International Business Law: Role of Competition Policy, Trade Barriers, Preferential Agreements

This report discusses the role of international competition policy, classical theory of trade barriers, types of preferential agreements, and the economic bases of GATT rules and principles in international business law. It also assesses the constitutions and rights and obligations of international sales contracts, as well as the implications of making international contracts online.

International Business
Law

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK 1 ...........................................................................................................................................3
1.1. Explain the role of international competition policy for environmental regulations and
strategic environmental protection for any organisation doing trade globally.......................3
1.2. Explain the concept of classical theory of distortions to measure trade barriers............4
1.3. Critically describe types and rationales for preferential agreements...............................4
1.4. Critically explain the economic bases of the rules and principles of the GATT.............5
TASK 2 ...........................................................................................................................................6
2.1. Assess constitutes for the contract for Sales of goods and products...............................6
2.2. Assess the rights and obligations imposed under international sales contracts...............7
2.3. Evaluate the validity of rights and obligation of international sales contracts................7
2.4. Evaluate the implications of making international contract online.................................8
TASK 3 ..........................................................................................................................................9
3.1. Identify various types exchange rate, regulatory and legal associated to an organisation
trading at an international level..............................................................................................9
3.2. Critically assess legal rules relating to the financing of international sales....................9
CONCLUSION .............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
International Business laws are those rules and regulations which are in the form of
conventions, treaties, customs, domestic legislations, etc. that helps in the governing of business
and its activities at the international level. Any transaction between the countries are termed to be
international only if the countries that are involved is more than one.1 There are many laws
which are made by to govern the activities of the business that involves trading at international
level. This can be either by way of exportation or importation. There are many laws under the
international business law that helps in the governance of the business activities internationally.
These laws are: GATT, WTO, etc.
This report contains three tasks. Task-1 explains the concepts of strategic trade,
preferential trade arrangements and international environmental competition in the international
trade. Task-2 helps in the evaluation of the principles underlying, practices, rules and regulations
that relates to the international sales contract. Task-3 of the report explains various issues that are
associated with organisations that are trading globally.
TASK 1
1.1. Explain the role of international competition policy for environmental regulations and
strategic environmental protection for any organisation doing trade globally.
International competition policy are those which ensures that the competition is healthy
in the international market and there are no restrictions imposed on any of the company to
prevent them to compete with others. International Competition helps in enhancing the
efficiency, promotion of innovation which helps an organisation to provide wider choices to its
customers with better quality. This helps in improving the welfare of the customers. Competition
policies if implemented in accordance with the economic, social and environmental factors then
the company is expected to grow more and be more successful2.
The main aim if the environmental policies in the international competition id to limit the
effects that are harmful for the society and which directly or indirectly is affecting the nature and
environment. Environment plays a major role therefore it needs to be protected. The quality of it
1 'Foreign Exchange Contract Case' (2020) 61 International Law Reports
2 'Global Corporate Policies And International “Double Standards” In Occupational And Environmental
Health' (2018) 5 International Journal of Occupational and Environmental Health

is degrading, this is the reason for which the international policies were made in regard to the
environment so that the companies includes those provisions in their company and also the
countries implement those rules in their domestic laws. This helps in the prevention of the
environment from getting harmed.
1.2. Explain the concept of classical theory of distortions to measure trade barriers
There are many classical theories in international trade law like: Mercantilism, Absolute
Advantage, comparative advantage and heckscher ohlin. The theory which measures the trade
barriers in relation to the distortion is the mercantilism classical trade theory. This was one of
the earliest efforts developed in sixteenth century. Under this theory it was stated that the wealth
of any country is determined by the amount of gold and silver a country is holding. In this theory
it was believed by the mercantilist that a country should promote export in order to increase its
gold and silver holding and at the same time it shall discourage the imports so that the country do
not have to pay to other countries. As it is said that the main barriers to any business or a country
are tariff barriers, taxed to be paid on imported goods and the non tariff barriers3.
The main objective of any country is to have trade surplus where the value of export is
high and also to avoid trade deficit where the value import is high. This is the policy or a strategy
which is commonly known as “Protectionism”. Although it is a very old and classical theory, it
is still being followed in almost every country as the rule to trade. The countries started
implementing this theory in the companies or organisations so that the economy of the country
can be increased. Nations were promoting exports and also were imposing restriction on its
import. Since the there is restrictions on the import, the buyers of the product have to pay high
prices for it.
1.3. Critically describe types and rationales for preferential agreements.
Preferential Trade Agreements i.e. PTAs, is a type of some formal trade arrangement
which is made between two or more countries to seen trade benefits from each other. When these
types of trade agreement are framed in any regional manner then such agreements are termed as
Regional Trade Agreements i.e. RTAs4.
3 Abe K, and Sugiyama Y, 'The Environmental Industry, Environmental Policies, And International Trade'
[2018] The International Economy
4 Chircop A, 'Book Review: Shipping Law, International Trade Law, International Trade Law Statutes And
Conventions 2011–2013' (2019) 25 International Journal of Maritime History

PTAs are those types of agreement which reduces the liabilities of the tax to be paid from
the countries either by making an association related to free trading or by making an union of
countries. The countries can set their own terms and conditions which is suitable for all. The
countries are free to trade, it can either import or export goods and services. The restrictions are
imposed by the countries which is mainly in the form of taxes which a country is suppose to pay
while trading.
There are two types of preferential agreements which can be formed between the countries. They
are:
Free Trade Association: This is the type of agreement between the countries in which all
the internal trades are free from tariffs. For example: Free trade agreement of North America and
Free trade area of the ASEAN.
Custom Union: This is the type of agreement between the countries in which all the
member countries of the union set equal tariff. The amount of the tariff to be paid is fixed and
there is no partiality done between any of the countries. For Example: European union i.e. EU is
custom Union5.
1.4. Critically explain the economic bases of the rules and principles of the GATT.
GATT i.e. General Agreement on Tariffs and Trade, is an agreement which relates to the
trade and its promotion in goods internationally by eliminating barriers to trade. The economic
reasons for the principles of the GATT are as follows: Most Favoured Nation (MFN) treatment: This principle states that the states under this
agreement is expected to treat other countries in same way as it treats its most favoured
nation. The conditions to the trade must be same for all and no difference shall be
present. Reciprocity: This is the principle which is associated to the MFN. This is the principle
which provides with the rights and obligations of the countries stating that every member
country have rights which can be accessed by them even if they are MFN6.
5 de Luca V, 'The Conformity Of The Goods To The Contract In International Sales' [2017] SSRN Electronic
Journal
6 deB. Katzenbach N, and Honnold J, 'Cases And Materials On The Law Of Sales And Sales Financing'
(2017) 102 University of Pennsylvania Law Review

 Transparency: It is the principle under which transparency is expected to be maintained
between the countries trading so that the barriers to the trade can be eliminated. Therefore
the quotas were reduced by the GATT except in few cases like agriculture, etc.
 Tariff Binding and Reduction: Earlier when GATT was established, to protect the trade
and its negotiations, the main form was tariffs. The primary focus of GATT was on its
binding and reduction so that the trade can be protected. Later in 1947, obligations were
imposed on the parties in this regard by the GATT7.
TASK 2
2.1. Assess constitutes for the contract for Sales of goods and products.
The contract which is made for the sales of goods and products at international level is
refereed to as International sales contract. This contract is made between the seller and the
buyer. It includes the name of the contracting parties and the transaction which is taking place. It
also records the golds being sold along with the price which is to be paid. The contract mentions
other terms and conditions which are necessary for the parties contracting. These international
sales are governed by the CISG i.e. Convention on Contracts for the International Sale of Goods,
of United Nations. The contract between the parties is dependent on the nature of the business
and the amount involved in trading. The contract between the countries can be of any type. It can
be either in writing or can orally be made.
There are most important 10 key clauses which an International contract must involve.
They are: product, quantity, delivery, price, terms of payment, transfer of ownership, insurance,
requirements of the government , laws which are applicable and the method to resolve dispute in
case any arises. These are the 10 very important and main things which are to be mentioned in
any agreement or contract of international sales. This will help companies trading at international
level to know the answers in case any problems arise. For e.g. in case there is any dispute
between the parties, referring to the conditions parties can resolve the matter referring to the
method mentioned in the contract8.
7 DeSombre E, Domestic Sources Of International Environmental Policy (MIT Press 2018)
8 Warburton C, 'International Trade Law And Trade Theory' (2018) 9 Journal of International Trade Law and
Policy

2.2. Assess the rights and obligations imposed under international sales contracts.
Convention on Contracts for the International Sale of Goods i.e. CISG states the
obligations of the seller and also of the buyers for the international sales contract.
Obligations of the seller
 Make proper delivery of the goods.
 Make delivery of the documentations related to the product or goods being delivered.
 Seller must abide with his obligations which were specifically mentioned in the contract. There are certain implied obligations to which the seller must follow. For e.g. seller must
not sell the product which has already crossed its expiry date, etc.
Obligations of the Buyer
 The most important obligation is that to make payment of the product received.
 It is the duty of the buyer to be present at the time of delivery at the exact location and
time.
 It is the duty of buyer to examine the goods after they receive the goods or products.
 It is the duty of the buyer to comply with all the terms and conditions mentioned in the
contact9.
Along with the obligations, both buyer and sellers have rights under the international
sales contract. They both have right to receive considerations. The parties have right against each
other in case there is any dispute related to the trade. The parties have right to sue. The parties
also have right to maintain transparency.
There are many rights and obligations which are given to buyers and sellers who are
party to the international contract sales. The parties to the contract are obliged to the terms and
conditions which are explicitly mentioned in the contract or otherwise it will amount to breach of
contract.
2.3. Evaluate the validity of rights and obligation of international sales contracts.
There is no such validity of rights and obligations mentioned under the CSIG. Few rights
and obligations of the parties are only limited till the delivery is made. But few of the rights and
obligations are still valid after the delivery made is accepted by the buyer. Few of the situations
in which rights and obligations of the international sales of contract is valid are as follows:
9 Venedikian H, and Warfield G, Export-Import Financing (Wiley 2018)

 Conformity of goods: Buyer have right to return the goods back if found less in quantity
or found defective. The seller in this is obliged to the duty to either send more products or
change the products if were defective.
 Defect in Title: Buyer have right to ask the seller to correct the defect in title of the goods
and the seller have this obligation towards the buyer.
The buyer do not have right only till the contract is valid but also after the terms and
conditions of the contract are being fulfilled by the parties. The issue may arise at any point. In
cases where the delivery is made on time but if the goods so delivered got rotten or expired then
in such case the buyer have right to return the goods back to the buyer. The buyer under this is
obliged to take back the goods and change it.
2.4. Evaluate the implications of making international contract online.
The binding effect of the contract when entered into by the party electronically is same as
that of a contract normally entered by them. While parties enter into international contract, it is
important that they are well aware of the terms and conditions of the contract and also the laws
that are governing in another country. Few things which is kept in mind while entering into
international contracts online are:
 Parties are bound to read all the terms and conditions mentioned in the online contract
once agreed to it.
 Parties must see to it that the signature needed to complete the agreement is electronic
signature or actual . If it is E signature then it will be governed by the Electronic
Transaction Act, 1999.
 It is important to see the effects of domestic laws on such contracts.
 In case any mistake is made in online contract, such can be corrected under section 15D
of the Electronic Transaction Act, 1999 which provides with the right under which error
can be withdrawn under electronic communication10.
10 Register Of Texts Of Conventions And Other Instruments Concerning International Trade Law (United
Nations 2020)

TASK 3
3.1. Identify various types exchange rate, regulatory and legal associated to an organisation
trading at an international level.
The rate of exchange is popularly known in the market of Foreign exchange. The
Exchange Rate basically is the amount of a currency of one country, which is equal to that of the
other country's currency either at the time of buying or selling. There are majorly three typos of
exchange rate. They are as follows: Fixed Exchange rate system: It is the system in which the government fix the exchange
rate of the currency. This system when adopted ensures the stability of the movement of
capital and of the foreign trade. Under this, when the government wants to achieve
stability, it buy foreign currency when the rate of exchange is less and then sell it once
the rate is increased. To achieve such stability government is expected to maintain large
reserves which contains foreign currencies so that they can maintain the rate of change at
the level which is already fixed by it. Flexible Exchange rate system: This is the system in which the rate of exchange is
determined by the demand force and the supplies of various other currencies into the
market of foreign exchange. The value of the currency is fluctuating and it changes
according to the changes in the market of foreign exchange related to demand and supply.
These are also commonly known as the “Floating Exchange Rate”.
 Managed Floating rate system: This is the type of system in which the rate of exchange
is determined by the forces in the market and also the influences of the bank have on the
rate of exchange in intervention to the market of foreign exchange. This system is hybrid
of both the above explained types. This system is commonly known as the “Dirty
Floating”. If this system is adopted, it becomes the duty of the central government to
maintain the foreign exchange reserve so that rate of exchange remains in the targeted
value11.
3.2. Critically assess legal rules relating to the financing of international sales.
Banks plays major role in the financing of international sales. There are few of the
methods that helps in financing international sales. They are:
11 Myneni S, International Trade Law (2019)

 Accounts Receivable Financing: An exporter who is need of funds may get loan from
the bank which is a secured way to obtain money by an account receivable by an
assignment. Factoring: When the accounts receivable by the bank are later sold to the third party
which is called as Factor, then all the responsibilities and the exposures which are
associated with its collecting are assumed to be from the buyer. Letters of credit (L/Cs): This is the letter which a bank issues to the exporter on behalf of
an importer which a promise to make payment upon presenting the documents of
shipping. These are usually irrevocable in nature and the importer have liability to pay
the amount along with the fees associated with it. Banker's acceptance: This is the type of Time draft which is drawn upon the importer
bank and also is accepted by the importers bank. The bank accepting L/Cs is under an
obligatory duty to pay its holder the amount of the draft at its maturity. Working Capital financing: Banks also provides the exporters and importers with short
term loans that helps company in financing its working capital cycle. This helps company
from making purchase of all the inventories until the eventually conversion of it into
cash. Medium-term capital goods Financing: This is the type of finance in which a
promissory note is issued by an importer to the exporter, this is send from the payment to
be paid for the capital goods which were imported for certain period. The period mostly
ranges between three to seven years. Later the note is sold by an exporter to the bank
without recourse.
 Countertrade: These trades are also termed as transactions of foreign trade. In this the
sales made by one country is directly linked to the exchange or goods or purchase of such
goods by some other country. For e.g. counter purchase, barter, compensation, etc. the
participants who are primary n this type of financing are the MNC's and the
Government12.
12 Higashida K, 'Trade Liberalization, Environmental Policies Of The Exporting Country, And Pollution
Emission' [2018] The International Economy

CONCLUSION
From this report it is concluded that it is important to impose laws on international
trading. With the increase in the import and export between the countries it was the need of the
society. These laws regulates the activities and transactions of the business at the international
level. There are many factors which are associated with the international trading. These laws
helps in the enhancement of the competition by removing the barriers which is preventing
healthy competition in the international market. These laws also explains the way in which the
trading companies have to make contracts and also specifies the obligations and rights of the
parties who are entering into the international contracts. The laws also provide with the ways in
wh9ich the companies trading with each other internationally are to get finances in case of need.
The laws also provide with the pro9visions which are required by the companies or countries to
make payment to other country which related to the exchange rate policies of the country for
international trade.

REFERENCES
Books and Journals
'Foreign Exchange Contract Case' (2020) 61 International Law Reports
'Global Corporate Policies And International “Double Standards” In Occupational And
Environmental Health' (2018) 5 International Journal of Occupational and
Environmental Health
Abe K, and Sugiyama Y, 'The Environmental Industry, Environmental Policies, And
International Trade' [2018] The International Economy
Chircop A, 'Book Review: Shipping Law, International Trade Law, International Trade Law
Statutes And Conventions 2011–2013' (2019) 25 International Journal of Maritime
History
de Luca V, 'The Conformity Of The Goods To The Contract In International Sales' [2017] SSRN
Electronic Journal
deB. Katzenbach N, and Honnold J, 'Cases And Materials On The Law Of Sales And Sales
Financing' (2017) 102 University of Pennsylvania Law Review
DeSombre E, Domestic Sources Of International Environmental Policy (MIT Press 2018)
Higashida K, 'Trade Liberalization, Environmental Policies Of The Exporting Country, And
Pollution Emission' [2018] The International Economy
Myneni S, International Trade Law (2019)
Register Of Texts Of Conventions And Other Instruments Concerning International Trade
Law (United Nations 2020)
Venedikian H, and Warfield G, Export-Import Financing (Wiley 2018)
Warburton C, 'International Trade Law And Trade Theory' (2018) 9 Journal of International
Trade Law and Policy