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Law Quadrangle (formerly Law Quad Notes)

Abstract

The following paper is an edited version of testimony presented before the Finance Committee of the United States Senate on November 21, 1985.

1. Interdependence reduces sovereign independence and frustrates national governments and leaders in their attempts to carry out programs on behalf of their constituents.

2. To a large extent, the current conditions of interdependence result from the success of the Bretton Woods System which includes the GATT.

3. "Unfair trade laws" are based on the policy of the "level playing field" and market economic principles. Not all nations agree with these principles.

4. Major differences in economic systems, such as between market and non-market economies, or developing and industrial countries, can create problems in trading relationships. But even relatively minor differences between two similar countries, such as two industrial market democracies, can by coincidence create situations which appear unfair and cause tensions and disputes. We need to think of some of these situations as requiring an "interface" mechanism to assist such nations to trade amicably together.

5. Subsidies are the most significant problem of current trade policy. They are deeply intertwined with national sovereignty. International rules on domestic or general subsidies often involve balancing legitimate national government policy goals with the "level playing field" policies. Consequently, a set of rules to help accomplish this balancing is important. These rules include an injury test and various principles of excluding from international consideration subsidy-like practices which either do not have an effect across borders, or are de minimus. The specificity test would be included.

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