A brief Summary of International Trade Law

International trade law refers to the complex network of national legislation and international agreements which govern commerce between countries. The most important international trade law regime is the set of institutions and rules overseen by the World Trade Organization (WTO).

According to the Georgetown Law Library, there are three basic tiers of international trade law. The first consists of laws and regulations passed by national governments, setting out the conditions on which imports and exports can cross their borders. Historically, national governments imposed a wide variety of protectionist measures controlling the amount and forms of international trade in which companies could engage. They continue to do so through devices like tariffs, or taxes on goods which cross the border. After several decades of international free trade agreements, however, national legislation currently occupies a much less important part of international trade law than it once did. In the United States, the federal government continues to operate a number of agencies which monitor and regulate international trade, most notably the International Trade Commission.

The second tier of international trade law consists of bilateral and plurilateral agreements. These are treaties signed by two governments or a small number of governments, respectively. The treaty terms are binding only on the countries that have ratified the agreement. The definition of a bilateral trade agreement includes a wide variety of actual types of international trade laws. For instance, foreign investment protection agreements are usually signed by two countries guaranteeing that they will take no specific measures to penalize investors from the other country which is party to the agreement, but little more than that. Alternatively, such agreements could also involve extensive deregulation, harmonization, and economic integration. The Canada-United States Free Trade Agreement of 1987 and the North American Free Trade Agreement (NAFTA) of 1994, which replaced it, are examples of extensive international trade agreement with more far-reaching implications for all member countries.

The third level of international trade law involves multilateral agreements. Multilateral treaties are signed by a large number of countries, and typically remain open for additional countries to join the regime provided they meet certain eligibility criteria. (In contrast, agreements like NAFTA are restricted to the countries which negotiated them and do not accept new member states.) There are a number of multilateral trade agreements in force, but the most important and over-arching are the General Agreement on Tariffs and Trade (GATT) and the organization formed to succeed it in the 1990s, the World Trade Organization (WTO).

International trade law could theoretically involve any sort of economic coordination by national governments, including forms of central economic planning and protectionism. The Canada-United States Automotive Productive Agreements (the “Auto Pact”) of 1965, for instance, removed car part tariffs in exchange for requiring the major American car manufacturers not to cut production at their Canadian plants. 

However, for the most part, over the past several decades international trade law has mainly been focused upon reducing government’s role in economic management and limiting the capacity of nation-states to engage in protectionist behaviour like subsidizing national industry or restricting imports from foreign manufacturers. The GATT, when it was signed shortly after World War II, was focused mainly on gradually reducing national tariff and subsidy programs. The basic economic principle behind such regimes is that free trade will increase economic efficiency and prosperity in the long term, provided governments can be persuaded not to indulge in trying to manipulate the markets for the benefit of favoured national corporations.

Members of the GATT, which now include the majority of countries in the world, have engaged in a number of major trade rounds, each of which involves a package of reforms further limiting government capacities to manipulate international trade. The so-called “Uruguay Round,” negotiated in the late 1980s and early 1990s, resulted in the creation of the WTO. The WTO possesses its own mechanisms for hearing disputes involving national subsidies and tariffs and for authorizing countries to penalize violators with trade sanctions. It also oversees new international agreements such as the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and the Trade Related Investment Measures (TRIMS).

The growth in international trade law in recent decades, and especially the growth of the WTO, has proven intensely controversial. Nationalists in many countries have denounced what they see as the elimination of national sovereignty via trade agreements for the benefit of multinational corporations, while developing countries have complained that wealthy governments’ free trade interests tend to be put at the top of the agenda while their own concerns languish unattended. The so-called “battle in Seattle” protests of 1999 were an indication of the degree of discontent in nationalist and labour circles. However, in the past decade the WTO has run up against even more serious problems as developing countries have refused to approve further agreements until developed countries in North America and Europe eliminate their agricultural subsidies. This bloc led directly to the effective collapse of the Doha Round of trade negotiations in 2005, and since then little progress has been made towards expanding the WTO.