Consumption Governance: The Role of Production and Consumption in International Economic Law

64 Pages Posted: 13 Jul 2023 Last revised: 16 Aug 2023

See all articles by Timothy Meyer

Timothy Meyer

Duke University School of Law

Date Written: July 6, 2023

Abstract

Over the last decade, international economic conflict has increased dramatically. To name only a few examples, the European Union has banned the import of products from deforested land and is poised to impose a duties on carbon-intensive imports; the United States has banned imports from China made with forced labor; and countries the world over threated to impose digital services taxes on U.S. corporations, leading to a new multilateral agreement on apportioning income tax revenue among countries.

The Article argues that these conflicts are explained by a shift in the norms governing authority to tax and regulate international commerce. Different fields within international economic law describe the limits of state authority to tax and regulate in very different ways. But I argue that a trans-substantive set of principles underlies the varied doctrines in international trade, international tax, and international antitrust. Specifically, throughout the twentieth century, international law’s limits on jurisdiction rested at bottom on the notion that production could be taxed and regulated primarily and often only by the country in which production occurred (what this Article terms “production jurisdiction”). Today, by contrast, nations increasingly claim jurisdiction to tax and regulate production that occurs overseas based on their interest in controlling the kinds of activity that consumption within their borders supports (what this Article terms “consumption jurisdiction”).

I make three contributions. First, I describe the ongoing shift from production jurisdiction to consumption jurisdiction. In so doing, I explain that the diverse doctrines limiting state authority in international antitrust law, international tax, and international trade, are really part of a single overarching approach to jurisdiction and that disruptive policies within each of these issue areas can be tied to the change in that approach.

Second, I argue that the shift from production to consumption jurisdiction does not mean the end of globalization or the rise of protectionism. Rather, it reflects a change in states’ views as to whether national policies should be part of a nation’s comparative advantage in the global economy. Under production jurisdiction, producing nations could set policies to support export-oriented growth and consuming nations were largely disabled from taxing and regulating on the basis of productive activities that occurred overseas. Under consumption jurisdiction, nations can condition market access on compliance with the consuming nations’ policies on production, thus negating any advantage nations might confer on their producers via low levels of tax and regulation. As such, consumption jurisdiction is consistent with an open global economy, but one in which nations can choose what kinds of activities their consumption supports.

Third, I discuss the implications of the shift from production to consumption jurisdiction. I highlight three points. First, consumption jurisdiction creates concurrent jurisdiction, whereas production jurisdiction grants one country primary authority. In a globalized economy, concurrent consumption jurisdiction is more likely to lead to a race to the top in tax and regulation, whereas production jurisdiction is more likely to lead to a race to the bottom. Second, the shift to consumption jurisdiction is likely to have negative distributional implications for small and developing economies. Third, and counterintuitively, well-institutionalized areas of the law like international trade have struggled to adjust to new jurisdiction rules, while more thinly institutionalized areas, such as competition law and tax, have seen relatively less conflict.

Keywords: international trade, international tax, antitrust, jurisdiction, territoriality, extraterritorial

JEL Classification: K33, K34, K21, K32

Suggested Citation

Meyer, Timothy, Consumption Governance: The Role of Production and Consumption in International Economic Law (July 6, 2023). Brigham Young University Law Review, Forthcoming, Duke Law School Public Law & Legal Theory Series No. 2023-39, Available at SSRN: https://ssrn.com/abstract=4502813 or http://dx.doi.org/10.2139/ssrn.4502813

Timothy Meyer (Contact Author)

Duke University School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States

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