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Printed By: Vishal R (vishal07) on Mon Jan 27 11:58:26 UTC 2020

INTERNATIONAL TRADE LAW eBooks
Table of Contents
Full Content
Suggestive Questions
Memory Tickers
Unit I - Genesis of International Trade Law

Introduction
Nature of International Trade
Brief history of International Trade Law

International Trade
Origin and Development of International Institutions
International Trade Organisation (ITO) to General Agreements on Tariffs and Trade (GATT)
Origin and growth of General Agreements on Tariffs and Trade (GATT)
General Agreements on Tariffs and Trade (GATT) to World Trade Organisation (WTO)
Theories of International Trade Law
Mercantilism Theory
The Absolute Advantage Theory
The Comparative Advantage
Hecksher-Ohlin’s Theory
Developing countries and free trade
United Nations
International Commercial Contracts

Introduction
UNIDROIT Principle on International Commercial Contracts
General Provisions
Validity of International Commercial Contracts
Damages
Limitation Period
Principles
Objective
International Commercial Disputes

International Sales of Goods
Hague Convention
Application of the law
General provisions of uniform law on the International Sale of Goods
Passing of the risk (Art. 96 to 100)
UNIDROIT Convention on International Sale of Goods, Geneva, 1983

Preamble
Application of the Convention
Scope of the authority of the Agent
Termination of authority of the Agent
U.N Convention on Contracts for the International Sales of Goods (CSIG) Vienna Convention, 1980
Convention on the limitation period in the international trade sales of goods (New York, 1974)
United Nations Convention on Contracts for the international sales of goods (Vienna, 1980)
UNCITRAL legal guide on international counter-trade transactions
Foreign Direct Investment (FDI)
Objectives of FDI
Some of the major objectives of FDI are as under
Direct Investment
Direct investor
Direct investment enterprise
Types of FDI
Horizontal Direct Investment
Vertical Investment
Conglomerate FDI
FDI Policy
Foreign Investment Promotion Board (FIPB)
Access to markets
Access to resources
Reduces cost of production
Transnational Corporations (TNCs)

Definition of Transnational Corporation (TNC)
Dominance of Transnational Corporations
Characteristics of TNCs
Reasons of growth of TNCs
Advantages of TNCs
Disadvantages of TNCs
Electronic Business Transactions

Advantages of Electronic Business Transactions
Electronic Commerce
UNCITRAL Model Law on Electronic Commerce, 1996
Risk Analysis of Electronic Transactions

International Payments
Elements of International Taxation

Concept of International Taxation
Advantages of International Trade
Disadvantages of International Trade
Risk Analysis of International Trade
Unit II - International Economic Institutions
Introduction
Economic Institution: Definition and Meaning
International Economic Institutions
Accountability of International Institutions
Current Trade Situation: Global and India
International Trade Organisation

Origin
Objectives
Functions
Failure of ITO
Bretton Wood Conference

Structure of the Bretton Wood Conference
Features and Aim of Bretton Wood Conference
Contradictory ideas at the Conference
World Trade Organisation

Structure of WTO
Ministerial Conferences
General Council
Trade Council
Uruguay Round
Objectives
Functions of World Trade Organisation

Doha Round
Negotiations
Reason of failure of Doha Round
Historical evolution of the General Agreement on Tariffs and Trade(GATT), 1947

Salient features of the GATT, 1994
Objectives of GATT
Principles of GATT
Non-discrimination
Prohibition of Quantitative Restrictions
Consultations
Negotiations
Fundamentals of the GATT

Most favoured Nation Status
National Treatment
Dispute settlement
Protection through tariffs
The GATT Negotiation Rounds
Round 1
Round 2
Round 3
Round 4
Round 5
Round 6
Round 7
Round 8
Difference between GATT and WTO
New Economic International Organisation (NIEO)

Origin of NIEO
Objectives of NIEO
United Nations Conference on Trade and Development [UNCTAD]

Objectives of UNCTAD
International Monetary Fund

Purpose of IMF
Objectives of IMF
Functions of IMF
Financial Structure of the IMF
Borrowings
Some of the reasons of failure of IMF
International Bank of Reconstruction and Development (IBRD)

Core Activities of IBRD
Objectives of IBRD
Functions of IBRD
International Investments
What is international investment?
Foreign Direct Investment

Investment Portfolio
Advantages of international investments
Diversification
Currency
International Trade
Unit III - World Trade Organisation

Introduction
Brief history- WTO
Uruguay Round
Key Developments under Uruguay Round
Objectives of WTO
Scope of WTO
Functions of WTO
Structure of WTO
Ministerial Conference
General Council
Dispute Settlement Body
Trade Policy Review Body
Council for trade in goods, Council for services and Council for TRIPs
Subsidiary Bodies
A Committee on trade and development; Committee on balance of payment restrictions and a

Committee on budget, finance and administration
Bodies provided for under the Plurilateral Trade Agreements
WTO Agreements
GATT
GATS
TRIPS
India’s engagement in free trade agreement

Role of Standards in International Trade
Wto and Various Agreements

WTO Agreement on textile and clothing
Purpose of the Agreement

Salient features
Important provisions of Agreement of Textile and Clothing

Article 2 of the agreement
Article 3 of the Agreement

Textile Monitoring Body (TMB) [Article 8]

Termination [Article 9]
Agreement on textile and clothing of the GATT, 1994 and India
WTO and Anti-dumping

Dumping
Types of dumping
Intermittent Dumping
Persistent Dumping
Predatory Dumping
Objectives of Dumping
Effects of Dumping
GATT and Anti- Dumping

Previous Agreements
Agreement on implementation of Articles VI of the GATT, 1994
Important provisions
Article 1 Anti-dumping Measures
Article 2 Determination of Dumping

Article 3.1 Determination of Injury
Article 4 Definition of ‘domestic industry’
Article 5 Initiation and subsequent investigation

Article 6 Evidence
Article 8 Price Undertaking

Article 9 Imposition and Collection of anti-dumping duties
Article 13 Judicial Review

Article 14 Anti-dumping action on behalf of a third Country
Article 15 Developing Country Members

Article 16 Committee on Anti-Dumping Practices
Article 17 Consultation and Dispute Settlement

Article 18 Final Provision
Concept of National Treatment

Introduction
GATT and National Treatment
Exceptions to the General Rule: GATT

Domestic Subsidies
GATT Article XVII
GATT Article XVIII
General Agreement on Trade in Services (GATS)

Article 1 Scope and Definitions
General obligations and disciplines (Part II, Articles II to XV)

Article 2 Most Favoured Nation treatments
Article 3 Transparency
Article 4 Increasing Participation of Developing Countries

Article 5 Economic Integration
Article 6 Domestic Integration

Article 7 Recognition
Article 8 Monopolies and Exclusive Service Supplier

Article 10 Emergency Safeguard Measures
Article 12 Restrictions to safeguard the Balance of Payments

Article 15 Subsidies
Specific Commitments (Articles XVI to XVIII)

Progressive Liberalization (Articles XIX to XXI)
Article XXIII Dispute Settlement and Enforcement
GATS and India
Agreement on Trade related aspects of Intellectual Property Rights (TRIPs)
General Provisions and Basic Principles (Article 1 to 8)
Article 1 Nature and scope of obligations
Article 3 National Treatment

Article 4 Most Favoured Nation Treatments
Article 7 Objectives
Article 8 Principles
Copyright and related rights (Article 9 to 14)

Article 9 Relation to Berne Convention
Article 10 Computer Programs and Compilations of Data

Article 11 Rental Rights
Article 12 Term of Protection

Article 14 Protection of Performers, Producers of Phonograms and Broadcasting Organisations
Trade Marks (Article 15 to 21)

Article 15 Protectable subject matter
Article 17 Exceptions
Article 21 Licensing and Assignment
Patents (Article 27 to 34)

Article 27 Patentable subject matter
Article 28 Rights Conferred
Article 32 Revocation/ Forfeiture

Enforcement of Intellectual Property Rights (Article 41 to 61)

Article 41
Article 42 Fair and Equitable Procedure

Article 45 Damages
Dispute prevention and settlement (Article 63 and 64)

Article 64 Dispute Settlement
TRIPS and Ministerial Conference of the WTO

Agreement on Trade-related Investment Measures (TRIMS)
Objective
Article 1
Article 2
Article 4 Developing Countries

Article 5 Notification and Transitional Arrangements
Committee on TRIMs (Article 7)
Dispute Settlement and Review (Article 8 and 9)
TRIMs and India
International Trade Law and the United Nations Conference on Trade and Development (U.N.C.T.A.D)
Objective of UNCTAD
Goals of UNCTAD
UNCTAD adopts two outcome documents at conclusion of its 13th Ministerial Meeting at Doha, Qatar on 26th
April, 2012
Free Trade and Trade Barriers
Trade Barriers
Tariff Barriers or Fiscal Control
Quantitative Restrictions or Non-tariff Barriers (NTBs)

Balance of Trade
Technical Barriers to Trade (TBT)

First Section
Second Section
Third Section
Fourth Section
Fifth Section
Application of TBT Agreement

Technical Barriers to Trade Agreement aims
WTO Agreement and Technical Barrier on Trade Agreement

The Prevention of Protectionism
United Nations Committee on Trade and Environment (UNCTE)

Trade and environment
Doha Agenda on Environment and Trade
Link between trade and environment

Impact of environment on growth of trade
Technical assistance regarding trade and environment

Relationship and impact of trade on environment
Unit IV - Bilateral and Regional Trade Agreements

Bilateral Trade Agreements
Introduction
Meaning of Bilateral Agreement

Advantage of Bilateral Agreements
India and Bilateral Agreements

Various Bilateral Agreements to which India entered
Multilateral Trade Agreements

Method of Multilateral Trade Negotiations under GATT
Introduction to Regional Trade Agreements (RTAs)

Regional Trade Organisation
Regional Trade Agreements
Preferential Trade Arrangements (PTAs)

Hierarchy of Regional Trade Agreements
Free Trade Area
Custom Union
Common markets
Aims and Objectives- Common Market

Political Union
Challenges included in RTAs for Developing Countries
Committee on Regional Trade Agreements

Transparency Mechanism for Regional Trade Agreements
New Transparency Mechanism for RTAs

Basic rules and principles of Trading
Definition of Most Favoured Nations (MFN)
Trade without discrimination

Most Favoured Nation (MFN)
Exception to the MFN Principle
National treatment
Free trade
Promoting fair competition

Advantages of Most Favoured Nation
Disadvantages of Most Favoured Nation
South Asian Association for Regional Cooperation (SAARC)

Introduction
Objectives of SAARC
Principles of SAARC
Institutional Structure of SAARC
Secretariat
Council of Ministers
Standing Committee
Programming Committee
Technical Committees
Areas of Cooperation (SAARC)
Apex Bodies of SAARC

Advantages and Achievements of SAARC
SAFTA
SAPTA
Greater cultural co-operation

Promotion of economic/ political growth
Advantages to Least Developed Countries

Disadvantages or limitations of SAARC
Political Differences
Domination of India
Inequality among Member countries
The Association of Southeast Asian Nation (ASEAN)

Introduction
Establishment of ASEAN
Objective of ASEAN
Aims of the ASEAN

Principles of ASEAN
AFTA (ASEAN Free Trade Area)
APEC (Asia Pacific Economic Co-operation Forum)

European Union
Introduction
Essential features of European Union (EU)

Member Countries of European Union
Constitution of European Union

Executive Branch
Legislative Branch
Judicial Branch
Purpose of EU
Objectives of EU
Goals of European Union
Values of European Union

Freedom
Human dignity
Democracy
Rule of law
Equality
Human rights
Organisation of Petroleum Exporting Countries (OPEC)

Introduction
Historical Background of OPEC
Member Countries of OPEC
Purpose of OPEC
Functions
Goals of OPEC
Oil prices stable
Reduce oil price volatility
Adjust world’s oil supply

North American Free Trade Agreement (NAFTA)
Establishment of NAFTA
NAFTA
Additions to NAFTA
Functions of NAFTA
Effects
Disadvantages and Criticism
The South Asian Free Trade Area (SAFTA)

Components of SAFTA
Objectives of SAFTA
Principles of SAFTA
General Exceptions
Main instruments of SAFTA

Trade Liberalisation Programme
Unit V - Settlement of Disputes in International Trade

Introduction
Types of Commerce
Internal Commerce
International Commerce
Disputes
Institutions of International Commercial Disputes

International Council for Commercial Arbitration (ICCA)
International Chamber of Commerce (ICC)
The International Centre for Settlement of Investment Dispute (ICSID)

The London Court of International Arbitration (The LCIA)
The International Centre for Settlement of Investment Disputes (ICSID)
The Asian African Legal Consultative Committee (AALCC) Regional Centres
The American Arbitration Association (AAA)
National Arbitration Bodies

United Nations Commission on International Trade Law (UNCITRAL)
International Commercial Arbitration and Conciliation

UNCITRAL Arbitration Rules, 1976
UNCITRAL Conciliation Rules, 1980

UNCITRAL Model Law on International Commercial Arbitration, 1985
UNCITRAL Model Law on International Commercial Conciliation, 2001
The need of Model Law on International Commercial Arbitration

UNCITRAL Arbitration Rules
Model Arbitration Clause- UNCITRAL
Notice of Arbitration
Arbitration Proceedings- UNCITRAL
The Arbitral Award
International Commercial Arbitration

Introduction
Meaning of International Commercial Arbitration
Importance of International Commercial Arbitration
Non-judicial or Alternative Dispute Resolution (ADR)
Procedure or techniques of ADR
Negotiation
Mediation
Commercial arbitration and conciliation
Arbitration
Conciliation
Distinction
Judicial Resolution of Dispute

Court
Judicial Dispute Resolution

Characteristics of judicial dispute resolution
Advantages
Disadvantages
Online Dispute Resolution

Online Dispute Resolution on Commercial Disputes
Advantages of Online Dispute Resolution

A single procedure
Speedy Resolution of dispute
Party autonomy
Neutrality
Confidentiality
Course Outline of Unit I: Genesis of International Trade Law

This Unit contains discussion on following topics :
Origin and Development - Theories - UN Conventions - Unification of International Trade Law - International Commercial
Contracts - International Sale of Goods - Foreign Direct Investments (FDI) - Transnational Companies - Electronic Business
Transactions - Elements of International Taxation - Risk Analysis of International Trade
Disclaimer: This subject content as provided under AIR Online Education Support Suite is only Study (Reference) Material for
supplementing your Academic Classroom (Text Book) Learning. These are not Text Books on the Law Subjects.
Introduction
International Trade Law regulates the international trade and commerce. It deals with two aspects i.e. private and public. The
Private International Law focuses upon the international commercial transactions between people and different States. The Public
International Law deals with co-ordination of various State Policies. The basic aim is the creation of an enabling environment and
infrastructure for accelerated growth of exports. It also mandates to develop and promote International Trade among various
provisions.
The sole purpose of International Trade Law is to promote free trade among States and Nations. Freedom of trade denotes where
people are free to buy and sell goods without any hindrance or hurdles. People should become capable to buy products freely from
anywhere throughout the world, it aims International Trade Law.
Article 301 of the Constitution of India also mentions free trade and commerce throughout the territory of India. The Department
of Commerce formulates implements and monitors the Foreign Trade Policy (FTP) which provides the basic framework of policy
and strategy which must be followed for the promotion of trade and commerce. Department periodically reviews the incorporated
changes which are necessary to take care of emerging economic scenario both in domestic as well as at international platform.
Department is entrusted with the responsibilities to deal and enact policies related to bilateral and multi-lateral relations, Special
Economic Zone, State trading, export promotion and trade facilities, development and regulation of export oriented industries and
commodities.
Nature of International Trade
According to Halsbury’s Law of England, the term ‘trade’ refers to exchange of goods and any business carried on for profit which
may be manual or mercantile. Trade comprises of lending, movements of goods, flow of goods, borrowing, mercantile documents
etc. ‘Business’ has a wider scope and meaning than trade as it includes occupation also.
International trade may be defined as trade between States or Nations which are completely foreign to each other. It refers to trade
between residents of two different Countries.
Brief history of International Trade Law
Before the emergence of Modern Trade system, the trade was free and merchants were free to move over the entire world for
buying and purchasing of goods. It gave birth to modern civilization in the world. However, when the trade grew complexities
started growing and then the Government started interfering into commercial transactions. Government started imposing levy
taxes and tariffs on goods.
International Trade Law started with the barter system and it was later replaced by Mercantilism during 16th and 17th Centuries
and during 18th Century the Trade saw a shift towards liberalism. In the year of 1776 the father of Economics, Adam Smith wrote
his famous book ‘The Wealth of Nations’ where he elaborated on the importance of specialization in production and he introduced
the scope of International Trade. The comparative advantage principle was developed by David Ricardo.
These economic thoughts and principles of Scholars had marked the growth of International Trade Policies of every country. From
last few centuries, countries have entered into several treaties, pacts and conventions which have influenced free trade for every
nation.
States started concluding bilateral treaties to mutually reduce tariffs with regard to certain specific goods which were of their
interest. Anglo-French Treaty came up in 1860 and it was the earliest bilateral treaty which was known as ‘tariff truce’ and it
aimed to reduce the tariff rates mutually.
The beginning of 19th century saw the move towards professionalism, which petered down by end of the century. Around 1913,
the countries in the west saw extensive move towards economic liberty where in quantitative restrictions were done away with and
customs duties were reduced across countries. All currencies were freely convertible into Gold, which was the international
monetary currency of exchange. Establishing business anywhere and finding employment was easy and one can say that trade was
really free between countries around this period.
In 1920 economic recession changed the balance of world trade and many countries saw change in trade due to fluctuation in
currencies which created trade depreciation and economic pressure on Government.
The need was felt to reduce pressure of economic conditions and to ease the policies regarding international trade between the
Nations. World Economic Conference was held in 1927 which was organised by League of Nation where most of the industrial
countries participated. This led drawing up of Multi-lateral Trade Agreement. This was followed with General Assembly of Tariffs
and Trade (GATT) in 1947.
Gradually the countries began to become familiar with the fact that they had to constantly review the international trade policies
and this would lead to all countries to agree to be guided by International Organizations and Trade Agreements on international
level related to trade and commerce.
After World War II an unexpected expansion of National Companies into International and multination Companies was witnessed.
International trade grew rapidly during 1990s. Multinational companies were producing products in their home countries and used
to market their products in various Foreign Countries.
International Trade
With the advancement of modern technologies and shipping methodologies we are able to export and import goods and can adopt
advanced shipping techniques and methods. It became possible to import and export goods and services of all kinds to every corner
in the world. Multilateral Trade Agreements have made it possible; some of them are NAFTA (North American Free Trade
Association) or SAFTA (South Asia Free Trade Agreement). Nations who has signed these agreements aimed to place their
domestic goods in the global market and to gain the advantage of competitive pricing for goods and service which are imported
from Foreign Nations. International trade law encompasses the appropriate rules and customs that were to be used while being
engaged in trade with foreign countries.
The origin of International Trade Law is traced back to the medieval era. It was developed from two separate doctrines:
a. Lexmercatoria which refers to the law for merchants on land; and
b. Lex maritime which means the law for merchants on sea
International trade began to grow after Second World War and it led the countries to enter to the negotiation and signed a treaty to
provide a method for trading goods; the Treaty was named as the General Agreement on Tariffs and Trade (GATT).
Origin and Development of International Institutions
Modern international trade law is the product of Second World War. The advent of the World War I had immensely disrupted
international trading system and relationships. There was a need of a functional understanding of modern international trade
policy.To establish an International Trade Organization (ITO), the President of the US and the Prime Minister of the UK issued
Atlantic Charter on the 14th day of August in 1941. After that the work began, in 1944 at the Bretton Woods Conference.
IMF and IBRD/ World Bank came into existence on 27th December, 1945. These institutions deal with the international
economics and financial aspects at international level. A need of the third organization was felt to regulate trade issues which had
resulted to the establishment of the International Trade Organisation (ITO).
International Trade Organisation (ITO) to General Agreements on Tariffs and Trade (GATT)
The International Trade Organisation Charter was much broader than the GATT and contained several provisions to promote co-
operation for economic development and reconstruction. However, the proposed International Trade Organisation could not be
established as wished due to clash of interests between the United States and other States.
International Trade Organisation (ITO) was never rejected as such rather it was essentially drafted as an interim arrangement
containing some rectifications which were agreed to, just after Havana Conference.
International Trade Organisation (ITO) was one of the significant steps taken under the so called Bretton Woods system. It was
designed during the Post- World War II era with an aim to promote and manage global economic development.
The objective of the International Trade Organisation (ITO) is the promotion and liberalization of free trade in goods and services.
The foundations of the International Trade Regime date back to the 1947 when the GATT was concluded.
Origin and growth of General Agreements on Tariffs and Trade (GATT)
General Agreement on Tariffs and Trade (GATT)was not intended to be an international organization. It gradually filled the gap to
create an International Trade Organisation. It was created as a temporary framework for tariff negotiation which assumes the
power of world economic administration not of regional.
General Agreement on Tariffs and Trade (GATT) is a code of general rules which regulates the conduct of the parties. However,
reduction of tariffs eventually eliminate tariff as a barrier to international trade.
The growth of trade and development further helps the State and its people who were indirectly dependent on their access to
resources. It also provides an opportunity for people to free themselves from local ecological constraints by importing resources
outside the boundaries of their own territory.
General Agreements on Tariffs and Trade (GATT) established the two basic directions for the trade regime:
i. Developing requirements to lower and eliminate tariffs; and
ii. Creating obligations to prevent or eliminate other types of impediments or barriers to trade (Non - tariff barriers)
The Preamble to the GATT looks to raising standards of living, ensuring full employment and a large and steadily growing of
volume of real income and effective demand by expanding the production and exchange of goods.
General Agreements on Tariffs and Trade (GATT) to World Trade Organisation (WTO)
World Trade Organisation is the principal forum for negotiations on multilateral trading relations among Member States. In regard
to the governance of General Agreement on Tariffs and Trade during the time span from 1948 to 1994, there were eight
negotiating “Rounds” that took place under the auspices of GATT. The aim of those rounds wasto further develop the trade
regime.
The traditional bodies of law and GATT still serve as the foundation for many laws governing international trade agreements
today. A new area of international trade law that has developed only recently involves the international trade of intellectual
property.
To facilitate the negotiation and execution of multilateral trade agreements, the World Trade Organization was established. It
consists of member countries who have signed on to a multilateral agreement. The purpose of this organization is to remove
impediments and barriers to free trade for example tariffs.
A tariff may be defined as a tax that is applied to any foreign imports and is designed to encourage consumers to produce
domestically produced products. World Trade Organization requires the member nations to guarantee that they will treat imports
from other nations in the same manner as they would treat the domestically produced goods and services. The rules and regulations
are also developed by WTO for governing trade and provide an International Forum for discussion and resolution of trade related
issues.
In 1964, the United Nations Conference on Trade and Development (UNCTAD) institutionalized permanent organ of the General
Assembly of the United Nations provided a forum where the developing countries tried to evolve and articulate a common position
on matters relating to trade.General Agreement on Tariffs and Trade(GATT)was not intended to be such a forum. Early rounds
focused more on tariffs alone but non-tariff barriers have since come to the force.
Theories of International Trade Law
Adam Smith’s Theory of Absolute Differences in Cost
Adam Smith, the father of Economics, in support of International trade in 1776, in The Wealth of Nations, upheld in this theory the
necessity of free trade as the only way for progressive expansion of trade and increased prosperity of nations. According to Smith
free trade promotes international division of labour.
Adam Smith writes, “Whether the advantage which one country has over another, be natural or acquired is in this respect of no
consequence. As long as one country has those advantages, and the other wants them, it will always be more advantageous for the
latter, rather to buy of the former than to make”.
Free and unfettered international trade can make the countries specialise in the productions and exchange of such commodities in
case of which they command some absolute advantage, compared to other countries. When countries specialise on the basis of
absolute advantage in costs, they stand to gain through international trade, just as a tailor does not make his own shoes and
shoemaker does not stitch his own suit and both gain by exchanging shoes and suits.
Absolute advantage
Let us first understand the concept of absolute advantage, Absolute advantage is when goods and services are produced in greater
quantity by one producer and other producer produces the same for the same cost, or the same quantity at lower cost. Absolute
advantage can be the basis for large gains from trade between producers of different goods with different absolute advantages.
Producers of different absolute advantages can always gain over producing in isolation by specialization, division of labour and
trade. It can open up more widespread opportunities for division of labour and gains from trade.
The concept of absolute advantage was developed by Adam Smith in his book Wealth of Nations to show how countries can gain
from trade by specializing in producing and exporting the goods that they can produce more efficiently than other
countries. Countries with an absolute advantage can decide to specialize in producing and selling a specific good or service and use
the funds that good or service generates to purchase goods and services from other countries.
By Smith’s argument, specializing in the products that they each have an absolute advantage in and then trading products, can
make all countries better off, as long as they each have at least one product for which they hold an absolute advantage over other
nations.
According to this theory, if India produces 20 units of cloth 8 units of crude oil and UAE produces 6 units of cloth and 14 units of
crude oil, India has advantage in production of cloth over UAE and UAE has absolute advantage in production of crude oil over
India. Thus, by application of this theory, India should specialize in production of cloth and meet its requirement of crude oil
through import from UAE and UAE should do the same in case of cloth, import it from India.
International trade law gives three types of advantages to the Country:
1. Productivity gain.
2. Absolute cost gain.
3. Vent for surplus.
Vent for surplus: According to Smith, once the item is produced, it is absorbed in the domestic market and whatever is left as
surplus can be disposed of in the foreign markets. Thus, when one country specialises in production of a commodity at cheap rate
compared to others then it can trade that commodity.
Critical analysis
The ‘Vent for Surplus’ implies that the international specialisation is an integral part of the development process in any country.
In addition to this, foreign trade results in the full utilisation of the idle productive capacity that is likely to exist in absence of
trade. Adam Smith, provided a lucid explanation of the principle of absolute cost advantage as the basis of international
transactions, yet his theory has certain weaknesses.
Firstly, there is an assumption that each exporting country has an absolute cost advantage in the production of specific commodity.
Therefore, when a country has no specific line of production in which it has superiority, this theory is not applicable. Therefore, for
application of this theory it is mandatory that, an exporting country must be able to produce with a given amount of capital and
labour a larger output than any other country. Most of the developing and backward countries with inefficient labour and
machinery may not be having absolute advantage in any line of activity. So the theory does not provide satisfactory explanation of
the trade proceeds among the different countries.
Secondly, this theory failed to explore in any comprehensive manner the factors influencing trade between two or more countries.
By Smith’s argument, specializing in the products that they each have an absolute advantage in and then trading products, can
make all countries better off, as long as they each have at least one product for which they hold an absolute advantage over other
nations.
Therefore, the ability of an individual, company, region or country to produce large quantity of a good or service with the with the
same quantity of inputs per unit of time, or to produce the same quantity of a good or service per unit of time using a lesser quantity
of inputs, than another entity that produces the same good or service is called absolute advantage. An entity with an absolute
advantage can produce a commodity or service at a lower absolute cost per unit using a smaller number of inputs or a more
efficient process than another entity producing the same good or service.
David Ricardo’s Comparative Cost Theory
David Ricardo in his book “On the principles of Political economy and Taxation” in 1817 on economics, presents the theory of
comparative advantage, the theory that free trade between two or more countries can be mutually beneficial, even when one
country has an absolute advantage over the other countries in all areas of production.
In other words, he maintained that, if trade is left free, each country, in long run, tends to specialise in the production and export o
those commodities in whose production it enjoys a comparative advantage in terms of real costs, and to obtain by importation
those commodities which could be produced at home at a comparative advantage in terms of real costs and that such specialisation
is to the mutual advantage of the countries participating in it.
A country also specialises in the production of the commodity in which it has the best natural advantages. India has advantage in
production of tea, cotton, jute, etc over others and it will specialise in those goods. Similarly, another country would produce those
goods in which it has comparative advantages in production over others. If these two countries produce goods according to their
respective areas of comparative advantage, each country would be able to produce the goods at the lowest cost; and both these
countries will gain from trading with each other. This is the substance of principle of comparative cost advantage.
In famous example, Ricardo considers two countries Portugal and England, each producing two goods of identical quality. In
Portugal it is possible to produce wine and cloth with lesser labour than it would take to produce the same quantity in England.
However, the relative costs of producing those two goods differ between the countries.
According to this theory, production cost of cloth and wine in England and Portugal. England produces a unit of cloth with 100
units of labour and a unit of wine with 120 units of labor, while Portugal produces a unit if cloth with 90 units of labour and a unit
of wine with 80 units of labour. From this, it seems that Portugal has an absolute superiority in both cloth and wine. However, a
comparison of the ratio of the cost of production of cloth (90/100) in both the countries reveals that though Portugal has an
absolute superiority in both the branches of production, it will pay her to concentrate on the production of wine in which it has
comparative advantage over England, while importing cloth from England, which has a comparative advantage in cloth production.
England will gain by specialising in producing cloth and selling it in Portugal in exchange for wine.
According to Ricardo’s Comparative cost theory, free and unrestricted trade among nations encourages specialisation on a large
scale and brings the following advantages:
i. The most efficient allocation of world resources as well as maximisation of world production;
ii. A redistribution of relative product demands, resulting in greater quantity of product prices among trading nations; and
iii. A redistribution of relative resources/ demands to correspond with relative product demands, resulting in relatively
greater quantity of resources prices among trading nations.
David Ricardo’s comparative cost theory is based on several assumptions. According to this theory, trade takes place between two
countries and two commodities only. Thereby the principle has a limited scope of application in practice. It is not applicable in
multi-lateral trade. The cost of production of these two goods in both the countries is expressed in terms of labour only and that too
at constant. Hence, it cannot be applied in the case of increasing or decreasing costs. No other possibility of events or expenses
like transportation is anticipated while applying this principle and is totally ignored. These assumptions restrict the application of
this theory.
Critical analyis
Firstly, a country may find it difficult in deciding in which goods it should have comparative cost advantage. A country may gain
comparative advantage by raising its factor (labour) productivity or by imposing restrictions on trade, for eg. Import tariff. The
theory ignores the effects of transport costs. If transport costs are added any comparative advantage may be lost. So, basically the
concept is not a static one but its pattern keep on changing.
Secondly, modern theories have established that the only necessary condition for the possibility of gains from trade is the
difference between the price ratios of two countries. Moreover, Ricardo ignored the role of demand completely and explained
trade solely on supply basis. The post trade exchange rate between the commodities, whose determination Ricardo could not
explain, is established by the law of Reciprocal Demand, i.e., one country’s demand for another country’s product and vice versa.
Thirdly, Ricardo’s analysis is based on the labour theory of value as costs are expressed in terms of labour hours. However, the
classical labour theory has itself lost its relevance.
The Ricardian theory of comparative costs has been elaborated with reciprocal demand and with the introduction of money.
Gottfried Haberler has attempted to restate the theory of comparative costs in terms of opportunity costs.
Heckscher-Ohlin’s Theory of International Trade
The Hecksher-Ohlin theory was a 1919 Swedish paper written by Eli Heckscher at the Stockholm School of Economics. Later his
student Bertil Ohlin added to it in 1933. In 1949 and 1953 Paul Samuelson expanded the theory through his articles. This theory is
also known as Hecksher-Ohlin Theory (H-O) model.
The theory emphasizes on the export of goods requiring factors of production that a country has in abundance and import of goods
that a nation cannot produce as efficiently. In other words, countries should ideally export materials and resources of which they
have an excess, while importing those resources they need. Heckscher- Ohlin theory explains mathematically, that two countries
should balance their resources and trade when resources are imbalanced throughout the world.
Second factor of production, capital is highlighted in this theory. It states that, comparative advantage occurs from differences in
factor endowments between the countries. Factor endowment refers to the amount of resources, such as land, labour and capital
available to a country. For example, a country may have abundant labour, and then the cost of labour would be low in that country.
The theory incorporates other production factors such as labour. The cost of labour varies from one nation to another, so countries
with cheap labour forces should focus primarily on producing labour-intensive goods. It evaluates the equilibrium of trade between
two countries that have varying specialities and natural resources.
The theory emphasizes on the benefits of international trade and the global benefits to everyone when each country puts its most
effort into exporting resources that are domestically naturally abundant. All countries benefit when they import the resources they
naturally lack. As nation does not have to rely solely on internal markets, it can take advantage of elastic demand. As a result cost
of labour increases and marginal productivity declines as more countries and emerging markets develop. Trading internationally
allows countries to adjust to capital-intensive goods production which is not possible otherwise.
Hechscher-Ohlin theory has certain assumptions, the needs of citizens of the two countries are same, transportation cost between
the countries is zero, factors of production in both the countries are immobile, and factors of production in both the countries are
not available in same proportion.
Theory shows relationship among various variable. The price of the product is determined by prices of the factors and their
availability. Cost advantage and specialization occurs as a result of difference of factor prices and product price.
W.F. Stopler and Paul A. Samuelson state that, “International trade necessarily lowers the real wage of the scarce factor expressed
in terms of any good”. In short, free international trade will benefit the relatively abundant factor and hurt the relatively scare
factor of production.
Developing countries and free trade
Free trade philosophy was propagated by the British colonialism in international trade. The concept of free trade was supported by
economists like Adam Smith. The policy of laiseez-faire is the corner-stone, this policy allowed individual activities which must
be conducted without any control of Government.
The concept of free trade is based on the market mechanism which is controlled by the forces of demand and supply in the market.
The interference of the Government should not be there and it should provide an opportunity for expansion of the market for better
economic growth and income. According to D.H Robertson, international trade is ‘an engine of growth’.
Benefits
Following are the benefits of free trade for developing and less developed countries-
i. International trade provides means for economic development
ii. It is a vehicle for dissemination of technical knowledge, transmission of ideas, importation of skills and talent
iii. It is a vehicle of capital movement from developed countries to developing countries
iv. It is the best means for free competition which will help in better economy
v. It leads to division of labour on an international level which ensures greater specialisation and economic growth
vi. It also benefits the consumers by providing them a large variety of goods at much lower price.
United Nations
During the period of 18th century a large number of developing countries were freed from the colonial rule. Most of the countries
have become the members of United Nations Organization and other international economic agencies. India was the original
member of most of the international economic institutions.
The United Nations Charter was signed on 26th June, 1945 in San Francisco. It came into force on 24th October, 1945, at the
conclusion of United Nations Conference of International Organisation. ICJ (International Court of Justice) is an integral part of
UN Charter.
United Nations is the second multi-purpose international organisation, UN headquarters is in New York and it has other regional
offices in Geneva, Vienna and Nairobi. The aim of United Nations is to save the generation from war, to maintain faith of people
in fundamental rights, to establish peace and justice among all member Nations, to promote social progress and better standard of
life.
It also has objective to develop friendly relations among countries based on the principle of equal rights, self-determination of
people, it aims to achieve worldwide cooperation by dealing and resolving issues related to socio-cultural, economic, humanitarian
problems etc. It further aims at maintaining international peace and security while dealing with socio-economic development.
United Nations has played an important role in building international consensus on action for development. In the beginning of
1960, the General Assembly has helped in settings of the priorities and goals through a series of 10-year International
Development Strategies. While focusing on issues of particular concern, it has consistently stressed on the need for progress on all
aspects specially related to social and economic development.
United Nations continued to formulate new development objectives in such key areas as sustainable development, the
advancement of women, human rights, environmental protection, economic growth of member countries etc. United Nations
programmes work under the authority of General Assembly and Economic and Social Council which functions to carry out social
and economic mandates.
It also aims of sustainable development which aims at economic growth which will ensure and allow people to have job
opportunities and quality jobs. Job opportunities and decent working conditions are also required for the whole working age
population. There is a need to increase financial access to accumulate assets and make productive investments. Increased
commitments to trade, banking and agriculture infrastructure will also help increase productivity and reduce unemployment levels
in the world’s most under developed countries.
Facts and figures of aim and achievement of United Nations
The unemployment rate in the year of 2017 was 5.6% which has come down from 6.4% in 2000.
Worldwide around 61% of workers were engaged in informal employment during the year 2016. Excluding the
agricultural sector, around 51% of workers fell into this employment category.
The data reveals that men earn 12.5% more than women in 40 out of 45 countries.
Despite their increasing presence in public life, women continue to do 2.6 times the unpaid care and domestic work
that men do.
There is a need of around 470 million jobs worldwide for new entrants to the labour market by 2030.
Role of United Nations in International Trade Law through UNCITRAL

Trade laws of various countries failed in reducing legal obstacles which caused hurdles in free flow of international trade. United
Nations Commission could not find time to deal with the issues of private international trade. To resolve such issues the General
Assembly of United Nations established United Nations Commission for International Trade Law (UNCITRAL) on 17th
December, 1966. The objective of the Commission is to harmonise and unify the international trade laws among member countries
to ensure equal growth and opportunity for each member.
There were various Conventions which UNCITRAL has produced and the Commission has worked on establishing various
Agencies such as United Nations Convention on the Carriage if Goods by Sea, UNCITRAL model law on cross-border insolvency
etc.
UNIFICATION OF INTERNATIONAL TRADE LAW
International trade law is not a separate legal system, branch or sub-branch of international law. It is a legal concept that includes
the norms and provisions of different international regulations, treaties, conventions and guidelines. The nature of interaction of
international trade law with various national trade (business, civil) laws is essentially same as the interaction between the
international private law and national law. The subject of international legal regulation in the area of practical application of
international trade law is the actions of states to ensure the contiguity of control activities in international trade. The subjects of
international trade are:
1. Property rights and non-property rights.
2. Intellectual property – copyright, patent rights, etc.
3. Services – transport, communication, scientific and technical, financial and credit, insurance, information and
computing, travel, etc.
4. Commodities, finished products, machinery and equipment.
The regulation of market is carried out at various levels: global, regional, bilateral, industry. Sales contract are a fundamental
element of international trade, so uniform regulation of such contracts is of key importance in the development of international
trade. Indeed, uncertainties caused by situations where the set of rules applicable to resolving a dispute has not been established in
advance can become a serious obstacle to international trade. Therefore, transnational efforts to achieve legal uniformity in order to
promote consistency in the application of international trade law are justified.
The unification set forth in the UNCITRAL document the United Nations Convention on Contracts for the International Sale of
Goods provided an opportunity to strengthen the security of international trade and contributed to evolution of relevant national
legislation. In addition to development of national law, the convention also had a significant impact on other international
instruments on unification of trade contracts:
1. Principles of International Commercial Contracts (UNIDROIT);
2. Principles of European Contract Law;
3. Principles, Definitions and Model Rules of European Private Law: Draft Common Frame of Reference (DCFR);
4. Common European sales law (CESL);
Parties to the Conventions are the countries with all legal traditions – Civil law as well as Common law. The Convention is
adopted by countries representing all economic systems; hence, the Convention provides the legal framework for the international
sale of goods and serves as a uniform legal instrument compatible with different legal systems.
The agreement on rules and procedures governing the resolution of disputes within the framework of WTO provides the following
procedure for settling international trade disputes.
1. Consultation: General conciliation procedures like mediation, conciliation etc were introduced and Special conciliation
procedures i.e. by instituting the panel and the appellate body.
2. Arbitration: Depending upon the subject of dispute, it is possible to use both diplomatic methods of resolving disputes
(consultations, good offices) and legal procedures (arbitration). The parties may also use other arrangements of disputes
settlement innate to the WTO, such as special conciliation procedures in the form of the panel and the appellate body.
3. International Trade Relations: It is necessary to determine the range of relations that are governed by international
commercial trade law. The entrepreneurial (commercial, trade) relations between business entities are private-law
relationships that are aimed at realizing the interests of private individuals, based on equality and independence of
participants.
The sources of international trade law are as follows:

1. National law;
2. Judicial precedent;
3. Customary legal practice;
4. International treaties;
5. International conventions.
Considering the sources of international commercial (trade) law, it is impossible to ignore such a category as “lex mercatoria” (in
Latin trade law). Despite the existing discussion about the legal nature and content of this definition, in most cases it is understood
as the group of non-state regulators of foreign economic operations, the main activity of which is non-national regulation, as well
as self-regulation.
In the context of globalization of international economic relations, the unification of the legal regulation of international trade
transactions continues to be one of the imperative issues of international economic cooperation. The existence of inconsistent
differences in the regulation of transactions in the national legal systems seriously complicates the process of concluding
and executing international commercial contracts. The removal of these obstacles, the creation of a uniform legal regime and its
international unification will undoubtedly contribute to the effective development of international trade.
The WTO is both an organization and an online database of legal texts and documents. It is a kind of multilateral trade agreement
defining the rights and obligations of governments in the field of international trade. The legal basis for the WTO activities is as
follows:
1. The General Agreement on Tariffs and Trade (GATT of 1994);
2. The General Agreement on Trade in Services (GATS);
3. The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)
4. The WTO agreements were ratified by the parliaments of all its member states (164 countries).
The main tasks of the WTO are the liberalization of international trade, ensuring its fairness and predictability; promoting
economic growth and improving the economic well-being of people around the globe. WTO deals with its tasks by monitoring the
implementation of multilateral agreements, holding trade negotiations, resolving trade disputes in accordance with the
WTO mechanism, as well as providing assistance to developing countries and studying the national economic policies.
The WTO sets out the principles of international trade law that legally bind the international trading system into a coherent
whole. These principles include:
1. Principle of the development of free trade;
2. Principle of liberalization of the legal regime of international trade;
3. Principle of protection of the national market;
4. Principle of freedom of transit;
5. Principle of economic non-discrimination;
6. Principle of granting most-favored-nation (MFN) treatment.
The subjects of international commercial (trade) law are participants in international commercial relations. These include
individuals engaged in entrepreneurial activities, legal entities, and sovereign states in the case of their participation in trading
activities. It turns out that independent states act not only as repositories of power that exercise authority in society, but also as
subjects of private, civil relations regulated by the norms of international private law.
With regard to the regulation of international contractual relations in the field of international trade, there is a tendency in modern
Common law countries to move from a law containing an enormous number of detailed rules to the so-called “skeletal”
legislation. The common law states are increasingly turning to the idea of codifying and consolidating their legislation and
eventually adopting universal uniform trade codes.
In this sense, the word that should guide works in this field for the next years is balance: balance between divergence and equality;
balance between existing instruments and societies’ new needs; balance between rigidity and flexibility; and last but not least,
balance between party autonomy and State power. Bearing this in mind, activities should be focused on initiatives aiming at
solving deficiencies of the existing system.
REGULATION OF INTERNATIONAL TRADE BY NATIONAL LAW
National law is the law of land it applies only in the territories of the state. Its uniformity is established through the system of
judicial precedents. It can be said that, national law is all that body of principles, decisions and enactments made, passed or
approved by the legally constituted authorities or agencies in a state. It regulates rights, duties and liabilities enforced through
judicial process securing obedience to the governing authority in the state.
International law compiles of the structure and conduct of states and inter-governmental organisations. International law may also
affect multinational corporations and individuals, an impact increasingly evolving beyond domestic legal interpretation and
enforcement. Over the twenty first century, there has been an increase in global trade, armed conflict, environmental deterioration
on a world-wide scale, awareness of human rights violation, rapid and vast increase in international transportation and boom in
global communications.
International organisations play an increasingly important role in the relationship between nations. An international organisation is
one that is created by international agreement. The United Nations, the most influential among international organisations, was
created on June 26, 1945. The purpose of united nation is to maintain peace and security, to develop friendly relations among
nations, to achieve International Corporation in solving international problems and to be a centre for harmonizing the actions of the
nations attaining their common ends. The international court of justice was established by the U.N. Charter as its principal judicial
organ
The Government of India Act, 1935 granted the central government exclusive legislative powers to regulate import of goods into
India and export goods from India. However, this power was never used till 1947, when the Imports and Exports (control) Act,
1947 was enacted. The need for the Act arose out of the consequences of the Second World War.
In 1976, far-reaching changes were made to Imports & Exports (Control) Act, 1947. The amended act gave the Central
Government wider powers to prohibit, restrict and control the Imports and Exports Trade. The Act covered practically all articles
of trade and manufacture excepts those permitted to be imported under a licence or customs clearance permit or an Open General
Licence. The Exports (Control) Order 1988 held sway before liberalization process was launched in 1991.
International trade controls: The international trade transactions, such as imports, exports and international financial transactions,
for a variety of reasons, including national security and foreign policy may be regulated. To protect the interest of the local
manufacturer, traders and service providers, a government of a particular country, may implement different types of tariff systems.
1. Single column tariff system: Here, same and uniform percentage of tariff duty rate is applied or same amount of duty
per unit of measurement is applied for a product irrespective of the country of origin.
2. Conventional tariff system: Except the country with whom the bilateral agreement entered into as a part of specific
treaty, a uniform rate is applied on imports from all other countries.
3. Conventional tariff system: Under this system, except the country with whom the bilateral agreement is entered into as
a part of specific treaty, a uniform rate is applied on imports from all other countries.
4. Specific duty: Whenever the tariff duty is imposed in as amount per unit of a goods, commodities, and services (e.g.
skill man hours, etc) it is known as specific duty rate.
5. Compensatory Tariff Rate: Whenever the imported product is available at quite a lower price than the domestic running
price of product, then to protect the interest of domestic producers, a specific duty is imposed on imported goods. As an
action of this, the imported goods will not be in a position to stand in the domestic market. Such duty is known as
compensatory tariff duty.
6. Countervailing Duty: Importing country will impose additional duty on imported goods if imported from a particular
country, in the case, when an exporting country supports its goods to be exported through the monetary support provided
in the form of subsidy. Such additional duty is imposed on the import of such goods by importing country to ensure the
protection to domestic manufactures.
Quantitative Restrictions: Government is also imposing the quantitative restrictions in addition to the tariff controls to protect the
interest of the domestic players. To impose quantitative restrictions, government resorts to the quota specification and also the
import license.
There are some other restrictions or measures to control the international trade which are generally applied by different nations few
of them are as follows:
1. Embargo: Embargo is a legal prohibition by a government or group of government restricting the departure of vessels or
movement of goods from some or all location to one or more countries. Embargo may be broad or narrow in scope.
2. Dumping: it is the practice of selling export goods below the price that producers would normally charge in their home
markets or cost of producing goods. Dumping creates unfair competition for domestic industries and governments are
justifiably concerned when they suspect foreign countries of dumping products on their markets.
3. Foreign investment limits: Countries used to put restrictions on the foreign investments by way of imposing limits on
Foreign Direct Investment (FDI) and Foreign Institutional Investors (FII) to promote and save their domestic market.
4. Licensing requirements: The requirement of prior approval, in the form of a license, to export, import or to make
investment in a particular country, is an important measure for international trade control. Licensing helps the host
government to regulate the business of a foreign enterprise or a multinational company in its jurisdiction.
5. Quality standard norms: States control the quality of import items to their country by prescribing the quality standard
norms. The foreign products have to pass through the tests prescribed by the government. These norms help the
government to keep the substandard and hazardous products out form the trade markets.
WTO prohibition on trade restrictions

World Trade Organisation is an important part of international trade system with IMF and the World Bank. Article XI of GATT
generally prohibiits quantitative restrictions on the importation or the exportation of any product by stating that, “No prohibition or
restrictions other than duties, taxes or other charges shall be instituted or maintained by any Member”. When a trading partner uses
quantitative restrictions, it is impossible to export in excess of the quota no matter how compititive foreign products may be. Thus,
this restriction has fundamental principles of the GATT.
The restrictions by WTO is not limited to quantitative measures only, but also on principles like Most Favoured nations, where its
members treat any of its other member differently in matter of tariff, etc. On the other hand WTO also provides consideration of
environment, health or growth of less developed economies.
Impact of WTO on India:
India being a member had to fulfil its commitments and remove quantitative restrictions on imports. As India suffered major
Balance of Payment crisis in 1991, it was allowed to maintain quotas on its imports, it was later removed in 2001. India’s tariff
rates are still higher than some East and Southeast Asian countries, compared to its own past the rates are much reduced and India
is now a more open country as compared to its past.
International Commercial Contracts

Introduction
‘Commerce’ is a term of great importance; it comprehends the intercourse for trade in all forms which includes transportation,
purchase, sale and exchange of commodities between the citizens of one country and the citizens of another country.
International commerce is between the States and nations which are completely foreign to each other. During 1990s a rapid
internationalisation and globalisation was witnessed. International markets presented more potential than domestic markets, the
international markets increased the scope, variety in the taste of consumers, increased their purchase abilities etc. International
commerce takes place to achieve higher rate of profit.
Meaning of Commerce
According to Webster Dictionary, ‘commerce’ means “An interchanging or mutual change of goods, wares, production or property
of any kind, between nations or individuals, either by barter or by purchase and sale, trade, traffic.”
Chamber’s Dictionary defined the term ‘commerce’ as involving of essentially of exchange or buying and selling of commodities.
There is a distinction between commerce and trade according to Tomlin’s Law Dictionary. ‘Commerce’ relates to dealings with
foreign nations or colonies etc. However, ‘trade’ is related to mutual traffic and dealings among themselves at home.
Atibari Tea Co. Ltd. v. State of Assam [AIR 1961 SC 232]
In this case it was observed by the Supreme Court that activities such as exchange of commodities for money, carriage of goods by
roads/ rail/ air etc. transactions in stock exchange, supply of energy, telegraphic services may be called as commercial transactions.
It is also covered by Article 301 of the Constitution of India, which is related to freedom of trade and commerce.
UNIDROIT Principle on International Commercial Contracts
The International Institute for the Unification of Private Law (UNIDROIT) is an independent intergovernmental organization
based in Rome. It had formulated the UNIDROIT Principles with an effort to harmonize and coordinate private commercial law
between States that have acceded to the UNIDROIT statute.
These Principles play an important role in international commerce due to the fact that they provide an alternative choice of law in
instances where parties cannot agree on a specific choice of law. They also provide for adjudication of a dispute relating to a
contract which is governed by the general principles of law as well as adjudication of a dispute in which the rules of “Conflict of
Laws” point to a State whose law is obscure.
The UNDROIT Principles of International Commercial Contracts was divided into the following parts-
General Provisions
Formation of International Commercial Contracts
Authority of Agents in International Commercial Contracts
Performance of International Commercial Contracts
Termination of Contract
Damages
Limitation Period- Suspension of judicial proceedings; alternative dispute resolution; restitution etc.
General Provisions
a. Freedom of contract- The parties are free to enter into a contract and to determine its content.
b. Binding nature of the contract- The contract can only be modified or terminated according to the terms of the contract.
c. Modification by the parties- The parties with mutual consent may modify the contents of the contract, if required.
d. Good faith and fair dealing- Each party must act in good faith and fair dealing in international trade.
e. Notice- A notice is effective when it reaches the concerned party, it may include a declaration; demand; request etc.
Formation of international commercial contracts- It deals with the manner of formation of contract, deals with offer/ its
acceptance/ revocation; mode of acceptance of offer; time of acceptance; acceptance must be within a fixed time period; late
acceptance etc.
Matters which are not covered under PICC-
a. Lack of capacity;
b. Immorality or illegality
Validity of mere agreement- A contract is concluded, modified or terminated by the mere agreement of the parties without any
further requirement.
Initial impossibility- The fact that at the time of the conclusion of the contract a party was not entitled to dispose of the assets to
which the contract relates does not affect the validity of the contract.
Remedies of non-performance- A party to contract cannot on the ground of mistake afford to not perform the contract.
Fraud- A party may avoid the contract when it has been led to conclude the contract by the other party’s fraudulent representation.
Damages
Right to damages- Non-performance of the contract gives the aggrieved party a right to damages either exclusively or in
conjunction with any other remedy.
Full compensation- The aggrieved party is entitled to full compensation for harm sustained as a result of non-performance. Such
harm may be non-pecuniary which include physical suffering or emotional distress.
Limitation Period
The general limitation time period is for three years from the beginning on the day after the obligee knows the facts. The
maximum limitation period is of ten years from the starting of the day the right can be exercised.
Amendment Rules, 2016 to UNIDROIT PRINCIPLES
On May 9th 2016, the International Institute for the Unification of Private Law (UNIDROIT) published the fourth edition of the
UNIDROIT Principles of International Commercial Contracts. The Principles include the amendments and additions to the rules of
2010 UNIDROIT.
There are some of the essential amendments introduced by 2016 edition which are-
a. The newly introduced definition of long-term contract refers to a contract which “is to be performed over a period of
time and which normally involves, to a varying degree, complexity of the transaction and an on-going relationship
between the parties.”
b. Relevant circumstances in contracts with evolving terms- It emphasizes that practices established between the parties
and conduct subsequent to the conclusion of contract are particularly relevant in the interpretation of long-term contracts
but cannot contradict the original terms of the contract.
c. Contract with terms deliberately left open- Introduction of the possibility that missing terms might be determined
unilaterally by one of the parties.
d. Termination of a contract for an indefinite period- It explicitly provides that once a contract for an indefinite period is
terminated, the contract is brought to an end and it does not deprive a party to the contract of its right to claim damages for
any non-performance.
Principles
The concept of “international” contracts should be given the broadest possible interpretation, so as ultimately to exclude only those
situations where no international element at allis involved, i.e. where all the relevant elements of the contract in question are
connected with one country only.
The Application of the Principles
The binding character of a contractual agreement presupposes that an agreement has actually been concluded by the parties and
that the agreement reached is not affected by any ground of invalidity.
The Preamble of the Principles of International Commercial Contracts (PICC) indicated the following essentials-
1. The Principles of ICC shall be applicable when the parties have agreed that their contract to be governed by them.
2. The Principles of ICC may be applied when the parties have agreed that their contract be governed by general
principles of law, the lexmercatoria.
3. It may be applied when the parties have not chosen any law to govern their contract.
4. It may be used to interpret or supplement international uniform law instruments.
5. It may be used to interpret or supplement domestic law. They may serve as a model for national and international
legislators.
Objective
The objective of UNIDROIT is to frame a balanced set of rules which are designed for use throughout the world irrespective of
legal traditions, economic and political conditions of the countries. This goal is reflected both in their formal presentation and in
the general policy underlying them.
Transactions conducted under international commercial contracts, in particular those related to the sale of goods, are considered to
form the base of international trade. The focus is global and the guide does not cover regionally-focused instruments or economic
integration organizations, such as the European Union. The guide also does not focus on the complexities of some contracts related
to sales, such as those of carriage, insurance, and financing.
Ideology behind International Commercial Contracts
Following are some of the basic principles of International Commercial Contracts-
1. Freedom of contract is the basic principle in relation with international trade. The free of contract is the most significant
aspect in context of international trade. It also deals with the right of people to decide whom they want to offer their goods
or services. By whom they want to get supply of products and possibility for them to agree freely on the terms of
individual transactions in competitive international economic order.
2. Economic sectors where there is no competition. As concerns the freedom to conclude contracts with any other person,
there are economic sectors which States may decide in the public interest to exclude from open competition.

‘Dispute’ may be defined as a conflict or a controversy. Dispute between two parties arises when one asserts a particular
proposition and the other denies the same. The term ‘dispute’ refers to a quarrel between two or more rival parties based on a
subject-matter which is in controversy. It implies to a kind of disagreement between the concerned parties, it also refers to
difference in opinion resulting to the interests, rights and liabilities of the concerned parties.
In International Commercial transactions, legal relationship will be there between the parties where one party is the buyer and
another one is the seller which deals in buying and selling of the goods and products. International commerce also maintains
relationships with persons willing to transfer goods from one State to another State. It has relationship with financial institutions
regarding financing or payment. It dealt with statutes of States from where goods are exported and they are imported.
The United Nations Principles of International Commercial Contracts provide an ingenious tool for cross-border contract which
deals with dispute resolution on neutral ground. This is so if the choice is combined with an arbitration clause, pursuant to many
arbitration laws, “the Arbitral Tribunal shall decide the dispute in accordance with such rules of law which are chosen by the
parties as applicable to the substance of the dispute”.
If the UNIDROIT Principles is combined with an arbitration clause, there is no danger of any legal discussion about the character
of the principles. The same is true when parties of an arbitration agreement decide to apply the UNIDROIT Principles later, during
the arbitration.
From a business perspective, the use of the UNIDROIT Principles can save time and money in many situations. It is aimed at
providing a convenient tool to navigate through the UNIDROIT system.
It can be defined as an agreement between a seller and a buyer in respect of sales of goods. It provides that the contract should at
least identify the seller and buyer, the quantity, the type of product, delivery time, price, terms of sale and other important
conditions of payment of price in exchange of goods.
Hague Convention
Each contracting State of Hague Convention in regard to a uniform law on the International Sale of Goods held in Hague on 1st
July, 1964 which undertakes to incorporate into its own legislation, according to the constitutional procedure based on uniform law
on International Sale of Goods.
Application of the law
a. Where the contract involves the sale of goods which at the time of conclusion of the contract in the course of carriage or
will be carried from the territory of one State to the territory of another State;
b. Where the acts constituting the offer and the acceptance have been effected in the territories of different States;
c. Where delivery of the goods is to be made in the territory of a State other than that within whose territory the acts
constitute the offer and the acceptance have been effected.
General provisions of uniform law on the International Sale of Goods

Article 9 of the Hague Convention provides that the parties shall be bound by any usage which they have expressly or impliedly
made applicable to their contract. The parties shall be bound by usages which reasonable people in the similar situation usually
consider to be applicable to their contract.
Article 18 provides that the seller shall effect delivery of the goods, hand over any documents relating thereto and transfer of the
property in the goods as required by the contract and the present law.
Article 19 deals with the delivery of goods, it should be done according to the provisions of the contract.
Article 20 to 22 of the Hague Convention mentions the date of delivery and other related procedure etc.
Rights of buyer are mentioned under Article 43 to 46 of the Hague Convention which is as under-
a. The buyer may declare the contract avoided if the failure of the goods to conform to the contract and also the failure to
deliver on the date fixed amount to fundamental breaches of the contract. (Art. 43)
b. In case of delay in delivery of the goods, the buyer may fix an additional period of time for the further delivery or
remedying the defects. (Art. 44)
c. Where the seller has handed over part of goods, the buyer may declare the contract avoided. (Art. 45)
d. Where the buyer has neither obtained performance of the contract by the seller nor declared the contract avoided, the
buyer may reduce the price in the same proportion as the value of the goods at the time of the conclusion of the contract
that has been diminished. (Art. 46)
Passing of the risk (Art. 96 to 100)

Article 96 provides that where the risk has passed to the buyer, he shall pay the price irrespective of the loss or deteriorate of the
goods, unless this is due to the act of the seller or of some other person for whose conduct the seller is responsible.
According to Article 97, the risk shall pass to the buyer when the delivery of goods is affected in according with the provisions of
the contract and the present law.
Article 99 says that where the sale of goods in transit by sea, the risk shall be borne by the buyer as from the time at which the
goods were handed over to the carrier.
According to Article 100, if the goods had been lost after they were handed over to the carrier, the risk shall remain with the seller
until the time of sending of notice or document (according to Art. 19).
UNIDROIT Convention on International Sale of Goods, Geneva, 1983
Preamble
The preamble of UNIDROIT Convention provides that the international trade is growing and will continue to grow. The cross-
border trade involves intermediaries as agents to create the necessary business contracts between sellers and buyers.
a. The parties to the Convention must bear in mind the objectives of it on contracts for the international sale of goods;
b. Considering the development of international trade on the basis of equality and mutual benefits, it is an important
element to promote friendly relations among States;
Application of the Convention

The Convention is applicable where the principal and the third party have their place of business in different States. This is not
applicable on the agent of a dealer on a stock, agency of an auctioneer, agency arising from statutory or judicial authorisation etc.
Scope of the authority of the Agent
a. The authorisation of the agent by the principal may be expressed or implied.
b. The authorisation need not be given in or evidenced by writing; it may be proved by any means including witnesses.
Termination of authority of the Agent

The authority of the agent is terminated which follows from any agreement between the Principal and the Agent. It is terminated
on revocation by the Principal or renunciation by the Agent, whether or not this is consistent with the terms of their agreement. It
may be terminated when the applicable law. The termination of the authority shall not affect the third party unless he knew or
ought to have known of the termination or the facts which caused it.
Article 21 to 35 of the UNIDRIOT Principles deals with- signing, implementing, ratification, denouncing etc. by the Contracting
Parties
U.N Convention on Contracts for the International Sales of Goods (CSIG) Vienna Convention,
1980
International Sales of goods contract will refer the governing body of law; in case of resolution of disputes methods such as
arbitration must be adopted rather than litigation. The body of law will be the United Nations Conventions on Contracts. The
contract must contain tome and place of delivery and the manner in which ownership shall pass from the seller to buyer.
U.N Convention on Contracts for the International Sales of Goods (CSIG) provides a uniform text of law for international sale of
goods. The Convention was prepared by the UNCITRAL and adopted by a diplomatic conference on 11th April, 1980.
UN Convention on Contracts for the International Sales of Goods (CSIG) has been recognised as the most successful attempt to
unify a board area of commercial law at international level. It aims to reduce hurdles related to international trade by providing
substantive rules providing the rights and obligations of parties. Presently more than 70 States are the parties to CSIG, which
represents the economic, geographic and cultural diversity.
Some of the important provisions which CISG deals with are as under-
i. It deals with the interpretation of the agreement signed between the parties
ii. The role of practices which are established between the parties
iii. It also works on duration and revocation of offers
iv. The manner and effectiveness of acceptance of offers
v. Effect of modification to the terms of acceptance
vi. Modifications to the international sales of contracts
CSIG further deals with the obligation of seller regarding the quality of goods; time and place of delivery; the place and date of
payment of about by the buyer to the seller; the buyer’s duty to take the delivery of the products; right to examine the delivered
goods and to give notice to the seller if the goods lack in quality or quantity. It further determines the remedies for breach of
contract; it includes the rights to demand delivery, recovery of damages, and reduction of price for non-conforming goods.
Contract for the International Sales of Goods (CSIG) is a project of the United Nations Commission on International Trade Law
(UNCITRAL). This Convention undertook to create a successor to two substantive international sales treaties –
a. Convention relating to a Uniform Law on the Formation of Contracts for the International Sale of Goods (ULF)
b. The Convention relating to a Uniform Law for the International Sale of Goods (ULIS)
Preparation of a uniform law for the international sale of goods began in 1930 at the International Institute of Unification of
Private Law (UNIDROIT) in Rome. UNCITRAL aimed to create a Convention that would attract an increased number of
participation in uniform international sales rules.
Contracts for the International Sales of Goods (CSIG) was finalized and approved in the six official languages of the United
Nations at the United Nations Conference on Contracts for the International Sale of Goods, which was held in the year of1980, in
Vienna. It entered into force in eleven initial Contracting States in 1988. Since then it has steadily and continuously attracted a
diverse group of adherents.
The Convention [Contract for the International Sales of Goods (CSIG)] is divided into four parts which are as under-
Part I- It deals with the scope of application of the Convention and the general provisions
Part II- It contains the rules governing the formation of contracts for international sale of goods;
Part III- Deals with the substantive rights and obligations of the buyer and the seller arising from the contract;
Part IV- It contains the final clause of the Convention dealing with enforcement of Convention, application of Convention to
international sales.
Some of the important Conventions of International Sales of Goods and related Transactions are mentioned below-
Convention on the limitation period in the international trade sales of goods (New York, 1974)
This establishes uniform rules governing the period of time within which legal proceedings arising from an International Sales
Contract must be commenced. There has been amendment to this Convention in 1980 when United Nations Sales Convention was
adopted.
United Nations Convention on Contracts for the international sales of goods (Vienna, 1980)
This Convention establishes a comprehensive code of legal rules governing the formation of contract for international sale of
goods, deals with obligations of buyer and seller, provides remedy for breach of contract. There are at present about 45 parties to
this Convention.
In April, 1980, a Diplomatic Conference of sixty-two nations, which was held in Vienna, approved the United Nations Convention
on Contracts for the International Sale of Goods (“Convention,” or “CISG”). The Convention was drafted by the United Nations
Commission on International Trade Law (“UNCITRAL”) which consisted of members representing countries in each region of the
world, and representing the differing legal systems. The Convention came into force on January 1, 1988.
This Convention applies to contracts of [sale of goods] between sellers and buyers
1. Who have their places of business in different States, and
2. When the States are Contracting States. (A “Contracting State” is a country that has become a party to the Convention.)
States, and
3. Exclusions from Convention: Based On: (i) Nature of the Transaction, (ii) Nature of the Goods.
The Convention does not apply to certain transactions, for example, sales of goods bought for personal, family or household use.
Thus, The Convention applies to commercial sales between persons in business. The Convention does not “apply to certain goods
(or other property), for example, ships, vessels, hovercraft, aircraft, electricity, investment securities, negotiable instruments, or
money.”
RISK OF LOSS - Problems in some domestic systems, relating to sales of goods, may be decided by reference to the “property”
concept. For example, a common law rule might read, “The goods remain at the seller’s risk until the property therein is
transferred to the buyer, but when the property therein is transferred to the buyer the goods are at the buyer’s risk.” Article 30
requires the seller to “transfer the property in the goods” to the buyer. However, Article 4(b) relates that the Convention “is not
concerned with the effect which the contract may have on the property in the goods sold.” Consequently, Articles 66-70 determine
when “risk of loss” has passed to the buyer. When the property (“title”) passes is irrelevant to passing of risk issues.
Loss or Damage After Risk Passes to Buyer Article 36(1) provides: “The seller is liable in accordance with the contract and this
Convention for any lack of conformity which exists at the time when the risk passes to the buyer.”
Article 66 states: “Loss of or damage to the goods after the risk has passed to the buyer does not discharge him from his obligation
to pay the price.”
Risk When the Contract Involves Carriage Nearly all international sales call for carriage of the goods. ‘Carriage’ refers to
arrangements involving use of a third party’s transportation facilities – e.g., a trucking service, railroad or maritime shipping
provider – rather than trucks or other transport vehicles of the parties themselves.” Under the CISG if the contract of sale involves
carriage of the goods, “the risk passes to the buyer when the goods are handed over to the first carrier for transmission to the
buyer.” Nevertheless, the risk does not pass until the goods are clearly identified to the contract.
Sale of Goods During Transit - “Article 68 governs contracts in which goods are sold while in the possession of a ‘carrier’. It
provides as a general rule: “The risk in respect of goods sold in transit passes to the buyer from the time of the conclusion of the
contract”.
Exceptionally, Article 68 states: “However, if the circumstances so indicate, the risk is assumed by the buyer from the time the
goods were handed over to the carrier who issued the documents embodying the contract of carriage.”
The purpose of adoption of this legal guide in 1992 is to assist the parties in negotiation of international counter-trade transactions.
It helps in identification of legal issues involved in contractual and trade based transactions and discuss possible contractual
solution to the issues.
Foreign Direct Investment (FDI)
Foreign Direct Investment may be defined as an investment made by a firm or an individual in one country into business interest
located in some another country. It takes place when an investor establishes foreign business or acquires foreign business assets
which may include ownership, controlling the interest of some foreign company.
Organization of Economic Cooperation and Development (OECD) defines the control as owning to ten per cent or more of the
business. Businesses that make foreign direct investments are often known as multinational corporations (MNCs) or multinational
enterprises (MNEs).
Foreign Direct Investment is the most important measure of growing economic globalization. Investment has been a major issue
for developing economic nations for example India. With the trend of globalisation most of the countries have liberalising their
policies to welcome investment from countries which are having bulk of capital resources.
FDI involves more than just a capital investment; it may include provisions of management or technology also. The key feature of
FDI is that it establishes either effective control of, or at least substantial influence over, the decision-making of a foreign business.
The developed countries are focusing majorly on new markets where there is abundance of labours, where there is high scope for
products and chances of high profits are there. FDI has become a ground of battle for emerging markets.
Objectives of FDI
To identify the various determinants of FDI
To understand the need for FDI in India
To exhibit the sector-wise, year-wise analysis of FDI’s in India
The objective behind allowing Foreign Direct Investment is to complement and supplement domestic investment, for achieving a
higher level of economic development and providing opportunities for technological up gradation, as well as access to global
managerial skills and practices.
Some of the major objectives of FDI are as under-
a. Sustaining a high level of investment - As the countries which are under-developed want to industrialise within a short
span of time, it becomes important to raise the level of investment substantially. There is a need of high level of saving,
but due to poverty the savings are low. This lead to an emergence of a gap between investment and savings, this gap has to
be filled through the method of inflow of foreign trade and capital.
b. Technological gap - The countries which are under-developed have a very low level and sub-standard technologies as
compared to developed countries. The under-developed nations import technologies from developed nations. There is
transfer of technologies with foreign capital.
c. Misuse and exploitation of natural resources - Many under-developed countries have a huge source of mineral.
However, these countries do not possess the required technical skill and expertise to accomplish the usefulness of these
resources. This led to their dependency upon foreign capital to undertake the exploitation of their mineral wealth.
d. Developments of basic economic infrastructure - The domestic capitals of the countries which are under-developed are
too inadequate to build up their economic infrastructure on their own. Hence, these under-developed countries require the
assistance of foreign capital.
e. Improvement in balance of payments position - In the initial phase of the economic development, the under developed
countries need much larger imports (in the form of machinery, capital goods, industrial raw materials, spares and
components), then they can possibly export. As a result, the balance of payments generally turns adverse. This creates a
gap between the earnings and foreign exchange. Foreign capital presents short run solution to the problem.
The objective of FDI is to obtain a lasting interest by a resident entity in one economy who is direct investor in an entity resident in
an economy other than that of the investor i.e. the direct investment enterprise. Here ‘the lasting interest’ refers to the existence of
a long-term relationship between the direct investor and the direct investment enterprise and a significant degree of influence on
the management of the enterprise.
For better understanding of the objective of FDI following terms are defined and explained as under-
Direct Investment
Direct investor

Direct Investment
It involves both the initial transaction between the two entities and all subsequent capital transactions between them and among
affiliated enterprises, both incorporated and unincorporated. It includes all the resources which include the equity capital, funding,
inter-company loans, reinvested earnings etc. that a direct investor has granted to the enterprises with which it is in a direct
investment relationship.
Direct investor
It is an individual or an incorporated or unincorporated public or private enterprise, a government or a group of related
incorporated and/or unincorporated enterprises which has a direct investment enterprise. It may be a subsidiary or an associate or
branch which is operating in a country other than the country or countries of residence of the foreign direct investor or investors.
It is an enterprise which is incorporated or unincorporated in which a foreign investor owns at least ten per cent or more of the
ordinary shares. The investor may have voting power of an incorporated enterprise or the equivalent of an unincorporated
enterprise.
Types of FDI
Horizontal Direct Investment
Horizontal direct investment refers to the investor establishing the same type of business operation in a foreign country as it
operates in its home country.
Vertical Investment
A vertical investment is one in which different but related business activities from the investor's main business are established or
acquired in a foreign country.
Conglomerate FDI
A conglomerate type of foreign direct investment is one where a company or individual makes a foreign investment in a business
that is unrelated to its existing business in its home country.
FDI Policy
According to the policy, FDI up to 100% is allowed under the automatic route in most of the sectors and activities. Under the
automatic route it does not require any prior approval from the Government of India or by the Reserve Bank of India. Investors
only require notifying and filing documents in the concerned Regional RBI Office. The Government approval route in that the
applications for FDI proposal are considered and approved by the Foreign Investment Promotion Board (FIPB).
The FDI Policy has been liberalized progressively through review of the policy on an on-going basis and allowing FDI in more
industries under the automatic route.
The following sectors are prohibited for Foreign Direct Investment-
i. Lottery business;
ii. Gambling and betting;
iii. Business of chit fund;
iv. Nidhi Company;
v. Trading in transferable development rights (TDRs);
vi. Manufacturing of cigars, cheroots, tobacco etc.
vii. Real estate business
viii. Sector which is not opened to private sector investment, i.e. atomic energy and railways operations
In all other sectors FDI is permitted up to 100% on the automatic route which is subject to applicable laws/ regulations, security
and other conditions.
Foreign Investment Promotion Board (FIPB)
It is a single window for the clearance for FDI proposals and it comprises the core departments such as of Economic Affairs,
Industrial Policy and Promotion, Ministry of Small Scale Industries; Department of Revenue, Department of Commerce, Ministry
of External Affairs. FIPB is chaired by the Secretary of the Department of Economic Affairs and its meetings are held regularly
with the interval of three to four weeks.
Benefits of Foreign Direct Investments
Access to markets
Foreign Direct Investment can be useful and effective when one enters into a foreign market. Some of the countries may limit
Foreign Company Access and they try to be limited to their domestic markets only. When a country acquires or starts a business in
the market it means that it is gaining access.
Access to resources
Foreign Direct Investment is effective if a country acquires essential natural resources i.e. precious metals and fossil fuels etc.
Reduces cost of production
Foreign Direct Investment is a way to reduce cost of production if the labour market is cheaper and the regulations are less
restrictive in the target foreign market.
Foreign Direct Investment offers some benefits for foreign countries. For new start-ups FDI offers a source of external capital and
increased revenue. It can be a tremendous source of external capital for a developing country, which can lead to economic
development.
Another benefit is that tax revenue is generated from the products and activities of the factory. Taxes imposed on factory employee
income and purchases. Governments from developing countries can use this capital infusion and revenue from economic growth to
create better physical and economic infrastructure for example- building roads, communication systems, educational institutions,
and subsidizing the creation of new domestic industries.
ADVANTAGES OF FDI
1. Economic Development: Participation in FDI can stimulate economic growth on the local level by creating
opportunities for the investors and local industry. In case of developing countries, they need higher investment to increase
their national income. There is a need to supplement savings of these countries from foreign savings. This can be done by
either external borrowings or through permitting and encouraging Foreign Direct Investments.
2. Easier international trade: Generally, a country has its own import tariff that must be paid for goods and services.
Imports and exporter can therefore struggle to keep products at affordable prices for their customers because of these
taxes. It is because of FDI that it becomes possible to limit these tariffs, these gives local business more control over the
market while maintaining price competition. Some industries usually require their presence in the international markets o
ensure their sales and goals are met. FDI makes this easier.
3. Increase in employment: Foreign direct investment creates opportunities for new employments. As the investors build
new companies in the target country, foreign enterprises by employing the nationals of developing countries provide
employment. Employment leads to an increase in income and more buying power to the people, which in turn leads to an
economic growth.
4. Development of Human Resources: In developing countries human skills are limited to basic labour, agricultural work,
etc. FDI creates educational opportunities for people to improve their skills. This will lead to improvement in level of
productivity, which benefits the country so does the worker. The capacity of the workers can be increased by sharing
experience and training. FDI can result in developing human resources.
5. Tax benefits: For the encouragement of FDI, governments of many countries have placed tax incentives on this type of
investment. This results in availability of capital to work for foreign company without disturbing their budget
dramatically. These incentives make it easier to accomplish goals instead of spending in taxes. Parent enterprises provide
foreign direct investment to get additional expertise, technology and products.
6. Exchange of resources: FDI encourages exchange of knowledge, management and marketing skills, etc. FDI brings
along with it assets which are either missing or scarce in developing countries. These assets are technology and
management skills without which development cannot take place. The facilities and equipment provided by the foreign
investors ultimately increase productivity.
DISADVANTAGES OF FDI
1. Affects domestic investments: FDI in a way stops domestic investment into a foreign company, as the money is not
going into domestic companies. It focuses its resources elsewhere other than the investor’s home country; foreign direct
investment can sometimes hinder domestic Investment.
2. Political risk factor: Political instability and issues in other countries can change foreign direct investment. Although
companies and individuals choose foreign organisations that have little risk, there can never be complete elimination of
risk from the transaction. In some countries risk factors are so high that FDI makes no sense. Political changes can also
lead to expropriation, in such scenario; the government will have control over the property and assets.
3. Exchange rates can impact: In case of developing country with a struggling currency would see a surge of popularity
after FDI. Investment in seen as a sign on stability, creating job opportunities, additional interest in the market, etc.
Increase in interest can lead to better monetary value for the foreign nation. But FDI can occasionally affect exchange
rates to the advantage of one county and detriment of another.
4. Higher costs: At times investment in foreign countries is more expensive than exporting goods. It is very imperative to
prepare sufficient money set such operations. FDI may be capital intensive from the investor’s point of view but
sometimes it is very risky or economically non-viable.
5. Can lead to exploitation: Exploitation can happen on many levels. A foreign government might choose to seize the
investment, assets or proprietary information be seized for political purposes. Even if there is contract governing the terms
and conditions of the investment, at times companies take the money and vanish. This leaves an investor with very few
options to recover their funds.
6. Economic colonialism: Many third-world countries, or at least those with history of colonialism, have an impression
that FDI would result in kind of modern day colonialism, which exposes host countries and leave them vulnerable to
fooreign companies’ exploitation.
Transnational Corporations (TNCs)

A commercial enterprise that operates substantial facilities does business in more than one country and does not consider any
particular country its national home. Some of the examples of Transnational Companies are- Unilever, Nestle, and Cadbury etc.
Transnational businesses are typically extensive and vested in numerous countries. They are tied to natural resources and play a
complex role in the operations of Governments and extraction-based industries.
According to Peter F. Drucker, the Transnational Corporations (TNCs) is, “the most important and most visible innovations of the
post-war period in the economic filed.”
The Transnational Company has a central corporate office; each country has its own central location where specific operations take
place. These individualized operations work within the big level and making the company powerful in each location.
Transnational Companies do not have any home company to manage them and will start as a new company. They do not have
subsidiaries, as there isn’t a centralized management system, a transnational company may take decisions suitable to the operating
context. Transnational companies are there all around the world, and they operate truly at the global level.
One of the most important significance of a transnational company is that they are able to maintain a greater degree of
responsiveness to local markets where they maintain facilities.
Definition of Transnational Corporation (TNC)
‘Transnational Corporation’ generally refers to a corporation with affiliated business operations in more than one country.
‘Transnational Corporation’ is a cluster of corporations of diverse nationality joined together by a common ownership and
responsible to a common management strategy.”
Dominance of Transnational Corporations
TNCs are active in most of the dynamic sectors of national economies like energy, telecommunications, information technology,
electronic consumer goods, insurance, trading etc. The economic dominance of TNCs is manifested by the fact that it controls the
major production and total sales of their foreign affiliates of most of the developing nations, excluding oil exporting developing
countries.
According to the guidelines issued by OECD (Organisation for Economic Cooperation and Development) regarding TNCs in June,
1976, TNCs play an important part which helps in increasing interest to Governments. Through international direct relations TNCs
can bring home substantial benefits regarding investment by contributing to the efficient utilisation of capital technology and
human resources between the nations.
Characteristics of TNCs
The following characteristics are associated with a TNC:
1. It is loyal to all of the countries they operate in and also look to maintain their own interests.
2. It avoids high tariffs involved in importing when they set up in foreign countries. This allows a corporation to cut costs.
3. TNCs work in reduction of costs by using foreign labour at a cheaper price than they would in their home country.
4. It blocks competition by acquiring businesses. If they purchase foreign companies, they will not have as much
competition.
5. TNCs may have political influence over some Governments. This means that they may use their power to convince
some governments to support their practices.
6. They can minimize taxes.
Reasons of growth of TNCs

a. Financial Superiority- It enjoys financial superiorities over National Companies. It has easy access to external capital
markets. It has easy access to international banks and financial institutions.
b. Technological superiority- These are rich in advanced technologies. It is developed through constant research.
c. Product innovation- TNCs have strong R&D Department with developed products.
d. Market superiority- It enjoys quick and warehousing facilities; it adopts sales and promotion techniques. Availability of
reliable date and various facilities.
Advantages of TNCs
It ensures the level of industrial and economic development.
It helps in increasing the investment level and increment of employment.

It acts as a vehicle of transfer of technologies in developing countries.
It helps and increases the export level of the countries.
It breaks protectionism; create competition among domestic companies etc.
It contributes for favourable balance of payments of home country in the long-run.
It creates opportunities for home country people.
Disadvantages of TNCs
A. It can evade or undermine national economic autonomy and control the activities which may affect the national
interest.
B. TNCs may harm competition and acquire monopoly power.
C. It may use natural resources and cause depreciation of the same.
D. It can cause unfavourable effect on the balance of payments of a country by investing less and transferring high returns.
E. It may cause fast depletion of some of the non-renewable natural resources.
Electronic Business Transactions

As per the definition given by OECD ‘Electronic Business Transactions’ can be defined as, “An electronic transaction which is the
sale of purchase of goods or services, whether between businesses, households, individuals, governments and other public or
private organisations, conducted over computer mediated networks. The goods and services are ordered over those networks, but
the payment and the ultimate delivery of the goods or services may be conducted on or off-line.”
Electronic business can be defined as the conduct of business processes over the internet. This includes buying and selling of
products, supplying and services, processing of payment, managing production control, collaborating with business partners,
running automated employee services their recruitments etc.
Electronic business processes can be handled in-house through a company's own network or possibly outsourced to providers that
specialize in these specific aspects of the transaction.
Advantages of Electronic Business Transactions
The electronic mode of transactions has replaced the tedious and lengthy process of writing a cheque and waiting for it to get
cleared. Business to business transactions now are conducted in a very speedy manner which makes the business more efficient in
its operations. Customers to business transactions operate more efficiently as there are now immediate cash payments and receipts
are available.
Businesses up to great lengths to encrypt financial data in order to keep it away from cyber-criminals who may try to steal personal
identifiers through illegally accessing online business transaction protected information. Despite this, the advantages of conducting
online business transactions steadily outweigh the risks.
Electronic Commerce
This was adopted in 1996 with an intention to facilitate the use of modern means of communications and storage of information
such as electronic data interchange electronic mail etc. There is no need of writing, signature or any kind of original documents for
any transactions electronically. This promoted and enhanced the use of paperless communication; it also contains rules for
electronic commerce in specified areas. It further assists executive branches of Government, legislative bodies etc.
This was adopted in the year of 2001 with an intention to bring additional legal certainty regarding the use of electronic signatures.
It established the basic rules of conduct that may serve as guidelines for assessing possible liabilities and responsibilities that
might bind upon the parties involved in the electronic signature.
Risk Analysis of Electronic Transactions
Cyber security experts are of the opinion that with the use of online payment platforms, the fraudulent use of payment networks
and data theft has also gone up.
There are various types of fraud which can be faced during electronic transactions which are as under-
a. Malware- These are the designed applications and programs that led challenge and compromise the security of
computers and mobile phone. It provides an access to criminals to sensitive data.
b. Public networks- Using of a public network can expose your mobile device and information to cyber criminals. Avoid
doing digital transactions on public computers and networks like a cyber cafe.
c. Phishing- The user is trapped in this case by using fake emails or website and criminals made their entry to their
accounts and takes away their sensitive information. Those who are new to the world of electronic transactions are more
prone to such traps.
d. Ransomware- In this the hacker gains remote access to the device as well as the data of the victims, and can block
access to the device until a sum of money is received.
International Payments
United Nations Conventions on International Bills of Exchange and International Promissory Notes (New York,
1988)
This Convention provides a comprehensive code of legal rules governing new international instruments for optional use by parties
to international commercial transactions. It is designed to overcome major disparities and uncertainties that currently exist in
relation to instruments used for international payments. This Convention was adopted and opened for signature by the General
Assembly in December, 1988.
UNCITRAL Legal Guide on Electronic Funds Transfers
This was published in 1987 which identifies the legal issues arising from the transfer of funds by electronic means.
UNCITRAL Model Law on International Credit Transfers (1992)
The Model is adopted in 1992 which deals with the operations beginning with an instruction by an originator to a bank to place at
the disposal of a beneficiary a specified amount of money.
INTERNATIONAL TAXATION
International taxation is the study or determination of tax on a person or business subject to the tax of different countries or the
international aspects of an individual country's tax laws as the case may be. Governments usually limit the scope of their income
taxation in some manner territorially or provide for offsets to taxation relating to extraterritorial income. The manner of limitation
generally takes the form of a territorial, residence-based, or exclusionary system. Some governments have attempted to mitigate the
differing limitations of each of these three broad systems by enacting a hybrid system with characteristics of two or more.
The Organisation for Economic Co-operation and Development (OECD; French: Organisation de co-opération et de
développement économiques, OCDE) is an intergovernmental economic organisation with 36 member countries, founded in 1961
to stimulate economic progress and world trade. It is a forum of countries describing themselves as committed to democracy and
the market economy, providing a platform to compare policy experiences, seek answers to common problems, identify good
practices and coordinate domestic and international policies of its members. Most OECD members are high-income
economies with a very high Human Development Index (HDI) and are regarded as developed countries. As of 2017, the OECD
member countries collectively comprised 62.2% of global nominal GDP (US$ 49.6 trillion) and 42.8% of global GDP (US$ 54.2
trillion) at purchasing power parity. The OECD is an official United Nations Observer.
The OECD participates in G20 meetings at the highest political level (Leaders, Ministers, Sherpas, Finance Deputies) as well as at
the technical level (Working Groups) and contributes to virtually all of the Group’s strands of work and most G20 working groups
with data, analytical reports, policy recommendations and standards. Since the London Summit in April 2009, the OECD has been
at the forefront of fighting against tax evasion, ending bank secrecy and tax havens, and addressing tax avoidance by multinational
corporations. OECD contributions to the G20 on tax have helped to reform, reshape and modernise the international tax
architecture. The OECD Secretary-General presents a report to G20 Finance Ministers and Leaders to update them on the progress
of the international tax co-operation.
Base Erosion and Profit Shifting (BEPS)
Costing governments an estimated 100-240 billion USD in lost corporate income tax revenues per year, tackling BEPS effectively
is a global issue, requiring a coherent global approach.
For the first time ever in international tax matters, OECD and G20 countries worked together to develop the OECD/G20 BEPS
Project to equip governments with domestic and international instruments needed to tackle tax avoidance.
At the request of G20 Leaders in 2015, the OECD established the OECD/G20 Inclusive Framework on BEPS, now covering over
125 members representing a wide diversity of economic profiles, including a significant number of developing countries. All of the
members participate on an equal footing. They are committed to implementing the BEPS measures, to undertake peer reviews
concerning the BEPS minimum standards, and to finalise the remaining standard-setting work, in particular in relation to transfer
pricing.
BEPS refers to tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax
locations where there is little or no economic activity or to erode tax bases through deductible payments such as interest or
royalties. Although some of the schemes used are illegal, most are not. This undermines the fairness and integrity of tax systems
because businesses that operate across borders can use BEPS to gain a competitive advantage over enterprises that operate at a
domestic level. Moreover, when taxpayers see multinational corporations legally avoiding income tax, it undermines voluntary
compliance by all taxpayers.
BEPS is of major significance for developing countries due to their heavy reliance on corporate income tax, particularly from
multinational enterprises. Engaging developing countries in the international tax agenda is important to ensure that they receive
support to address their specific needs and can effectively participate in the process of standard-setting on international tax.
The OECD/G20 Inclusive Framework on BEPS brings together over 130 countries and jurisdictions to collaborate on the
implementation of the BEPS Package.
The BEPS Package provides 15 Actions that equip governments with the domestic and international instruments needed to tackle
tax avoidance. Countries now have the tools to ensure that profits are taxed where economic activities generating the profits are
performed and where value is created. These tools also give businesses greater certainty by reducing disputes over the application
of international tax rules and standardising compliance requirements.
OECD and G20 countries along with developing countries that are participating in the implementation of the BEPS Package and
the ongoing development of anti-BEPS international standards are establishing a modern international tax framework to ensure
profits are taxed where economic activity and value creation occur. Work is being carried out to support all countries interested
in implementing and applying the rules in a consistent and coherent manner, particularly those for which capacity building is an
important issue.
The Inclusive Framework on BEPS allows interested countries and jurisdictions to work with OECD and G20 members on
developing standards on BEPS related issues and review and monitor the implementation of the BEPS Package.
The OECD/G20 Inclusive Framework on BEPS actively monitors the implementation of all the BEPS Actions and reports
annually to the G20 on this progress. The implementation of the BEPS Minimum Standards is of particular importance, and each
of these is the subject of a peer review process that evaluates the implementation by each member and provides clear
recommendations for improvement. Peer reviews of the BEPS minimum standards are an essential tool to ensure the effective
implementation of the BEPS package. First results were available for Action 5 in 2017, for Action 13 and Action 14 in 2018, and
the first results for Action 6 were published this year. The results of the peer reviews show strong implementation throughout the
world. All countries and jurisdictions joining the framework will participate in this review process, which allows members to
review their own tax systems and to identify and remove elements that pose BEPS risks.
Concept of International Taxation
The international aspects of income tax laws of a particular nation can be called as international taxation. The Income Tax Act in
India offers for levy of income tax on the earnings of overseas companies and non-residents, but which is restricted to the extent of
income accumulated in India.
According to Sec. 5 of the Income Tax Act, 1961, a foreign company or any other NRI, is responsible to tax on income which is
received or is deemed to be received in India by or on behalf of such person or income which accrues or arises or is deemed to
accrue or arise to it in India.
As per Sec. 9 of the Income Tax Act, certain types of income that are deemed to accrue or arise in India under certain
circumstances are dealt with. No income of a non-resident can be taxed in India. There are a few exceptions to the same, if the
case falls within the four corners of Sec. 5 read with Sec. 9 of the Income-tax Act.
Transfer pricing is an important aspect in dealing with international taxation, it denotes the amount that is used in accounting for
transfer of goods or services from one centre to another. It means distribution of income between different divisions which deals
with developing, manufacturing, marketing of products and services. Companies use variations of market-based and cost-based
transfer pricing mechanisms to achieve the objective of goal equality. Transfer-pricing system must have in-built mechanisms for
smooth negotiation and conflict resolution.
Developing nations like India must take into consideration the factor of social justice and designing of International Taxation
Structure. It must also take into consideration the standards of taxation like equity, economy of a Nation etc. while developing
international taxation.
Elements of International Taxation
Due to increase in liberalisation and globalisation there are several cross-border economic transactions which are carried over
across by many Nations. The world has become a global village.
Integration between the countries is increasing; in that case there are no restrictions to national boundaries and there are
opportunities to make money internationally. There are issues of international taxation due to income earned in foreign state and its
taxation in resident state.
ADVANTAGES OF INTERNATIONAL TRADE
International trade is the exchange of capital, goods and services across international borders or territories. International trade has
existed throughout history but its economic, social and political importance has been on the rise in recent centuries. Many factors
are involved when two or more nations trade, like – currency, government policies, economy, judicial system, laws and markets
influence.
To ensure that the process of trade between countries goes smoothly, economic organisations were formed, like World Trade
Organisation. They work towards the facilitation and growth of international trade. The importance of international trade was
recognised early by political economists like Adam Smith and David Ricardo.
International trade enables the consumers and countries the opportunity to be exposed to goods and services not available in their
own countries, or which would be more expensive domestically. It is the exchange of goods and services between countries. Some
are of the opinion that international trade actually can be bad for smaller nations, putting them at a greater disadvantage on the
world stage.
Countries resources and requirement of its people may not coincide. Hence, there tend to be interdependence between countries on
large scale. Factor endowments in different countries differ. Technological advancement of different countries differs. Thus, some
countries are better placed in one kind of production and some others superior in other kind of production. Labour and
entrepreneurial skills differ in different countries. In short, international trade is the outcome of territorial division of labour and
specialisation in the countries of the world.
Following are the advantages from international trade law:
1. Utmost use of natural resources
International trade law helps each country to make optimum use of its natural resources. Each country can concentrate on
production of goods which are best suited for utilisation of its resources. It enables a country which cannot produce a commodity
due to higher costs, by importing from other countries at lower costs. International trade also irons out wild fluctuations in prices.
It equalizes the prices of goods throughout the world.
2. Specialisation
Foreign trade encourages production of different goods in different countries. Goods can be produced at a low cost due to
advantage of division of labour. The producers in a country due to international competition, attempt to produce better quality
goods at minimum cost. This increases the efficiency and benefits to the consumers all over the world.
3. Surplus production
Goods are produced not only for home consumption but for export to other countries also. Nations of the world can dispose of
goods which they have in surplus in the international markets. This leads to production at large scale and the advantages of large
scale production can be obtained by all the countries of the world.
4. Technological advancement
Underdeveloped countries can establish and develop new industries with the machinery, equipments; technical knowledge is
gained from developed countries. This accelerates the growth and development of these countries and the economy of the world at
large.
5. International co-operation and understanding
Commercial interactions amongst nations of the world encourage exchange of ideas and culture. It creates co-operation and
understanding among different nations. In case of natural calamities such as drought, floods, famine, earthquake etc, production of
a country gets adversely affected. Deficiency in the supply of goods at the time of such calamities can be met by the help of other
countries.
6. Other advantages
International trade helps in many other ways such as benefits to consumers, international peace and better standard of living.
Disadvantages of International Trade
1. Economic dependence
International trade has an adverse effect on the development of industries at home. Due to foreign competition, the upcoming
industries in the country may collapse. The underdeveloped have to be dependent on developed countries for their economic
development. Such reliance often leads to economic exploitations.
2. Exhaustion of natural resources
Excessive export may exhaust the natural resources of a country in a shorter span of time than it would have been otherwise. This
will result in economic downfall of the country in the long run. On the other hand, import of spurious drugs, luxury articles, etc
adversely affects the economy and well-being of the people.
3. Storage of goods
Sometimes the essential commodities required in a country and in short supply are also exported to earn foreign exchange. This
results in shortage of these goods at home and causes inflation. For example, India has been exporting sugar to earn foreign trade
exchange; hence the exalting prices of sugar in the country.
4. Danger to international peace
International trade promotes lopsided development of a country as only those goods which have comparative advantage are
produced in a country. International trade gives an opportunity to foreign agents to settle down in the country which ultimately
endangers its internal peace. Trade breeds rivalries amongst nations due to competition in the foreign markets. This may eventually
lead to disputes and disturb world peace.
Risk Analysis of International Trade
Some of the challenges or risks of international trade are-
Economic risks- It includes risk of concession in economic control, risk of insolvency of the buyer, risk of non-
acceptance, risk of exchange rates etc.
Foreign Exchange Fluctuations Risks- In case of depreciation of foreign currency in terms of rupees, exporter will
receive lesser amount. If there is depreciation of Indian currency, exporter stands to gain, but there is always fluctuation
and there is risk of profit or loss. If there is intervening difference in the exchange rate between the date of giving the
bill for collection and date of realization, exporter stands to lose or gain, depending on the trend in fluctuation.
Political risks- These may be non-renewal of license, risk of war between trades linked nations, surrendering of
political sovereignty etc.
Legal Risks- Every country has its own commercial law. Legal risk is the major risk while entering into international
trade. Hence, different law prevail both in exporter and importer countries. Legal proceedings are complex and
expensive.
In every relationship, however cordial and long-standing may be, differences are likely to arise. Legal risks can be avoided to a
great extent by incorporating the provision for appointment of an arbitrator, in case of dispute about contractual terms.
Commercial risks- It may comprise of risks like buyer’s failure paying the due amount due to financial limitations,
sellers inability to provide the required quality and quantity of goods etc.
Natural risk- The list of dreary and hazardous risks in transit includes storms, theft, spoilage, fire, high sea robbery
etc.
Other risks- International trade is comprised of many risks which may create a challenge for international market
players especially the developing nations. Risk may occur due to change in policy of the Government, lack of foreign
currency, cultural gap and differences, corruption, sovereign risks etc.
List of references
Sr.No Details
1 Myneni - International Trade Law
2 Autar Krishen Koul - Guide to the WTO and GATT
3 Jayanta Bagachi - World Trade Organisation: An Indian Perspective
4 C. Singhania-Foreign Collaborations and Investments in India Law and Procedure
5 Anupam Goyal-The WTO and International Environmental Law: Towards Conciliation
Course Outline of Unit II: International Economic Institutions

Structure and Functions of Inetrnational Economic Institutions - International Trade Organisation (ITO) - Brettonwood
Conference - Various Rounds of WTO - General Agreement on Tariff and Trade (GATT) - New International Economic Order
(NIEO) - International Monetary Fund (IMF) - International Bank for Reconstruction and Development (IBRD) - International
Investments
Introduction
Globalisation is international integration; it is a process by which the people of the world are unified into a single society. This is a
process of combination of economic, technological, socio-cultural and political forces. It is often used to refer economic
globalisation which means integration of national companies into international economy through trade, foreign direct investment,
capital flows, migration and spread of technology etc.
It deals with various dimensions such as trade in goods and services; movement of capital; flow of finance by influence of market
and industrial organisation etc. It consists of liberalisation which deals with-
a. Reduction of trade barriers to perform free flow of goods across nation frontiers;
b. Creation of an environment in which free flow of capital can take place;
c. Ensuring to create an environment for free trade;
d. Permitting free flow of technology.
According to U.L Hill ‘globalisation’ is “the shift towards more integrated and interdependent world economy. It has two main
components- the globalisation of markets and the globalisation of production.”
International Monetary Fund (IMF) defines ‘globalisation’ as “the growing economic interdependence of countries world-wide
through increasing volume and variety of cross-border transactions in goods and services and of international capital flows and
also through the more rapid and widespread diffusion of technology.”
It is a process which includes globalisation of markets, of production, of technology and globalisation of investment.
Impact of globalisation on Indian Trade and Economy
The Indian economy is in the age of continuous globalising. It is growing at a very rapid rate. Before the establishment of World
Trade Organisation in 1995 and the Uruguay round of multilateral trade negotiations, the India Government announced its New
Economic Policy in 1991. It brought a radical change to the economy and its growth in India.
The seeds of globalisation were sown in 1980s when concession for inflow of foreign companies, Transnational Companies is
permitted to enter into the crucial sectors. The liberalisation of provisions of FERA, acceleration of import liberalisation process
was initiated since 1980 in India.
Government of India adopted many policies to achieve the objective of economic growth in India. In India globalisation has been
implemented at the behest of IBRD (World Bank) and the IMF. These two institutions initiated the processes of globalisation in
India.
It followed the following components to achieve their goals-
i. Cutting down of fiscal deficits and the growth rate of money supply to achieve economic stabilisation;
ii. Liberalising the domestic economy by releasing the restrictions on production, investment, prices and by increasing the
role of market economy, guiding and maintaining resources allocation;
iii. Releasing the restrictions on external sector. It includes international flow of goods, services, technology and capital.
Several international economic and trade organizations affect the environment of international business in a variety of ways, such
as assessing the country’s economic environment, extending credit facilities to national governments as well as individual
organizations, undertaking equity investments, providing multilateral guarantees for trade and investment, settling disputes,
keeping surveillance of international monetary systems, compiling and disseminating information, protecting intellectual property,
providing technical assistance, and funding development projects.
India has adopted various measures in order to globalise the Indian economy which includes- reduction in the import tariffs,
replacement of licenses of import tariffs; removal of export subsidies; removal of constraints and obstacles to the entry of
Transnational Companies; freeing the way of investment in foreign joint ventures etc.
India has always stood for an open, equitable, non-discriminatory based international trading system. It views free trade agreement
as ‘building blocks’ towards achieving overall objectives of trade liberalisation and complementing the multilateral trading system.
Economic Institution: Definition and Meaning

An economic institution may be defined as a company or an organisation that deals with money or with the management of
distribution of money, goods and services in an economy such as banks, investment funds, Government organisations etc. are all
economic institutions.
In the present scenario, there are many international economic organizations;however there are three major international economic
organizations. It helps the world by promoting development, providing financial and technical assistances, providing loan, settling
dispute, facilitate agreements and so on.
International Economic Institutions
These three international economic organisations are World Trade Organization (WTO), International Monetary Fund (IMF) and
World Bank (WB).
These organization help every country be it developed or developing country. They were conceived under the sameinstitution and
Conference-Bretton Woods’s conference which was held in July 1944called Bretton Wood institution.It functions for monetary
management and establishment of the rules for commercial and financial relation among the world’s major industrial stated during
the mid-20thcentury.
It helps in fully negotiation of monetary order to govern monetary relations among nation-states. WTO; IMF and World Bank help
the countries to recover their economy and financial system after World War II.These institutions have played role in various ways
to help the world. International Monetary Fund functions to help countries to manage their monetary policies, to stable balance of
payment by providing technical, to maintain exchange rate, and financial assistances.
World Bank functionsto help countries in developing their economic structure by providing them loan with low interest rate and
technical assistance as well.
GATT (General Agreement on Tariff and Trade) functions to facilitate trade agreement between its members to settle trade
disputes.
Accountability of International Institutions
These international organisations hold accountability to ascertain their credibility to secure control over public power. It aims to
assert than an institution must put in place the adequate accountability mechanism which implies that there exists some standard
through which the conducts of these organisations are assessed.
Dealing with global governance, issues of accountability have often been centred on concerns pertaining to institutional design,
efficiency and effectiveness of the outcomes resulting from the institutions under scrutiny. Such accountability mechanism is
generally less concerned with suitability of goals; it is more focused on how goals are achieved. This form of accountability,
herein termed ‘procedural accountability’.
Current Trade Situation: Global and India
India is becoming increasingly integrated with the global economy; its total merchandise trade in GDP has been increased
tremendously. There is increase in exports along with focus on manufacturing and industrial development which results into
increase in income and employment for people of India.
India is the 19th largest exporter and in commercial service exports India ranks 8th in the year of 2014. In imports of commercial
services India ranks 10th world-wide.
However, as per the World Trade Organisation, growth in the volume of world merchandise trade will pick up only slightly since
last few years. The percentage of growth was evaluated at 2.8% in 2014, 3.3 in 2015 and 4% in 2016. The reasons could be slow
GDP growth in emerging economies, an uneven recovery in developed countries and rise in global tensions among countries.
International Trade Organisation

Origin
On 18 February 1946 the Economic and Social Council of the United Nations decided to take a call on an International
Conference on Trade and Employment. The Council established a Preparatory Committee to prepare, for consideration over an
agenda and a draft Charter for an International Trade Organization.
United Nations Conference on Trade and Employment, held in 1947 and it drew up the final text of the Charter known as the
“Havana Charter”. 54 countries participated in the Conference signed the Final Act of the Conference, which authenticated the text
of the Havana Charter.
Objectives
The objectives of the International Trade Organization are-
a. To assure a large and steadily growing volume of real income and effective demand;
b. To increase the production, consumption, and exchange of goods;
c. To help promote industrial and general economic development, particularly of those countries in the early stages of
industrial development;
d. To encourage the international flow of capital for productive investment;
e. To further the enjoyment by all countries on equal terms of access to the markets, products, and productive facilities
needed for their economic prosperity and development
f. To promote the reduction of tariffs and other trade barriers and the elimination of discriminatory, treatment in
international commerce;
g. To enable countries, by increasing opportunities for their trade and development, to abstain from measures 'disrupting
world commerce and reducing employment; and
h. To facilitate the solution of problems relating to international trade in the fields of employment, economic
development, commercial policy, business practices, and commodity policy.
Functions
It deals with the trade regulations, services and intellectual property between participating countries by providing a framework for
negotiation of trade agreements and by resolving disputes through resolution process.
It prohibits discrimination between trading partners and aims at maintaining national security and other important goals.
Failure of ITO
The International Trade Organisation was led by the US in collaboration with allies. The effort to form an International Trade
Organisation was made between 1945 to 1948. Havana Charter was successfully passed, however it failed due to lack of approval
by US Congress. Until the creation of WTO i.e. World Trade Organisation in the year of 1994, international trade was managed
through GATT the General Assembly on Tariffs and Trade.
The Havana Charter never came into force and in 1950 US Government announced that it would not submit the treaty to Senate
for ratification. Even the Charter was repeatedly submitted to US Congress, it was not approved. US Congress refused to ratify the
Havana Charter even though it had signed it.
The major reason of failure of the Charter was that it involved certain internal issues related to economy. In 1950 finally it was
declared by the US President Truman that ITO Charter was disapproved and would not seek further approval. International Trade
Organisation collapsed which represented a significant closure of the full employment.
Bretton Wood Conference

This Conference was formally known as the United Nations Monetary and Financial Conference which was the gathering of 730
delegates from 44 Countries at Washington hotel which was situated at Bretton Wood, United States. The aim of the Conference
was to regulate the International monetary and financial order after end of World War II.
The Conference was held from 1st July through 22nd July, 1944. Agreements were signed between the Nations after legislative
ratification by the members of the Government. The two major accomplishments of the Conference were the creation of the
International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD).
The official such as the President Franklin D. Roosevelt and the Secretary of State Cordell Hull were adherents of the Wilsonian
belief. The belief was that free trade generation international peace and promoted international prosperity. The policies adopted by
Governments such as - competitive currency devaluations, high tariff barriers, discriminatory trading blocs - had contributed to
creating an unstable international environment without improving the economic situation.
During the period 1942 to 1944, a number of bilateral and multi-lateral meetings of allied financial experts were conducted. The
efforts were made to agree upon a common approach and to concentrate on international peace and development. On 21st April,
1944, allied leaders released a “Joint Statement by Experts on the Establishment of an International Monetary Fund.” This
statement provided the basis for the negotiations at Bretton Woods Conference.
After a Conference which was held in Atlantic City around mid-June in the year of 1944, the Bretton Woods Conference convened
on 1st July, 1944. After a long discussion the delegates signed the final Act which was the United Nations Monetary and Financial
Conference. It included Charters outlining the aims and mechanisms of both the International Monetary Fund and International
Bank for Reconstruction and Development.
International Monetary Fund (IMF) was given the charge of the maintenance of a system of fixed exchange rates centred on the
United States dollar and gold. A forum for consultation and cooperation, IMF would contribute to international monetary relations
and the expansion of world trade by providing short-term financial assistance to countries. The focus was on the countries which
were experiencing temporary deficits in their balance of payments which could be addressed through modification of a country's
exchange rate.
International Bank for Reconstruction and Development (IBRD) was responsible for providing financial assistance for the
reconstruction of war-ravaged nations and the economic development of under-developed or developing Nations.
Even though the Conference at Bretton Wood recognised the exchange control and discriminatory tariffs, which was the need of
consideration for some time after war, it prescribed measure though which the challenges should be ended as soon as possible. In
July, 1945, Congress passed the Bretton Woods Agreements Act which authorised the United States entry into International
Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD). IMF and IBRD came into
existence on 27th December, 1945.
Structure of the Bretton Wood Conference
The highest body at the Conference was the plenary session which met only at the first and last days of the Bretton Wood
Conference. It was there mainly to confirm the decisions of the lower bodies.
The Conference was conducted its major work through ‘Three Commissions’
First Commission dealt with International Monetary Fund which was chaired by Harry Dexter White who was the
Assistant to the United States Secretary.
Second Commission was IBRD which was chaired by John Maynard Keynes who was an economic adviser to the
British Chancellor of the Exchequer and the Chief British negotiator at the Conference.
Third Commission dealt with the other means of international financial cooperation which was chaired by Eduardo
Suarex who was a Mexico’s Minister of Finance.
Every Commission had a number of committees, and some of those committees had sub-committees. Every country at the Bretton
Wood Conference was entitled to send their delegates to all meetings conducted by the Commissions and the “standing
committees”.
The main purpose and the goal of the Conference were to achieve an agreement on the International Monetary Fund. After enough
consensus Conference was able to achieve an agreement on the International Bank for Reconstruction and Development.
United States being the world's largest economy during that time, and it was the main prospective source of funds for the both the
organisations- IMF and IBRD, the United States delegation had the largest influence on the proposals agreed to at Bretton Woods
Conference.
Features and Aim of Bretton Wood Conference
The major features of the Act are as under-
It encouraged an adjustable pegged foreign exchange market rate system. Governments were supposed to alter the
exchange rates to maintain correct equilibrium.
Member countries pledged to make their currencies convertible for trade-related and other account transactions.
Exchange rates might be not favourable for some countries; the Government has the power to revise the rates up to
10% without any objection of IMF.
The member Nations were required to subscribe themselves to the IMF’s Capital.
Membership to IBRD was not compulsory on being a member of IMF.
Voting in both institutions was apportioned according to formulas giving greater weight to countries contributing
more capital (“quotas”).
Contradictory ideas at the Conference

The two major personalities at the conference reflected the leading countries of the Western world at the time:
a. Britain as the previous world power
b. United States as the emerging world power
The ideas of John Maynard Keynes, an economist representing Britain, and Harry Dexter White, an economist and a senior
Treasury official representing the United States, dominated the Bretton Woods Conference. The Agreement was dissolved
between 1968 and 1973, there was an over valuation of Dollars of United States which led to concerns over the exchange rates and
ties based on the price of gold.
World Trade Organisation

The World Trade Organisation was set up by agreement of 125 Countries in April, 1994, at a Conference of Marrakesh which
concluded the Uruguay Round of General Agreement on Tariffs and Trade(GATT) negotiation after a period of more than seven
years of strong bargaining.
The new WTO replaced GATT and had come into effect from 1st January, 1995 which 85 founding members which includes
India. As on 1st January, 2002, WTO has 144 members. WTO is the third economic pillar after International Monetary Fund
(IMF) and the International Bank for Reconstruction and Development (IBRD).
Structure of WTO
Ministerial Conferences
The Ministerial Conferences is the most important decision making body of the World Trade Organisation. There have been 11
Ministerial Conference from 1996 to 2017 which is usually conducted every two years.
Doha Declaration on TRIPS agreement and public health was adopted by World Trade Organisation Ministerial Conference in
Doha on 14th November, 2001. This Declaration reaffirmed flexible TRIPS member States in circumventing patent rights for
better access to basic and essential medicines.
The eleventh Ministerial Conference of WTO was held in Buenos Aires at Argentina from 11th to 13th December, 2017. This was
chaired by Susana Malcorra, the Minister of Argentina. This was ended with numerous ministerial decisions which include
fisheries subsidies, e-commerce duties and commitment to continue negations of Doha Round.
Many Ministers expressed deep regret at the currently facing situation of Doha Round. Many have showed their openness to
different negotiating approach. Several emphasised on the importance of transparent, inclusive and bottom-up approach in the
work ahead.
The only way to ensure trade progress is that the world creates a legitimate and secure world trading system. Another aim must be
to rebuild the World Trade Organisation strong which must focus on fair trade, balanced rules, inclusivity and transparency.
General Council
WTO consists of a General Council to check the WTO agreement and ministerial decisions on a regular basis. It is also formed by
the representatives of all WTO Members and acts on behalf of Ministerial Conference whenever the Conference is not in sessions.
The General Council also meets as the Dispute Settlement Body and the Trade Policy Review Body. The Council sits in its
headquarters Geneva, Switzerland usually once a month.
Trade Council
There is the Council for-
Trade in Goods
The Council for Trade in Services
The Council for Trade-Related Intellectual Property Rights (TRIPS)
These Councils perform their respective functions. Each member has one vote. Decision-making is made by consensus. If
consensus is not reached then majority voting plays the crucial rate. In addition to these councils, Working Parties can be
established by the General Council in order to deal with specific issues defined by General Council.
Uruguay Round
The Uruguay Round was launched at Punta del Este at Uruguay, in September 1986. It was concluded at Marrakesh, Morocco, in
March 1994. It was the most important and successful of round among eight rounds of General Agreement on Tariffs and Trade
based on multilateral negotiations.
This was the eighth round of Multilateral Trade Negotiations (MTN) which was conducted in 1994 and there were 123 countries as
“Contracting Parties”. This round led the creation of WTO Agreement.
The Board mandate of the Round had been extend to GATT trade rules to exempt too rigid rules and liberalize agricultural, textile
fields etc. The tariffs on non-agricultural trade were reduced substantially and a trade liberalization framework for agriculture was
adopted. New areas were included in trade related to services, intellectual property, investment policy etc.
The Round came into effect in 1995 and end by 2000 [in case of developing countries by 2004]. Uruguay Round led to the
creation of the World Trade Organization. This Round dealt with balance of power in the WTO, the rise of regionalism, and the
persistence of the so-called irrational dichotomy between developed and developing countries.
The members of Uruguay Round talks concluded to establish World Trade Organisation by recognizing their relations in the field
of trade. Economic endeavour should be made with a view to raise standards of living in ensuring full employment and a large and
steadily growth volume of real income and effective demand.
The Members resolved to establish the World Trade Organisation to develop an integrated and durable multilateral trading system
encompassing GATT. The results of past trade liberalisation efforts and all the results of the Uruguay Round of Multilateral Trade
Negotiation gave a positive signal of establishment of WTO.
The Uruguay Round showed some results within two years, participants had agreed to cut in import duties on tropical products -
which are mainly exported by developing countries. The rules for settling disputes had also been revised, with some measures
implemented on the spot. The regular reports were called related to GATT members’ trade policies. An initiative was made to
make trade regimes transparent throughout the world.
Objectives
The main objectives of Uruguay Round are as under-
a. To reduce agricultural subsidies
b. To lift restrictions on foreign investment
c. To begin the process of opening trade in service such as banking, insurance etc.
d. To include the protection of intellectual property.
e. To deal with copyright violations and to secure other forms of intellectual property rights.
Functions of World Trade Organisation

There were certain principles upon which the WTO was based which are non-discrimination, free trade, fair and undistorted
competition etc. WTO has a special concern for developing countries.
The goal of WTO is to help producers of goods and services, exporters, and importers conduct their business. World Trade
Organisation’s overriding objective is to help trade flow smoothly, fairly, and predictably.
Following are the various functions which are performed by the WTO-
a. WTO shall facilitate the implementation, administration and operation of trade agreements like multilateral trade
agreements and pluri-lateral trade agreements.
b. WTO shall provide a forum for liberalization negotiations among its members concerning their multilateral trade
relations.
c. It shall administer the ‘Dispute Settlement Procedure’ to handle trade disputes.
d. It shall cooperate with various international organizations like the International Monetary Fund and the World Bank to
achieve greater coherence in global economic policy-making.
e. It shall provide technical assistance and training for members of the developing countries.
Doha Round
Doha Development Round is also known as Doha Development Agenda (DDA) which is a trade negotiation round of the World
Trade Organisation commenced in November, 2001. Mike Moore was the Director-General when the Round was commenced.
The core objective of this was to lower the trade barriers throughout the world and to facilitate increased global trade.
It is the latest round of trade negotiations among the World Trade Organisation membership. The aim of Doha Round is to achieve
major reform of the international trading system through introduction of-
a. Lower trade barriers
b. Revised trade rules
The work program under Doha Round covers near about 20 areas of trade. This is also known as semi-official round as ‘Doha
Development Agenda’. The prime objective of this is to improve trading prospects of developing countries. This was launched at
World Trade Organisation’s fourth Conference in Doha, Qatar in November, 2001.
Negotiations
The Doha Round began in November 2001 with an aim to commit all countries to negotiations opening agricultural
and manufacturing markets, as well as trade-in-services negotiations and expanded intellectual property regulation.
The intent of the Doha round, according to its proponents, was to make trade rules fairer for developing nations.The needs of the
developing countries were the core reasons for this. The major factors discussed in this Round were- trade facilitation, services,
rules of origin and dispute settlement. Special and differential treatment for the developing countries was also discussed.
These negotiations that were proposed at the Doha Round stalled early in the process. The tension and disagreements between
major trading countries in the developed and developing world impeded progress.
Reason of failure of Doha Round
The reason for collapse of Doha Round is increase in protectionism in both United States and European Union. This has been led
to formidable new alliances between developing country alliances in the World Trade Organisation which have provided a real
countervailing negotiating power to the United States and European Union.
The United States of America’s economy has undergone dramatic changes since the launch of Doha Round. There is an
emergence of big business lobbies that put pressure on United States trade, including an increasingly aggressive competitive
services sector and increasingly protectionist agriculture and manufacturing sectors. The European Union has also seen a marked
rise in the power of its agricultural lobby.
Participation of China in world trade took a dramatic turn after its accession to the World Trade Organisation in 2001. This caused
fear in Untied States by seeing the growth of China in manufacturing process.
By the time of World Trade Organisation’s last meeting which was held in December, 2015 at Nairobi, Doha Round was almost
dead by that time.
Historical evolution of the General Agreement on Tariffs and
Trade(GATT), 1947
The Bretton Wood Conference held in 1944 which was the starting point for a new world order. Even though the Conference at
Bretton Wood recognised the exchange control and discriminatory tariffs, which was the need of consideration for some time after
war, it prescribed measure though which the challenges should be ended as soon as possible.
In July, 1945, Congress passed the Bretton Woods Agreements Act which authorised the United States entry into International
Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD). IMF and IBRD came into
existence on 27th December, 1945.
International Monetary Fund (IMF) was given the charge of the maintenance of a system of fixed exchange rates centred on the
United States dollar and gold. A forum for consultation and cooperation, IMF would contribute to international monetary relations
and the expansion of world trade by providing short-term financial assistance to countries. The focus was on the countries which
were experiencing temporary deficits in their balance of payments which could be addressed through modification of a country's
exchange rate.
International Bank for Reconstruction and Development (IBRD) was responsible for providing financial assistance for the
reconstruction of war-ravaged nations and the economic development of under-developed or developing Nations.
General Agreement on Tariffs and Trade (GATT) was made in the year 1947 which aimed at initiating an international trade, by
liberalizing policies and removing tariffs. It is a multilateral agreement, between several nations of the world that regulates
international trade. Its primary objective is to reduce tariffs to a substantial amount along with abolishing other trade barriers.
In 1995 the World Trade Organisationreplaced GATT. WTO is a global organization encourages and facilitates inter-country trade
and also helps in resolving trade disputes. It is designed to provide a common institutional framework for the conduct of trade
relations amongst its members. The WTO’s creation, as a result of Uruguay Round, marked the biggest reform of international
trade since after World War II.
Salient features of the GATT, 1994
The Uruguay Round is the eighth and most crucial round of multilateral trade negotiations under the GATT. This involved 117
countries that were concluded on 15th December, 1993, after seven years of contentious trade talks.
The Final Act was signed at Marrakesh on 15th April, 1994. This contained fifteen agreements, four annexes, four declarations
etc. Final Act comprised of 18 multilateral and 4 Plurilateral trade agreements. It brings trade in agricultural products, services,
textiles, clothing and intellectual property rights within the scope of World Trade Organisation.
The major themes of GATT were- World Trade Organisations, market access of industrial products, dealt with agricultural
products, services, textile and clothing, intellectual property, anti-dumping rules, dispute settlement, coherence in global policy
making etc.
Objectives of GATT
The prime objective of GATT is to expand international trade by ensuring liberalisation of trade so as to bring all round economic
prosperity.
The Preamble of GATT mentions the following objective-
i. Raising the standard of living;
ii. Ensuring full employment, large and steady growing volume of real income based on effective demand;
iii. Better utilization of resource;
iv. Expansion of production;
v. International trade
Principles of GATT
a. Non-discrimination
This requires that no Member country shall discriminate between the members of GATT while conducting international trade.
However, certain exceptions to the general rule are permitted.
b. Prohibition of Quantitative Restrictions
GATT rules seek prohibition on quantitative restrictions and also aim to limit restrictions on trade. Certain exceptions to the
general rule are accepted.
c. Consultations
It is based on the concept of consultation which aims at avoiding damages to the trading interests of the contracting parties.
d. Negotiations
GATT provides a framework within which negotiations can be held for the reduction of tariffs and the other trade related barriers.
Fundamentals of the GATT
1. Most favoured Nation Status
GATT Member must extend to all contracting parties to which GATT applies. The non-discriminatory treatment ensures that any
tariff reduction or other trade concession is automatically extended to all GATT Members. It allows some exceptions, primarily
related to customs union like EU, free trade areas like U.S- Canada Free Trade Agreement, Tokyo Round Code commitments such
as on anti-dumping, subsidies and Government procurement.
2. National Treatment
GATT Members must give import goods treatment which is equal to domestic goods treatment in domestic market. No restrictions
on charges like taxes may be applicable on imported products.
3. Dispute settlement
Parties may challenge the trade actions of other parties which may not be in consistence with GATT. The GATT Members may
decide whether they accept the findings of a panel of trade experts related to their dispute.
4. Protection through tariffs
GATT Prohibits quantitative restrictions or something like quotas. The contracting parties of GATT are protected by means of
tariffs which are a transparent method and subject of negotiations in the GATT.
The GATT Negotiation Rounds
There were eight rounds of negotiations which were held. The negotiations were related to reduction of tariffs and non-tariffs
barriers in trade of goods.
Uruguay Round was the final round which seeks to integrate trade in goods, services, based on protection of intellectual property
rights, imposition of ‘cross retaliation’ across different sectors and to ensure effective enforcement of prescribed obligation.
Following are the negotiation rounds that were held-
Round 1
The Geneva Round, 1947: This was the part of establishment of GATT. It was held during 10th April to 30th October, 1947. There
was participation of 23 Countries in the first round of GATT.
Round 2
The Annecy Round, 1949:The purpose of second round of GATT was its extension to the countries which were not the members
of GATT. During this round nine countries joined GATT.
Round 3
The Torguay Round, 1950-51:The European Countries with low tariff level felt that Torguay Round was a disadvantage for them.
There were 400 agreements and only 147 could settle in the third round. There were 34 participant countries during third round of
GATT.
Round 4
The Geneva Round, 1955-56: In the fourth round of GATT several member countries withdrew from negotiations due to
inadequate scope for tariff reductions. The participation to this round of GATT came down to 22, during its fourth round.
Round 5
The Dillon Round, 1960-61: There were 35 parties to the fifth round of GATT. EEC entered negotiations as a trade block. United
States Government got the authority under Trade Agreement Extension Act, 1958, to draw the maximum advantage and
participation from multilateral trade.
Round 6
The Kennedy Round, 1964-67: There were 48 countries which participated in this round. Eleven industrialised countries decided to
give 50% reduction offer in industrial tariffs. This round was named so as it was proposed by Kennedy.
The first six rounds were related to multi-lateral reduction of tariffs, with the successful progress in lowering of tariffs and non-
tariffs barriers related to trade which was the prime concern during that time.
Round 7
The Tokyo Round, 1973-79: 99 countries participated in this round, even those nation who were not the members of GATT were
participants. The developed countries played a prominent role in the seventh round of GATT.This round was a comprehensive
effort to deal with tariff and non-tariff barriers related to trade. In this round agreements dealing with dairy products, meat, civil
aircraft were also reached.
Round 8
The Uruguay Round, 1986- 1993: The Uruguay Round was launched at Punta del Este at Uruguay, in September 1986. It was
concluded at Marrakesh, Morocco, in March 1994. It was the most important and successful of round among eight rounds of
General Agreement on Tariffs and Trade based on multilateral negotiations.
This round concluded 25 agreements which were related to declarations and decisions in the goods sector, it included the
agreement on GATs, TRIPs and also dealt with establishment of WTO. It extends to the multilateral trade in the areas of
investment, services and intellectual property rights.
Difference between GATT and WTO
GATT WTO
The WTO and its agreement are permanent with WTO having a
GATT was ad-hoc and provisional. sound legal basis because members have ratified the WTO
agreements.
GATT refers to an international multilateral treaty to
WTO is a global body, which superseded GATT and deals with the
promote international trade and remove cross-country trade
rules of international trade between member nations.
barriers.
GATT is a simple agreement, there is no institutional
WTO is a permanent institution along with a secretariat.
existence, but have a small secretariat.
GATT commitments are provisional in nature. WTO commitments are permanent, since the very beginning.
GATT agreement is primarily multilateral, but the pluri- WTO whose rules are applicable to services and aspects of
lateral agreement is added to it later. intellectual property along with the goods.
The domestic legislation is allowed to continue in GATT. The same is not possible in the case of WTO.
The dispute settlement system of GATT was slower, less
WTO’s dispute settlement system is very effective.
automatic and susceptible to blockages.
New Economic International Organisation (NIEO)

It is been very long that NIEO has been proposed and gained considerable recognition at international platform. The concept of
NIEO was initially given by Raul Prebisch and some other economists during 1950’s and 1960’s. However, the idea of NIEO was
endorsed by the UN in the year of 1974 with the belief and objective that the Third World Countries would achieve sovereignty,
control over natural resources and control over economic destiny.
This UN commitment recognises that the existing economic order was unjust, wicked and immoral and that there was the necessity
to create a new and healthy international economic order based on justice and co-operation.
It reflects the political claims of Least Developed Countries and it provided a platform and opportunity to these Nations to
participate in international political, social, cultural and economic arena. The political independence of any Stare is reflected in the
economic capability and strength of any State.
NIEO is based on equity, sovereign equality, common interest and co-operation among all States irrespective of the social,
economic systems of those States. It aims to maintain check over inequalities, redressing existing injustice, elimination of
widening gap between developing and developed nations, to ensure steady development and growth of present and future
generation.
Origin of NIEO
The establishment of NIEO was made to deal with the deficiencies in existing economic order, due to failure of GATT and the
UNCTAD in fulfilling their objectives. NIEO is found to be working symmetrical. However, it favoured the rich-advanced
countries. There has been over dependence of the South on the North. Rich countries have major control over important decision
making in the matters related to international trade, international finance, aid and technological flows.
The formal idea of NIEO was put forward in the Algiers Conference of non-aligned countries in 1973. In 1975, a declaration for
the establishment of NIEO was adopted along with a programme of action in the Sixth Special Session of the UNCTAD.
NIEO emphasised on global interdependence, it seeks radical changes in allied social, economic, and institutional aspects of
international relations. New developing sovereign nations of South have insisted on NIEO.
Further it has been supported by the non-allied nation. The developing nations are now asserting their right to participate in the
decision making process of international institutions such as IMF, World Bank, UNCTAC, GATT etc.
Objectives of NIEO
At the Sixth Special Session of the United Nations General Assembly in 1975, a declaration was made for the establishment of a
NIEO. It is regarded as a turning-point in the evolution of the international community.
1. The objective of NIEO is the development of the global economy by setting up of interrelated policies and performance
targets of international community at large.
2. It aims at social justice among trading countries of the world, it seeks restructuring of existing institutions and forming
new organisations to regulate the free flow of trade, technology, capital funds in the common interest of the world’s global
economy and due benefits for least developed countries.
3. It works to promote equitable allocation of world’s resources through increased flow of aid from the rich nations of
under-developed countries.
4. It aims to overcome world mass misery and disparities between the living standard of developed and developing
nations.
5. It seeks to provide least developed nations increased participation in decision making process of international trade
affairs.
6. It envisages the establishment of new international currency to promote least developing countries.
7. Its crucial aim is to promote the economic development through self-help of under-developed nations.
8. It intends to deal with the major problems of South such as payment disequilibrium, debt crisis, exchange scarcity etc.
United Nations Conference on Trade and Development [UNCTAD]

It was established in 1964, UNCTAD is the principal organ of United Nations General Assembly. It provides a platform for
developing nations to deal and find solutions for economic development. It has its headquarters in Geneva, Switzerland, has 193
member countries.
The purpose of creation of UNCTAD is to deal with the problems of developing countries which existing institutions like GATT,
IMF etc. are not concerned about. Its main objective is to formulate policies related to areas of development like trade, transport,
finance etc.
a. Elimination of trade barriers which is a challenge for developing countries;
b. Promotion of international trade for speeding up of economic development;
c. Formulation of principles and policies related to international trade;
d. Negotiation of multinational trade agreements;
e. Providing technical assistance to least developed countries.
International Monetary Fund

There was an adverse effect on the global economy after World War II. To deal with this situation, an international monetary
conference was convened in the year of 1944 at Bretton Wood at America. The Conference was attended by 44 representative
countries. India was also a participant of that Conference. In this Conference it was decided to set up two institutions for the
economic development of all countries. The two institutions were the International Monetary Fund (IMF) and International Bank
of Reconstruction and Development (IBRD).
International Monetary Fund was established in the year 1945. It consists of 189 member countries. The headquarters of IMF is in
Washington D.C United States.
IMF works to secure financial stability, facilitate international trade, and develops global monetary cooperation, reduction of
poverty and to maintain sustainable economic growth around the world.
It plays an important role in the management of balance of payments difficulties and international financial crises. It also works to
improve the economy of its member countries.
World Trade Organisation and International Monetary Fund have 150 common members. Both the organisations work together,
WTO focus on the international trade. IMF is on the international monetary and financial system. Both IMF and WTO
organizations work together to ensure a sound system of global trade and financial stability in the world.
Purpose of IMF
Following are the main purpose of IMF-
a. The main purpose of IMF is to promote international monetary cooperation through a permanent institution. It also
provides the machinery for consultation and collaboration on international monetary system.
b. It aims to facilitate expansion of international trade and to contribute to the promotion and maintenance of employment
and real income to the development of the productive resources of all members as primary objectives of economic policy.
c. To promote exchange stability and to maintain orderly exchange arrangements among members.
d. Its purpose is to eliminations the foreign exchange restrictions that would promote the growth of world trade.
e. To shorten the duration and lessen the degree of disequilibrium in the international balance of payments of members.
Objectives of IMF
The objective of IMF is to promote international monetary co-operation, exchange-rate stability, sustainable economic
growth,international trade, high employment and making resources available to its members to secure their financial ability.
a. It helps in increasing employment and real income of people;
b. It works to solve the international monetary problems that ruins and distort the economic development of different
countries;
c. Maintains the stability in the international exchange rates;
d. Functions to strengthen the economic integrity of the countries;
e. Provides funds to the member countries when required;
f. Monitors the financial and economic policies of member countries;
g. Assists low developed nations in effective management of their economies.
Functions of IMF
There are three principal functions and activities-
A. Surveillance of financial and monetary conditions in its member countries and of the world economy;
B. Financial assistance to help countries overcome major balance of payments problems;
C. Technical assistance and advisory services to member nations.
The main function of IMF is to purchase and sell the currencies of its member nations. In case if any country is facing adverse
balance of payment and facing financial crisis, IMF gets short term credit from the fund to clear the debt. It purchases the scare
currency by gold.
It also borrows from those nations scare currency which has surplus amount. It allows the debtor countries scare currency who has
surplus money. The main function of IMF is to promote exchange stability among its member nations.When the devaluation policy
is indispensible of any country then IMF provides loan to correct balance of payment of that nation.
Financial Structure of the IMF:
Subscription or quota of the member nations
Every member nation of IMF is required to subscribe an amount equivalent to its quota. It is the quota on which payment
obligations, voting right and credit facilities of members are determined.A country that joins IMF is assigned a quota which is
expressed in Special Drawing Rights (SDRs).
Borrowings
The Fund is authorised to borrow in special circumstances if its own resources prove to be insufficient. IMF also sells gold to its
member nations to replenish currency holdings. It is also entitled to borrow even from international capital market. Though the
Articles of Agreement (AOA) permit the Fund to borrow from the private capital market, however IMF has not borrowed any
amount yet.
Some of the reasons of failure of IMF
The reasons of failure of International Monetary Fund are- lack of stability in exchange rate; no significant help given to
development projects; inability to remove restrictions of foreign trade; interference of domestic economies; no proper aid was
provided to developing nations; high rate of interest etc.
International Bank of Reconstruction and Development (IBRD)

IBRD is also known as World Bank which was set up as a result of decision which was taken in Bretton Wood Conference. It is an
international institution whose objective is to assist the development of member nations; it aims promotion of private foreign
investment and targets balance of growth in international trade.
It was set up on 27th December, 1945, and was signed by 29 members. By 30th June, 1996 it had 185 member nations. If a
country resigns from its membership, it requires to pay back all loan with due interest. If the institution incurs financial loss in the
year in which a country resigns then it is required to pay its share of loss on demand by IBRD.
It is the largest bank in the world. IBRD supports the World Bank Group’s mission by providing guarantees, risk management
products, loans and advisory services to middle-income and creditworthy low-income countries.
It helped the European Countries to rebuild after World War II. The first loan ever issued by the IBRD was to the Government of
France, to help finance the reconstruction of critical infrastructure. After development of European Countries; IBRD shifted its
focus to promoting economic development in other parts of the world.
The World Bank Group engages with middle-income countries (MICs) both as clients and shareholders. These countries are major
drivers of global growth, home to major infrastructure investments, and recipients of a large share of exports from advanced
economies and poorer countries. Many are making rapid economic and social progress, and they play an ever larger role in finding
solutions to global challenges.
Core Activities of IBRD
Following are the various areas of functions or core activities of IBRD-
a. Lending of funds directly from its capital fund or from the fund the institution borrowed from private investment
markets.
b. This institution may guarantee loan advanced by others or it may itself participate in such loans.
c. IBRD provides loan to developing nations for various development projects.
d. It supports nations which find difficulties in raising funds in international capital market.
e. World Bank or IBRD is a vital source for the developing nations when the member Government in whose territory the
project is located, is not the borrower. The World Bank asks the member Government for a guarantee.
Objectives of IBRD
a. The main objective of IBRD is to reconstruct and develop its member countries by facilitation the investment of capital
for productive purposes. It helps in promoting long range growth of international trade and improvement in living
standard.
b. Its objective is to promote private foreign investment by guaranteeing participation in loans and other investments made
by private investors.
c. When private capital is not available or reasonable terms to make loans for productive purposes out of its own resources
or the funds borrowed by it.
d. It aims to arrange the loans or guaranteed by it regarding international loans through other channels.
e. To ensure the implementation of development projects so as to bring about a smooth transference from a war-time to
peace economy.
f. To promote capital investment in member countries by the following ways-
i. To provide guarantee on private loans or capital investment.

ii. If private capital is not available even after providing guarantee, then IBRD provides loans for productive activities on
considerate conditions.
Functions of IBRD
IBRD is playing an important role in providing loans for development works to member countries, especially to under-developed
nations. It also provides long term loans for various development projects.
It functions to reduce poverty, supportedprojects related to health and education, functions for good governance, to protect the
environment, to encourage the development of private initiative, to support reform policies and the consolidation of the economic
environment.
Following are the main functions of World Bank/ IBRD-
a. It provides various technical services to the member nations, to achieve this purpose World Bank has established ‘The
Economic Development Institute’.
b. It grants loan to member countries up to 20 per cent of its share in the paid up capital.
c. It also determines the quantities of loans, interest rate, terms and conditions etc.
d. The debtor country has to repay either in reserve currencies or the currency in which loan was sanctioned.
e. It also provides loan to private investors.
International Investments
The growing international production and trade requires an increased amount of international investment. It results to flow of
international investment has been increasing. A country must invest internationally for enhancing production, trade and for
distribution of capabilities. The need is more for developing countries to invest internationally.
Developing countries aims to achieve sustained income growth strengthen their technological capacities, imposing
competitiveness of their exports in world market, distribution of benefits of growth, creating opportunity for better employment,
protection of economic stability. International investment plays a significant role in providing developing countries a platform to
grow themselves.
What is international investment?
It is an investing strategy which involves selecting global investment instruments as a part of investment portfolio. It provides
investors with a broader investment universe for selecting portfolio investments. It helps to mitigate some systematic risks
associated with country’s economy.
It expands the scope of investment beyond domestic investments. An investor can find the same kind of investment options
internationally which they have at domestic markets. Investors can invest in options and futures on underlying international
investments and currencies.
Foreign Direct Investment

It occurs when an investor who is based in one country acquires assets in another country. The Company investing in a country
also transfers assets like management, technology and marketing. The investing company also seeks the power to exercise control
over decision making a foreign enterprise. It also includes reinvested earnings which comprise the direct investor’s share of
earnings not distributed as dividends by affiliates or earnings not remitted to the direct investor.
Investment Portfolio
An investment portfolio is a collection of assets owned by an individual or by an institution. An investor's portfolio can include
real estate. But most investment portfolios are mostly assembled to pay for a retirement and are made up mainly of securities like
stocks, bonds, mutual funds, money market funds and exchange traded funds. The foreign investors have a short-term interest in
the ownership of passive investments such as bonds and stocks.
Advantages of international investments
Diversification
It is one of the biggest advantages of international investment. By putting money in stocks, bonds, real estate of United States, a
person invests in that country. By investing directly in stocks, bonds and real estate abroad, one diversifies his risk. In case US
have a sluggish economy for a few years, but countries have good rate of economic growth, one can boost investment returns. In
this manner diversification spreads risk.
Currency
While investing internationally, one would be aware of change in currency. If dollar is strongest against another currency then the
person has more buying power. This will allow investor to have hold over more stocks, bonds and real estate. Dollar is the
strongest currency against other currencies. There are various emerging markets such as India, Russia, Brazil and China.
International Trade
It allows countries to buy and sell products in foreign market. It also helps less developed nations to freely trade in international
market without any hurdles.
A country gains profit from exports of goods and services.
List of references
Sr.No Details
Course Outline of Unit III: World Trade Organisation

Structure and Functions of WTO - WTO and Covered Agreements - Subsidies - Dumping and Anti - dumping - General
Agreements of Trade and Services (GATS) - Trade Related Intellectual Property Rights (TRIPS) - Trade Related Investment
Measures (TRIMs) - Trade in Agriculture - Technical Barriers of Trade (TBT) - United Nations Committee on Trade and
Environment (UNCTE) - United Nations Committee on Trade and Development (UNCTAD) - Summits of the WTO
Introduction
The setting up of World Trade Organisation was agreed by 125 countries in April, 1994, at a Conference in Marrakesh which was
concluded the strenuous Uruguay Round of GATT negotiation after more than seven years of tough bargaining. At present WTO
have around 165 member countries.The Uruguay Round laid down the foundations for regulating trade in services.
The new WTO (World Trade Organisation) replaced GATT (General Agreements on Tariffs and Trade) which has come into
effect on 1st January, 1955, with 85 founding member countries. India is also a member of WTO. GATT was the part of Breton
Wood Conference. GATT began at the end of World War II, it aimed at reducing tariffs for the facilitation of global trade. It
aimed that all member countries should gain international trade advantage. Now World Trade Organisation has come up as a third
pillar along with World Bank and International Monetary Fund (IMF).
It is the only global international organisation which deals with the rules of trade between member nations. WTO Agreements,
negotiations are signed by many Countries. The goal of WTO is to help producers of goods and services, importers and exporters
to conduct their business.
WTO is a forum for Governments of various countries to negotiate trade agreements. WTO is a platform for member countries to
settle their trade disputes. It operates as a system of trade rules. It is a place where Governments of member countries try to sort out
the trade related issues they face with each other.
Brief history- WTO

WTO began trade negotiations after World War II. In 1948, GATT (General Agreement on Tariffs and Trade) focused on
reduction of tariffs, anti-dumping and non-tariff measures. Uruguay Round of negotiations led to a formal creation of World Trade
Organisation during 1985 to 1994.
In the year 1997, the World Trade Organisation brokered agreements and focused in promoting trade in telecommunications sector
among 69 countries. WTO also removed tariffs on information technology (IT) products between 40 members. It improved trade
of insurance, securities, banking and financial information.
Doha Round began in the year 2000 which focused on improving trade in agriculture and services sector. It further expanded to
include emerging mark, including countries at the fourth WTO Ministerial Conference in Doha, Qatar, in November 2001.
However, the Doha talks collapsed in Cancun, Mexico in 2003. In 2008, at Geneva, Switzerland a second attempt also failed
regarding Doha Round.
Uruguay Round
The Uruguay Round was launched at Punta del Este at Uruguay, in September 1986. It was concluded at Marrakesh, Morocco, in
March 1994. It was the most important and successful of round among eight rounds of General Agreement on Tariffs and Trade
based on multilateral negotiations.
The Round came into effect in 1995 and end by 2000 [in case of developing countries by 2004]. Uruguay Round led to the
creation of the World Trade Organization. This Round dealt with balance of power in the WTO, the rise of regionalism, and the
persistence of the so-called irrational dichotomy between developed and developing countries.
The members of Uruguay Round talks concluded to establish World Trade Organisation by recognizing their relations in the field
of trade. Economic endeavour should be made with a view to raise standards of living in ensuring full employment and a large and
steadily growth volume of real income and effective demand.
The Uruguay Round showed some results within two years, participants had agreed to cut in import duties on tropical products -
which are mainly exported by developing countries. The rules for settling disputes had also been revised, with some measures
implemented on the spot. The regular reports were called related to GATT members’ trade policies. An initiative was made to
make trade regimes transparent throughout the world.
Key Developments under Uruguay Round
It resulted in numerous new trade-liberalizing agreements among member countries, such as-
a. The General Agreement on Trade in Services (GATS)

b. The Agreement on Agriculture
c. The Agreement on Textiles and Clothing (ATC)
d. The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)
The GATS involved commitments to reduce regulations restricting international trade in services.
The Agreement on Textiles and Clothing involved commitments to eliminate the quota system established in the
1970s on textile and apparel products.
The Agreement on Agriculture involved some modest commitments to reduce support for the agricultural industry.
The Agreement on Trade-Related Aspects of Intellectual Property Rights involved commitments to standardize the
treatment and enforcement of intellectual property rights.
Objectives of WTO
The member countries at Uruguay Round meet and discussions concluded to establish the World Trade Organisation. They
recognised that their relations in the field of trade and economic endeavour should be conducted with a view to raise the standard
of living, steadily growth of real income, ensuring full employment, effective demand, expanding the production of goods and
services by utilising the resources to meet the objective of sustainable development. It aims to protect and preserve the
environment and to enhance the means to meet the needs and concerns at different level of economic development.
It is further recognised that there is need for positive efforts to ensure that developing nations and LDCs (Least Developing
Countries) secure a share in growth in international trade. The members resolved to establish World Trade Organisation to develop
an integrated and durable multilateral trading system encompassing the GATT, the results of past trade liberalisation efforts and all
the results of Uruguay Round of Multilateral Trade Negotiations. Agreement of establishing WTO consists of XVI Articles and
according to Article 1 of the Agreement WTO is established.
Scope of WTO
The scope of World Trade Organisation was defined under Article III of the WTO Agreement. It shall provide the common
institutional framework for the conduct of trade relations among its members in the matters related to agreements and matters
associated with legal instruments.
The agreements and associated legal instruments included Multilateral Trade Agreements which are binding on all the members of
WTO. The Plurilateral Trade Agreements are binding on those members who have accepted them.
Functions of WTO
Decisions are made by consensus through a majority vote. The Ministerial Committee based in Geneva, Switzerland, hold
meetings at least after every two years and make important decision regarding functioning of WTO and takes other important
decisions.
There are Service Council, Intellectual Property Rights Council and various Committees which reports to General Council
regarding their functioning.
Article III of WTO agreement deals with the functions which are as under-
a. It shall facilitate the implementation, administration and operation of the WTO Agreement and of Multilateral Trade
Agreement (MTA) and Plurilateral Trade Agreements (PTA).
b. It shall provide the forums for negotiations among its members concerning their multilateral trade relations.
c. It shall administer the understanding on rules and procedures governing the settlement of disputes.
d. It shall administer the Trade Policy Review Mechanism (TPRM).
e. It shall co-operate with the International Monetary Fund (IMF) and with the International Bank of Reconstruction and
Development (IBRD).
f. It shall affiliate agents to achieve greater coherence in global economic policy-making.
Structure of WTO
WTO is run by its member Governments, all the major decisions are made by the members as a whole, either by Ministers (who
usually meet at least once every two years) or by their Ambassadors or Delegates (who meet regularly in Geneva). Article IV of
the WTO Agreement provides the structure of WTO. It shall consists of the following bodies-
1. Ministerial Conference
It shall consist of Ministerial Conference composed of representative of all the members. WTO shall meet once in every two years.
It shall have the authority to take decisions on all matters related to multilateral trade agreements, if requested by its Member.
2. General Council
The General Council composed of representatives of all the member nations. During the intervals of the meetings of Ministerial
Conference, the General Council shall carry its functions as assigned under the Agreement. Under Article V of the WTO
Agreement, General Council is also assigned the work to make arrangements for effective co-operation with inter-governmental
organisations and non-governmental organisations.
3. Dispute Settlement Body
The body may have its own Chairman and it shall establish such rules and procedures which may deem necessary for fulfilment of
responsibilities assigned to the body. It shall be convened by the General Council to discharge the functions and responsibilities of
the Dispute Settlement Body.
4. Trade Policy Review Body
The body may have its own Chairman and it shall establish such rules and procedures which may deem necessary for fulfilment of
responsibilities assigned to the body. The General Council convenes this body to discharge the responsibilities of the Trade Policy
Review Body.
5. Council for trade in goods, Council for services and Council for TRIPs
Council for trade in goods, Council for trade in services and Council for TRIPs shall operate under the general guidance of the
General Council. All these Councils shall carry the functions assigned to them by respective agreements and by General Council.
6. Subsidiary Bodies
Council for trade in goods, services and Council for TRIPs shall establish subsidiary bodies as and when required. These bodies
shall establish their respective rules of procedure based on approval of their respective Councils.
7.
A Committee on trade and development; Committee on balance of payment restrictions and a Committee on
budget, finance and administration
Ministerial Conference is authorised to establish these Committees that shall carry out the functions assigned to them by the
Agreement.
8. Bodies provided for under the Plurilateral Trade Agreements
These bodies shall carry out the functions assigned to them and shall operate within the institutional framework of the WTO. These
bodies shall keep the General Council informed of their activities on a regular basis.
WTO Agreements
WTO Agreements cover goods, services, and intellectual property. The three agreements establishing the WTO are-
GATT
General Agreement on Tariffs and Trade was established in 1947. In 1995, GATT was replaced by the World Trade Organisation
(WTO). GATT, the organisation, has been replaced by the establishment of the WTO.
GATT, the agreement, however, exists along with the additional WTO new agreements, viz.
a. General Agreement on Trade in Services (GATS), and
b. General Agreements on the Trade-Related Aspects of Intellectual Property Rights (TRIPS).
GATT is related to increasing market access by reducing various trade barriers operating in different countries. The dismantling of
trade restrictions was to be achieved by the reduction in tariff rates, reductions in non-tariff support in agriculture, abolition of
voluntary export restraints or phasing out the Multi-fibre Arrangement (MFA), cut in subsidies, etc.
On 1 January 2003, textiles and clothing sector will stand integrated into GATT, with the elimination of MFA restrictions. GATT
aims at the elimination of farm support and export support in developed countries.
GATS
Multilaterally agreed and legally enforceable rules and disciplines relating to trade in services are covered by General Agreement
on Trade in Services. It envisages free trade in services, like banking, insurance, hotels, construction, etc., so as to promote growth
in the developed countries by providing larger markets and in the developing countries through the transfer of technologies from
the developed countries.
GATS is more comprehensive in coverage than GATT. Trade in services is defined as covering more than a cross-border exchange
of a service and includes also consumer movements and factor flows.
This agreement, access of service personnel into markets of member countries will henceforth be possible on a non-discriminatory
basis under the transparent and rule-based system. Under the agreement, service sector would be placed under most favoured
nation (MFN) obligations that prevent countries from discriminating among different nations in respect of services.
TRIPS
The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) is an international legal agreement between all
the member nations of the World Trade Organization (WTO). It sets down minimum standards for the regulation by national
governments of many forms of intellectual property (IP) as applied to nationals of other WTO member nations.
TRIPS Agreement was negotiated at the end of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) in
1994 and is administered by the WTO.
The TRIPS agreement introduced intellectual property law into the international trading system for the first time and remains the
most comprehensive international agreement on intellectual property to date.
WTO advocates necessary amendments to national IPR laws to accommodate the TRIPs provisions. TRIPs agreement is an effort
to bring national legislation under common international rules. An important feature of TRIPs is that it is more specific and hard
on ‘patents’ -the most important form of intellectual property.
Patents should be available for any invention, whether products or processes, in all fields of technology provided they are new,
involve an inventive step and capable of industrial application. Patents should be available and patent rights enjoyable without
discrimination. In the case of plant rights, geographical indications etc., members can adopt a sui-generis (own designed) IPR
regime.
WTO gives following areas of intellectual property – copyright and related rights, trademarks, protection of undisclosed
information (trade secrets), geographical indications, industrial designs, integrated circuits, patents, and control of anti-competitive
practices in contractual licenses.
Signing TRIPs means countries have to modify their Patent Act, Copy Right Act, Trade Mark Act etc., in accordance with the
provisions of the TRIPs. In India, the government has made a major amendment to the 1970 Patent Act in 2005 to accommodate
the TRIPs provisions. In 2010, the Copyright Act was amended and enforced from 2012. Other legislations with respect to
Industrial designs also have been made.
India’s engagement in free trade agreement
India has always stood for an open, equitable, predictable, and non-discriminatory and rule based international trading system. It
views at Free Trade Agreements as a ‘building block’ towards overall objective of trade liberalisation as well as complementing
the multilateral trading system.
The General Council also adopted a protocol to make the Trade Facilitation Agreement a part of World Trade Organisation
Agreement and opened the Protocol for acceptance. After the Trade Facilitation Agreement automatically come into force after
ratification by 2/3rd of the members of WTO.
In December, 2013, WTO members concluded negotiations on Trade Facilitation Agreement at Bali Ministerial Conference,
which was named as ‘Bali Package’. This agreement contains provisions for expediting the movement, release and clearance of
goods in transit. It also measures for effective cooperation between customs and other appropriate authorities on trade facilitation
and customs compliance issues.
Role of Standards in International Trade
In today’s market, domestic as well as international standards have assumed tremendous significance. Globally as tariffs are going
down, the complexities connected with international trade are also increasing.
To ensure supply of quality, safe and environment-friendly products to consumers, it is important that our industrial enterprises and
business operators also adopt the concept of standards and technical regulations in their respective organisations. To make it
possible, Government must ensure a complete eco-system where standards and technical regulations are developed and complied
easily.
The WTO Agreement on ‘Technical Barriers to Trade’ is an agreement based on conformity assessment at international level. This
Agreement try to balance the competing demands for domestic regulatory autonomy and global harmonisation of products
standards in a manner which is trade friendly.
It is very important for India to create a conducive atmosphere in which industry is encouraged and facilitate to follow a standard
driven culture; this would add value to products competitive internationally. Industry would continuously strive for technology
upgrading and higher value addition.
India has export potential in many of the skills based services in many of the non-traditional services exports including
professional services such as accountancy, architecture and services like tourism, medical value travel etc.
WTO and Various Agreements

WTO Agreement on textile and clothing
Since 1979, world trade in textile and clothing has been governed by Multi-fibre Agreement (MFA). It enables importing countries
to deviate from GATT Rules by imposing restrictions on imports from exporting countries, by protecting domestic industries. The
developing nation united and succeeded in incorporating a multilateral agreement on textile in GATT, 1994.
Agreement on Textiles and Clothing was negotiated in the Uruguay Round of Trade Negotiations. This Agreement replaced the
arrangement regarding International Trade in Textiles (Multi-Fibre Arrangement, 20th December, 1973). Agreement on Textiles
and Clothing provided for textile and clothing trade related restrictions to be notified and eliminated over a period of 10 years from
the date of entry into force of the WTO Agreement.
Agreement on Textiles and Clothing also provided that the Agreement itself would be terminated at the beginning of the 12th year
of the WTO, together with all of the remaining restrictions within its scope.
On the date of entry into force of the WTO Agreement, each Member shall integrate into GATT, 1994 products which accounted
for not less than 16% of the total volume of the Member's 1990 imports of the products. The products to be integrated shall
encompass products from each of the following four groups: tops and yarns, fabrics, made-up textile products, and clothing
Purpose of the Agreement
The purpose of this is to integrate the textiles and clothing sector into GATT, 1994. Article 1 of Agreement of Textile and
Clothing, makes the purpose very clear. To this effect, it requires notification of all existing quantitative restrictions (Article 2 of
the Agreement provides so) and provides that they will have to be terminated by the year 2004 (Article 9).
Salient features
Salient features of agreement on textile and clothing-
1. The agreement intended to set out provisions which are to be applied by members during a transitional period for
integration of textile and clothing sector.
2. To facilitate the integration of textile and clothing sector into GATT, members should allow continuous industrial
adjustment and increased competition in the market.
3. It aims to ensure development of commercially significant trading opportunities for new entrants in the field of textile
and clothing sector.
4. All quantitative restrictions within bilateral agreements in force under Multi-fibre Agreement shall be notified in detail.
5. No new restrictions shall be introduced except under the provisions provided under the agreement.
Important provisions of Agreement of Textile and Clothing

Article 2 of the agreement
Article 2 of the Agreement provides for-
A. Notification of all restrictions imposed under the Multi-fibre Agreement as of the day before the date of entry into
force of the WTO Agreement;
B. A ban on introduction or maintenance of restrictions except as provided by Article 2(4);
C. Elimination of all the notified restrictions, in four stages, supervised by the Textile Monitoring Body (TMB);
D. Provisions regarding application of Article XIX of the GATT 1994 to products covered by the Agreement of Trade and
Clothing.

Article 3.1 of the Agreement provides that within 60 days following the date of entry into force of the World Trade Organisation
Agreement, members maintaining restrictions on textile and clothing products, whether consistent with GATT 1994 or not, shall-
a. Notify them in detail to the Textile Monitoring Body(TMB), or
b. Provide to the Textile Monitoring Body (TMB) notifications with respect to them which have been submitted to any
other WTO body.
The notifications should, wherever applicable, provide information with respect to any GATT 1994 justification for the
restrictions, including GATT 1994 provisions on which they are based.
Article 3.3 of the Agreement provides that during the duration of this Agreement, members shall provide to the Textile Monitoring
Body(TMB), for its information, notifications submitted to any other WTO bodies with respect to any new restrictions or changes
in existing restrictions on textile and clothing products, taken under any GATT 1994 provision, within 60 days of their coming into
effect.
Article 5.1 of the agreement provides that members agree that circumvention by trans-shipment, re-routing, false declaration
concerning country or place of origin, and falsification of official documents, frustrates the implementation of this Agreement to
integrate the textiles and clothing sector into GATT 1994.
Accordingly, members should establish the necessary legal provisions and/or administrative procedures to address and take action
against such circumvention. Members further agree that, consistent with their domestic laws and procedures, they will cooperate
fully to address problems arising from circumvention.
Textile Monitoring Body (TMB) [Article 8]
The Textiles Monitoring Body (TMB) supervised the agreement’s implementation. It consisted of a Chairman and 10 members
acting in their personal capacity. It monitored actions taken under the agreement to ensure that they were consistent, and it reported
to the Goods Council that reviewed the operation of the agreement before each new step of the integration process.
The Textiles Monitoring Body also dealt with disputes under the Agreement on Textiles and Clothing. If they remained
unresolved, the disputes could be brought to the World Trade Organisation’s regular Dispute Settlement Body. When the Textiles
and Clothing Agreement expired on 1st January, 2005, the Textiles Monitoring Body also ceased to exist.
Termination [Article 9]
Restrictions on Agreement on Textiles and Clothing were terminated on 1st January, 2005. The expiry of the 10 years transition
period of Agreement on Textiles and Clothing implementation means that trade in textile and clothing products is no longer subject
to quotas under a special regime outside normal WTO/GATT rules. It is now governed by the general rules and disciplines
embodied in the multilateral trading system.
Agreement on textile and clothing of the GATT, 1994 and India
1. India wanted liberalisation of textile trade in 6 years. The proposal envisaged 10 years transition period.
2. At the end of the 7th year only 1/3rd of the world textile trade would be integrated into GATT.
3. Liberalisation is not limited to restricted products alone. It encompasses the whole range of textile products.
4. In the transitional period, the textile exporting countries continue to face products quota and ceilings.
5. Integrated textile products into GATT became subject to the operation of GATT safeguard clause Article XIX.
6. India wanted to exclude from the scope of the agreement the bulk items such as cotton and carded wool.
7. Multi-fibre Agreement will be phased out during 10 years.
WTO and Anti-dumping

Dumping
According to Haberler, ‘dumping’ is “the sale of goods abroad at a price which is lower than the selling price of the same goods at
the same time in the same circumstance at home, taking account of difference in transport cost.”
In simple terms, ‘dumping’ can be defined as selling the products at below the on-going market price or at the price below the cost
of production.
‘Dumping’ occurs if a company exports a product at a price lower than the price it normally charges in its domestic market; it is
called as “dumping” the product.
Types of dumping
Intermittent Dumping
When the production of a product is more than the demand at the domestic market, the stocks pile up even after sales. Then the
producer sells the remaining stock in foreign countries at low price without reducing the price at domestic market. It is known as
intermittent dumping.
Persistent Dumping
When the monopolist sells and remaining production in foreign countries at a lower price continuously, it is known as persistent
dumping.
Predatory Dumping
When the monopolist sells the product in foreign market at a low price initially with a view to drive away the competitors and
increases the price after the competitors leave the market, it is known as predatory dumping.
a. To enter into a foreign market by elimination the competitors in the foreign market;
b. To sell surplus production;
c. To develop trade relations with foreign countries;
d. To expand market to their products.
Effects of Dumping
On Importing Countries On Exporting Countries

Finds uneconomical to dump the goods in a foreign country and
Decline in sales and profits
stops dumping
Effects the survival of the industry and changes the The importing country in addition to tariff duty, restricts the volume
industrial structure in the foreign country of imports in reducing the dumping
It changes the preference of the consumer of the domestic
Importing nation bans the import of particular goods
country
Importing countries may impose penalties on the imports if they
It increases the deficit of the balance of payments
cause injury to domestic industry
Importing country can benefit by imposing anti-dumping Exporting country may restrain exports by voluntarily making
tariffs bilateral agreements to avoid dumping
GATT and Anti- Dumping

Article VI of GATT and the Anti-Dumping Agreement
GATT 1994 sets forth a number of basic principles applicable in trade between Members of the World Trade Organisation,
including the ‘most favoured nation’ principle.
GATT also requires that imported products not be subject to internal taxes or other changes in excess of those imposed on
domestic goods. Imported goods in other respects be accorded treatment no less favourable than domestic goods under domestic
laws and regulations, and establishes rules regarding quantitative restrictions, fees etc.
Members of the World Trade Organisation agreed to the establish schedules of bound tariff rates. Article VI of GATT 1994,
explicitly authorizes the imposition of a specific anti-dumping duty on imports from a particular source, in excess of bound rates.
Agreement on Implementation of Article VI of GATT 1994, commonly known as the Anti-Dumping Agreement, it provides
further elaboration on the basic principles of Article VI that deals with the investigation, determination, and application, of anti-
dumping duties.
Previous Agreements
Tariff rates were lowered with a period of time, following the original GATT Agreement, Anti-dumping duties were imposed
increasingly and the inadequacy of Article VI to govern their imposition became ever more apparent.
Article VI of GATT requires a determination of material injury, but does not contain any guidance as to criteria for determining
whether such injury exists, and addresses the methodology for establishing the existence of dumping.
Contracting parties to GATT negotiated very detailed Codes relating to anti-dumping. Agreement on Anti-Dumping Practices,
entered into force in 1967, as a result of the Kennedy Round. U.S never signed the Kennedy Round Code.
Agreement on implementation of Articles VI of the GATT, 1994

In 1980, the Tokyo Round Code entered into force that represented a quantum leap forward. The GATT Members in Tokyo
Round discussed in detail, the rules and measures to be imposed. Anti-dumping measures may be in the form of duties,
undertakings on pricing by exporters etc.
Important provisions
These measures were revised in Uruguay Round and the members adopted in the final Act, the following Agreement on
implementation of anti-dumping measures-
Article 1Anti-dumping Measures
An anti-dumping measure shall be applied only under the circumstances provided under Article VI of GATT 1994 and pursuant to
investigations initiated and conducted in accordance with the provisions of this Agreement.
Article 2 Determination of Dumping
It provides that a product is to be considered as being dumped, i.e. introduced into the commerce of another country at less than its
normal value, if the export price of the product exported from one country to another is less than the comparable price, in the
ordinary course of trade, for the like product when destined for consumption in the exporting country.
Article 3.1 Determination of Injury
A determination of injury for purposes of Article VI of GATT 1994 shall be based on positive evidence and involve an objective
examination of both-
a. The volume of the dumped imports and the effect of the dumped imports on prices in the domestic market for like
products, and
b. The consequent impact of these imports on domestic producers of such products.
Article 3.2 of the Agreement provides, that with regard to the volume of the dumped imports, the investigating authorities shall
consider whether there has been a significant increase in dumped imports, either in absolute terms or relative to production or
consumption in the importing member.
With regard to the effect of the dumped imports on prices, the investigating authorities shall consider whether there has been a
significant price undercutting by the dumped imports as compared with the price of a like product of the importing Member, or
whether the effect of such imports is otherwise to depress prices to a significant degree or prevent price increases, which otherwise
would have occurred, to a significant degree. No one or several of these factors can necessarily give decisive guidance.
Article 4 Definition of ‘domestic industry’
The term “domestic industry” shall be interpreted as referring to the domestic producers as a whole of the like products or to those
of them whose collective output of the products constitutes a major proportion of the total domestic production of those products.
The given definition has following two exceptions-
A. When producers are related to the exporters or importers or are themselves importers of the allegedly dumped product,
the term “domestic industry” may be interpreted as referring to the rest of the producers;
B. In exceptional circumstances the territory of a Member may, for the production in question, be divided into two or
more competitive markets and the producers within each market may be regarded as a separate industry if-
i. The producers within such market sell all or almost all of their production of the product in question in that market, and
ii. The demand in that market is not to any substantial degree supplied by producers of the product in question located
elsewhere in the territory.
In such circumstances, injury may be found to exist even where a major portion of the total domestic industry is not injured,
provided there is a concentration of dumped imports into such an isolated market and provided further that the dumped imports are
causing injury to the producers of all or almost all of the production within such market.
Article 5 Initiation and subsequent investigation
An investigation to determine the existence, degree and effect of any alleged dumping shall be initiated upon a written application
by or on behalf of the domestic industry.
The authorities shall examine the accuracy and adequacy of the evidence provided in the application to determine whether there is
sufficient evidence to justify the initiation of an investigation.
An anti-dumping proceeding shall not affect the procedure of custom clearance. Investigation shall be concluded within one year
and in no case beyond 18 months, after initiation of investigation.
Article 6 Evidence
All interested parties in an anti-dumping investigation shall be given notice of the information which the authorities require and
ample opportunity to present in writing all evidence which they consider relevant in respect of the investigation in question.During
the anti-dumping investigation all interested parties shall have a full opportunity for the defence of their interests.
The authorities shall, on request, provide opportunities for all interested parties to meet those parties with adverse interests, so that
opposing views may be presented and rebuttal arguments offered.
Oral information shall be taken into account by the authorities only in so far as it is subsequently reproduced in writing and made
available to other interested parties. Confidential information need not be disclosed while producing evidence.
To verify the information provided or to obtain further details, the authorities may carry out investigations in the territory of other
Members as required. Proviso- They obtain the agreement concerned firms and notify the representatives of the Government of the
Member in question, and unless that Member objects to the investigation.
Article 8 Price Undertaking
Proceedings may be suspended or terminated without the imposition of provisional measures or anti-dumping duties upon receipt
of satisfactory voluntary undertakings from any exporter to revise its prices or to cease exports to the area in question at dumped
prices so that the authorities are satisfied that the injurious effect of the dumping is eliminated.
Price increases under such undertakings shall not be higher than necessary to eliminate the margin of dumping. It is desirable that
the price increases be less than the margin of dumping if such increases would be adequate to remove the injury to the domestic
industry.
Price undertakings shall not be sought or accepted from exporters unless the authorities of the importing Member have made a
preliminary affirmative determination of dumping and injury caused by such dumping. Price undertakings may be suggested by
the authorities of the importing Member, but no exporter shall be forced to enter into such undertakings.
Authorities of an importing Member may require any exporter from whom an undertaking has been accepted to provide
periodically information relevant to the fulfilment of such an undertaking and to permit verification of pertinent data.
In case of violation of an undertaking, the authorities of the importing Member may take, expeditious actions which may constitute
immediate application of provisional measures using the best information available.
Article 9 Imposition and Collection of anti-dumping duties
The decision whether or not to impose an anti-dumping duty in cases where all requirements for the imposition have been fulfilled,
and the decision whether the amount of the anti-dumping duty to be imposed shall be the full margin of dumping or less, are
decisions to be made by the authorities of the importing Member.
It is desirable that the imposition be permissive in the territory of all Members, and that the duty be less than the margin if such
lesser duty would be adequate to remove the injury to the domestic industry.
Article 13 Judicial Review
Each Member whose national legislation contain provisions on anti-dumping measures shall maintain Judicial, Arbitral or
Administrative Tribunals or procedures for the purpose, inter alia, of the prompt review of administrative actions relating to final
determinations and reviews of determinations within the meaning of Article 11. Such Tribunals or procedures shall be independent
of the authorities responsible for the determination or review in question.
Article 14 Anti-dumping action on behalf of a third Country
An application for anti-dumping action on behalf of a third country shall be made by the authorities of the third country requesting
action.
Article 15 Developing Country Members
It is recognized that special regard must be given by developed country Members to the special situation of developing country
Members when considering the application of anti-dumping measures under this Agreement.
Possibilities of constructive remedies provided for by this Agreement shall be explored before applying anti-dumping duties where
they would affect the essential interests of developing country Members.
Article 16 Committee on Anti-Dumping Practices
There must be a Committee on Anti-Dumping Practices, which must compose of representatives from each of the Members.
The Committee shall elect its own Chairman and shall meet not less than twice a year and otherwise as envisaged by relevant
provisions of this Agreement at the request of any Member. The WTO Secretariat shall act as the Secretariat to the Committee.
Article 17 Consultation and Dispute Settlement
Dispute Settlement Understanding is applicable to consultations and the settlement of disputes under this Agreement. Each
Member shall afford sympathetic consideration to and shall afford adequate opportunity for consultation regarding, representations
made by another Member with respect to any matter affecting the operation of this Agreement.
Article 18 Final Provision
No specific actions against dumping of exports from another Member can be taken except in accordance with the provisions of
GATT 1994. Reservations may not be entered in respect of any of the provisions of this Agreement without the consent of the
other Members.
Each Member shall take all necessary steps, to ensure, the conformity of its laws, regulations and administrative procedures with
the provisions of this Agreement as they may apply for the Member in question.
Each Member shall inform the Committee of any changes in its laws and regulations relevant to this Agreement and in the
administration of such laws and regulations.
Concept of National Treatment

Introduction
National treatment stands alongside Most Favoured Nations treatment as one of the important principles of the WTO Agreement.
Under the National Treatment Rule, Members must not accord discriminatory treatment between imports and domestic products.
The GATS and the TRIPS Agreement have similar provisions.
Illustration- Member ‘X’ reduces the import tariff on product ‘Z’ from 10% to 5%, only to impose a 5% domestic consumption tax
only on imported product Z, effectively offsetting the 5% tariff cut.
The purpose of the national treatment rule is to eliminate hidden domestic barriers on trade byWorld Trade Organisation Members
through imported products treatment. This principle is important in order to maintain a balance of rights and obligations. It is
essential for the maintenance of the multilateral trading system.
GATT and National Treatment
Article III of GATT requires thatWTOMembers provide national treatment to all other Members.
Article III stipulates the general principle that Members must not apply internal taxes or other internal charges, laws, regulations,
and requirements affecting imported or domestic products so as to afford protection to domestic production.
In regard to WTO; Article III of GATT stipulates that WTO Members shall not apply standards higher than those imposed on
domestic products between imported goods and like domestic goods, or between imported goods and a directly competitive or
substitutable product.
With regard to internal regulations and laws Article III provides that Members shall accord imported products treatment no less
favourable than that accorded to like products of national origin.
Exceptions to the General Rule: GATT
Article III of GATT permits Governments to purchase domestic products preferentially.It makes Government procurement one
exception to the National Treatment Rule. This is accepted as WTO Members recognize the role of Government procurement in
national policy.
Domestic Subsidies
Article III further allows for the payment of subsidies exclusively to domestic producers as an exception to the national treatment
rule, under the condition that it is not in violation of other provisions in Article III and the Agreement on Subsidies and
Countervailing Measures.
GATT Article XVII
National Treatment obligation is contained under Article XVII which does not apply generally to all measures affecting trade in
services. The Rule only applies to the particular service sectors with respect to which a Member has made specific commitments.
The general requirement is that a Member cannot maintain or impose a measure - a law, regulation, policy or practice - that
discriminates against foreign services or service suppliers as compared to like domestic services or service suppliers.
For example, a Government may grant a subsidy to domestic service suppliers, but not to Foreign Service suppliers. If this measure
discriminates on the face of the law, regulation or executive act granting it, then it will be found to discriminate de jure.
GATT Article XVIII
Article XVIII allows both broader measures and violations of the national treatment obligations in order to promote domestic
infant industries.
National Treatment outside GATT
Article 5.1.1 of the TBT Agreement also addresses national treatment.
Article 3 of the TRIPS Agreement provides national treatment for the protection of intellectual property rights.
The plurilateral Agreement on Government Procurementalso contains a national treatment clause.
The General Rule of National Treatment does not permit policies designed to protect domestic products. Article II of GATT does
permit the use of tariffs as a means of protecting domestic industry. Further, domestic taxes and regulations are hidden barriers to
trade that lack both transparency and predictability, it leads to trade-distortive impact. The existence of GATT Article III generally
impedes the adoption of policies and measures which aimed at domestic protection and promotes trade liberalization.
General Agreement on Trade in Services (GATS)
Members of WTO recognised the importance of trade in services for the growth and development of the world economy. The
Members wanted to establish a multilateral framework of principles and rules for trade in service. They desired and aimed early
achievement and progressive levels of liberalisation of trade in services.
The establishment of the GATS was one of the landmark achievements of the Uruguay Round. GATS entered into force in
January 1995. It was inspired by essentially the same objectives as its counterpart in merchandise trade, the General Agreement on
Tariffs and Trade (GATT). The Agreement consists of VI Parts; contains XXIX Article and VIII Annexes. All WTO Members
around 140 economies at present, are the members of the GATS.
The main objectives were-
a. Creating a credible and reliable system of international trade rules;
b. Ensuring fair and equitable treatment of all participants;
c. Stimulating economic activity through guaranteed policy bindings; and
d. Promoting trade and development through progressive liberalization.
It envisages the objective of establishing a sound multilateral framework or makes rules for trade in service sector. Many countries
have laws which directly restrict entry of foreign services enterprises such as finance; media; transport etc.
Some of the other objectives of GATS are- It recognizes the right of Members to regulate, and to introduce new regulations, on the
supply of services within their territories in order to meet national policy objectives and, given asymmetries existing with respect
to the degree of development of services regulations in different countries, the particular need of developing countries to exercise
this right.
It desires to facilitate the increasing participation of developing countries in trade in service sector and the expansion of their
service exports including, through strengthening of their domestic services capacity and its efficiency and competitiveness.
It takes into account the serious difficulty of the least-developed countries in view of their special economic situation and their
development, trade and financial needs.
Article 1 Scope and Definitions
GATS apply to measures by Members affecting trade in services.
For the purposes of this Agreement, trade in services is defined as the supply of a service:
a. From the territory of one Member into the territory of any other Member;
b. In the territory of one Member to the service consumer of any other Member;
c. By a service supplier of one Member, through commercial presence in the territory of any other Member;
d. By a service supplier of one Member, through presence of natural persons of a Member in the territory of any other
Member.
GATS exclude services provided in the exercise of Governmental functions. It consists of three major sections, which are as
under-
General obligations and disciplines (Part II, Articles II to XV)
Article 2 Most Favoured Nation treatments
Each Member shall accord immediately and unconditionally to services and service suppliers of any other Member treatment no
less favourable than that it accords to like services and service suppliers of any other country.
This Agreement (GATS) requires transparent decision- making with regard to trade in service. Each Member shall publish
promptly, except in emergency situations, at the latest by the time of their entry into force, all relevant measures of general
application which pertain to or affect the operation of this Agreement. International agreements pertaining to or affecting trade in
services to which a Member is a signatory shall also be published.
Each Member shall respond promptly to all requests by any other Member for specific information on any of its measures of
general application or international agreements.
Article 4 Increasing Participation of Developing Countries
The increasing participation of developing country Members in world trade shall be facilitated through negotiated specific
commitments, by different Members.
This Agreement aims at-
a. The strengthening of domestic services of the developing countries and its efficiency and competitiveness, through
access to technology on a commercial basis;
b. The improvement of their access to distribution channels and information networks; and
c. The liberalization of market access in service sectors and modes of supply of export interest to them.
Article 5 Economic Integration

GATS allows countries to enter into regional integration agreements liberalizing services as long as they have substantial sectorial
coverage and eliminate substantially all discrimination between the parties.
Article 6 Domestic Integration
GATs requires domestic regulation of services to be based on objective criteria such as competence to provide the service. It
should not be burdensome than necessary to ensure the quality of a service and should not operate as a restriction on the supply of
a service.
Article 7 Recognition
A Member may recognize the education or experience obtained, requirements met, or licenses or certifications granted in a
particular country. Such recognition may be achieved through harmonization or otherwise, may be based upon an agreement or
arrangement with the country concerned or may be accorded autonomously.
Article 8 Monopolies and Exclusive Service Supplier
Each Member shall ensure that any monopoly supplier of a service in its territory does not, in the supply of the monopoly service
in the relevant market, act in a manner inconsistent with that Member’s obligations.
Article 10 Emergency Safeguard Measures
There shall be multilateral negotiations on the question of emergency safeguard measures based on the principle of non-
discrimination. The results of such negotiations shall enter into effect on a date not later than three years from the date of entry into
force of the WTO Agreement.
Article 12 Restrictions to safeguard the Balance of Payments
In the event of serious balance-of-payments and external financial difficulties or threat thereof, a Member may adopt or maintain
restrictions on trade in services on which it has undertaken specific commitments, including on payments or transfers for
transactions related to such commitments.
Article 15 Subsidies
Members shall enter into negotiations with a view to developing the necessary multilateral disciplines to avoid such trade-distortive
effects. The negotiations shall also address the appropriateness of countervailing procedures.
Such negotiations shall recognize the role of subsidies in relation to the development programmes of developing countries and take
into account the needs of Members, particularly developing country Members, for flexibility in this area.
Specific Commitments (Articles XVI to XVIII)
In the service sectors inscribed in a country’s schedule a country must provide both market access and national treatment. The
market access prohibits limitations in the number of service suppliers; limitation on the total value of service transactions or total
number of service operations; limitations on the number of natural persons employed in a particular service sector.
National treatment means the same laws and regulations which must apply to service provider by foreign suppliers as affecting
trade in service including those in respect of qualifications, standards and licensing matters.
Progressive Liberalization (Articles XIX to XXI)
In pursuance of the objectives of GATS Agreement, Members shall enter into successive rounds of negotiations, beginning not
later than five years from the date of entry into force of the WTO Agreement and periodically thereafter, with a view to achieving a
progressively higher level of liberalization. The process of liberalization shall take place with due respect for national policy
objectives and the level of development of individual Members, both overall and in individual sectors.
A Member may modify or withdraw any commitment in its Schedule, at any time after three years have elapsed from the date on
which that commitment entered into force, in accordance with the provisions of GATS.
Article XXIII Dispute Settlement and Enforcement
If any Member should consider that any other Member fails to carry out its obligations or specific commitments under GATS
Agreement, it may with a view to reaching a mutually satisfactory resolution of the matter have recourse to the Dispute Settlement
Unit.
GATS and India

Developing nations were apprehensive about the proposal of liberalization of trade in service. There is no general obligation
imposed on the need to provide access to Foreign Service enterprises or for granting them national treatment. The service
agreement is not tied to progress in the market access. Interlink between services and goods are not present.
India and Brazil was opposing the inclusion of service for negotiations in the Uruguay Round. The opposition by both the
countries was based on a number of considerations which are as under-
a. These countries felt that they have not acquired adequate knowledge on various service;
b. Few services such as banking, transport and insurance needs protection;
c. The State played an important role in a number of service sectors such as banking, transport to achieve specific
development objectives in developing countries;
d. The services sector is dominated by the transnational corporations, it has increased hold over merger and acquisition;
e. The developing countries would like to include liberalization in trade in service sectors of their interest.
f. Many developing countries suffer from adverse effect of balance of payments in a large number of services.
g. These countries considered that negotiations should be organised not in GATT, but in other institutions which are
related to various services.
Agreement on Trade related aspects of Intellectual Property Rights

(TRIPs)
TRIPs agreement consists of seventy three Articles and it is divided into VII Parts. Intellectual Rights are private rights however
there is need for a multilateral framework of principles, rules and disciplines dealing with intellectual property rights. TRIPs have
been negotiated under multilateral negotiations.The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)
is an international legal agreement between all the member nations of the World Trade Organization.
General Provisions and Basic Principles (Article 1 to 8)
Article 1 Nature and scope of obligations
Members shall give effect to the provisions of TRIPS Agreement. Members may, but shall not be obliged to, implement in their
law more extensive protection than is required TRIPS, provided that such protection does not contravene the provisions of TRIPS.
Members shall be free to determine the appropriate method of implementing the provisions of TRIPS within their own legal
system and practice.
Members shall accord the treatment provided for TRIPS to the nationals of other Members. In respect of the relevant intellectual
property right, the nationals of other Members shall be understood as those natural or legal persons that would meet the criteria for
eligibility for protection provided for in the Paris Convention (1967), the Berne Convention (1971), the Rome Convention and the
Treaty on Intellectual Property in Respect of Integrated Circuits, were all Members of the WTO members of those conventions.
Article 3 National Treatment
Each Member shall accord to the nationals of other Members treatment no less favourable than that it accords to its own nationals
with regard to the protection of intellectual property.
Article 4 Most Favoured Nation Treatments
Any advantage, favour, privilege or immunity granted by a Member to the nationals of any country shall be accorded immediately
and unconditionally to the nationals of all other Members.
Article 7 Objectives
The protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and
to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in
a manner conducive to social and economic welfare, and to a balance of rights and obligations.
Article 8 Principles
Members may adopt measures necessary to protect public health and nutrition, and to promote the public interest in sectors of vital
importance to their socio-economic and technological development, provided that such measures are consistent with the provisions
of TRIPS.
Copyright and related rights (Article 9 to 14)
Article 9 Relation to Berne Convention
Members to the TRIPS Agreement shall comply with the Berne Convention. Copyright protection shall extend to expressions and
not to ideas, procedures and methods of operation or mathematical concepts as such.
Article 10 Computer Programs and Compilations of Data
Computer programs, whether in source or object code, shall be protected as literary works under the Berne Convention.
Compilations of data or other material, whether in machine readable or other form which by reason of the selection or arrangement
of their contents constitute intellectual creations shall be protected.
Article 11 Rental Rights
In respects of at least computer programs and cinematographic works, a Member shall provide authors and their successors in title
the right to authorize or to prohibit the commercial rental to the public of originals or copies of their copyright works.
A Member shall be accepted from this obligation in respect of cinematographic works unless such rental has led to widespread
copying of such works which is materially impairing the exclusive right of reproduction conferred in that Member on authors and
their successors in title.
Whenever the term of protection of a work, other than a photographic work or a work of applied art, is calculated on a basis other
than the life of a natural person, such term shall be no less than 50 years from the end of the calendar year of authorized
publication, or, failing such authorized publication within 50 years from the making of the work, 50 years from the end of the
calendar year of making.
Article 14 Protection of Performers, Producers of Phonograms and Broadcasting Organisations
In respect of a fixation of their performance on a phonogram, performers shall have the possibility of preventing the following acts
when undertaken without their authorization: the fixation of their unfixed performance and the reproduction of such fixation.
Performers shall also have the possibility of preventing the following acts when undertaken without their authorization.
Producers of phonograms shall enjoy the right to authorize or prohibit the direct or indirect reproduction of their
phonograms. Broadcasting organizations shall have the right to prohibit the following acts when undertaken without their
authorization.
The term of the protection available under this Agreement to performers and producers of phonograms shall last at least until the
end of a period of 50 years computed from the end of the calendar year in which the fixation was made or the performance took
place.
Trade Marks (Article 15 to 21)
Article 15 Protectable subject matter
Any sign or any combination of signs, capable of distinguishing the goods or services of one undertaking from those of other
undertakings, shall be capable of constituting a trademark. Such signs, in particular words including personal names, letters,
numerals, figurative elements and combinations of colours as well as any combination of such signs, shall be eligible for
registration as trademarks.
Where signs are not inherently capable of distinguishing the relevant goods or services, Members may get their signs registered
depending on distinctiveness acquired through use. Members may require, as a condition of registration, that signs be visually
perceptible.
Article 17 Exceptions
Members may provide limited exceptions to the rights conferred by a trademark, such as fair use of descriptive terms, provided that
such exceptions take account of the legitimate interests of the owner of the trademark and of third parties.
Initial registration and each renewal of registration, of a trademark shall be for a term not less than seven years. The registration of
a trademark shall be renewable indefinitely.
Article 21 Licensing and Assignment
Members may determine conditions on the licensing and assignment of trademarks. The compulsory licensing of trademarks shall
not be permitted and that the owner of a registered trademark shall have the right to assign the trademark with or without the
transfer of the business to which the trademark belongs.
Patents (Article 27 to 34)
Article 27 Patentable subject matter
Patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new,
involve an inventive step and are capable of industrial application. Patents shall be available and patent rights enjoyable without
discrimination as to the place of invention, the field of technology and whether products are imported or locally produced.
Members may exclude from patentability inventions, the prevention within their territory of the commercial exploitation of which
is necessary to protect morality, including to protect human, animal or plant life or health or to avoid serious prejudice to the
environment, provided that such exclusion is not made merely because the exploitation is prohibited by their law.
Members may also exclude from patentability:
a. Diagnostic, therapeutic and surgical methods for the treatment of humans or animals;
b. Plants and animals other than micro-organisms, and essentially biological processes for the production of plants or
animals other than non-biological and microbiological processes.
Article 28 Rights Conferred

Patentee shall have exclusive rights i.e. to prevent third parties from making, using, selling, offering for sale or importing, where
the Patent is a product. When a Patent is a process, patentee has the right to prevent third parties from using, offering for sale or
importing obtained directly by that process.
Article 32 Revocation/ Forfeiture
An opportunity for judicial review of any decision to revoke or forfeit a patent shall be available.
The term of protection available shall not end before the expiration of a period of twenty years counted from the filing date.
Enforcement of Intellectual Property Rights (Article 41 to 61)
Article 41
Members shall ensure that enforcement procedures which are available under their law so as to permit effective action against any
act of infringement of intellectual property rights covered by this Agreement, including expeditious remedies to prevent
infringements and remedies which constitute a deterrent to further infringements.
These procedures shall be applied in such a manner as to avoid the creation of barriers to legitimate trade and to provide for
safeguards against their abuse.Procedures concerning the enforcement of intellectual property rights shall be fair and equitable.
Parties to a proceeding shall have an opportunity for review by a judicial authority of final administrative decisions and subject to
jurisdictional provisions in a Member’s law concerning the importance of a case of at least the legal aspects of initial judicial
decisions on the merits of a case.
Article 42 Fair and Equitable Procedure
Members shall make available to right holders civil judicial procedures concerning the enforcement of any intellectual property
right covered by this Agreement.
Article 45 Damages
The judicial authorities shall have the authority to order the infringer to pay the right holder damages adequate to compensate for
the injury the right holder has suffered because of an infringement of that person.
Dispute prevention and settlement (Article 63 and 64)
Laws and regulations, and final judicial decisions and administrative rulings of general application, made effective by a Member
pertaining to the subject matter of TRIPS shall be published.
Agreements concerning the subject matter of TRIPS which are in force between the Government or a Governmental Agency of a
Member and the Government or a Governmental Agency of another Member shall also be published.
Article 64 Dispute Settlement
The provisions of Articles XXII and XXIII of GATT 1994 (mentioned above) as elaborated and applied by the Dispute Settlement
Understanding shall apply to consultations and the settlement of disputes under this Agreement except as otherwise specifically
provided.
TRIPS and Ministerial Conference of the WTO

The fourth Ministerial Conference of WTO held at Doha, which adopted the following declarations of TRIPS Agreements-
a. Recognition of gravity of public health related issues which largely affects developing and under developed countries.
b. Stress on WTO Agreement on TRIPS to be a part of wider national and international actions.
c. Recognizes the importance of protection of intellectual property for development of new medicines.
d. Affirmation of right of WTO Members to use the provisions in the TRIPS Agreement.
e. Reaffirmation of the commitment from the developed countries to provide incentive to their enterprises and institutions
to promote and encourage technology transfer to the least developed countries.
Agreement on Trade-related Investment Measures (TRIMS)

TRIMS Agreement was negotiated during the Uruguay Round. It applies mainly to measures which affects trade in goods. After
recognition that investment measures can have trade-restrictive effects, TRIMS state that no member shall apply to any measure
which is prohibited by the provisions of GATT. Taking into account the least developed countries, members agreed to the TRIMs
Agreement.
TRIMs Agreement is based on the belief that there is a strong connection between trade and investment. It was also recognised that
several restrictive measures on investments are prohibiting trade and hence shall be curbed. According to the provisions of TRIMs,
investment should be promoted and developing countries should be given priority.
Objective
The objective of TRIMs Agreement as provided in its Preamble is, “the expansion and progressive liberalization of world trade and
to facilitate investment across international frontiers so as to increase the economic growth of all trading partners, particularly
developing country members, while ensuring free competition”.
Article 1
Article 1 of the Agreement clearly provides that TRIMs applies to investment measures related to trade in goods only.
Article 2
Article 2 of the Agreement provides that Members must apply to any trade related investment measure which is inconsistent with
the provisions of Article III (national treatment of imported products) or Article XI (prohibition of quantitative restrictions on
imports or exports) of GATT 1994.
National treatment means that a country may not regulate foreign investment to confer an advantage on locally produced goods or
to disadvantage imports.
Article 4 Developing Countries
A developing country Member shall be free to deviate temporarily from the provisions of national treatment, the Understanding on
the Balance-of-Payments Provisions of GATT 1994 and Declaration on Trade Measures taken for Balance of Payments.
In this regard TRIMs attention is drawn to the following aspects-
1. There is no requirement in the proposals to give a preferential treatment to foreign investors.
2. Government’s ability to impose export obligation on foreign or domestic investors remain unimpaired.
3. In the TRIMs Agreement there is no provision regarding limiting the application of investment measures such as
limitation access to foreign investors, ceiling on foreign equity in domestic companies etc.
4. There is no need to give more advantages to foreign investors in the application of domestic laws.
Article 5 Notification and Transitional Arrangements

Members, within 90 days of the date of entry into force of the WTO Agreement, shall notify the Council for Trade in Goods of all
TRIMs they are applying that are not in conformity with the provisions of this Agreement. Such TRIMs of general or specific
application shall be notified, along with their principal features.
Each Member shall eliminate all TRIMs within two years of the date of entry into force of the WTO Agreement in the case of a
developed country Member, within five years in the case of a developing country Member, and within seven years in the case of a
least-developed country Member.
Members affirm their commitment to obligations on transparency. Each Member shall notify the Secretariat of the publications in
which TRIMs may be found, including those applied by regional and local governments and authorities within their territories.
Each Member shall accord sympathetic consideration to requests for information and afford adequate opportunity for consultation,
on any matter arising from TRIMs raised by another Member.
Committee on TRIMs (Article 7)
The Committee on Trade-Related Investment Measures monitors the operation and implementation of the TRIMs Agreement and
affords Members the opportunity to consult on any matters related. The Committee reports to the Council for Trade in Goods.
Dispute Settlement and Review (Article 8 and 9)
The provisions of Dispute Settlement Understanding, shall apply to consultations and the settlement of disputes under TRIMs.
Not later than five years after the date of entry into force of the WTO Agreement, the Council for Trade in Goods shall review the
operation of TRIMs and propose to the Ministerial Conference amendments to its text. In the course of this review, the Council
for Trade in Goods shall consider whether the Agreement should be complemented with provisions on investment policy and
competition policy.
TRIMs and India
TRIMs Agreement has narrow scope. This Agreement suggests that member countries should extend national treatment. There are
no new obligations, the export obligations practice which was adopted by developing countries remained untouched. There is no
explicit or implicit reference to obligations regarding entry on quantities balance the proposal meet India’s demand more than half
way.
This Agreement prevents the Indian Government from ensuring that foreign investment promotes national objectives or
encourages domestic industry. India will not have power to prevent multinationals from extracting resources from India and
dumping the goods imported in the domestic market. This will prohibit India from protecting its national interest despite the fact
that foreign investment has increased imports and reduced exports.
TRIMs Agreement prevents discriminatory investment measures which favour goods produced by Indian Companies over imports.
This would make Indian Companies unable to compete on an equal basis with transnational corporations. It leads to fear of taking
over of trade by foreign companies and deprivation of Indian Companies of a fair opportunity to engage in trade.
ECONOMIC IMPLICATIONS (TRIMs)
Trade Related Investment Measures (TRIMs) were proposed by the United States in the 1994 Uruguay Round as a way to create a
better investment environment in both developed and developing countries. Since many theoretical and empirical analyses of
TRIMs agreement are ambiguous or incomplete, this three-essay dissertation will examine theoretical and empirical trade-related
investment policies with a focus on the strategic regulation of TRIMs policies in developing countries.
A dynamic general equilibrium model is used to examine two types of TRIMs policy instruments, local content requirements
(LCRs) and government investment incentives (GIIs), such as subsidies given to MNEs operating in host countries. The model
shows that increasing LCRs will benefit the economy of developing countries through increases in R&D and technology transfer
in the short run. However, in the long run, increased LCRs will hinder their economic development because production of less
competitive goods of higher cost will reduce domestic demand. GIIs use in developing countries will result in increase in available
resource inputs for relative wages for R&D or technology adapting sector, while decreasing these inputs and relative wages for
manufacturing sectors.
TRIMs policies in a CGE (Computable General Equilibrium) model of a small open economy, and quantifies the economic
impacts of the strengthening of TRIMs policies under a post Uruguay Round scenario in Tunisia. The employed model is based on
the model of Konan and Maskus (2000), which concentrates on trade liberalization in Tunisia . The policy instruments are
government subsidies and taxes. Strengthening of these TRIMs policies was examined for 35 sectors. In order to analyze TRIMs
policies, another important feature, FDI, was integrated into this CGE model. It was found that TRIMs policies tend to have a
significant impact on service and other capital-intensive sectors, but have only a minor impact on mining, utilities, agriculture and
other highly protected and labor intensive sectors. Government taxes on MNEs would cause a loss in the GDP of a host country
and lower its relative wages, while investment incentives would increase both the GDP of the host country and its relative wages.
International Trade Law and the United Nations Conference on Trade and
Development (U.N.C.T.A.D)
The United Nations Conference on Trade and Development was set up in 1964 by the United Nations Organisation with an aim to
promote international trade and economic development of developing countries. UNCTAD had its first conference in 1964, since
then conference has been held for every year and various important decisions have been taken by the member of conference.
It is a permanent intergovernmental body which is established by the United Nations General Assembly in 1964. UNCTAD has its
headquarters at Geneva, Switzerland. It is a part of UN Secretariat. It reports at UN General Assembly and the Economic and
Social Council however have its own membership and budget planning.
Objective of UNCTAD
It offers analysis, advice and seeks to build consensus, strengthen capacity. It promotes partnerships for trade policy, trade
negotiations; trade in goods and services, competition law and consumer protection. It functions in managing issues arising at the
intersection of trade, environment and climate change.
It aims to support developing countries to access the benefits of a globalized economy more fairly and effectively. It helps to equip
developing countries to deal with the potential drawbacks of greater economic integration. It facilitates consensus-building, and
offer technical assistance. This helps them to use trade, investment, finance, and technology as vehicles for inclusive and
sustainable development.
Goals of UNCTAD
It works in the following aspects at National, Regional and global level-
a. Comprehend options to address macro-level development challenges
b. Achieve beneficial integration into the international trading system
c. Diversify economies to make them less dependent on commodities
d. Limited exposure to financial volatility and debt
e. Attract investment and make it more development friendly
f. Increase access to digital technologies
g. Promote entrepreneurship and innovation
h. Help local firms move up value chains
i. Speed up the flow of goods across borders
j. Protect consumers from abuse
k. Curb regulations that stifle competition
l. Adapt to climate change and use natural resources more effectively
Functions of UNCTAD
The main functions of the UNCTAD are:
1. Promotion of international trade between developed and developing countries with a view to accelerate economic
development.
2. Formation of principles and policies on international trade and related problems of economic development.
3. Making proposals to put its principles and policies into effect.
4. Negotiation of trade agreements.
5. To review and facilitate the co-ordination of activities of the other UN institutions in the field of international trade.
6. To function as a centre for harmonious trade and related documents in development policies of governments.
Basic principles of UNCTAD

The first conference held in 1964 laid down UNCTAD’s action programme and priorities. The various recommendations are based
on the following principles:
1. Every country has the supreme right to freely dispose of its natural resources for the sake of its economic development.
It can freely trade with other countries.
2. Principles of sovereign equality of states, self determination of people and non-interference in the internal affairs are
the principles which guide trade and economic relations between countries;
3. There shall be no discrimination on the basis of differences in socio-economic systems. The adoption of various
methods and policies shall be consistent with this principle.
UNCTAD adopts two outcome documents at conclusion of its 13th Ministerial Meeting at Doha,
Qatar on 26th April, 2012
Member States concentrated over financial flow oriented substantial development at the 13th Ministerial Meeting of UN
Conference on Trade and Development (UNCTAD) which is closed in Doha, Qatar.
According to Doha Mandate, “finance should support the real economy towards sustainable, sustained, inclusive and equitable
economic growth and sustainable development.”
The mandate sets out agreed conclusion on policy analysis and the role of UNCTAD on the overall agenda of meeting which was,
‘development centred globalizing towards inclusive and sustainable growth and development’. The Agenda included enhancement
and enabling of economic environment to support inclusive development; strengthening all forms of cooperation and partnership
for trade and development.
Accompanying this Mandate there was a political declaration which is known as ‘Doha Manar’. The objective of it was to
recognize the need to make common economic life more conducive to progressive structural change, more productive of inclusive
and sustainable growth and development and more effective in fostering broad-based inclusion in a new social contract. Doha
Manar also recognises the economic significance of the revolutionary protests occurring over the past year.
The role of UNCTAD in achieving development centred globalization, the organization remained the United Nations focal point
for the integrated treatment of trade and development, related issues in the areas of finance, technology, investment and sustainable
development. It further aims to transition towards a green economy; continue to monitor and assess the evolution of the
international trading system and its trends from a development perspective and continue to support the specific needs of least
developed countries, developing States, middle-income countries and those with economic transition.
The Mandate states, “For trade to serve as an engine of inclusive growth and development, the multilateral trading system must
remain open, transparent, inclusive, non-discriminatory and rules-based.” It also stressed on fragile economic recovery, trade
protectionism remained a risk and efforts to fight all forms of protectionism should continue.
Free Trade and Trade Barriers
The policy of laissez-faire is the corner-stone of free trade. It is a policy of allowing individuals activities which must be
conducted without the control of the Government. The free trade concept is based on market mechanism which is controlled by the
forces of demand and supply in a particular market. The Government should not interfere in the trade and commerce to provide
infrastructure which is necessary for the expansion of market.
According to Haberler following are the benefits of free international trade for developing and less developed countries-
1. It provides material means indispensible for economic development of developing countries;
2. It is a vehicle for dissemination of technical knowledge, the transmission of ideas, for the importation of know-how
skills, managerial talents and entrepreneurship.
3. It is also a vehicle and mechanism for the international movement of capital from North i.e. developed countries to
South i.e. developing countries.
4. It is the best anti-monopoly policy and the best guarantee for the maintenance of healthy degree of free competition.
5. It leads to division of labour on an international scale leading to greater specialisation, efficiency and economy in
production.
6. It benefits the consumers by providing large variety of goods at the best price.
Trade Barriers
Free trade enabled the industrial developed countries to expand their trade throughout the world. However, there were certain
barriers which hampered the free trade and development. The term ‘barrier’ here refers to the Governmental policies and measures
which obstruct free flow of goods and services across national borders.
GATT aims to reduce the tariff and non-tariff barriers in the trade of goods. These barriers restrict free trade. It also refers to
Government policies and measures which obstruct the free flow of goods and services across national borders.
The objectives of imposing trade barriers are as under-
i. Ensuring protection of domestic industry from foreign companies;
ii. Guard against dumping;
iii. Promoting indigenous research and development;
iv. Conservation of foreign exchange resources of the country;
v. To make the balance of payment position most favourable;
vi. Curbing conspicuous consumption and mobilise revenue for the Government.
Tariff Barriers or Fiscal Control

‘Tariff’ may be defined as a financial levy imposed by the importing country on goods. This is imposed by countries in order to
protect their domestic industry producing same goods or for any other reason in interest of domestic economy. Tariff is regarded as
less restrictive than other methods of protection like quantitative restrictions.
It is generally classified as export duties, import duties and transit duties on the basis of the origin and destination of goods
crossing the national boundary.
Quantitative Restrictions or Non-tariff Barriers (NTBs)
NTBs are considered as new-protectionism measures which have grown considerably since the beginning of 1980s.
It falls under two categories:
1. The first category includes those measures which are generally used by developing countries to prevent foreign
exchange outflows or those which results from their chosen strategy of economic development. These are traditional such
as import licensing, import quotas, foreign exchange regulations and canalisation of imports.
2. The second category of NTBs is those which are mostly used by developed economies to protect domestic industries
which have lost international competitiveness and which are politically sensitive for Government of these countries.
Balance of Trade
It is a situation where the value of a country’s exports and the value of its imports of visible items are equal. It takes into account
only those transactions arising out of the exports and imports of the visible items, it does not consider the exchange of invisible
items such as service rendered by shipping, insurance and banking; payment of interest and divided or expenditure by tourists.
Balance of payment takes into account the exchange of both visible and invisible items. Balance of trade is a part of balance of
payment; it represents a better image of a country’s economy and financial transactions with the rest of the world than the balance
of trade.
Technical Barriers to Trade (TBT)
The WTO Agreement on Technical Barriers to Trade was entered into force in 1995. It is the multilateral successor to the
Standards Code which was signed by 32 GATT contracting parties at the conclusion of Tokyo Round of Trade Negotiations in
1979.
The concept of ‘technical barriers to trade’ refers to the use of domestic regulatory process as a means of protecting domestic
producers.
The Agreement seeks to assure that-
Do not cause unnecessary obstacles to international trade.
The purposes of this Agreement can be broadly described as:
i. Assuring that technical regulations, standards and conformity assessment procedures, do not create unnecessary
obstacles to international trade; and
ii. Leaving members adequate regulatory discretion to protect human, animal and plant life and health, national security,
the environment, consumers, and other policy interests.
The legal analysis of the TBT Agreement is divided into six Sections-
First Section
In this Section the reasons for the adoption of the TBT Agreement are set forth and the treatment of regulations and standards
under the General Agreement on Tariffs and Trade (GATT) is examined.
Second Section
Under this the general scope of the TBT Agreement is examined. Definitions of key concept such as- technical regulations;
standards; and conformity assessment procedures, are mentioned under this Section.
Third Section
The structure of the TBT Agreement and the applicability of the Agreement on other than Central Government Bodies is dealt with
under this Section.
Fourth Section
It provides a nuts and bolts examination of the principles and rules of the Agreement like the principle of non-discrimination, the
obligation to prevent unnecessary obstacles to international trade and the obligation to use international standards as a basis for
technical regulations.
Fifth Section
Itdeals with technical assistance; special and differential treatment for developing country members provided under the Technical
Barriers on Trade Agreement.
Sixth Section- It deals with dispute settlement and institutional matters under the TBT Agreement.
Application of TBT Agreement
The Agreement applies to various Governmental and Non-Governmental Organizations at different levels of society. Technical
regulations, standards, and conformity assessment procedures are not only administered by national authorities, but also by
international, regional and local authorities, as well as Non-Governmental Organizations.
TBT Agreement mentions rules and disciplines which are applicable to international, regional, Governmental and Non-
Governmental Organizations. The application of the basic TBT rules differs slightly depending on the regulatory level at settling
issues whether technical regulations, standards, or conformity assessment procedures are involved.
Technical Barriers to Trade Agreement aims
This Agreement also recognises WTO members' right to implement measures to achieve legitimate policy objectives, such as the
protection of human health and safety, or protection of the environment.
This Agreement strongly encourages members to base their measures on international standards as a means to facilitate trade.
Through its transparency provisions, it also aims to create a predictable trading environment.
The WTO Agreement on Technical Barriers to Trade establishes rules and procedures with regard to the development, adoption,
and application of voluntary product standards, mandatory technical regulations, and the procedures which are used to determine
whether a particular product meets such standards or regulations.
The aim of the Technical Barriers to Trade Agreement is to prevent the use of technical requirements as unnecessary barriers to
trade. However, this Agreement applies to a broad range of industrial and agricultural products and specifications for Government
procurement are covered under separate agreements.
This Agreement helps to distinguish legitimate standards and technical regulations from protectionist measures. Standards,
technical regulations, and conformity assessment procedures are to be developed and applied on a non-discriminatory basis,
developed and applied transparently and should be based on relevant international standards and guidelines, when appropriate.
WTO Agreement and Technical Barrier on Trade Agreement
The Agreement includes the following aspects-
a. An introduction to WTO rules on technical barriers to trade and understanding the Technical Barrier on Trade
Agreement;
b. A technical explanation of the WTO Agreement on Technical Barrier on Trade Agreement;
c. Annual reports and reviews from the Technical Barrier on Trade Agreement, Committee along with Technical Barrier
on Trade Agreement Committee meeting minutes and decisions and recommendations;
d. Subscription to receive Technical Barrier on Trade Agreement notifications by e-mail;
e. Notification by members, of events and mutual recognition agreements under the Technical Barrier on Trade
Agreement.
The Prevention of Protectionism

The Technical Barriers on Trade Agreement establishes rules and disciplines designed to prevent mandatory technical regulations,
voluntary standards, and conformity assessment procedures from becoming unnecessary barriers to international trade. However
the TBT Agreement seeks to leave Members with sufficient domestic policy autonomy to pursue legitimate regulatory objectives.
United Nations Committee on Trade and Environment (UNCTE)

The Ministerial Decision on 1994 regarding Trade and Environment created the WTO’s Committee on Trade and Environment
that is open to the entire WTO membership, with some international organizations.
The Committee’s mandate is broad, and it has contributed to identifying and understanding the relationship between trade and the
environment in order to promote sustainable development.
Towards the end of the Uruguay Round attention was drawn to trade-related environmental issues and the role of the newly
emerging World Trade Organization in the field of trade and environment. In the Preamble to the Marrakesh Agreement
Establishing the WTO reference was made to the importance of working towards sustainable development.
Trade and environment
The fundamental goals of WTO are- Sustainable development and protection and preservation of the environment. They are
enshrined in the Marrakesh Agreement, which established the WTO. It complements the WTO’s objective to reduce trade barriers
and eliminate discriminatory treatment regarding international trade relations.
There is no specific Agreement dealing with the environment under WTO. Members can adopt trade-related measures which aims
at protecting the environment provided a number of conditions to avoid the misuse of such measures for protectionist.
WTO contributes to protection and preservation of the environment through-
a. Its objective of trade openness
b. Rules and enforcement mechanism
c. Different WTO bodies
d. On-going efforts under the Doha Development Agenda
Doha Agenda on Environment and Trade

The Doha Agenda includes specific negotiations on trade and environment and some tasks assigned to the regular Trade and
Environment Committee. Through its goals, rules, institutions and forward-looking agenda, the World Trade Organisation
provides an important means of advancing international environmental goals.
Members of WTO who are working to liberalize trade in goods and services which can benefit the environment. There is also a
discussion going on to maintain a harmonious co-existence between WTO rules and the specific trade obligations that have been
negotiated multilaterally to protect the environment.
Other parts of Doha Negotiations are also relevant to the environment such as aspects of the agriculture negotiations and also
disciplines on fisheries subsidies.
At the Doha Ministerial Conference, WTO Members reaffirmed their commitment to environmental protection, and agreed to
embark on a new round of trade negotiations, including negotiations on certain aspects of the linkage between trade and
environment.
Link between trade and environment
Trade and environment is not a new concept. The link between trade and environmental protection and its impact on
environmental policies on trade, and the impact of trade on the environment was recognized during 1970.
On one side, there was growing international concern regarding the impact of economic growth on social development and the
environment and on the other handsome developing countries were concerned that environmental protection policies could
become obstacles to trade and constitute a new form of protectionism.
Towards the end of the Uruguay Round between 1986 to1994, attention was once again drawn to the field related to trade and
environmental issues.
WTO aims to deal with the following objectives regarding trade and environment-
1. To identify the relationship between trade measures and environmental measures in order to promote sustainable
development;
2. To make appropriate recommendations on whether any modifications of the provisions of the multilateral trading
system are required, compatible with the open, equitable and non-discriminatory nature of the system.
The issue of climate change is not part of the World Trade Organisation on going work programme. There are no WTO rules
specific to climate change. Though WTO is relevant due to climate change measures and policies intersect with international trade
in various ways.
Trade and Environment Committee are dedicated to dialogue between Governments and its impact on trade policies on
environment. It was created in 1995 and the Committee has followed a comprehensive work programme. Under the Doha
Development Agenda, the regular Committee is dealing and working on the effects of environmental measures on market access,
biodiversity, intellectual property agreement etc.
World Trade Organisation offers a powerful supporting framework for sustainable development and green economy. WTO
provides an enabling environment through its objectives, institutions and monitoring of potential trade protectionism.
Impact of environment on growth of trade
WTO’s contribution based on sustainable development and protection of the environment comes in the form of furthering trade
opening in goods and services to promote economic development. It provides stable and predictable conditions which enhance the
possibility of innovation.
Members of WTO recognize the importance of trade liberalization for developing nation exports. It also concentrates on the
financial and technology transfers that are necessary in helping developing countries and generating the resources they need to
protect the environment and work towards sustainable development.
Developing and least-developed countries (LDCs) are heavily dependent on the export of natural resources for foreign exchange
earnings, trade liberalization and is expected to improve allocation through more efficient use of their resources, as well as enhance
export opportunities for their manufactured goods.
It also promotes the efficient allocation of resources, increased income levels and economic growth which in turn provide
additional possibilities for protecting the environment.
Technical assistance of World Trade Organisation on trade and the environment aims to help developing countries which
participate more effectively in the programme of the Trade and Environment Committee and in the negotiations.
Relationship and impact of trade on environment
The relationship between trade and environment consists of both-
a. The impact of trade on the environment;
b. The impact of environmental policies on trade
WTO Members aims at upholding and safeguarding an open and non-discriminatory multilateral trading system. It also acts for the
protection of the environment and the promotion of sustainable development, on the other, can and must be mutually supportive.
The competence of the WTO in the field of environment is limited to trade policies and to the trade-related aspects of
environmental policies which have a significant effect on trade. WTO Members are allowed to adopt trade-related measures which
aim to protect the environment that is subject to some conditions directed to avoid the misuse of such measures.
List of references
Sr.No Details
Course Outline of Unit IV: Bilateral and Regional Trade Agreements

Regional Arrangements under the United Nations - Most Favoured Nation (MFN) Clause - South Asian Association for
Regional Cooperation (SAARC) - Association for South Eastern Asian Nations (ASEAN) - European Union (EU) -
Organisation for Petroleum Exporting Countries (OPEC) - North American Free Trade Agreement (NAFTA) - South Asian Free
Trade Agreement (SAFTA)
Bilateral Trade Agreements

Introduction
Trade agreements on bilateral basis have been entered into by a number of countries in the post-war period. Under the agreements,
quotas for imports and exports are fixed by the contracting parties. Each of the parties to an agreement binds itself to imports from
the other quantities of specified commodities at stipulated prices every year or for a number of years. The agreements often
provide trade between the partners.
These agreements are entered into by nations for various purposes. One of the objectives sought to be achieved by some countries
is to bring about a balance in their payments with other countries. When a country has difficulty of payment to another country due
to shortage of foreign exchange reserve, it may enter into an agreement with another country. Under such a circumstance either the
other country increases its purchase or reduces the sales to another country.
Most significant bilateral treaty among market economies are the ‘Friendship Commerce Navigation’ (FCN). There are various
treating which are made for avoidance of multiple taxation. There are several treaties dealing with tariffs, customs matters or
particular commercial treaties dealing with a specific product group.
Recently, a number of bilateral treaties have been signed and completed ‘economic co-operation agreements’. These treaties
provide a platform and a framework for developing trade between market and non-market economies.
The pattern of the pre-war bilateral agreements of the United States, the GATT rules was focused on safeguarding the tariffs
concession such as reduction or bindings, negotiation between its signatories etc. GATT included a set of rules which are designed
to prevent the tariffs concessions from being frustrated by other protective means. The principle feature of commercial policy code
was based on principles governing the reciprocal trade programme of US.
The Bilateral reciprocal trade agreements concerned primarily reciprocal obligation by which each party undertook to apply on
tariff on a particular good at not more than specified in the agreement.
Under the most-favoured nation obligation when a country granted such a tariff concession, it was required to give like treatment
to all countries to whom it owed the obligation of MFN (Most-Favoured- Nation). It became apparent that bilateral negotiations of
tariffs reductions would have limited results. Countries tend to negotiate only with trading partners who were ‘principle suppliers’
of particular commodities.
Meaning of Bilateral Agreement
A bilateral trade agreement deals with favourable trading status between two countries. It ensures to given those countries access to
each other's markets, it increases trade and economic growth.
At times arrangements are made according to which the deficit country is allowed credit terms for the purchase of goods up to
certain limits. Bilateral agreement is to provide an outlet for their surplus output. It may be conducted if a country wants access to
a scarce material available in another country.
Advantage of Bilateral Agreements
a. Bilateral Agreements increase trade between two nations.
b. It opens markets to successful industries which are well-equipped with technologies.
c. It adds to employment.
d. It also benefits the country by lower costs.
e. Multilateral trade agreements are easier to negotiate as it involves two nations.
f. In case of failure of multilateral agreements, nations amongst each other negotiate a series of bilateral agreements.
India and Bilateral Agreements

India has entered into bilateral trading agreements over the years. Bilateral Agreements offers preferential tariff rates on the trade
of goods among member countries. It also provides wider economic cooperation in the fields of-
Trade in services,
Investment, and
Intellectual property
Various Bilateral Agreements to which India entered

Various preferential arrangement and plans under which India receives tariff preferences are-
There are 46 Member Countries of the Global System of Trade Preferences GSTP and India has exchanged tariff concessions with
12 Countries on a limited number of products at present.
There are various other preferential arrangements which includes-
The South Asian Association for Regional Cooperation (SAARC)
Preferential Trading Agreement (SAPTA),
The Bangkok Agreement and India–Sri Lanka Free Trade Agreement (ISLFTA).
These arrangements/ agreements prescribe Rules of Origin that must be fulfilled for exports to be eligible for tariff preference.
Many Asian countries and India also have signed a Comprehensive Economic Cooperation Agreement. It is an integrated package
of agreements which embraces trade in goods, services, investments and economic co-operations in the field of education, science
and technology, intellectual property etc.
These agreements provide a very wide-range of exemptions. It also provides reduction on basic customs duty on products which
are imported from Singapore to India. In policy shift, the Government has decided to convert all Preferential/Free Trade
Agreements into Comprehensive Economic Cooperation Agreements.
Multilateral Trade Agreements

These agreements are concluded usually in regard to trade in specific commodities among the countries that are major producers
and buyers of these commodities.
The purpose of multilateral agreements is to regulate the production, prices, trade and marketing practices in relation to these
commodities. It aims to safeguard the interests of both producers and consumers and to control flow of trade between countries.
Agreements are concluded among countries interested in the commodities, example of agreements are- International Wheat
Agreement, International Sugar Agreement etc.
Multilateral Agreement usually provides for the quantity that will be exported by such participating exporting country and
quantities that importing countries will purchase. The upper and lower price limits are agreed based on the producers and
consumers both have a fair deal.
International Commodity Agreements generally looked beyond the immediate market situations and one of the objects often is to
expand the market. Certain basic problems of the industry in the producing nation are given special attention and sought to be
solved through control of trade.
GATT is a multilateral agreement. Each and every contracting party of GATT has a separate schedule which lists its own
commitments or which is binding to GATT Agreement.
Method of Multilateral Trade Negotiations under GATT
1. The negotiations shall be conducted on a selective product which will afford adequate opportunity to take in the needs
of individual countries and industries.
2. Participation Government will be free not to grant concession on particular products. If concession is granted then duty
may be reduced or it may undertake not to raise it above a specified level.
3. No participation government shall be required to grant unilateral concession or to grant concession to other
Governments without receiving adequate concession in return.
4. Negotiations which are related to preferences, the application provisions of the General Agreement shall be applied in
accordance with the rules.
5. Participating Governments will be expected to take into consideration the indirect benefits which they will receive from
the negotiations between other Governments.
The Government shall refrain from increasing the tariff and other protective measures in consistence with the principles of the
General Agreement and designed to improve their bargaining position in preparation of negotiations.
Introduction to Regional Trade Agreements (RTAs)

RTAs cover more than half of the international trade which operates alongside of global multilateral agreements under the WTO.
There are two policies that have emerged in this area which are- Firstly, the actual effects of Regional Trade Agreements bolster
the case for a strengthened multilateral framework, when regionalism leads to a patchwork effect between members and non-
members; it raises transaction cost for business. Secondly, Regional Trade Agreements contribute to the case for strengthening the
multilateral framework whereby some features of regional approaches may complement multilateral rules.
Scope for complementarily arises from the contribution which regional initiatives can make towards multilateral-driven
liberalisation and harmonious rule-making which goes beyond the scope of World Trade Organisation. These elements together
yield effectiveness between various approaches at the regional and multilateral levels.
Regional Trade Organisation
Regional trade organizations are a multilateral arrangement that focusesaround a geographical area. Its goal is the liberalization of
International Trade between the member nations. In the case of free trade areas member countries eliminate tariffs and trade
barriers, but maintain individual foreign trade policies. In customs unions, member countries eliminate tariffs and create a common
external trade regime. In case of common market, regional integration includes Trade as well as free movement of all aspects of
production. There are several regional trade organizations in all areas of the world.
Regional Trade Agreements
The prominent feature of International Trade is the ever-growing number of regional trade agreements and preferential trade
arrangements. World Trade Organisation members participating in these regional and preferential trade agreements are encouraged
to notify the WTO when new agreements are formed.
The Regional Trade Agreements (RTAs) is defined by World Trade Organisation as reciprocal trade agreements between two or
more partners.
Regional trade agreements are the treaties among two or more Governments which agree to offer more favourable treatment to
trade between them, than they do to goods imported from outside the region.
Preferential Trade Arrangements (PTAs)

Preferential trade arrangements (PTAs) in the World Trade Organisation are unilateral trade preferences. It includes Generalized
System of Preferences schemes whereby the developed countries grant preferential tariffs to imports from developing countries. It
also supports other non-reciprocal preferential schemes which granted a waiver by the General Council.
Hierarchy of Regional Trade Agreements
Regional trade agreements are reciprocal trade agreements between two or more partners. The growth, expansion and deepening of
these regional trade agreements could be remarkably noticed since the 1990.
Since then, RTAs goes beyond traditional trade liberalization, investment, encompassing disciplines going beyond WTO rules on
issues like- services competition, Government procurement environment and labour.
Regional Trade Agreements includes- free trade agreements, customs unions, common market and political union.
Institutions such as WTO, IMF, and UNCTAD aim at promotion of economic cooperation throughout the world. Similar effort is
made regionally through regional economic integration that is an agreement between the countries to expand trade with mutual
benefits. It involves removing trade barriers and coordinating the trade policies of the countries.
Regional Trade Agreements are classified in a hierarchy which has a range between-
The Free Trade Areas
Customs Union
Common market
Finally to political union
Free Trade Area-

The preferential treatment usually takes the form of the removal or reduction of tariffs on imports from regional partners, thereby
creating a free trade area.It refers to trade bloc that aims at elimination of tariffs, quotas, custom duties and other trade related
barriers on all goods and services between the participating countries. The member nations of free trade area do not charge tariffs
with one another. They charge tariffs from the rest of the countries. It helps in reducing trade barriers and facilitation of easy
exchange in trade. It also aims to promote economic and governmental stability among the nations.
Custom Union-
It goes beyond the removal of internal tariffs which occurs within a free trade area. It specifies common tariffs which all Member
States impose on imports from outside the region. A group of countries forms common trade policies which decide the common
tariff for trading goods and services and ensures no tariff for participating countries. The import duties and regulations are same
for all the member countries. Customs union is a free trade zone with a common tariff for rest of the world.
Common markets-
These are the customs unions which also remove barriers to the flow of factor; capital and labour within the region. These are the
common markets which also adopts a common currency.
Countries join together to eliminate the trade barriers. Its unique feature is that they allow free movement of goods, labour and
capital among the countries. Common markets are formed to eliminate the physical and fiscal barriers, where physical barriers
include borders and fiscal barriers include taxes. Its formation helps in increasing employment opportunities and gross domestic
product.
Aims and Objectives- Common Market
1. Attainment of sustainable development of the participating nations

2. Promotion of mutual development in the field of economic activities
3. Adoption of policies and programs to raise the standard of living of the residents and fostering closer relations
4. Facilitation of cooperation among participating nations to maintain peace, security, and stability
5. Strengthening the relations between the countries worldwide.
Political Union-
It involves the integration of Government bodies, legislative bodies and enforcement powers of the countries. It implies the union
of the Government of the country’s leading to a common Government as a single political entity. For example- European Union, it
works on common foreign policy, common defence policy and common legal system for all member nations.
Challenges included in RTAs for Developing Countries
Challenges from the perspective of developing countries includes the following aspects-
1. The developing countries have to undertake the impact assessment to deal with and understand the implications of new
disciplines regarding the national policy-making.
2. It ensures that agreements that leads to develop complementarities favouring economies of scale and strengthening
productive capacities, lead to enhancement of intra-regional trade opportunities and development gains from trade.
3. It has to ensure coherence between negotiations of different agreements which includes the interface with multilateral
rules.
United Nations Conference on Trade and Development (UNCTAD) works in this direction to deal with trade negotiations and
commercial diplomacy. It also supports the countries in their engagement in different phases of negotiations. It further includes
those Nations which aimed at the development of negotiating modalities for trade in goods and services. UNCTAD provides
analysis to facilitate the evaluation of alternative scenarios and provisions.
Committee on Regional Trade Agreements
Committee on Regional Trade Agreements (CRTA) considers individual regional agreements under the Transparency Mechanism
for Regional Trade Agreements. This Committee is also mandated to hold talks and discussion on the systemic implications of
Regional Trade Agreements. It focuses on the multilateral trading system as was reaffirmed by World Trade Organisation
members at the Ministerial Conference in Nairobi in the year 2015.
Transparency Mechanism for Regional Trade Agreements
In 2006 the World Trade Organisation (WTO) members agreed to implement a provisional mechanism for the enhancement of the
transparency of Regional Trade Agreements. It works to understand the effects of Regional Trade Agreements on the multilateral
system.
Under this process, the members notify the World Trade Organisation about their Regional Trade Agreements. These Agreements
are further discussed by the wider World Trade Organisation (WTO) membership based on the factual presentation prepared by
the WTO Secretariat. The Members of WTO agreed to work at the Ministerial Conference in Nairobi which was held in 2015,
towards the transformation of the provisional mechanism into a permanent mechanism.
RTAs are increasing in number and there is change in their nature constantly. There were around 50 trade agreements which were
into force in 1990 and in 2017 there were more than 280 trade agreements.
Today in many of the trade agreements, negotiation goes beyond tariffs to cover multiple policy areas which affect the trade and
investment in goods and services. It includes behind-the-border regulations like-
a. Competition policy
b. Government procurement rules, and
c. Intellectual Property Rights
In the recent years Regional Trade Agreements (RTAs) have become a very prominent feature of the Multilateral Trading System
(MTS). There has been a flow in the number of Regional Trade Agreements since early 1990s.
New Transparency Mechanism for RTAs
General Council of World Trade Organisation has established transparency mechanism for Regional Trade Agreements recently.
On 14th December, 2006, the mechanism of new transparency has been established on a provisional basis.
The salient features of the new Transparency Mechanism are as under-
a. It provides for early announcement of any Regional Trade Agreements and notification to the World Trade
Organisation.
b. Members will consider the notified Regional Trade Agreements based on a factual presentation by the WTO Secretariat.
c. The Committee on Regional Trade Agreements is entrusted with the implementation of Transparency Mechanism for
Regional Trade Agreements falling of General Agreement on Tariffs and Trade (GATT) 1994 and Article V of the
General Agreement on Trade in Services (GATS).
d. The Committee on Trade and Development (CTD) shall look after the implementation of Transparency Mechanism of
Regional Trade Agreements.
e. The mechanism must be implemented on a provisional basis.
f. The process follows where the Members will review and if necessary they shall modify the decision and replace it by a
permanent mechanism, adopted as part of the overall results of the Doha Round.
g. Members will also review the legal relationship between this mechanism and relevant World Trade Organisation
provisions related to Regional Trade Agreements.
Basic rules and principles of Trading

World Trade Organisation Agreements are lengthy and complex in nature as they are legal texts which cover a wide range of
activities. WTO Agreements deal with: agriculture, textiles and clothing, Government purchases, industrial standards and product
safety, intellectual property etc.
WTO has made the most favoured nation principle part of its rules, the members of WTO are not allowed to favour any country
based on lower tariffs or any other reason. Further, countries should not give any preferential treatment to their own goods and
services, which is known as national treatment.
The principle related to Most Favoured Nation is based on the idea and the concept that countries must treat all its trading partners
equally. There should be no trading country that is treated as ‘most favoured’ one. No country shall be given special treatment in
regard to goods and services coming from a particular trading partner (country). The concept of MFN does not include preferential
tariffs under free trade agreements. For example- Canada has a free trade agreement with Korea.
Definition of Most Favoured Nations (MFN)
The expression Most Favoured Nations may be defined as, ‘The treatment accorded by the granting State to the beneficiary State,
or to persons or things in a determined relationship with that State, not less favourable that treatment extended by the granting State
to a Third State or to persons or things in the same relationship with that Third State.’
MFN is an economic position where a country enjoys the best trading terms given by the trading partner. It receives the lowest
tariffs, the highest import quotas and fewest trade barriers. The principle says that all MFN trading partners shall be treated
equally.
Trade without discrimination

Most Favoured Nation (MFN)-
The principle that lies behind MFN is treating others equally. The Members to World Trade Organisation Agreement cannot
discriminate between trading partners. Granting any country a special favour like lower customs duty rate for some of their
products is not admissible. This principle is known as Most Favoured Nation Treatment.
The Most Favoured Nation Principle requires that every member of World Trade Organisation will treat all its trading partners
equally without any prejudice and discrimination. In case, if a member country grants some special favour or concession to another
country then it will have to extend the same favourable / concessional treatment to all other WTO members. The crux of Most
Favoured Nation Principle is the 'equality of treatment'.
This Principle is mentioned under-
Article-I of GATT that governs trade in goods;
Article-II of GATS that deals with the agreement relating to Trade in Services;
Article-IV of Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS)
Exception to the MFN Principle

Major exceptions to the general rule are -Formation of Common Markets / Free Trading Agreement / Regional Trading
Agreements; positive differential action like Generalised System of Preferences (GSP) giving special market access to a specific
country or group of countries and discriminatory actions due to unfair trade e.g. antidumping and countervailing actions.
1. Countries can set up a free trade agreement which is applicable only to goods traded within the group, discriminating
against goods from outside.
2. Developing countries may be given special access to their markets.
3. A country can raise barriers against products which are considered to be traded unfairly from specific countries.
4. Countries are allowed to discriminate in services up to limited extent.
The agreements permit these exceptions only under strict conditions. Most Favoured Nation (MFN) means that every time a
country lowers a trade barrier or opens up a market, it has to do it for the same goods or services from all its trading partners must
treat all partners equally.
National treatment
It implies equal treatment for foreigners and locals. Imported and locally produced goods must be treated equally, at least after the
foreign goods have entered the market. The same should be applicable to foreign and domestic services. It is also applicable to
foreign and local Trademarks, Copyrights and Patents.
It applies once a product and service or item of intellectual property has entered to the market. Charging customs duty on an import
is not a violation of national treatment, even if locally-produced products are not charged an equivalent tax.
Free trade
One of the most obvious means of encouraging trade is lowering trade barriers. ‘Barriers’ include customs duties or tariffs. It also
provides measure like import bans or quotas that restrict quantities selectively.
In 1947-48, since the establishment of GATT’s there have been around eight rounds of trade negotiations. Ninth round is under its
way now it is the Doha Development Agenda. These negotiations focused on lowering tariffs and customs duties on imported
goods. By mid-1990s industrial countries tariff rates on industrial goods, had fallen to less than four per cent.
Opening markets requires adjustment; the World Trade Organisation Agreements allow countries to introduce changes through
‘progressive liberalization’. Developing countries are usually given longer to fulfil their obligations.
Promoting fair competition
The system does allow tariffs in limited circumstances, other forms of protection. It is a system of rules dedicated to open, fair and
undistorted competition. The rules such as non-discrimination and national treatment are designed to secure fair conditions of
trade.
Such issues are complex and the rules try to establish what is fair or unfair how Governments can respond regarding charging of
additional import duties which are calculated to compensate for damage caused by unfair trade. The WTO Agreements aim to
support fair competition in various fields such as agriculture, intellectual property, services etc.
Predictability- From predictability, investment is encouraged and it creates jobs. Consumers can fully enjoy the benefits of
competition choice and lower prices. The multilateral trading system is an attempt by Governments to make the business
environment stable and predictable.
Advantages of Most Favoured Nation
1. It is important for smaller and developing countries as it gives them access to the larger market.
2. It lowers the cost of exports of the developing countries since trade barriers are the lowest given.
3. It helps in making their products more competitive.
4. The country's industries have a chance to improve their products as they service this large market. Their companies will
grow to meet increased demand.
5. Developing countries receive the benefits of economics of scale; it increases their exports and their country's economic
growth.
6. It reduces the ill effects of trade protectionism.
Disadvantages of Most Favoured Nation

a. The country must also grant the same to all other members of the agreement or the WTO. They cannot protect their
country's industries from cheaper goods produced by foreign countries.
b. Some of the industries get wiped out because they just can't compete.
c. Without tariffs, sometimes countries subsidize their domestic industries; it allows them to export them for incredibly
cheap prices.
d. Unfair practice will put companies out of business in the trade partner's country. The country reduces the subsidy,
prices rise, but now there's a monopoly.
South Asian Association for Regional Cooperation (SAARC)

Introduction
South Asian Association for Regional Co-operation (SAARC) was formed at Dhaka in Dec. 1985. India, Nepal, Pakistan, Bhutan,
Sri Lanka, Bangladesh and Maldives are the founding Members of SAARC and in April 2007, at the Association's 14th summit,
Afghanistan became its 8th member.
The Association was the first systematic organizational output of efforts at regional level among the Member States of South Asia.
It is an economic and political organisation of eight countries in South Asia. The Foreign Ministers, at their first meeting in New
Delhi, in August 1983, formally launched the Integrated Programme of Action (IPA) through the adoption of the Declaration on
South Asian Regional Cooperation (SARC).
The President of Bangladesh Ziaur Rahman in late 1970s, proposed the creation of a trade bloc. The idea behind the proposal was
of regional cooperation in South Asian Nations, which was later argued in 1980s. The meeting was held of Foreign Secretaries of
the seven countries for the first time in Colombo in April 1981. The Committee identified some broad areas for regional
cooperation. New areas of cooperation were added in the later years.
Objectives of SAARC
The core objective of SAARC is to promote welfare of the people of South Asia Nations which were the Founding Members of the
Association. It aimed at improving their quality of life; acceleration of economic growth; cultural development and social progress.
It further concentrates to provide all individuals the opportunity to live in dignity; to promote and strengthen collective self-
reliance among the countries of South Asia.
There are some other objectives of SAARC which includes- contribution to mutual trust, understanding another's problems,
promote active collaboration and mutual assistance in the economic, social, cultural, technical and scientific fields etc.
Some of the important objectives of SAARC are as under-
a. Promotion of welfare of people of South Asian Countries;
b. Promote mutual trust and understanding;
c. Collaboration with regional and international organisation with an objective to ensure growth of South Asian Countries;
d. To promote active collaboration and mutual assistance in the economic, social, cultural, technical and scientific fields.
e. To strengthen cooperation with other developing countries.
f. Non-interference in the internal affairs of South Asian Countries and respect for their equality, sovereignty, integrity.
Principles of SAARC
a. One of the core principles of SAARC is based on respect of sovereignty, territorial integrity, political independence and
non- interference in the internal affairs of States.
b. It emphasised that the decisions by Member States must be taken on the basis of consensus leaving aside bilateral or
any such issues.
c. Such cooperation shall not be inconsistent with bilateral and multilateral obligations.
Institutional Structure of SAARC

Secretariat
It was established in Kathmandu in 1987. The Secretariat is responsible to coordinate and monitor the implementation of various
activities of SAARC. It deals with the meetings of the Association and also serves as the channel of communication between
various international organizations and SAARC.
It comprises of-
Council of Ministers
The Council meets twice a year and may also meet in extraordinary session by agreement of Member States.
The Foreign Ministers of Member States is responsible for-
a. The formulation of policies
b. Reviewing progress
c. Deciding on new areas of cooperation
d. Establishing additional mechanisms as deemed necessary and
e. Deciding on other matters of general interest to the Association
Standing Committee
Foreign Secretaries of Member States is entrusted with-
i. The overall monitoring and coordination of programmes
ii. The modalities of financing
iii. Determining inter-sectorial priorities
iv. Mobilising regional and external resources
v. Identifying new areas of cooperation based on appropriate studies
Programming Committee
It comprises of senior officials, they meet prior to the Standing Committee Sessions. This Committee scrutinize Secretariat Budget
and finalise the calendar of activities. It also takes up any other matter assigned to it by the Standing Committee.
Technical Committees
This Committee comprises of representatives of Member States which formulate programmes and it prepares projects. The
Members are responsible for monitoring the implementation of various activities and report to the Standing Committee.
Areas of Cooperation (SAARC)
SAARC Member States realised that they could develop their countries more rapidly if they helped and cooperated with each other
in the fields like agriculture, tourism, education, sports, etc. There are different areas of united action and cooperation of SAARC.
There are eleven areas of cooperation which are agriculture and forestry, rural development; telecommunications; health and
population, meteorology, transport; sports, arts, and culture; women in development; science and technology; postal services; drug
trafficking and abuse. There are few other concerns as well of the Association such as terrorism, tourism; it deals with bilateral and
contentious issues.
Apex Bodies of SAARC
Advantages and Achievements of SAARC
SAFTA
It is a free trade agreement that is confined to goods but excludes all services such as information technology. This Agreement was
signed to reduce custom duties of all trade goods to zero in the coming years.
SAPTA
It is the South Asian Preferential Trading Agreement for promotion of trade among the Member Countries. This came into effect
in the year of 1995.
Greater cultural co-operation
SAARC aimed at greater cultural co-operation.
Promotion of economic/ political growth
It worked to promote economic, political, cultural and social growth of South Asian Countries.
Advantages to Least Developed Countries
SAARC has provided a forum for bilateral and regional agreements to the small poor nations with an aim to collaborate those
nations for development.
Disadvantages or limitations of SAARC
Political Differences
It has a negative impact on the political will to realize the economic co-operation and integration of the Member Countries.
Domination of India
India has almost seventy per cent area among all the SAARC Member Countries. The other small countries does not share border
except Pakistan and Afghanistan. It is a set-back for those countries as having major area India has an upper hand.
Inequality among Member countries-
The Member Countries of SAARC has not reached at the stage where they are able to pursue the economic development and
collaboration programme.
SAARC Charter excludes bilateral and contentious issues which making discussion on Forum.
Obstruction policies of Pakistan have caused severe issues and problems in economic co-operation among Member States of
SAARC.
The Association of Southeast Asian Nation (ASEAN)

Introduction
It is a regional grouping that promotes- political, economic, and security cooperation. It has ten Member Countries which are-
Brunei, Malaysia, Myanmar, Cambodia, Indonesia, Laos, the Philippines, Thailand, Singapore, and Vietnam.
The Member Countries has spurred economic integration; they signed six Free Trade Agreements. However, its impact lacks
diverging national priorities, strategic vision, and suffered from weak leadership. It is an association of nations which is dedicated
to economic and political co-operation in Southeast Asia countries.
Establishment of ASEAN
The Association was established in Bangkok on 8th of August, 1967. It had five Member Countries originally at the time of
establishment, those were- Thailand, Singapore, Malaysia, Philippines and Indonesia.
In the year of 1984 Brunei Darussalam joined the Association and in 1995 the Vietnam joined it, followed by Cambodia in 1999.
Objective of ASEAN
Nation building was often vulnerable to foreign intervention. It was important for the governing people to have free hands to
conduct their policies without interference from neighbouring countries. The Association was established to ensure sovereignty
stayed resolutely located at the national level.
The main objective is the acceleration of economic growth, social progress and cultural development of its members along with
the promotion of regional peace.
Following are some of the objectives of ASEAN-
a. Its core objective is to accelerate the economic growth, social progress and cultural development in the Member
Countries.
b. To promote regional peace and stability through abiding respect for justice and the rule of law.
c. Encouragement of active collaboration and mutual assistance on matters of common interest in technical, scientific,
economic, social, cultural and administrative fields.
d. It provides assistance in terms of training and research facilities in the areas related to profession, education, technical
and administrative.
e. Working together for better utilisation of agricultural and industrial aspect in order to expand trade in domestic and
international market.
f. It aims to study the problem related to international trade community, improvement of their transportation, deals with
the communicational facilities and to raise the living standards of the Member Countries.
g. To maintain close and positive co-operation with existing international and regional organisations.
Aims of the ASEAN

1. It aims to promote cooperation and collaboration of Member States and to advance the interests of the regions in whole.
2. It includes economic development and trade growth to achieve overall welfare of Member States.
3. It functions to negotiate a Free Trade Agreement among Member Nations and with other countries.
4. In the year 2015, the Association established ASEAN Economic Community to ensure regional economic integration.
5. The mission of the Association is to strive towards peace and stability among the Member Countries, through sharing
intelligence, easing extradition process of terror suspects etc.
Principles of ASEAN
The most essential and significant principle of ASEAN was non-interference among its Member Countries. The Association is
open to the participation of all States among the Sothern Eastern Asian Region. It aims to represent the collective will of Southeast
Asia Countries and to bind them together with cordial relationship.
The Association also hopes for efforts of its Member Countries to secure peace, freedom and integrity. ASEAN conducts meetings
known as the ASEAN Summit, the heads of Government of every Member Country meets to resolve various regional issues and to
find solution for the same. The purpose of the meeting is to promote sound external relations.
Fundamental principles of the Association are to create mutual respect for sovereignty and independence of Member Countries.
ASEAN holds the right of every member state to lead its national existence from external interference. The member countries of
the ASEAN commit to resort to peaceful processes in the settlement of intra-regional disputes.
AFTA (ASEAN Free Trade Area)
It aims to enhance economic co-operation by increasing ASEAN’s competitive advantage as a single production unit in the international
market. It aims of greater economic efficiency, productivity, competitiveness by elimination of tariffs and non-tariffs barriers.
Common Effective Preferential Tariff (CEPT) was adopted to affect a lower targeted tariff level which was targeted to be achieved
within a short span of ten years, i.e. by 2003. This Scheme provides for elimination of non-tariff barriers with the time period of
five years.
The implementation of CEPT is expected to facilitate the following aspects-
a. Harmonisation of standards
b. Removal of barriers of foreign investments
c. Reciprocal recognition of tests and certification procedures
d. Macro-economic consultations
e. Promotion of venture capitals etc.
APEC (Asia Pacific Economic Co-operation Forum)

This was launched in the year of 1989. This emerged as one of the most powerful regional blocs in the world. It aims to create
greater prosperity for the people of member countries by promoting inclusiveness, sustainable growth; balance and by accelerating
the regional economic integration. It works to help all residents of the Asia-Pacific participate in the growing economy.
The working groups of APEC are headed by experts who consider specific issues such as energy, transportation, tourism, fishing,
and telecommunications. The APEC Secretariat was established in the year of 1993 and it has its headquarters in Singapore. It
works to provide advisory and logistic services as well as research and analysis.
It was formed with an aim to encourage a growing and prosperous economy by focusing on the following aspects-
1. Trade and investment liberalisation and facilitation
2. Reduced costs of cross-border trade to assist businesses
3. Economic and technical cooperation
4. Simplified regulatory and administrative processes
5. Improved institutional capacity to implement and take advantage of the benefits of trade and investment reform.
European Union
Introduction
European Union evolved from a regional economic agreement in 1951 between six neighbouring countries. In Europe, unions
between royal dynasties for territorial consolidation were the mode. There were also a few country-level unions arranged like
Austro-Hungarian Empire and the Polish-Lithuanian Commonwealth.
European Union is not a federation it is a free-trade association such as NAFTA, the ASEAN etc. It also has several attributes of an
independent nation, as it has its own flag, founding date, anthem, currency and foreign policies in its interactions with other
countries.
Essential features of European Union (EU)
a. EU is an economic and political union which has twenty eight Member States which are located in Europe.
b. EU operates through a system of independent institutions and inter-governmental negotiated decisions by the Member
States.
c. The institutions of EU includes-
1. The European Commission
2. The Council of EU
3. The European Council
4. The Court of Justice of EU
5. The European Central Bank
6. The Court of Auditors
7. The European Parliament
d. The European Parliament is elected for every five years by European Union Citizens
e. The policies of EU aim to ensure the freedom of people, free movement of goods, services and capital.
f. EU also aims to maintain common policies on agriculture, trade, fisheries and regional development.
Member Countries of European Union
It has twenty eight member countries which are- Austria, Belgium, Bulgaria, Croatia, Cyprus Republic, Denmark, Estonia, France,
Finland, Greece, Germany, Hungry, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania,
Slovakia, Slovenia, Spain, Sweden and United Kingdom (U.K).
Constitution of European Union
Executive Branch
The European Council contains heads of State Government and the President of the European Commission. It meets at least twice
a year. The aim of Executive Branch is to provide-
a. The push for the major political issues relating to European integration
b. To issue general policy guidelines
Legislative Branch
The Council of the European Union consists of 25 Member State Ministers, who have 321 votes. The number of votes is
proportional to Member States’ population. The Council of European Union is the main decision-making body. The European
Parliament has 732 seats in total and seats are allocated among Member States by proportion to population. Members are elected
by direct universal suffrage for a term of five years.
Judicial Branch
The judicial branch of European Union consists of the Court of Justice. It has twenty five Judges; there is one Judge from every
Member State who is appointed for a term of six years. The Court can sit with eleven Judges which is known as the ‘Grand
Chamber’.
Purpose of EU
The purpose of EU is to become more competitive in the global market place; it also aims to maintain balance between the needs
of independent fiscal and political members.
Objectives of EU
The core objective of the EU is to maintain closer economic and political integration among the Member countries in the following
ways-
a. Establishing an economic and a monetary union;
b. Implementing a common foreign and defence policy;
c. Strengthening of its economic and political institutions; and
d. Developing relations in the spheres of’ home affairs and justice.
Goals of European Union

Following are the goals of EU-
1. Promote peace and its values for ensuring the well-being of citizens
2. Its goal is to offer freedom, security and justice without any internal borders
3. It focuses on the sustainable development which is based on balanced economic growth and price stability
4. It aims to maintain highly competitive market economy which will offer full employment, social progress, and
environmental protection
5. Combat social exclusion and discrimination
6. It aims to promote scientific and technological progress
7. Enhancement of economic, social, territorial cohesion and solidarity among EU countries
8. Respect its rich cultural and linguistic diversity
Values of European Union

Freedom
The freedom of movement is the most significant principle of EU. Right of free movement and reside freely within the Union is
the foremost value of EU. It focuses on individual freedom such as freedom of thought, respect for private life, freedom of religion,
freedom to assemble, freedom of expression etc.
Human dignity
It must be respected protected and it is the base of all fundamental rights of every citizen.
Democracy
The foundation and establishment of EU are based on representative democracy. European citizens also enjoy various political
rights. EU citizens have the right to stand as candidate and to vote in their country of residence, or in their country of origin.
Rule of law
European Union is based on the rule of law. Every activity of EU is based on treaties, voluntarily and democratically mutually
agreed by its EU countries. Law and justice are upheld by an independent judiciary. The EU countries gave final jurisdiction to the
European Court of Justice which judgements.
Equality
EU ensures equal rights for all its member countries before the law. EU policies ensure European integration. The principle that
promotes equal pay for equal work became a part of Treaty of Rome in 1957.
Human rights
Human rights are protected by the EU Charter of Fundamental Rights. These cover the right to be free from discrimination on the
basis of-
Sex, racial or ethnic origin
Religion or belief
Disability, age or sexual orientation
The right to the protection of your personal data, and
The right to get access to justice.
SINGLE EUROPEAN ACT (SEA)

The primary aim of the Single European Act (SEA) was, to “add new momentum to the process of European construction so as to
complete the internal market” (European Commission, 2007). It was felt that by enhancing co-operation and co-ordination within
the Community, its international influence could be strengthened, thus allowing for more effective competition as a single
economic entity against the United States of America and Japan. In order to achieve this, it was necessary to adapt the internal
workings and decision making processes of the Community by amending the 1957 Treaty Establishing the European Community.
As will be seen, this largely involved changes to the relative powers of the institutions and the introduction of Qualified Majority
Voting (European Commission, 2007). From a theoretical perspective, the SEA arguably demonstrates the neo-functionalist
concept of technical spill-over: harmonisation is achieved through necessary sequential policy development.
The Single European Act was signed by the member states’ foreign ministers at the Inter-Governmental Conference in
Luxembourg during February 1986. The main provisions of the SEA were as follows:
Economic Provisions
The establishment of the Single Market, defined as: “an area without internal frontiers in which the free movement of goods,
persons, services and capital is ensured in accordance with the provisions of this Treaty" (European Commission, 2007). This was
to be achieved by the removal of physical barriers to the movement of people and goods (such as border immigration and customs
posts). The removal of technical barriers. That is, freedom of movement of:
1. Labour, skills and professions.
2. Capital and financial services.
3. Technology and intellectual property.
4. Public procurement (i.e. provision of utilities).
5. Common testing and certification of product standards.
6. Transport – de-regulation of the transport markets.
7. The removal of fiscal barriers (VAT and Excise duties)
Political Provisions
A commitment in the preamble by member states to “transform relations as a whole among their States into a European Union”. A
commitment to the principle of future Economic and Monetary Union. The introduction of Qualified Majority Voting for policy
decisions concerning the Single Market. With the exceptions of direct taxation and movement of people.
An extension of the powers of the European Parliament:
1. The establishment of the co-operation process for QMV policies – the right to amend.
2. The right of assent to future enlargements.
3. Formal recognition of the European Council.
4. Empowerment of the Council (having consulted the Commission and Parliament) to establish the Court of first
Instance
5. The formalising of European Political Co-operation
6. Commission “fully associated” and Parliament “closely associated”.
7. The Commission responsible for ensuring that the external policies/actions of the Community were consistent with
those agreed under EPC.
THE MAASTRICHT TREATY, 1992

The Maastricht Treaty was approved by heads of government of the states making up the European Community (EC) in December
1991. The treaty required voters in each country to approve the European Union, which proved to be a hotly debated topic in many
areas. The agreement took ended with the creation of the European Union and has since been amended by other treaties. The
Maastricht Treaty was signed on February 7, 1992, by the leaders of 12 member nations (Belgium, Italy, Luxembourg, France,
Netherlands, West Germany, Denmark, Ireland, United Kingdom, Greece, Portugal, and Spain). The treaty entered into force
November 1, 1993.
Effects of the Maastricht Treaty and European Unionization
The Maastricht Treaty had a few major areas of impact. One was citizenship. The treaty, in forming the European Union (EU),
granted EU citizenship to every person with citizenship of a member state. It enabled people to run for local office and for
European Parliament elections in the EU country they lived in, regardless of nationality.
It also created a common economic and monetary union, with a central banking system and common currency (euro (EUR)). The
European Central Bank (EBC) had one main objective: to maintain price stability; basically, to safeguard the value of the euro. It
also created a roadmap towards the introduction and implementation of the euro. This started with free movement of capital
between the member states, which then graduated into increased cooperation between national central banks and the increased
alignment of economic policy among member states.
The final step was the introduction of the euro itself, along with the implementation of a singular monetary policy, coming from
the ECB. It also introduced the criteria that countries must meet in order to join the euro. This was a measure to ensure that
countries joining the euro were stable in inflation, levels of public debt, interest rates and exchange rates.
A major goal was greater policy co-operation and co-ordination more generally. The environment, policing and social policy were
just some of a number of areas in which the countries aimed to increase co-operation and co-ordination.
Organisation of Petroleum Exporting Countries [OPEC]

Introduction
OPEC is an organisation of fourteen oil producing nations; it controls around 61% of the world’s oil exports and also holds 80% of
the world’s proven oil reserves. It has a significant impact on oil prices as well.
It is a permanent inter-governmental organization of oil-exporting developing nations which unifies and co-ordinates the
petroleum policies of its Member Nations. It ensures the stabilisation of the oil prices in the international oil market with a view of
eliminating harmful and unnecessary fluctuations in the oil prices and market.
OPEC plays an important role in securing an effective economic and regular supply of petroleum to consuming nations and
maintaining a fair return on capital to petroleum industry.
Historical Background of OPEC
In the year of 1960, five countries allied to regulate the supply of oil and its price. These five countries have realized the non-
renewable resources. OPEC was founded on 14th September, 1960, it was the result of a meeting which was conducted in
Baghdad and was attended by Five Founder Member of OPEC. Those five members were- Iran, Iraq, Kuwait, Saudi Arabia and
Venezuela. OPEC was registered with the United Nations Secretariat on 6th Nov, 1962, following UN Resolution. It has its
headquarters at Vienna, Austria.
Member Countries of OPEC
There are at present fifteen member nations of OPEC which are- Algeria, Angola, Congo, Ecuador, Equatorial Guinea, Gabon, IR
Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela.
Purpose of OPEC
It is considered a cartel. A cartel may be defined as an organization of producers of goods or services that collectively agree to
regulate the output in an attempt to control the price of the good or service. Reducing the supply of oil, for example, tends to
increase its price, while increasing the supply will tend to reduce its price.
The primary purposes of OPEC are to control and manage the market price of oil by controlling the supply offered to the market.
It believes engaging in this coordinated activity which helps to ensure-
a. Stable oil prices
b. A regular supply of oil to consumers that is both efficient and economic
c. A steady income to producers of oil
d. A fair return for investors in the industry
Functions
The OPEC Member Countries coordinate their oil production policies in order to help stabilise the oil market and to help oil
producers achieve a reasonable rate of return on their investments. This policy is also designed to ensure that oil consumers
continue to receive stable supplies of oil.
The Member Countries hold meetings at various levels of interest, including meetings of petroleum and economic experts, country
representatives and special purpose bodies such as committees to address environmental affairs.
Decisions about matching oil production to expected demand are taken at the Meeting of the OPEC Conference. Details of such
decisions are communicated in the form of OPEC Press Releases.
The Ministers of energy and hydrocarbon affairs meet twice a year to review the status of the international oil market and the
forecasts for the future in order to agree upon appropriate actions which will promote stability in the oil market.
Goals of OPEC
Oil prices stable
The most important goal of OPEC is to keep the oil prices stable. It wants to ensure that the Member Countries of OPEC get oil at
a reasonable price.
Reduce oil price volatility
Second most important goal of OPEC is to reduce oil price volatility. For maximum efficiency, oil extraction must run complete
day and whole week. Closing facilities could physically damage oil installations and even the fields themselves. Ocean drilling is
difficult and expensive to shut down.
Adjust world’s oil supply
The third goal of OPEC is to adjust world’s oil supply while dealing with the shortages. The Oil and Energy Ministers of OPEC
members meet at least twice a year, to coordinate their oil production policies.
OPEC & WTO ROLE IN PETROLEUM SECTION
The Organization of Petroleum Exporting Countries (OPEC) and the World Trade Organization (WTO) are two of the most visible
international economic institutions. But, they are often associated with two diametrically opposed players in the global economy:
the WTO with the sometimes savage rules of the market and OPEC with the often demonized intergovernmental manipulation of
prices. Many believe that OPEC and the WTO do not have anything in common, arguing that OPEC’s domain of oil resource
management does not have anything to do with the WTO. Indeed, every time oil succeeds in occupying the news headlines, often
because of a price hike or collapse and consequent concerted governmental intervention in the name of correcting market failures,
while OPEC comes in as the embodiment of that concerted governmental intervention against market forces, the WTO is nowhere
to be seen in its professed role as the guardian of those same forces. This raises the important question of whether or not the WTO
has any role in the petroleum sector.
Petroleum is the largest primary commodity of international trade in terms of both volume and value. There is also the obvious
national security element involved in it for both producing/exporting and consuming/importing countries. The political stability
and economic survival of both groups of countries—and hence of the entire international community—depends to a large extent on
the availability and affordability of oil in the international marketplace. It is widely believed that high oil prices were responsible
for several global economic recessions in the history. The Organization of Petroleum Exporting Countries (OPEC) and the World
Trade Organization (WTO) are two of the most visible international economic institutions today. But, they are often associated
with two diametrically opposed players in the global economy: the WTO with the sometimes savage rules of the market and OPEC
with the often demonised intergovernmental manipulation of prices.
Energy has become increasingly important in international trade relations. However, the World Trade Organization (WTO) does
not deal specifically with this sector, and this creates several problems when it comes to regulating trade in energy goods and
services. The situation is further complicated, on the one hand, by the need to foster the diffusion of renewable energy to address
the current environmental concerns and, on the other, by the total and overwhelming control exercised by the Organization of
Petroleum Exporting Countries (OPEC) over the oil market.
It is true that, recently, the WTO has shown an increasingly open approach towards environmental issues. However, free trade is
still the backbone of the Organization and trade liberalization its main goal. This explains why the WTO Panel and Appellate Body
are still reluctant to justify measures adopted to support the renewable energy sector that may conflict with international trade law.
Different might be the case with fossil fuels, the main competitor of renewable energy. OPEC exploits several strategies to control
oil prices, which, at least in theory, clash with international trade rules. However, whatever the reason, such practices have never
been challenged in front of the WTO. The way WTO provisions are interpreted and applied by the Panel and the Appellate Body
when environmental concerns are involved can be used as a starting point to forecast a hypothetical judgment in case OPEC’s
practices were eventually challenged.
North American Free Trade Agreement (NAFTA)

NAFTA eliminated most of the tariffs on trade between Canada, Mexico and United States which came into effect on 1st Jan,
1994. Its purpose is to encourage economic activity between North America’s major economic powers. It works in various fields
related to agriculture, textile and automobiles.
Establishment of NAFTA
It was inspired by the growth of European Economic Community in 1957-93 that worked in elimination of tariffs to stimulate trade
among Members. Free trade area in North America would bring prosperity by increasing trade and production which results in
creation of a number of jobs.
A Canadian and United States free-trade Agreement was concluded in the year of 1988. NAFTA extended that agreement’s
provisions to Mexico. NAFTA was negotiated by administration of US President Mr. George Bush; Canadian Prime Minister Mr.
Brian and Mexican President Carlos Salinas.
Preliminary agreement on NAFTA was reached in August in the year of 1992; it was signed by three leaders. NAFTA was ratified
by three countries’ national legislature in 1993 and it came into effect on 1st Jan, 1994. NAFTA is an executive agreement,
reached on August 12, 1992.
NAFTA
It is an agreement among the United States, Canada and Mexico designed to remove tariff barriers between three countries.
Additions to NAFTA
NAFTA was supplemented by two other regulations:
a. The North American Agreement on Environmental Cooperation (NAAEC) and
b. The North American Agreement on Labour Cooperation (NAALC)
These side agreements were intended to prevent businesses from relocating to other countries to exploit lower wages, safety
regulations, lenient worker health, and looser environmental regulations.
Functions of NAFTA
1. Most Favoured Nations- NAFTA grants the status of co-signer to the Most Favoured Nations. The Countries must give
equal treatment to all member nations and better treatment to domestic investors. No better offer can be made to the
investors to countries which are not the Members of NAFTA.
2. Elimination of Tariffs- Elimination of tariffs from imports and exports between Mexico, United States and Canada.
NAFTA created specific rules to regulate trade in farm products, automobiles, clothing and to some services like
telecommunications and finance.
3. Certificates of Origin- The exporters must get certificates of origin to waive off tariffs. For example a product made in
Chile but shipped from Mexico then duty will be charged if the product enters to United States or Canada.
4. Resolution of dispute- NAFTA protects its Members from unfair practices. NAFTA Secretariat facilitates an informal
resolution between the parties. It also establishes a panel to review the dispute. It further held the members to save time
and efforts from investing in lawsuits.
5. Patents, Trademarks and Copyrights- It focuses that all member countries must respect patents, trademarks and
copyrights. It also ensures that these intellectual property rights don’t interfere with trade.
6. NAFTA agreement allows travelling easy access throughout all three countries.
Effects
NAFTA produced mixed results. Mexico did experience a dramatic increase in its exports. The surge in exports was accompanied
by an explosion in imports as well, resulting in an influx of better-quality and lower-priced goods for Mexican consumers.
During post-NAFTA the economic growth was not impressive in any of the countries involved. The United States and Canada
suffered greatly from several economic recessions. The Gross Domestic Product of Mexico grew at a lower rate compared to other
Latin American countries like Brazil and Chile. Mexico’s growth in terms of income per person also was not significant.
There was growth and development in the labour market which dramatically changed the outcomes of the countries involved in the
treaty. Due to immigration restrictions the wage gap between Mexico and the United States/ Canada did not shrink.
Lack of infrastructure in Mexico caused the firms of United States and Canada to not invest directly in that country. Hence, there
were no significant job losses in the U.S. and Canada; no environmental disaster caused by industrialization in Mexico.
Disadvantages and Criticism
a. It is a radical experiment engineered by influential multinational corporations seeking to increase their profits at the
expense of the ordinary citizens of the countries involved.
b. Opposition groups argued that overarching rules imposed by NAFTA could undermine Local Governments by
preventing them from issuing laws or regulations.
c. NAFTA would bring major degradation of environment and health standards, would promote privatization etc.
The South Asian Free Trade Area (SAFTA)

It is an agreement that was reached on 6th Jan, 2004, at 12th SAARC Summit which was held in Islamabad of Pakistan. It created
a free trade among people in India, Nepal, Bangladesh, Bhutan, Maldives, Pakistan and Sri Lanka.
It has seven Member Countries; the Foreign Ministers of the region signed a framework Agreement on SAFTA. The Agreement
aims to reduce customs duties of all traded goods to zero in near future. The process of establishing a free trade area like SAFTA
has been delayed due to India-Pakistan differences on Kashmir issue.
SAFTA presupposes abolition of all kinds of trade and tariff restrictions. Ultimately it will pave the way for the creation of
common market with common currency. Seven SAARC member countries agreed upon to reduce tariffs. SAFTA Agreement
allows any states to pull out of the treaty at any time.
Components of SAFTA
Components SAFTA may, consist of arrangements relating to-
1. Tariffs
2. Direct Trade Measures
3. Non-Tariff Measures
4. Para-Tariffs
Objectives of SAFTA
The objectives of this Agreement are to promote and enhance mutual trade and economic cooperation among Contracting States in
the following manner-
a. Eliminating barriers to trade and facilitating the cross-border movement of goods between the territories of the
Contracting States;
b. Promoting conditions of fair competition in the free trade area, and ensuring equitable benefits to all Contracting States,
taking into account their respective levels and pattern of economic development;
c. Creating effective mechanism for the implementation and application of this Agreement, for its joint administration and
for the resolution of disputes; and
d. Establishing a framework for further regional cooperation to expand and enhance the mutual benefits of this Agreement.
Principles of SAFTA
SAFTA shall be governed in accordance with the following principles:
1. Regulations, decisions, understandings and protocols to be agreed upon within its framework by the Contracting States;
2. The Contracting States affirm their existing rights and obligations with respect to each other under Marrakesh
Agreement Establishing the World Trade Organization and other Treaties/Agreements to which such Contracting States
are signatories;
3. SAFTA shall be based and applied on the principles of overall reciprocity and mutuality of advantages in such a way as
to benefit equitably all Contracting States, taking into account their respective levels of economic and industrial
development, the pattern of their external trade and tariff policies and systems;
4. SAFTA shall involve the free movement of goods, between countries through, elimination of tariffs, para-tariffs and
non-tariff restrictions on the movement of goods, and any other equivalent measures;
5. SAFTA shall entail adoption of trade facilitation and other measures, and the progressive harmonization of legislations
by the Contracting States in the relevant areas;
6. The special needs of the Least Developed Contracting States shall be clearly recognized by adopting concrete
preferential measures in their favour on a non-reciprocal basis.
General Exceptions
a. Nothing shall be construed to prevent any Contracting State from taking action and adopting measures which it
considers necessary for the protection of its national security.
b. Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary
or unjustifiable discrimination between countries where the similar conditions prevail, or a disguised restriction on intra-
regional trade, nothing shall prevent any Contracting State from taking action and adopting measures which it considers
necessary for the protection of-
1. Public morals;
2. Human, animal or plant life and health; and
3. Articles of artistic, historic and archaeological value
Main instruments of SAFTA

Trade Liberalisation Programme
The Contracting Countries must follow the tariff reduction schedule; there must be a fall up to 20% tariff from the existing non
least developing countries and 30% reduction in tariff from least developed countries.
SAARC countries have also agreement to promote free trade area amongst them but their economic integration is doubtful.
Pakistan has agreed to operationalize SAFTA but still there are certain reservations regarding unrestricted entry of imports and
exports from India.
Pakistan may play an important role in facilitation transmission of energy supplies to India; it could provide the transit route for oil
and gas from Iran and Central Asia. However, it is offering no support as such to India, which is leading to trade obstruction and
hindrance to free trade.
SAFTA Agreement was a major step towards the trade liberalization as it provides reduction of tariffs on imports to Least
Developed Countries. However, even after several steps SAFTA failed to meet its aims and goals due to following reasons-
1. The political will and coordination is lacking among the member countries;
2. Pakistan does not provide support which caused several hurdles in free trade;
3. Lack of transport facilities lead to grave challenge to trade. There is a need to build smooth transportation route between
member countries;
4. There are many products which could not be exchanges between member countries due to various political and other
issues
List of references
Sr.No Details
Course Outline of Unit V: Settlement of Disputes in International Trade

Methods of Dispute Settlement - Alternative Dispute Resolution (ADR) and International Trade - UNCITRAL - International
Arbitration, Conciliation, Mediation and Litigation - Online Dispute Resolution - Dispute Settlement Body in WTO - Appellate
Body (AB) - Consultation - Trade and Environment Controversies - Enforcement and Compliance
Introduction
The term “commercial” should be given a wide interpretation so as to cover matters arising from all relationships of a commercial
nature, whether contractual or not. Relationships of a commercial nature include, but are not limited to, the following transactions:
any trade transaction for the supply or exchange of goods or services; distribution agreement; commercial representation or
agency; factoring; leasing; construction of works; consulting; engineering; licensing; investment; financing; banking; insurance;
exploitation agreement or concession; joint venture and other forms of industrial or business cooperation; carriage of goods or
passengers by air, sea, rail or road, as defined under Article 1 of UNICTRAL Model Law.
In Atibari Tea Co. Ltd. v. State of Assam [AIR 1961 SC 232]- It was held by the Supreme Court that activities such as exchange of
commodities for money or other commodities, carriage of persons and goods by roads, rail, air or waterways, supply of energy,
postal and telegraphic services etc. may be called as commercial intercourse within the meaning under Article 301 of the
Constitution of India which is related to freedom of trade, commerce and intercourse.
Types of Commerce
There are two types of commerce-
a. Internal Commerce or Interstate Commerce;
b. International Commerce
Internal Commerce
It is carried on between man and man in a State or between different parts of the same State and it does not extend to or affect other
States.
International Commerce
It is between States or Nations which are entirely foreign to each other. It takes place to achieve higher rate of profit.
International market present more potential than the domestic markets. The international markets are wide in scope, varied in
consumer tastes, preference and purchasing abilities, size of population etc.
Disputes
The term ‘dispute’ refers to ‘a conflict’ or ‘controversy’. Dispute between two parties arises when one asserts a particular
proposition and the other party denies the same. The term ‘dispute’ means quarrel between two or more rival parties laying claim
over the subject-matter of same controversy.
It implies some kind of a disagreement over some issue over a common subject-matter. It also refers to a difference of opinion
which results in difference regarding the interests, rights and liabilities of the concerned parties.
Under the international commercial transactions, there will be a legal relationship between the parties where one is a seller and
other is a buyer and there is relationship of selling and purchasing of goods from one another.
International Commerce also maintains relationships with persons willing to transfer of goods from one State to another. It also
maintains relationship with persons willing with insurers who protect their goods from the situation of loss or damage.
It deals with statutes of States from where goods are exported and they are imported, while dealing it has to be decided under
which legal system it will come and which has jurisdiction over such matter.
Institutions of International Commercial Disputes
Following are the various international commercial disputes institutions-
International Council for Commercial Arbitration (ICCA)
It was formed in the year of 1969 with an aim to promote the use of International Commercial Arbitration for resolution and
settlement of dispute between the parties. It consists of member from various countries.
International Chamber of Commerce (ICC)
ICC has its International Court of Arbitration in Paris. It is the world’s leading international arbitration institution. There are
around 50 member countries in the world; the arbitration is conducted in many countries throughout the world.
Following are some of the unique features of ICC-
a. The Tribunal and the parties are required to draw up the terms of reference, the main reason of this activity is to define
the issues which are to be determined;
b. The comprehensive supervision over the proceedings which is to be exercised by the Court of Arbitration.
The International Centre for Settlement of Investment Dispute (ICSID)

This was created under the auspices of the World Bank pursuant to 1965 Washington Convention on the settlement of investment
disputes between States and Nationals of other States. It must have jurisdiction over a dispute.
The London Court of International Arbitration (The LCIA)
It is an international organisation which conducts LCIA Rules. It is the Arbitral Tribunal which is appointed by the Court. It
exercises supervision over arbitration preferring to lay greater emphasis on the autonomy of the Tribunal.
The International Centre for Settlement of Investment Disputes (ICSID)
It was created under the World Bank pursuant to the Washington Convention held in 1965 on settlement of investment disputes
between States and Nationals of other States.
The Asian African Legal Consultative Committee (AALCC) Regional Centres
Three international regional arbitration centres have been set up under the Asian African Legal Consultative Committee in Kuala
Lumpur, Cairo and Lagos to provide the international arbitration services.
The American Arbitration Association (AAA)
It is one of the most prominent national arbitration institutions; it handles significant numbers of international arbitrations.
National Arbitration Bodies
Specialised arbitral institutions have been set up in most of the countries for the use of commercial arbitration. It plays an
important role in developing of infrastructure for international commercial arbitration.
United Nations Commission on International Trade Law (UNCITRAL)
The UNCITRAL commenced its effect on the international commercial arbitration with a solicited report submitted by the
Secretary General of United Nations Organisation. The report made a comparative analysis of certain international instruments in
various fields; it also reviewed the relationship between national and international commercial arbitration; it dealt with arbitration
rules etc.
The United Nations Commission on International Trade Law works in the field of commercial arbitration that has been extensive.
It functions in improving the quality and universal acceptability of arbitration as one of the most effective means for the settlement
of international commercial disputes.
The UNCITRAL Arbitration Rules works to coordinate activities of other organizations active in the field for the modernization. It
is now gaining momentum, it have the strong support of the United States and of the American Arbitration Association.
UNCITRAL was established in the year of 1966 by a General Assembly Resolution of the United Nations. It was established by
the proposal of Hungary which urged that the United Nations to play a more active role in removing or reducing legal obstacles in
international trade.
There are several international bodies which were entrusted with the harmonization of law;however none could attract global
participation. UNCITRAL attempted to fill the gap and play the role. UNCITRAL has accomplished concrete work in several
fields and it is now widely recognized as the core legal body for the unification and harmonization of international trade law.
It was established to perform substantive work on various issues such as-
International Payment
Commercial Arbitration
UNCITRAL holds its annual sessions in alternative years at United Nations Headquarters in New York and at the Vienna
International Centre at Vienna. Each working group holds one or two sessions a year depending on the subject-matter.
Role of United Nations in International Trade Law through UNCITRAL
Trade laws of various countries failed in reducing legal obstacles which caused hurdles in free flow of international trade. United
Nations Commission could not find time to deal with the issues of private international trade. To resolve such issues the General
Assembly of United Nations established United Nations Commission for International Trade Law (UNCITRAL) on 17th
December, 1966. The objective of the Commission is to harmonise and unify the international trade laws among member countries
to ensure equal growth and opportunity for each member.
There were various Conventions which UNCITRAL has produced and the Commission has worked on establishing various
Agencies such as United Nations Convention on the Carriage if Goods by Sea, UNCITRAL model law on cross-border insolvency
etc.
International Commercial Arbitration and Conciliation
UNCITRAL Arbitration Rules, 1976
It was adopted on 15th December, 1976, to provide a comprehensive set of procedural rules upon which parties may agree for the
conduct of arbitral proceedings arising out of their commercial relationship. These rules are widely used in many contexts.
UNCITRAL Conciliation Rules, 1980
When the parties to dispute want to settle their conflict amicably through conciliation, both the parties may mutually agree upon to
set procedural rules governing conciliation proceedings.
UNCITRAL Model Law on International Commercial Arbitration, 1985
This is designed to assist States in reforming and modernizing their laws based on arbitration proceedings this is done to take into
account the basic features and needs of international commercial arbitration. It was adopted in the year of 1985 for developed as
well as for developing nations.
UNCITRAL Model Law on International Commercial Conciliation, 2001
This is designed to assist States in creating new, enhancing existing, and legislation governing use of conciliation or mediation
conducted by a neutral third party with an aim to amicably resolve their disputes. This model was adopted in 2002. The Model Law
further aims to assists executive branches such as of Governments, Parliaments and legislatures.
The purpose of adoption of this legal guide in 1992 is to assist the parties in negotiation of international counter-trade transactions.
It helps in identification of legal issues involved in contractual and trade based transactions and discuss possible contractual
solution to the issues.
The need of Model Law on International Commercial Arbitration
UNCITRAL Model Law on International Commercial Arbitration is required as the domestic laws are at time not appropriate for
international cases and that considerable disparity exists between them. There are various reasons of the need of international
commercial arbitration which are as under-
a. Inadequacy of domestic laws of arbitration- The global survey revealed that considerable disparities are there in the
domestic laws related to arbitration. Most of the domestic laws are not comprehensive in nature; hence there was an urgent
need of international commercial arbitration.
b. Disparity between National laws of arbitration- The domestic law with the risk of frustration may adversely affect the
functioning of the arbitral process and also the selection of place of arbitration.
UNCITRAL Arbitration Rules
Model Arbitration Clause- UNCITRAL
Any dispute, controversy or claim arising out of or relating to any contract, or the breach, termination or invalidity thereof, shall be
settled by arbitration in accordance with the UNCITRAL Arbitration Rules as in force.
Notice of Arbitration
The party initiating recourse to arbitration is called as the "claimant" and shall give to the other party called as the "respondent" a
notice of arbitration. Arbitral proceedings shall be deemed to commence on the date on which the notice of arbitration is received
by the respondent.
The notice of arbitration shall include the following-
a. A demand that the dispute be referred to arbitration;
b. The names and addresses of the parties;
c. A reference to the arbitration clause or the separate arbitration agreement that is invoked;
d. A reference to the contract out of or in relation to which the dispute arises;
e. The general nature of the claim and an indication of the amount involved, if any;
f. The relief or remedy sought;
g. A proposal as to the number of arbitrators (i.e. one or three), if the parties have not previously agreed thereon.
Arbitration Proceedings- UNCITRAL

The Arbitral Tribunal may conduct the arbitration in such manner as it considers appropriate, provided that the parties are treated
with equality and that at any stage of the proceedings each party is given a full opportunity of presenting his case.
If either party so requests at any stage of the proceedings, the Arbitral Tribunal shall hold hearings for the presentation of evidence
by witnesses, including expert witnesses, or for oral argument. In the absence of such a request, the Arbitral Tribunal shall decide
whether to hold such hearings or whether the proceedings shall be conducted on the basis of documents and other materials.
All documents or information supplied to the Arbitral Tribunal by one party shall at the same time be communicated by that party
to the other party.
The Arbitral Award
When there are three arbitrators, any award or other decision of the Arbitral Tribunal shall be made by a majority of the arbitrators.
In the case of questions of procedure, when there is no majority or when the Arbitral Tribunal so authorizes, the presiding
arbitrator may decide on his own, by the Arbitral Tribunal.
International Commercial Arbitration

Introduction
The International business community all across the globe has accepted international commercial arbitration as an effective
mechanism for resolving its commercial disputes. Unwillingness of parties to have matters resolved in the National Court of the
other disputing party, with unfamiliar law, language and culture, is treated as one of the major reasons for this preference.
‘Arbitration’ is a process by which parties agree to have their disputes determined by a third party, an arbitrator in the form of a
final and binding arbitral award. Parties can agree to arbitration when negotiating the terms of the contract or after a dispute has
arisen. It is easier to agree to arbitration at the beginning of a commercial relationship as, once a dispute arises, it can be difficult
for parties to agree on anything.
‘Commercial arbitration’ may be international or domestic. Arbitration is international if the parties to an arbitration agreement
have their places of business in different countries or if the place of arbitration or a substantial part of the obligations of the
commercial relationship is in a country outside that of the place of business of the parties.
International Commercial Arbitration as a form of alternative dispute resolution has flourished over the past decades. Parties to an
arbitration agreement choose to have their dispute settled by means of arbitration and thereby exclude national courts from
deciding on matters covered by their agreement.International commercial arbitration is governed by different international
instruments, like the UNCITRAL Model Law on International Commercial Arbitration, which has had a major influence on
national arbitration laws.
International arbitration protects parties from the uncertainty of litigation in local domestic courts, which is of particular concern in
some developing countries, and provides a private forum for the resolution of commercial disputes.
Meaning of International Commercial Arbitration
International commercial arbitration is an alternative method of resolving disputes between private parties arising out of
commercial transactions conducted across national boundaries that allow the parties to avoid litigation in National Courts.
Importance of International Commercial Arbitration
International commercial arbitration is one of the most important legal institutions in international private law. The nature of
arbitration depends largely on autonomy of the parties, who choose arbitration procedure in which the dispute will be settled; place
where the arbitration is to be held; Arbitral Tribunal etc. The most important and considerable expression of the autonomy is the
right to choose the law, which is to be applied to merits of the dispute.
Some of the important features of international commercial arbitration are as under-
a. In international trade and commerce every commercial activity is preceded by a contract to avoid legal disputes. When
dispute arises between the parties, mutual settlement through an arbitrator is the best way to resolve a dispute.
b. The parties of international trade are reluctant to seek settlement for disputes in Court of Law, as the judicial process is
very complexed, expensive and time consuming. Parties prefer speedy justice hence they approach arbitration to find a
speedy solution of their problems.
c. Arbitration is better than litigation, as diversities of legal rules among countries lead to uncertainties between the parties
regarding their rights and duties.
d. The traders insist on the embodiment of an arbitration clause in the contract. The arbitration clause provides machinery
to international character of the transaction and facilitates the execution of the award in various jurisdictions.
e. Arbitration is a means and not an end; it has speedy, economic and expert judgment to commend itself.
Non-judicial or Alternative Dispute Resolution (ADR)
Meaning of Alternative Dispute Resolution- It includes only that process in which the decision is finally arrived at, with the
consent of the parties, like- negotiation, arbitration, and mediation. The Conciliator does not himself decide the dispute; he
facilitates the resolution and helps the parties to mutually resolve their issues. Arbitration process settles the dispute outside the
Court, it is considered as Arbitration process, as it helps the parties to negotiate and settle their disputes.
Procedure or techniques of ADR
There are four dispute resolution methods in international trade which are as follows-
Negotiation
Negotiation is a non-binding procedure where the discussion between the parties is initiated without any intervention of a third
party. In this a party directly approaches the other with the offer of a negotiated settlement. It is a voluntary, non-binding
procedure for settlement of the dispute.
It is a settlement method of a dispute which is applied in international dispute settlement. The result of the negotiation could be
either resolution of dispute or not. Negotiation is conducted in two ways:
a. The two parties directly meet each other to discuss and deal;
b. One party submit complaint to the other party and the other party answers the complaint.
Mediation
Mediation is a non-binding procedure in which an impartial and neutral third party, the mediator assists the parties to a dispute in
reaching a mutually satisfactory and agreed settlement. The Mediator may also hold private session with each party separately and
goes back and forth between them. It is an informal process where a negotiation of dispute between the parties is made.
It is the method of resolution of dispute between the parties by intervention of a third party. It can be accomplished by two ways-
a. The parties agree with each other about mediation, the mediator will be designated and conduct the mediation.
b. The parties agree to conduct the mediation under rules of a professional organization or one specific arbitration
institution, like mediation rules of the International Chamber of Commerce (ICC).
Commercial arbitration and conciliation

Arbitration
It is a process where a dispute is submitted by agreement of the parties to arbitration or to a Tribunal of several arbitrators who
gives a decision on the dispute that is binding on the parties.
Encyclopaedia Britannica defines the term ‘arbitration’ as a “means of settlement of dispute of differences by the decision not of a
regular and ordinary Court of Law but of a person or persons who are called arbitrators are appointed by the parties or with their
actual or constructive consent.”
It is a method of dispute resolution and settlement which arises in trade activities that are agreed between the parties. There are
kinds of arbitration such as-
Ad hoc arbitration
Permanent arbitration
Conciliation
In Halsbury’s Law of England the term ‘conciliation’ is defined as “A process of persuading parties to reach agreement and is
plainly not arbitration, nor is the Chairman of Conciliation Board an arbitrator.”
It may be defined as an act of brining into harmony, harmonising, and reconcilement. It is the adjustment and settlement of a
dispute in a friendly manner. It is a non-binding procedure where an impartial third party, the conciliator assists the parties to a
dispute in reaching a mutually satisfactory and agreed dispute to the settlement. The neutral person should be chosen by agreement
of the parties.
Distinction
Arbitration Conciliation Negotiation
It is a binding process where the dispute It is a non-binding procedure where an It is a non-binding procedure where the
is submitted for adjudication according to impartial third party assists the parties to a discussions between the parties are
an agreement. dispute in reaching a mutually satisfactory initiated without the intervention of a
settlement. third party.
There is a prior agreement in writing in a It may be initiated without any prior
contract or separate agreement in writing. agreement, in this one party may invite in There is no need of a written agreement;
Both the parties are bound to the writing and other party may not accept the it can be started after the dispute arises.
agreement. same.
The arbitrator does not merely assist in There will be no negotiator, a third party
The conciliator assists the parties to reach to
resolution of a dispute but he resolves the and the parties themselves try to resolve
an amicable settlement.
dispute by passing the award. the dispute.
The parties have to submit the written
The factual information shall be kept The parties can openly discuss their
statements and other evidential
confidential. issues and convince the other party.
documents.
The settlement agreement may be made by
An award is made and signed by the The parties settle the issues themselves
the parties themselves with the assistance of
arbitrator. and settlement may be written or oral.
the conciliator.
It may be unilaterally terminated by a
The proceedings may be terminated by a
It cannot be unilaterally terminated. written declaration by a party to the other
party permanently or temporarily.
party and the conciliator.
There is no such negotiator present in the
Neither the arbitrator nor the parties to The conciliator shall not act as an arbitrator,
proceedings the parties may seek judicial
the arbitration are subject to disabilities or a representative or a as a counsel in any
proceedings for the settlement of the
of prohibition. arbitration.
dispute.
An arbitrator has to decide the issue Conciliator may conciliate irrespective of
There is no third party to intervene.
based on natural justice and law. law.
Conciliator does not engage in any formal The parties themselves meet together and
Arbitrator has to give a hearing to the
hearing, he may formally consult the can come to a settlement with mutual
parties.
parties. understanding.
Dispute again arises in the
Conciliation and Negotiation at the end of the proceedings maintain emotional
implementation of the award and one
harmony between the parties and try that the parties do not suffer much. The
party may feel that the party was
settlement is based on mutual consent.
deprived of something.
Judicial Resolution of Dispute

Court
Settlement of dispute by Court is to resolve dispute through the activities of the State Tribunals. Litigants in dispute are often
considered as a final solution to protect their legitimate interests. When there is a conflict, the parties will choose the form of trade
negotiation or mediation rather than Commercial Arbitration or Court.
Judicial Dispute Resolution
During the British rule in India, the modern delivery justice was developed in India. Before the period of 1726 the Courts derived
the power not from the British Crown but from the East India Company. The Crown issued the Charter of 1726 and the Mayor’s
Court was established at Bombay, Calcutta and Madras, these were the Royal Courts. They had no jurisdiction in criminal cases.
The Regulating Act, 1773, empowered the British Crown to establish Supreme Court at Calcutta; a Supreme Court at Madras was
also established in 1801 and in Bombay in the year of 1823. The Courts in different parts of India were empowered to settle
disputes and to settlement of disputes through Courts called as the ‘Judicial Dispute Resolution’.
Characteristics of judicial dispute resolution
a. It adjudicates the litigation; it is a law suit or a judicial contest. Litigation means dispute and not actual proceedings in a
Court of Law. It is a method of resolution of dispute between two parties. International dispute may be defined as a
dispute involving questions related to public law or administrative law or fiscal law.
b. Resolution of judicial disputes is done through the established Courts. Court is a place where legal matters are heard by
the people who are authorised to deliver justice. It is an authority under the Constitution of State which is vested with the
powers to impart justice by rendering judgments. There are three kinds of Courts which are defined under-
Court of Inquiry- A Court that makes a preliminary investigation of charges is the Courts of Inquiry.
Court of Record- A Court whose proceedings are recorded permanently and has power of punishing for contempt of
Court.
Court not of records- A Court of limited or inferior jurisdiction.
c. Judicial Dispute Resolution is administered by Judges in Courts; a Judge may be called a Justice or a Magistrate.
d. An advocate assists Judges in delivering justice for resolution of dispute. He is an officer of justice. It is duty of the
advocate to be fair and honest towards his client.
e. Resolution of judicial dispute is based on law. It is related to body of rules which are enforced in Courts or in
administrative agencies.
f. In delivery of justice the hierarchy of Courts is required to protect the interest and the rights of citizens. The Supreme
Court is the Apex Court of India.
g. In justice delivery system the Courts should have jurisdiction over the subject-matter and the parties. The jurisdiction
refers to authority of power of a Court to act.
h. In judicial dispute resolution, there is a scope for rectification in decisions through appeals. In case, if the lower Court
fails to take into consideration any fact or issues, the Appellate Court may consider the change in verdict.
Advantages
1. Established rules and procedures result in cases being presented to the best advantage;
2. Principles applied in Court are reasonable;
3. Courts have authority hence it attracts public confidence;
4. Legal aid is available
Disadvantages
Delays are endemic
The litigation in Judicial Dispute Resolution involves high costs
Litigation causes stress, anxiety and concern;
Overcrowded matters in Courts lead to burdening and backlogs.
Online Dispute Resolution

According to the Vice President of India, Shri M. Venkaiah Naidu-
‘Online Dispute Resolution Mechanism’, “is a laudable initiative to fast-track dispute resolution and it shall go a long way in
resolving disputes, attracting more foreign investment by projecting India as an investor-friendly country and strengthen
economy.”
Schiavetta explained ‘online dispute resolution’ as the process that comprises to resolve dispute exclusively online and also other
dispute resolution process that use internet.
The modern techniques of dispute resolution related to commercial conflicts there is an emphasis that has drifted from litigation to
arbitration. Emphasis has shifted from arbitration to alternate dispute resolution procedures. It has been labelled as “a logical and
natural step” as it facilitates expeditious resolution of disputes.
Online Dispute Resolution (ODR) in India is an essential aspect of legal enablement in India and serves as a legal framework for
information society in India. ODR in India is in its infancy stage and gaining prominence with period of time. The enactment of
Information Technology Act, 2000, E-commerce and E-governance have been given a formal and legal recognition in India.
The traditional arbitration law of India has been reformulated and now India has Arbitration and Conciliation Act, 1996 is in place
that is satisfying the harmonised standards of UNCITRAL Model. The necessity has arisen due to the growing use of ADR
mechanism in India and it will reduce the burdening of the Courts in India.
ODR is very common technique that is adopted nowadays as it is a very low cost generated, and also more usable to solve small
disputes. It could facilitate and access to justice, it acts as a platform that could be used for a long time as a permanent tool and
procedure to solve problems. It has a strong focus on small disputes as the parties to large disputes will meet in person
with Arbitral Tribunals and their opponent.
ODR is the most advanced field in which the use of technology in dispute resolution is used. Another factor is that ODR cost is
lower than the Ad hoc arbitration institution or an Arbitral Tribunal. Online tools take sense to resolve disputes by a
dematerialized and interconnections so that the electronic means are controlled by the parties.
ODR is a cyberspace facility to dispute that has to operate quickly in arbitration supported by the electronic communication means.
Examples- E-mail-web based, message posting, voice mail or real-time conferencing etc.
ODR Platform is provided by the European Commission to help in resolving disputes with online customers without going to
Court. It can be used for any contractual dispute arising from online purchases of goods or services where the trader and consumer.
Online Dispute Resolution (ODR) in India is a process of alternative dispute resolution (ADR) which is enhanced by allowing the
parties to settle the dispute. Proceedings are made available online; the agreement and evidence are also made online. Issue of
territorial jurisdiction is not a matter of consideration where the arbitration clause specifies unless it refers to the methods of ADR
in India or Online Dispute Resolution in India.
Online Dispute Resolution on Commercial Disputes
Commercial disputes can be of different kinds, it may be a mere breach of contract or the joint venture or online contacts or
protection of intellectual property etc. All matters relating to contracts are subject to application of appropriate law that can be
settled in a time-bound manner by choosing the online dispute resolution in India.
Advantages of Online Dispute Resolution
A single procedure
In Online dispute resolution (ODR) the parties can agree to resolve the dispute in a single procedure. It avoids the expense and
complexity of multi-jurisdictional litigation, and the risk of inconsistent results.
Speedy Resolution of dispute
In order to ensure speedy resolution of commercial disputes and facilitate effective conduct of international and domestic disputes,
it is necessary to adopt various dispute resolution mechanisms. This shall also encourage foreign investment by projecting India as
an investor-friendly country having a sound legal framework and ease of doing business in India.
Party autonomy
ODR in India provides parties the opportunity to exercise greater control over the way their dispute is resolved. The parties may
choose the applicable law, place and language of the proceedings. Increased party autonomy can result in a faster process. Parties
are free to devise the most efficient procedures for their dispute.
Neutrality
ODR can be neutral to the law, language and institutional culture of the parties. There is no home Court advantage which one of
the parties may enjoy in Court-based litigation.
Confidentiality
ODR proceedings are private in nature. The parties can agree to keep the proceedings confidential. It also allows parties to focus
on the merits of the dispute without any concern regarding its public impact and may be of special importance where commercial
reputations and trade secrets are involved.
Distinction
Alternative Dispute Resolution (ADR) Online Dispute Resolution (ODR)
It is the process of providing dispute resolution
mechanism through arbitration, mediation and The process of providing alternative dispute resolution services online
conciliation services. Parties can avoid litigation in is referred to as online dispute resolution.
Courts and can amicably settle the matter between them.
The method has been considered as most suitable for
Online dispute resolution is similar to the institutional method of
resolving all kinds of civil and commercial disputes by
alternative dispute resolution where a set of guidelines are established
Indian Courts. The alternative dispute resolution in India
to guide the parties, arbitrators/mediators and the proceedings.
can be either ad-hoc or institutional.
With the advent of online dispute resolution in India, the entire
The proceedings under ADR are made through a fixed
proceedings are made available online at the comfort of home and best
place that suits both parties and the mostly conducted by
of the professional from across the country is engaged to provide the
the professional in the locality.
best of alternative dispute resolution in India.
Dispute Settlement and WTO

Introduction
The procedure of WTO is a mechanism that is used to settle trade dispute under the Dispute Settlement Understanding (DSU).
There is a dispute when a member Government believes that another member Government is violating an agreement which has
been made in the WTO.
If in case any dispute arises, the duty to settle the dispute lies in the hands of member Government through Dispute Settlement
Body (DSB). This procedure has achieved a great deal and providing some of the necessary attributes of security and predictability
and is called as the Dispute Settlement Understanding (DSU).
DSU advanced out of the ineffective means used under the GATT for settling disagreements among members. Procedures for
settling disputes under GATT were ineffective and time consuming. The reason behind is that a single nation, including the nation
whose actions was the subject of complaint could effectively block every stage of the dispute resolution process. Gradually, the
process has met success and functioning effectively.
Dispute Settlement Understanding was designed with the purpose to deal with the difficulty of reduction and elimination of non-
tariff barriers to trade. This could be any Government Policy or Regulation which has the effect and makes it more difficult/ costly
for foreign competitors to do business in any country. During the early years of the GATT, the success in reducing trade barriers
focused majorly on trade in goods and in reduction and elimination of the tariff levels on those goods.
Many new interest groups were fascinated during the time period of 1980s by the GATT’s procedures which were held as model.
It was used for the purpose of accomplishing their goals. Intellectual Property Sectors and Service sectors that wanted to engage in
multilateral agreements through GATT’s Uruguay Round Conference were influenced based on the success of dispute settlement
procedures.
There is a recent development where the tariffs have been eliminated in a wide variety of sectors. It implies that non-tariff trade
barriers have become more important in the absence of tariffs. Non-tariff trade barriers are the inadvertent consequence of well-
meaning attempts to regulate to ensure safety or protection for the environment, or other public policy goals.
Historical Background
In the year of 1947 the General Agreement on Tariffs and Trade (GATT) was signed by the U.S. Ultimately GATT was signed by
a total of 128 countries that provided for consultations and dispute resolution. It allowed a GATT Party to invoke dispute
settlement articles if in case the Party believes that another Party’s measure, whether violative of the GATT or not, caused it trade
injury.
The General Agreement on Tariffs and Trade GATT did not set out a dispute procedure with great specificity. The Parties
developed a detailed process which includes ad hoc panels and other practices.
In 1986, the GATT Uruguay Round of Multilateral Trade Negotiations began which concluded in the year of 1994 with the
signing of the Marrakesh Agreement establishing the World Trade Organization. The WTO Agreement requires any country to be
a that accept all of the multilateral trade agreements negotiated during the Round, such as the GATT 1994, the Understanding on
Rules and Procedures Governing the Settlement of Disputes, applicable to disputes arising under virtually all WTO agreements.
Dispute Settlement Body (DSB)
It comprises of a Chairman who is the head of the permanent mission of one of the Member countries appointed by consensus
among the Members of World Trade Organisation and representatives of all WTO Members. The Government officials
receive instructions from their Governments on the positions they must adopt and the statements they must make within the
Dispute Settlement Body, hence the latter is considered a political body.
The DSB is responsible for the application of the DSU, in other words it oversees the entire dispute settlement
procedure. It has the authority to set up panels, adopt panel and Appellate Body reports, monitor the application of
recommendations and authorize retaliatory measures when a Member fails to comply with rulings.
Dispute Settlement Understanding (DSU)
The dispute settlement procedure of the World Trade Organization (WTO) is governed by the Understanding on Rules
and Procedures Governing the Settlement of Disputes (DSU). The DSU is uniformly applicable to differences that arise
in the context of all WTO agreements.
WTO aims and demands that all its Members respect the rules related to settlement of dispute in the interests of a reliable
multilateral trade system. The WTO Members have agreed to the same and when they judge that other Members have violated
the rules, the Members shall refer the matter to the dispute settlement mechanism. It involves compliance of the procedures and
respecting the decisions which is reached by the dispute settlement bodies (DSB).
DSU governs the Settlement of Disputes and establishment of rules/ procedures which manage various disputes. There had been
around 314 complaints which were brought by the member of WTO. All WTO membersare subject to it and are the legal entities
that may bring and file cases to the WTO. Dispute Settlement Understanding created the Dispute Settlement Body (DSB) which
consists of all WTO members that administers dispute settlement procedures.
Strict time frames for the dispute settlement process were provided and establish an appeals system to standardize the
interpretation of various clauses of the Agreements. It further provides for the automatic establishment and automatic adoption of a
panel report to prevent nations from stopping action by simply ignoring complaints.
Strengthened rules and procedures with strict time limits for the dispute settlement process aim at providing “security and
predictability to the multilateral trading system” and achieving “a solution mutually acceptable to the parties to a dispute and
consistent with the covered agreements.”
The basic stages of dispute resolution covered in the understanding include-
Consultation
Panel Phase
Conciliation, Mediation and Negotiation
Appellate Body Review and Remedies
Stagesof Dispute Settlement in WTO

WTO’s procedure is a mechanism which is used to settle trade dispute under the Dispute Settlement Understanding (DSU).
‘Dispute’ arises when a member Government believes that another member Government is violating or is in breach of an
agreement which has been made in the WTO.
Resolution of dispute under WTO ensures security and predictability to the multilateral trading system. It is also concerned with
the situations where a member seeks remedy for damage to its trade interests.
There are different stages of dispute settlement under WTO which are as follows:
1. Consultations
2. Establishing a Dispute Panel
3. Implementing of Panel and Appellate Body Ruling
Consultations
Pre-litigation stage
Dispute Settlement Understanding permits a WTO Member to consult with another Member regarding “measures affecting the
operation of any covered agreement taken within the territory” of the latter. When a WTO Member requests consultations with
another Member under a WTO Agreement, the latter Member must enter into consultations with the former within a period of 30
days.
In case the dispute is not resolved within a period of 60 days then the complaining party may request a panel. The Party who has
filed the complaint, he may request a panel before the end of period of 60 days, if the other Member has failed to enter into
consultations or if the disputants agree that consultations have been failed.
Consultationhelps the parties in providing the opportunity to debate the issue and find a reasonable solution without resorting to
litigation. According to the procedure, the party complained against must reply to the request within a period of 10 days after the
date of its receipt. The parties shall enter into consultations in good faith within 30 days after the date of receipt of the request. If in
case the Member does not reply or comply with the time limit, then the Member requested for the holding of consultations may
proceed directly to the litigation.
Establishing a Dispute Panel
An establishment of a dispute panel can be made in writing that must “identify the specific measures at issue and provide a brief
summary of the legal basis for the complaint sufficient to present the problem clearly”.
In case a panel is requested, the Dispute Settlement Body must establish the panel at the second meeting of DSB. If a defending
Member blocks the establishment of a panel the complaining Member make its request at a DSB meeting, the panel will be
established, the second time such a request is placed on the DSB’s agenda.
The panel is ordinarily composed of three Members. WTO Secretariat proposes the names of panellists to the disputing parties.
The opponent cannot oppose the list of panellistsexcept for “compelling reasons”. The maximum time period for the panel to be
appointed is 45 days. The Panel has to conclude its decision within a period of 6 months.
Arbitration
Members may seek arbitration within the WTO as an alternative means of dispute settlement “to facilitate the solution of certain
disputes that concern issues that are clearly defined by both parties.” Those parties must reach mutual agreement to arbitration and
the procedures to be followed. Agreed arbitration must be notified to all members prior to the beginning of the arbitration process.
Third parties may become party to the arbitration “only upon the agreement of the parties that have agreed to have recourse to
arbitration.” The parties to the proceeding must agree to abide by the arbitration award. “Arbitration awards shall be notified to the
DSB and the Council or Committee of any relevant agreement where any member may raise any point relating thereto.”
Conciliation and Mediation
Any party may initiate or terminate them at any time. The complaining party may request the formation of panel, if the parties to
the dispute jointly consider that the conciliation or mediation process has failed to settle the dispute.
The DSU recognized that the nations involved in a dispute come to a workable understanding on how to proceed, and that
sometimes the formal WTO dispute resolution process would not be the best way to find such an accord. No nation could simply
ignore its obligations under international trade agreements without taking the risk that a WTO panel would take note of its
behaviour.
Panel Proceedings
a. After considering written and oral arguments, the panel issues the descriptive part of its report to the disputing parties.
b. The panel submits the report on facts and arguments along with its findings and conclusions to the disputants as an
interim report.
c. Following a review period, a final report is issued to the disputing parties and later circulated to all WTO Members.
d. A panel must generally provide its final report to disputants within six months after the panel is composed, but may
take longer if needed; extensions are usual in complex cases.
e. The period from panel establishment to circulation of a panel report to WTO Members should not exceed beyond a
period of 9 months.
f. Panels have been found to take more than 13 months on average to publicly circulate reports.
Appellate Body Review

Dispute Settlement Body establishes a standing Appellate Body that will hear the appeals from panel cases. The Appellate Body
“shall be composed of seven persons, three of whom shall serve on any one case.” Persons serving on the Appellate Body are the
persons of recognized authority, with demonstrated expertise in-
Law
International trade
The subject matter of the Covered Agreements
The Body shall consider only “issues of law covered in the panel report and legal interpretations developed by the
panel.”
Its proceedings shall be confidential, and its reports anonymous.Decisions made by the Appellate Body “may uphold, modify, or
reverse the legal findings and conclusions of the panel.” The appeals should not last beyond the period of 60 days and maximum it
could be of 90 days.
Dispute Settlement Body and the parties shall accept the report by the Appellate Body without amendments “unless the DSB
decides by consensus not to adopt the Appellate Body report within thirty days following its circulation to the members.”
Remedies
The dispute panel issues recommendations with suggestions of how a nation is to come into compliance with the trade agreements.
If the member fails to do so within the determined “reasonable period of time,” the complainant may request negotiations for
compensation.
Within 20 days after the expiration of the reasonable period of time, if satisfactory compensation is not agreed, the complaining
party “may request authorization from the DSB to suspend the application to the member concerned of concessions or other
obligations under the Covered Agreements.”
If the complaining party considers the retaliation insufficient, it may seek retaliation across sectors. The Dispute Settlement Body
shall grant authorization to suspend concessions or other obligations within thirty days of the expiry of the reasonable time unless
the Dispute Settlement Body decides by consensus to reject the request.
The defendant may object to the level of suspension proposed. The original panel, if members are available, or an arbitrator
appointed by the director-general” may conduct arbitration.
Litigation stage
Implementation- It is insisted when the party fails to fulfil its obligations and to comply with the recommendations of
the Panel or Appellate Body. The Dispute Settlement Body may establish a reasonable period of time for
implementation.
Payment of compensation- If the offending party exceeds the reasonable period of time without
implementation of the recommendations, the complainant may ask for compensation.
Retaliatory measures- When the offending party fails to comply with recommendations of the Panel or Appellate
Body and refuses to offer compensation, then the affected party may request Dispute Settlement Board for
authorization to introduce retaliatory measures against the offending Party.
Contribution of WTO in settling dispute

The World Trade Organisation mechanism works in resolving international trade related dispute that emphasized on consensus
building over unilateral action. The rules governing system are set forth in the Dispute Settlement Understanding (DSU). The
adjudication of dispute is delegated to the Dispute Settlement Body (DSB) which is a special assembly of the WTO’s General
Council that includes the members of WTO. Seven members are appointed by WTOAppellate Body.
Multi-stage process of dispute settlement-
i. It begins with a request for informal consultation between the parties;
ii. If in case the consultation fails in resolving the disputes the party that complained may request for the appointment of a
three-member investigation panel;
iii. The panel issues its report and recommendations after receiving oral and written submissions from the parties;
iv. A party may seek appellate review of a panel report regarding the issues of law and legal interpretations developed by
the panel;
v. The appeal is heard by 3 of the 7 members of the Appellate Body;
vi. The Appellate Body may uphold, modify or reverse the panel’s report;
vii. A panel must be adopted by Dispute Settlement Body without amendment;
viii. The respondent party may request a reasonable time to comply with the recommendations of a report;
ix. If in case the respondent fails to comply then the complainant may seek compensation or request the authorization
from the Dispute Settlement Body to engage in retaliation;
x. The Dispute Settlement Understanding provides for a parallel process of binding arbitration if both the parties agree to
arbitrate their dispute instead of submitting it to a Dispute Settlement Body;
xi. A party subject to an adverse decision by the Dispute Settlement Body may seek arbitration as a matter of right;
International Commercial Trade Related Agreements

CIF AND FOB Agreements- Seller and Buyer’s Responsibility
Cost, Insurance and Freight (CIF) and Free on Board (FOB) are the international shipping agreements which are used in the
transportation of goods between a buyer and a seller. These are the most common terms of the international commerce which was
established by the International Chamber of Commerce in the year of 1936.
CIF and FOB both contracts specify origin and destination information which is used to determine the liability that officially
begins and ends. It provides an outline of the responsibilities of buyers to sellers. In case of Cost, Insurance and Freight (CIF) the
buyer must note that seller is required to obtain insurance on minimum cover.
Cost, Insurance and Freight (CIF)
In this agreement the insurance and other costs are assumed by the seller. It is based on the liability and costs associated with
transit, which is to be paid by the seller till the goods are received by the buyer.
In this the responsibilities of the seller include-
Transporting the goods to the nearest port
Loading them on a vessel
Paying for the insurance and freight
Under the CIF in case of some of the agreements, goods are not considered to be delivered until they are actually in the buyer’s
possession. However in other cases, the goods are considered delivered once they reach the port of destination and then it is the
buyer’s responsibility.
Advantages of CIF for the seller-
1. He has the opportunity to increase his profits by making the carriage and insurance arrangements;
2. He retains the right of disposal of the goods until payment is made, thus keeping some level of security;
3. He does not bear any risk during transit of the goods.
Advantages of CIF for the buyer-

a. A means to take delivery of the goods;
b. A means to trade the goods on or to pledge them as security for finance;
c. Rights against the carrier and insurer to recover at least the value of the goods if they are damaged or lost in transit.
Disadvantage of CIF
The passing of the risk to buyer at the time of CIF Contract, in this the risk passes to the buyer at the time he pays and takes up the
document. It must be further noted that risk passes to the buyer when the seller ships the goods.
If in case the contract is made after the shipment then the risk passes at the time of contract. Furthermore, the risk passes to the
buyer at the time of shipment. In case if the goods are damaged at the time of loading into the cargo or the goods are lost in the sea
the risk is on the buyer.
Where the goods are unascertained and shipped in bulk in that case the documents can not identify the goods sold. Hence the CIF
Contract gets very vague at times.
Free on Board (FOB) Agreements
In this agreement the seller is relived from his responsibility once the goods are shipped to the buyer. After the goods have been
loaded the goods are considered to be delivered into the control of the buyer. When the voyage begins, the buyer then assumes all
liability.
The buyer can negotiate a cheaper price for the freight and insurance. Some of the international traders seek to maximize their
profits by buying F.O.B and selling CIF. Free on Board (FOB) clause is frequently taken as a basis for the calculation of the goods
sold and not as a term defining the method of delivery.
When the customer can select their own freight carrier, they ultimately have more control over the shipment, having the ability to
choose the route taken, and the transit time. They then have the benefit of working with one company throughout the
transportation process. That means one central point of contact for any questions or problems that may arise. Working with one
company further ensures that the carrier will be working with the customer’s best interests in mind, since their sole purpose is to
get the freight to the specified destination.
Bill of Lading
Bill of lading can be defined as a written evidence of a contract for the carriage and delivery of goods sent by sea for certain
freight. A shipper delivers goods to a carrier while the carrier or his agent issues a bill of lading. It serves as a document of title, a
contract of carriage and a receipt for goods.
In the case of B.M. Ltd. v. Woermann-Line [(2009) 13 NWLR (Pt. 1157)], the Court defined a ‘Bill of Lading’ as-
“A written document signed on behalf of the owner of the ship, in which goods are embarked, acknowledging the receipt of the
goods and undertaking to deliver them at the end of the voyage, subject to such conditions as may be mentioned in the bill of
lading. The bill of lading is therefore a written contract between those who are expressed to be parties to it.”
Procedure and Transactions
a. The parties (seller and the buyer) agree upon a transaction through a contract which specifies price, quantity, time and
place of delivery.
b. The buyer will contact its bank to have a letter of credit issued with the seller as the beneficiary.
c. The letter of credit can either funded through loan or it may be simply debited from the buyer’s account balance.
d. In case a loan method is used, it is subject to standard underwriting procedures.
e. Insurance is commonly required as a condition to issue a letter of credit so that various risks, such as damage and delays,
can be mitigated.
f. With the letter of credit the seller has credit available at its bank and final payment shall be made once the delivery
conditions of the contract are met satisfactorily.
g. The seller can then provide the consignment to a shipper in exchange of a bill of lading promising that the consignment
will be delivered at the agreed destination.
h. The consignment is handled by the transportation system.
i. The seller can present the bill of lading to its bank as an additional condition to secure his final payment.
j. Then the bill of lading is then forwarded to the buyer’s bank in exchange of payment and afterwards to the buyer so that
the consignment can be claimed once delivered.
k. The buyer is finally able to provide the bill of lading to the shipper and claim the consignment.
Types of Bill of Lading
Following are the various types of Bill of Lading-
Negotiable Bill of Lading
A bill of lading is negotiable when it is made out to the bearer and can be passed hand to hand just like cash.
Shipped and Received for Shipment Bills
A shipped bill of lading is one which states that the goods have actually been shipped on board.
The received for shipment bill of lading is usually issued when the carrier receives goods into its custody prior to shipment.
Clean Bill of Lading and Clause based Bill of Lading
Clean bill of lading is the one that qualifies in good order and condition on receipt by the carrier.
A bill is claused when it is annotated to show that the goods carried are not in apparent good order and bad condition. Where a
document is claused, such document may be rejected by the buyer.
Through Bills of Lading
This is usually used when the carriage of goods is to be undertaken by two or more carriers.
Advantages of Bill of Lading
a. Bill of Lading serves as a receipt for goods. A shipped bill is evidence that such goods have been conveyed and such
was shipped on the date of shipment stated on the bill.
b. In case of a dispute related to the quantity of goods or the condition of goods, the bill of lading acts as a prima facie
evidence that the goods where shipped in the conditions stated on the bill of lading. It is the conclusive evidence and
proof of the fact.
c. It is a document of title which allows the holder of the document to deal with the goods as he is the owner. It allows the
buyer to obtain the actual delivery of goods at the designated port.
d. It is a document of credit that covers the letter of credit transactions. The buyer’s bank provides him with a letter of
credit that effects the payment for goods purchased. The seller is comforted by substituting the credit worthiness of the
bank for the creditworthiness of the buyer.
e. Bill of lading is the only binding contract between the buyer and the seller. The use of this agreement on the
commercial basis has made the parties more comfortable and easy to rely upon each other. It is an important document
while goods are shipped from seller to buyer.
Letter of credit
It is a document which is issued by a financial institution that provides a promise of payment for a trade transaction, implying that
it can be redeemed if certain conditions are satisfied. Letter of credit is mainly used in international trade for transactions between a
buyer and a seller, in different countries.
It is also known as documentary credit or banker’s commercial credit. It is a mechanism of payment which is used in international
trade to provide an economic guarantee from a bank to an exporter of goods. A letter of credit is a common phenomenon within
international trade and goods delivery.The economic effect of letter of credit is to introduce a bank as underwriting the credit risk
of the buyer paying the seller for goods.
Functions- Letter of Credit
It is an important method of payment in international trade and is useful where the buyer and seller may not be aware
of details of each other and are at distance governing under different laws.
Letter of Credit is a method in international trade to mitigate the risk of a seller while delivering the goods to the
buyer.
It is a payment method used to discharge the legal obligations for payments from the buyer to the seller.
Seller relies on the credit risk of bank instead of the buyer to receive the payment.
The bank will pay the seller the value of the goods when the seller provides negotiable instruments.
On presentation of the documents, the goods will be under the control of the issuing bank which provides them
security against the risk that the buyer will repay the bank for making such a payment to the seller.
Types of the letter of credits

Revocable/ Irrevocable
A letter of credit may be revocable or irrevocable which determines whether the buyer and the issuing bank could be able to
manipulate the Letter of Creditwithout informing/ taking permissions from the seller.
Confirmed/Unconfirmed
A letter of credit is confirmed when a second bank adds its confirmation to honour a complying presentation at the request or
authorization of the issuing bank.
Import/export
Letter of credit can be termed as an import or export letter of credit; for the importer it is termed an Import Letter of Credit and for
the Exporter of goods, an Export Letter of Credit.
Deferred / Usance
A deferred letter of credit is the one that is not paid or is not assigned immediately after presentation, but after an indicated period
that is accepted by both buyer and seller. In this the seller allows buyer to pay the required sum of money after taking the goods
and selling them.
Restricted/ Unrestricted
In case of a restricted letter of credit the advising bank can purchase a bill of exchange from the seller. Where the confirmation
bank is not specified, then the exporter can show the bill of exchange to any bank and receive a payment on an unrestricted letter of
credit.
Trade and environmental controversies

The conflict between environmental concerns and international trade is rapidly increasing. In the past two decades a proliferation
of national environmental laws and international environmental agreements with a rapid expansion of international trade and
investment has been witnessed. The two regimes- Environmental protection and International trade have developed independently.
There were many rules which were put in place related to tradebefore the environment.
The relationship between environmental and trade agreements has been a subject of political and legal discussions it is the base for
the foundation of the World Trade Organization (WTO) in the year of 1995. The fundamental goals of WTO are- Sustainable
development and protection and preservation of the environment. They are enshrined in the Marrakesh Agreement, which
established the WTO. It complements the WTO’s objective to reduce trade barriers and eliminate discriminatory treatment
regarding international trade relations.
There is no specific Agreement dealing with the environment under WTO. Members can adopt trade-related measures which aims
at protecting the environment provided a number of conditions to avoid the misuse of such measures for protectionist.
The GATT which is the major international agreement governing trade-was formed during the period of late 1940s. Some of the
countries had significant environmental laws which were global, bilateral, or regional environmental agreements. By the period of
1990, the number of international environmental agreements had increased a lot.
The trade community is concerned about the trade impacts of measures taken in the name of the environment. Measures include
both domestic environmental regulations, which can have side effects on trade, and explicit trade restrictions taken in the name of
environmental concerns. Some measures have the potential to restrict trade to achieve environmental goals; the disruption of trade
also might be out of proportion to the environmental benefit.
International trade agreements are aimed at the removal of trade barriers. It partly contains obligations for countries to restrict the
trade related to certain dangerous goods or products. This causes certain tension between trade and environmental agreements. It
lead to risk that international trade agreements narrow down the scope of States to establish environmental protection measures.
Technical assistance of World Trade Organisation on trade and the environment aims to help developing countries which
participate more effectively in the programme of the Trade and Environment Committee and in the negotiations.
Enforcement and Compliance
The conflict between international environmental conservation and international free trade is not a battle, but a struggle between
reconciling the good with the good. The contracting parties to the General Agreement on Tariffs and Trade agreed to formalize the
principle in maintaining harmony between trade and environment; during the Uruguay Round in 1994 by establishing a Committee
on Trade and the Environment.
Trade and environment is not a new concept. The link between trade and environmental protection and its impact on
environmental policies on trade, and the impact of trade on the environment was recognized during 1970.
On one side, there was growing international concern regarding the impact of economic growth on social development and the
environment and on the other handsome developing countries were concerned that environmental protection policies could
become obstacles to trade and constitute a new form of protectionism.
The competence of the WTO in the field of environment is limited to trade policies and to the trade-related aspects of
environmental policies which have a significant effect on trade. WTO Members are allowed to adopt trade-related measures which
aim to protect the environment that is subject to some conditions directed to avoid the misuse of such measures.
WTO DISPUTES PANEL & BALANCE BETWEEN TRADE
1. Agreements & National Policy
Dispute settlement system (DSS) is a central pillar of the multilateral trading system of the WTO and has made a “Unique
contribution to the stability of global economy”. A dispute arises when one member country adopts a trade policy measure or
takes some action that one or more fellow members considers to be a breach of WTO agreements or to be a failure to live up to
obligations. The member countries have agreed that in case of violation of trade rules, they will use the multilateral system of
settling disputes instead of taking action unilaterally. This ensures abiding by agreed procedures.
The operation of the WTO dispute settlement process involves the parties and third parties to a case and may also involves the
DSB panels, the Appellate Body, the WTO Secretariat, arbitrators, independent experts and several specialized institutions. The
General Council discharges its responsibilities under the DSU through the dispute settlement body (DSB). Like the General
Council, the DSB is composed of representatives of all WTO Members. The DSB is responsible for administering the DSU, i.e.
for overseeing the entire dispute settlement process. It also has the authority to establish panels, adopt panel and appellate body
reports, maintain surveillance of implementation of rulings and recommendations, and authorize the suspension of obligations
under the covered agreements.
2. Japan alcohol case
Japan replaced the GATT incompatible regime with a new tax system, but designed it with different beverage categories, so that
the imported drinks were predominantly subject to higher specific tax rates than like domestic products. Whether these specific
rates truly resulted in a disadvantage in competitive opportunities expressed in the price ratio of the different drink, remained
somewhat doubtful. This is immaterial for the purpose of exploring in what manner the sub-categories were compared in the
article III:2 assessment.
In the new dispute, the panel confined itself to establishing that vodka was obviously taxed in excess of shochu, without even
adding the attributes imported/ domestic. In respect of Article III:2, second sentence, the panel similarly established that the tax
rates applicable to the different directly substitutable drinks at issue were dissimilar by more than de minimis. Therefore, Japan
afforded protection to shochu in contradiction to the GATT. Again, the panel did not add the attributes of origin contained in
GATT Article III:2 and more, importantly, the comparison did not take place between the entire groups of domestic and imported
substitutable goods. Only after making these findings, the panel refer to the fact that the favoured “shochu is essentially a Japanese
product”.
The reasoning does not reflect the asymmetric impact approach, although the facts certainly allowed it and the European
Communities had expressly relied on it and accordingly furnished market share numbers. Interestingly, the USA who won at the
panel stage appealed and referred precisely to the dilemma of the diagonal test, that tax distinctions between products results in
violation of Article III:2, first sentence. Rather than promoting an asymmetric impact test, the appeal in vain pushed for the
adoption of the “aims and effects” approach to remedy the dilemma.
The appellate body also did not significantly rely on the factual asymmetry in the tax treatment of imports and domestic goods as a
whole. The report neither provides support for the diagonal test, except for the fact that the appellate body upheld the panel’s
reasoning, which should not be overestimated given the facts of the case.
3. European Hormone Case

The beef hormone dispute is one of the most intractable agricultural controversies since the establishment of the WTO. It has
sometimes been called the “beef war” in the media, similarly o the UK-EU Beef war over the mad cow disease issue, creating
some confusion, since these two wars overlapped in time.
The European Union banned the import of meat that contained artificial beef growth hormones, approved for use in the USA in
1989. The ban covered six hormones but later amended and banned one hormone – estradiol- 17β, while provisionally banning the
use of the five others. WTO rules permit such bans, but only where a signatory presents valid scientific evidence that the ban is a
health and safety measure. Canada and USA opposed this ban, taking the EU to the WTO Dispute Settlement Body. In 1997, the
WTO Dispute Settlement Body ruled against the EU.
WTO disputes settlements and US laws
Legal effects of WTO decision: The legal effects of World Trade Organisation agreements and dispute settlement
results in the USA in the Uruguay Round Agreements (URAA). The act provides that domestic law prevailed over
conflicting provisions of WTO agreements and prohibits private remedies based on alleged violation of these
agreements. As a result, provisions of WTO agreements and WTO panel and Appellate Body reports adopted by the
WTO members that are in conflict with federal law do not have domestic legal effect unless and until the branch of the
executive, as the case may be, takes action to modify or remove the conflicting statute, regulation or regulatory action.
Violative state laws may be withdrawn by the state or, in rare circumstances, invalidating through legal action by the
federal government.
Unilateral sanctions and Japan Auto dispute (Section 301 of The Trade Act of 1974): Section 301 authorizes the
United States Trade Representatives (USTR) to investigate and take action against unreasonable, unfair or
discriminatory practices or violations of international agreements. The 1988 amendments transferred authority for
recognising unfair practices and invoking unilateral measures from the President to USTR, theoretically divorcing
actions from other political considerations and thus making them easier to invoke. In addition, through the amendments,
sanctions became mandatory in certain instances, affording USTR less discretion.
The Japan-US Auto dispute was the first case in which a section 301 action was challenged under the WTO dispute settlement
procedures. The United States initiated a Section 301 investigation of the Japanese aftermarket for auto parts on 1st October 1994,
and Announced sanctions on 5th May, 1995. The United States proposed unilateral measures that would impose 100% import
duties on Japanese luxury automobiles. In response to this unilateral threat, Japan immediately requested GATT Article XXLL
consultations with the United States. Ultimately, this dispute was settled through bilateral negotiations outside the WTO
consultations, but the fact that the dispute was referred to the WTO dispute settlement procedures and that the negotiation took
place before the international community was quite integral to achieving a resolution in conformity with international norms and
without inducing a trade war.
4. WTO DISPUTE – THE SHRIMP TURTLE CASE

Earth justice the environmental group from Oakland, California sued the Environmental Protection Agency (EPA) for a lack of
oversight among US shrimp fishers and international fishermen. Sea turtle are on the list of Endangered Species Act, (ESA) were
caught as by-catch with shrimp. The US environmental Protection agency sought to protect endangered species. Presently, the US
shrimp fishermen are required to use the technology while fishing for shrimp.
Malaysia, India, Pakistan and Thailand jointly filed suit with the WTO in opposition to the requirement. The WTO initially ruled
against the US, as according to the WTO, the United States could not discriminate between each country by providing the
protesting countries with “financial and technical assistance”, but not all countries. The US later amended the EPA. Malaysia
continued to assert that the US banned the import of shrimp. After review, a WTO compliance panel ruled in favour of the US in
2001. It was held that, the US was justified under GATT because the U.S. no longer discriminated in the application of their
exception under Article XX(g).
This case is of paramount importance because the WTO permitted the U.S. to restrict an import based on its production process
and not the product itself. A matter known as the process versus product issue.
5. A GATT DISPUTE – THE TUNA DOLPHIN DISPUTE

Much of the tuna consumed in the USA originates in the Eastern tropical Pacific (ETP), where dolphins often associate with
yellowfin tuna. Because of this association, there have been problems of dolphins being killed or injured as by-catch during the
capture of tuna in the area. Policies were first introduced in the USA in 1972 to reduce dolphin by-catch in the fishery. During the
1980s and 1990s, environmental groups vocally lobbied for these policies to be more stringent in content and implementation.
Following this, government trade embargoes were introduced on tuna not caught in compliance with USA dolphin protection
standards. An environmental non-governmental organisation (NGO) consumer level labelling scheme was also introduced,
demonstrating which tuna products are ‘dolphin-safe’. The dolphin-safe tuna issue has had a significant impact on the USA
market, spreading throughout the global canned tuna market and affecting market, production and trade patterns. The dolphin-safe
issue began to emerge in the UK in the early 1990s. This was despite the fact that virtually all canned tuna was skipjack and thus
did not suffer from the association with dolphins encountered with yellowfin tuna in the ETP. The dolphin-safe issue in the USA
and ETP fishery has been covered extensively in the literature and discussed in terms of its biological, economic, trade and
political implications from many points of view.
In 1991, Mexico contested the USA embargoes through a GATT dispute-settlement panel (Tuna Dolphin I), contested the USA
embargoes through a GATT dispute-settlement panel (Tuna Dolphin I), contesting that they were disguised restrictions on free
trade. The European Community (EC) also pursued the case (Tuna-Dolphin II) in 1994, focusing on the unilateral actions of the
USA. In both cases the Panel noted that although there is a need for marine conservation and sustainable development, the USA
trade measures were in violation of free trade under GATT, with the Panel showing favour towards multilateral rather unilateral
agreements. Following the first panel ruling, a multilateral approach was pursued by the USA through the 1992 La Jolla
Agreement for the Reduction of Dolphin Mortality in the Eastern Pacific Ocean. This was subsequently endorsed by the 199
Declaration of Panama, signed by 12 nations participating in the ETP tuna fishery, including the USA. The International Dolphin
Conservation Programme (IDCP) was founded under the auspices of the Inter-American Tropical Tuna Commission (IATTC),
establishing quotas on dolphin kills and a monitoring programme. The agreements were transposed into American law through the
adoption of the 1992 International dolphin Conversation Programme act. This Act relaxed the definition of ‘dolphin-safe’ and
enabled tuna from foreign producers to be imported into the USA provided that it was harvested in a manner consistent with the
agreements.
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Long Question Answer
1. What is Letter of Credit in International Sales? Discuss its various types
2. Write a brief note on General Agreement on Trade in Services
3. "The International Monetary Fund has been established to promote International Co-operation on Monetary Problems
through a Permanent Institution". Examine the given statement in the light of the role and functions of the International
Monetary Fund with special reference to Regulation and Promotion of International Trade.
4. Examine the role of the Government of India in Promoting Foreign Collaboration in Framing Industrial Policy.
5. Explain the historical background of International Trade in India.
6. Discuss about Vienna Convention on sale of goods
7. Explain the Rules relating to rejection of goods in contracts under International Sale of Goods.
8. Discuss about Foreign Direct Investment (FDI) in industries and its governing policies.
9. Explain the significance of Foreign Investment
10. State the legal problems of container transport
11. Discuss the various factors effecting International investment
12. Explain the types of Foreign Investment and mention the position of Foreign Institutional Investors (FII) in India
13. Foreign Collaboration and Investment Policy in India
14. Discuss different kinds of letters of credit
15. Explain the significance of Foreign Investment
16. What is Foreign Direct Investment? Examine the trends in the international capital flows?
17. Write a brief note on Enforcement of foreign award in India
18. Explain in detail acceptance and rejection of goods in international contracts
19. Write a brief note on elements of International Taxation
20. Write a brief explanatory note on International Commercial Contracts
21. Write a brief note on Transnational Corporation (TNC) and its Characteristics.
22. Trace Development and Evolution of International Trade Law
Short Notes
1. Principle of National Treatment
2. Write a International Commercial Contracts
3. Transitional Companies
4. Electronic Business Transactions
5. Discuss various kinds of Marine Insurance
6. Countervailing measures
7. Contract of Insurance
8. Mercantilism Theory
9. The Absolute Advantage Theory
10. The Comparative Advantage
11. Hecksher-Ohlin’s Theory
12. Developing countries and free trade
13. Limitation Period
14. International Commercial Disputes
15. Passing of the risk
16. Foreign Direct Investment (FDI)
17. Definition of Transnational Corporation (TNC)
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Long Question Answers
1. Write a brief explanatory note on Brettonwood Conference
2. Write a detail note on Historical evolution of the General Agreement on Tariffs and Trade (GATT), 1947 and silent feature
of GATT.
3. The Uruguay Round of Negotiations finally led to the creation of WTO. In the light of this statement briefly discuss the
salient achievements of Uruguay Round.
4. Explain in detail the GATT Negotiation Rounds
5. What are the elements for identification of subsidy under the GATT/WTO? Explain the various types of subsidy. What are
the requirements before the countervailing measure can be applied under the framework of WTO?
6. Describe the important differences between GATT and the WTO? How the current decision-making process under WTO is
different from the GATT, 1947.
7. Discuss the rule governing ―Most Favoured Nation Treatment‖ (MFN) under the GATT, 1994. What are its exceptions?
Support your answer with the help of WTO decisions
8. Discuss the decision-making process under the agreement establishing the W.T.O. highlighting how the current system
decision-making is different from GATT, 1947.
9. Discuss the origin and evolution of GATT leading to the birth of W.T.O.
10. Discuss the rule on "National Treatment" under the GATT, 1994. Critically analyse in the light of decisions of the W.T.O.
and relevant exceptions provided within the GATT, 1994.
11. Discuss the Uruguay Round Anti-Dumping code.
12. Explain the obligation of the seller in International sale transaction as adopted in the Vienna Convention on sale of goods.
13. Discuss the rules relating to rejection of goods in contracts under International sale of goods
14. "Art. III of GATT 1994 presupposes non-discrimination between the domestic and imported goods under certain
conditions". Discuss this statement in the light of ingredients of Art. III
15. Write a brief explanatory note on International Trade Organisation (ITO)
16. What is New Economic International Organisation (NIEO)? Write a detail note on the Origin and Objective of NIEO.
17. What is International Monetary Fund (IMF)? What are the purpose and objectives of IMF?
18. Supposing US imposes an internal ad valorem tax of 4% on imported Chocolates candies and a 2% ad valorem tax on
domestic Chocolates. Is the US tax discriminatory in light of Art. III of GATT?
19. Write a detail note on International Bank of Reconstruction and Development (IBRD) and what are the functions and
objective of IBRD?
Short Notes
1. WTO Doha Round
2. Role of W.T.O. in regulating International Trade.
3. Investment by Overseas Corporate Bodies
4. International Trade Organisation (ITO)
5. Write a short note on Current Trade Situation: Global and India
6. Structure of the Bretton Wood Conference
7. Write a short note on Features and Aim of Bretton Wood Conference
8. Write a short note on WTO
9. General Council of WTO
10. New Economic International Organisation (NIEO)
11. United Nations Conference on Trade and Development [UNCTAD] or Objective of UNCTAD
12. International Investments
13. Foreign Direct Investment
14. Write a short note on functions and objective of IBRD?
15. Write a short note on objectives of IMF?
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1. What is the scope and function of WTO? Discuss in brief the organizational structure of the WTO
2. The Uruguay Round of Negotiations finally led to the creation of WTO. In the light of this statement briefly discuss the
salient achievements of Uruguay Round
3. Explain the rules and exceptions governing Principle of National Treatment in WTO? Refer to relevant decisions of WTO.
4. What are the objectives of Dispute Settlement Body of the WTO? Discuss in detail the different stages of the WTO Dispute
Settlement Process.
5. Discuss the objectives and functions of WTO
6. What is dumping of goods? Discuss the scope and application of Article VI of GATT, 1994. Explain the process governing
anti-dumping measures under the WTO.
7. Discuss briefly the developments leading to the establishment of WTO, 1995. Discuss also the differences between WTO,
1995 and GATT, 1947.
8. The Understanding on Rules and Procedures governing the Settlement of Trade Disputes between nations has proved to be a
boon to freedom of International Trade. In the light of the above, discuss briefly the salient features of settlement of disputes
under WTO, 1995. What will be the legal position if there is a conflict between the Dispute Settlement Agreement of WTO
and Dispute Settlement Provisions of individual agreements, which are part of WTO, 1995?
9. Discuss briefly Structure of WTO, 1995
10. Country X takes a measure whereby meat imported from country Y is required to be sold from an exclusive separate outlet
in the domestic market of X. Country Y alleges discrimination. Examine the validity of the measure taken by X and claims
made by Y in the light of relevant finding made by WTO in the Korea-Beef case, WT/DS 161 (2000)
11. Explain the Dispute Settlement Mechanism under the W.T.O. what are the remedies available to the complaining party
when the State in question does not comply with the decision of the W.T.O.?
12. What is dumping and how does it distort trade? Discuss the scope and application of anti-dumping measures under the
framework of W.T.O.
13. Write a detail note on Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)
14. Examine the role the United Nation Conference on Trade and Development (UNCTAD) for the Regulation and Promotion
of International Trade
15. Define subsidy. Discuss different types of subsidies
16. Discuss the Uruguay Round Anti-Dumping code.
17. US, Canada and Thailand are member of WTO. North Korea and Libya are not members of WTO. Assuming US enters into
Bilateral Investment Treaty (BIT) with North Korea extending MFN treatment to each other. US charges 3% tariff duty on
Apparel exports from North Korea under the BIT, while as it charges 5% tariff duty on like exports from Canada. Canada
has approached DSB through you. What advice will you render to Canada?
18. Discuss briefly the dispute settlement rules and procedure as contained in the understanding on rules governing the
settlement of disputes under WTO, 1995. In what way have these rules undone the drawbacks of dispute settlement
mechanism of GATT 1948?
19. Write a brief note on General Agreement on Trade in Services under WTO
20. Write a brief explanatory essay on Structure of WTO
21. The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) is an international legal agreement
between all the member nations of the World Trade Organization (WTO). Discuss in detail.
Short Notes
1. Anti-Dumping and Countervailing Duties
2. ‘Services‘ under WTO
3. Subsidies and Countervailing Measures
4. Accession to WTO
5. Dumping and Anti-Dumping Duties
6. WTO's structure and main functions of its key bodies
7. GATS
8. Role of W.T.O. in regulating International Trade
9. Retaliation under W.T.O.
10. Margin of Dumping and Margin of Injury
11. Subsidy
12. Trade related subsidy
13. Agriculture subsidy
14. Uruguay Round
15. Write a short note on Structure of WTO
16. TRIPS
17. Concept of National Treatment
18. United Nations Committee on Trade and Environment (UNCTE)
19. TRIMs
20. TBT
21. UNCTAD
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1. General Most Favoured Nation Treatment is the cornerstone of the free trade, yet maintaining state freedom in regulating
international trade. In the light of the above statement, discuss the salient features of MFN treatment. Discuss also
exceptions, if any, to MFN treatment.
2. "Most-Favoured Nation Treatment is central to multilateral trading". Analyze this Statement briefly in the light of Art. 1 of
General Agreement on Tariffs and Trade (GATT) 1994
3. What is Bilateral Trade Agreement? Explain in detail Advantages of the Bilateral Trade Agreements.
4. Write a brief note on Regional Trade Agreements (RTA's) with reference to the challenges included in RTA for developing
countries.
5. Write a brief note on Trade without discrimination.
6. What is South Asian Association for Regional Cooperation (SAARC)? What are their objectives? And explain in detail the
institutional structure of SAARC?
7. Write a brief explanatory note on Association of Southeast Asian Nation (ASEAN) and explain the aim and principle of
ASEAN.
8. What is Organisation of Petroleum Exporting Countries (OPEC) explain in detail? And what are the Scope and functions
OPEC?
9. Write a brief note on North American Free Trade Agreement (NAFTA) and the Functions of NAFTA.
10. The South Asian Free Trade Area (SAFTA) is an agreement that was reached on 6th Jan, 2004, at 12th SAARC Summit
which was held in Islamabad of Pakistan. It created a free trade among people in India, Nepal, Bangladesh, Bhutan,
Maldives, Pakistan and Sri Lanka. Discuss.
Short Notes
1. Principle of Most Favoured National Treatment
2. What is Multilateral Trade Agreements?
3. Regional Trade Agreements(RTA's)
4. Write a short note on Preferential Trade Agreement (PTA's)
5. Basic rules and principles of Trading
6. Definition of Most Favoured Nations (MFN)
7. Institutional Structure of SAARC
8. Write a short note on Advantages and Achievements of SAARC
9. What are the Disadvantages or limitations of SAARC
10. Aims and Principle of ASEAN
11. APEC (Asia Pacific Economic Co-operation Forum)
12. Functions of NAFTA
13. Objectives and principles of SAFTA
14. Trade Liberalisation Programme
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1. Discuss the benefits of arbitration in the settlement of international commercial disputes
2. Discuss briefly International Commercial Arbitration
3. Discuss arbitration as a method of settlement of international commercial dispute
4. What are the objectives of Dispute Settlement Body of the WTO? Discuss in detail the different stages of the WTO Dispute
Settlement Process
5. Critically examine work carried out by the United Nations Commission for International Trade Law (UNCITRAL)
6. Critically examine the major issues of Promotion of Foreign Investment and Transfer of Technology involved in Promotion
of International Trade with special reference to India
7. Write a detail note on International Commercial Arbitration and Conciliation with reference to UNCITRAL Arbitration
Rules.
8. Write a detail note on Judicial Resolution of Dispute and Characteristics of judicial dispute resolution.
9. Discuss in brief Online Dispute Resolution on Commercial Disputes and advantages and disadvantages of Online Dispute
Resolution Mechanism.
10. Write a detail note on Stages of dispute settlement in WTO.
11. Write a brief note on International Commercial Trade Related Agreements
12. What do you mean by International Commercial Terms used in international sale contracts? Discuss the obligations of the
parties under CIF, FOB and FAS contracts
13. Distinguish between a C.I.F. contract and F.O.B. contract. What are the responsibility of seller and buyer in C.I.F. contract?
14. Discuss the responsibilities of a seller under F.O.B. contract
15. Explain the standard trade terms CIF, FOB, and FAS commonly used in the international contract of sale. What are the
obligations of seller and buyer under these contracts?
16. Discuss the main elements of a C.I.F. and F.O.B. contract. Discuss also the responsibilities of parties to a C.I.F. contract
17. Discuss the salient features of a Letter of Credit. Discuss the Rules governing the operation of a Letter of Credit
18. What is a Letter of Credit (LOC) used in international commerce? Discuss the advantages and disadvantages of using the
Letter of Credit?
19. Explain the purpose and functions of a Bill of Lading in International Commerce? Enumerate the liabilities of a carrier under
the Bill of Lading
20. What is a Bill of Lading? Explain its various types. Describe its different functions and purposes under the international
carriage of goods
21. Letters of Credit (LOC) are described as the "Life and blood of international commerce". Elucidate. Discuss the rules
governing the Letters of Credit.
22. Explain the international rules relating to Bill of Lading
Short Notes
1. Commercial Arbitration in settlement of Trade Dispute
2. Conciliation and Mediation
3. Types of Commerce
4. UNCITRAL
5. Commercial arbitration and conciliation
6. Write a short note on Advantages and disadvantages of Judicial Resolution of Dispute.
7. Dispute Settlement Body (DSB)
8. Dispute Settlement Understanding (DSU)
9. Stages of dispute settlement in WTO.
10. Disadvantage of CIF
11. Bill of Lading
12. Bill of Exchange
13. Letter of Credit
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Let us Recapitulate points dissussed in this module:
Article 301 of the Constitution of India also mentions free trade and commerce throughout the territory of India.
According to Halsbury’s Law of England, the term ‘trade’ refers to exchange of goods and any business carried on for profit
which may be manual or mercantile.
International trade may be defined as trade between States or Nations which are completely foreign to each other. It refers to
trade between residents of two different Countries.
International Trade Law started with the barter system and it was later replaced by Mercantilism during 16th and 17th
Centuries and during 18th Century the Trade saw a shift towards liberalism.
International trade grew rapidly during 1990s. Multinational companies were producing products in their home countries and
used to market their products in various Foreign Countries.
The origin of International Trade Law is traced back to the medieval era.
International trade began to grow after Second World War and it led the countries to enter to the negotiation and signed a
treaty to provide a method for trading goods; the Treaty was named as the General Agreement on Tariffs and Trade
(GATT).
IMF and IBRD/ World Bank came into existence on 27th December, 1945.
The International Trade Organisation Charter was much broader than the GATT and contained several provisions to
promote co-operation for economic development and reconstruction.
International Trade Organisation (ITO) was one of the significant steps taken under the so called Bretton Woods system.
General Agreements on Tariffs and Trade (GATT) established the two basic directions for the trade regime:
a. Developing requirements to lower and eliminate tariffs; and
b. Creating obligations to prevent or eliminate other types of impediments or barriers to trade (Non - tariff barriers)
Mercantilism theory was based on the ideology that the world only contained a fixed amount of wealth; for better trade and
growth one country had to take some wealth from another, either through having a higher import/export ratio.
The Absolute Advantage Theory was propounded by Adam Smith.
The Comparative Advantage Theory was given by David Ricardo who demonstrated that countries can gain from trade and
commerce even if one country is less productive than the other.
The theory of ‘Factor Endowment’ or ‘General Equilibrium Theory’ of International Law was propounded by Eli Hecksher
and Bertil Ohlin.
The concept of free trade is based on the market mechanism which is controlled by the forces of demand and supply in the
market.
According to Webster Dictionary, ‘commerce’ means “An interchanging or mutual change of goods, wares, production or
property of any kind, between nations or individuals, either by barter or by purchase and sale, trade, traffic.”
The binding character of a contractual agreement presupposes that an agreement has actually been concluded by the parties
and that the agreement reached is not affected by any ground of invalidity.
The objective of UNIDROIT is to frame a balanced set of rules which are designed for use throughout the world irrespective
of legal traditions, economic and political conditions of the countries.
The preamble of UNIDROIT Convention provides that the international trade is growing and will continue to grow.
Contracts for the International Sales of Goods (CSIG) was finalized and approved in the six official languages of the United
Nations at the United Nations Conference on Contracts for the International Sale of Goods, which was held in the year
of1980, in Vienna.
Horizontal direct investment refers to the investor establishing the same type of business operation in a foreign country as it
operates in its home country.
The following sectors are prohibited for Foreign Direct Investment-
a. Lottery business;
b. Gambling and betting;
c. Business of chit fund;
d. Nidhi Company;
e. Trading in transferable development rights (TDRs);
f. Manufacturing of cigars, cheroots, tobacco etc.
g. Real estate business
h. Sector which is not opened to private sector investment, i.e. atomic energy and railways operations
Foreign Direct Investment is a way to reduce cost of production if the labour market is cheaper and the regulations are less
restrictive in the target foreign market.
Electronic business can be defined as the conduct of business processes over the internet. This includes buying and selling of
products, supplying and services, processing of payment, managing production control, collaborating with business partners,
running automated employee services their recruitments etc.
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India has adopted various measures in order to globalise the Indian economy which includes- reduction in the import tariffs,
replacement of licenses of import tariffs; removal of export subsidies; removal of constraints and obstacles to the entry of
Transnational Companies; freeing the way of investment in foreign joint ventures etc.
An economic institution may be defined as a company or an organisation that deals with money or with the management of
distribution of money, goods and services in an economy such as banks, investment funds, Government organisations etc.
are all economic institutions.
On 18 February 1946 the Economic and Social Council of the United Nations decided to take a call on an International
Conference on Trade and Employment.
The International Trade Organisation was led by the US in collaboration with allies.
The major reason of failure of the Charter was that it involved certain internal issues related to economy.
Bretton Wood Conference was formally known as the United Nations Monetary and Financial Conference which was the
gathering of 730 delegates from 44 Countries at Washington hotel which was situated at Bretton Wood, United States.
Bretton Wood Conference was held from 1st July through 22nd July, 1944.
The World Trade Organisation was set up by agreement of 125 Countries in April, 1994, at a Conference of Marrakesh
which concluded the Uruguay Round of General Agreement on Tariffs and Trade(GATT) negotiation after a period of more
than seven years of strong bargaining.
The new WTO replaced GATT and had come into effect from 1st January, 1995 which 85 founding members which
includes India.
The Ministerial Conferences is the most important decision making body of the World Trade Organisation.
The eleventh Ministerial Conference of WTO was held in Buenos Aires at Argentina from 11th to 13th December, 2017.
The Uruguay Round was launched at Punta del Este at Uruguay, in September 1986. It was concluded at Marrakesh,
Morocco, in March 1994.
The members of Uruguay Round talks concluded to establish World Trade Organisation by recognizing their relations in the
field of trade.
The main objectives of Uruguay Round are as under-
a. To reduce agricultural subsidies
b. To lift restrictions on foreign investment
c. To begin the process of opening trade in service such as banking, insurance etc.
d. To include the protection of intellectual property.
e. To deal with copyright violations and to secure other forms of intellectual property rights.
The reason for collapse of Doha Round is increase in protectionism in both United States and European Union.
The Bretton Wood Conference held in 1944 which was the starting point for a new world order.
The Preamble of GATT mentions the following objective-
i. Raising the standard of living;
ii. Ensuring full employment, large and steady growing volume of real income based on effective demand;
iii. Better utilization of resource;
iv. Expansion of production;
v. International trade
Uruguay Round was the final round which seeks to integrate trade in goods, services, based on protection of intellectual
property rights, imposition of ‘cross retaliation’ across different sectors and to ensure effective enforcement of prescribed
obligation.
The concept of NIEO was initially given by Raul Prebisch and some other economists during 1950’s and 1960’s.
The establishment of NIEO was made to deal with the deficiencies in existing economic order, due to failure of GATT and
the UNCTAD in fulfilling their objectives.
a. Elimination of trade barriers which is a challenge for developing countries;
b. Promotion of international trade for speeding up of economic development;
c. Formulation of principles and policies related to international trade;
d. Negotiation of multinational trade agreements;
e. Providing technical assistance to least developed countries.
The objective of IMF is to promote international monetary co-operation, exchange-rate stability, sustainable economic
growth, international trade, high employment and making resources available to its members to secure their financial ability.
IBRD is also known as World Bank which was set up as a result of decision which was taken in Bretton Wood Conference.
IBRD is playing an important role in providing loans for development works to member countries, especially to under-
developed nations. It also provides long term loans for various development projects.
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The Uruguay Round was launched at Punta del Este at Uruguay, in September 1986.
The scope of World Trade Organisation was defined under Article III of the WTO Agreement.
The Ministerial Committee based in Geneva, Switzerland, hold meetings at least after every two years and make important
decision regarding functioning of WTO and takes other important decisions.
The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) is an international legal agreement
between all the member nations of the World Trade Organization (WTO).
TRIPS Agreement was negotiated at the end of the Uruguay Round of the General Agreement on Tariffs and Trade
(GATT) in 1994 and is administered by the WTO.
According to Haberler, ‘dumping’ is “the sale of goods abroad at a price which is lower than the selling price of the same
goods at the same time in the same circumstance at home, taking account of difference in transport cost.”
The purpose of the national treatment rule is to eliminate hidden domestic barriers on trade by World Trade Organisation
Members through imported products treatment.
Types of Dumping –
a. Intermittent Dumping
b. Persistent Dumping
c. Predatory Dumping
GATS entered into force in January 1995. It was inspired by essentially the same objectives as its counterpart in
merchandise trade, the General Agreement on Tariffs and Trade (GATT).
In pursuance of the objectives of GATS Agreement, Members shall enter into successive rounds of negotiations, beginning
not later than five years from the date of entry into force of the WTO Agreement and periodically thereafter, with a view to
achieving a progressively higher level of liberalization.
TRIPs agreement consists of seventy three Articles and it is divided into VII Parts.
TRIMS Agreement was negotiated during the Uruguay Round. It applies mainly to measures which affects trade in goods.
The objective of TRIMs Agreement as provided in its Preamble is, “the expansion and progressive liberalization of world
trade and to facilitate investment across international frontiers so as to increase the economic growth of all trading partners,
particularly developing country members, while ensuring free competition”.
TRIMs Agreement has narrow scope. This Agreement suggests that member countries should extend national treatment.
The United Nations Conference on Trade and Development was set up in 1964 by the United Nations Organisation with an
aim to promote international trade and economic development of developing countries.
According to Doha Mandate, “finance should support the real economy towards sustainable, sustained, inclusive and
equitable economic growth and sustainable development.”
The WTO Agreement on Technical Barriers to Trade was entered into force in 1995.
The Doha Agenda includes specific negotiations on trade and environment and some tasks assigned to the regular Trade and
Environment Committee.
The relationship between trade and environment consists of both-
a. The impact of trade on the environment;
b. The impact of environmental policies on trade
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Most significant bilateral treaty among market economies are the ‘Friendship Commerce Navigation’ (FCN).
A bilateral trade agreement deals with favourable trading status between two countries. It ensures to given those countries
access to each other's markets, it increases trade and economic growth.
Advantage of Bilateral Agreements –
a. Bilateral Agreements increase trade between two nations.
b. It opens markets to successful industries which are well-equipped with technologies.
c. It adds to employment.
d. It also benefits the country by lower costs.
e. Multilateral trade agreements are easier to negotiate as it involves two nations.
f. In case of failure of multilateral agreements, nations amongst each other negotiate a series of bilateral agreements.
The purpose of multilateral agreements is to regulate the production, prices, trade and marketing practices in relation to these
commodities.
Multilateral Agreements aims to safeguard the interests of both producers and consumers and to control flow of trade
between countries.
Regional trade organizations are a multilateral arrangement that focuses around a geographical area. Its goal is the
liberalization of International Trade between the member nations.
The Regional Trade Agreements (RTAs) is defined by World Trade Organisation as reciprocal trade agreements between
two or more partners.
Regional trade agreements are the treaties among two or more Governments which agree to offer more favourable treatment
to trade between them, than they do to goods imported from outside the region.
Regional Trade Agreements includes- free trade agreements, customs unions, common market and political union.
Institutions such as WTO, IMF, and UNCTAD aim at promotion of economic cooperation throughout the world.
Regional Trade Agreements are classified in a hierarchy which has a range between-
a. The Free Trade Areas
b. Customs Union
c. Common market
d. Finally to political union
The preferential treatment usually takes the form of the removal or reduction of tariffs on imports from regional partners,
thereby creating a free trade area.
Custom Union goes beyond the removal of internal tariffs which occurs within a free trade area. It specifies common tariffs
which all Member States impose on imports from outside the region.
The Customs Unions also remove barriers to the flow of factor; capital and labour within the region.
Political Union involves the integration of Government bodies, legislative bodies and enforcement powers of the countries.
Political Union implies the union of the Government of the country’s leading to a common Government as a single political
entity.
United Nations Conference on Trade and Development (UNCTAD) works in this direction to deal with trade negotiations
and commercial diplomacy.
Committee on Regional Trade Agreements (CRTA) considers individual regional agreements under the Transparency
Mechanism for Regional Trade Agreements.
In 2006 the World Trade Organisation (WTO) members agreed to implement a provisional mechanism for the enhancement
of the transparency of Regional Trade Agreements.
General Council of World Trade Organisation has established transparency mechanism for Regional Trade Agreements on
14th December, 2006 on a provisional basis.
The principle related to Most Favoured Nation is based on the idea and the concept that countries must treat all its trading
partners equally.
Most Favoured Nations is an economic position where a country enjoys the best trading terms given by the trading partner.
The principle that lies behind MFN is treating others equally. The Members to World Trade Organisation Agreement cannot
discriminate between trading partners.
South Asian Association for Regional Co-operation (SAARC) was formed at Dhaka in Dec. 1985.
SAFTA is a free trade agreement that is confined to goods but excludes all services such as information technology.
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Types of commerce-
a. Internal Commerce or Interstate Commerce;
b. International Commerce
Internal Commerce is carried on between man and man in a State or between different parts of the same State and it does not
extend to or affect other States.
International Commerce is between States or Nations which are entirely foreign to each other. It takes place to achieve
higher rate of profit.
The term ‘dispute’ refers to ‘a conflict’ or ‘controversy’. It implies some kind of a disagreement over some issue over a
common subject-matter.
International Commerce maintains relationships with persons willing to transfer of goods from one State to another.
ICCA was formed in the year of 1969 with an aim to promote the use of International Commercial Arbitration for resolution
and settlement of dispute between the parties.
ICC has its International Court of Arbitration in Paris. It is the world’s leading international arbitration institution.
The UNCITRAL commenced its effect on the international commercial arbitration with a solicited report submitted by the
Secretary General of United Nations Organisation.
The UNCITRAL Arbitration Rules works to coordinate activities of other organizations active in the field for the
modernization.
The UNCITRAL Arbitration Rules was adopted on 15th December, 1976, to provide a comprehensive set of procedural
rules upon which parties may agree for the conduct of arbitral proceedings arising out of their commercial relationship.
These rules are widely used in many contexts.
The International business community all across the globe has accepted international commercial arbitration as an effective
mechanism for resolving its commercial disputes.
International commercial arbitration is an alternative method of resolving disputes between private parties arising out of
commercial transactions conducted across national boundaries that allow the parties to avoid litigation in National Courts.
Negotiation is a non-binding procedure where the discussion between the parties is initiated without any intervention of a
third party.
Mediation is a non-binding procedure in which an impartial and neutral third party, the mediator assists the parties to a
dispute in reaching a mutually satisfactory and agreed settlement.
In Halsbury’s Law of England the term ‘conciliation’ is defined as “A process of persuading parties to reach agreement and
is plainly not arbitration, nor is the Chairman of Conciliation Board an arbitrator.”
Advantages of Judicial Dispute Resolution –
a. Established rules and procedures result in cases being presented to the best advantage;
b. Principles applied in Court are reasonable;
c. Courts have authority hence it attracts public confidence;
d. Legal aid is available
Disadvantages of Judicial Dispute Resolution –

a. Delays are endemic
b. The litigation in Judicial Dispute Resolution involves high costs
c. Litigation causes stress, anxiety and concern;
d. Overcrowded matters in Courts lead to burdening and backlogs.
In Online dispute resolution (ODR) the parties can agree to resolve the dispute in a single procedure. It avoids the expense
and complexity of multi-jurisdictional litigation, and the risk of inconsistent results.
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Printed By: Vishal R (vishal07) on Mon Jan 27 11:58:26 UTC 2020

Unit I - Genesis of International Trade Law

Brief history of International Trade Law

International Commercial Contracts

International Commercial Disputes

UNIDROIT Convention on International Sale of Goods, Geneva, 1983

Reduces cost of production

Transnational Corporations (TNCs)

Electronic Business Transactions

Risk Analysis of Electronic Transactions

Elements of International Taxation

International Trade Organisation

Bretton Wood Conference

World Trade Organisation

Functions of World Trade Organisation

Historical evolution of the General Agreement on Tariffs and Trade(GATT), 1947

Fundamentals of the GATT

Difference between GATT and WTO

New Economic International Organisation (NIEO)

United Nations Conference on Trade and Development [UNCTAD]

International Monetary Fund

Some of the reasons of failure of IMF

International Bank of Reconstruction and Development (IBRD)

Foreign Direct Investment

Unit III - World Trade Organisation

A Committee on trade and development; Committee on balance of payment restrictions and a

Bodies provided for under the Plurilateral Trade Agreements

India’s engagement in free trade agreement

Wto and Various Agreements

Purpose of the Agreement

Important provisions of Agreement of Textile and Clothing

Article 3 of the Agreement

Textile Monitoring Body (TMB) [Article 8]

Agreement on textile and clothing of the GATT, 1994 and India

WTO and Anti-dumping

GATT and Anti- Dumping

Article 2 Determination of Dumping

Article 4 Definition of ‘domestic industry’

Article 5 Initiation and subsequent investigation

Article 8 Price Undertaking

Article 13 Judicial Review

Article 15 Developing Country Members

Article 17 Consultation and Dispute Settlement

Concept of National Treatment

Exceptions to the General Rule: GATT

GATT Article XVIII

General Agreement on Trade in Services (GATS)

General obligations and disciplines (Part II, Articles II to XV)

Article 4 Increasing Participation of Developing Countries

Article 6 Domestic Integration

Article 8 Monopolies and Exclusive Service Supplier

Article 12 Restrictions to safeguard the Balance of Payments

Specific Commitments (Articles XVI to XVIII)

Article 3 National Treatment

Copyright and related rights (Article 9 to 14)

Article 10 Computer Programs and Compilations of Data

Article 12 Term of Protection

Trade Marks (Article 15 to 21)