Economic Impact Assessment of International Instruments

Author
Dr. Jie (Jeanne) Huang (Senior Lecturer, UNSW Law)

Lord Kelvin once indicated “When you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot express it in numbers, your knowledge is of a meagre and unsatisfactory kind.”

In the field of economic law, economic impact assessment is a popular tool to quantify the success of an international agreement, to convince states to adopt this agreement, and even to encourage students to learn this agreement in law schools. For example, economic impact is frequently used to assess the significance of FTAs or BITs. According to the Global Economic Prospects published in January 2016 by the World Bank, if TPP was ratified, it could raise GDP in its 12 member states by an average of 1.1 percent by 2030. Economic impact assessment is also widely used to evaluate domestic economic law. For example, the European Centre for International Political Economy conducted quantifiable research in seven jurisdictions (namely Brazil, China, the EU, India, Indonesia, South Korea and Vietnam) about the losses resulting from data localization requirements, related data privacy and security law. It shows that these legislations on GDP are substantial in all seven countries: Brazil (-0.2%), China (-1.1%), EU (-0.4%), India (-0.1%), Indonesia (-0.5%), Korea (-0.4%) and Vietnam (-1.7%).

However, in the field of commercial law, economic impact assessment is less frequently used. For example, the CISG is the most successful achievement made in harmonization of international commercial law thus far. The economic benefits of adopting the CISG for a state are unclear. The same as the 1958 New York Convention. Few economic data show that if the 1958 New York Convention did not exist, what the economic detriment be for the global economy. In the recent International Law Association 77th Biennial International Conference, Mr. José Angelo Estrella Faria, the Secretary-General of the International Institute for the Unification of Private Law (UNIDROIT) summarized the difficulties in quantifying the economic impacts of international commercial law instruments: lack of standard methodology and economic data. For example, how to quantify the economic impact of predictability in dispute resolutions involving private parties? This is different from reducing tariff in the FTAs, whose economic impact can be much more easily calculated.

Rather than focusing on GDP growth, the economic impact of commercial law is usually demonstrated by how many private parties adopt this law in their daily business transactions, and to what extent courts and arbitration tribunals in different jurisdictions uniformly apply this law in the dispute resolution process. For example, almost all letter of credits currently used in the world adopt the Uniform Customs and Practice for Documentary Credits issued by ICC and more than 600,000 entries of transaction have been registered under the Cape Town Convention since 2006.

Therefore, different approaches should be adopted for quantifying the success of a legal instrument in the fields of economic law and commercial law. As Mr. José Angelo Estrella Faria beautifully indicated, “law and economy” is not necessarily “laws and economics.”

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