INTERNATIONAL TRADE LAW

UNIT – 1
➢ ECONOMIC THEORIES
MERCANTILISM: This theory was popular in the 16th and 18th Century. During that
time the wealth of the nation only consisted of gold or other kinds of precious metals so
the theorists suggested that the countries should start accumulating gold and other kinds
of metals more and more. The European Nations started doing so. Mercantilists, during
this period stated that all these precious stones denoted the wealth of a nation, they
believed that a country will strengthen only if the nation imports less and exports more.
They said that this is the favourable balance of trade and that this will help a nation to
progress more.
Mercantilism thrived during the 1500's because there was a rise in new nation-states
and the rulers of these states wanted to strengthen their nations. The only way to do so
was by increasing exports and trade, because of which these rulers were able to collect
more capital for their nations. These rulers encouraged exports by putting limitations
on imports. This approach is called protectionism and it is still used today.
Though, Mercantilism is one the most old-fashioned theory, it still remains a part of
contemporary thinking. Countries like China, Taiwan, Japan, etcetera still Favor
Protectionism. Almost every country, has implemented protectionist policy in one way
or another, to protect their economy. Countries that are export oriented prefer
protectionist policies as it Favors them. Import restrictions lead to higher prices of goods
and services. Free-trade benefits everyone, whereas, mercantilism's protectionist
policies only profit select industries.
ABSOLUTE COST ADVANTAGE: This theory was developed by Adam Smith; he
was the father of Modern Economics & proposed the theory of absolute advantage in
his seminal work "The Wealth of Nations" (1776). Smith argued that countries should
specialize in producing goods in which they have an absolute advantage, meaning they
can produce those goods more efficiently than other countries. This theory came out as
a strong reaction against the protectionist mercantilist views on international trade.
Adam Smith supported the necessity of free trade as the only assurance for expansion
of trade. He said that a country should only produce those products in which they have
an absolute advantage. According to Smith, free trade promoted international division
of labour. By specialization and division of labour producers with different absolute
advantages can always gain over producing in remoteness. He emphasised on producing
what a country specializes in so that it can produce more at a lower cost than other
countries. This theory says that a country should export a product in which it has a cost
advantage.
Adam's theory specified that a country's prosperity should not be premeditated by how
much gold and other precious metals it has, but rather by the living standards of its
citizens. In terms of international trade law, Smith's theory supports the principles of
free trade and argues against protectionist measures such as tariffs and quotas. Smith
believed that government intervention in trade only hinders economic growth and
efficiency.
COMPARATIVE COST ADVANTAGE THEORY: The comparative cost theory was
first given by David Ricardo. It was later polished by J. S. Mill, Marshall, Taussig and
others. Ricardo said absolute advantage is not necessary. He also said a country will
produce where there is comparative advantage. The theory suggests that each country
should concentrate in the production of those products in which it has the utmost
advantage or the least disadvantage. Hence, a state will export those supplies in which
it has the most benefit and import those supplies in which it has the least drawback.
Comparative advantage arises when a country is not able to yield a commodity more
competently than another country; however, it has the resources to manufacture that
commodity more proficiently than it does other commodities.
David Ricardo expanded on Smith's ideas with his theory of comparative advantage,
presented in his book "Principles of Political Economy and Taxation" (1817). Ricardo
argued that even if one country is more efficient in producing all goods than another
country, both countries can still benefit from trade if they specialize in producing the
goods they can produce relatively more efficiently (i.e., at a lower opportunity cost)
compared to other goods.
Ricardo's theory highlights the importance of opportunity cost in determining
comparative advantage. In terms of international trade law, Ricardo's theory supports
the idea of specialization and trade liberalization. It suggests that countries should focus
on producing goods and services where they have a comparative advantage and engage
in trade to maximize overall welfare.
HECKSHER 0HLIN THEORY (H-0 THEORY): Smith and Ricardo's theories didn't
help the countries figure out which products would give better returns to the country. In
1900s, two economists, Eli Hecksher and Bertil Ohlin, fixated on how a country could
profit by making goods that utilized factors that were in abundance in the country. They
found out that the factors that were in abundance in relation to the demand would be
cheaper and that the factors in great demand comparatively to its supply would be more
expensive.
The H-0 Theory is also known as the Modern Theory or the General Equilibrium
Theory. This theory focused on factor endowments and factor prices as the most
important determinants of international trade. The H - 0 is divided in two theorems: The
H - 0 theorem, and the Factor Price Equalization Theorem. The H - 0 theorem predicts
the pattern of trade while the factor-price equalization theorem deals with the effect of
international trade on factor prices. H - 0 theorem is further divided in two parts: factor
intensity and factor abundance. Factor Abundance can be explained in terms of physical
units and relative factor prices. Physical units include capital and labour, whereas,
relative factor price includes the adjoining expenses like rent, labour cost, etcetera. On
the other hand, factor intensity means capital, labour or technology, etcetera, any factor
that a country has.
For example, a capital-rich country will export capital-intensive goods and import
labour-intensive goods. Similarly, a labour-abundant country will specialize in labour-
intensive industries. This theory suggests that differences in factor endowments
between countries drive comparative advantage and patterns of trade.
NATIONAL COMPETITIVE THEORY OR PORTER'S DIAMOND
The diamond theory was given by Micheal Porter. This theory states that the qualities
of the home country are vital for the triumph of a corporation. This theory was given its
name because it is in the shape of a diamond. It describes the factors that influence the
success of an organization. There are Six Model Factors in this theory which are also
known as the determinants.
The following are the determinants:
▪ Factor Condition;
▪ Demand Conditions;
▪ Related and Supporting Industries;
▪ Firm Strategy, Structure, and Rivalry;
▪ Chance; and
▪ Government.
In terms of international trade law, Porter's theory suggests that trade policy should
focus on enhancing the competitiveness of domestic industries by improving factor
conditions, fostering innovation and entrepreneurship, and promoting collaboration
between firms and supporting industries. Trade agreements may include provisions
aimed at enhancing these factors through investment, education, infrastructure
development, and technology transfer.
PRODUCT LIFE CYCLE THEORY: This theory was developed by Raymond
Vernon in the Mid 1960's, he was a Harvard Business School professor. This theory was
developed after the failure of Hecksher Ohlin's Theory. The theory, detailed that a
product goes through various stages in the course of its progress. These stages are: (1)
new product stage, (2) maturing product stage, and (3) standardized product stage. This
theory assumed that the production of a new product would take place in the nation
where it was innovated.
In the 1960's this was a very useful theory. At that time, United States of America was
dominating the whole globe in terms of manufacturing after the World War II.
Stage I: New Product: The stage begins with introducing a new product in the market.
A corporation will begin from developing a new good. The market for which will be
small and sales will be comparatively low. Vernon assumed that innovation or invention
of products will mostly be done in developed nations, because of the economy of the
nation. To balance the effect of less sales, corporations would keep the manufacturing
local. As the sales would increase, the corporations would start to export the goods to
different nations in order to increase the revenue and sales.
Stage II: Mature Product Stage: The product enters this stage when it has established
demand in developed nations. The manufacturer, would need to open manufacturing
plants in each nation where the product has demand. Due to local production, labour
costs and export costs will decline which will in result reduce the per unit cost and
increase the revenue. This stage may include product development. Demand for the
product will continue to rise in this stage. demand can also be expected from less
developed nations. Local competition with other cooperation's will begin.
Stage III: Standardized Product Stage: In this stage exports to nations various
developed and under developed nations will begin. Foreign product competition will
reach its peak due to which the product will start losing its market. The demand in the
nation from where the product originated will start declining and eventually diminishes
as a new product grabs the attention of the people. The market for the product is now
completely finished.
Then, the cycle of a new product begins.

➢ LEX MERCATORIA AND CODIFICATION OF INTERNATIONAL

TRADE LAW: Lex mercatoria, often referred to as the "law merchant," is a
 body of customary international commercial law that developed among
merchants during the medieval and early modern periods. It originated as a
response to the need for consistent rules and norms to govern trade across
different jurisdictions. As merchants engaged in international trade encountered
diverse legal systems and customs, they developed a set of rules and practices to
facilitate commerce and resolve disputes. The lex mercatoria was characterized
by several key features:
1. Flexibility: The rules of the lex mercatoria were adaptable to the needs of
merchants and the evolving nature of trade. They were not bound by rigid legal
codes but instead emerged through commercial practice and consensus among
merchants.
2. Universality: The lex mercatoria transcended national boundaries and applied
to merchants engaging in trade across different jurisdictions. It provided a
common framework for conducting business and resolving disputes, regardless
of the specific legal systems involved.
3. Principles of Fairness and Equity: The lex mercatoria emphasized principles
of fairness, equity, and good faith in commercial transactions. It sought to uphold
the integrity of contracts and ensure that merchants were treated fairly in their
dealings with one another.
4. Dispute Resolution Mechanisms: The lex mercatoria established mechanisms
for resolving disputes among merchants, such as arbitration by impartial third
parties or merchant courts composed of fellow traders. These mechanisms
offered a faster and more efficient alternative to traditional legal proceedings.
While the lex mercatoria was effective in facilitating international trade during its time,
it faced challenges in terms of enforcement and recognition by national legal systems.
As trade expanded and became more complex, there was a growing demand for greater
legal certainty and uniformity in commercial law.

CODIFICATION OF INTERNATIONAL TRADE LAW refers to the process of

creating formal legal codes or treaties to regulate international commerce. This
codification aimed to address the limitations of the lex mercatoria by establishing clear
and enforceable rules governing international trade. One of the earliest examples of
codification in international trade law is the "Law of the Sea," which was codified in
various treaties and conventions to regulate navigation, fishing rights, and other
maritime activities. Another significant development was the creation of the General
Agreement on Tariffs and Trade (GATT) in 1947, which established a framework for
international trade relations and the reduction of trade barriers. In recent decades, efforts
to codify international trade law have intensified with the proliferation of regional and
bilateral trade agreements, as well as the establishment of international organizations
such as the World Trade Organization (WTO). These agreements and institutions seek
to harmonize trade rules, promote liberalization, and provide mechanisms for resolving
trade disputes. The codification of international trade law offers several advantages:
1. Legal Certainty: Codified rules provide greater clarity and predictability for
businesses engaged in international trade, reducing uncertainty and the risk of
disputes.
 2. Enforceability: Codified rules are backed by legal mechanisms for enforcement,
such as dispute resolution mechanisms and sanctions for non-compliance.
3. Uniformity: Codification promotes uniformity in commercial law, making it
easier for businesses to navigate different legal systems and jurisdictions.
4. Adaptability: Codified rules can be updated and revised to reflect changes in
the global economy and emerging issues in international trade.
However, the codification of international trade law also faces challenges,
including:
1. Complexity: The negotiation and implementation of international trade
agreements can be complex and time-consuming, involving multiple
stakeholders with diverse interests.
2. Sovereignty Concerns: Some countries may be reluctant to cede sovereignty to
international institutions or comply with binding international rules that may
conflict with their domestic laws and policies.
3. Inequality: Developing countries may lack the resources and expertise to
participate effectively in the negotiation of international trade agreements,
leading to concerns about unequal bargaining power and outcomes.

➢ SOURCES AND PRINCIPLES OF INTERNATIONAL TRADE LAW:

International trade law encompasses a broad range of legal principles, rules, and
norms that govern the conduct of trade relations between nations. These
principles and rules derive from various sources, including international
agreements, customary practices, judicial decisions, and scholarly writings.
Understanding these sources is essential for comprehending the foundations of
international trade law. Additionally, there are key principles that underpin the
operation of international trade law, guiding the behaviour of states and shaping
the development of trade regulations and agreements.
Sources of International Trade Law:
▪ International Agreements and Treaties: International trade law is primarily
shaped by treaties and agreements negotiated among countries. These
agreements can be bilateral, involving two countries, or multilateral, involving
multiple countries. Examples include the General Agreement on Tariffs and
Trade (GATT), the World Trade Organization (WTO) agreements, and various
regional trade agreements like the North American Free Trade Agreement
(NAFTA) or the European Union treaties.
▪ Customary International Law: Customary international law refers to the
general practices and norms accepted by states as binding obligations. In the
context of international trade, customary practices have developed over time
through consistent state practice and the belief that such practices are legally
obligatory. For example, the principle of most-favoured-nation (MFN)
treatment, which requires states to extend the same favourable treatment to all
trading partners, is considered a customary norm in international trade law.
▪ Judicial Decisions and Precedents: Judicial decisions rendered by international
courts and tribunals play a significant role in shaping international trade law.
Decisions of bodies such as the WTO's Dispute Settlement Body (DSB) and the
International Court of Justice (ICJ) contribute to the development and
 interpretation of trade norms and rules. These decisions serve as precedents that
influence future legal interpretations and practices.
▪ Soft Law Instruments: Soft law refers to non-binding instruments such as
declarations, resolutions, and guidelines that express principles and aspirations
without creating legally enforceable obligations. While not legally binding, soft
law instruments can still influence state behaviour and shape the development of
international trade law. Examples include the WTO Ministerial Declarations and
the United Nations Commission on International Trade Law (UNCITRAL)
Model Laws.
▪ Scholarly Writings and Commentary: Academic scholarship and commentary
provide valuable insights and interpretations of international trade law. Legal
scholars contribute to the understanding of trade principles, doctrines, and
emerging issues through research, analysis, and commentary published in
academic journals, books, and other forums. While not binding sources of law,
scholarly writings inform legal debates and policymaking in the field of
international trade.
Principles of International Trade Law:
1. Non-Discrimination: Non-discrimination is a fundamental principle of
international trade law, reflected in the principles of MFN treatment and national
treatment. MFN treatment requires countries to extend any favourable trade
terms granted to one trading partner to all other trading partners, ensuring
equality and non-discrimination in trade relations. National treatment requires
countries to treat foreign goods, services, and nationals no less favourably than
their own, once they have entered the domestic market.
2. Reciprocity: Reciprocity is another key principle in international trade law,
emphasizing the mutual exchange of trade concessions between countries. Under
this principle, countries negotiate trade agreements based on the principle of
"give and take," seeking equivalent benefits for the concessions they grant.
Reciprocity promotes fairness and balance in trade relations by ensuring that
concessions are matched by equivalent benefits.
3. Transparency: Transparency is essential for ensuring predictability and fairness
in international trade. Countries are expected to provide timely and accessible
information about their trade policies, regulations, and measures to other trading
partners. Transparency enhances market predictability, facilitates compliance
with trade rules, and promotes trust among trading partners.
4. Sovereignty and National Interest: While international trade law aims to
promote liberalization and economic integration, it also recognizes the sovereign
right of states to regulate trade in pursuit of their national interests. States retain
the authority to adopt trade policies and measures to protect domestic industries,
promote public health and safety, and achieve other legitimate policy objectives.
However, such measures must be consistent with their international obligations
and not unjustifiably restrict trade.
5. Good Faith and Fair-Trade Practices: International trade law is underpinned
by principles of good faith and fair-trade practices. States are expected to conduct
trade relations in a manner that is honest, transparent, and respectful of the rights
and interests of other trading partners. Fair trade practices prohibit practices such
 as dumping (selling goods below cost to gain market share), subsidies that distort
trade, and other unfair trade practices that undermine competition and harm other
countries' interests.

UNIT – 2
➢ INTRODUCTION - The General Agreement on Tariffs and Trade (GATT)
stands as one of the most influential and enduring international agreements in
the realm of global commerce. Conceived in the wake of the devastation wrought
by World War II, GATT emerged as a beacon of hope and cooperation, aimed at
fostering economic recovery, promoting international trade, and preventing the
reemergence of the protectionist policies that had contributed to the economic
turmoil of the interwar period.
▪ Formally established on October 30, 1947, GATT represented a landmark
achievement in international diplomacy, bringing together 23 nations in Geneva,
Switzerland, to negotiate a framework for the regulation of trade. Its creation
was spurred by a recognition of the need to dismantle trade barriers, reduce
tariffs, and foster a climate of economic openness and cooperation among
nations still reeling from the ravages of war.
▪ At its core, GATT embodied a set of principles designed to promote free and fair
trade among its signatory countries. Key among these principles was the concept
of Most-Favored-Nation (MFN) treatment, which stipulated that member nations
would extend to each other the same favorable trade terms and concessions
granted to any other nation. This principle served as a cornerstone of non-
discrimination, ensuring that no member would face discriminatory trade
practices from its counterparts.
▪ Another fundamental principle of GATT was the commitment to tariff reduction.
Member nations agreed to engage in negotiations aimed at lowering tariffs and
dismantling trade barriers, with the ultimate goal of expanding market access and
facilitating the flow of goods and services across borders. By promoting trade
liberalization, GATT sought to spur economic growth, enhance efficiency, and
raise living standards for people around the world.
▪ In addition to its focus on tariff reduction and non-discrimination, GATT also
established mechanisms for the resolution of trade disputes among member
nations. These mechanisms provided a framework for the peaceful settlement of
disputes, helping to prevent conflicts and ensure compliance with the rules and
obligations outlined in the agreement.
▪ Over the years, GATT evolved through a series of negotiation rounds, each aimed
at furthering the objectives of trade liberalization and expanding the scope of the
agreement to cover new areas of trade. These negotiation rounds, including the
Kennedy Round, the Tokyo Round, and the Uruguay Round, resulted in
agreements that addressed a wide range of issues, from agriculture and textiles
to intellectual property and services.
▪ While GATT ultimately paved the way for the establishment of the World Trade
Organization (WTO) in 1995, its legacy endures as a testament to the power of
international cooperation and multilateralism in addressing the challenges of
global trade. By fostering a rules-based system for international trade, GATT laid
 the groundwork for a more open, prosperous, and interconnected global
economy, leaving an indelible mark on the history of international commerce.

➢ HISTORY: The General Agreement on Tariffs and Trade (GATT) of 1947

emerged in the aftermath of World War II as a response to the economic
devastation and protectionist trade policies that characterized the interwar
period. It aimed to promote international trade, reduce tariffs and trade barriers,
and establish a framework for economic cooperation among nations. To
understand the historical background of GATT 1947, it is essential to explore the
context leading up to its creation, its key principles, and its evolution over time.
▪ Post-World War II Economic Context: The devastation of World War II left
much of Europe and Asia in ruins, with economies shattered and millions of
people displaced or impoverished. In response to this widespread destruction,
there was a growing recognition of the need for international cooperation to
rebuild economies, foster stability, and prevent future conflicts.
▪ Interwar Protectionism and Trade Barriers: The interwar period (1919-1939)
was marked by a rise in protectionist trade policies, tariff barriers, and economic
nationalism. Countries imposed high tariffs and trade restrictions to protect
domestic industries and preserve employment, contributing to a decline in
international trade and exacerbating the effects of the Great Depression.
▪ Pre-GATT Initiatives: Prior to the establishment of GATT, there were several
attempts to promote international trade cooperation. The most notable was the
failed attempt to create the International Trade Organization (ITO) as part of the
Bretton Woods Conference in 1944. The ITO was intended to serve as a
comprehensive framework for international trade, but disagreements among
member states prevented its establishment.
▪ Creation of GATT 1947: In 1947, representatives from 23 countries gathered in
Geneva, Switzerland, to negotiate a multilateral agreement aimed at reducing
trade barriers and promoting international trade. The result of these negotiations
was the signing of the General Agreement on Tariffs and Trade (GATT) on
October 30, 1947. GATT was conceived as an interim measure until the
establishment of the proposed ITO, but it ultimately became the primary
international instrument governing trade until the creation of the World Trade
Organization (WTO) in 1995.
▪ Key Principles of GATT 1947:GATT 1947 was founded on several key
principles that aimed to liberalize trade and promote economic cooperation:
a) Most-Favored-Nation (MFN) Treatment: GATT members agreed to grant
each other the same favorable trade terms and concessions offered to any other
member, ensuring non-discrimination in trade relations.
b) Tariff Reductions: GATT members committed to reducing tariffs and trade
barriers through negotiations, with the goal of promoting freer trade and
expanding market access.
c) Trade Liberalization: GATT sought to dismantle protectionist measures and
promote the liberalization of trade, recognizing the benefits of open markets for
economic growth and development.
 d) Dispute Resolution: GATT established mechanisms for resolving disputes
between member states, including consultations, mediation, and arbitration, to
address violations of trade rules and agreements.
▪ Impact and Evolution of GATT: GATT 1947 had a significant impact on global
trade, contributing to a gradual reduction in tariffs and trade barriers over several
decades. Through a series of negotiation rounds, including the Dillon, Kennedy,
and Tokyo Rounds, GATT members successfully concluded agreements to
further liberalize trade and expand the scope of the agreement to cover new areas
such as agriculture, textiles, and services.
However, GATT faced challenges and criticisms over the years, including concerns
about the effectiveness of dispute resolution mechanisms, the exclusion of developing
countries from decision-making processes, and the need for greater attention to non-
tariff barriers to trade.
▪ Transition to the World Trade Organization (WTO): As international trade
expanded and diversified, there was a recognition of the need to modernize and
strengthen the global trading system. Negotiations to establish a new, more
comprehensive trade organization culminated in the creation of the World Trade
Organization (WTO) in 1995. The WTO incorporated and built upon the
principles and rules of GATT, while also introducing new agreements covering
areas such as intellectual property, services, and investment.
▪ Legacy of GATT 1947: Despite its eventual replacement by the WTO, GATT
1947 left a lasting legacy in shaping the rules and norms of international trade.
It played a pivotal role in promoting trade liberalization, fostering economic
cooperation, and establishing a rules-based system for resolving trade disputes.
The principles and principles enshrined in GATT continue to influence
international trade agreements and negotiations to this day.

➢ URUGUAY ROUND & MARRAKESH AGREEMENT

The Uruguay Round of trade negotiations, which took place from 1986 to 1994, was a
landmark event in the history of international trade, culminating in the creation of the
World Trade Organization (WTO) and the signing of the Marrakesh Agreement. This
round of negotiations represented a significant expansion and modernization of the
global trading system, addressing a wide range of issues and setting the stage for a more
comprehensive and rules-based approach to international trade.
A. URUGUAY ROUND
▪ Background and Objectives: The Uruguay Round was initiated against the
backdrop of increasing globalization, technological advancements, and changing
economic realities. Its primary objectives were to further liberalize trade, expand
the scope of international trade rules, and modernize the multilateral trading
system established under the General Agreement on Tariffs and Trade (GATT).
▪ Key Issues and Negotiations: The Uruguay Round addressed a broad range of
trade-related issues, including tariffs, non-tariff barriers, agriculture, services,
intellectual property, investment, and dispute resolution. Negotiations were
complex and multifaceted, involving extensive discussions among participating
countries to reach consensus on various contentious issues.
Key Achievements: The Uruguay Round produced several key agreements and
commitments that significantly impacted the global trading system:
▪ Agreement on Agriculture: The Uruguay Round led to the first comprehensive
agreement on agricultural trade, aiming to reduce agricultural subsidies, increase
market access, and improve disciplines on trade-distorting practices.
▪ Agreement on Trade-Related Aspects of Intellectual Property Rights
(TRIPS): TRIPS established international standards for the protection and
enforcement of intellectual property rights, including patents, copyrights,
trademarks, and trade secrets.
▪ Agreement on the Application of Sanitary and Phytosanitary Measures
(SPS Agreement): The SPS Agreement set out rules for food safety and animal
and plant health standards, aiming to ensure that these measures are based on
scientific principles and do not unjustifiably restrict trade.
▪ Agreement on Trade in Services (GATS): GATS created a framework for the
liberalization of trade in services, covering sectors such as telecommunications,
finance, transportation, and professional services.
▪ Agreement on Trade-Related Investment Measures (TRIMS): TRIMS aimed
to prevent trade-restrictive measures imposed by governments on foreign
investment, such as local content requirements and export performance
requirements.
▪ Establishment of the World Trade Organization (WTO): The Uruguay Round
resulted in the creation of the WTO as the successor to GATT, providing a
permanent institutional framework for the negotiation, implementation, and
enforcement of international trade rules.

B. Marrakesh Agreement:
Signing and Implementation: The Marrakesh Agreement, named after the city in
Morocco where it was signed in April 1994, formalized the agreements reached during
the Uruguay Round and established the legal framework for the newly created WTO.
The agreement was signed by representatives of over 120 countries and entered into
force on January 1, 1995.
▪ Key Components: The Marrakesh Agreement consists of several key
components that govern the functioning of the WTO and its various agreements:
▪ Agreement Establishing the WTO: This agreement establishes the WTO as an
international organization with a mandate to facilitate trade negotiations,
administer trade agreements, and provide a forum for dispute resolution.
▪ Multilateral Trade Agreements: The Marrakesh Agreement incorporates the
various agreements negotiated during the Uruguay Round, including the General
Agreement on Tariffs and Trade (GATT 1994), the General Agreement on Trade
in Services (GATS), and the Agreement on Trade-Related Aspects of Intellectual
Property Rights (TRIPS), among others.
▪ Dispute Settlement Understanding (DSU): The DSU provides the legal
framework and procedures for resolving disputes between member countries
regarding the interpretation and application of WTO agreements.
▪ Trade Policy Review Mechanism: The Marrakesh Agreement establishes a
system for the regular review of member countries' trade policies and practices,
 providing transparency and accountability in the implementation of WTO
commitments.
Impact and Legacy: The Marrakesh Agreement and the establishment of the WTO
marked a significant milestone in the evolution of the global trading system. By
providing a comprehensive legal framework for international trade, the agreement
promoted stability, predictability, and transparency in global commerce. The WTO's
dispute settlement mechanism became a crucial tool for resolving trade disputes and
enforcing compliance with trade rules, contributing to the reduction of trade barriers
and the promotion of a rules-based trading system.

In conclusion, the Uruguay Round of trade negotiations and the signing of the
Marrakesh Agreement represented a watershed moment in the history of international
trade. These developments led to the creation of the World Trade Organization and
ushered in a new era of globalization, liberalization, and cooperation in the global
trading system. The agreements reached during the Uruguay Round and enshrined in
the Marrakesh Agreement have had a profound and lasting impact on global trade,
shaping the rules and norms that govern international commerce to this day.

➢ GATT 1994: The General Agreement on Tariffs and Trade (GATT) of 1994 is a
significant international trade agreement that emerged from the Uruguay Round
of negotiations, representing a major overhaul and modernization of the global
trading system. GATT 1994 incorporated the results of the Uruguay Round
negotiations into a new legal framework, which became an integral part of the
World Trade Organization (WTO) upon its establishment. To understand GATT
1994, it's crucial to delve into its background, key provisions, and its impact on
international trade.
A. Background: The Uruguay Round of trade negotiations, which took place from
1986 to 1994, was the eighth round of multilateral trade negotiations conducted
under the auspices of GATT. It was initiated in response to changing global
economic conditions and the need to address emerging trade issues not
adequately covered by previous agreements. The objectives of the Uruguay
Round were to further liberalize trade, expand the scope of international trade
rules, and modernize the global trading system. The negotiations covered a wide
range of issues, including tariffs, non-tariff barriers, agriculture, services,
intellectual property, investment, and dispute resolution.
Key Provisions of GATT 1994:
▪ Tariff Reductions: GATT 1994 built upon previous agreements to further reduce
tariffs on industrial goods and agricultural products. Member countries
committed to lowering their tariff levels through negotiated tariff concessions,
with the aim of expanding market access and promoting freer trade.
▪ Non-Tariff Barriers: GATT 1994 addressed various non-tariff barriers to trade,
such as quotas, import licensing requirements, and technical barriers to trade.
Member countries agreed to reduce or eliminate these barriers, thereby
facilitating trade and promoting greater transparency and predictability in
international commerce.
▪ Trade in Services (GATS): GATT 1994 included the Agreement on Trade in
Services (GATS), which established rules and disciplines for the liberalization
of trade in services. GATS aimed to promote greater openness and competition
in service sectors such as telecommunications, finance, transportation, and
professional services, facilitating the cross-border movement of services and
fostering economic growth.
B. Intellectual Property Rights (TRIPS): GATT 1994 incorporated the
Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS),
which established international standards for the protection and enforcement of
intellectual property rights. TRIPS covered various forms of intellectual
property, including patents, copyrights, trademarks, and trade secrets, and aimed
to promote innovation, creativity, and technology transfer while ensuring
adequate protection for intellectual property owners.
C. Dispute Settlement: GATT 1994 strengthened the dispute settlement
mechanism established under previous agreements, providing a more effective
and enforceable means of resolving disputes between member countries. The
new dispute settlement understanding (DSU) introduced stricter deadlines,
clearer procedures, and stronger enforcement mechanisms, enhancing the
credibility and effectiveness of the dispute resolution process.
D. Agriculture: GATT 1994 included the Agreement on Agriculture, which
represented the first comprehensive agreement on agricultural trade. The
agreement aimed to reduce agricultural subsidies, increase market access for
agricultural products, and improve disciplines on trade-distorting practices such
as export subsidies and import quotas.
E. Impact and Legacy: GATT 1994 had a profound impact on the global trading
system, paving the way for greater liberalization, integration, and cooperation
among member countries. Some key impacts and legacies of GATT 1994
include:
F. Expansion of Trade: GATT 1994 led to a significant expansion of international
trade by reducing tariffs, eliminating non-tariff barriers, and promoting greater
market access for goods and services.
G. Creation of the WTO: GATT 1994 served as the foundation for the
establishment of the World Trade Organization (WTO) in 1995. The WTO
provided a permanent institutional framework for the negotiation,
implementation, and enforcement of international trade rules, replacing GATT
as the primary international organization governing trade.
H. Promotion of Economic Growth: GATT 1994 contributed to global economic
growth and development by fostering a more open, transparent, and rules-based
trading system. By promoting trade liberalization and reducing trade barriers,
GATT 1994 helped to stimulate investment, innovation, and productivity growth
across member countries.
I. Integration of Developing Countries: GATT 1994 sought to integrate
developing countries more fully into the global trading system by providing
technical assistance, capacity-building support, and special and differential
treatment provisions. While challenges remain, GATT 1994 represented a step
 towards greater inclusivity and participation of developing countries in
international trade.
J. Resolution of Trade Disputes: GATT 1994 strengthened the dispute settlement
mechanism, providing member countries with a more effective and transparent
means of resolving trade disputes. This contributed to the stability and
predictability of the global trading system by ensuring compliance with trade
rules and obligations.
In conclusion, GATT 1994 was a pivotal moment in the history of international trade,
representing a comprehensive and ambitious effort to modernize and liberalize the
global trading system. By incorporating the results of the Uruguay Round negotiations
into a new legal framework, GATT 1994 laid the foundation for the establishment of
the WTO and helped to shape the rules and norms that govern international trade to this
day.

➢ WORLD TRADE ORGANISATION (WTO): International trade is governed

by the World Trade Organization (WTO), an intergovernmental body. By
offering a foundation for negotiating trade agreements and a dispute resolution
procedure intended to enforce participants’ conformance to WTO agreements,
which are agreed to be signed by officials of signatory countries and approved
by their parliaments, the WTO regulates trade between participating nations. The
majority of the WTO’s current concerns originate from earlier trade discussions,
particularly the Uruguay Round (1986–1994).
Following the creation of other fresh multilateral frameworks devoted to global
economic cooperation, such as the World Bank (founded in 1944) and the International
Monetary Fund, the General Agreement on Tariffs and Trade (GATT), the forerunner of
the World Trade Organization (WTO), was established in 1947 by a multilateral treaty
of 23 nations (founded in 1944 or 1945). Since the United States and other signatories
did not approve the founding treaty, the International Trade Organization, a parallel
international institution for trade, was never established, and GATT gradually grew into
a de facto international organisation.

All contracting parties applied the General Agreement ‘provisionally.’ The GATT is
applied under the Protocol of Provisional Application by the original contracting parties,
as well as former territories of Belgium, France, the Netherlands, and the United
Kingdom that acceded to the General Agreement after gaining independence
under Article XXVI:5(c). Chile implemented the General Agreement with a September
1948 Special Protocol. The General Agreement was applied by the contracting countries
that have acceded since 1948 under their separate Protocols of Accession. The
contracting parties altered the title of the head of the GATT secretariat from ‘Executive
Secretary’ to ‘Director-General’ by a decision dated March 23, 1965. However, because
the General Agreement had not been amended to reflect this change, the term ‘Executive
Secretary’ had been kept in the wording of Articles XVIII:12(e), XXIII:2, XXVI:4, 5,
and 6. The General Agreement’s responsibilities and powers “must be executed by the
person holding the office of Director-General, who shall, for this purpose, also hold the
position of Executive Secretary,” according to the decision of March 23, 1965. GATT
Articles that are included in the Final Act have been provided hereunder:
A. Article II (Schedules of Concessions): Agreement to record “additional levies
or charges” paid in addition to the recorded tariff in national schedules and bind
them at the levels in effect at the time the Uruguay Round Protocol was signed.
B. Article XVII (State-trading Enterprises): By enforcing stricter notification
and review procedures, they will be able to keep a closer eye on their operations.
C. Articles XII and XVIII:B (Balance-of-payments provisions): Agreement that
contracting parties should impose balance-of-payments limitations in the least
trade-distorting way possible, preferring price-based measures such as import
surcharges and import deposits over quantitative limits. The agreement was also
reached on protocols for GATT Balance-of-Payments (BOP) Committee
discussions and notification of BOP measures.
D. Article XXIV (Customs Unions and Free-Trade Areas): Agreement defining
and reinforcing the criteria and processes for evaluating the implications of new
or expanded customs unions or free-trade zones on third parties. In the event that
contracting parties join a customs union and wish to increase a binding tariff, the
agreement defines the method to be followed to achieve any necessary
compensating adjustment. Contracting parties’ duties in relation to actions
implemented by regional or local governments or authorities within their
jurisdictions are also defined.
E. Article XXV (Waivers): Agreement on new processes for awarding exemptions
from GATT disciplines, including the specification of termination dates for any
future waivers and the fixation of expiry dates for current waivers. However, the
major clauses addressing the granting of exemptions are included in the WTO
Agreement.
F. Article XXVIII (Modification of GATT Schedules): Agreement on new
processes for discussing compensation when tariff bindings are amended or
removed, including the establishment of a new negotiating right for the nation
whose exports are dominated by the goods in issue. Smaller and developing
nations will be better able to engage in discussions as a result of this.
G. Article XXXV (Non-application of the General Agreement): After entering
tariff discussions with each other, an agreement to allow a contracting party or a
newly acceding nation to exercise GATT’s non-application provisions against
the other party. Any use of the WTO Agreement’s non-application provisions
must apply to all multilateral agreements, according to the agreement.

➢ AGREEMENTS UNDER GATT

A. Agreement on Agriculture: The Agriculture Agreement (AoA) is a World
Trade Organization (WTO) international treaty. It was negotiated at the Uruguay
Round of the General Agreement on Tariffs and Trade, and it went into effect on
January 1, 1995, when the WTO was established.
B. Agreement on Sanitary and Phytosanitary Measures: The Sanitary and
Phytosanitary Measures Agreement lays down the groundwork for food safety
as well as animal and plant health requirements. It empowers countries to create
their own standards, which should only be used to preserve human, animal, plant
life or health.
C. Agreement on Textiles and Clothing: The Uruguay Round of Trade
Negotiations produced the Agreement on Textiles and Clothing (ATC). From
the date of the WTO Agreement’s entrance into effect, all existing textile and
garment trade barriers were to be disclosed and abolished over a 10-year period.
D. Agreement on Technical Barriers to Trade Agreement on Trade Related
Aspects of Investment Measures: Certain investment measures can limit and
distort trade, according to the Trade-Related Investment Measures
Agreement (TRIMS). It stipulates that members of the WTO may not take any
action that discriminates against foreign products or results in quantitative limits,
both of which are in violation of fundamental WTO principles.
E. Agreement on Implementation of Article VI (Anti-dumping): In written
applications for anti-dumping relief, the Anti-Dumping Agreement establishes
requirements for evidence of dumping, injury, and causality, as well as other
information about the product, industry, importers, exporters, and other matters,
and specifies that, in special circumstances when authorities initiate without a
written application from domestic industry, they shall proceed only if they have
sufficient evidence of dumping, injury, and causality.
F. Agreement on Implementation of Article VII (Customs Valuation): The
WTO Agreement on customs valuation aspires for a fair, uniform, and impartial
system for valuing products for customs purposes, one that is based on business
reality and prohibits the use of false or arbitrary customs values.
G. Agreement on Preshipment Inspection: Private firms are hired to examine
shipping data such as pricing, quantity, and quality of items bought from another
country. The Preshipment Agreement acknowledges that the GATT
Agreement’s principles apply to the aforementioned action.
H. Agreement on Rules of Origin Agreement on Import Licensing
Procedures: Import licencing should be straightforward, clear, and predictable,
according to the Agreement on Import Licensing Procedures, so that it does not
constitute a trade barrier. It also explains how nations should inform the WTO
when they implement new or amend current import licencing processes.
I. Agreement on Subsidies and Countervailing Measures: The World Trade
Organization’s (WTO) Agreement on Subsidies and Countervailing
Measures (Subsidies Agreement) establishes standards for the use of
government subsidies as well as the implementation of remedies to address
subsidised trade that has negative commercial consequences.
J. Agreement on Safeguards: The Safeguards Agreement establishes the
regulations for using safeguard measures under Article XIX of the GATT 1994.
Safeguard measures are described as ‘emergency’ procedures taken in response
to increasing imports of certain items that have caused or threatened to cause
substantial harm to the domestic industry of the importing Member.
K. General Agreement on Trade in Services (GATS): The Uruguay Round’s
outcomes went into force in January 1995, and one of the most significant
successes was the founding of the GATS. The GATS was founded on the same
principles as its merchandise trade counterpart, the General Agreement on
Tariffs and Trade (GATT) with the purpose of establishing a credible and
reliable system of international trade rules, ensuring fair and equitable treatment
 of all participants (principle of non-discrimination), stimulating economic
activity through guaranteed policy bindings and promoting trade and
development through progressive liberalisation.
L. Agreement on Trade Related Aspects of Intellectual Property Rights,
Including Trade in Counterfeit Goods: The TRIPS Agreement mandated that
WTO members must offer a minimum degree of protection to the intellectual
property of other WTO members. Copyrights, trademarks, patents, geographical
indications (GI), industrial and layout designs, and concealed information (trade
secrets) are among the topics covered in the TRIPS Agreement.

➢ RULES AND PROCEDURES GOVERNING THE SETTLEMENT OF

DISPUTES
▪ The GATT’s dispute settlement mechanism is widely regarded as one of the
multilateral trade order’s pillars. Reforms agreed upon during the Mid-Term
Review Ministerial Meeting in Montreal in December 1988 have already
improved and simplified the system. Disputes now before the Council are subject
to these new rules, which include increased automaticity in decisions on panel
creation, terms of reference, and composition, so that these decisions are no
longer reliant on the parties’ permission.
▪ The Uruguay Round Agreement on Rules and Procedures Governing Dispute
Settlement (DSU) greatly enhanced the present system, expanding the more
automaticity agreed in the Mid-Term Review to the implementation of panels’
and a new Appellate Body’s conclusions. Furthermore, the DSU provides an
integrated system that will allow WTO Members to base their claims on any of
the multilateral trade agreements included in the WTO’s Annexes. The General
Council, as well as the councils and committees of the covered agreements, shall
exercise their jurisdiction in this regard through a Dispute Settlement
Body (DSB).
▪ The DSU stresses the significance of discussions in obtaining conflict settlement
by requiring a member to engage in consultations within 30 days of another
member’s request for consultations. If no resolution is reached within 60 days
following the request for discussions, the aggrieved party may request the
formation of a panel. If a disagreement cannot be resolved through discussions,
the DSU mandates the installation of a panel at the DSB meeting following the
one at which a request is made, unless the DSB unanimously decides against it.
▪ The DSU also establishes particular procedures and timelines for determining
terms of reference and panel membership. Unless the parties agree to specific
conditions within 20 days of the panel’s formation, the standard terms of
reference shall apply. If the parties cannot agree on the panel’s membership
within 20 days, the Director-General has the authority to make the decision.
Panels are usually made up of three people with relevant backgrounds and
expertise from nations that are not parties to the dispute. One of the DSU’s core
clauses underlines that members must use the DSU’s dispute resolution norms
and processes to determine whether or not there have been breaches or
concessions suspended.
➢ DIFFERENCE BETWEEN GATT AND WTO
1. The GATT is an international multilateral treaty signed by 23 countries to
promote international commerce and eliminate trade obstacles between
countries. WTO, on the other hand, is a worldwide organisation that replaced
GATT and regulates international commerce between member countries.
2. GATT is a basic agreement with no institutional structure, but it does have a
small secretariat. WTO, on the other hand, is a permanent organisation with
a secretariat.
3. In the GATT, the participating countries are referred to as contracting parties,
whereas in the WTO, they are referred to as member nations.
4. GATT agreements are temporary in nature, with the government having the
option of treating them as permanent commitments after 47 years. WTO
obligations, on the other hand, have been in place since the outset.
5. The WTO’s scope is broader than the GATT’s in the sense that the GATT’s
regulations apply only when products are traded, unlike the WTO, which has
laws that apply to both commodities and services, as well as parts of
intellectual property.
6. The GATT agreement is essentially multilateral, although it is subsequently
expanded to include plurilateral agreements. WTO accords, on the other hand,
are completely multilateral.

➢ GATT and its success : GATT stands for the General Agreement on Tariffs and
Trade. It was a multilateral agreement regulating international trade that was in
effect from 1948 to 1994. GATT was created with the primary goal of promoting
international trade by reducing or eliminating barriers such as tariffs, quotas, and
subsidies. Here are some key aspects and reasons for its success:
▪ Reduction of Trade Barriers: GATT facilitated the reduction of tariffs and
other trade barriers among its member countries through a series of negotiating
rounds. This reduction in barriers helped to stimulate global trade and economic
growth.
▪ Non-discrimination Principle: GATT established the principle of most-
favored-nation (MFN) treatment, which required member countries to extend the
same favorable trading terms to all other member countries that they offered to
any one country. This principle helped prevent discrimination in trade practices.
▪ Promotion of Trade Liberalization: GATT provided a forum for negotiation
and dialogue among member countries to continually work towards further trade
liberalization. The periodic rounds of negotiations, such as the Uruguay Round,
resulted in significant reductions in tariffs and the inclusion of new areas like
services and intellectual property rights.
▪ Dispute Resolution Mechanism: GATT established a mechanism for resolving
disputes between member countries regarding trade issues. This mechanism
helped prevent trade conflicts from escalating into trade wars and provided a
framework for resolving disputes through negotiation and mediation.
▪ Flexibility and Adaptability: GATT was designed to be flexible and adaptable
to changing economic and political circumstances. It allowed for amendments
 and updates to its rules and procedures to accommodate the evolving needs of
the global economy.
▪ Multilateralism: GATT promoted multilateralism by providing a platform for
negotiations among a large number of countries. This approach helped foster
cooperation and consensus-building among diverse nations, contributing to a
more stable and predictable international trading system.
Overall, GATT's success can be attributed to its role in reducing trade barriers,
promoting trade liberalization, establishing principles of non-discrimination and dispute
resolution, fostering multilateral cooperation, and adapting to changing global
circumstances. GATT laid the groundwork for the establishment of the World Trade
Organization (WTO) in 1995, which continues to build upon the principles and
achievements of GATT in regulating international trade.