‘STATES AND MARKETS AS TWO SIDES OF THE SAME COIN’

Abstract

This chapter provides an elaborate exposition of the law and its application bridging the gap between markets and in so doing enables them to co-exist in fostering desired markets discipline and stability. The term law can used to connote many things, for this reason, the law used to refer to the rules governing global markets. The law in its varied contexts is a subset of politics and therefore whether one is talking of market rules or the law in other respect, the law is a reflection of prevailing political climate in a country and other regulatory domains. The analysis of the law and its usage in regulation of global markets will be limited to interstate agreements adopted by states to govern global markets such as the WTO, IMF and the World Bank and other oversight institutions. The market can be understood in the context of emerging regional initiatives such as the EAC, the WTO rules and those engendered by other supranational initiatives. It is an inescapable fact that the relationship between states and markets is complimentary and mutually reinforcing to the extent that when the market sneezes, the state catches the cold literally speaking. What remains sacrosanct is that there is no market without the state and vice versa, meanwhile, they both need the law as a bridge to co-exist in their respective regulatory domains. The law helps to create the space where markets and states work together harmoniously without overlapping each other’s regulatory roles. The author has drawn examples from the East African Community and the European Union member countries to tease the relationship between states and markets (which are literally two sides of the same coin). The irony however is that most of global regulatory regimes are evolved at the periphery of the State, (for example in Brussels for the case of EU Countries) but implemented within the state. The foregoing challenge tends to create tensions/challenges in implementation of engendered market rules conflict with the constitutional mandate of sovereign states. Desired market rules are evolved either at a regional level such as the East African Community (EAC) or the European Union (EU) or at a global level such as the WTO oversight rules on trade. It worth noting that while the State has seemingly been emasculated by proliferating regional groupings, it still calls the shots and as such dictates the pace at which ratified treaties can be implemented and hence dictate the effectiveness of engendered global market initiatives. A good case in point is the recently concluded Brexit in EU whereby the United Kingdom invoked Article 50 of Lisbon Treaty (2009) and quit the EU.2 Thus, the ability of states to implement their international obligations often depends on the goodwill and the prevailing political climate within a state. The challenge has been that states have been emasculated by ceding constitutional powers to regional markets in areas erstwhile within its exclusive domain where it needs to have a strong presence. For examples, important laws on immigration control in Europe are decided in Brussels (the periphery of states) but implemented within member’s states notwithstanding the far reaching ramifications this has on member states in terms of jobs, housing and other social services provisions within a state.