International Trade Law

International Trade Law

How the World Trade Organization practice law and how do they regulate?

Introduction

International trade has become, in today’s global world, an usual and common practice for countries to exchange goods and services. In order to regulate and stimulate free trade, in 1995 the world trade organization was established. Most of the WTO’s current work comes from the Uruguay Round (1986 – 1994) and General Agreement on Tariffs and Trade (GATT) negotiations. Currently, 159 countries are members and the Organization hold a budget of 196 million Swiss francs (World Trade Organization, 2014). They are based in Geneva, Switzerland and the Head is Roberto Azevêdo (Director-General). When countries encounter trade barriers and want to lower them, the WTO negotiations help to open the markets for free trade, but also sometimes its rules support maintaining trade barriers – e.g. to protect consumers. The heart of the WTO are its agreements, of which one is currently held in Doha, in part of the “Doha Development Agenda” launched in 2001.

Unfortunately, international trade and globalisation are blamed by many for things that are wrong in the world: from child labour and hunger to pollution. However most economists agree that international trade, in general, can be beneficial for all countries if they practice it smart and wisely. As Adam Smith in his famous book The Wealth of Nations pointed:

“It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy. The tailor does not attempt to make his own shoes, but he buys them from the shoemaker. The shoemaker does not attempt to make his own cloths, but employs a tailor. The farmer attempts to make neither the one nor the other, but employs those different artificers. All of them find it for their interest to employ their whole industry in a way in which they have some advantage over their neighbours, and to purchase with a part of its produce, or what is the same thing, with the price of a part of it, whatever else they have occasion for (Smith, 1776).” Here he has basically explained us the concept of comparative advantage and how international trade can benefit all producers and countries. However, in order to benefit to all humankind international trade has to be managed properly. In this research paper, legal policies, principles, customs and common practices of the WTO will be discussed and how far can they actually go in sanctioning and punishing their members.

Main Body

In 1997 Peter Sutherland (former GATT and WTO Director) expressed how important is to have an international system to provide equity for all trade parties:

“The greatest economic challenge facing the world is the need to create an international system that not only maximizes global growth but also achieves a greater measure of equity, a system that both integrates emerging powers and assists currently marginalized countries in their efforts to participate in worldwide economic expansion... The most important means available to secure peace and prosperity into the future is to develop effective multilateral approaches and institutions (Sutherland, 1997).”

There are actually four basic reasons why there is a need for international trade rules. First, countries must be restrained from adopting trade-restrictive measures both in their own interest and in that of the world economy. International trade rules restrain countries from taking trade-restrictive measures. Such measures may benefit specific short-term interests of small groups, but can harm general economic interests of the country adopting them. These measures can also lead to mercantilism, where other countries also would adopt trade-restrictive measures and in that way healthy international trade would be impossible. The second reason, why international trade rules are important, lies in the fact that they offer security and predictability for all parties participating in the trade. A third reason why international trade rules are necessary is that national governments alone simply cannot cope with the challenges presented by economic globalisation (Bossche, 2005). The final reason is the need to achieve a greater measure of equity in international economic relations.

International law, unlike domestic law, is highly decentralized, which means that there is no central legislator who creates rules and frameworks. Subjects of international law are in the same time the creators of that same law. States as subjects of international law, unlike individuals in domestic law, do not elect an “international legislator”, which is mandated to make law on their behalf (Pauwelyn, 2001). States as creators of law are complete equals. We should look at international law as a law of cooperation, not subordination. Despite the fact that there is no central legislator and international law is essentially based on various bilateral relationships, international law does include an element with features of international legislation, namely general international law ( (Pauwelyn, 2001), composed of general customs and principles of law. All states are banded to this general international law. Regarding the WTO law, we can assume that the WTO law is actually a part of the general international law. However, the World Trade Organization law is very complex – considering the fact that it deals with a wide range of issues, from import quotas, tariffs and customs to food safety regulations, national security measures and intellectual property rights. We can distinguish six groups of basic rules and principles (Bossche, 2005):