International Legal Frameworks

(GATT, WTO, International Business Laws)

PRESENTERS-AARCHEE CHHARIA , PARI TANEJA , KRRISH

BHUSHAN
General Agreement on
Tariffs and Trade (GATT)
◦History-GATT was established in 1947 to promote
international trade by reducing trade barriers such as tariffs
and quotas. Its goal was to create a fairer and more
predictable trading environment after World War II.
◦Function: GATT focused on promoting multilateral trade
negotiations and aimed at achieving tariff reductions among member
nations. It established rules for international trade and dispute
settlement.
◦ Evolution: In 1995, GATT was incorporated into the WTO (World Trade
Organization) as part of the Uruguay Round of trade negotiations.
Limitations of GATT:
◦Dispute Resolution: GATT’s dispute settlement system was weak,
relying primarily on diplomacy and voluntary compliance. There was
no binding mechanism for resolving trade disputes, and
enforcement of GATT rules was largely left to the discretion of
member countries.
◦Limited Scope: GATT focused primarily on goods and tariffs but
did not address services, intellectual property, or other emerging
issues in international trade.
◦Institutional Weakness: GATT lacked a permanent institutional
structure. It was essentially a set of rules with no formal
organization, leading to limited enforcement capabilities.
World Trade Organization
(WTO)
◦ History: The WTO was created in 1995 to replace GATT and broaden its functions.
It includes agreements covering goods, services, intellectual property rights, and
dispute resolution mechanisms.
◦ Function: The WTO ensures that trade flows smoothly by providing a framework
for negotiating and implementing trade agreements. It also handles disputes
between members, promoting fair competition and resolving issues through its
dispute settlement body.
◦ Structure: The WTO operates through a system of agreements and forums,
including the General Council, the Dispute Settlement Body, and various
committees for specific areas (e.g., Trade in Services, Intellectual Property).
◦ Key Principles: The WTO is built on principles like non-discrimination,
transparency, and the reduction of trade barriers. The Most-Favored-Nation
(MFN) principle ensures that trade advantages granted to one member are
extended to all others, and the National Treatment principle ensures that
imported goods are treated the same as domestically produced goods once they
enter a market.
Key Functions of the WTO:
◦ Trade Negotiations: The WTO provides a platform for negotiations on trade issues and new
agreements. The Doha Development Agenda (2001), for example, focused on addressing the
needs of developing countries in global trade, though it has faced challenges in conclusion.
◦ Trade Negotiations: The WTO provides a platform for negotiations on trade issues and new
agreements. The Doha Development Agenda (2001), for example, focused on addressing the
needs of developing countries in global trade, though it has faced challenges in conclusion.
◦ Monitoring and Transparency: The WTO monitors trade policies and ensures compliance
with agreements. Through the Trade Policy Review Mechanism (TPRM), it provides
assessments of members’ trade policies and practices.
◦ Multilateral Trade Agreements: The WTO oversees various agreements beyond GATT, such
as the General Agreement on Trade in Services (GATS), which governs trade in services,
and Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS),
which sets global standards for the protection of intellectual property.
◦Membership and Global Impact:
• The WTO has grown significantly since its
establishment, with nearly 165 member countries
as of today, representing more than 98% of global
trade.
• The WTO has been instrumental in reducing global
trade barriers and promoting economic integration.
However, it faces ongoing challenges such as trade
disputes, disagreements over agricultural subsidies,
and disagreements between developed and
developing nations on various issues.
The Evolution of GATT into
the WTO:
◦The evolution from GATT (1986-1994) to the WTO represents
a significant leap in the governance of international trade.
GATT provided the foundation for multilateral trade
agreements, but the creation of the WTO introduced a more
robust institutional structure, broader coverage of trade
issues, and a binding dispute resolution mechanism. While
challenges remain, particularly in terms of achieving universal
agreement on trade policies, the WTO continues to serve as
the cornerstone of global trade governance, facilitating
economic cooperation among its member countries.
International Business Laws
◦ International business laws encompass a broad range of legal frameworks
governing cross-border commercial activities. These laws are essential for
facilitating the global exchange of goods, services, and investments. Here are
some critical components:
◦ A. International Contract Law
• Key Instruments:
• The United Nations Convention on Contracts for the International Sale of
Goods (CISG), which came into effect in 1988, provides an internationally
accepted framework for the sale of goods across borders. It reduces uncertainty
for international trade by harmonizing rules related to contract formation,
performance, and dispute resolution.
• Private International Law or Conflict of Laws determines which national laws
apply to international contracts and how courts decide cases involving parties
from different jurisdictions.
◦Key Aspects:
• Contract Enforcement: Ensuring that international
contracts are enforceable and that remedies for breaches of
contract are available through courts or arbitration bodies.
• Choice of Law and Jurisdiction: Often, contracts will
specify which country’s laws will apply to disputes and where
any legal disputes will be heard.
◦International Trade Law
• Trade Agreements: Countries sign numerous free trade
agreements (FTAs), such as the North American Free
Trade Agreement (NAFTA) or the European Union (EU)
Single Market, which help reduce tariffs and create more
transparent trade practices.
◦ Customs Law and Regulations: Customs laws govern the movement of
goods across borders, including duties, taxes, and trade restrictions.
Understanding customs procedures is crucial for international business
transactions.
◦ . Investment Law and Dispute Resolution
• International Investment Treaties: Treaties like Bilateral Investment
Treaties (BITs) and Multilateral Investment Agreements (MIAs) protect
foreign investments and provide mechanisms for resolving disputes between
investors and states.
◦ The International Centre for Settlement of Investment Disputes (ICSID)
provides arbitration services to settle investment disputes, with the goal of
ensuring that foreign investors are not unfairly treated by host countries.
◦ Arbitration: International business disputes often resort to arbitration rather
than litigation due to its flexibility and neutrality. Institutions like the
International Chamber of Commerce (ICC) and the London Court of
International Arbitration (LCIA) play key roles in resolving cross-border
business disputes.
◦ Intellectual Property (IP) Law
• TRIPS Agreement: The Agreement on Trade-Related Aspects of Intellectual
Property Rights (TRIPS), part of the WTO framework, sets international
minimum standards for the protection of intellectual property. This includes
patents, trademarks, copyrights, and trade secrets.
◦ Global IP Protection: To protect intellectual property across multiple
jurisdictions, international treaties like the Patent Cooperation Treaty (PCT)
and the Madrid Protocol for trademarks ensure the efficient registration of IP
rights in multiple countries.
◦ Anti-dumping and Subsidies
• Anti-dumping Laws: These laws prevent the practice of dumping—where a
country exports goods at a price lower than their domestic market price, thereby
harming domestic industries in the importing country. The WTO helps manage
these issues by providing rules and dispute mechanisms.
• Subsidies and Countervailing Measures: The WTO regulates the use of
subsidies that distort competition, particularly in agriculture and manufacturing.
Countries can apply countervailing measures if they believe unfair subsidies are
harming their industries.
CONCLUSION
◦The GATT, WTO, and International Business Laws are all
intertwined to create a system that facilitates international trade
while protecting the interests of businesses, consumers, and nations.
The shift from GATT to WTO marked a transition to a more
comprehensive system with formal institutions and greater
enforcement mechanisms. Meanwhile, international business laws
continue to evolve to address the complexities of global commerce,
ensuring businesses can navigate cross-border transactions and
investments efficiently. Through these frameworks, global trade has
become more predictable, fostering economic development
worldwide while maintaining fairness and resolving disputes.
Interaction Between GATT, WTO,
and International Business Laws
◦ Trade Liberalization: Both GATT and the WTO aim to liberalize trade by
reducing tariffs and promoting fair practices among member states,
aligning with international business law principles that foster cross-
border commerce.
◦ Dispute Settlement: While GATT had mechanisms for resolving trade
disputes, the WTO has a more structured and formalized dispute
resolution system, offering binding rulings.
◦ Globalization: International business law, through frameworks like the
WTO and international agreements, supports the increasing globalization
of trade by establishing predictable rules and dispute-resolution
mechanisms.
◦ In summary, GATT and the WTO help to create a global framework for
trade, while international business laws ensure that companies can
operate and resolve disputes across borders. Together, these frameworks
ensure a smoother, more predictable international trade environment.
WTO’s Boeing-Airbus trade dispute
◦ The Boeing-Airbus trade dispute is a highly complex and longstanding conflict between
the United States and the European Union (EU) regarding subsidies provided to the two
largest aircraft manufacturers: Boeing (based in the U.S.) and Airbus (based in Europe).
This dispute has been one of the longest-running and most significant trade cases in the
history of the World Trade Organization (WTO).
◦ Background:
◦ Both companies are dominant players in the global commercial aviation market, producing
the majority of passenger jets. The conflict revolves around accusations of unfair subsidies
provided by their respective governments, which both the U.S. and EU argue distort
competition in the aerospace sector.
◦ Key Aspects of the Dispute:
◦ 1. U.S. Accusations Against Airbus:
• The United States has argued that Airbus has received illegal government support, primarily
in the form of launch aid (government-backed loans) and other subsidies from EU member
states like France, Germany, Spain, and the UK.
◦ 2. EU Accusations Against Boeing:
• The European Union counters by accusing the U.S. of providing illegal
subsidies to Boeing, particularly through tax breaks, military
contracts, and research and development (R&D) funding from the
U.S. government.
• The EU argues that these government supports lower Boeing's costs,
giving the company an unfair advantage in global markets.
◦ WTO's Role in the Dispute:
◦ The WTO has played a central role in overseeing the legal proceedings
and making determinations about whether the subsidies violate global
trade rules. The dispute has resulted in several WTO rulings, which
found that both the EU and the U.S. violated international trade law by
providing illegal government subsidies to their aircraft manufacturers.
◦ The WTO has repeatedly ruled that the subsidies caused market
distortions, making it difficult for each side to compete fairly. The
organization has also authorized both parties to impose retaliatory tariffs
on each other's products.
◦Current Status:
◦As of 2021, the U.S. and EU agreed to a temporary truce,
suspending tariffs on certain goods for a period of time to
encourage further negotiation. However, the underlying issue
of government subsidies to Boeing and Airbus remains
unresolved. Both sides have continued to pressure each other
to comply with WTO rulings, and discussions over potential
reforms to the way subsidies are provided to the aerospace
sector are ongoing.
◦The dispute is far from settled, and while both companies
continue to dominate the global commercial aircraft market,
it has raised important questions about the role of
government intervention in major industries and how
international trade law should regulate such support.
Conclusion:
◦The Boeing-Airbus trade dispute continues to
be a major issue in the world of international
trade. Although some steps have been taken
to ease tensions, both sides remain deeply
entrenched in their positions regarding
subsidies. The future of the dispute depends
on continued diplomatic negotiations,
potential changes to international trade rules,
and the evolving relationship between the U.S.