GLOBALIZATION AND THE LAW

Peter V. Baugher

Schopf & Weiss - Chicago

At the beginning of the new century, goods, services, capital, people, diseases, and ideas move with increasing speed and frequency across national borders.  These movements strain the capacity of nation states and domestic law, creating both opportunities and problems.  New legal and political institutions are needed to capitalize on these developments and to meet these challenges.

I.          THE RISE OF GLOBALIZATION

A.            Global Economic Integration

1.            International trade in goods and services, accelerating after Cold War (now 25% of U.S. GDP)

2.            Capital flows, spurred by recycled petrodollars, reduced barriers, desire for diversification, new financial instruments from 1970s (cross-border transactions in bonds/equities 223% of GDP in ’98, compared with 9% in ’80)

3.            U.S. Foreign direct investment averaged $181 billion in ‘86-’91, $649 billion in ’98; $200 billion in net capital inflows to U.S. in ’98

4.            Chicago’s largest trading volumes with Japan, China, Germany, UK, France, Canada, South Korea

5.            Growth in world economy due to dramatic improvements in technology, transportation, communications, and information transfer

<!--[if !supportLists]--> B.                 Movement of People (Control of Borders)

<!--[if !supportLists]--> 1.                  Travel

<!--[if !supportLists]--> 2.                  Immigration

<!--[if !supportLists]--> 3.                  Brain drain/bonus

<!--[if !supportLists]--> 4.                  Crime and Terrorism

<!--[if !supportLists]--> C.                Movement of Environmental Conditions

<!--[if !supportLists]--> 1.                  Disease

<!--[if !supportLists]--> 2.                  Pollutants, carbon sinks

<!--[if !supportLists]--> D.                Movement of Ideas and Information

<!--[if !supportLists]--> 1.                  Communication - telecommunications, global media (CNN analogous to invention of printing press)

<!--[if !supportLists]--> 2.                  Internet - data

<!--[if !supportLists]--> 3.                  Not just business, but political, cultural, religious (Catholic Church has one billion members, Solidarity in Poland); non-governmental organizations (NGO)

<!--[if !supportLists]--> 4.                  English as linqua franca

<!--[if !supportLists]--> II.                BENEFITS AND PROBLEMS

 

<!--[if !supportLists]--> A.                Prosperity Tied to Integration of Global Economy

<!--[if !supportLists]--> 1.                  Comparative advantage and specialization (e.g., US financial services/Costa Rican coffee)

<!--[if !supportLists]--> 2.                  Scale economies

<!--[if !supportLists]--> 3.                  Best practices and competitive efficiencies

<!--[if !supportLists]--> B.                 Economic Disruptions

<!--[if !supportLists]--> 1.                  Employment and industries

<!--[if !supportLists]--> 2.                  Financial crises - Mexico (94-5), Thailand and Asia (97), Russia and Brazil (98-9), Argentina (01)

<!--[if !supportLists]--> 3.                  Control of Multinational Corporations (MNCs)

<!--[if !supportLists]--> a)                  60,000 parents and 500,000 foreign affiliates responsible output, 1/3 in host countries

<!--[if !supportLists]--> b)                  US-based MNCs account for 19% of GDP; 6% from foreign-based

<!--[if !supportLists]--> c)                  Foreign affiliates of US MNCs employed 8 million in ’97, affiliates of foreign companies employed 5 million

<!--[if !supportLists]--> D.                Opening of Societies Socially, Politically and Culturally

<!--[if !supportLists]--> 1.                  Centralized control undermined

<!--[if !supportLists]--> 2.                  Free flow of ideas benefits all

<!--[if !supportLists]--> E.                 Social and Cultural Impact on Local Communities

<!--[if !supportLists]--> III.             NEW LEGAL AND POLITICAL ARRANGEMENTS

 

<!--[if !supportLists]--> A.                Strain on National States

<!--[if !supportLists]--> 1.                  Territoriality principle erodes

<!--[if !supportLists]--> 2.                  Effects and conduct tests lead to extraterritorial reach and conflict

<!--[if !supportLists]--> 3.                  National structure does not correspond to evolving decision points and problems

<!--[if !supportLists]--> B.                 Harmonization and Coordination of Laws

<!--[if !supportLists]--> 1.                  UN Convention on Contracts for the International Sale of goods (CISG)

<!--[if !supportLists]--> 2.                  UNCITRAL

<!--[if !supportLists]--> 3.                  Hague Conventions on Service, Evidence, perhaps in future on Jurisdiction and Enforcement of Judgments

<!--[if !supportLists]--> 4.                  UNIDROIT (International Institute for the Unification of Private Law)

<!--[if !supportLists]--> 5.                  ALI/UNIDROIT Principles and Rules of Transnational Civil Procedure (www.ali.org, www.unidroit.org)

<!--[if !supportLists]--> C.                Multilateral Economic Institutions

<!--[if !supportLists]--> 1.                  WTO GATT Uruguay Round (86-94); comprised of nation states, designed to lower tariffs and other trade barriers, and to set up a dispute settlement process (foreign sales corporations, 1916 Antidumping Act)

<!--[if !supportLists]--> 2.                  NAFTA

<!--[if !supportLists]--> 3.                  IMF, OECD, WIPO

<!--[if !supportLists]--> 4.                  EU; move to single currency, uniform laws, expansion

<!--[if !supportLists]--> D.                International Criminal Court

<!--[if !supportLists]--> 1.                  Rome Treaty ’98

<!--[if !supportLists]--> 2.                  Yugoslavia, Rwanda

<!--[if !supportLists]--> 3.                  Cambodia (three from Cambodia, two from UN)

<!--[if !supportLists]--> E.                 Nongovernmental Entities

<!--[if !supportLists]--> 1.                  Capital markets and multinational corporations

<!--[if !supportLists]--> 2.                  Standard-setting bodies like ISO, International Accounting Standards (US GAPP)

<!--[if !supportLists]--> IV.              CHALLENGES OF GLOBALIZATION

 

<!--[if !supportLists]--> A.                Need for Oversight and Law to Protect Marketplace from Excesses

<!--[if !supportLists]--> 1.                  Disruptions

<!--[if !supportLists]--> 2.                  Economic Crises

<!--[if !supportLists]--> B.                 Transfer of National Functions/Competences

<!--[if !supportLists]--> 1.                  All are anxious about unbundling

<!--[if !supportLists]--> 2.                  Despite US hegemony, even US concerned

<!--[if !supportLists]--> a)                  target as in ICC

<!--[if !supportLists]--> b)                  adverse WTO decisions

<!--[if !supportLists]--> c)                  question of who will control

<!--[if !supportLists]--> C.                Impact on Democracy

                        Peter V. Baugher

                        Schopf & Weiss

                        312 West Randolph Street

                        Chicago, IL 60606

                        312-701-9300

                        baugher@sw.com

                        www.sw.com

                        February 2001