A Study On the Legal Aspects of International Trade

Introduction

International trade is exchange of capital, goods, and services across international borders or

territories. In most countries, it represents a significant share of gross domestic product (GDP).

While international trade has been present throughout much of history, its economic, social, and

political importance has been on the rise in recent centuries. All countries need goods and

services to satisfy wants of their people. Production of goods and services requires resources.

Every country has only limited resources. No country can produce all the goods and services that

it requires. It has to buy from other countries what it cannot produce or can produce less than its

requirements. Similarly, it sells to other countries the goods which it has in surplus quantities.
India too, buys from and sells to other countries various types of goods and services.

Generally no country is self-sufficient. It has to depend upon other countries for importing the

goods which are either non-available with it or are available in insufficient quantities. Similarly,
it can export goods, which are in excess quantity with it and are in high demand outside.

Currency exchange involves the international exchange of goods as one of the most specific

types. Moreover, it is alluded to the fact that trade in goods at international level exists earlier

than the domestic trade of goods. In ancient times, individuals made various exchanges between

nature and then traded between members belonging to different tribes. With the introduction of

capitalism, conditions have been created for the development of contemporary commerce, and

within them, contemporary foreign trade. The value of commodity exchange is permanent,
though in the last decades of the 20th century, relative reductions in its participation in world
trade became apparent. International trade has a positive impact on economic growth. When

referring to the international law of international trade, the institutions are called upon and the

rules or conditions that were created after World War II. Through these bodies was required the

creation of an appropriate legal environment to regulate the global flows of goods and services

(Charnovitz 2011). Although the first steps for international trade law are present in the twentieth

century, the current multilateral system is a relatively new phenomenon, enabling the post-war
geopolitical context.

International trade means trade between the two or more countries. International trade involves

different currencies of different countries and is regulated by laws, rules and regulations of the

concerned countries. Thus, International trade is more complex.

According to Wasserman and Haltman, “International trade consists of transaction between

residents of different countries”.

According to Anatol Marad, “International trade is a trade between nations”.

According to Eugeworth, “International trade means trade between nations”.

Industrialization, advanced transportation, globalization, multinational corporations, and

outsourcing are all having a major impact on the international trade system. Increasing

international trade is crucial to the continuance of globalization. Without international trade,

nations would be limited to the goods and services produced within their own borders.

International trade is in principle not different from domestic trade as the motivation and the

behaviour of parties involved in a trade do not change fundamentally regardless of whether trade

is across a border or not. The main difference is that international trade is typically more costly
than domestic trade.

The reason is that a border typically imposes additional costs such as tariffs, time costs due to

border delays and costs associated with country differences such as language, the legal system or
culture. International trade consists of ‘export trade’ and ‘import trade’. Export involves sale of
goods and services to other countries. Import consists of purchases from other countries.

International or Foreign trade is recognized as the most significant determinants of economic

development of a country, all over the world. The foreign trade of a country consists of inward

(import) and outward (export) movement of goods and services, which results into. outflow and
inflow of foreign exchange. Thus it is also called EXIM Trade.

Advantages of International Trade:

(i) Optimal use of natural resources:
International trade helps each country to make optimum use of its natural resources. Each

country can concentrate on production of those goods for which its resources are best suited.
Wastage of resources is avoided.

(ii) Availability of all types of goods:

:

It enables a country to obtain goods which it cannot produce or which it is not producing due to
higher costs, by importing from other countries at lower costs.

(iii) Specialisation:
Foreign trade leads to specialisation and encourages production of different goods in different

countries. Goods can be produced at a comparatively low cost due to advantages of division of
labour.

(iv) Advantages of large-scale production:

:

Due to international trade, 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.

(v) Stability in prices:

International trade irons out wild fluctuations in prices. It equalizes the prices of goods
throughout the world (ignoring cost of transportation, etc.)

(vi) Exchange of technical know-how and establishment of new industries:

:

Underdeveloped countries can establish and develop new industries with the machinery,

equipment and technical know-how imported from developed countries. This helps in the
development of these countries and the economy of the world at large.

(vii) Increase in efficiency:

Due to international competition, the producers in a country attempt to produce better quality

goods and at the minimum possible cost. This increases the efficiency and benefits to the
consumers all over the world.

(viii) Development of the means of transport and communication:

:

International trade requires the best means of transport and communication. For the advantages

of international trade, development in the means of transport and communication is also made
possible.

(ix) International co-operation and understanding:

The people of different countries come in contact with each other. Commercial intercourse

amongst nations of the world encourages exchange of ideas and culture. It creates co-operation,
understanding, cordial relations amongst various nations.

(x) Ability to face natural calamities:

:

Natural calamities such as drought, floods, famine, earthquake etc., affect the production of a

country adversely. Deficiency in the supply of goods at the time of such natural calamities can be
met by imports from other countries.

(xi) 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:

Though foreign trade has many advantages, its dangers or disadvantages should not be ignored.

(i) Impediment in the Development of Home Industries:

International trade has an adverse effect on the development of home industries. It poses a threat

to the survival of infant industries at home. Due to foreign competition and unrestricted imports,
the upcoming industries in the country may collapse.

(ii) Economic Dependence:

The underdeveloped countries have to depend upon the developed ones for their economic

development. Such reliance often leads to economic exploitation. For instance, most of the
underdeveloped countries in Africa and Asia have been exploited by European countries.

(iii) Political Dependence:

International trade often encourages subjugation and slavery. It impairs economic independence

which endangers political dependence. For example, the Britishers came to India as traders and
ultimately ruled over India for a very long time.

(iv) Mis-utilisation of Natural Resources:

Excessive exports may exhaust the natural resources of a country in a shorter span of time than it
would have been otherwise. This will cause economic downfall of the country in the long run.

(v) Import of Harmful Goods:

Import of spurious drugs, luxury articles, etc. adversely affects the economy and well-being of
the people.

(vi) 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.

(vii) Danger to International Peace:

International trade gives an opportunity to foreign agents to settle down in the country which
ultimately endangers its internal peace.

(viii) World Wars:

International trade breeds rivalries amongst nations due to competition in the foreign markets.
This may eventually lead to wars and disturb world peace.

(ix) Hardships in times of War:

International trade promotes lopsided development of a country as only those goods which have

comparative cost advantage are produced in a country. During wars or when good relations do
not prevail between nations, many hardships may follow.

Differences between Internal Trade and International Trade:

Characteristically, there are marked differences between internal and international trade as stated

below:
1. Specific Terms:
Exports and Imports. Internal trade is the exchange of domestic output within the political

boundaries of a nation, while international trade is the trade between two or more nations. Thus,

unlike internal trade, the terms “export” and “import” are used in foreign trade. To export means
to sell goods to a foreign country. To import goods means to buy goods from a foreign country.

2. Heterogeneous Group:
An obvious difference between home trade and foreign trade is that trade within a country is

trade among the same group of people, whereas trade between countries takes place between
differently cohered groups. The socio-economic environment differs greatly between nations,

while it is more or less uniform within a country. Frederick List, therefore, put that: “Domestic
trade is among us, international trade is between us and them.”

3. Political Differences:
International trade occurs between different political units, while domestic trade occurs within

the same political unit. The government in each country is keen about the welfare of its own

nationals against that of the people of other countries. Hence, in international trade policy, each
government tries to see its own interest at the cost of the other country.
4. Different Rules:
National rules, laws and policies relating to trade, commerce, industry, taxation, etc. are more or
less uniform within a country, but differ widely between countries.

5. Different Currencies:
Perhaps the principal difference between domestic and international trade is that the latter

involves the use of different types of currencies and each country follows different foreign

exchange policies. That is why there is the problem of exchange rates and foreign exchange.

Thus, one has to study not only the factors which determine the value of each country’s
monetary unit, but also the divergent practices and types of exchange resorted to.

6. Heterogeneous World Markets:

In a way, home trade has a homogeneous market. In foreign trade, however, the world markets

lack homogeneity on account of differences in climate, language, preferences, habits, customs,

weights and measures etc.

The behaviour of international buyers in each case would, therefore, be different. For instance,

Indians have right-hand drive cars, while Americans have left-hand driven cars. Hence, the

markets for automobiles are effectively separated. Thus, one peculiarity of international trade is
that it involves heterogeneous national markets.

7. Factor Immobility:
Another major difference between internal and international trade is the degree of immobility of

factors of production like labour and capital which is generally greater between countries than

within the country. Immigration laws, citizenship qualifications, etc., often restrict international

mobility of labour. International capital flows are prohibited or severely limited by different
governments.
International Trade Law and the WTO

Scholars of the world trade law begin their studies of the trading system with the principles that

give the law its distinctive form, namely the Most Favoured Nation and National Treatment

principles. These conceptual touchstones form the basis of much of the scholarship about trade

governance and animate much discussion about the developmental trajectory of the multilateral

trading system (Heiskanen 2004). The Most Favored Nation principle dates back to the

Medieval period in the twelfth century, and in the 18th and 19th century its inclusion in treaty

arrangements occurred as a conditional clause, in which “benefits granted by one State were

dependent on the granting of the same concessions by the beneficiary State” (UNCTAD 2010).

Traditionally, MFN treatment required certain conditions to be met in order to trigger its

benefits, and its inclusion in treaty arrangements required a substantial level of good will on the

part of treaty signatories. As VanGrasstek notes, the granting of MFN was more often an

exception rather than the rule of trade governance (2013). Following the Second World War,

MFN was defined so as to make the unconditional granting of most-favoured nation status the

basis for membership in the GATT (Cottier, Mavroidis and Blatter 2000). Article I of the GATT

1947 declares that “any advantage, favour, privilege or immunity granted by any contracting

party to any product originating in or destined for any other country shall be accorded

immediately and unconditionally to the like product originating in or destined for the territories

of all other contracting parties”. The benefits of a multilateral application of MFN are

particularly important for developing countries and include transparency in the application of

tariffs across all member jurisdictions that gives smaller economies a trading advantage they

would have otherwise been unlikely to negotiate with large trading partners (Aggarwal 2006).

The second principle is national treatment. The principle of national treatment states that nations

must treat imported goods the same way that they treat domestic goods for regulatory and

taxation purposes. GATT 1947 Article III paragraph 1 states “The contracting parties recognize
that internal taxes and other internal charges, and laws, regulations and requirements... should
not be applied to imported or domestic products so as to afford protection to domestic

production.” Like the MFN principle, the principle of the national treatment is difficult to apply

in the real world because while some protectionist regulations are obvious, much of what the

state does to protect and enhance economic output occurs in the domain of business regulation.

Even so, members have an obligation and must maintain law and policy in such a way as to

minimize (and hopefully eliminate) substantive differences in the way domestic and imported

goods are regulated (Ortino 2005). These two principles give some sense of the complexity of

bringing together the priorities of national governments and the demands of citizens with the
multilateral standards for fair treatment of goods for trade. The WTO was created in order to

develop an institutional frame in the form of the secretariat with which to deal with the

complexity of an international trading system in which more than a hundred countries had signed
on to the GATT.

International trade rules

This is meant by those international trade laws and regulations, which are appropriately
formulated and certified by authorized bodies and institutions, scholarships, commercial
chambers and economic development, professional organizations, and even international
commercial chambers. With trade rules, one-size-fits-all regulates a large number of practical
problems in the field of foreign trade or explains the terms of trade, the actions, the principles in
the essential choice of important relationships and controversies, one-sided instructions are given
for explaining professional terms when working with currencies, foreign currency or using non-
cash payment instruments in the payment of international earnings, use of measures and
measurement systems, etc (Krasniqi, 2012).
General trade rules accept and declare the wider associations of economic development entities,
traders or others. General International General Approves and Announces International Trade
Shares in Paris.
More importantly, it is worth mentioning these summaries of the general international rules:

Similar Rules and Documents for Documentary Letters Accepted in 1933 and Revised in
1963 and 1984. These rules completely regulate the subject for accreditation payment;
 Types and notifications of letters of credit, liabilities and responsibilities of banks and
issuers;
Presentation documents (transport documents, insurance documents, commercial invoices
etc);
The deadline for accreditation, transfer of accreditation and the like. The same rules for
collection have come into force in 1958. These rules have elaborated all the moments of
payment rule;
Obligations and responsibilities of banks and issuers;
Presentation of documents;
Payment and information between banks and issuers, as well as the issue of interest,
expenses and supplementary expenses.

Burden rules describe the different types of the international scholarships as the specific foreign
trade market where the basic conditions for incorporating those markets are contained. Any
subject that wants to transact on a stock exchange must correctly and in detail know all the
"game rules" of that market. In addition to regulating the sale transaction; the way of affiliation;
norms and standards in terms of quantitative and qualitative qualities of goods, in the rules of the
stock exchange are also regulated the issues of the manner of the choice of eventual disputes etc.
Some rules also describe the form of sales contracts (eg, sale under "standard termination").
Admission and strict adherence to the provisions of special rules by participants in those markets
is a condition for participation in trading transactions. Failure to comply with trade rules means
no possibility for trading in a particular market.
The main actors of International Trade include:

States that imply different approaches of developed and developing countries to the
international legal framework governing international trade. States play a key and
indisputable role in the creation of international law. Determining whether an entity is
actually a state presents a challenge on its own. Most sovereign countries are both de jure
states (in law) as well as de facto (in reality).
Corporations. Corporations sometimes called multinational corporations are playing a
growing role in the development of international law. Corporations are commercial
entities whose profits are profit-driven. Corporations lobby states and international
organizations in a way similar to NGOs, in the hope that their interests will be protected
under international law. Many of the same suspicions about the accountability and
legitimacy of NGOs can also be raised in the context of corporations.
International organizations, otherwise known as intergovernmental organizations or
NGOs, are formed between two or more state governments. Some NGOs act by making
decisions based on a vote for each member state, some making decisions on the basis of
consensus or unanimity, while others have weighted voting structures based on security
interests or monetary donations.
 Regional organizations.
Juridical persons.
Physical persons. The position of individuals under international law has evolved
significantly during the last century. Now, more than ever, under international law
individuals are being given more rights and being held responsible for their actions.
Human rights law, for example, has tried to establish that every person around the world
has certain basic rights that cannot be violated.
Arbitration associations

Legal Aspects
legal aspects of international tradeintroduces the audience to the intricate international legal
framework that enables individuals, businesses and governments to successfully and legally
exchange goods and services across borders. Through cooperation between private enterprises
and intergovernmental organizations, the international community has already lowered trade
barriers around the world. The work of harmonizing the legal frameworks and trade agendas of
individual nations through treaties, conventions, agreements, model laws and effective methods
for dispute resolution continues.
The law is perceived in different ways. According to domestic law, we understand the law as a
rule that the state puts under control the lives of its citizens. These rules are usually created by
the legislature, interpreted by the judiciary and implemented by the executive branch, using the
police, if necessary, to compel citizens to obey. There are a number of Treaties and other types of
agreements between countries that set rules for international trade and finance, such as GATT;
Encourage cooperation on environmental protection; and the establishment of fundamental
human rights, such as the International Covenant on Civil and Political Rights. Meanwhile,
among many international organizations, the United Nations facilitates international diplomacy,
the World Health Organization coordinates public health and international protection and the
International Labor Organization monitors and promotes workers' rights around the world.
Foreign trade represents a complex activity which is characterized by significant specificities in
relation to domestic trade. The specification of domestic trade in relation to that of the outside
does not only stem from the differences in market size and the preferences of the buyers, but also
of the differences in the socio-economic systems between different countries. Within that
framework are highlighted the differences of national policy of partner countries in the field of
foreign trade system, foreign exchange system, credit system with foreign countries, fiscal
system etc. At the same time; the exchange in general is carried out on a non-equivalent basis
where the disproportionate division of the excess of value between the subjects in exchange
occurs, ie the revenue spill (one wins, the other loses or one wins more than the other of the
actual work outcomes and past). The unequal distribution in the surplus value has different
effects on the national economy in the exchange of goods and services in domestic and foreign
trade.
Legal aspects of international trade outlines the concepts and sources of public and private
international law. It discusses the international organizations, such as the United Nations and the
World Trade Organization, whose work has enabled developed countries to expand their trade
agendas fairly and has brought developing countries into international trade. Legal aspects of
international trade also explains the impact international conventions such as the Vienna Sales
Convention and regional trade agreements such as NAFTA have on the flow of business between
countries. It clarifies the effect of national legislation, regulations and court systems on national
and international business, and describes how legislation contributes to the market appeal a
nation will have for international traders. Emerging legal, ethical and technological challenges
the international community will face as the trend towards globalization of trade continues are
also introduced.

In addition to the legal frameworks governing international trade, Legal aspects of international
trade describes the absolute necessity of due diligence when negotiating firm and transparent
contracts that specify the rights and obligations of parties involved in the sale of goods and or
services. Solid contracts and any additional sub contracts or agreements reduce trade risks
associated with issues of legal jurisdiction, payments, currency, transportation, delivery, quality,
intellectual property rights, partnerships, investments, confidentiality and dispute resolution.

Whether you are an entrepreneur currently invested in the international trade market, a business
person contemplating an international endeavour or a professional committed to expanding your
general knowledge of the legalities of international trade, this course will be invaluable. After
completing this course, you will have a solid understanding of the international legal frameworks
within which trade is conducted, as well as best practices for navigating the complexities of
international trade laws governing imports, exports, taxation, product liability, intellectual
property and anti-competition.

Conclusion

The terrain of the trade law is complex and prognostication is inherently risky, but it is possible
to identify a number of potential trajectories for the development of international economic law.
In particular, we will identify possible futures identified in the literature for regional trade
agreements, multilateral trade negotiation, dispute settlement, and the future role of the WTO in
the larger system of international law. Regional trade agreements have proliferated exponentially
in the years following the birth of the WTO, and while it is perhaps safe to say that the trend has
peaked in numerical terms, the future of integration likely lies at the regional level (Crawford
2005). This is not to deny the significance and rising juridical importance of the WTO, but rather
point towards the number of increasingly large and complex arrangements currently under
negotiation at the Transpacific Partnership, the EU-US negotiations, and many others. The
literature is split on the implications of the new regionalism, with some commentators seeing the
rise of a particularism that undercuts the multilateral liberalization project (Bhagwati 2007),
while others see a compliment to the current trading system (Summers 1991). They further argue
that regionalism may offer a way to bypass the deadlock in the Doha Round while
simultaneously offering multiple platforms upon which to test new institutional and legal
mechanisms for governance. The future of the trade law within the broader system of public
international law is likely to be one in which the many small challenges, conflicts and overlaps
within and between these bodies will continue to be addressed as they arise in the processes of
treaty negotiation and dispute settlement. Compromise will continue to be the rule, and now that
a rationalization process is underway, it will continue to knit together the many disparate legal
strands that compose the body of international economic law (Guzman and Sykes 2008; Lester
2013). The final outcome is likely to be a more coherent and focused body of trade law with a
stronger understanding of its own strengths and limitations within the growing body of public
international law that exists beyond the state.

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