General Agreement on Tariffs & Trade - Research Paper Example

General Agreement on Tariffs & Trade Introduction to Trade Regulation Countries create trade barriers to protect their national interests and promote their domestic industries from foreign competition through trade barriers. These trade barriers may include anything from high tariff, quotas or regulations made to keep at bay foreign made goods and services provided. An import trade barrier is a direct or indirect obstruction created to bar the entry of imported goods and services from the country of its export. Tariffs and taxes on imported goods make them comparatively costly to sell. Why is it important to regulate imports? According to Schaffer, Agusti, & Beverley (2009) import regulation is important for economic and political reasons. Decisions at policy level impact the import or export regulation of goods and services. Reasons to regulate import are: Revenue collection by taxing imports Counter-reaction to trade barriers by foreign governments Working under foreign policy guidelines to obstruct trade relations with countries violating international norms or enemy country Maintaining allegiance with national economic policies for creating a reserve of foreign exchange and by following the country’s own industrial policy For providing support to national defense by creating barriers to foreign firms selling defense related or essential products or safeguarding the interests of own country’s strategic industries like aerospace and telecommunications For safeguarding public health, safety and ethics in the import of consumer goods, pharmaceutical or construction, to obstruct the import of banned and objectionable content Safeguarding the natural resources or maintaining the ecological balance Safeguarding of local cultural, religious or ethnic values by prohibiting import of objectionable content (pp. 289-290). Non-tariff barriers to trade Trade barriers on import of goods and services can be of different types like tariff or non-tariff barriers. Non-tariff barriers are roadblocks created to stop trade by non-tariff means, which can be direct or indirect. Direct non-tariff barriers are such that put a limit to the import of certain particular goods and services like embargo and quotas. Indirect non-tariff barriers that just look impartial and totally unbiased for importing goods but in reality it become more difficult to import foreign goods when restrictions are used and applied (Schaffer et al., 2009, p. 290). Indirect tariff barriers are laws, regulations and practices, social and cultural powers that impact the free trade of certain products and services whether for export or import in the local market. Most of the indirect tariff barriers are meant to secure the domestic industries from competition from imported (Schaffer et al., 2009, p. 290). How do these nontariff trade barriers affect management decisions? Such direct and indirect non-tariff barriers can be suicidal to the interests of an exporting firm. It cannot run its business and the same applies to the importing country; if the importing country has alternative sources of getting the same product, it can manage but the exporting firm has to change its business planning strategy and need to find out new locations to export is stock, which can be dead stock if no other foreign market places an order for the same produce. Management has to be always on the alert to take bold decisions as per the new reality. What is GATT? Scope and horizon of GATT is necessary to know before knowing the basic principles of GATT. GATT 1947 rules were framed to be applicable in trade of goods only. GATT 1947 played a dominant role in minimizing tariff and non-tariff barriers in world trade but worldwide problems were surfaced where GATT could not play a positive role in resolving the issues. Certain areas of business were not part of the GATT responsibilities like trade in services and agriculture related issues of continuous quarrels among nations. Trade in textile and apparel was left out of the GATT scope because of politically touchy nature of these industries. Left out of the scope of GATT were intellectual property rights issues. GATT could not succeed in controlling “unfair trade” practices ((Schaffer et al., 2009, p. 297). GATT 1994 came in effect to address the limitations of the previous agreement on trade. GATT 1994 included two most important agreements on WTO Final Agreement representing the Uruguay Round of Multilateral Trade Negotiations and the WTO Agreement Establishing the World Trade Organization. GATT 1994 included other than the earlier provisions of GATT 1947, a number of multilateral trade agreements on particular issues ((Schaffer et al., 2009, p. 297). What is the primary function of the World Trade Organization WTO? On January 1, 1995 WTO changed place with the previous organization, GATT. It is an intergovernmental organization to help countries in controlling trade in goods, services, intellectual property among others. WTO provides a medium for global cooperation to open markers, provides a platform to hold future trade discussions between members and disposal of trade disputes among member countries. Its ranking is equal to that of World Bank and IMF. It cooperates with these international monetary bodies in the economic matters. All member countries of GATT are members of WTO. New members can be made if the current members clear it with a two-third majority (Schaffer et al., 2009, p. 297). How do parties settle trade disputes through GATT and the WTO? It is the responsibility of Dispute Settlement Body (DSB) to settle disputes. It constitutes “panels” of experts to study and reach conclusions. The DSB is not bound to accept the findings of the panel; it overlooks and keeps a check on the rulings and recommendations. It has the power to order retaliation when a country does not follow the decision (World Trade Organization, 2007). There are two stages of 60 days and 45 days each to resolve the issue. If nothing positive materializes from the first stage, the DSB creates a panel. Panel’s report can only be questioned by consensus in the DSB; its rulings cannot be override. There is a time limit of six months to provide panel reports to the concerned parties, which in some cases like perishable goods can be three months. There are stages to work through the panel. The main stages include: Before the first hearing: Both sides present their cases in writing to the panel. First Hearing: The complaining country, the responding countries and other countries that have their interests at stake in the dispute, present their case in the first hearing. Rebuttals: both parties offer their contentions to the plaintiff party’s objections and raise objections in the second meeting. In case experts’ opinion is needed on technical or scientific issues, a review group is formed to present an advisory report. First draft: It is the discussions record given to both the parties with two weeks’ time to comment; it is not the findings of the panel. Interim report: An interim report, including the findings and conclusions, is given to both sides with a week time to ask for a review. Review: Review cannot exceed a time limit of two weeks. More meetings can be organized in the same time with both the sides. Final report: It is given to both parties and after three weeks, all WTO members are provided a copy of the report. If an irregularity is found by the panel in the disputed trade measures, panel recommends the steps to be taken to bear allegiance the rules and give suggestions as well. Ruling: The report automatically becomes the ruling or decision of the panel within 60 days if it is rejected by a consensus. Both sides have right to appeal against the ruling (World Trade Organization, 2007). Liability of international carriers Air carriers: A number of international treaties and law govern the liability of international carriers like the Warsaw Convention of 1929, which is still applicable for some purpose, the Montreal Convention of 1999. A carrier is liable only when damages happen on board the aircraft or when loading and unloading is carried on (Schaffer et al., 2009, p. 191-192). Sea Carriers: In the matter of sea-carrier, the liability of damage to ocean cargo is defined under COGSA. COGSA provides good security to the carrier for harm to cargo because of carelessness in navigation and management by the ship owners besides loss from fire or storm (Schaffer et al., 2009, p. 203). Ocean Intermediaries: The ocean transport intermediaries like freight forwarders and non-vessel operating common carriers are liable for clearing the cargo through legal paper work for carrying goods across by arranging vehicles for air or ocean carriers, and other related jobs (Schaffer et al., 2009, p. 215). References: Schaffer, Richard., Agusti, Filiberto., Earle, Beverley. (2009). International business law and its environment. Chapter 9: GATT law and the world trade organization: basic principles. (pp. 216-300). Cengage Learning. Retrieved from  http://books.google.co.in/books?id=73nQYLkj4lIC&pg=PA288&lpg=PA288&dq=GATT+law&source=bl&ots=jZh0NrGLYo&sig=U27QzcVQpBkRyro9WkX9AG0f2WQ&hl=en&ei=obPGS_ftHoStrAeFwM3ICQ&sa=X&oi=book_result&ct=result&resnum=6&ved=0CCAQ6AEwBQ# Schaffer, Richard., Agusti, Filiberto., Earle, Beverley. (2009). International business law and its environment. Chapter 6: The carriage of goods and the liability of air and sea carriers. (pp. 191-215). Cengage Learning. Retrieved from  http://books.google.co.in/books?id=73nQYLkj4lIC&pg=PA288&lpg=PA288&dq=GATT+law&source=bl&ots=jZh0NrGLYo&sig=U27QzcVQpBkRyro9WkX9AG0f2WQ&hl=en&ei=obPGS_ftHoStrAeFwM3ICQ&sa=X&oi=book_result&ct=result&resnum=6&ved=0CCAQ6AEwBQ# World Trade Organization. (2007). Understanding the WTO: settling disputes: how are disputes settled? Retrieved from http://www.wto.org/english/thewto_e/whatis_e/tif_e/disp1_e.htm Read More