General principles of trade law

A large number of organizations exist that affect the multinational markets for goods, services, and investments.

GATT 1944 and WTO. The General Agreement on Tariffs and Trade 1944 (GATT) is a multilateral treaty subscribed to 125 members governments. It consists of the original 1947 GATT, numerous multilateral agreements negotiated since 1947, the Uruguay Round Agreements, and the agreement establishing the World Trade Organization (WTO). On January 1, 1995, the WTO took over responsibility of the former GATT organizations. Since 1947 and the end of the World War II era, the goal of the GATT has been to liberalize world trade and make it secure for furthering economic growth and human development.

The GATT is based on the fundamental principles of (1) trade without discrimination and (2) protection through tariffs. The principle of trade without discrimination is embodies on in its most favored nation clause. All member countries grant each other equal treatment. They are equal and share the benefits of any moves toward lower trade barriers. Exceptions to this basic rule are allowed in regard to the European Union (EU) and the North American free Trade Agreement (NAFTA). Special preferences are also granted to developing countries. The second basic principle is protection for domestic industry, which should be extended essentially through a tariff, not thorough other commercial measures. The aim of this rule is to make the extent of protection clear and to make competition possible.

The new WTO provides a Dispute Settlement Body (DSB) to enable member countries to resolve trade disputes. The DSB appoints panels to hear disputes concerning allegations of GATT agreements violations. If a GATT agreement violation if found and not removed by the offering country, trade sanctions authorized by a panel may be imposed on that country in an amount equal to the economic injury caused by the violation.

The European Economic Community (EEC) was established in 1958 by the treaty of Rome in order to remove trade and economic barriers between member countries to unify their economic policies. It changed its name and became the European Union (EU) after the Treaty of Maastricht was ratified on November1, 1993. The Treaty of Rome contained the governing principles of this regional trading group. The treaty was signed by the original six nations of Belgium, France, West Germany, Italy, Luxembourg, and the Netherlands. Membership expanded by the entry of Denmark, Ireland, and Great Britain in 1973; Greece in 1981; Spain and Portugal in 1986; and Austria, Sweden, and Finland in 1995.

Four main institutions make up the formal structure of the EU. The first, the European Council, consists of the heads of state of the member countries. The Council sets broad policy guidelines for the EU. The second, the European Commission, implements decisions of the council and initiates actions against individuals, companies, or member states that violate EU law. The third, the European Parliament, has an advisory legislative role with limited veto powers. The fourth, the European Court of Justice (ECJ), is the judicial arm of the EU. The courts of member states may refer cases involving questions on the EU treaty to the ECJ.

The Single European Act eliminated internal barriers to the free movement of goods, persons, services, and capital between EU countries. The treaty on European Union, signed in Maastricht, Netherlands (the Maastricht Treaty), amended the Treaty of Rome with a focus on monetary and political union. It sets goals for the EU of (1) single monetary and fiscal policies, (2) common foreign and security policies, and (3) cooperation in justice and home affairs.

The International Monetary Fund (IMF) was created after World War II by a group of nations meeting in Breton Woods, New Hampshire. The Articles of Agreement of the IMF state that the purpose is “to facilitate the expansion and balanced growth of international trade” and “shorten the duration and lessen the disequilibrium in the international balance of payments of members”. The IMF administers a complex lending system. A country can borrow money from other IMF members or from the IMF by means of special drawing rights (SDRs) sufficient to permit that country to maintain the stability of its currency’s relationship to other world currencies. The Breton Woods conference also set up the International Bank for Reconstruction and Development (World Bank) to facilitate the lending of money by capital surplus countries – such as the United States – to countries needing economic help and wanting foreign investments after World War II.

The Organization of Petroleum Exporting Countries (OPEC) is a producer cartel or combination. One of its main goals was to raise the taxes and royalties earned from crude oil production. Another major goal was to take control over production and exploration from the major oil countries.

Notes: GATT - the General Agreement on Tariffs and Trade – Соглашение по таможенным тарифам и торговле;

WTO – the World Trade Organization (of the United Nations) – Организация ООН по международной торговле или ВТО (Всемирная торговая организация);

EU – the European Union – Европейский Союз (ЕС);

DSB – a Dispute Settlement Body – коллегия по разрешению споров;

EEC – The European Economic Community – Европейское экономическое сообщество (ЕЭС);

ECJ – the European Court of Justice – Европейский суд;

IMF – the International Monetary Fund – Международный валютный фонд (МВФ);

OPEC – the Organization of Petroleum Exporting countries – Организация стран – экспортеров нефти (ОПЕК);

The Treaty of Rome – Римский договор;

The Treaty of Maastricht – Маастрихтский договор;

The European Council – Европейский совет;

The European Commission – Европейская комиссия;

The European Parliament – Европейский парламент;

The Single European Act – единый европейский закон;

International Bank for Reconstruction and Development (World Bank) - Всемирный банк реконструкции и развития.

 

3. How do absolute and comparative advantages differ, and which has a greater influence on the international trade?

4. Describe the major barriers to international trade. What are the major reasons for such barriers construction?

5. What does customs duty mean? Using your own words, describe the different types of duty. What purposes do they serve? What are the basic features in common and differences between them?

6. What do protective and preferential duties mean? What do you know about NAFTA, ASEAN, CAFTA and other international trade agreements within the process of export-import operations? Are there any relationship between international trade agreements and preferential duty? Nominate them briefly.

7. How does the customs duty influence on the economical and political life of the country? Hope the following broadcast transcript will help you to understand this problem better. Read and translate the text and be ready to discuss it from the positions of customs tariffs and linguistics: