International Trade

International trade law represents the need to balance two competing interests: (1) the protection of local [Page 809]industries from harm by foreign competitors, and (2) the encouragement of trade across national borders. Since the 1990s, there has been a shift toward freer international trade. However, restrictive trade devices that impede or distort trade still create problems in the international trade of goods, services, intellectual property, and investment.

The most common devices used to restrict trade are tariff barriers, such as import duties and export duties, and nontariff trade barriers (NTBs), such as import quotas; import licensing procedures; safety, environmental, and other minimum manufacturing standards; import testing requirements; complex customs procedures (including valuation); government procurement policies; and government subsidies.

The initial effort by countries to limit disruptive trade practices has usually been the bilateral treaty of friendship, commerce, and navigation, which opens the territory of each signatory nation to imports arriving from the other signatory nation. Such bilateral friendship, commerce, and navigation treaties are usually linked to other preferential trade agreements, such as a reciprocal most favored nation (MFN) clause. An MFN clause binds both parties not to extend to any other nation trade arrangements more favorable than those available under the bilateral treaty unless the more favorable trade arrangements are immediately also available to the signatory of the bilateral treaty.

Another intergovernmental arrangement is the customs union, in which two or more countries join to expand commerce among themselves and to acquire increased bargaining power in international trade negotiations. The European Union is a prime example.

The General Agreement on Tariffs and Trade (GATT), now replaced by the World Trade Organization (WTO), was an international trade agreement created in 1945. Through GATT, numerous countries sought ways of promoting international trade and making it freer. The GATT organization regularly held multinational trade negotiations, sometimes referred to as rounds, which cumulatively reduced average tariff barriers by 80 percent below those existing in the immediate post–World War II era. The most recently completed multilateral negotiations, the Uruguay Round (completed in 1994), cut the average tariff rates of developed countries on dutiable manufactured imports from 6.3 percent to 3.9 percent. Tariff reductions are one of the success stories of GATT. Nevertheless, not all nations are members of GATT or its replacement, the WTO. For example, Russia and Iran are still seeking membership in the WTO. China did not join until 2001 and Vietnam only in 2007.

Today, the GATT 1947 Agreement has been superseded by the substantially similar GATT 1994 Agreement, which is part of the WTO package of trade agreements that took effect in 1995.