International Tax Policy in the Context of Integration and Trade: The Case of the US Free Trade Agreements

Abstract

By means of the Free Trade Act of 2002, the Congress of the United States (“US”) granted to the President a ‘Trade Promotion Authority’ to negotiate free trade agreements (“FTA”). Under this authority, the FTAs concluded by the President are subject to up-or-down vote at the Congress. In other words, the Congress may accept or reject the FTA without any amendments. This authority has been and still is extensively used by the President. As a result, an unprecedented number of FTAs have been concluded or are in the process of being concluded by the US with other countries. In the past the relationship of taxation and trade has received some attention from legal scholarship. The most illustrative issue is the several trade disputes related to the US export tax subsidies being inconsistent with the World Trade Organization (“WTO”) obligations. The analysis of this relationship by legal scholars has resulted in the following questions posed by scholars: •Whether there should be a unified tax and trade system? •If no unification whether coordination should be achieved? •Should an International Tax Organization be set up? •If no international tax organization, whether the WTO can be the institutional vehicle to achieve coordination in tax law? In this article, I argue that the study of the relationship of taxation and trade requires a new approach given to the following features, namely: the importance given by the United States and developing countries to conclude US FTA and the problems faced by the WTO multilateral agreements. In this context, the first aim of this article is to analyze the features of the US FTA and its influence in the work carried out at international level by the WTO. The second aim is in the light of the extensive use of FTA by the United States, to revisit the different theories of scholars on the relationship of taxation and trade. Finally, this paper aims to answer the following two questions: -Can the WTO be the institutional vehicle to achieve coordination in tax law? -Are FTAs the response to a new international trade and tax policy? A general description of the international trade regime is provided in the following section 2. The multilateral and bilateral agreements for trade are addressed in this section. The advantages and disadvantages of FTA are also described in this section 2. Section 3 deals with the international tax policy of the United States. Section 4 deals with the relationship of taxation and trade. Finally, recommendations for future studies are presented in Section 5.