The GATT and WTO

Barriers to trade, including tariffs and quotas, are challenging for international businesses, as they can adversely affect international trade and economic stability as a whole.

Before the end of the Second World War, several government delegates met at the Bretton Woods Conference in the U.S. to, among many goals, establish an International Trade Organization (ITO) in order to promote economic recovery and stabilize world trade after the war ended. But the U.S. Congress refused to approve participation and the attempt to formally establish an ITO subsequently failed.

The attempt to formalize an ITO was not without accomplishment. Its legacy document, the General Agreement on Tariffs and Trade (GATT), was a 1947 document agreed to by all parties, including the United States, which aimed to reduce trade barriers (especially tariffs).

The GATT provided both trade rules and a forum for members to discuss and address trade issues. It also established some basic rules to direct international trade, following several years of gathering members (rounds) for negotiations.

Three major rules were established:

• Tariffs and the Binding Concessions rule: If a WTO member lowers a tariff, it is considered “bound” and the country is prohibited from subsequently raising the tariff. The bound tariff applies to all WTO members.
• The Most-Favoured-Nation rule: The MFN principles prohibit discrimination among like products regardless of their origin and the rules relating to the importation or exportation of goods or payments on the basis of their origin or destination.
• The National Treatment rule: “The requirement, set forth most prominently in GATT Article III, that members treat imported goods no less favourably than domestically-produced like products once the imports have passed customs”. (See Raj Bhala, Dictionary of International Trade Law).

While the GATT made significant progress in the reduction of tariffs, other trade agreements (multi-lateral and bi-lateral) and national protectionism began to emerge as significant barriers to trade. In April of 1994 in Marrakesh, Morocco, more than 100 countries agreed to form a World Trade Organization (WTO) and the WTO came into effect in January, 1995.

According to its website, the WTO is:

• A place where member governments go to try to sort out the trade problems they face with each other
• A set of rules, contracts and agreements binding governments to keep their trade policies within agreed limits
• A harmonious way to settle trade differences through neutral procedures based on an agreed legal foundation The WTO is the only international organization responsible for the rules pertaining to trade between nations for goods, services, intellectual property, dispute settlement, and monitoring members’ trade policies.

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Negative impact of trade barriers: the Great Depression

One of the most disastrous examples of the negative impact of trade barriers are the U.S. protectionist measures (quotas, high tariffs) taken in an attempt to mitigate the effects of the Great Depression.

The hope was to acquire revenue from tariffs and to increase the demand for goods produced domestically.

The response of industrialized nations to the crisis of the depression was to impose barriers on trade imports. This periodically paralysed international trade.

There are however, a number of additional organizations working to make international trade freer:

UNIDROIT

The International Institute for the Unification of Private Law (UNIDROIT) is an independent intergovernmental organization that studies “needs and methods for modernising and harmonising private and, in particular, commercial law as between States and groups of States”. 

UNCITRAL

The United Nations Commission on International Trade Law (UNCITRAL) was established by the UN General Assembly in 1966 to play an active role to overcome the “disparities in national laws governing international trade created obstacles to the flow of trade”.

ICC

The International Chamber of Commerce (ICC) is an organization that has worked to harmonize private international law. This Paris-based industry group is also playing a major role as an arbitration institution.

Although the ICC works in tandem with the UN, it is not a governmental organization. Rather, it is a group made up of specially appointed business executives that form a council. National committees of business industry executives volunteer their time to ensure their nations’ business perspectives are heard. As well to help formulate ICC policies and agendas.

In addition, with regards to instruments that will help promote uniformity and transparency in international trade, the ICC creates and makes recommendations to industries and intergovernmental organizations. For example, by codifying the following, the ICC has been influential in harmonizing international contract terms as well as arbitration practices:

• Incoterms: Universally accepted contract terms governing international transportation
• Uniform Customs and Practice for Documentary Credit (UCP 600): Defines terms and credit rules for documentary credits on demands and guarantees predominately used by banks all over the world

Hague Conference on Private International Law

The Hague Conference on Private International Law is a global intergovernmental organization. They are working towards the harmonization of private international laws states have adopted. This will address individuals and corporations connected to more than one state. Representing all continents, it is a melting pot of different legal traditions that develops and services multilateral legal instruments, which respond to global needs.

European Union

Established in 1993, the European Union (EU) is a political community with 28 member states comprising a single economic market. This reduces the barriers and obstacles when moving goods, services and investments within the community. Through a standardized system of laws and a single currency (Euro), EU citizens can freely live, work, study and do business throughout the EU. As well as enjoy a wide choice of competitively priced goods and services.

OHADA

Established in 1993, the Organization for the Harmonization of Business Law in Africa, known by its French acronym OHADA, is working toward instituting more secure legal and judicial measures. As well as establishing a modern and uniform business law in order to attract investors to African states.

CDIP

The World Intellectual Property Organization (WIPO) is a UN agency whose mandate is to develop an international intellectual property (IP) system to ensure creativity and innovation to foster economic development while safeguarding public interest. In September of 2007 it announced the establishment of the Committee on Development and Intellectual Property (CDIP).

The CDIP was established to “develop a work-program for implementation of recommendations adopted in relation to the WIPO Development Agenda. The CDIP is also mandated to monitor, assess, discuss and report on the implementation of all recommendations”.

International law works to improve global business potential by enabling more open borders, modernized customary exchanges and reduced trade barriers around the world.

For entrepreneurs, this in turn can mean opportunities for market and labour growth and specialization, infrastructure research and development, jobs, and global, economic and social stature.

The post The role of international organizations in international business law appeared first on Trade Ready.

As with all aspects of private international law, there are a number of issues an entrepreneur must consider before entering the e-commerce marketplace. The following are some of the important issues that will improve the chances of a successful online business, if thoroughly considered. 

1. What’s the applicable international framework?

Entrepreneurs must discover which organizations, treaties, conventions and agreements create and harmonize national legislations in an effort to establish a global framework for e-commerce.

As e-commerce gains momentum, lawmakers around the world endeavour to adapt the rules of traditional paper-based documents to the technical environment of e-commerce transactions.

The challenge for private international law makers is to provide a workable legal framework and implementation guidance for domestic lawmakers to adapt legacy laws or to create new legislation for electronic contracts.

A workable international framework will harmonize the rules of individual nations, which in turn will remove the potential for conflicting national rules that would impede international e-commerce trade.

Responding to the challenge, UNCITRAL adopted two model laws to promote global e-commerce through a predictable and transparent legal structure:

• Model Law on Electronic Commerce (1996)
• Model Law on Electronic Signatures (2001)

The Model Law on Electronic Commerce determines how the principles of paper-based documents could be reconciled with their electronic equivalents. It facilitates the development of a unified method to ensure the validity and enforceability of international contracts.

The Model Law on Electronic Signatures establishes common standards of signature authentication and enforceability.

2.  Do you have a handle on all of the new types of e-commerce contracts?

The growing prevalence of e-commerce contracts has opened up an entire new set of issues pertaining to the validity of a commercial contract.

Entrepreneurs and consumers must be aware of the rights and obligations of offers, acceptances, authentications, signatures and payments. In addition, the responsibilities of virtual service providers (web hosting services, internet service provides) in the event of service interruptions and security breaches must be addressed.

3. Which legal jurisdiction applies and what are the laws?

The lack of a tangible physical location of the Internet has added an even more complex element to the rules and dispute resolution of cross-border commerce.

The regulations imposed on online businesses and contracts by nations around the world have become a major point of contention in e-commerce’s evolution. The pace of regulation is not uniform, so accounting for the disparities between technological and regulatory systems of various nations can be quite difficult.

For example, some nations do not regulate the Internet at all in such areas as taxation, making those nations tax havens for offshore investors. Other nations are studying the success of ground-breaking nations such as the U.S. and the EU to determine which model to implement domestically.

Will these national disparities in online regulations create barriers in the free market as entrepreneurs and consumers struggle to determine where it is most advantageous to buy and sell goods and services online?

The issue of self-regulation is at the center of this debate.

Many believe the Internet has been able to enjoy global expansion because governments have not actively been regulating its activity.

As with competition laws, while government regulations are at times necessary, they can also interfere or restrict the free market’s ability to self-regulate.

Despite this, it is safe to say that national legislation will have a major impact on the evolution of thriving international e-commerce.

4. How will you protect your consumers and prevent cyber crime?

Purchasing goods or services online presupposes a great amount of trust on behalf of the buyer who is usually giving out credit card and other personal information without the benefit of face-to-face interaction.

E-commerce merchants must keep up with the evolving technical demands of network security to ensure consumer protection and privacy.

International organizations, national governments and regional authorities must consider how to prosecute cyber criminals to compensate victims of theft, fraud and forgery.

Failure to do so will render an enterprise uncompetitive.

Also, merchants who use e-commerce as a means to conduct illegal operations (such as child pornography) must be dealt with.

5.  Is your intellectual property (IP) safe?

In addition to protecting consumer information, ecommerce enterprises must consider how they can protect their own valuable information from all types of copyright infringement.

6.  How will you facilitate electronic payments and collect taxes?

E-commerce enterprises must decide on an appropriate payment system that is secure and legally authorized to process various payments. Entrepreneurs are struggling to keep up with the complex issues of taxation in the various countries they sell to around the world.

Governments are still trying to determine how to best collect taxes on goods and services sold in a borderless Internet.

Are you thinking of expanding your business into the e-commerce marketplace? For those that have already done so, what are the challenges you face? 

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