INTERNATIONAL TRADE LAW BASIC CONCEPTS AND TOPICS THEREUNDER

PURPOSE OF THE INTERNATIONAL TRADE LAW

1. TO PROMOTE FREE TRADE AMONG NATIONS TO UNIVERSIZE ARTICLE 301 OF THE INDIAN CONSTITUTION

Free trade means that people should be free to buy and sell goods cutting across national frontiers in other words, a person should be free to buy a product from anywhere in the world where he can get best quality of product at the cheapest possible price similarly, a person must be able to sell his products at the highest possible price at any place in the world.

DEFINITION OF FREE TRADE

Free Trade is a government policy for the trade of goods and services with other countries and states where the trade is based on accessible and open markets and the price of the goods and services are determined by supply and demand.

There are three stages in the evolution of the International Trade Regimes which are as follows;

STAGE 1:

LIMITING THE TARIFFS

There were bilateral treaties to reduce the tariffs For Example: Anglo-French treaty of 1860:

This treaty is also known as The Cobden–Chevalier Treaty, was an Anglo- French free trade agreement signed by Great Britain and France on 23 January 1860. After Britain started to implement free trade policies there were still some sort of tariffs with the French. The treaty ended all the tariffs on the main products such as wine, brandy, silk goods from France and coal, iron and industrial products from Britain. The impact of this treaty was not too big rather the policy under which this treaty was signed was widely copied throughout the Europe. Stephen Krasner a former American Diplomat stated that this treaty set off a Golden age of free trade in Europe. The treaty is named after the main British and French originators of the treaty, Richard Cobden MP and Michel Chevalier.1

STAGE 2:

NON- TARRIF BARRIERS:

There were efforts to regulate the non-tariff barriers and also to apply the principle of Non-Discrimination.2 For Example, the GATT

STAGE 3:

DEVELOP GLOBAL GOVERNANCE:

There were the efforts to develop the Global Governance by ensuring regulatory Convergence in the area of Intellectual Property Rights and Other Trade related issues.3

HISTORICAL BACKGROUND OF THE GENERAL AGREEMENT ON TARIFFS AND TRADE

The Great Depression in thirties

The Great Depression was a severe widespread economic depression that took place first in the United States during 1930’s. The economic crisis occurred all over the world but the timing of this crisis was different. It is considered to be the longest, deepest and widespread devastation of the global economy, in other parts of the world it started to take place from 1929 and lasted until 1930’s. This period of Depression is widely been used as an example that how and with what intensity the economy of the world can decline. The global economic crisis started first in the US by a major fall in stock prices and became a worldwide headline as the stock market crash of 1929 or Black Tuesday, worldwide GDP during the period from 1929-1932 fell by 15% which is only less than 1% if compared with the Great Recession of 2008. Some economies started to recover by the late 1930’s but some economies faced the consequences of this depression until the Start of the

second world war. The Great Depression had devastating effects on rich as well as poor countries. Personal Income, tax revenue, prices, profits declined and the International Trade fell by more than 50%. Economies which were dependent mostly on the heavy industries suffered a lot, countries dependent on primary sector Industries were adversely affected. Farming communities suffered and was hit very badly as the crop prices fell by 60% and unemployment in the US rose to 23% and in other countries then percentage had reached 30.

The General Agreement On tariffs and Trade i.e. The GATT was the first institutional manifestation of Multilateralism in trade. It was influenced by the developments in the 1930’s when the World Economy was hit by the great Depression. Major States followed the Beggar Thy Neighbor policies and this led to the shrinkage of the International Trade nearly by two-thirds. For instance, every state wanted to limit the imports from other states and wants to promote exports from its territory to other states, when every state started to follow this policy, this led to the shrinkage of trade because import of one state is the export of the other state. If state restricts its import, then subsequently the exports of other state will be drastically affected and would in turn be held responsible for the reduction in the International Commercial Transactions.4

Note:

Beggar Thy Neighbor Policy is the policy that refers to the International Trade Policy that benefits the country that has enacted it and thereby,

harming the neighboring States. Beggar thy neighbor policies were brought, originally as a policy solution to domestic depression and high unemployment rates. The basic idea is to increase the demand for a nation’s exports, while reducing reliance on imports. The Objective is usually achieved through trade barriers such has tariffs, quotas and competitive devaluation. The most common and prime example of this kind of policy is Currency War or Competitive Devaluation where the one country tries to gain trade Advantages over the other country by causing the other country to reduce the exchange rates in relation to other countries. Protectionism can also be seen as a major example of the Beggar Thy Neighbor Policy which means that it restricts international trade to help domestic industries. Protectionist policies are usually implemented with the goal to improve economic activity within a domestic economy but can also be implemented for safety or quality concerns. 5

ESTABLISHMENT OF THE GATT

By the end of the second World War there was general consensus that free trade among free people is the most significant and surest means of establishing the World peace.

The GATT was first discussed during the United Nations Conference on Trade and Employment and was the outcome of the failure of negotiating governments to create the International Trade Organization (ITO). It was signed by 23 nations in Geneva on 30 October 1947, and took effect on 1 January 1948. It remained in effect until the signature by 123 nations in Marrakesh on 14 April 1994, of the

Uruguay Round Agreements which established the World Trade Organization (WTO) on 1 January 1995. The WTO is the successor to the GATT, and the original GATT text (GATT 1947) is still in effect under the WTO framework, subject to the modifications of GATT 1994. Nations that were not party in 1995 to the GATT need to meet the minimum conditions spelled out in specific documents before they can accede; in September 2019, the list contained 36 nations.

The GATT, and its successor the WTO, have successfully reduced tariffs. The average tariff levels for the major GATT participants were about 22% in 1947, but were 5% after the Uruguay Round in 1999. Experts attribute part of these tariff changes to GATT and the WTO. The General Agreement on Tariffs and Trade is a portmanteau for a series of global trade negotiations which were held in a total of nine rounds between 1947 and 1995. The GATT was first conceived in the aftermath of the Allied victory in the Second World War at the 1947 United Nations Conference on Trade and Employment, at which the International Trade Organization was one of the ideas proposed. It was hoped that the ITO would be run alongside the World Bank and the International Monetary Fund6.

REFERENCE

www.econlib.org

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