INTERNATIONAL TRADE:

International trade is the exchange of goods and services between countries.

This type of trade gives rise to a world economy, in which prices,
or   supply
supply and
and demand,
 demand, affect
 affect and are affected by global events. Political change

in Asia, for example, could result in an increase in the cost of labour, thereby
increasing the manufacturing costs for an American sneaker company based in
Malaysia, which would then result in an increase in the price that you have to
 pay to buy the tennis shoes at your local mall. A decrease in the cost of labour,
on the other hand, would result in you having to pay less for your new
shoes. Trading globally gives consumers and countries the opportunity to be
exposed to goods and services not available in their own countries. Almost
every kind of product can be found on the international market: food, clothes,
spare parts, oil, jewellery, wine, stocks, currencies and water. Services are also
traded: tourism, banking, consulting and transportation. A product that is sold to
the global market is an export,
an  export,   and a product that is bought from the global
market is an import.
an import.   Imports and exports are accounted for in a
country’s. Increased Efficiency of Trading Globally ,Global trade allows
wealthy countries to use their resources - whether labour, technology or   capital
capital -
more efficiently. Because countries are endowed with different assets
different  assets and
natural resources (land, labour, capital and technology), some countries may
 produce the same good more efficiently and therefore sell it more cheaply than
other countries. If a country cannot efficiently produce
produce an item, it can obtain the
item by trading with another country that can. Let's take a simple example.
Country A and Country B both produce cotton sweaters and wine. Country A
 produces 10 sweaters and six bottles of wine a year while Country B produces
six sweaters and 10 bottles of wine a year. Both can produce a total of 16 units.
Country A, however, takes three hours to produce the 10 sweaters and two

hours to produce the six bottles of wine (total of five hours). Country B, on the
 

other hand, takes one hour to produce 10 sweaters and three hours to produce
six bottles of wine (total of four hours).

More than 50% of retirement age individu

in dividuals
als to not have enough savings

But these two countries realize that they could produce more by focusing on

those products with which they have a comparative

a  comparative advantage.
advantage. Country
 Country A then
 begins to produce only wine and Country B produces only cotton sweaters.
Each country can now create a specialized output of 20 units per year and trade
equal proportions of both products. As such, each country now has access to 20
units of both products. We can see then that for both countries, the opportunity
the  opportunity
cost of producing both products is greater than the cost of specializing. More
specifically, for each country, the opportunity cost of producing 16 units of both
sweaters and wine is 20 units of both products (after trading). Specialization
reduces their opportunity cost and therefore maximizes their efficiency in
acquiring the goods they need. With the greater supply, the price of each
 product would decrease, thus giving an advantage to the end consumer as well.
 Note that, in the example
example above, Country B coul
could
d produce both
both wine and cotton
more efficiently than Country A (less time). This is called an absolute
an  absolute
advantage, and
advantage, and Country B may have it because of a higher level of technology.
However, according to the international trade theory, even if a country has an
absolute advantage over another, it can still benefit from specialization.

Other Possible Benefits of Trading Globally

International trade not only results in increased efficiency but also allows
countries to participate in a global economy, encouraging the opportunity
of  foreign direct investment(FDI),
investment (FDI), which is the amount of money that
individuals invest into foreign companies and other assets. In theory, economies
can therefore grow more efficiently and can more easily become competitive
economic participants. For the receiving government, FDI is a means by which
 

foreign currency and expertise can enter the country. These raise employment
levels, and, theoretically, lead to a growth in the gross
the gross domestic product.
product...

Free Trade Vs. Protectionism

As with other theories, there are opposing views. International trade has two

contrasting views regarding the level of control placed on trade: free

trade:  free
trade and
and protectionism.
 protectionism. Free
 Free trade is the simpler of the two theories: a laissez-
a  laissez-
faire approach, with no restrictions on trade. The main idea is that supply and
demand factors, operating on a global scale, will ensure that production happens
efficiently. Therefore, nothing needs to be done to protect or promote trade and
growth, because market forces will do so automatically
automatically.. In contrast,
 protectionism
 protectionism holds that
that regulation
 regulation of international trade is important to ensure
that markets function properly. 
properly.  Advocates of this theory believe that market
inefficiencies may hamper the benefits of international trade and they aim to
guide the market accordingly. Protectionism exists in many different forms, but
the most common are tariffs,
tariffs, subsidies
 subsidies and
and quotas.
 quotas.   These strategies attempt to
correct any inefficiency in the international market.

THE BOTTOM LINE :

As it opens up the opportunity for specialization and therefore more efficient

use of resources, international trade has the potential to maximize a country's
capacity to produce and acquire goods. Opponents of global free trade have
argued, however, that international trade still allows for inefficiencies that leave
developing nations compromised. What is certain is that the global economy is
in a state of continual change, and, as it develops, so too must all of its
 participants.
 participants.
 

 
TRADE BARRIERS:

Trade barriers are government-induced restrictions on international

on  international trade. The
trade. The
 barriers can take many fforms,
orms, incl
including
uding th
thee followin
following:
g:

   Tariffs
    Non-tariff barriers tto
o trade
  Import licenses
  Export licenses
  Import quotas
  Subsidies
  Voluntary Export Restraints
  Local content requirem
requirements
ents
  Embargo
  Currency devaluation
  Trade restriction
restriction
 

 
Trade barriers are generally classified
generally classified as
1.  Import  policies reflected in tariffs and other import charges,
charges,   quotas, 
quotas,  import
licensing, customs
customs practices,
 practices,  
2.  standards,
standards, testing,
 testing, labelling,
 labelling, and
 and various
various types
 types of  certification
  certification
3.  direct
direct procurement
 procurement by
 by gover
government,
nment,
4.  subsidies for local
local exporters,
 exporters,  
5.  lack of   copyright
copyright protection,
protection,  
6.  restrictions on
on franchising,
 franchising, licensing,
 licensing, technology
 technology transfer
7.  restrictions on foreign
on foreign direct investment, etc.
investment, etc.

Most trade barriers work on the same principle: the imposition of some sort
of   cost
cost on trade that raises the price of the traded
traded products.
 products.   If two or more

nations repeatedly use trade barriers against each other, then a trade
a  trade war results
Economists generally agree that trade barriers are detrimental and decrease
overall economic
overall economic efficiency,
efficiency, this
 this can be explained by the
the theory
 theory of comparative
advantage. In
advantage. In theory,
theory, free
 free trade involves the removal of all such barriers, except
 perhaps those considered necessary for health or national security. In practice,
however, even those countries promoting free trade heavily subsidize certain
industries, such as agriculture
as agriculture and steel.
and steel.  

IMPACT OF TRADE BARRIERS ON BUSINESS :

Trade barriers are often criticized for the effect they have on the developing
world. Because rich-country players call most of the shots and set trade policies,
goods such as crops that developing countries are best at producing still face
high barriers. Trade barriers such as taxes on food imports or subsidies for
farmers in developed economies lead to overproduction and dumping on world
markets, thus lowering prices and hurting poor-country farmers. Tariffs also
tend to be anti-poor, with low rates for raw commodities and high rates for
labor-intensive processed goods. The Commitment
The  to Development
 

Index measures the effect that rich country trade policies actually have on the
developing world. Another negative aspect of trade barriers is that it would
cause a limited choice of products and would therefore force customers to pay
higher prices and accept inferior quality. Trade barrier obstructs free trade.
Before exporting or importing to other countries, firstly, they must be aware of
restrictions that the government imposes on the trade. Subsequently they need to
make sure that they are not violating the restrictions by checking those related
regulation on tax or duty, and finally they probably need a license in order to
ensure a smooth export or import business and reduce the risk of penalty of
violation. Sometimes the situation becomes even more complicated with the
changing of policy and restrictions of a country. In the past, many companies
relied on spreadsheets and manual process to keep track of compliance issues

related to incoming and outgoing shipments, which takes risks of potential

errors.

TARIFF AND NON TARIFF BARRIERS :

Tari
Ta riff
ffss ba
barr
rrie
iess repr
represen
esentt taxes on imp
imports
orts of commoditi
commodities
es into a
country/region and are among the oldest form of government intervention in the
economic
economic activit
activity.Non
y.Non tari
ta ri ff barr
ba rrie
iers
rs represen
representt the great variety
variety of
mechanisms that countries use in order to restrict the imports. For example:

 
 technical barriers to entry;
 
 import licensing;
 
 domestic content regulations;
 
 voluntary export restarins etc.
 

The non tariff barriers are mentioned in GATT 1947, art.37 (1/b):

1. The developed contracting parties shall to the fullest extent possible

 _ th a t i s, e xc ep
eptt whe
wh e n co mp
mpel
el li ng re
reas
as on s, wh ic h may
ma y i ncl
nc l ud e l eg al
reasons, make it impossible _ give effect to the following provisions:

(b) refrain from introducing, or increasing the incidence of, customs

duties or non-tariff import barriers on products currently or potentially
of particular export interest to less-developed contracting parties.

WORLD TRADE ORGANIZATION:

The World Trade Organization (WTO) is an organisation that intends to

supervise and liberalise  internatio
and liberalise international
nal trade. 
trade.  The organization officially
commenced on January 1, 1995 under the 
the  Marrakech Agreement,
Agreement,   replacing
the   General Agreement on Tariffs and Trade (GATT), which commenced in
the
1948.The organization deals with regulation of trade between participating
countries; it provides a framework for negotiating and formalizing trade
agreements, and a dispute resolution process aimed at enforcing participants'
adherence to WTO agreements, which are signed by representatives of member
governments and ratified by their  parliaments. Most
  parliaments. Most of the issues that the WTO
focuses on derive from previous trade negotiations, especially from the Uruguay
the  Uruguay

Round (1986 – 1
1994).The
994).The organization is attempting to complete negotiations on
the   Doha Development Round,
the Round,   which was launched in 2001 with an explicit
focus on addressing the needs of developing countries. As of June 2012, the
future of the Doha Round remains uncertain: the work programme lists 21
subjects in which the original deadline of 1 January 2005 was missed, and the
round is still incomplete. The conflict between free trade on industrial goods
and services but retention of  protection
 protectionism
ism on
on  farm subsidies to
domestic  agricultural
domestic agricultural sector (requested by
by  developed countries) 
countries)  and
the substantiation of the international liberalization of  fair
  fair trade on agricultural
 

 products (requested
(requested by
by developing
 developing countries
countries)) remain the major obstacles. These
 points of contenti
contention
on have hindered any progress to launch new WTO
negotiations beyond the Doha Development Round. As a result of this impasse,
there has been an increasing number of bilateral 
bilateral  free trade agreements
signed. As of July 2012, there are various negotiatio
negotiation
n groups in the WTO
system for the current agricultural trade negotiation which is in the condition of
stalemate.

WTO's current Director-General is Pascal

is Pascal Lamy,
Lamy, who
 who leads a staff of over 600
 people in Geneva,
Geneva, Switzer
Switzerland.
land.

HISTORY

The WTO's predecessor, the General Agreement on Tariffs and Trade (GATT),
was established after  World War II in the wake of other
new multilateral
new multilateral institutions dedicated to international economic cooperation  —  
notably the Bretton
the  Woods institutions known as the World and
the   International Monetary Fund.
the Fund.   A comparable international institution for
trade, named the Inter
the International
national Trade Organizatio
Organization
n was successfully negotiated.
The ITO was to be a United Nations specialized agency and would address not
only trade barriers but other issues indirectly related to trade, including
employment, investment, restrictive business practices, and commodity

agreements. But the ITO treaty was not approved by the U.S. and a few other
signatories and never went into effect. 

In the absence of an international organization for trade, the GATT would over
the years "transform itself" into a de
a de facto international organization.

GATT rounds of negotiations

The GATT was the only multilateral

only multilateral instrument governing international trade
from 1946 until the WTO was established on January 1, 1995.Despite attempts

in the mid-1950s and 1960s to create some form of institutional mechanism for
 

international trade; the GATT continued to operate for almost half a century as
a semi-institutionalized multilateral treaty regime on a provisional basis.

From Geneva to Tokyo

Seven rounds of negotiations occurred under GATT. The first real GATT trade

rounds concentrated on further reducing tariffs.

reducing  tariffs. Then,
 Then, the Kennedy in the mid-
sixties brought about a GATT anti-dumping
GATT  anti-dumping Agreement and a section on
development. The Tokyo Round during the seventies was the first major attempt
to tackle trade barriers that do not take the form of tariffs, and to improve the
system, adopting a series of agreements on non-tariff
on non-tariff barriers,
barriers,   which in some
cases interpreted existing GATT rules, and in others broke entirely new ground.
Because these 
these plurilateral agreements were not accepted by the full GATT
membership, they were often informally called "codes". Several of these codes
were amended in the Uruguay Round, and turned into multilateral commitments
accepted by all WTO members. Only four remained plurilateral (those on
government procurement, bovine meat, civil aircraft and dairy products), but in
1997 WTO members agreed to terminate the bovine meat and dairy agreements,
leaving only two.

Uruguay Round 

Well before GATT's 40th anniversary, its members concluded that the GATT
system was straining to adapt to a new globalizing
new globalizing world economy. In response
to the problems identified in the 1982 Ministerial Declaration (structural
deficiencies, spill-over impacts of certain countries' policies on world trade
GATT could not manage etc.), the eighth GATT round  —   known as the
Uruguay Round  —   was launched in September 1986, in 
in  Punta del
Este, Uruguay.
Este, Uruguay.  

It was the biggest negotiating mandate on trade ever agreed: the talks were

going to extend the trading system into several new areas, notably trade in
services and intellectual property, and to reform trade in the sensitive sectors of
 

agriculture and textiles; all the original GATT articles were up for review. The
Final Act concluding the Uruguay Round and officially establishing the WTO
regime was signed April 15, 1994, during the ministerial meeting
at Marrakesh,
at Marrakesh, Morocco,
 Morocco, and
 and hence is known as the
the Marrakesh
 Marrakesh Agreement.
Agreement.  

The GATT still exists as the WTO's umbrella treaty for trade in goods, updated
as a result of the Uruguay Round negotiations (a distinction is made
 between GATT 1994, the
the updated parts of GATT
GATT,, and GATT 1947, the original
agreement which is still the heart of GATT 1994). GATT 1994 is not however
the only legally binding agreement included via the Final Act at Marrakesh; a
long list of about 60 agreements, annexes, decisions and understandings was
adopted. The agreements fall into a structure
structure with six main parts:

  
The Agreement Establishing the WTO
   Goods and
and investment
 investment —   the Multilateral Agreements on Trade in Goods
including the GATT 1994 and the  Trade
the  Related Investm
Investment
ent
Measures (TRIMS)
   Services —  the General
 the General Agreement on Trade in Services
   Intellectual property —   the
the  Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS)
   Dispute settlement (DSU)
   Reviews of governments' trade policies (TPRM).

In terms of the WTO's principle

WTO's  principle relating to tariff "ceiling-binding" (No. 3),
3), the
 the
Uruguay Round has been successful in increasing binding commitments by both
developed and developing countries, as may be seen in the percentages of tariffs
 bound before
before and af
after
ter the 19
1986-1994
86-1994 talks.

Ministerial conferences

The topmost decision-making body of the WTO is the Ministerial

the Ministerial Conference,
Conference,  
which usually meets every two years. It brings together all members of the
 

WTO, all of which are countries or customs unions. The Ministerial Conferen
Conference
ce
can take decisions on all matters under any of the multilateral trade agreements.
The  inaugural
The ministerial conference was held in
in Singapore
 Singapore in 1996.
Disagreements between largely developed and developing economies emerged
during this conference over four issues initiated by this conference, which led to
them being collectively referred to as the "Singapore
" Singapore issues".
issues". The
The second
 second
ministerial conference was held in
in Geneva
 Geneva in
in Switzerland.
 Switzerland.   The
The third
 third
conference in 
in Seattle, Washington ended in failure, with massive
demonstrations and police and National Guard crowd control efforts drawing
worldwide attention. The 
The fourth ministerial conference was held in
in Doha
 Doha in
the Persian
the Persian Gulf nation of   Qatar. 
Qatar.  The
The   Doha Development Round was launched
at the conference. The conference also approved the joining of China, which

 became the 143rd member to join. The fifth

The fifth ministerial conference was held
in Cancun,
in Cancun, Mexico,
 Mexico,   aiming at forging agreement on the Doha round. An
alliance of 22 southern
22 southern states, the
the  G20 developing nations (led by India,
China, Brazil, ASEAN
Brazil, ASEAN led by the
the Philippines)
 Philippines),, resisted demands from the North
for agreements on the so-called "Singapore issues"
issues"   and called for an end
to 
to agricultu
agricultural
ral subsidies within the EU and the US. The talks broke down
without progress.

The  sixth WTO ministeria

The ministeriall conference was held in
in  Hong Kong from 13 – 18
18
December 2005. It was considered vital if the four-year-old Doha Development
Round negotiations were to move forward sufficiently to conclude the round in
2006. In this meeting, countries agreed to phase out all their agricultural export
subsidies by the end of 2013, and terminate any cotton export subsidies by the
end of 2006. Further concessions to developing countries included an agreement
to introduce duty free, tariff free access for goods from the Least Developed
Countries, following the 
the Everything but Arms initiative of the European
the European

Union —   but with up to 3% of tariff lines exempted. Other major issues were
 

left for further negotiation to be completed by the end of 2010. The WTO
General Council, on 26 May 2009, agreed to hold a seventh WTO ministerial
conference session in 
in Geneva from 30 November-3 December 2009.
2009.   A
statement by chairman Amb. 
Amb. Mario Matus acknowledged that the prime
 purpose was to remedy a breach of protocol
protocol requiring
requiring two-yearly "regular"
meetings, which had lapsed with the Doha Round failure in 2005, and that the
"scaled-down" meeting would not be a negotiating session, but "emphasis will
 be on transparency and open discussio
discussion
n rather than on small group processes
and informal negotiating structures". The general theme for discussion was "The
WTO, the Multilateral Trading System and the Current Global Economic
Environment.

Doha Round (The Doha Agenda)

The WTO launched the current round of negotiations, the Doha Development
Round, at the fourth ministerial conference in Doha,
in  Doha, Qatar in November 2001.
This was to be an ambitious effort to make globalization more inclusive and
help the world's poor, particularly by slashing barriers and subsidies in farming.
The initial agenda comprised both further trade liberalization and new rule-
making, underpinned by commitments to strengthen substantial assistance to
developing countries.

The negotiations have been highly contentious. Disagreements still continue

over several key areas including agriculture subsidies, which emerged as critical
in July 2006. According to a European
a European Union statement, "The 2008 Ministerial
meeting broke down over a disagreement between exporters of agricultural bulk
commodities and countries with large numbers of subsistence farmers on the
 precise terms of a 'special safeguard measure' to protect farmers from surges in
imports’. The position of the 
the European Commission is that "The successful
conclusion of the Doha negotiations would confirm the central role of
multilateral liberalisation and rule-making. It would confirm the WTO as a
 

 powerful shield
shield agains
againstt protection
protectionist
ist backslid
backsliding.
ing. An imp
impasse
asse remains and As
As of
June 2012, agreement has not been reached, despite intense negotiations at
several ministerial conferences and at other sessions.

PRINCIPLE OF TRADING SYSTEM:

The WTO establishes a framework for trade policies; it does not define or
specify outcomes. That is, it is concerned with setting the rules of the trade
 policy games.
games. Five princi
principles
ples are of particular
particular importanc
importancee in understanding
understanding both
the pre-1994 GATT and the WTO:

1.  Non-discr
 Non-discrimination.
imination. It has two major components:
components: the 
the most favoured
nation (MFN) rule, and the
the national
 national treatment
treatment policy.
 policy. Both are embedde
embedded
d
in the main WTO rules on goods, services, and intellectual property, but

their precise scope and nature differ across these areas. The MFN rule
requires that a WTO member must apply the same conditions on all trade
with other WTO members, i.e. a WTO member has to grant the most
favourable conditions under which it allows trade in a certain product
type to all other WTO members. "Grant someone a special favour and
you have to do the same for all other WTO members."National treatment
means that imported goods should be treated no less favourably than
domestically produced goods (at least after the foreign goods have
entered the market) and was introduced to tackle non-tariff
tackle  non-tariff barriers to
trade (e.g. technical standards, security standards et al. discriminating
against imported goods).
2.  Reciprocity. It reflects both a desire to limit the scope of  free-riding
  free-riding that
may arise because of the MFN rule, and a desire to obtain better access to
foreign markets. A related point is that for a nation to negotiate, it is
necessary that the gain from doing so be greater than the gain available
from unilateral
from unilateral liberalizatio
liberalization;
n; reciprocal concession
concessionss intend to ensure that
such gains will materialise.
 

3.  Binding and enforceable commitments. The tariff commitments made by

WTO members in a multilateral trade negotiation and on accession are
enumerated in a schedule (list) of concessions. These schedules establish
"ceiling bindings": a country can change its bindings, but only after
negotiating with its trading partners, which could mean compensating
them for loss of trade. If satisfaction is not obtained, the complaining
country may invoke the WTO dispute settlement procedures.
4.  Transparency. The WTO members are required to publish their trade
regulations, to maintain institutions allowing for the review of
administrative decisions affecting trade, to respond to requests for
information by other members, and to notify changes in trade policies to
the WTO. These internal transparency requirements are supplemented

and facilitated by periodic country-specific reports (trade policy reviews)

through the Trade Policy Review Mechanism (TPRM).The WTO system
tries also to improve predictability and stability, discouraging the use
of   quotas
quotas and other measures used to set limits on quantities of imports.
5.  Safety valves. In specific circumstances, governments are able to restrict
to  restrict
trade.  The WTO’s agreements permit members to take measures to
 protect not only the environment
environment but also public health, animal health
and plant health.

There are three types of provision in this direction:

  Articles allowing for the use of trade measures to attain non

non-econom
-economic
ic
objectives;
  Articles aimed at ensuring "fair competition"; members must not use
environmental protection measures as a means of disguising
 protectionist
 protectionist policie
policies.
s.
  Provisions permitting intervention in trade for economic reasons.
 

Exceptions to the MFN principle also allow for preferential treatment

of   developing
developing countries,
countries, regional
 regional free
 free trade areas and
and customs
 customs unions.
unions.  

ROLE OF WTO IN INTERNATIONAL TRADE:

Globalization causes a significant change across the world economy. This

occurs because of an increase in interaction of households and firms all over the
world who exchange goods and services between each other. As technology and
 productivity
 productivity of many countries develop year by year the world community
community is
less constrained with political borders. Exports and Imports and the measure of
economic openness more than doubled over recent decades in countries with
advanced economies. In order to sustain a healthy trade among different nations
it was sufficient for the world to form one global institute which may control the
overall performance and conduct international trade policies. Consequently after
many negotiations organizations such as General Agreements on Tariffs and
Trade (GATT) and later the World Trade Organization (WTO) were created.
General Agreement on Tariffs and Trade (GATT) was established in 1947, it
was an agreement between 150 countries which was done with an intention of
reduction of tariffs and other trade barriers and the elimination of preferences,
on a reciprocal and mutually advantageous basis. It lasted for 46 years and

ended with a new agreement among 117 countries with a name World Trade
Organization (WTO) which had more comprehensive and enforceable world
trade rules. Nowadays WTO is the only global international organization
dealing with rules of trade between different countries. It is exist ―to facilitate
the implementation, administration, and operation as well as to further the
objectives‖ of the WTO agreements. The main goal of these agreements is to
enrich and enlarge free trade which has various advantages for global economy.
After the Great Depression of 1930th many countries preferred to apply trade
 barriers such as tariffs and quotas which could help every single country to
 

increase its Domestic output and employment by stopping imports. However

those restrictions that were implemented made the things even worse, since they
 prevented nations from maximizing their specialization level and thus using
factors of production inefficiently. This politics which goes against free trade is

called protectionism. There are few arguments that protectionists use for
implementing tariffs and quotas on imported goods. Primarily they state that
trade restrictions could protect infant industries to survive, since those well-
established foreign producers generate smaller costs and are able to sell their
 products at lower price.
price. In addition to law costs, unfair
unfair competition might
might occur
due to subsidies or other benefits that firms receive from government. Even
though free trade critics argue that protectionist policies protect domestic jobs
the net effect on employment is close to zero. Government may save jobs in one

industry where there is a direct foreign competition, but lose jobs in other
industries that you may not see.One of the most important functions of WTO is
to serve as a forum for trade negotiations since international negotiations are
very technical, detailed and politically sensitive. Furthermore their system helps
to keep the peace which is achieved by helping trade to flow smoothly plus an
international confidence and cooperation are created and reinforced. Moreover
trade is a core tool to raise income. At the time of 1994 Uruguay Round trade
deal was $109 billion and after $510 billion was added to the world income.
Economists estimate that cutting trade barriers in agriculture, manufacturing and
services by only one third would expand the world economy by $613 billion.
 Not only an appropriat
appropriatee and effective usage of resources in production
production is
offered by trading system of WTO, in addition it helps to reduce costs even
more because of principles established. Lower costs improve the well- being of
society by making the prices for goods and services, such as food, clothes, cars
and real-estate, cheaper. Another major benefit world economies could get from
 joining WTO is Free Trade Agreements (FTAs) which is an example of
 preferential trade agreements and certainly the most popular. FTAs are
 

dependable on WTO rules. One of the examples of the benefit a country may
get from the agreement is an Australian FTAs with New Zealand, Singapore,
US, Thailand and Chile. By facilitating access to these markets, FTAs provide
significant commercial profits to Australian exporters and more economic

 benefit to all Australians. Additio

Additionally
nally these agreements may help to improve
competitiveness through access to inputs with lower costs and to encourage
domestic producers to remain competitive against imports. The idea of WTO
appeared slowly from various needs and negotiations. Despite there are still
many protectionists who argue the necessity of markets to be protected by
various restrictions, the Great Depression of 1930s showed the reverse situation
and proved that protected markets are more likely to fail. WTO has a big impact
on international trade as it is the only global organization in the world which

sets the rules and controls performance among member countries and it is
considered as among most powerful international bodies in the world.

IMF (INTERNATIONAL MONETARY FUND):

The International Monetary Fund (IMF) is an

an  international organization that
was initiated in 1944 at the Conference and formally created in 1945 by 29
member countries. The IMF's stated goal was to assist in the reconstruction of
the world's international payment system
system post
 post – 
 – World
World War II. 
II.  Countries
contribute money to a pool through a quota system from which countries with
 payment imbalances can borrow
borrow funds
 funds temporarily. Through this activity and
others such as surveillance of its members' economies and the demand for self-
correcting policies, the IMF works to improve the economies of its member
countries. The IMF describes itself as ―an organization of 188 countries,
working to foster global monetary cooperation, secure financial stability,
facilitate international trade, promote high employment and sustainable

economic growth, and reduce po verty around the world.‖  The organization's
stated objectives are to promote international economic co-
 

operation,  internatio
operation, international
nal trade,
trade,   employment, and exchange rate stability,
including by making financial resources available to member countries to
meet  balance
meet of payments needs. Its headquarters
headquarter s are in
in Washington,
 Washington,
D.C., United
D.C., United States.
States.  

WORLD BANK:

The World Bank is a United Nations

Nations  international financial institution that
 provides loans
 provides loans to developing
to developing countries for  capital
 capital programs.
programs. The
 The World Bank is
a component of the 
the  World Bank Group,
Group,   and a member of the
the United
 United Nations
Development Group. The
Group. The World Bank's official goal is the
the reduction
 reduction of poverty.
poverty.  
According to its Articles of Agreement, all its decisions must be guided by a
commitment to the promotion of  foreign
  foreign investment and internatio
and international
nal trade and
to the facilitation of   capital
capital investment .The World Bank was created at the end
of World War II as a result of many European and Asian countries needing
financing to fund reconstruction efforts. Created out of the Bretton Woods
agreement of 1944, the Bank was successful in providing financing for these
devastated countries. Today, the Bank functions as an international organization
that attempts to fight poverty by offering developmental assistance to middle
and poor-income countries. By giving loans, and offering advice and training in
 both the private and public sectors, the World Bank aims to eliminate poverty
 by helping
helping people help them
themselves..
selves..

The World Bank is composed of two institutions:

1.  International Bank for Reconstruction and Development (IBRD)

2.  International Development Association (IDA).
 

World Bank performs the following functions:

(i) Granting reconstruction loans to war devastated countries.

(ii) Granting developmental loans to underdeveloped countries.

(iii) Providing loans to governments for agriculture, irrigation, power,

transport, water supply, educations, health, etc

(iv) Providing loans to private concerns for specified projects.

(v) Promoting foreign investment by guara

guaranteeing
nteeing lo
loans
ans provided by
other organisations.

(vi)Providing technical, economic and monetary advice to member

countries for specific projects

(vii) Encouraging industrial development of underdeveloped countries by

 promoting
 promoting econom
economic
ic reforms.

ISSUES

This paper covers nine areas where international agreements are needed to
 preserve the Internet
Internet as a non-regulatory
non-regulatory medium
medium,, one in which com
competition
petition and
consumer choice will shape the marketplace. Although there are significant
areas of overlap, these items can be divided into three main subgroups: financial
issues, legal issues, and market access issues.

Financial Issues

 
customs and taxation
  electronic payments
 

Legal Issues

  'Uniform Commercial Code' for electronic commerce

  intellectual property protection
   privacy
  security

Market Access Issues

  telecommunications infrastructure and information technology

  content
  technical standard
standardss

I. Financial Issues

1. CUSTOMS AND TAXATION

For over 50 years, nations have negotiated tariff reductions because they have
recognized that the economies and citizens of all nations benefit from freer
trade. Given this recognition, and because the Internet is truly a global medium,
it makes little sense to introduce tariffs on goods and services delivered over the
Internet. Further, the Internet lacks the clear and fixed geographic lines of

transit that historically have characterized the physical trade of goods. Thus,
while it remains possible to administer tariffs for products ordered over the
Internet but ultimately delivered via surface or air transport, the structure of the
Internet makes it difficult to do so when the product or service is delivered
electronically. Nevertheless, many nations are looking for new sources of
revenue, and may seek to levy tariffs on global electronic commerce. Therefore,
the United States will advocate in the World Trade Organization (WTO) and
other appropriate international for a that the Internet be declared a tariff-free

environment whenever it is used to deliver products or services. This principle

 

should be established quickly before nations impose tariffs and before vested
interests form to protect those tariffs.In addition, the United States believes that
no new taxes should be imposed on Internet commerce. The taxation of
commerce conducted over the Internet should be consistent with the established

 principles of international
international taxation, should avoid inconsistent
inconsistent national tax
 jurisdictions
 jurisdictions and double taxation, and should be simple to administer and easy
to understand.

Any taxation of Internet sales should follo

follow
w these princip
principles:
les:

  It should neither distort nor hinder commerce. No tax system should

discriminate among types of commerce, nor should it create incentives
that will change the nature or location of transactions.
  The system should be simple and transparent. It should be capable of
capturing the overwhelming majority of appropriate revenues, be easy to
implement, and minimize burdensome record keeping and costs for all
 parties.
  The system should be able to accommodate tax systems used by the
United States and our international partners today.

Wherever feasible, we should look to existing taxation concepts and principles

to achieve these goals. Any such taxation system will have to accomplish these
goals in the context of the Internet's special characteristics -- the potential
anonymity of buyer and seller, the capacity for multiple small transactions, and
the difficulty of associating online activities with physically defined locations
To achieve global consensus on this approach, the United States, through the
Treasury Department, is participating in discussions on the taxation of
electronic commerce through the Organization for Economic Cooperation and
Development (OECD), the primary forum for cooperation in international
taxation.
 

The Administration is also concerned about possible moves by state and local
tax authorities to target electronic commerce and Internet access. The
uncertainties associated with such taxes and the inconsistencies among them
could stifle the development of Internet commerce. The Administration believes

that the same broad principles applicable to international taxation, such as not
hindering the growth of electronic commerce and neutrality between
conventional and electronic commerce, should be applied to sub federal
taxation. No new taxes should be applied to electronic commerce, and states
should coordinate their allocation of income derived from electronic commerce.
Of course, implementation of these principles may differ at the sub federal level
where indirect taxation plays a larger role. Before any further action is taken,
states and local governments should cooperate to develop a uniform, simple

approach to the taxation of electronic commerce, based on existing principles of

taxation where feasible.

2. ELECTRONIC PAYMENT SYSTEMS

 New technology has made it possible to pay for goods and services over the
Internet. Some of the methods would link existing electronic banking and
 payment systems, including credit and debit card networks, with new retail
interfaces via the Internet. "Electronic money," based on stored-value, smart
card, or other technologies, is also under development. Substantial private
sector investment and competition is spurring an intense period of innovation
that should benefit consumers and businesses wishing to engage in global
electronic commerce. At this early stage in the development of electronic
 payment systems, the commercial and technolog
technological
ical environment
environment is changing
changing
rapidly. It would be hard to develop policy that is both timely and appropriate.
For these reasons, inflexible and highly prescriptive regulations and rules are

inappropriate and potentially harmful. Rather, in the near term, case-by-case

monitoring
monitoring of electronic payment experiments is preferred.
 

From a longer term perspective, however, the marketplace and industry self-
regulation alone may not fully address all issues. For example, government
action may be necessary to ensure the safety and soundness of electronic
 payment systems, to protect consum
consumers,
ers, or to respond to important
important law

enforcement objectives. The United States, through the Department of the

Treasury, is working with other governments in international for a to study the
global implications of emerging electronic payment systems. A number of
organizations are already working on important aspects of electronic banking
payments..6 [See
and payments [See  W3C JEPI]
JEPI]  Their analyses will contribute to a better
understanding of how electronic payment systems will affect global commerce
and banking. The Economic Communiqué issued at the Lyon Summit by the G-
7 Heads of State called for a cooperative study of the implications of new,

sophisticated retail electronic payment systems. In response, the G-10 deputies

formed a Working Party, with representation from finance ministries and central
 banks (in consultation with law enforcement authorities).
authorities). The Working Party is
chaired by a representative from the U.S. Treasury Department, and tasked to
 produce a report that identifies common policy objectives among the G-10
countries and analyzes the national approaches to electronic commerce taken to
date. As electronic payment systems develop, governments should work closely
with the private sector to inform policy development, and ensure that
governmental activities flexibly accommodate the needs of the emerging
marketplace.

II. Legal Issues

3. 'UNIFORM COMMERCIAL CODE' FOR ELECTRONIC COMMERCE

In general, parties should be able to do business with each other on the Internet
under whatever terms and conditions they agree upon.
 

Private enterprise and free markets have typically flourished, however, where
there are predictable and widely accepted legal environments supporting
commercial transactions. To encourage electronic commerce, the U.S.
government should support the development of both a domestic and global

uniform commercial legal framework that recognizes, facilitates, and enforces

electronic transactions worldwide. Fully informed buyers and sellers could
voluntarily agree to form a contract subject to this uniform legal framework,
 just as parties currently choose the body of law that will be used to interpret
their contract. Participants in the marketplace should define and articulate most
of the rules that will govern electronic commerce. To enable private entities to
 perform this task and to fulfill their roles adequately,
adequately, governments
governments should
encourage the development of simple and predictable domestic and

international rules and norms that will serve as the legal foundation for
commercial activities in cyberspace. In the United States, every state
government has adopted the Uniform Commercial Code (UCC), a codification
of substantial portions of commercial law. The National Conference of
Commissioners of Uniform State Law (NCCUSL) and the American Law
Institute, domestic sponsors of the UCC, already are working to adapt the UCC
to cyberspace. Private sector organizations, including the American Bar
Association (ABA) along with other interest groups, are participants in this
 process. Work is also ongoing on a proposed electronic contracting
contracting and records
act for transactions not covered by the UCC. The Administration supports the
 prompt consideration
consideration of these prop
proposals,
osals, and the ad
adoption
option of uniform legislation
 by all states. Of course, any such legislation will be designed to accommodate
ongoing and possible future global initiatives.

Internationally, the United Nations Commission on International Trade Law

(UNCITRAL) has completed work on a model law that supports the
commercial use of international contracts in electronic commerce. This model
 

law establishes rules and norms that validate and recognize contracts formed
through electronic means, sets default rules for contract formation and
governance of electronic contract performance, defines the characteristics of a
valid electronic writing and an original document, provides for the acceptability

of electronic signatures for legal and commercial purposes, and supports the
admission of computer evidence in courts and arbitration proceedings.The
United States Government supports the adoption of principles along these lines
 by all nations as a start to defining an internatio
international
nal set of uniform commercial
 principles for electronic commerce. We urge UNCITRAL, other appropriate
appropriate
international bodies, bar associations, and other private sector groups to
continue their work in this area.

The following principles should, to the extent possible, guide the drafting of
rules governing global electronic commerce:

   parties should be free to order the contractual relationship

relationship between
themselves as they see fit;
  rules should be technology-neutral (i.e., the rules should neither require
nor assume a particular technology) and forward looking (i.e., the rules
should not hinder the use or development of technologies in the future);
  existing rules should be modified and new rules should be adopted only
as necessary or substantially desirable to support the use of electronic
technologies;
technologies; and
  the process should involve the high-tech commercial sector as well as
 businesses
 businesses that hav
havee not yet m
moved
oved online.

With these principles in mind, UNCITRAL, UNIDROIT, and the International

Chamber of Commerce (ICC), and others should develop additional model
 provisions
 provisions and uniform fundamental principles
principles designed to eliminate
administrative
administrative and regulator
regulatory
y barriers and to facilitate electronic commerce by:
 

  encouraging governmental recognition, acceptance and facilitation of

electronic communications
communications (i.e., contracts, notarized documents, etc.);
  encouraging consistent international rules to support the acceptance of
electronic signatures and other authenticati
authentication
on procedures; and
 
 promoting the developm
 promoting development
ent of adequate, efficient, and effective alternate
dispute resolution mechanisms for global commercial transactions.

The expansion of global electronic commerce also depends upon the

 participants'
 participants' ability to achieve a reasonable degree of certainty regarding their
exposure to liability for any damage or injury that might result from their
actions. Inconsistent local tort laws, coupled with uncertainties regarding
 jurisdiction,
 jurisdiction, could substant
substantially
ially increase litigatio
litigation
n and create unnecessary costs
that ultimately will be born by consumers. The U.S. should work closely with
other nations to clarify applicable jurisdictional rules and to generally favor and
enforce contract provisions that allow parties to select substantive rules
governing liability.

Finally, the development of global electronic commerce provides an opportunity

to create legal rules that allow business and consumers to take advantage of new
technology to streamline and automate functions now accomplished manually.
For example, consideration should be given to establishing electronic registries.

The Departments of Commerce and State will continue to organize U.S.

 participation
 participation in these areas with a goal of achieving substantive
substantive international
international
agreement on model law within the next two years. NCCUSL and the American
Law Institute, working with the American Bar Association and other interested
groups, are urged to continue their work to develop complementary domestic
and international efforts