INTERNTIONAL TRADE POLICIES

Learning Objectives
 To determine what is Trade Agreements.
 To understand what Tariffs Quota and Non-tariff barriers.
 To understand what is Trade facilitation and Trade Promotion.
 To determine what is Trade dispute resolution mechanisms.

TRADE AGREEMENT
UNILATERAL - one sided, non-reciprocal trade preferences granted by developed countries
to developing ones.
Example: Philip Morris created Marlboro in London in 1846. He traded tobacco in other
nations, and he doesn't give any thought about the rules and conditions there. He simply listed
the item on a marketplace and sold it.
BILATERAL - exchange of goods between two nations promoting trade and investment.
Example 1: US and Chile selling digital products and guaranteeing non-discrimination when
selling digital products to their prospects. The agreement took effect on January 1, 2004.
Example 2: US and Morocco, the agreement took effect on January 1, 2006 This agreement
addresses barriers to trade and investments by lowering tariffs and removing barriers.
Morocco became the 55th largest export market for US.
MULTILATERAL - multiple countries making a deal to lower trade restrictions together.
To strengthen the global economy by making developing countries competitive.
Example: US-Mexico-Canada Agreement (USMCA) - a successor to the North American
Free Trade Agreement (NAFTA)
Agreement includes:
Creating a more level playing field for American workers, including improved rules of origin
for auto mobiles, trucks and other products
Benefiting American farmers, ranchers and agri business by modernizing and strengthening
food and agriculture trade in North America.

GROUP 2
TARIFF‚ QUOTA‚ NON-TARIFF BARRIER
Tariff- A tariff is essentially a tax on goods and services that are imported.

Types of Tariff
A fixed fee levied on one unit of an imported good is referred to as a specific tariff.
Specific Tariff
A fixed fee levied on one unit of an imported good is referred to as a specific tariff.
Ad Valorem Tariff
The phrase "ad valorem" is Latin for "according to value," and this type of tariff is levied on a
good based on a percentage of that good's value.

Quota- Is the numerical limit on the quantity of imports allowed to enter the country.

Types of Quota
Production Quota
A production quota is a supply restriction that is used to increase the price of a good or
service above the equilibrium price by creating a shortage.
Import Quota
An import quota is a limit on how much a specific good or type of good can be imported into
the country in a certain time period.
Export Quota
An export quota is a limit on how much of a specific good or type of good can be exported
out of a country in a certain time period.

Non-Tariff Barriers- Non-tariff barriers are other elements which can slow or prevent trade.

Types of Non-Tariff Barriers

Licenses
Licenses are one of the most common instruments that countries use to regulate the
importation of goods.
Quota

GROUP 2
Quotas are quantitative restrictions that are imposed on imports and exports of a specific
product for a specified period.
Embargoes
are total bans of trade on specific commodities and may be imposed on imports or exports of
specific goods that are supplied to or from specific countries.

Import Deposit
Import deposit is a form of foreign trade regulation that requires importers to pay the central
bank of the country a specified sum of money for a definite period.

GROUP 2
TRADE FACILITATION AND TRADE PROMOTION

Trade Facilitation- helps the movement of goods by simplifying international trade

procedure.

Trade Facilitation Principles

Transparency

It entails disclosure of information in a way that the public can readily access and use it.

Simplification

the process of eliminating all unnecessary elements and duplications in trade formalities,
processes and procedures.

Harmonization

the alignment of national procedures, operations and documents with international

conventions, standards and practices.

Standardization

process of developing formats for practices and procedures, documents and information
internationally agreed by various parties.

Trade Promotion- can also include expanding the supply of key inputs in a country's
strongest industries, via import expansion. If successful, such a tactic would lead to pro-trade
biased growth.

GROUP 2
Trade Dispute Resolution Mechanism
WHAT IS INTERNATIONAL TRADE DISPUTE SETTLEMENT?
Under international trade or investment agreements, conflicts that arise in global trade can be
resolved by binding judgments. Members of the World Trade Organization (WTO) may file
such issues using the WTO's two-step dispute resolution process. Similar dispute resolution
clauses are also included in the trade agreements of the European Union (EU).
HOW TO SETTLE TRADE DISPUTE?
There are numerous approaches to resolve commercial conflicts. most issues are resolved
through formal and informal negotiations between states. Those that need more review
frequently appear before the World Trade Organization's Dispute Settlements Body.

4 METHODS OF DISPUTE SETTLEMENT IN INTERNATIONAL TRADE

Negotiation
Is typically used as a method of resolution. Particularly the parties talk together fight come to
an agreement and settle the dispute.
Mediation
Is a process in which mental third party helps the disputing parties reach an agreement. A mental third party
listens to both sides and helps the parties negotiate a compromise.
Commercial Arbitration
Is a method for resolving disputes arising from trade activities that parties agree and are carried out in
accordance with the order and procedures. A neutral third party listens to both sides and makes a final legally
binding decision.
Letter of Guarantee
While negotiating the contract, counterparties may require the issuance of letters of
guarantees and letters of credit as a method to secure themselves against non-compliance on
contractual terms.

4 Common Causes of International Trade Finance Disputes

Payment Terms
Offering payment terms as part of contract negotiations enables to a company to be
competitive. In many situations, the benefit of winning a contract by opening payment terms
comes with the risk of being unable to collect the receivables from importers.
Letter of Guarantee

GROUP 2
While negotiating the contract, counterparties may require the issuance of letters of
guarantees and letters of credit as a method to secure themselves against non-compliance on
contractual terms.
Foreign Exchange Rates
In the international market, counterparties sign contracts in currencies other than their home
currency. In these situations, the buyer and/or the seller face foreign exchange rate.
Documentation Error
Documents in trade such as, the letter of credit, letter of guarantee, forward contrast, futures and others can be
subject to errors. A letter of credit, for example is issued by the bank of the importers and is used as a
payment instrument.

SUBJECT OF TRADE DISPUTE

Trade disputes usually arise when there are disagreements on wages, working conditions,
fringe benefits, and employment terms. The conflict could be with a different employer who
is allegedly trying to undercut terms and conditions in a particular industry or a set union rate.

Characteristics of trade disputes

Trade disputes are conflicts of rights and obligations between parties in a specific relationship, which can be
mentioned as:

 Buying and selling goods, providing services; lease, lease purchase; build; freight;
buying and selling bonds, stocks; financial investment, banking.

GROUP 2