Journal of International Economic Law Vol. 22 Issue 4

Publisher:

• Introduction to the Special Issue on ‘Trade Wars’

• The Smoot–Hawley Fixation: Putting the Sino-US Trade War in Contemporary and Historical Perspective
• WTO’ing a Resolution to the China Subsidy Problem
• Undermining the Consensus-Building and List-Based Standards in Export Controls: What the US Export Controls Act Means to the Global Export Control Regime
• Beyond Rational Choice: International Trade Law and The Behavioral Political Economy of Protectionism
• Investment Wars: Contestation and Confusion in Debate About Investment Liberalization
• Toward a Geoeconomic Order in International Trade and Investment
• Heterodox markets and ‘market distortions’ in the global trading system
• At the Vanishing Point of Law: Rebalancing, Non-Violation Claims, and the Role of the Multilateral Trade Regime in the Trade Wars
• Forced Technology Transfer and the US–China Trade War: Implications for International Economic Law

• The Willing World: Shaping and Sharing a Sustainable Global Prosperity. By JAMES BACCHUS, Cambridge: Cambridge University Press, 2018. ISBN 9781108428217, 515pp
• The Clash of Capitalisms? Chinese Companies in the United States. By Ji Li, Cambridge: Cambridge University Press, 2018, ISBN 978-1-107-15715-6, 227 pp., xiii.

Andrew Lang

Heterodox markets and ‘market distortions’ in the global trading system

ABSTRACT

An important context for contemporary trade frictions is the emergence, since the 1990s, of a wide range of new forms of market capitalism, of which China’s hybrid market economy is the most significant. Institutional diversity of this kind is a source of strength and dynamism for the global trading system, but it is also the cause of very serious friction. The General Agreement on Tariffs and Trade/World Trade Organization system has dealt with this problem before, but the existing settlement regarding the legitimate boundaries of institutional diversity is under pressure and needs to be revisited. One concept that has been incorporated into World Trade Organization trade defence law (and elsewhere) to help draw these boundaries is the concept of the ‘market distortion’. The concept can be a useful one, but it has so far been interpreted and applied with an inadequate appreciation of its serious conceptual and practical difficulties. The potential result is a system of trade defences targeted in a discriminatory and even punitive manner against heterodox institutional forms, in ways that may excessively disincentivize institutional experimentation. In response, this paper argues for an approach to the interpretation and application of this concept, which proceeds from an understanding of the institutionally embedded character of markets. This does not take the form of a readily available ‘solution’, but rather a messy and evolving set of legal techniques that, in the best case, can form the legal basis of a practical and justifiable approach to the tensions caused by institutional diversity. A toolkit of legal techniques of this kind clearly cannot take the place of a more foundational political settlement of some sort, but it is a necessary accompaniment to it, if we are to preserve the aspiration towards a genuinely non-discriminatory and rules-based global economic order.

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