International Trade law

 A branch of public international law

 Nothing as created by customary principles of international law.
 A series of trade agreements articulating rights and obligations of trading partners
(i.e., WTO is a combination of 12 agreements on goods, services, intellectual
property.
 Contractual in nature

The purpose of international trade law

1. International trade law purports to promote and protect a fair and free trading
environment worldwide.
2. Fair trading means trading in transparent and non-discriminatory manner.
3. Free trade or trade liberalization refers to gradual, yet progressive removal
/reduction of tariff and non-tariff trade barriers.

WTO: How does it work

- The negotiated legal rules included in the various
- WTO agreements cover the following topics:
- Trade in Goods.
- Trade in Services.
- Trade-related aspects of intellectual property rights.
- Dispute Settlement. Dispute Settlement Resolves trade quarrels under the Dispute
Settlement Understanding to ensure trading runs smoothly.
- Trade Policy Reviews.

The objectives of WTO

WTO was established as a single institutional framework for an integrated, viable, and
durable multilateral trading system, and to preserve its basic principles and promote its
underlying objectives.
1. Raising standards of living.
2. Ensuring full employment.
3. Ensuring growth of real income and demand.
4. Expanding production and trade.
5. Sustainable development.
 6. Protection of trade environment.

Principles of WTO
 Non-discrimination.

 Predictable and growing market access.

 Fair competition.

 Economic Progress and reform in developing countries.

 Special & Differential treatment for LDCs.

 Promoting harmonisation of national regulation in specific fields.

 Institutional and procedural rules, including those relating to decision-making and

dispute settlement.

Five groups of basic rules and principles: WTO

1. the principles of non-discrimination

2. the rules on market access
3. the rules on unfair trade
4. the rules on conflicts between trade liberalization and other societal values and
interests: including the rules on special and differential treatment for developing
countries;
5. the rules promoting harmonization of national regulation in specific fields.
6. Institutional and procedural rules , including those related to decision-making and
dispute settlement
WTO Multilateral Agreement (covered agreements)
1. Agriculture
2. Textile and Clothing
3. TRIMs
4. Anti-dumping measures
5. Subsidies and Countervailing
6. Pre-shipment Inspections
7. Rules of origin
8. Safeguards
9. Import licensing
10. Custom Valuation
 11. TBT
12. SPS

Development of multilateral trading regime

1. Trade protectionism in 1930s (US, UK, Italy, Germany, France, Belgium) is mainly
responsible for the great depression which ended up in the WW2.
2. Tariff protection of these countries was much higher than their current tariff levels.
3. To stop the recurrence of similar depression and avoiding another war, in Bretton
Woods, world leaders wanted to establish an institutional framework for
restructuring world economy.
4. Objective is to liberalize trade by eliminating tariffs, subsidies, & import quotas.
5. 23 original members grew to 120.

Features of GATT 1947 principles

1. Liberalized policy for industrial products.
2. Protected/restricted policy for trade in agricultural and raw materials.
3. Principle of non-discrimination.
4. Trade Remedy Provisions: Anti-dumping, Countervailing duties.
5. GSP as an exception to principle of non-discrimination.
6. General Exceptions: Art. XX (measures necessary to protect.
7. Dispute settlement.
8. Positive consensus.
9. Customs unions and free trade areas.

Criticism about GATT 1947

1. The underlying policy objective of GATT was discriminatory as it protects the interest
of the industrial countries. Three economic big powers namely the US, EU and Japan
dominated GATT.
2. The negotiating rounds were conducted on a pragmatic and conciliatory basis that
favoured the powerful trading countries.
3. The rule of positive consensus became stumbling block of dispute settlement.
4. Profound politicization, underhanded deal and infringement of assumed obligations
as well as impairing legitimate trading rights and interests of other GATT members
made GATT unpopular and thus it suffered confidence crisis and became no one
property.
Rules on market access
1. Rules on custom duties.
2. Rules on other duties and financial charges.
3. Rules on quantitative restrictions.
4. Rules on other non-tariff barriers such as rules on transparency of trade regulations;
custom formalities; and government procurement practices.
5. Trade liberalisation versus other social values and interests ((non-economic values
and interest including protection of environment, public health, public morals,
national treasures and national security)

Principles of non-discrimination
1. Equal treatment for all importers.
2. Any advantage, privilege, favour or immunity given to any member shall be accorded
to all members ‘immediately and unconditionally’. It is called Most-favoured –nation
Treatment (GATT Article I).
3. National treatment on internal taxation and regulation.
(GATT Art. III) “Once a foreign product is available in any domestic market (after
compliance of all border measures/payment of all tariffs and taxes), it must be
treated equally with national/domestic products (like products) in terms of internal
(indirect) taxation”.
Generalised System of preference (G.S.P.)
 GSP is one kind of exception to MFN obligations.
 Particular member state or states to promote their economic development as the
uniform application of MFN is viewed as an attempt to create level playing field with
equal rules between unequal players.
 The difference of strength between developed and developing countries is obvious,
that calls for positive differential treatment.
 GSP is a favourable and special treatment as an exception to MFN enabling
developed countries to provide greater market access to product imported from
developing countries.
 The GSP exception is largely a product of developing countries’ insistence
particularly through UNCTAD in the mid-1960s, that less developed economies need
special assistance to overcome the problem of high initial costs in the export market
until they catch up with international standards.
 It is a permanent rule, but granted usually on a temporal basis, but may last as long
as the economic disparity between developed and developing countries persists.
 The granting of GSP is not comprehensive across all products of developing
countries.
 Dispute settlement under GATT
1. GATT Council (Art.22) mediated and resolved the disputes.
2. It was friendly, conciliatory and amicable settlement in lieu of adjudicative
settlement.
3. Cause of action was impairment or nullification of GATT provisions and the
frustration of GATT objective. It was based on violation and non-violation claim.
4. The procedure was based on positive consensus (Art.23)
5. The entire dispute settlement was time driven.
6. Power and diplomacy were the driving force.

Explanation of most-favoured-nation (MFN) Principle

1. It means treatment by a member state with each of others as favourably as it treats
its ‘most-favoured’ member, that is, the nation with which it has the most
unimpeded commerce. It seems to establish sovereign equality of states with
respect to trading policy.
2. The method of levying such duties and charges, and with respect to all rules and
formalities in connection with importation and exportation.
3. MFN treatment is a contractual obligation of a country towards other trading
countries under an international treaty, namely GATT. It obliges a trading country to
accord to another the same favourable treatment that the former has granted to any
third trading country under the treaty.
4. The requirement of MFN includes concession granted in both the past and future.
5. The main objective of MFN principle is to maximise the equality of opportunity by
stamping out all discriminatory treatment. The right is exercisable only in the domain
(subject-matter and the same category or like products) covered by MFN clause and
in compliance with the terms, conditions, and limitations set out in the treaty
provision.
Uruguay Round (1986-1994)
Negotiations started to be held in Punta del Este.

Punta del Este Declaration set out fourteen subjects for negotiations including :

1. tariffs, non-tariff measures,

2. tropical
3. products,
4. natural resource-based products,
5. textiles and clothing,
6. agriculture,
7. GATT 1947 Articles,
8. safeguards,
9. the MFN agreements and arrangements,
10. subsidies and countervailing measures,
11. dispute settlement,
12. trade-related aspects of intellectual property rights,
13. trade-related investment measures, and
14. the functioning of GATT system.

 123 participating countries

 Canada put forth the proposal to establish world trade organization.
 Extended trading system to new areas – services and intellectual property,
agriculture, and textiles.
 Established the WTO to replace GATT
 Membership into the WTO required participating states to accept the WTO
agreements in a single undertaking,
 contrary to the GATT 1947 where contracting parties could selectively adhere to the
specialized agreements.
 The agreements of the WTO essentially continue the institutional ideas and practices
of the GATT 1947.
 The WTO Agreements create a package tying together the various texts developed in
the Uruguay Round and reinforces the single undertaking idea of negotiators.
 GATT still exists as the WTO’s integral part for trade in goods.