International Trade Law

Unit - 1
Modes
Fundamentals of International Trade
• International trade is the exchange of goods and services between
countries.
• Opportunity to be exposed to goods and services
• not available in their own countries
• or available at a higher cost.
Who could raise objection?
Domestic price is higher than world price.

Country begins to import and domestic price falls.

Domestic consumers benefit.

Domestic producers are harmed.
Barriers to Trade
Tariff
• Tax on imported goods or services
• Reasons for tariffs
• Raise tax revenues
• Reduce consumption of the imported good or service
• Effect – Price of import rises, “cheaper” domestic goods become
more attractive
Quota
• Limits the amount of an imported good allowed into the country
• Supply is decreased and price increases
• Voluntary Export Restrictions (VER’s) are similar
Export Subsidy
• Government financial assistance to a firm that allows a firm to sell its
product at a reduced price
• Benefits and harms
• Consumers (both at home and abroad) benefit from lower prices
• Foreign producers are harmed because of lower world prices
• Taxpayers in the producing country pay the subsidy
Why – Need for International Trade
• The factors of production are unevenly distributed throughout the
world.
• when one nation can produce a good at a lower cost than another
History of ITL
• Barter System – Age Old Practice
• International trade, however, refers specifically to an exchange between
members of different nations.
• Hence, begin only with the rise of the modern nation-state.
• Barter System replaced by Mercantilism in the 16th and 17th Centuries.
• The 18th Century saw the shift towards liberalism.
• 1776 - Adam Smith, the father of Economics wrote the famous book ‘The
Wealth of Nations’ where he defined the importance of specialization in
production and brought International trade under the said scope.
• 19th century beginning saw the move towards professionalism, which
petered down by end of the century.
• 1913 - The countries in the west - extensive move towards economic
liberty where in quantitative restrictions were done away with and
customs duties were reduced across countries.
• Establishing business anywhere and finding employment was easy
and one can say that trade was really free between countries around
this period.
• Sudden Shift – First World War
• First World War Consequences- countries built walls around
themselves with wartime controls.
• Next 5 Years - Post world war, 5 years went into dismantling
of the wartime measures and getting back trade to
normalcy.
• 1920 - Economic recession – Fluctuation of nation’s
currencies and depreciation creating economic pressures on
various Governments
• Governments adopted protective mechanisms by raising
customs duties and tariffs.
• 1927 - World Economic Conference in May 1927 organized by League of
Nations
• Led to drawing up of Multilateral Trade Agreement between important
industrial countries.
• 1930s – Economic Depression - Disrupting the economies in all
countries leading to rise in import duties to be able to maintain
favorable balance of payments and import quotas or quantity
restrictions including import prohibitions and licensing.
• The U.S. Congress passed Smoot-Hawley Act in 1930 whereby import duties were
raised considerably.
• The Atlantic Charter, agreed between the USA and the UK, was the first
step in this direction; and this Charter, inter alia, emphasized free trade.
• Understanding – Need to keep reviewing their international trade
policies on continuous basis as per given circumstances.
League of Nations was established to foster multilateral
approach towards international problems.

Though the League did not have a separate set up to deal with
international economic problems, its Secretariat made
significant intellectual contribution to the analysis of economic
problems.
Second World War
• Economic isolationism
The General Agreement on Tariffs and Trade
• Aftermath of World War II
• Freer trade would in the long term be mutually advantageous for
economic and security reasons.
• United Kingdom and the United States began discussing the
establishment of a trade organization.
• Purpose - creation and enforcement of a uniform set of trade rules,
agreed upon by its member states.
• Intended goal was to promote trade across international borders with
limited government interference.
• 1945, the United States submitted a document to the United Nations.
• Proposed - Creation of what was then called the International Trade
Organization (ITO)
• This plan led to the commencement of a long string of negotiation
rounds, all with the purpose of promoting trade across borders.
• Unfortunately, due to various reasons, the ITO never materialized.
• However, the concessions resulting from the negotiations were
recorded in what is known as the General Agreement on Tariffs and
Trade (GATT 1947).
• No organization was formally charged with implementing the GATT.
• Hence, GATT was implemented through a Protocol of Provisional Application,
which lasted almost fifty years.
• Originally, the GATT was controlled by industrialized nations, and therefore
did not address the concerns of developing countries.
• Notably, the Middle East was poorly represented in GATT 1947—only two of
the twenty-three Contracting Parties, Lebanon and Syria, were from this part
of the world.
• Moreover, many of the developing countries included as Contracting Parties
had only recently left the sphere of influence of European powers (e.g.
Burma, India, Pakistan, etc.).
• Between 1947 and 1979, the GATT’s Contracting Parties undertook seven rounds
of negotiations—including the 1947 round.
• Throughout these years, the number of Contracting Parties increased from a
meager twenty-three to a substantial one-hundred-and-two at the Tokyo Round
of Negotiations.
• The Uruguay Round and the Creation of the World Trade Organization
• In 1986, the most important round of negotiations to date commenced in Punta
del Este, Uruguay.
• This round led to the creation of an international organization devoted to trade.
• The Marrakesh Agreement of 1994 marked the end of the Uruguay Round of
negotiations and the establishment of the World Trade Organization (WTO).
• By the end of 1945, the U.N.O., the IMF and the IBRD came
into existence. The negotiations for the International Trade
Organization (ITO), the trade component of post-War
international economic order, started in 1946
• U.S. proposal with inputs from the U.K. on International Trade
Organization provided the basis for the deliberation of
Preparatory Committee

• As Cordell Hull, the leader of the U.S. delegation to the ITO

negotiations, put it:

Enduring peace and welfare of nations are indissolubly connected with

friendliness, fairness, equality and maximum degree of freedom in
international trade. Unhampered trade dovetails with peace and high
tariffs, trade barriers and unfair competition with War.
Final U.N. Conference on Trade and Employment was held
during November 1947 and March 1948 and it produced the
U.N. Convention on Trade and Employment, popularly known
as Havana Charter.
• U.S. delegation took out certain portions of the ITO charter in
making, especially from Part IV dealing with “Commercial
Policies” and produced the General Agreement on Tariffs and
Trade (GAAT) in order to provide the legal backing to the
tariff concessions already negotiated in Geneva meeting and
also to provide a legal framework for future negotiations.

• The GATT was essentially conceived as a stop-gap

arrangement pending the establishment of the ITO
• The Protocol also provided in its Preamble that the GATT
would “apply provisionally on and after 1st January 1948”
provided the following eight Governments sign the Protocol
not later than 15 November 1947.
• Eight Governments were: Australia, Belgium, Canada,
France, Luxembourg, Netherlands, the U.K. and the U.S.A.
• All of them signed before 15 November 1947. Many other
countries joined the GATT later on.
• General Agreement on Tariffs and Trade (GATT)
• International Monetary Fund (IMF)
• International Bank for Reconstruction and
Development (IBRD)
International trade theories are simply different theories to
explain international trade. Trade is the concept of exchanging
goods and services between two people or
entities. International trade is then the concept of this
exchange between people or entities in two different countries.
Thomas Friedman’s flat-world approach segments history into three
stages:

Globalization 1.0 from 1492 to 1800,

2.0 from 1800 to 2000, and
3.0 from 2000 to the present
Over time, economists have developed theories to explain the
mechanisms of global trade

The main historical theories are called classical 

The mid-twentieth century theories referred to as modern 

 Mercantilism

• Developed in the 16th century

• Mercantilists believed that a country should increase its holdings of

gold and silver by promoting exports and discouraging imports

• The objective of each country was to have a trade surplus, or a

situation where the value of exports are greater than the value of
imports, and to avoid a trade deficit, or a situation where the value of
imports is greater than the value of exports.
• A closer look at world history from the 1500s to the late 1800s helps
explain why mercantilism flourished.
•  This strategy is called protectionism and is still used today.
• Although mercantilism is one of the oldest trade theories, it remains
part of modern thinking.
• Countries such as Japan, China, Singapore, Taiwan, and even
Germany still favor exports and discourage imports through a form of
neo-mercantilism in which the countries promote a combination of
protectionist policies and restrictions and domestic-industry subsidies
 Absolute Advantage

• In 1776, Adam Smith has offered this theory

• Absolute advantage, which focused on the ability of a country to
produce a good more efficiently than another nation.
• By specialization, countries would generate efficiencies, because their
labor force would become more skilled by doing the same tasks.
• Production would also become more efficient, because there would be
an incentive to create faster and better production methods to increase
the specialization. 
Smith’s theory reasoned that with increased efficiencies, people in both
countries would benefit and trade should be encouraged.

His theory stated that a nation’s wealth shouldn’t be judged by how

much gold and silver it had but rather by the living standards of its
people.
 Comparative Advantage

David Ricardo, an English economist, introduced the theory of

comparative advantage in 1817

Comparative advantage occurs when a country cannot produce a

product more efficiently than the other country; however, it can produce
that product better and more efficiently than it does other goods. 

The difference between these two theories is subtle. Comparative

advantage focuses on the relative productivity differences, whereas
absolute advantage looks at the absolute productivity.
 Heckscher-Ohlin Theory (Factor Proportions Theory)

 In the early 1900s, two Swedish economists, Eli Heckscher and Bertil
Ohlin, focused their attention on how a country could gain comparative
advantage by producing products that utilized factors that were in
abundance in the country. 

Their theory is based on a country’s production factors—land, labor,

and capital, which provide the funds for investment in plants and
equipment.
• Factors that were in great supply relative to demand would be cheaper;
factors in great demand relative to supply would be more expensive.

• Their theory, also called the factor proportions theory, stated that

countries would produce and export goods that required resources or
factors that were in great supply and, therefore, cheaper production
factors.

• In contrast, countries would import goods that required resources that

were in short supply, but higher demand.
• In contrast to classical, country-based trade theories, the category of
modern, firm-based theories emerged after World War II and was
developed in large part by business school professors, not economists.

• Unlike the country-based theories, firm-based theories incorporate

other product and service factors, including brand and customer
loyalty, technology, and quality, into the understanding of trade flows.
 Country Similarity Theory

• Swedish economist Steffan Linder developed this theory in 1961

• In this firm-based theory, Linder suggested that companies first

produce for domestic consumption.

• When they explore exporting, the companies often find the markets
that look similar to their domestic one, in terms of customer
preferences, offer the most potential for success.
• This theory is often most useful in understanding trade in goods where
brand names and product reputations are important factors in the
buyers’ decision-making and purchasing processes.
• Intra-industry trade takes place between the countries with similar
levels of development.
• This theory describes the idea that countries with comparable qualities
are mainly likely to trade with each other.
• Basis for trade among countries
• Similarity of location - less transportation cost
• Cultural similarity - exports and imports among European countries, between
USA and Canada, among the Asian countries, and among the Islamic
countries.
• Similarity of political and economic interests
 Product Life Cycle Theory

Raymond Vernon, a Harvard Business School professor, developed

the product life cycle theory in the 1960s.

The theory, originating in the field of marketing, stated that a product

life cycle has three distinct stages:
(1) new product,
(2) maturing product, and
(3) standardized product.
• The theory assumed that production of the new product will occur
completely in the home country of its innovation.

• The product life cycle theory has been less able to explain current
trade patterns where innovation and manufacturing occur around the
world. 
 Global Strategic Rivalry Theory

Theory emerged in the 1980s and was based on the work of economists
Paul Krugman and Kelvin Lancaster.

Their theory focused on MNCs and their efforts to gain a competitive

advantage against other global firms in their industry.

Firms will encounter global competition in their industries and in order

to prosper, they must develop competitive advantages.
The barriers to entry refer to the obstacles a new firm may face when
trying to enter into an industry or new market. The barriers to entry that
corporations may seek to optimize include:

• research and development,

• the ownership of intellectual property rights,
• economies of scale,
• unique business processes or methods as well as extensive experience
in the industry, and
• the control of resources or favorable access to raw materials.
 Porter’s National Competitive Advantage Theory

In the continuing evolution of international trade theories, Michael

Porter of Harvard Business School developed a new model to explain
national competitive advantage in 1990. 

Porter’s theory stated that a nation’s competitiveness in an industry

depends on the capacity of the industry to innovate and upgrade.

His theory focused on explaining why some nations are more

competitive in certain industries.
To explain his theory, Porter identified four determinants that he linked
together.

The four determinants are

(1) local market resources and capabilities,

(2) local market demand conditions,

(3) local suppliers and complementary industries, and

(4) local firm characteristics.

Q. Which Trade Theory Is Dominant Today?
 NIEO
• New International Economic Order
• Introduced by a United Nations declaration in 1974 - transnational governance
reform initiative.
• Earlier, similar resolution was adopted by the GA itself long back in 1952.
• Focused on Developing Nations
• The NIEO aims at a development of the global economy as a whole, with the
set up of interrelated policies and performance targets of the international
community at large.
• The movement for the establishment of the NIEO is caused by the existing
deficiencies in the current international economic order and the gross failures
of the GATT and the UNCTAD in fulfillment of their vowed objectives.
• A bid to empower the united nations general assembly as the legislative
body for making binding international law
• The genealogical starting point for “the right to development”
• An effort to create a global regulatory framework for transnational
corporations
• An extension of the principle of sovereignty from the political to the
economic realm
• An incrementalist approach to reforming global economic and political
power arrangements
• An endeavor to redress historical grievances of newly independent states,
thereby “completing” decolonization
• A Call For Global Redistribution—including Financial, Resource,
And Technology Transfer—from Rich To Poor Countries
• An Attempt To Universalize And Globalize The Principles Of
“Embedded Liberalism”
• A Realistic Program For Global Socialism
• A Utopian Political Project, Global And Totalizing In Its Ambitions
• An Alternative Model For Transnational Economic Integration—that Is, Of
Globalization
• A Key Catalyst (Via Backlash) For The Formulation Of The Neoliberal
Paradigm In Favor Of Limiting State Power And Augmenting Private Power
Schemes
The program of action called for promotion of schemes such as:
• (a) International commodity agreements to support developing countries’ exports of
primary products;
• (b) The negotiation of special trade concessions to enable LDCs’ exports of
manufactured goods to gain greater access to the markets of the developed countries;
• (c) Improved terms of trade for the LDCs
• (d) Greater financial and real resource transfer to LDCs and alleviation of their past debt;
• (e) Reform of the IMF and a greater say in decision making on international bodies
concerned with trade and development- issues;
• (f) An international food program; and
• (g) Greater technical cooperation among nations.
The UNCTAD regularly calls for new policy initiatives in the four
major areas:
• 1. Debt relief,

• 2. International aid,

• 3. Commodity policy (buffer stock arrange­ment) and

• 4. Trade promotion for developing coun­tries.

Letter of Credit
• A Letter of Credit (or LC) is a commonly used trade finance instrument
used to ensure that the payment of goods and services will be fulfilled
between a buyer and a seller.
• The rules of a Letter of Credit are issued and defined by the
International Chamber of Commerce through their Uniform Customs
& Practice for Documentary Credits (UCP 600), used by producers and
traders worldwide.
• Both parties use an intermediary, namely a bank or financier, to issue
a Letter of Credit and legally guarantee that the goods or services
received will be paid for.
How do You Use a Letter of Credit?
• Letters of Credit are issued and formatted under the guidelines of the Uniform
Customs & Practice for Documentary Credits, or the UCP600, that is issued by
the International Chamber of Commerce (ICC).
• Used for both, selling and those buying goods and services.
• One of the parties, usually the importer, will contact a bank to serve as an
intermediary and to guarantee to the seller that the goods will be paid for
according to the agreement.
• All parties involved need to agree to the terms and sign the contract.
• This lowers the risk of doing business significantly, as Letters of Credit are
legally binding documents that are acknowledged by 175 countries
worldwide.
Terms
• Advising bank – accepts and then notifies the beneficiary of the LC

• Confirming bank – financial institution that agrees to honour and payment the LC to the
beneficiary and receives payment from the advising bank

• Issuing bank / issuer – the party that issues the LC

• Presentation – delivery of the LC documentation and any other required documents that are
required by the beneficiary should payment be made / the LC honoured

• Revocable – a type of LC that can be withdrawn, amended or cancelled y the issuing party at any
time

• Standby - the most common LC type whereby agreement to pay is made under certain conditions
Key advantages
• Avoids potential disputes overseas

• Some form of guarantee to a seller / supplier that they will get paid

• Flexibility and variability across different types of LCs

• Secure payment method endorsed by most major markets

• Risk of non-payment is taken by the banks rather than the buyer

• Often required by national border / exchange control agencies

Different Types of Letters of Credit
• Irrevocable
• Confirmed
• Transferable
• Letter of Credit at Sight
• Deferred or Usance Letter of Credit
• Red Clause
INCOTERMS
 ICC
• The International Chamber of Commerce is the largest, most
diverse business organization in the world.
• The ICC has institutional representative of more than 45
million companies in over 100 countries.
• Plays a vital role in scaling widespread action on Sustainable
Development Goals and has a long history of formulating the
voluntary rules.
• Mission - To make business work for everyone, every day,
everywhere.
• ICC was founded in the aftermath of the First World War
when no world system of rules governed trade, investment,
finance or commercial relations.

• The ICC was founded in Paris, France in 1919.

• The organization’s international secretariat was also

established in Paris, and its International Court of Arbitration
was formed in 1923.
• What are Incoterms?

• When are Incoterms used?

• How to use Incoterms?

What are Incoterms rules?
• International Commercial Terms
• Are the world’s essential terms of trade for the sale of goods.
• Provide specific guidance to individuals participating in the import
and export of global trade on a daily basis.
• Who Publishes? – ICC
• Latest Rules – Incoterms 2020
• The newest edition of the Incoterms rules will help prepare business
for the next century of global trade.
• Available in over 29 languages.
Why?
• Incoterms® rules are global in their reach. 
• Do not include trade terms codified for national purposes.
• Universal, providing clarity and predictability to business.
Incoterms answer the following questions:
• Which party is responsible for the shipping costs?
• Which party is responsible for the insurance costs?
• Which party is responsible for the import costs?
• Which party is responsible for customs clearance?
• Which party is responsible for transport and where
does this go?
• Which party is liable for the goods and until when?
Main functions of the Incoterms:
• Cost allocation: which contract partner bears which costs?
• Division of obligations: which contract partner takes on
which obligations on which route?
• Risk transfer: which contract partner covers which risk at
which moment in time?
Other functions of the Incoterms
• Goods documents: which contract partner buys the required goods documents?
• Customs: which contract partner is responsible for customs clearance?
• Transport documents: which contract partner buys which transport documents?
• Shipping insurance: which contract partner insures the goods for which part of the
transport?
• Information: which contract partner informs the other at what time and about
what?
• Goods inspection: which contract partner carries out the goods inspection?
• Packaging: which contract partner determines the type and packaging method?
In total there are 11 different Incoterms.
The main difference between these International Commercial
Terms is the point where the risk shifts from seller to the
buyer.
So from what time is the buyer responsible for:
• the costs of transport
• the risk of shipment
• the insurance
EXW – Ex-Works or Ex-Warehouse
• Ex works is shipping arrangement in international trade where a seller
makes goods available to a buyer, who then pays for transport costs.
• when the seller places the goods at the disposal of the buyer at the
seller’s premises or at another named place (i.e., works, factory,
warehouse, etc.).
• The seller does not need to load the goods on any collecting vehicle.
Nor does it need to clear them for export, where such clearance is
applicable.
FCA – Free Carrier
• The seller delivers the goods to the carrier or another person
nominated by the buyer at the seller’s premises or another named
place.
• The parties are well advised to specify as explicitly as possible the
point within the named place of delivery, as the risk passes to the
buyer at that point.
CPT  – Carriage Paid To
• The seller delivers the goods to the carrier or another person
nominated by the seller at an agreed place (if any such site is agreed
between parties).
• The seller must contract for and pay the costs of carriage necessary to
bring the goods to the named place of destination.
CIP – Carriage And Insurance Paid To
• The seller has the same responsibilities as CPT, but they also contract
for insurance cover against the buyer’s risk of loss of or damage to the
goods during the carriage.
• The buyer should note that under CIP the seller is required to obtain
insurance only on minimum cover. Should the buyer wish to have
more insurance protection, it will need either to agree as much
expressly with the seller or to make its own extra insurance
arrangements.
DAT – Delivered At Terminal
• The seller delivers when the goods, once unloaded from the arriving
means of transport, are placed at the disposal of the buyer at a named
terminal at the designated port or place of destination.
• “Terminal” includes a place, whether covered or not, such as a quay,
warehouse, container yard or road, rail or air cargo terminal.
• The seller bears all risks involved in bringing the goods to and
unloading them at the terminal at the named port or place of
destination.
DAP – Delivered At Place
• The seller delivers when the goods are placed at the disposal of the
buyer on the arriving means of transport ready for unloading at the
named place of destination.
• The seller bears all risks involved in bringing the goods to the named
place.
DDP – Delivered Duty Paid
• The seller delivers the goods when the goods are placed at the disposal
of the buyer, cleared for import on the arriving means of transport
ready for unloading at the named place of destination.
• The seller bears all the costs and risks involved in bringing the goods
to the place of destination. 
• They must clear the products not only for export but also for import, to
pay any duty for both export and import and to carry out all customs
formalities.
FAS – Free Alongside Ship
• The seller delivers goods placed alongside the vessel (e.g., on a quay
or a barge) nominated by the buyer at the named port of shipment.
• The risk of loss of or damage to the goods passes when the products
are alongside the ship.  The buyer bears all costs from that moment
onwards.
FOB – Free On Board
• The seller delivers the goods on board the vessel nominated by the
buyer at the named port of shipment.
• The risk of loss or damage to the goods passes when the products are
on board the vessel. 
• The buyer bears all costs from that moment onwards.
CFR – Cost and Freight
• The seller delivers the goods on board the vessel.
• The risk of loss of or damage to the goods passes when the products
are on board the vessel.
• The seller must contract for and pay the costs and freight necessary
to bring the goods to the named port of destination.
CIF – Cost, Insurance and Freight
• The seller delivers the goods on board the vessel. The risk of loss of or damage to
the goods passes when the products are on the ship.
• The seller must contract for and pay the costs and freight necessary to bring the
goods to the named port of destination.
• The seller also contracts for insurance cover against the buyer’s risk of loss of or
damage to the goods during the carriage.
• The buyer should note that under CIF the seller is required to obtain insurance
only on minimum cover. Should the buyer wish to have more insurance
protection, it will need either to agree as much expressly with the seller or to make
its own extra insurance arrangements.

 
 New Incoterms 2020

• DAT has changed to DPU: Delivered at Terminal has been changed

to Delivered at Place Unloaded. The reason is that goods can not only
be delivered to a terminal or dock, but also at any other point where it
is possible to load goods, such as a factory or warehouse.

• The on-board Bill of Lading (BL) option has been added to the
FCA: It can be specified in the sales agreement that a Bill of Lading
must be issued. The Bill of Lading indicates that goods have been
loaded on board.
• CIF and CIP contain different levels of coverage: With the CIP, the
seller is obliged to take out comprehensive transport insurance. For
CIF there is an obligation for insurance with minimal coverage.

• FCA, DAP, DPU, and DDP have their own means of transport: For
these Incoterms, it is possible to arrange the transport of goods with
their own means of transport.
GATT
 Justifications for the world trading regime

The terms-of-trade school

Political incentivization

Existing bilateral and discriminatory trade policies

 Genesis of GATT

Bretton Woods Conference

Failed attempts to set up ITO

(Provisional application of GATT)

The Geneva 1947 Meeting was an important step in the
creation of GATT and the world trading order.
Prof. John H. Jackson describes the 1947 Geneva Meeting as
an elaborate conference divided in three parts dealing with the
following areas :
i. The first dealt with the preparation of a charter for an
international trade institution i.e. the International Trade
Organization (ITO);
ii. The second dealt with the negotiation of a multilateral
agreement to reduce tariffs on a reciprocal basis;
iii. The third dealt with the drafting of general clauses‘ of
obligations relating to the tariff obligations.
• The twenty-three countries engaging in the Geneva
negotiations that led to the signing of the GATT in 1947 were
Australia, Belgium, Brazil, Burma (Myanmar), Canada,
Ceylon (Sri Lanka), Chile, China, Cuba, Czechoslovakia
(Czech Republic and Slovakia), France, India, Lebanon,
Luxembourg, Netherlands, New Zealand, Norway, Pakistan,
South Africa, Southern Rhodesia (Zimbabwe), Syria, United
Kingdom, and United States.
 Guiding principles of GATT

• MFN

• RECIPROCITY

• TARIFF REDUCTION
• PROCEDURE of GATT NEGOTIAITONS

• FORMATION OF TNC

• 3 STEPS OF NEGOTIATIONS
 Kennedy Round (1964-67)
• During the Kennedy Round from 1964-67, which was named after
President John F Kennedy of the US, the Ministers agreed on three
negotiating objectives for the round :
i. Measures for the expansion of trade of developing counties as a
means of furthering their economic development;
ii. Reduction or elimination of tariffs and other barriers to trade;
iii. Measures for access to markets for agricultural and other primary
products
• In the end, the result was an average 35% reduction in tariffs, except
for textiles, chemicals, steel and other sensitive products;

• Plus a 15% to 18% reduction in tariffs for agricultural and food

products.

• In addition, the negotiations on chemicals led to a provisional

agreement on the abolition of the American Selling Price (ASP).
 Tokyo Round (1973-79)

• The Tokyo Round was launched on 14 September 1973 at a

Ministerial meeting in Tokyo, but the negotiations were
conducted largely in Geneva

• Aims of Ministerial declaration for the Tokyo Round

• OUTLINE OF GATT 1947

• BRIEF OVERVIEW OF GATT 1994

 BASIS FOR COMPARISON GATT WTO
Meaning GATT can be described as a set of WTO is an international organization,
rules, multilateral trade agreement, that that came into existence to oversee and
came into force, to encourage liberalize trade between countries.
international trade and remove cross-
country trade barriers.

Institution It does not have any institutional It has permanent institution along with
existence, but have a small secretariat. a secretariat.

Participant nations Contracting parties Members

Commitments Provisional Full and Permanent
Application The rules of GATT are only for trade in The rules of WTO includes services
goods. and aspects of intellectual property
along with the goods.
Agreement Its agreement are originally Its agreements are purely multilateral.
multilateral, but plurilateral agreement
are added to it later.
Dispute Settlement System Slow and ineffective Fast and effective
GATS
• One of the landmark achievements of the Uruguay Round.
• Inspired by essentially the same objectives as its counterpart in merchandise
trade i.e. the General Agreement on Tariffs and Trade (GATT)
• Objectives
• Creating a credible and reliable system of international trade rules;
• Ensuring fair and equitable treatment of all participants (principle of non-discrimination);
• Stimulating economic activity through guaranteed policy bindings; and
• Promoting trade and development through progressive liberalization.
• Members - All WTO members are at the same time members of the GATS and,
to varying degrees, have assumed commitments in individual service sectors.
• 5 Parts, 26 Articles
Services Covered
• Applicable in principle to all service sectors, with two exceptions.
• Article I (3) of the GATS excludes “services supplied in the exercise
of governmental authority”.
• These are services that are supplied neither on a commercial basis nor in
competition with other suppliers.
• Cases in point are social security schemes and any other public service, such
as health or education, that is provided at non-market conditions.
• Furthermore, the Annex on Air Transport Services exempts from
coverage measures affecting air traffic rights and services directly
related to the exercise of such rights.
Modes of supplying services
• Cross-border supply is defined to cover services flows from the territory of one member into
the territory of another member (e.g. banking or architectural services transmitted via
telecommunications or mail);
• Consumption abroad refers to situations where a service consumer (e.g. tourist or patient)
moves into another member's territory to obtain a service;
• Commercial presence implies that a service supplier of one member establishes a territorial
presence, including through ownership or lease of premises, in another member's territory to
provide a service (e.g. domestic subsidiaries of foreign insurance companies or hotel chains);
and
• Presence of natural persons consists of persons of one member entering the territory of
another member to supply a service (e.g. accountants, doctors or teachers). The Annex on
Movement of Natural Persons specifies, however, that members remain free to operate
measures regarding citizenship, residence or access to the employment market on a permanent
basis.
Obligations under the GATS
• General obligations
• MFN treatment
• Transparency
• Specific commitments
• Market access
• National treatment
Exemptions
• protect public morals or maintain public order;
• protect human, animal or plant life or health; or
• secure compliance with laws or regulations not inconsistent with the
Agreement including, among other things, measures necessary to prevent
deceptive or fraudulent practices.
• to take measures for prudential reasons, including for the protection of
investors, depositors, policy holders or persons to whom a fiduciary duty is
owed by a financial service supplier, or to ensure the integrity and stability of
the financial system.