$12,000 per person per year, rendering such vital life-saving drugs inaccessible to the many South Africans suffering from AIDS. As such, the government, under pressure from AIDS activists, despite it being party to the TRIPs agreement, sought to allow the importation of generic drugs under the Medicines Act. This led to a lawsuit in 2001 led by big drug corporations over how TRIPs should be implemented in South Africa⁴⁸ . Clearly, one would be misguided to expect the implementation of IEL to be a smooth process in host countries when there exist so many different actors with competing interests.

The account of market-based incentives makes an even more fundamental assumption than that of the homogeneity of actors within the domestic sphere: the susceptibility of state actors to market forces. In certain cases, the state has interests that override its concerns about loss of reputation as a place for investment, thus leading it to take measures that could potentially violate international treaties that it has signed. The earlier discussed case of the South African Medicines Act is one such example. The South African government did not request a compulsory license that would allow it to it manufacture generic versions of the AIDS medication because it feared an imposition of sanctions by the United States. But eventually, domestic pressure became so great that it was forced to abrogate its obligations under the TRIPS agreement to protect the patents of drug companies⁴⁹ . Ultimately, the implementation of IEL after its crafting is no easy task since the implementation stage, much like the previous formulation stage, is populated by many actors with conflicting interests and this can change the subsequent decision-making calculus of the state. This ultimately leads to differences in opinion over how IEL is applied in the domestic sphere.

Interpreting and Applying the Contentious Law

When one recalls that the most contentious issues are also often the ones that result in the most ambiguously worded texts⁵⁰ , it is no surprise that this often leads to conflicting interpretations of the text by parties with opposing interests. An example would be the wording of the United Nations Security Council Resolution 1483 that empowered the US-UK coalition to be the legitimate peacekeeping and governing authority in Iraq after it was invaded in 2003. The newly created Coalition Provisional Authority (CPA) argued that the resolution gave it greater control over Iraq’s natural resources and economy than usually allowed under the Hague and Geneva Conventions, and then went ahead with a massive liberalisation and reform of the Iraqi economy. However, international legal experts disputed this interpretation of the resolution, leading to the CPA backing off from its original claims⁵¹ . In such cases, views on how a text should be interpreted vary and this affects how it is subsequently applied on the ground.

Cases where the wording of the text can be ambiguous and open to varied interpretations are perhaps best manifested in legal disputes over how IEL should be applied. For instance, in the Shrimp-Turtle case brought before the WTO in 1994, there was a dispute over the form of limits that countries could place on imported products. Malaysia, India and Pakistan filed suit with the WTO against the United States, alleging that the United State’s prohibition on the importation of shrimp from a country that had not been certified as having used turtle-friendly devices was against WTO regulations. The US held that it was simply applying a legitimate environmental exception to the General Agreement on Tariffs and Trade (GATT), but ultimately the US lost because it was seen to be discriminatory in its application of the prohibition⁵² . In this case, the contention was over the interpretation of the GATT and the exceptions to the free movement of goods that were allowed. What this demonstrates is that the IEL text, even after it has been formulated and agreed upon, is often vague as to how it should be interpreted, thus creating the conditions for conflict between multiple parties.

However, while the text may lead to disagreements over its interpretation and implementation, the context and subtext of IEL may help in resolving such disputes. In resolving legal disputes, tribunals or adjudication bodies may refer to the historical context of the case, referring to past cases that were similar. While they may not always be binding, such as in the case of the WTO Dispute Settlement Body (DSB), they do play an important role. As noted by the Appellate Body in Stainless Steel (Mexico),

In short, the historical context often does matter in the interpretation of how the text is supposed to be implemented.

Nonetheless, context is not the only factor that plays into how conflicts over the text are resolved. Subtext also plays a role. When dispute settlement bodies resolve conflicts between two or more parties, they often seek to examine the ‘spirit’ of the law or institution that the dispute is concerned with. In other words, they often refer to more than just the words in IEL, but the moral meaning or intention behind its crafting, otherwise known as the subtext. In the Shrimp-Turtle case, the appellate body noted that while it was important that countries protect the environment, this could not violate their non-discrimination obligations that they undertook and which the WTO has noted is one of its “fundamental principles”⁵⁴ . Hence, they ruled against the US in the Shrimp-Turtle case because the US did not provide technical assistance to all shrimp-importing countries, thus the importation of some countries’ shrimp were prohibited while others were allowed, amounting to discrimination⁵⁵ . The appellate body interpreted the role of the WTO and its primary concern being the issue of trade. According to their reading of WTO rulings and treaties, environmental protection was construed as a secondary issue. As a result, its interpretation of the subtext of the GATT saw its decision to prioritise the principle of non-discrimination over the protection of the environment based upon what they felt was the intention behind the setting up of the WTO as a whole.

The Effects on the Ground of Implementing International Economic Law

So far this article has been concerned with how the context of struggles over the wording and interpretation of IEL affect how the IEL is formulated and subsequently implemented. However, the interaction between context and the application of the text is not uni-directional with the context affecting the content of IEL and the degree to which it can modify actors’ behavior. The application of the text in a specific context can alter the very context in which it is applied. This may be the intention of IEL in the first place, since it does aim to regulate and guide behavior that would not have otherwise occurred. An example of such deliberate effects that occur with the implementation of IEL would be the case of granting conditional aid to India in 1991. Facing a major external payments crisis due to the Gulf Crisis of 1990 and global recession, India turned to the International Monetary Fund (IMF) for a loan. This loan was granted on the condition that India liberalise its economy, which it did through its “phased liberalization” projects, such as removing public sector monopolies in most industries⁵⁶ . While the conditions did have the desired short-term effects of liberalizing the Indian economy, it had long-term effects of helping the economy remain stable even in the face of later financial crises, such as the Asian financial crisis of 1997⁵⁷ .

Although the implementation of IEL can achieve its intended effects, it can also affect the context in which it is applied in an unexpected and often negative manner. A contrasting case study to the Indian one is instructive to make this point. The IMF was called in to provide conditional loans to a number of Asian countries during the Asian financial crisis of 1997, such as Indonesia and Thailand. However, the IMF’s austerity measures did not help the economy through reassuring investors as planned, but instead deepened the economic contraction faced by these economies, and ultimately made matters worse⁵⁸ .

The implementation of IEL text is not an easy issue, the method of doing so is often fraught with struggles between competing interests, and even if the text is applied, it can often have unintended and sometimes disastrous repercussions which change the landscape of the affected countries. Therefore, the conflict may not even end after the implementation of IEL, since negative consequences of its implementation can lead to political and social backlash domestically, as evidenced by the Indonesian riots that took place after the crisis worsened, finally leading to the fall of President Suharto in 1998⁵⁹ .

Conclusion

To conclude, it is useful to recall Halliday and Carruther’s demonstration of the dynamism of IEL as a recursive system once again. Although this article has distinguished between the crafting and implementation of IEL as distinct stages in order to focus more clearly on the political struggles that take place, in practice these two phases are intertwined. The crafting and application of IEL in a particular context, or lack thereof, affects the creation and implementation of future text. In other words, how actors respond to IEL in the future is informed by their positive or negative experience with IEL previously. China is a useful case study to illustrate this theory; its negative experience in the Opium War and its subsequent signing of the Treaty of Nanjing of 1842, which essentially forced its market to liberalise, meant that it saw IEL as “unreliable” and thus it refrained from engaging formally in any IEL institutions⁶⁰ . When it finally engaged with IEL during its economic reform under Deng Xiaoping, it found that it was ill-prepared to protect its interests. Hence, it is now in the process of strengthening its legal capacity with regards to its interaction within the WTO⁶¹ . As it becomes more familiar with the IEL system, it is likely to become more influential in the future, challenging traditionally accepted ideologies and practices, thus shaping how IEL is crafted and implemented in the future and potentially changing the way the entire international economy works.

This essay has sought to demonstrate that IEL − comprising its text, context and subtext − is a dynamic system that is constantly in flux because of political struggles over the content of its substance and how its authority is employed to effect change. Throughout this essay has shown how politics plays into the crafting and implementation of IEL, and hence this vital aspect cannot be ignored in any study of IEL, but must be included in order to strengthen current socio-legal scholarship.

Since legislation is often a site for political conflicts, both at the crafting and implementation stages, there is no straightforward way to see how IEL will be shaped now or in the future Moreover, the discipline and the entire body of law does not remain static either, much like the changing states of matter; as individual laws are subject to conflicting interests, it is inevitable that the face of IEL will change over time as well. As David Kennedy notes, “We will need to think about global governance as a dynamic process, in which legal, political and economic arrangements unleash interests, change the balance of forces, and lead to further reinvention of the governance scheme itself”⁶² . The only way that scholars can fully understand IEL is to view it as an ever-changing system, with the realisation that it is not a discipline that occurs in a vacuum, merely comprising of written words or formal treaties. Moreover, being aware of the political struggles that take place is vital for a fuller understanding of how IEL affects the world and us as individuals.