Charting the transnational dimension of law: U.S. free trade agreements as benchmarks of globalization.

AuthorMurphy, Jr., Ewell E.
  1. TWO RADICAL CHANGES II. PREDICTING THE FUTURE III. LAW IN THE THIRD DIMENSION IV. SEARCHING FOR BENCHMARKS A. The five agreements B. Imagining a template C. Three sensitive issues V. THREE PARADOXICAL LESSONS I. TWO RADICAL CHANGES

    We are living in a time of radical changes, "a twilight age," (1) "one of those relatively rare periods in which the future is unlikely to be very much like the past." (2) Octavio Paz expressed it eloquently: "[I]f I am sure of one thing," he wrote, "it is that we are living an interregnum; we are walking across a zone whose ground is not solid: its foundations, its basis have evaporated." (3)

    What is this interregnum we are living, this un-solid ground we are walking across? In what respects is our time so radically different from the past? When scholars answer those questions in terms of changes in human behavior, different scholars point to different contemporary traits--including, on the down-side, a self-destructive consumerism, (4) a decline in religion and morality, (5) the decay of human communication, (6) and a surge of human brutality. (7) When scholars answer the same questions in terms of structural changes in society, they come closer to consensus; the radical changes, they say, are globalization and the decline of the nation-state.

    Globalization accelerated at amazing speed. By the 1990s, merchandise exports were growing twice as fast, transnational investment three times as fast, and cross-border securities sales ten times as fast, as was growth of the world's domestic production. (8) Global trading in foreign exchange zoomed from $15 billion per day in 1973 to $1.5 trillion per day in 1998. (9) The foreign trade of the United States now equals some 30% of our gross domestic product, compared to only about 10% in 1970. (10)

    Globalization has many accelerators, but two are especially powerful. One is technology. In the old days, the goods that moved in transnational commerce were chiefly such blue-collar products as foods, fuels, minerals and metals; now they increasingly are high-tech manufactures, white-collar services and intellectual property rights. By the late 1990s, average labor cost in OECD (Organisation for Economic Co-operation and Development) countries dropped to between 5% and 10% of the cost of production, down from 25% in the 1970s. (11) By 1996, the world's trade in commercial services rose to about one-fourth of its trade in tangible goods. (12)

    Globalization's second powerful accelerator is transnational investment, annual flows of which increased six-fold between 1990 and 2000. (13) By 1995, gross sales by foreign affiliates of transnational enterprises were greater than the total exports of the world, and the foreign sales of those affiliates were growing 20% to 30% faster than exports. (14) Seventy percent of all transnational technology royalties, and more than one-third of all world trade, move within those affiliated groups. (15) Of the world's hundred largest economies, only forty-nine are nations; fifty-one are corporations. (16) The two hundred largest corporations account for 28% of the world's economic activity; the five hundred largest conduct 70% of all world trade. (17)

    The result is a world changed and challenged by globalization. A Director General of the World Trade Organization complained that "[g]lobalization is the new 'ism' that everyone loves to hate." (18) An African prime minister put it more pragmatically. "[T]here is only one thing worse than globalization," he said, "and that is to be left outside it." (19) As President Clinton noted, "The great question of this new century is whether the age of interdependence is going to be good or bad for humanity." (20) In the words of a Nobel Laureate, "globalization has become the most pressing issue of our time." (21)

    There is a growing perception that as national barriers to globalization diminish, so does the regulatory power of the state, and that the consequence is globalization's reciprocal, the decline of the nation-state. Henry Kissinger well described that cause and effect. "For the first time in history," he wrote, "a single worldwide economic system has come into being.... [B]y basing growth on interdependence, globalization has served to undermine the role of the nation-state as the sole determinant of a society's well-being...." (22) Contemporary views of national sovereignty "amount to a revolution in the way the international system has operated for more than three hundred years." (23)

    Other observers assert, even more extremely, that "traditional nation states have become unnatural, even impossible, business units in a global economy," (24) have "begun to crumble," (25) and are "increasingly a nostalgic fiction," (26) with the consequence that the national boundaries marked on maps are themselves "a conceptual barrier that prevents us from comprehending the political crack-up just beginning to occur worldwide." (27) Perhaps those are exaggerations, but certainly "[w]e are at a moment when our understanding of the very purposes of the State is undergoing historic change." (28)

  2. PREDICTING THE FUTURE

    If our world is changing so radically, what will the new world be like? Pondering that question, scholars have examined our time with the hindsight of history, seeking prefigurations of the future in the past. The result is divergent views. Francis Fukuyama praised the universalization of Western liberal democracy as the "final form of human government," and celebrated the "end of history" that leaves no other political ideal to seek. (29) To the contrary, Samuel Huntington predicted that "the early years of the twenty-first century are likely to see an ongoing resurgence of non-Western power and culture and the clash of the peoples of non-Western civilizations with the West and with each other," (30) and concluded that "Western intervention in the affairs of other civilizations is probably the single most dangerous source of instability and potential global conflict in a multicivilizational world." (31) Philip Bobbitt's massive study, The Shield of Achilles, (32) offered yet another perspective, including thoughtful speculation on the impact our changing world will have on law.

    By Bobbitt's analysis the post-medieval world has seen states of six types that existed in successive but partly overlapping epochs, each type asserting its own concept of the proper function of the state: the Princely State of 1494-1572 ("The State confers legitimacy on the dynasty."), the Kingly State of 1567-1651 ("The dynasty confers legitimacy on the State."), the Territorial State of 1649-1789 ("The State will manage the country efficiently."), the State-nation of 1776-1870 ("The State will forge the identity of the nation."), the Nation-state of 1861-1991 ("The State will better the welfare of the nation."), and now, since 1989, the Market-state ("The State will maximize the opportunity of its citizens."). (33) Each epoch's years of succession and overlap were its most changeful, and each epoch fought its own defining war. Bobbitt considers that the defining war of the nation-state was the "Long War" fought from 1914 to 1990. (34) Now, in his view, "we can expect a new epochal war in which a new form of the State--the market-state-asserts its primacy." (35)

    Bobbitt predicts that the epoch of the market-state will see the continued withering of state functions as we have known them. The market-state, he wrote, "depends on the international capital markets and, to a lesser degree, on the modern multinational business network to create stability in the world economy, in preference to management by national or transnational political bodies." (36) Accordingly, there will be "a world market that is no longer structured along national lines but rather in a way that is transnational and thus in many ways operates independently of states." (37)

    How will law function in the new, market-driven world? In Bobbit's view, not in the manner law functions in the world we know today. "Law will continue as a resource available to [the] state," he wrote, "but it will occupy a very different role in the world of market-states than it did in the world of nation-states." (38) "Law will change, and the use of law as regulation, so favored by the nation-state, will lessen. Nevertheless the State will continue to rely on law to shape its internal order, even if the legal rules derived tend to be rules that recognize a larger role for the market." (39) And "we will have to change our ideas about international law;" (40) "we must free ourselves from the assumption that international law is universal and that it must be the law of a society of nation-states." (41) "We eventually will have an international law that is based on the unwritten constitution of the new society of market-states," (42) "where multinational companies, NGOs, governments, and ad hoc coalitions share overlapping authority within a framework of universal commercial law but regionalized political rules." (43)

  3. LAW IN THE THIRD DIMENSION

    Those are heady thoughts, difficult for lawyers to comprehend, and particularly difficult for U.S. lawyers of my generation, who were schooled in the doctrine that national authority is the exclusive source of law. We understand our national identity to be proclaimed by a Declaration of Independence, constituted by Articles of Confederation, and reformed by a Constitution--each the work of lawfully empowered representatives, each an act of national law. We respect both the external boundary of the United States and the internal boundaries of its component states. We realize that globalization is changing our world, and we can imagine that globalization is lessening the authority of less influential nations, but it is difficult for us to project that lessening on the United States. The United States is the superpower of the globalizing world, we reason, so how can globalization diminish the national...

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