VOL 18 NO 2 REGD NO DA 1589 | Dhaka, Sunday November 21 2010

Trade association in law and practice -- I of III parts

Trade association in law and practice

M S Siddiqui

GLOBALIZATION has replaced the word 'country' by 'economy'. In the era of free
market economy, the responsibility of economic development has largely been shifted to
private sector. Business-related issues are integrated with the socio-political dimensions
of an economy. Problems in trade and investment are closely linked with the problems of
unemployment, income distribution, poverty, macroeconomic growth, regional and
infrastructure development, socio-cultural changes, political structure etc.

Bangladesh economy is undergoing a transformation from agriculture-based economy to

industrial economy. Due to advancement in technology, employment opportunities in
agricultural sector are reducing day by day. One the other hand, small businesses are
growing in rural areas, and services and industrial sectors are employing more and more
people. There is a visible change in socio-cultural arena and polarization in all levels of
society. At this juncture, civil society is concerned over the dominance of parliament by
the business persons. This change in political power structure is a reality.

There is a change in businesses as well. The situation is demanding reform in business

sector as well. There is an emerging bureaucracy in private sectors. The increasing role of
private sector has introduced new concepts of democratization in business and finance of
public companies, corporate culture, fair trade, good governance and economic freedom
etc. The concepts like limited liability, separate entity, management through agent,
professionalism, and competitiveness are coming up for evaluation and redefinition.

There are many associations of professionals. The lawyers, doctors, engineers, architects,
auditors, accountants, etc. are usually organized into professional associations, which are
established under different acts and authorized to issue professional degrees and
certificates. These associations are enjoying freedom of running the organizations. These
associations take active part in the establishment and implementation of rules which
affect their profession and in the elaboration of new regulations to be endorsed by
government regulatory authorities. Generally, professional associations lay down the
educational qualifications and the level of experience required for practising the
profession, they keep a register of the members of the profession, they promulgate code
of conduct and code of ethics to be maintained by members, and enforce these standards
through a complaints and disciplinary procedure. Similar to trade associations (TAs), a
professional association represents the interests of its members. A trade association has
been defined as an association which is formed or intended to be formed with the object
of promoting any trade, commerce or industry or any group or class thereof or for
representing for any purpose, in any manner and to any extent any trade, commerce or
industry or any group or class thereof. Mentionable, the laws and rules for Trade
Association are totally different from those of other associations.

There are mainly two categories of TAs. One category is established under conventions
and the other under a legal framework. Conventional laws are prevalent in most
developed countries like the UK and the USA. The business organizations in some
developed economies like France, Italy and Germany and many newly developing
countries are established under the legal system. The TAs all over the world have,
however, similar organizational structure and common purpose, i.e. to serve the interests
of the national economy and the business community.

The law provides compulsory membership of TAs for any individual, partnership firm,
company or any other establishment engaged in production, import or export, or any
other business products and services.

As per standard rule, TAs play a critical role in product standardization, harmonization
and promotion of good business practices, presenting business interests before
governments and public agencies, the determination of ethical rules for professions, etc.

TAs are formed under strict rule and monitored by regulating authorities. There are a
number of laws and regulations to govern TAs. In many instances, professional
associations act as self-regulating bodies for their profession and find their legitimacy in
statutes. These associations have no bearing on the applicability of competition rules.
TAs do not enjoy the freedom of professional associations and other self-regulating
bodies which are regulated under competition rule.

There is a common perception that TA is a forum of business persons and the activities
are limited to the extent of the protection of business and economic interests of the
members. Trade organizations primarily focus on lobbying the legislature for preferential
regulatory treatment. But in other countries, TA performs the role of an association to
promote human progress through an economic, political and social system based on
individual freedom, incentive, initiative, opportunity, and responsibility. It is also a
standard practice of policymakers to consult TA on each and every issue and solicit its
opinion for shaping a policy and even the rule and regulation to govern the business or
economic activities.

The business leaders are ambassadors of the nation and can play a pivotal role in the
determination of global linkages and implementation of policies. They play the role of a
catalyst for foreign investment and transfer of technology and for reshaping world's
economic policies and political trends.
However, the principal function of a trade association is to provide services to its
members, including the organizing of training activities in areas such as legal, marketing
and product development. TAs organize and sponsor fairs and trade shows. They publish
newsletters and trade journals. Trade associations also collect, aggregate and disseminate
statistical information and industrial data, and prepare regular industry reports on
developments in the market.

TAs have an important advisory function, as they take an active role in shaping the way
their industry works. In particular, they promote product standards and best practices for
their industries; they define and promote standard terms and conditions of sale, publish
and enforce codes of ethics and, in some cases, they formulate and enforce industry self-
regulation. They issue recommendations to their members on a variety of commercial and
non-commercial issues.

One of the most important functions of trade association is alternative dispute resolution
(ADR). Bangladesh does not have mandatory provision of ADR. The volume of
international trade and investment is low because there is no law and even practice of
ADR under common law. Some of the chambers like Dhaka Chamber, Metropolitan
Chamber and International Chamber of Commerce have joined hand to organize ADR in
Bangladesh. This is not yet widely practised and not known to thebusiness community.

The important role played by trade associations in modern economies is widely

recognized. Many of the activities of trade associations are protected as an expression of
fundamental rights of individuals and corporations, such as the right to form an
association in the first place or to join an existing one, the right to express one's views
and opinions and the right to freely petition the government. All the rights and freedom
are subject to enforcement of competition law and rule.

Business persons join TA as regulatory obligation in almost all countries of the world.
The majority of the members join trade association because of the specified nature of
their industries and for achieving integrity. Making self-regulations, achieving
creditability, getting expertise in specific industry issues, speaking with a unified voice to
media, specific promises, and forming collective policy position are the main reasons to
join the trade associations. Trade associations consist of individuals and firms with
common commercial interests, joining together to further their commercial or
professional goals. The important role played by trade associations in modern economies
is widely recognized. Their activities benefit their members but they may also contribute
towards increasing the efficiency of the market. They pursue creation of a congenial
atmosphere with de-regulation, alternative dispute resolution etc. Trade associations play
valuable, fundamental roles as forums for the discussion and exchange of views on
important issues of common interest for the sector which they represent.

In most instances, trade associations serve legitimate purposes, such as the preparation of
industry studies, advocacy before government entities to bring to their attention industry-
specific interests, the development of guidelines for product standardization, the
dissemination of aggregate market information to help firms make investment decisions,
the dissemination of good industry practices, and the like. Trade associations can also
educate members about proper antitrust compliance.

One of the primary functions of trade associations is to build consensus among the
members on public policy issues affecting the industry and to promote these policy
interests with the government and with other public institutions. Such activities may
create a level playing field among the members of the association and to a certain extent
limit competition in the industry.

The writer, a part-time teacher at Leading University, can be reached at e-mail:

shah@banglachemcial.com