Carl, Economic Integration Among Developing Nations: Law and Policy
132 FORDHAM INTERNATIONAL LAW JOURNAL [Vol. 10:131
Fordham International Law Journal
Copyright c 1986 by the authors. Fordham International Law Journal is produced by The
Berkeley Electronic Press (bepress). http://ir.lawnet.fordham.edu/ilj
Richard A. Givens
It is this integration—the reduction in trade barriers between countries—that is explored in
Beverly May Carl’s Economic Integration Among Developing Nations: Law and Policy. Professor
Carl focuses on regional common market associations of developing nations, their benefits as
well as their difficulties, and their utility as a means of reducing trade barriers and dependence
on imports by member nations from industrialized nations. Integration thus can be a tool for
development, as the Commerce Clause of the Federal Constitution was for the nascent United
States of America and still is today.
ECONOMIC INTEGRATION AMONG DEVELOPING
NATIONS: LAW AND POLICY. By BEVERLY MAY CARL. New
York, N.Y.: Praeger, 1986. xx + 285 pp. $42.95. ISBN
Reviewed by Richard A. Givens*
The early success of the European Economic Community
(EEC) boldly demonstrated the benefits of economic
integration. Between 1959 and 1971, trade between the original six
Member Countries increased nearly sixfold,' and by 1979 the
expanded EEC accounted for 20 percent of total world trade.'
It is this integration - the reduction in trade barriers between
countries - that is explored in Beverly May Carl's Economic
Integration Among Developing Nations: Law and Policy. Professor
Carl focuses on regional common market associations of
developing nations, their benefits as well as their difficulties, and
their utility as a means of reducing trade barriers and
dependence on imports by member nations from industrialized
nations. Integration thus can be a tool for development, as the
Commerce Clause of the Federal Constitution was for the
nascent United States of America and still is today.
Professor Carl's work also contains much practical
information and useful appendices that can be of assistance to those
doing business in many areas of the Third World that have
regional economic arrangements.
One deficiency of the book is its treatment of the
Sovietbloc Council for Mutual Economic Assistance (COMECON) as
if it were actually composed of entirely independent sovereign
states: "[s]ince COMECON operates on the theory of
sovereign equality of its states, no measure may be adopted against
* Member, Botein Hays & Sklar, New York City; LL.B., Columbia University
1959; M.S. in Economics, University of Wisconsin, 1954; Assistant U.S. Attorney,
New York, 1961-1971; Regional Director, Federal Trade Commission, New York,
1.B. BALASSA, TYPES OF ECONOMIC INTEGRATION 18 (World Bank Reprint Series
No. 69, 1976).
2. U.S. DEPARTMENT OF STATE, THE EUROPEAN COMMUNITY GIST 3 (August
3. See Hunt v. Washington State Apple Advertising Comm'n, 432 U.S. 333, 350
(1977); Task Force on Simplification, Report on the Commerce Clause of the Federal
Constitution and Complex Regulation hIposinga Burden on InterstateCommerce, 58 N.Y. ST. B.J. 52
the will of any member concerned." 4
The book fails to discuss the implications of the coercion
of the "will" of a "member" by the intervention of Soviet
armed forces or threat of such intervention, as in the cases of
Hungary in 1956, Czechoslovakia in 1968 and Poland in 198 1.5
The primacy of self-promotion of political power by a ruling
party6 over ordinary economic objectives creates further
differences extending beyond those brought about by the
non-market aspects of state management of economic enterprises. 7
The deeper question raised by Professor Carl is the extent
to which the benefits of reducing trade barriers between
developing nations can overcome economic and political difficulties
attributed to disparities in the rate of development.
To the degree that integration of the kind Professor Carl
describes can overcome these difficulties, Third World nations
with large populations or geographic extent already have an
appreciable portion of that advantage. Perhaps Japan
represents the most spectacular instance of a formerly
lesser-developed nation moving into the forefront of industrialized
nations.8 Yet few others have been able to emulate the Japanese
example. And Japan, of course, was already a strongly
industrialized nation by the end of the 1930's, as the United States
discovered in 19
41 and 1942
Japan today faces many of the problems of other
industrialized nations - such as difficulty in making affirmative efforts
to protect its own environment 9 and in creating outlets for its
products. Likewise, Japan has been unable to avoid the
tendency to exhaust scarce resources, such as species of whales,
which has caused international hostility.10
Perhaps even more seriously, Japan's economy is heavily
dependent upon exports, which tend to trigger import
restrictions generated by loss of jobs among its trading partners.
These restrictions can set off trade wars - with obvious harm
to all parties, including consumers."' Such events can also
harm political relations among the countries drawn into an
economic free-for-all.' 2 Trade wars cause all concerned to
forfeit the very benefits of a "common market" described by
Professor Carl. 13
Professor Carl acknowledges that mercantilist tendencies
represent a weed almost impossible to extirpate, i.e., witness
the fact that large aggregations which themselves benefit from
their internal "common markets" are riven by internal
disputes over differential export advantages sought by member
nations.' 4 Efforts to deal with such disputes by offering
transitional aid to victims of reductions of trade barriers have partial
success at times, but run into problems because of the
difficulty of distinguishing injury due to imports or reductions in
barriers from that due to general economic circumstances.' 5
Further, the cost of compensation may tend to become
prohibitive. Similarly, economic blocs often become even more avid
to obtain export advantages over outsiders. An example is
found in the trade disputes between the politically friendly
EEC and the United States.
Such tendencies may be reduced, although not eliminated,
when demand surges for labor, goods and services and
everyone in a nation's labor market is needed. Competition under
these conditions takes different forms, as during the Second
After that war, President Harry S. Truman proposed his
Point Four program, designed to provide technical assistance
to developing nations.' 7 This view that technology transfer at
the "rice roots" would permit a leap forward by developing
economies also formed the foundation of the Peace Corps.' 8
It was unforeseen, however, that much of the assistance
granted would instead merely fill balance-of-payments deficits
swollen by uneconomical governmental expenditures by Third
World governments and even hurt local industry competing
with imports subsidized by the aid.' 9 Nor was it foreseen that
imported concepts might work entirely differently in a different
environment 20 or that technological advance might focus
chiefly on industries whose primary function was to sell goods
back to the industrialized nations at lower prices due, in large
part, to lower wage rates paid, thus depriving workers of jobs
in nations such as the United States.
Proposals to require higher wages to be paid in such
industries as a condition to allowing imports ignore the difficulty
of enforcement of such rules, 2 1 as well as the impossible
situation created, at least theoretically, by far different wage scales
for export and domestic industries existing side by side in the
same local environment. Moreover, the United States and
similar advanced nations themselves must export, and cannot do
so if their domestic industries are protected at higher cost
levels. Therefore these nations cannot compete with, e.g.,
Hong Kong, Taiwan or Korea, in selling many manufactured
products in, e.g., Italian, German or Pakistani markets.
Technological advance is, of course, the engine that has
made much of the world, including major parts of the Third
World, wealthier economically than ever before.2 2 In order to
increase the benefit of an advance that can be captured by an
inventor or investor, removal of unnecessary artificial barriers,
including but far from limited to international barriers reduced
by the common markets discussed by Professor Carl, is
important.23 Much benefit may also flow to the nation's economy as
a whole, a phenomenon described by economists as an
"externality, ' 24 which is the reason that basic research has long been
subsidized by nations that can afford to do so. 25
But in order to be useful rather than counterproductive, a
technology must fit its environment and thus cannot be
imported as if it fell out of the sky - as were huge coffee bean
storage elevators placed in Ghana under Nkrumah when there
were no adequate roads to carry the crop to the elevators.
"Appropriate" techniques that take advantage of local
resources such as labor, or manure to make cooking gas, may be
especially important in this respect.26
In order to prevent injury arising from competition by
developing nations, which focus on external markets for
manufactured goods in developed nations rather than on their own
internal markets, the developed nations would have to see to it
that they remain ahead. This may require deliberate attention
to technologies that will keep them several jumps ahead of
what can workably be copied. 7
It must be recognized that, on balance, technical advance
creates rather than destroys jobs 28 because ultimately what
people want to do seems to expand to meet their ability to do
it. 29 In any event, to retain jobs, advanced countries must
maintain their technological advantage, for if country A does not do
so it will lose jobs to country B that does.
Politically, as well as economically, the form of society,
open or closed, that shows itself superior in moving forward
technologically is likely to have an expanded role in
determining the future.3 0 Areas of sharing 3' between nations at
different stages of development may provide a common basis from
which each can benefit from both the knowledge and mistakes
of the other. It is here that Professor Carl's book may have its
Cooperation between independent nations, of course, is the
very opposite of the kind of control exercised within
COMECON and ignored by Professor Carl in Chapter Six of
her otherwise excellent volume. The ability to develop
mutually beneficial political and economic relationships with Third
World countries that are based on mutual respect rather than
extortion or predation is an important part of this larger
competition between systems.
Just as a bicycle remains stable if it moves ahead,
technological advance within the open societies of the industrialized
world may provide energy and spinoffs that can promote if not
automatically provide stability and benefit all.32 In such a
text, open societies with a marketplace for both ideas33 and for
goods and services 34 may have a tremendous advantage. 5
Of course, there are many other obvious challenges,
among them: How can the disruption of economic activity by
political events be overcome? How can the ceaseless pressure
of totalitarian expansion be defeated where it takes advantage
of weakness? How can the tendency to become enmeshed with
unpopular or corrupt regimes that are doomed over a period
of time be avoided?
In addition to the challenges enumerated above, how can
aid be supervised so as to be used for intended, rather than
corrupt, purposes and simultaneously critical independence of
the developing nations be fostered? Even with sophisticated
and dedicated personnel, these difficulties seem often
Ultimately, one returns to the obvious: the fate of the
Third World rests primarily and necessarily in the hands of its
own people. Heroic figures from Ghandi to Anwar Sadat to
the new democratic leaders of Argentina and Brazil show that
innovation grows in their soil as much as in that of more highly
industrialized nations. Part of the message of Professor Carl's
work is that the Third World must determine its own destiny,
and that regional common groupings of the kind Simon
Bolivar envisioned for Latin America, must be part of the means to
Eduardo Frei Montalva, the last great democratic (and by
party designation Christian Democratic) president of Chile,
who preceded both Augusto Pinochet's coup in 1973 and
Salvador Allende Gossens' minority-candidate victory in 1970,37
proposed a convergence of democratic nations on a larger
scale than hitherto seen.3 8 The economic summits of
non-totalitarian industrialized powers may be a foreshadowing of
future economic relations among these nations - perhaps
common markets and common enterprises on a grander scale.
These undertakings could embrace technological
consortia involving new industries not yet entwined in protectionist
brambles and relevant to Third World needs, such as
cost-effective sea water desalinization .3 9 However, such common
ventures are not likely to succeed if obstructionist, totalitarian,
or non-contributing countries are given an "equal" voice. In
order for economies of scale to be gained,4 ° treating unequal
contributors equally would hardly be workable - or true
equality. One-nation-one-vote or one-nation-one-veto is
hardly a way to run a technological effort. Admission of all to a
technological enterprise may mean maximum results for
Disparities often lead to corrective measures that
overbalance in other areas. For example, purchase of raw materials
from developing nations by industrialized trading partners on
terms unfavorable to the developing nations was temporarily
counterbalanced in the case of oil during the heyday of the
OPEC cartel. The wealth transferred, however, did not
necessarily benefit the bulk of the population in the developing
nations that controlled the oil. And the precipitous rise and fall
of oil prices may have left such nations worse off than before
Coalitions of developing nations such as those discussed
by Professor Carl may tend to promote OPEC-type behavior
by their members expressing pooled self-interest.12 This may
be impossible to prevent. However, development of
substitutes for items subject to import disruption - which may
themselves become even more valuable for new purposes - is
one defense against industrialized nations' vulnerability to this
kind of blackmail by developing nations.4"
Another troublesome disparity relates to credit. There is
as yet no international equivalent to Chapter 11 of the United
States Bankruptcy Code, which allows an entity that wishes to
reorganize to stay all litigation throughout the United States
merely by filing a petition in Bankruptcy Court. Perhaps the
closest thing to a formal international system is that of the
International Monetary Fund (IMF) and various auxiliary
And, ironically, accounting rules permitting banks to keep
questionable loans on their books support favorable balance
sheets in some instances, even though the money is not
collected. This suggests that the actual collection of the funds
may be less important than the accounting treatment of the
assets.45 Once a developing nation becomes an industrial
competitor, such as Hong Kong or Korea, perhaps the old
loans might serve as a set-off to balances due to the former
debtor if they had been kept alive. Some form of longer-term
deferral of loans may in fact be developing informally through
the device of rolling them over despite the lack of realistic
hope of payment within a foreseeable period. Obviously the
impact of debt depends on the purposes for which the credit is
used, e.g., whether it is income-producing or for meeting
current expenses, or in the case of foreign loans, for making
international payments or supporting governmental budget
In these and many other respects, attempts at
collaboration that seek to ignore difficulties run into almost automatic
misunderstanding between partners of grossly unequal
bargaining power.4 7 Such difficulties can best be overcome where
there is an overarching common goal that makes the
differences largely irrelevant4 8 or where the disparities are not
particularly pertinent to the area of joint endeavor.4 9
The path of closer technological, and hence economic,
collaboration with those willing and able to share, in a manner
that is a true two-way street, may lead to benefits on a broader
scale, so that one may be able to say in the future as did a
[p]rodigious hammer strokes have been needed to bring us
together... he must indeed have a blind soul who cannot
see that some great purpose and design is being worked out
here below, of which we have the honor to be the faithful
men," quoted in HARNSBERGER, THE LINCOLN TREASURY 67-68 (1950). Much earlier,
Thomas Jefferson had said, "(m)ay it be to the world, what I believe it will be (to
some parts sooner, to others later, but finally to all), the signal of arousing men to
burst their chains." White, The American Idea, N.Y. Times, July 6, 1986, § 6
(Magazine), at 13; 3 STATE OF THE UNION MESSAGES OF THE PRESIDENTS 2860, 2868,
300809 (1966); see also 2 A. DAVIES, AMERICAN DESTINY (1942); 2 R. HOFSTADTER, GREAT
ISSUES IN AMERICAN HISTORY: A DOCUMENTARY RECORD 398-99, 444-45 (1958).
50. Winston Churchill, address to the Congress of the United States (Dec. 26,
1941), quoted in THE UNRELENTING STRUGGLE: WAR SPEECHES OF THE RT. HON. SIR
WINSTON CHURCHILL 339 (1942).
4. B. CARL , ECONOMIC INTEGRATION AMONG DEVELOPING NATIONS: LAW AND POLICY 91 ( 1986 ).
5. Where force or threat of force cannot be brought to bear, a differing course of political and hence economic development occcurs. Yugoslavia and China, which separated themselves from the Soviet bloc, have had a different history from Poland and Afghanistan .
6. For early recognition of some relevant aspects, see M. DILAS, THE NEW CLASS: AN ANALYSIS OF THE COMMUNIST SYSTEM ( 1957 ); G. ORWELL, HOMAGE TO CATALONIA ( 1969 ed.); S. PfTREMENT, SIMONE WEIL: A LIFE ( 1976 ) (describing Simone Weil's perceptions in the 1930's).
7. See Keren , The Ministv, Plan Changes and the Ratchet in Planning, 6 J . COMP. EcON. 327 ( 1982 ) ; cf. N. LEITES, SOVIET STYLE IN WAR ( 1982 ).
8. See F. GIBNEY , MIRACLE BY DESIGN: THE REAL REASONS BEHIND JAPAN'S EcoNOMIC SUCCESS ( 1982 ).
9. On possibilities of "positive" technology assessment for such purposes, see BUSINESS ROUNDTABLE, STRATEGY FOR A VITAL U .S. ECONOMY 31 ( 1984 ); Thomas, How Should HMans Pay Their Way? , N.Y. Times , Aug. 24 , 1981 , at A15, col. 3;
16. See G. THOMSON , VOTE OF CENSURE ( 1968 ) (concerning Britain); see also L. SULLIVAN, BUILD BROTHER BUILD ( 1969 ) (Apollo program in the United States in the 1960's) . CompareB . KLEIN, GERMANY'S ECONOMIC PREPARATIONS FOR WAR ( 1959 ) with A. SPEER, INSIDE THE THIRD REICH ( 1970 ) (concerning Germany) .
17. See 3 STATE OF THE UNION MESSAGES OF THE PRESIDENTS 1970 ( 1966 ).
18. SeeJ. KENNEDY, THE BURDEN AND THE GLORY 15 nn. 25 & 32 , 21 n. 72 ( 1964 ).
19. See Foreign Assistance Act of 1969: Hearings Before the House Comm . on Foreign Affairs, 91st Cong., 1st Sess ., reprinted in 1969 U.S. CODE CONG. & AD. NEWS 2611 . Improper Practices , Commodity Import Program, U.S. Foreign Aid: Hearings Before the Subcomm . on Investigationsof the Senate Comm. on Government Operations, 90th Cong., 1st and 2nd Sess . ( 1968 ).
20. See M. YOUNG , SHAREHOLDER RIGHTS AND SHAREHOLDERS' MEETINGS IN JAPAN: A CASE STUDY IN INSTITUTIONAL DISTORTION , Working Paper No. 5, Center for Law & Economic Studies, Columbia Law School , July 1983 .
21. Cf . the situation described in C. VIDICH, THE NEW YORK CAB DRIVER AND HIS FARE ( 1976 ).
22. See generally V. CHILDE, WHAT HAPPENED IN HISTORY (rev . ed. 1964 ).
23. See Richardson , Cutting Regulatory Tape, N.Y. Times , Dec. 13 , 1984 , at A31, col. 2.
24. See generally N. TERLECKYJ , EFFECTS OF R&D ON THE PRODUCTIVITY GROWrH OF INDUSTRIES ( 1974 ); Mansfield, Basic Research and Productivity Increase in Manufacturing, 70 AMER. ECON. REV . 863 ( 1980 ); Starr & Rudman, Parameters of Technological Growth, 182 Sci. 358 ( 1973 ).
25. See I STATE OF THE UNION MESSAGES OF THE PRESIDENTS 3 ( 1966 ) (George Washington in 1790); id . at 88 (Thomas Jefferson) ; id . at 249 (John Quincy Adams); Bronk, The National Science Foundation: Origins , Hopes, and Aspirations, 188 Sci. 409 ( 1975 ).
26. See ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT, TechnologicalInnovation: Key to Progressin Less-IndustrializedCountries, 126 OECD OBSERVER 7 ( 1964 ).
27. See Levin , InterindustryDifferences in R &D Appropriabilityand TechnologicalOpportunity, Table 2 (Preliminary Report 1984 ).
28. See C. FREEMAN , UNEMPLOYMENT AND TECHNICAL INNOVATION ( 1982 ), discussed in Dickson, Technology and Cycles of Boom and Bust , 219 Sci. 33 ( 1983 ).
29. See G. ALLPORT , BECOMING: BASIC CONSIDERATIONS FOR A PSYCHOLOGY OF PERSONALITY ( 1955 ) ; K. LORENZ , ON AGGRESSION ( 1966 ).
30. See 3 STATE OF THE UNION MESSAGES OF THE PRESIDENTS 3008- 09 ( 1966 ).
31. Compare Norris , Halting the Flow of High-Tech Bargains , N.Y. Times , Feb. 26 , 1986 , at F3, with Dickson, New Push for European Science Cooperation, 220 ScI. 1134 ( 1983 ).
32. See T. SCHELLING , THE STRATEGY OF CONFLICT ( 1960 ).
33. Abrams v. United States , 250 U.S. 616 , 630 ( 1919 ) (Holmes ,J., dissenting). Compare A. SAKHAROV, PROGRESS, COEXISTENCE AND INTELLECTUAL FREEDOM ( 1968 ) with G. ORWELL, NINETEEN EIGHTY-FOUR ( 1949 ).
34. Axinn , Response, 52 A.B. A. ANTITRUST L.J . 643 , 652 ( 1983 ), quoting Pitofsky, The Political Content of Antitrust , 127 U. PA. L. REV . 1051 , 1055 ( 1979 ).
35. See LEGAL STRATEGIES FOR INDUSTRIAL INNOVATION (R. Givens ed. 1982 ).
36. Compare H. SUMMERS , ON STRATEGY : A CRITICAL ANALYSIS OF THE VIETNAM WAR ( 1982 ) with B. TUCHMAN, STILWELL AND THE AMERICAN EXPERIENCE IN CHINA, 1911 - 1945 ( 1970 ).
37. Allende won by a plurality of 36.3% in a field of five candidates and was elected by Congress based on rhetoric that Congress had to confirm the candidate with the most popular votes, contrary to the very purpose of the constitutional provision which enabled Congress to prevent a minority candidate from changing the nature of the society .
38. Similar goals were put forward by Montalva and Lester Pearson ofCanada in Cryingfor a Vision, and by other distinguished contributors, in ATLANTIC COMMUNITY QUARTERLY ( Fall 1966 ).
39. See Hamilton , What Will We Do When the Well Runs Dry, HARV . Bus. REV., Nov .- Dec. 1984 , at 28;Johnson, If We Could Take the Salt Out of Water , N.Y. Times, Oct. 30 , 1960 (Magazine), at 17.
40. See Dickson, supra note 31.
41. See also H.R. REP . No. 1659 , 90th Cong., 2d Sess . ( 1968 ). Compare Franck, Going Outside the U .N., N.Y. Times ,June 4, 1985 , at A29, col. 1 with Winston Churchill in the House of Commons , Jan. 27 , 1942 , quoted in NEVER GIVE IN! 22 ( 1967 ) (consulting everyone on everything is the best way to lose).
42. See Int'l Ass 'n of Machinists v . OPEC , 649 F.2d 1354 ( 9th Cir . 1981 ).
43. See Cohen , Heine & Phillips, The Quantum Mechanics ofMaterials, 246 Sci. AM . 82 ( 1982 ); Goeller & Zucker, Infinite Resources: The Ultimate Strategy, 223 ScI. 456 ( 1984 ).
44. For background, see GARDNER, supra note 12; SAMUELSON, supra note 13 at 642 , 703 - 14 .
45. Cf AMERICAN BANKERS ASS'N AND ERNST & WHINNEY, OFF-BALANCE SHEET FINANCING ARRANGEMENTS IN BANKS AND BANK HOLDING COMPANIES ( 1986 ).
46. See generally V. CHILDE, supra note 22; C. FREEMAN, UNEMPLOYMENT AND TECHNOLOGICAL INNOVATION ( 1982 ) ; J. ROBINSON, THE ACCUMULATION OF CAPITAL (2d ed . 1965 ); J. SCHUMPETER , BUSINESS CYCLES ( 1964 ) ;J. SCHUMPETER, CAPITALISM, SOCIALISM AND DEMOCRACY (3rd ed. 1962 ); Clinger, Capital Budgeting , N.Y. Times , Feb. 2 , 1982 , at A25, col. 3.
47. Cf E.M. FORSTER , A PASSAGE TO INDIA ( 1981 ed.).
48. Cf E. COOKRIDGE , THEY CAME FROM THE SKY ( 1965 ) (divergent experiences involving the French Resistance during World War II) .
49. E.g., the view of Abraham Lincoln that the Declaration of Independence "gave promise that in due time the weight would be lifted from the shoulders of all