Today’s global economy offers more products and services than were previously imaginable. With modern technology and advanced shipping methodologies, we are able to import and export goods and services of all kinds to every corner of the globe. Naturally, the implications of international trade require the execution of detailed international trade agreements. This is especially true in light of the complex, multi-party nature of most international trade agreements in place today. A common example of a multilateral trade agreement is the North American Free Trade Association (NAFTA) or the South Asia Free Trade Agreement (SAFTA). Nations within these regions sign onto these agreements in order to place their domestic goods into the global markets and to take advantage of competitive pricing for goods and services imported from abroad. In general, international trade law encompasses the appropriate rules and customs that must be used when engaging in trade with foreign countries.
Origins of International Trade Law
The origins of international trade law trace back to the medieval era and stem from two separate doctrines: lex mercatoria (the law for merchants on land) and lex maritima (the law for merchants at sea).
International trade began to increase shortly after World War II and the negotiation of a treaty to provide a method for trading goods: the General Agreement on Tariffs and Trade (GATT).Today, international trade law consists of a body of international legislation, mainly comprised of international treaties and acts of international intergovernmental organizations. The traditional bodies of law and GATT still serve as the foundation for many laws governing international trade agreements today. A new area of international trade law that has developed only recently involves the international trade of intellectual property.
Virtually every nation is now a member of the WTO.
In order to facilitate the negotiation and execution of multilateral trade agreements, the World Trade Organization (WTO) was established. The WTO consists of member countries that have signed on to a multilateral agreement. The purpose of the WTO is to remove impediments and barriers to free trade, such as tariffs. A tariff is a tax that is applied to any foreign imports and is designed to encourage consumers to produce domestically produced products. To counteract the effect of tariffs, the WTO requires member nations to guarantee that they will treat imports from other nations the same way that they would treat domestically produced goods and services. The WTO also develops rules and regulations governing trade and provides an international forum for discussing and resolving trade related issues.
One of the WTO’s most prominent components is its trade dispute settlement system. Established in 1995, the WTO dispute settlement system has handled over 350 cases, with approximately one-quarter of cases reaching an amicable solution. The WTO has enacted its own body of legislation, known as WTO law.
International trade law also carries substantial tax implications. Any operation conducted among multiple jurisdictions is known as a cross-border transaction. Nations engaging in cross-border transactions and international business development must be thoroughly knowledgeable in tax law. Each country enforces different tax requirements on foreign businesses activities, and the consequences of failing to comply with domestic tax laws can be severe.