International Trade Law In Brief - iPleaders (2022)

In this blog post, Sreeraj K.V, a student of Government Law College, Ernakulam, Kerala writes about International trade laws. The article covers areas like the definition given to the term international trade law, the various dispute settlement machinery available under this field of law, the role India plays in international trade law as well as its contribution to the disputes resolution mechanisms.

International trade laws are those areas of law which deal with certain rules and customs regarding the handling of trade between countries. It is also used for trade between two private sector companies in two countries. This branch of law has now become independent as almost every country is now a member of the World Trade Organisation (WTO). The General Agreement on Tariff and Trade (GATT) has been the backbone of international trade laws since 1948. It contains a provision relating to rules of ‘unfair’ trade practices, dumping and subsidies. In 1994, World Trade Organisation (WTO) was established to take the place of GATT. This is because GATT was meant to be a temporary fix to trade issues and the founders needed something more which was concrete.[1]

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Cross-border transactions

Cross-border transactions are done in international trade between two or more entities beyond the territorial limits of a country or a transaction in a domestic trade where at least one party is located outside the country of the transaction. Major types of cross-border transactions are:

1. Cross-border financing

The term refers to any financial arrangement that cross national boundaries. It includes loans, letter of credit, banker’s acceptance, bank guarantees, depository receipts, etc.

2. Buying or selling products or services

It refers to buying and selling of products and services. Both may have different features on infrastructure, establishment, producing product service outside the jurisdictional limits, trading across borders, bridging between local resources and outside supply, etc.

3. Combined research/shared services etc.

Business entities are now being equipped with shared services. For that, joint research programs are being introduced as one cartel or chamber of commerce. Such shared service are concerned with matters of international trade if those shared service centres are providing services across the borders scattered in different locations.[2]

Dispute settlement

Under the international trade law, there are different provisions for dispute settlement which is done with the help of WTO and GATT. It was governed by Article XXII and XXIII of the GATT, which set up a system of consultation for the settlement of disputes among the member nations. The dispute settlement system evolved over time, and there were additional documents, and legal instruments were created to incorporate changes. Even with certain changes, the dispute resolution mechanism was not considered satisfactory.

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International Trade laws deal with certain subjects which are inclusive to all the member nations under the WTO. It includes:

Negotiating trade agreements

Agreements of accession to the WTO, general trade agreements, and regional trade agreements.

Compliance

  • Tariffs and quotas
  • Administration of customs laws
  • Government subsidies, anti-dumping, countervailing duties and other trade remedies.
  • Technical standards for industrial and agricultural products.
  • Intellectual property protection
  • Understanding and utilizing various provisions of the WTO for trade enhancement for developing countries during domestic adjustments integrating into the rule-based trading system.

Law reforms

  • Laws regulating foreign investments
  • Government procurement laws and anti-corruption measures.[3]

India’s Foreign Trade Policies

It will be clear when we look into India’s economy before the 90’s. Till then, India was a closed economy where average tariffs exceeded 200 per cent, quantitative restrictions on import were very extensive, and there were strict regulations on foreign investments. India started to reform during the 1990’s as it opened up the economy so that there will be a flow of foreign investments and increase in the foreign trade policies of the country as well. Since then, foreign trade showed a remarkable change. India’s percentage of GDP increased drastically, and the economy is now one of the fastest-growing economies in the world. India is now aggressively pushing for a more liberal global trade management. It has gained a leadership role among developing nations in global trade negotiations.

Recently, India has signed various trade agreements with neighbouring countries as well as the United States. Its regional and bilateral trade agreements are at different levels of development.

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  • India – Sri Lanka Free Trade Agreement
  • Trade agreements with Bangladesh, Bhutan, Maldives, China, and South Korea.
  • India – Nepal Trade Treaty.
  • Comprehensive Economic Cooperation Agreements (CECA) with Singapore.
  • Framework Agreements with the Association of South East Asian Nations (ASEAN), Thailand and Chile[4].

India is now, one of the largest trading partners with the US, which imports major items such as IT services, textiles, machinery, gems, chemicals, etc. The US have also made notable investments in India’s power generation, telecommunication, ports, roads, petroleum exploration and processing, and mining industries as well.[5]

While looking for the cases involving international trade, we can see that almost all the cases deal with issues involving any private sector business organization on one side and the concerned Government business authority on the other. In the case of Suntec Industries v. the United States[6], the court was of the opinion that the issue regarding granting of defendants motion for summary judgment would be denied due to the failure of producing evidence for proving their part, and hence the court decided the case for the defendant. Hence it will be clear that for cases involving international trade practices, submission of strong evidence against the concerned parties must be necessary so that they realizes the fault on their part and the correctional mechanism will be implemented accordingly. Or else the case may likely lead to certain international trade disputes among the concerned nations. While looking through India’s use of the WTO dispute resolution mechanism, we can see that the nation actively involved in all the spheres including disputes and also in negotiations and reviews as well. India also had many cases against its international trade partners and won many among them and even considered to be a landmark in this field. The majority of the cases are involved in measures regulating textiles and clothing exports, which is one of the prime areas of India’s international trade. Mainly the United States is the other party in many of such suits. Overall, India was able to make a consistent remark in the field of dispute resolution mechanisms under WTO in order to pursue issues that matter to it.[7]

Conclusion

On the whole, international trade gives an opportunity for the buyers and the sellers to be exposed to a new market environment as well as with new products. Industrialization, advanced technology, globalization, multinational corporations as well as outsourcing receives major impact from the area of international trade and commerce. Hence, there lies an utmost importance in the area of international trade so that there are effective laws and statutes in this sector which are applicable and convincing to each and every member nations under the WTO as well as various other international trade federations. According to the World Bank, around twenty-four developing countries have gained higher income growth, an increase in revenue and various other developmental aspects solely through the way of increase in international trade relations among their member’s countries. Various economic theories also state that international trade raises the standard of living and eventually, a drastic change from a closed economy to an opened economy willbe visible then.[8]

Footnotes:

[1] Retrieved on: https://en.wikipedia.org/wiki/International_trade_law

[2] Retrieved on: http://taxguru.in/finance/international-transaction-cross-border-transactions.html

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[3] Retrieved on: http://www.ili.org/centers-of-expertise/international-trade-law.html

[4] Retrieved on http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/SOUTHASIAEXT/EXTSARREGTOPINTECOTRA/0,,contentMDK:20592520~menuPK:579454~pagePK:34004173~piPK:34003707~theSitePK:579448,00.html

[5] Retrieved on: https://en.wikipedia.org/wiki/India%E2%80%93United_States_relations#Trade_relations

[6]Retrieved on http://cases.justia.com/federal/appellate-courts/cit/13-00157/13-00157-2016-04-21.pdf?ts=1461256272

[7] Retrieved on: http://www.cuts-citee.org/pdf/Trade_law_Brief10-India_at_Dispute_Settlement_Understanding.pdf

[8] Retrieved on: http://www.econlib.org/library/Enc/InternationalTrade.html

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FAQs

What do you mean by international trade law? ›

Generally, international trade law includes the rules and customs governing trade between countries. International trade lawyers may focus on applying domestic laws to international trade, and applying treaty-based international law governing trade.

What is the importance of international trade law? ›

International trade law is the tool used by the nation's government for taking corrective actions against trade. International trade law focuses on applying domestic rules to international trade rules and applying treaty-based international trade law governing trade.

What is international trade law in India? ›

International trade law has bilateral trade agreements, regional trade agreements and multinational trade agreements. Each of these agreements has its own history, policies and dispute settlement procedures. Furthermore, individual countries have their own policies and laws relating to international trade.

What are the principles of international trade law? ›

4.1 The Main Principles of International Trade

The modern international trade regime is based on four main principles. These principles are, in no particular order of importance, Most-Favored-Nation Treatment (MFN), National Treatment (NT), tariff binding, and the general prohibition of quantitative restrictions.

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