International Trade Agreements: GATT, WTO, and Competition Law

Posted on Feb 19, 2025 in Law

GATT: General Agreement on Tariffs and Trade

The General Agreement on Tariffs and Trade (GATT) was a multilateral agreement regulating international trade from 1947. According to its preamble, its purpose was the substantial reduction of tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis. It was negotiated during the UN Conference on Trade and Employment and was the outcome of the failure of negotiating governments to create the International Trade Organization. GATT was signed in 1948 and lasted until 1993 when it was replaced by the WTO in 1995.

Some key principles:

  • Most Favored Nation Treatment (Article 1): With respect to customs duties and charges of any kind imposed on or in connection with importation or exportation or imposed on the international transfer of payments for imports or exports, and with respect to the method of levying such duties and charges, and with respect to all rules and formalities in connection with importation and exportation.
  • National Treatment on Internal Taxation and Regulation (Article 3): The contracting parties recognize that internal taxes and other internal charges, and laws, regulations, and requirements affecting internal sale, offering for sale, purchase, transportation, distribution, or use of products, and internal quantitative regulations requiring the mixture, should not be applied to imported or domestic products so as to afford protection to domestic production. The products of the territory imported into the territory of any other contracting party shall not be subjected directly or indirectly to internal taxes like domestic products.
  • General Elimination of Quantitative Restrictions (Article 11): No prohibitions other than duties, taxes, or other charges.
  • Non-Discriminatory Administration of Quantitative Restrictions (Article 13).

GATT helped establish a strong and prosperous multilateral trading system that became more and more liberal through rounds of trade negotiations. GATT held a total of 8 rounds.

WTO: World Trade Organization

The World Trade Organization (WTO) is located in Geneva and was established on January 1, 1995, created by the Uruguay Round negotiations (1986-1994). It has 153 member countries. The head is Pascal Lamy.

Functions: The WTO’s overriding objective is to help trade flow smoothly, freely, fairly, and predictably. It does this by:

  • Administering trade agreements
  • Acting as a forum for trade negotiations
  • Settling trade disputes
  • Reviewing national trade policies

Structure: The WTO has 153 members, accounting for over 97% of world trade. Around 30 others are negotiating membership. Decisions are made by the entire membership, typically by consensus. A majority vote is also possible but has never been used in the WTO, and was extremely rare under the WTO’s predecessor, GATT. The WTO’s agreements have been ratified in all members’ parliaments.

The WTO’s top-level decision-making body is the Ministerial Conference, which meets at least once every 2 years. Below this is the General Council, normally ambassadors and heads of delegation in Geneva, but sometimes officials sent from members’ capitals, several times a year in the Geneva headquarters. The General Council also meets as the Trade Policy Review Body and the Dispute Settlement Body. At the next level, the Goods Council, Services Council, and Intellectual Property Council report to the General Council. Numerous specialized committees, working groups, and working parties deal with the individual agreements and other areas such as the environment, development, membership applications, and regional trade agreements.

The WTO agreement oversees about 60 different agreements which have the status of international legal texts. The WTO is an organization that intends to supervise and liberalize international trade. The organization deals with regulations of trade between participating countries, and it provides a framework for negotiating and formalizing trade agreements.

Competition Law

Competition law promotes or maintains market competition by regulating anti-competitive conduct by companies. Competition law has 3 main elements:

  1. Prohibiting agreements or practices that restrict free trading and competition between businesses.
  2. Banning abusive behavior by a firm dominating a market, or anti-competitive practices that tend to lead to such a dominant position. Practices controlled by pricing, tying.
  3. Supervising the mergers and acquisitions of large corporations, including some joint ventures.

Fair Competition: Same rules and conditions are applied to all participants and the competitive action of some does not harm the ability of others to compete. Competition based on the factors of prices, quality, and service, not on the abuse of near-monopoly powers, competitor bashing, etc.

REG. 1/2003: Application of Community rules by courts and competition authorities of Member States. In order to ensure that the Community competition rules are applied effectively, the competition authorities of Member States should be associated more closely with their application; they should be empowered to apply Community law. National courts have an essential part to play in applying the Community competition rules. When deciding disputes between private individuals, they protect the subjective rights under Community law. To ensure the effective enforcement of the Community competition rules and the proper functioning of the cooperation mechanism contained in the regulation, it is necessary to oblige the competition authorities and courts of Member States to apply Articles 81 and 82 of the Treaty where they apply national competition law to agreements and practices which may affect trade between Member States. Articles 81 and 82 have as their objective the protection of competition on the market. This regulation, which is adopted for the implementation of these treaty provisions, does not preclude Member States from implementing on their territory national legislation which protects other legitimate interests provided that such legislation is compatible with general principles and other provisions of Community law.

Double Barrier Principles

The double barrier principle means that the national competition law must not be more permissive than EU law but can be more restrictive. To ensure compliance, therefore, companies should ensure that their agreements satisfy the requirements of both EU and national law. Articles 85 and 86 EC Treaty are directly applicable and produce direct effects which means that they give rise to rights and obligations on the part of individuals and companies that national courts have a duty to enforce. Although the national courts are empowered to apply Articles 85 and 86 in proceedings before them and grant appropriate national remedies for infringement of their provisions, they will also apply relevant provisions of national competition law.

Dominant Position

Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market as it affects the trade between Member States. Such abuses consist in directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions, limiting production, markets, or technical development to the prejudice of consumers, applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage, making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which by their nature or according to commercial usage, have no connection with the subject of such contracts.

Unfair Competition

Unfair competition, in a sense, means that the competitors compete on unequal terms because favorable or disadvantageous conditions are applied to some competitors but not to others, or that the actions of some competitors actively harm the position of others with respect to their ability to compete on equal and fair terms. In commercial law, it refers to a number of areas involving acts by one competitor or group of competitors which harm another in the field and which may give rise to criminal offenses and civil causes of action. It is an unjust and often illegal attempt to gain an unfair competitive advantage through false, fraudulent, or unethical commercial conducts. Any act of competition contrary to honest practices in industrial or commercial matters constitutes an act of unfair competition (Article 10bis). Examples: imitation, dumping, trademark or trade secret infringement.

Intellectual Property Rights (IPRs)

Intellectual Property Rights (IPRs) encompass knowledge, creative ideas, or expressions of the human mind that have commercial value and are protectable under copyright, patent, service mark, trademark, or trade secret laws from imitation, infringement, and dilution. Intellectual property includes brand names, discoveries, formulas, inventions, knowledge, registered designs, software, and works of artistic, literary, or musical nature. It is one of the most readily tradable properties in the digital market. The importance of protecting intellectual property was first recognized in the Paris Convention for the Protection of Industrial Property in 1883 and the Berne Convention for the Protection of Literary and Artistic Works in 1886. Both treaties are administered by WIPO.

Industrial Designs

Industrial designs are what make a product attractive and appealing. The existence of a grace period and the corresponding requirements can be provided by national or regional laws applicable in some countries. The law can allow the filing of an application for registration of an industrial design after its disclosure, within a limited time period from the date of disclosure, generally 6 months or a year. In most countries, industrial designs must be registered in order to be protected under industrial design law. As a general rule, to be registrable, the design must be new or original. Once a design is registered, the term of protection is generally 5 years with the possibility of renewal up to 15 years.

Trademarks

Trademarks are distinctive signs used to differentiate between identical or similar goods and services offered by different producers or service providers.

Patents

A patent is a right granted for an invention which is a product or a process that provides a new way of doing something. A patent provides protection for the invention to the owner of the patent. The protection is granted for a limited period of 20 years. Protection means that the invention cannot be commercially made, used, distributed, or sold without the patent owner’s consent.

Copyright

Copyright relates to artistic creations such as books, music, paintings, and sculptures, films, and technology-based works such as computer programs and electronic databases. Copyright is known as author’s rights. The expression “copyright” refers to the main act which, in respect of literary and artistic creations, may be made only by the author or with his authorization; that act is the making of copies of the work. The expression “author’s rights” refers to the creator of the artistic work, its author. The author has certain specific rights in his creation which only he can exercise.

Duration: Copyright does not continue indefinitely. The period or duration of copyright begins from the moment when the work has been created. In countries party to the Berne Convention, the duration of copyright is, as a general rule, the life of the author plus not less than 50 years after his death. The EU, USA, and several others have extended the term of copyright to 70 years after the death of the author.

Incoterms Rules

Incoterms (International Commercial Terms) are internationally recognized standard trade terms used in sales contracts. They’re used to make sure the buyer and seller know:

  • Who is responsible for the cost of transporting the goods, including insurance, taxes, and duties.
  • Where the goods should be picked up from and transported to.
  • Who is responsible for the goods at each step during transportation.

They are contained in the International Chamber of Commerce and they serve as global standards for uniform interpretation of common contract clauses in international trade.

For example:

  • EXW (Ex Works): Means that the seller delivers when it places the goods at the disposal of the buyer at the seller’s premises or at another named place (i.e., works, factory). The seller does not need to load the goods on any collecting vehicle, where such clearance is applicable.
  • FCA (Free Carrier): Means that the seller delivers the goods to the carrier or another person nominated by the buyer at the seller’s premises or another named place.
  • CPT (Carriage Paid To): Means that the seller delivers the goods to the carrier or another person nominated by the seller at an agreed place.