Disintegration of international economic law order and then what?

For some time the multilateral trading regime and the international investment regime have faced serious challenges of legitimacy, efficacy and outcomes. While the international trade regime, epitomised by the WTO and several trade agreements has seen some kind of stagnation in terms of the ability to make new rules, the international investment regime has faced a serious crisis of legitimacy, especially the ISDS model. The outcomes of these crises is still playing out.

In this background the a latest piece in the Journal of International Economic Law (JIEL) titled "The Remains of the Day: The InternationalEconomic Order in the Era of Disintegration" lays out threadbare the elements of the crisis and what is in store. It speaks about the disintegration of the international economic order in two ways - disintegration through law and disintegration of law. The two are explained thus:

On the one hand, disintegration is understood as the impact of international economic rules on socio-economic structures and the environment (disintegration through law). On the other hand, disintegration is also a phenomenon eroding international economic regimes and institutions (disintegration of law).

On the working and disintegration of the WTO, it has this to say:

To begin with, disintegration through law offers a compelling explanation to the disintegration of international trade law. As is well-known, the World Trade Organization had shown signs of distress already at the beginning of the new millennium. However, although the agonizing stalemate ofthe Doha round cast serious doubts on the prospect of advancement of the multilateral trading system, the day-to-day functioning of the WTO was not in peril. But the unthinkable became reality. Disintegration culminated in the United States’ obstructing the appointment of Appellate Body members,to which the European Union has responded by promoting the establishment of an interim appeal facility. Not to mention the attempt of the US at reading the national security clause to include economic security; and the efforts at bi-lateralizing the relationship with China. (footnotes excluded)

On the churning in international investment law, it goes on:

"It thus comes as no surprise that international investment law has entered a phase of tumultuous change. On the one hand, States have unilaterally withdrawn from IIAS and denounced the ICSID Convention (albeit more limited in numbers). On the other hand, there is currently a plethora of reform proposals concerning both substantive standards and the ISDS mechanism, some possibly more transformative than others. But the road to change is bumpy and tortuous. For one thing, even formal withdrawal from IIAs does not necessarily imply a complete disengagement from the current investment protection regime. Sunset clauses—at times long ones—delay the full and immediate effects of withdrawals. Furthermore, reforming the massive network of IIAs inevitably takes time." (footnotes excluded)

This JIEL piece and special edition is an elaborate exercise in stating the current crisis and offering a way forward.

The first is the idea of the ‘repatriation’ of competences, which is a ‘return’ to the State as the main place of decision-making. The second is the conceptualization of a (re)embedded liberalism in a multilateral dimension, that is the idea of addressing certain compelling issues in existing multilateral frameworks. The third could be defined as progressive ‘managed’ integration, half-way between deep integration and reshoring, with more ad hoc solutions in the short-term and the possibility to extend them multilaterally at a later stage. The fourth one advances an inversion of scope with the regulation of the market being subservient to social and environmental issues, rather than ‘embedding’ these issues in market regulation. The last could be indicated as a ‘participatory’ approach, in that these solutions identify the site of democratic decision-making in the affected stakeholders at a subnational and transnational level, rather than in the nation-state. 

All these solutions present advantages and disadvantages, both from a substantive and pragmatic perspective. The idea of the return to the State might conceal both the (now highly visible) risk of autocratic power grab, but also ‘de-responsibilize’ international economic law of its central role in the attainment of public purposes. On the other hand, a (re)-embedded multilateralism might still risk obliterating the ‘perspective of the oppressed,’ and maintaining the traditional divides between ‘trade and non-trade issues’. Solutions that rest on bilateralism—albeit in the short-term— may advance more progressive agendas, such as a stronger active industrial policy and be more achievable, while risking to fragment the response.

To conclude, what are we looking at in terms of the emerging landscape:

1. A form of hyper-protectionism or precautionary-ism and State led growth models and positions in international trade?
2. A renewed effort by States to address environmental and the traditionally "non-trade" issues in multilateral and bilateral fora?
3. More examples of "coalition of the willing" types of arrangements as seen today on ecommerce, investment facilitation and services liberalisation?
4. Moving away from the State as the focal point of decision making, and more "democratic" movements and structures drive the agenda on economic integration?


But to those doomsday naysayers and global critics, the article also clarifies:

A cautionary note, however, is in order. By taking this perspective, this special issue does not aim to sound the death knell for all types of international economic integration. Nor does it wish to provide ‘ammunitions to the barbarians’ or stoke up the appetite for simplistic and chauvinist solutions.

Well once again, where and how will the middle path be found?