Issues of Developing and Developed Countries in International Trade


At the Bretton Woods Conference of 1944, the global economic organizations the International Monetary Fund and the International Bank for Reconstruction and Development were born. A global trade organization also appeared in the Havana Conference of 1948, i.e., the International Trade Organization. However, the ITO failed to survive; it was replaced by a ‘provisional’ mechanism governing international trade in goods, i.e., the General Agreement governed the global trade in goods for nearly 50years, until the creation of the World Trade Organization (WTO) in 1995.

Since the end of World War II, the global trade system, which has continuously developed over more than 65years, is now standing in the multi-route crossroads. Where the WTO will head, together with global commitments to the liberalization of trade in goods; trade in services, protection, and enforcement of intellectual property rights and international investment issues, among other issues, remains to be concluded. To overcome the relative effectiveness of the commitments to the liberalization of global trade, regional economic integration is now becoming the most appropriate foreign trade policy planned by most states.

(a) Economic Reasons

Free trade is not an idea. It exists in different economic theories since- between the fifteenth and eighteenth centuries in Europe. Even the poorest with little or no absolute advantage can participate in international trade and benefit based on comparative advantage. Openness to trade and investment promotes growth in several ways, including. It encourages economies to specialize and produce in areas where they have a comparative advantage over other economies; trade expands the markets to where domestic producers can expand the markets to were domestic workers and managers productivity; eliminating tariffs on imports gives consumers access to cheaper products, increasing their purchasing power and living standards, and gives producers access to cheaper inputs, reducing production costs and increasing competitiveness. Liberalized trade and rapid growth, in not a few countries, are responsible for much of the poverty reduction, such as China, India, Thailand, and Vietnam.

(b) Political Reasons

It is often stated that ‘if goods do not cross frontiers, soldiers will’.in reality, trade protectionism is frequently a source of conflict. In 1947, representatives from 23 countries met in Geneva (Switzerland) to negotiate the GATT aiming at the import tariffs under the non-discrimination principle and the rule of law.

For many developing countries, economic power is a determinant factor of the existence and position of a state in the international arena. All are well aware of the impact of international trade on national trade policy. Besides, international trade is a very important tool of the international integration process performed by states. International trade rules provide the ‘rules of the game’ for the international trade ‘game’. It is a wide range of rules that are ‘international’ and relate to ‘trade’ or ‘economics’ having ‘legal’ or ‘regulatory’ nature. As international trade rules are the expression of trade policy, it is linked more closely to economics than almost any other area of law.

International trade rules focus on the legal instruments that govern international trade flows. This includes international treaties relating to trade, as well as a part of domestic regulations affecting trade flows. The WTO agreements are almost fully global treaties on international trade matter. It provides a binding set of rules on a wide range of international. WTO agreements, there are numerous regional and bilateral trade treaties are the EU, the NAFTA, MERCOSUR, and the ASEAN free trade area. Having increased in large numbers in recent years, bilateral trade treaties are gaining in importance in the trade policy of many countries in the world, including Vietnam and its certain trading partners, such as the EU, the US, and China. Traditionally, international investment treaties have taken the form of bilateral investment treaties.

Yet recently, investment provisions have been now incorporated in many bilateral and regional trade agreement, thus both trade and investment have been combined into a single agreement. At the state level, states make provisions governing the cross-border movement of goods, services, labor, capital, and currencies, for example concurrently possibly concluding treaties with other states and international organizations aimed at facilitating trade. If a state needs to promote international trade, it should create a legal environment that helps to increase the competitiveness of its goods, services, and labor in comparison with those of other states. Thus international trade rules restrain countries from taking trade-restrictive measures and help to avoid an escalation of trade-restrictive measures taken by states. These rules satisfy the need of traders and investors for the degree of security and predictability which will encourage trade and investment. These rules help states cope with the challenges presented by economic globalization, it is the need to achieve a greater measure of equity in international economic relations.[1]


[1] Textbook International Trade And Business Law; Edited by Professor Dr.Surya P. Subedi

This article is authored by Suchismita Sarangi, Second-Year, BBA. LL.B (Hons.) student at SOA National Institute of Law

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