International Trade Law
Historically regulated by monarchs and pirates, international trade law pertains to the rules and regulations for handling trade between countries. In contrast to traditional law, international trade laws not only involve strict guidelines but also unwritten policies which trade partners adhere to. This makes the field of international trade law an interesting topic of study, as it not only involves the interpretation of existing rules but also the considerations of political economy that are involved with everyday trade.
International Trade Law Institutions
The General Agreement on Trade and Tariffs (GATT) was the first major institutional framework which covered global trade. Signed in 1947 by a group of 23 countries, the first round of GATT removed 45,000 tariffs between its members, which accounted for $10 billion of trade (about ⅕ of the world’s economy). Since the first round of agreements in Geneva, eight more rounds were conducted, each resulting in the concession of further tariffs, benefiting global trade through removing inefficiencies through tariffs. Obviously, this was positive for most American citizens, as the costs of goods and services became cheaper with less protective tariffs.
In 1993, the GATT was updated to include new stipulations for its member states. This update created the World Trade Organization (WTO), in which the 75 existing GATT members were included in. The remaining 52 members trickled in within the next two years, and today, the WTO includes 153 members.
In contrast to the GATT, which set regulations governing its member states, the WTO’s role instead was one of an institution. What this means is that the WTO is an international organization which habitually supervises and litigates international trade laws and regulations, while the GATT only set a framework for the regulations, leaving other institutions to enforce such laws.
The WTO abides by five principles in its policy-setting demeanor:
Trade Without Discrimination
All WTO agreements must abide by the “Most Favoured Nation” principle, meaning that trade between member countries cannot be discriminatory or favored towards a specific trade partner. This tenet is covered specifically in the three main articles of WTO agreements, which governs the trade of goods, services, and intellectual property.
Freer Trade, Gradually, Through Negotiation
As an international trade organization, the WTO believes that reducing barriers trade is beneficial to the world as a whole. Currently, the ninth round of international locations, known as the Doha Development Agenda, is mainly focused on removing agricultural barriers along with reevaluating existing WTO regulations.
Predictability: Through Binding and Transparency
In the field of economics, information is just as valuable as money. More reliable information (such as tariffs imposed by trade partners) allows governments to regulate accordingly and private businesses to adequately budget for future market volatility. To promote this, the WTO requires its members to declare binding tariffs, which are essentially tariffs that cannot be changed unless deliberated upon by WTO members. This gives member countries trade stability without imposing overly-strict regulations.
Promoting Fair Competition
Going along similar lines to its non-discrimination clause, the WTO frowns upon anti-competitive trade behavior. One example of this is the act of trade “dumping”, which is the act of exporting a good/service below market price to a foreign nation in hopes of debilitating the profitability of local producers, ultimately resulting in gaining market share in the region. Given the accelerating pressures of globalization, possibilities for predatory pricing agendas have come to the forefront of policy debates. Anti-dumping policy is another area in which the Doha Development Agenda aims to look at.
Encouraging Development and Welfare
The obvious goal of promoting international trade is to improve the welfare of all countries through utilizing the comparative advantage of different nations. All countries, developed and developing, play a crucial role in advancing international trade. With that said, the WTO understands that the global economic chain is only as strong as its weakest link, therefore giving special attention to the “least-developed countries”.
Case Study: Boeing versus Airbus
An ongoing international trade battle has occurred between Boeing and Airbus, the biggest airplane producers from United States and Europe, respectively. We will outline several trade-related arguments that have occurred between the two companies and their respective nations below.
In 2005, the United States filed a formal complaint against the European Union over the EU’s “reimbursable launch investments” (RLI) to Airbus. According to the US, these RLI loans, essentially subsidies, gave Airbus a competitive advantage against Boeing, defying the 1992 bilateral trade agreement between the two countries. In response, the EU accused Boeing receiving “pork barrel” subsidies from the US government through NASA and other funding.
In early 2010, the WTO responded to the allegations by announcing that Airbus had indeed received unfair advantages through the RLIs. Later that year, the WTO announced that Boeing had also received unfair subsidies from the US government. This resulted in both sides claiming victories.
Although the WTO has not enforcement mechanisms, it can encourage anti-competitive policies against member nations. Currently, the institution is still in deliberation on further actions against the two countries, but it has identified that Boeing has received over $5 billion in illegal subsidies. Furthermore, the WTO confirmed allegations that RLIs provided for unfair advantages to Airbus.
Today, both companies remain competitive in terms of production. Litigation in international trade law takes years to finalize, and debates are often laced with political sway. Look for the WTO to slowly usher in trade sanction recommendations for both countries in the years to come.