When did you become interested in international trade law?

Since very early on I’ve been interested in global affairs. I started studying law with the conviction of specializing in international law, which is what I now teach in the undergraduate programs at IE Law School. I was (and unfortunately still am) frustrated with the lack of enforceability and structure in many areas of international law. At the same time, I became increasingly aware of the powerful instrument of change that trade is for states and communities. This encouraged me to embark on the study and practice of international trade law, which is what I teach in the School’s LLM in International Business Law program.

International trade law is one of the rare areas of international law where we can witness close legal cooperation between countries – well, that is until recently, as the current presidency in the United States is radically undermining these well-established legal principles and the binding international dispute settlement system of the World Trade Organization.

Clear and enforceable rules on trade are necessary to provide legal certainty for business. However, there is much more to trade than just trade law.  It is also about economics and diplomacy, and about politics and psychology. More and more, we are witnessing how domestic audiences react to state trade policies and make their voices heard through their votes.  Trade law is highly relevant in our globalized world and it is this which has brought me to also teach at the IE School of Global & Public Affairs in their new Executive Master in Internationalization and Trade program. The study of international trade law continues to keep me busy!

And your research focuses specifically on services trade?

I got interested in services when studying EU law. That interest led me to the study and research of international trade in services. When explaining the difference between physical goods and immaterial services to my students, I always point out that services are something that they cannot touch, smell, or feel. Services are intangible, made of experiences, and are rarely alike from one consumption situation to another. The service seller knows the value of the service, but the utility impact is nearly impossible for the consumer to ascertain.

This asymmetry of information is why regulation is so important.  Services are difficult to trade because regulators in different countries do not trust each other and others’ service suppliers. Service locality also complicates matters.  For example, it’s hard to trade hairdressing services over country borders. However, the internet has been a game-changer in this aspect, enabling more and more services to become internationally tradable. International agreements can be used to address the regulatory concerns of states and to restrain protectionism. The challenges in drafting and enforcing such agreements, as well as the huge economic potential that lies in further liberalization of international services trade, make it a fascinating area of study. Services are not regulated only by central government but powers over services are often spread out over different levels of government. I’ve recently published a book on the matter, which argues that we should pay more attention to lower levels of government in international negotiations concerning trade in services.

By looking at how the European Union’s trade agreements have evolved over the past 25+ years, what can we understand about the nature of political and economic unions in general? 

There are two different stories at play here. First, there is the internal integration of the EU, which began as an economic union in the 1950s but has since gone much deeper towards a social and political union. Secondly, we must consider the EU’s agreements with non-EU countries. There, the EU has been grouping non-economic goals with trade-related commitments. Both stories have a common thread that materializes around one important question: should economic integration focus on trade alone (movement of goods and services across borders) or also encompass other policy areas?

It is important to note that there are limits as to what can be reached through international agreements without an organic change within the society.  The EU is sometimes criticized for imposing its own standards on trade partners, and for expecting those partners to become more “European.” In the EU’s own internal integration process, one of the underlying ideas has been that integration based on strictly economic values is not sustainable and that the people must get something in return. This plays out in heightened protection of labor standards, social policies, and political participation rights (in this last arena, the EU has unfortunately not done a very good job. Its citizens still do not seem to feel much ownership over the Union.)

What impact has the recent boom in technology and digitization had on trade? 

The impact of technology on trade is not entirely clear yet – and it is likewise not very straightforward. In many cases, technology makes it easier to trade. For example, a good programmer in Madrid can now sell her services all over the world without moving from her sofa. In services trade, the internet is a true enabler. At the same time, however, it brings new competition to areas of the economy that were once more protected from globalization. Call centers abroad are a well-established practice by now. Soon medical procedures will be conducted from distance. Even professionals in highly regulated sectors such as lawyers will face more competition from outside their local borders.

In the more traditional area of trade in goods, technology is also making a difference. Supply chains are more global and complex thanks to technological innovations such as GPS tracking and chipping.  These innovations have revolutionized feet management. There are some fears that technological advancement may reduce the need for trade, the same way it might reduce the need for labor. For example, there are some concerns that 3D printing will disrupt world trade by making it possible to print all goods locally. Thus, global supply chains will be shortened, and international trade will be dramatically reduced. This might be the case for some goods, yes, but it may also come with great environmental benefits. There is an interesting paper published recently by three World Bank economists regarding 3D printing’s effects on trade.

What are the connections between trade and immigration?

The connection is clear in the area of services trade where it is not just the service but also often the people who move across the border. That is one of the reasons why services trade is tricky to liberalize. For example, in the EU there has been much controversy about posted workers who are sent from one EU country to conclude a specific project in another EU country (for instance on a construction site.) The concerns relate to cheap labor flowing into the country, very much like in a more permanent type of labor immigration. People do not often realize that these similar dynamics are at play when they buy a product made in China or somewhere else where labor costs are lower than in their home country. The cheaper labor is hidden but it is there and it is making that product more competitive than a home-made product. Of course, the cheaper labor is much more visible when it competes with you in your domestic labor market. In my opinion, we should allow both dynamics to play out (trade and immigration) while at the same time promote adequate labor standards both in the home and host countries and prepare people for change through re-education and sufficient re-distribution policies.

So there are different categories placed on the type of immigration?

Indeed, there are big differences between various immigration categories. Also, countries have very different policies in this regard. Typical categories include, first, different labor-based categories. Here you can separate between more permanent type of labor immigration and short-term entry to carry out temporary service contracts (the last category being covered by some trade agreements.) Other categories are often based on study, family reunification, and humanitarian reasons.

States carefully guard their sovereignty over immigration and that is why it is so difficult to conclude international agreements in this field. Even EU states have not given up on their national immigration policies and therefore remain free to regulate the entry of persons from states outside the EU. For EU nationals, there is of course free movement across the Union.

Do you consider migration a boon or hindrance to labor markets?  

This is again a very complex issue. Economists tend to agree that immigration largely benefits the economy, but of course – similarly to trade – it should not be left unchecked. The key European question seems to be whether we try to keep everybody in the same boat or allow a certain fragmentation in our social protection system – meaning, for example, lowering minimum wage and labor protection for certain groups of workers. The digital economy complicates this even further, and proponents are pushing for more flexibility in labor laws. The situation demands great consideration. While employment and social security systems must undoubtedly be updated, I hope that Europeans will keep the combat against rising inequality close to their hearts.

How will Brexit affect the EU’s trade policy?

Brexit will impact the UK’s trade policy more than it will the EU trade policy. Naturally, it is in the EU’s best interest to quickly have a free trade agreement in place with the UK. But otherwise, the EU can continue its current trade policy without too much hindrance. Third countries remain interested in trading with the EU because of its huge internal market. The UK, on the other hand, will need to conclude its own trade agreements with those third states. That is going to be a challenging task as all EU trade agreements have, for decades, been negotiated by the European Commission. UK is lacking the knowhow in this field. For my students who are interested in trade law, I recommend them to look into work opportunities in the UK’s new Department for International Trade. The UK needs lots of trade specialists and negotiators now, so there is some great working experience available in London! In any case, both Europeans and Brits should put their hard feelings aside and work swiftly towards a new, comprehensive partnership. What is now clear is that it will not be anywhere close to what the EU membership provides.

Professor Jacobsson was interviewed and photographed by Kerry Parke in Madrid.