Bob Hudec had the great good fortune to witness – and make important contributions to – the full evolution of the focus of his life's work, namely the GATT/WTO legal system. When he began, the GATT had what he called a ‘diplomat's jurisprudence’, a state of affairs perhaps best exemplified by the fact that the member countries did not allow the Secretariat to have a formal Legal Division (or even a formal legal advisor) until 1983, 35 years after the GATT was established (the IMF had a General Counsel and a Legal Division the day it opened for business). By the 1980s the authority of legal obligations was playing a much more important role. Then, with the successful conclusion of the Uruguay Round, came the bold changes we are living with today: the automatic right to bring legal complaints before a dispute settlement tribunal, automatically binding legal rulings, appellate review, and an automatic right to impose retaliatory trade sanctions when the defendant government fails to comply with a legal ruling.

The first significant GATT case regarding the principle of trade discrimination was ‘Belgian Family Allowances,’ a complaint by Denmark and Norway against Belgium. This 1952 decision expounding the meaning of the unconditional ‘most-favoured-nation’ principle is often cited for the proposition that origin-based conditions are inconsistent with that core principle. This article reconsiders ‘Family Allowances’ through the window of Professor Hudec's classic case study written in 1975. In particular, the article considers whether the panel and Professor Hudec correctly interpreted the term ‘unconditionally,’ in light of the pre-1947 international trade law practices. In addition, the article explores the status of ‘Family Allowances’ as the first GATT case holding that a governmental social program violated trade rules. Although Belgium did not invoke GATT Article XX as a defense, this paper assesses how current WTO jurisprudence would be applied to the facts in ‘Family Allowances,’ and concludes that Belgium would still lose the case.

A diplomat's jurisprudence, as Bob Hudec characterized the early GATT legal system, was a compromise between jurisprudence as understood by lawyers and the reality of the limited influence trade negotiators had over national trade policy decisions. A diplomat's economics was a parallel compromise between economics as understood by economists and the reality of the many objectives that governments hoped the GATT would serve. As the GATT evolved into the WTO and took on more complicated areas of economic policy, its jurisprudence evolved with it, but its economics remained the same. When the bargain was tariff concessions versus tariff concessions, the difference between mercantilist economics and real economics did not matter, but in the new areas the WTO took on at the Uruguay Round it does matter. There is such a thing as comparative advantage among institutions, and in the new areas the WTO is at a comparative disadvantage relative to the international development banks.

The Generalized System of Preferences (GSP), authorized by the 1979 Enabling Clause under GATT, allows importing nations to extend preferential tariff treatment to the products of developing countries. India recently brought a successful WTO complaint challenging aspects of the EC preference scheme, claiming that it impermissibly discriminated among developing countries. We analyze the law and economics of discrimination within GSP schemes, assessing the implications of the Appellate Body decision in the case brought by India, and noting the economic costs and benefits of imposing tight nondiscrimination obligations on trade preferences for developing countries. We conclude that the case against discriminatory preferences is at best an uneasy one, both in legal and in economic terms. We also note that the ostensible justification for GSP schemes in the fist instance – to promote growth and development – is unlikely to be served terribly well by existing GSP policy.

Nondiscriminatory treatment at its border of a like product coming from another WTO signatory (Article I on Most Favored Nation Treatment), and of domestic and foreign suppliers of like or similar products within its borders (Article III on National Treatment) are widely held to be the fundamental principles of GATT/WTO. Yet GATT included significant exceptions to nondiscriminatory treatment, for example, in its articles relating to customs unions and free trade areas, antidumping and safeguards. I argue that these exceptions have become dominant over time so that not much nondiscrimination remains in the global trading system. With the recent inclusion of services, intellectual property and trade-related investment measures, traditional GATT issues of tariff and non-tariff barriers at the border to market access have become less important compared to regulatory barriers inside the border. It is an open question whether nondiscrimination per se is a salient issue in thinking about multilateral disciplines in these new areas.

Professor Robert Emil Hudec (Fletcher School, Tufts University) passed away last week. He belonged, together with Professor John H. Jackson of Georgetown University Law Center and Professor Ernst-Ulrich Petersmann of University of Geneva, Faculty of Law, to the first generation of legal scholars who founded and developed the branch of international law known as international economic law, centering on the study of world trade rules negotiated in the World Trade Organization.

Some of the legal analysis in this study derives from joint work between Robert Howse and Susan Esserman on this ruling, ‘Trade disputes quire fairer arbitration’, FT.com, September 12, 2002