From Fiscal to Legal Fragmentation: Coherence Challenges in Global Trade Governance

Tax havens exemplify the structural vulnerabilities of the international commercial order. They reveal how the non-application of coherent regulatory mechanisms between tax, trade and regulatory regimes has led to the existing state of affairs of fiscal sovereignty and global interdependence as they currently exist. This article argues that the existence of tax havens is not a mere fiscal anomaly, but rather the symptom of a deeper crisis of law and institutions in the fragmentation of international trade governance. By linking fiscal fragmentation with the legal fragmentation of law, the paper shows how the same forces which have brought about offshore financial regimes regulatory competition, insecure enforcement, and asymmetrical institutional power now return in the governance of digital and sustainable trade. Through a doctrinal and comparative analysis of regimes of tax, trade and environmental law, the paper identifies a parallel between the collapse of coherence of global tax law and the growing divergence between the WTO and the EU. It is concluded that in viewing tax havens as an early warning of systemic incoherence, the potential to inform the design of a new Legal Alignment Model for the reconciliation of multilateral and regional norms of trade law. The paper thus offers a new view of coherence as a preventive principle in international economic law.