Chapter One: Economic Globalization

X. Regional International Economic Bodies

The OECD was in its origins sectoral rather than global; but its reach is now global. Other geographically delimited rule-making bodies which cannot claim global reach include a number of supra-national groupings such as the European Union, NAFTA (North American Free Trade Area), CAFTA (Central American Free Trade Area), APEC (Asia-Pacific Economic Community), Mercosur and Caricom. Among these the EU comes closest to having real extra-territorial power through pacts such as the Lome Convention (aid to developing countries) and its clout in standard-setting negotiations in such areas as telecommunications and environmental initiatives. Political aspects of the European Union, along with equivalent organizations CARICOM and APEC are dealt with in Chapter Three: Globalization of Politics.

As economic actors, each of these regional groupings has real power over its component member states. It is a commonplace that the EU, with a formidable legal apparatus in the European Court of Justice, has diminished the capacity for independent action of its member states over a wide range of economic fields. Even in taxation, one of the 'red lines' which EU competencies are supposedly not allowed to cross, recent rulings of the Commission over state aid and 'level playing field' judgements of the ECJ over dividend taxation, VAT and corporation tax have started to put severe limits to the freedom of action of national tax authorities.

It seems highly likely that there will come to be a common corporation tax base in the EU within the next ten years, although rate-setting itself will remain a national prerogative for a long time to come. The VAT regime is already 90% harmonized, and there is a (quite high) minimum VAT rate of 15% across the Union.

Free trade areas such as NAFTA are more limited in their scope than the EU, of course, but they still put substantial limits to national powers in the areas in which they apply. NAFTA competencies include the elimination of barriers to trade, the promotion of fair competition in the free trade area, the development of investment opportunities, and the protection and enforcement of intellectual property rights. To this end, NAFTA's secretariat (the equivalent of the European Commission) is empowered to create effective procedures for the implementation and application of the Agreement, for its joint administration and for the resolution of disputes. So it has a quasi-judicial function which has supremacy over national judicial procedures.

NAFTA itself is complemented by further ancillary agreements, including the North American Agreement for Environmental Cooperation (NAAEC) and the North American Agreement on Labor Cooperation (NAALC).

NAAEC established the North American Commission for Environmental Cooperation (NACEC), a mechanism for addressing trade and environmental issues, the North American Development Bank for assisting and financing investments in pollution reduction and the Border Environmental Cooperation Commission (BECC).

NAALC aims to create a framework for the resolution of labor problems, and is thought to have been partly responsible for an acknowledged convergence of labor standards in North America.

This is an example of what might be called regulatory creep, which is a marked characteristic of all international rule-making or rule-enforcing bodies. They are pushing at an open door, in fact, because any national legislative body which attempts to create extra-territorial jurisdiction immediately runs up against a storm of protest from other countries concerned. Though one must note that the US Congress does not always seem unduly held back by such considerations!