Understanding International Trade and Its Key Institutions

Posted on Jun 8, 2025 in Business Administration and Innovation Management

1. General Aspects

  • Growth of International Trade: Increased post-WWII in both:

  • Volume (due to modernization of transport and telecommunications) and

  • Complexity (more actors, new types of trade, including services and intellectual property).

  • Led to the creation of institutions to regulate trade at the regional and international levels.

Major Organizations:

  1. UN (1945): General international cooperation.

  2. ITO (1946, not created): Intended for trade regulation; failed due to US non-ratification.

  3. GATT (1947): Multilateral agreement reducing tariffs and trade barriers.

  4. WTO (1994): Established through the Marrakesh Agreement.

  5. OECD (1961): Economic cooperation and development.

GATT (General Agreement on Tariffs and Trade)

  • Aimed to liberalize international trade through tariff reduction and non-discrimination.

  • Three principles:

    1. Most Favoured Nation: Equal treatment to all partners.

  • e.g., if a state grants a benefit to another state, this benefit is extended to other states.

  1. National Treatment: Imported goods are treated like domestic goods.

  2. Prohibition of Quantitative Restrictions: Prohibition of restrictions on the import or export of goods.

  • Criticism: Favored developed western nations → Led to UNCTAD (1964) and UNIDO (1964) to support developing countries.


GATT Rounds:

  1. Kennedy Round (1964-67): Reduced tariffs imposed on industrial products.

  2. Tokyo Round (1973-79): Sectoral agreements adopted, more sensitive policy introduced for developing countries.

  3. Uruguay Round (1986-94): Led to WTO creation through signing of the Marrakesh Agreement.

WTO (World Trade Organization)

  • Established: 1995, via the Marrakesh Agreement at the Uruguay Round.

  • Headquarters: Geneva, Switzerland.

  • Purpose: Free trade promotion and economic development.

  • Key Annexes (Marrakesh Final Act 1994):

    • Annex 1.A: Updated GATT (goods).

    • Annex 1.B: GATS (services).

    • Annex 1.C: TRIPS (intellectual property rights).

    • Annex 2: Dispute settlement (DSU).

    • Annex 3: Trade Policy Review Mechanism (TPRM).

    • Annex 4: Plurilateral trade agreements (e.g., aircraft, procurement).

OECD (Organisation for Economic Cooperation and Development)

  • Founded: 1961.

  • Goal: Economic growth, employment, and financial stability.

Levels of Regional Trade Cooperation:

  1. Customs Preferences: Agreements where two or more countries grant customs advantages to each other (e.g., British Commonwealth, French Union).

  2. Free Trade Area: No trade barriers (e.g., EFTA – Norway, Iceland, Switzerland, Liechtenstein; NAFTA/USMCA – USA, Canada, Mexico; CPTPP).

  3. Customs Union: Unified external tariffs.

  4. Single Market: Common trade policies, legal and economic unification (e.g., EU, MERCOSUR).


MERCOSUR (1991, Treaty of Asunción)

  • Members: Argentina, Brazil, Paraguay, Uruguay; Venezuela (joined 2006, currently suspended); Bolivia (accession process).

  • Legal Nature: Intergovernmental (not an IO), decisions are adopted unanimously and lack direct effectiveness.

  • Objectives of the Treaty of Asunción (Articles 1 & 2):

    1. Free movement of people, goods, and factors.

    2. Common external tariff.

    3. Common trade policy.

    4. Macroeconomic coordination.

    5. Legal harmonization.

  • Protocol of Ouro Preto (1994): Gave MERCOSUR legal personality, structured organization, established regional customs union, adopted common external tariff.

European Union (EU)

  • Founded: 1957 as EEC.

  • Objectives:

    1. Common market, free trade, free movement.

    2. Harmonized trade policies.

    3. Common external tariff.

    4. Economic growth, competition, and stability.

  • TEU Article 3 Goals: Peace, security, economic growth, social justice, environmental protection, and monetary union (Euro).

International Trade Law Harmonization

  • Need: Unified regulations to ensure trade security.

  • Institutions:

    • Public: UNCITRAL (UN Commission on International Trade Law).

    • Private: ICC (International Chamber of Commerce).

    • Mixed: UNIDROIT (International Institute for the Unification of Private Law).


UNCITRAL (1966, UN GA)

  • Purpose: Harmonization and unification of international trade law.

  • Normative Areas:

    • Arbitration: NY Convention (1958), Model Laws.

    • Contracts: Vienna Convention (1980).

    • Payments: Bills of Exchange (1988).

    • Carriage of Goods: Hamburg Rules (1978), Rotterdam Rules (2008).

    • E-Commerce: Model Laws (1998, 2001).

    • Public Procurement: Model Law (1994).

ICC (International Chamber of Commerce, 1919, Paris)

  • World Business Organization, bringing together several thousand companies from over 130 countries.

  • Activities:

    • Arbitration (IAC).

    • Free trade advocacy.

    • Business self-regulation.

    • Anti-corruption measures.

  • Key Norms:

    • Documentary credit rules.

    • INCOTERMS: Definitions of international commercial clauses with a generalized and relevant use in international trade.

UNIDROIT (1926, Rome)

  • Purpose: Private law unification.

  • Legal Focus:

    • Contracts, capital markets, leasing, reinsurance, transport.


National Institutions: Spain

  • ICEX (Instituto de Comercio Exterior): Supports Spanish companies’ internationalization.

  • ICO (Instituto de Crédito Oficial): Public bank promoting economic growth.

WTO – Global Trade Rules

The WTO provides a framework for international trade, ensuring stability, predictability, and openness. It guarantees that producers and exporters can access foreign markets while protecting consumer interests. WTO rules aim to reduce trade conflicts and prevent them from escalating into political or military disputes.

Trade Negotiations

  • Founded in 1995 as the successor to the General Agreement on Tariffs and Trade (GATT).

  • The multilateral trading system has been in place for over 70 years.

  • Trade negotiations, known as “rounds,” have progressively reduced tariffs and expanded to cover services, intellectual property, and trade facilitation.

  • Major trade agreements:

    • Uruguay Round (1986-1994): Led to the WTO’s creation.

    • Doha Development Agenda (2001): Focused on trade and development.

    • Bali Package (2013): Introduced the Trade Facilitation Agreement to cut trade costs.

WTO Agreements

  • Establish legally binding rules for trade in goods, services, and intellectual property.

  • Aim to ensure fair competition, transparency, and market access.

  • Developing economies receive flexibility in implementing commitments.

Trade in Goods

  • Governed by GATT and additional agreements on:

    • Agriculture

    • Product standards

    • Subsidies

    • Anti-dumping measures

    • Trade Facilitation Agreement (2017)


Trade in Services

  • Covered under the General Agreement on Trade in Services (GATS).

  • WTO members set commitments to open their service sectors to foreign competition.

Intellectual Property

  • Governed by the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement.

  • Covers patents, copyrights, trademarks, and other protections.

  • A 2017 amendment improved access to affordable medicines for developing nations.

Dispute Settlement

  • The WTO’s dispute resolution system ensures trade rules are enforced.

  • Governments can file disputes if they believe WTO rules are violated.

  • More than 600 disputes have been handled since 1995.

Trade Monitoring

  • The Trade Policy Review Mechanism ensures transparency.

  • The WTO regularly monitors global trade policies to assess their impact.

Building Trade Capacity in Developing Economies

  • Over 75% of WTO members are developing or least-developed economies.

  • Special provisions include:

    • Longer implementation periods.

    • Technical assistance.

    • Aid for Trade initiative (US$400 billion+ invested).

    • Enhanced Integrated Framework (EIF) for least-developed countries.

    • Standards and Trade Development Facility (STDF) to help meet food safety and trade standards.


Technical Assistance and Training

  • The WTO provides training programs for government officials.

  • Includes seminars, e-learning courses, and regional workshops.

How the WTO is Organized

  • Functions:

    • Administers trade agreements.

    • Negotiates trade rules.

    • Settles disputes.

    • Monitors trade policies.

    • Supports developing economies.

    • Cooperates with international organizations.

  • Structure:

    • Ministerial Conference: Top decision-making body, meets every two years.

    • General Council: Handles daily WTO operations and meets regularly in Geneva.

    • Specialized Councils: Cover goods, services, and intellectual property.

    • Committees and working groups focus on specific trade issues.

WTO Secretariat

  • Based in Geneva, with 620 staff.

  • Headed by the Director-General (Ngozi Okonjo-Iweala as of 2021).

  • Supports technical assistance, dispute settlement, and trade analysis.

  • Annual budget: 197 million Swiss francs.

Key Facts

  • Established: 1995.

  • Members: 164 (98% of world trade).

  • Ongoing membership negotiations: 25 countries.

  • Main goal: Facilitate free, fair, and predictable trade globally.