Week 2 – Governmental Control Measures:

Government Bodies, trade regulations, and restrictions

Contents
2.1 Introduction .......................................................................................................................................................2
2.2 Learning Outcomes ...........................................................................................................................................2
2.3 Government bodies and International Trade Institutions/Organisations: Definitions, Roles, and
Contributions ...........................................................................................................................................................3
2.4 The Purpose, Definition, and Role of Regulatory Agencies ...........................................................................6
2.5 Trade Restrictions and Policy Measures .........................................................................................................7
2.6 The Effects of Trade Policies on a National Level ........................................................................................12
2.7 Traded Products Classification: the Hamonized System (HS) Code ..........................................................13
2.8 Trade Agreements: ..........................................................................................................................................15
2.9 Protectionism and Trade Liberalisaion: ........................................................................................................16
2.10 Governmental and Transnational bodies and regulatory agencies: Filling the Gaps ..............................18
References ..............................................................................................................................................................22

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2.1 Introduction

International trade is currently portrayed in an increasingly globalized world as a crucial activity

essential to reducing, and ultimately eliminating, worldwide poverty in addition to being a
fundamental method for balancing global supply and demand, meeting consumer demands, and
generating economic advantages. (Guadagni and Kaufmann, 2004).
Countries that exhibit and go above and beyond openness to international commerce are more likely
to innovate, grow quickly, and increase their productivity while generating better national incomes
and more chances and prosperity for their citizens. Additionally, by providing consumers with
reasonably priced goods and services, open (restrictions-free) commerce benefits lower-income
households.
Interaction with the global economy through global trade and along value chains, both locally and
globally, enables economic growth and poverty reduction.
Export, import, and customs clearance procedures have all been reduced while also promoting trade
across borders by the World Bank Group, the World Trade Organization, other governmental
organizations, and institutions. (Abdin, 2017).
A more transparent, trustworthy, and predictable global trade system has been made possible by these
modern bodies, programs, and procedures.

2.2 Learning Outcomes

Upon the completion of this second week of study you will be able to:
• Analyse the roles and effects of international trade bodies and the regulations and agreements
on international trade
• Critically examine the legal principles underpinning the international trade market.

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2.3 Government bodies and International Trade Institutions/Organisations: Definitions,
Roles, and Contributions

Some of the most important international players are mentioned hereunder:

1) World Trade Organisation (WTO): The General Agreement on Tariffs and Trade
(GATT), which was replaced by the World Commerce Organization (WTO) in 1995, is
an international organization with its headquarters in Geneva, Switzerland, and a mandate
to oversee and control international trade. With its 164 current members, it accounts for
more over 90% of the value of world trade (WTO, 2022). Like the GATT, the
fundamental objectives of the WTO were to eliminate trade discrimination, reduce tariffs
and other trade barriers (non-tariff barriers/measures), and enhance living standards.
Additionally, it focuses on using "consultations and mediations rather than retaliation" to
resolve trade conflicts (USTR, 2022).

2) World Bank (World Bank Group – WBG): The Bretton Woods Conference formed the
World Bank Group (WBG) in 1944 under the initial name International Bank for
Reconstruction and Development (IBRD), which it eventually merged with the
International Development Association (IDA) in 1960. (IDA, 2022). It is an international
financial organization that supports national capital projects by lending money and giving
grants to governments of low- and middle-income nations.
A WBG member's voting rights are proportional to the number of shares they own,
following a structure similar to the International Monetary Fund (below).
Although the WBG's primary goal was to provide financfinancial for the reconstruction
of post-World War II Europe, the organization currently primarily focuses on promoting
growth in non-industrial nations.
The World Bank’s main funding comes from tapping the world’s capital markets, and in
the case of IDA, from contributions of the wealthier member governments (WBG, 2022).

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 3) International Monetary Fund (IMF): The establishment of the IMF by 29 countries
also resulted from the Bretton Woods Conference in July 1944. Similar to the World
Bank Group (WBG), the IMF is a significant United Nations (UN) financial body. It is
headquartered in Washington, DC, and currently includes 190 nations.
It is the largest and most important monetary organization, making it a significant actor in
the current global economy.
The majority of the IMF's income comes from membership dues (quota), which vary
according to each member's size and status and affect the member's voting weight. (the
higher the size and status, the bigger the fee and the voting weight) (Nelson and Weiss,
2014). The main functions of the IMF are:
• Promoting a balanced increase of international trade
• Monitoring members' economic and financial policies while advancing global monetary
cooperation and exchange rate stability
• Providing tools to help members manage their payment challenges
• Improving living conditions and assisting in the fight against poverty (IMF, 2022).

4) International Chamber of Commerce (ICC): The largest and most diverse business
organisation in the world, the ICC has more than 45 million members, is spread across
100+ nations and has interests in every field of private enterprise. Created in 1919 by
entrepreneurs, the founding objectives were to encourage international and cross-border
trade, and investments and fortify the multilateral trading system, in addition to
grouping/representing businesses across the world under one ‘umbrella’ (ICC, 2022).
Among the major breakthrough of the ICC, are the Incoterms (International Commercial
Terms) developed in 1936, which facilitated the synergy and common grounds of
international traders ever since (Further elaborated in Week 6).

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 Some of the ICC members are shown in below image:

Source: (James, 2014)

5) United Nations Conference on Trade and Development (UNCTAD): An

intergovernmental body designed to advance the interests of developing states in
international trade, investment and development, the United Nations Conference on
Trade and Development was founded in 1964. It represents the section of the UN
Secretariat that deals with trade, investment, and development-related concerns.
UNCTAD tackles problems relating to economic development along with disparities
between rich nations and poorer developing countries (UNCTAD, 2022a).

6) United Nations Commission on International Trade Law (UNCITRAL): A part of

the United Nations General Assembly, UNCITRAL is in charge of aiding in the
facilitation of global investment and trade (UNCITRAL, 2022).

7) Organisation for Economic Co-operation and Development (OECD): Aiming to

promote and stimulate global trade and economic growth, 38 nations are non members of

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 the OECD, founded in 1961 (OECD, 2022).

8) Asia Pacific Economic Cooperation (APEC): Made of 21 member economies, APEC

was formed in 1989 with goals to promote free trade along the Asia-Pacific region
(APEC, 2021).

9) Association of South East Asian Nations (ASEAN): This political and economic union
of ten Southeast Asian countries, officially known as the Association of Southeast Asian
Nations (ASEAN), aims to promote intergovernmental cooperation and make it simpler
for its members to integrate economically, politically, militarily, educationally, and
socioculturally with other countries in the Asia-Pacific region (ASEAN, 2022).

10) International Trade Centre (ITC): The UNCTAD and WTO’s technical cooperation
agency for operational, business-focused aspects of trade development, the ITC aids
emerging and transitioning nations' attempts to maximize their capacity for expanding
exports and enhancing import activities, particularly in the business sector (ITO, 2022).

11) Government Controls and regulatory agencies/bodies:

Quota systems, tariffs, and subsidies are the three principal instruments used by governments to
impose trade restrictions. The number of commodities that can be imported into a country is
restricted by a quota system (e.g. governments can limit the number of imports to assist
safeguard native businesses by using quota systems) (Copeland, 1990).

2.4 The Purpose, Definition, and Role of Regulatory Agencies

• A regulatory agency: As suggested by Koblmeier Jr (1969) and Van Loo (1969), a

regulatory agency is a governmental entity formed/created by the legislature with the
objective of enacting and enforcing laws relating to the strategic and operational practices
of business (2018).
• Legislature: An assembly with the power to enact laws for a political unit, such as a
nation or city, is known as a legislature. They frequently compete with the government's

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 executive and judicial branches. "Primary legislation" refers to laws that have been
passed by legislatures (Eskridge, 1994).
• Regulations: These are the fundamental tools and materials needed for legislative bodies
to put laws into practice, like formal rules generated from laws that control specific social
and/or economic activities (Le Galès, 1998).

2.5 Trade Restrictions and Policy Measures

1) Tariffs:
a. Definition: Tariffs are levies imposed by governments or labor unions for the benefit of
international trade and the economy that are applied to imported goods but do not appear on
invoices or receipts (Bown and Irwin, 2015; Nevil, 2022).
b. Types: Specific vs. Ad valorem: A particular tariff is a fixed charge (tax) based on a physical
unit of the import, as opposed to an ad valorem tariff, which is a percentage tax applied on the
import's worth (Keen, 1998).
c. Examples:

Source: (WTO, 2015)

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 Source: (WTO, 2015)

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 d. How to Find Tariffs
• UK: [Link]

Source: ([Link], 2022)

Source: ([Link], 2022)

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 • Cyprus: [Link]
or [Link]

Source: ([Link], 2022)

Source: (Europa, 2022)

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 2) Non-tariff measures (NTMs):
Regarding their goal, judicial makeup, and economic implications, non-tariff measures cover
a wide range of legislative and administrative actions. NTMs are any regulatory actions that
more or less direct impact global trade, excluding tariffs and tariff-rate quotas. (Carrère & De
Melo, 2011).
The most typical NTMs, whether import quotas, tariff quotas, or other types, are listed below.
Each has a unique description and impact on domestic and global trade from micro and meso
viewpoints.

Source: (LJMU Lecture)

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 3) UNCTAD and NTMs:

The International Classification of NTMs adheres to a taxonomy of all measures deemed

pertinent to modern international trade (UNCTAD, 2022b).

Source: (Basu et al., 2012)

2.6 The Effects of Trade Policies on a National Level

Tariffs generate government revenue; export subsidies drain it; import quotas do not affect
government revenue (Goldberg and Pavcnik, 2016).

Hence, all these trade policies create production and consumption distortions.

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2.7 Traded Products Classification: the Hamonized System (HS) Code

Harmonized Commodity Description and Coding System is abbreviated as HS code. It is a collection

of numbers that customs use to categorize products (Wind, 2007).
Where and How to Find an HS Code:
a. Cyprus Example: The HS Code of a horse traded for breeding from one country to another:

Source: (Europa, 2022)

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 b. UK Example:

Source: ([Link], 2022b)

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2.8 Trade Agreements:

1) Definition:
A trade agreement is an agreement reached between two or more nations about issues
pertaining to the exchange of goods and services, such as investor protections, intellectual
property rights, and other topics. The Free Trade Deal is the most prevalent kind of trade
agreement (FTA).

2) Types:
• Unilateral Trade Agreements: A unilateral trade deal is one that has been arranged unilaterally
by one country without the involvement of other nations. A nation can benefit from unilateral
free trade right away, which is a benefit. Nations that remove trade obstacles independently
need not delay reform while pleading with other countries to do the same. Studies have
indicated that nations with open trade see quicker income development than those with more
restrictive trade policies, hence the benefits of this kind of trade liberalization are significant.
Dramatic examples of this phenomena may be seen in the fast rise of China and India after
sweeping trade reforms were implemented in 1978 and 1991, respectively (Irwin, 2018).
• Bilateral Trade Agreements: Bilateral trade agreements are negotiated between two states or
nations to advance trade and business. To promote trade and investment, they get rid of trade
restrictions including tariffs, import quotas, and export limitations.
• Multilateral Trade Agreements: Multilateral trade agreements are made between three or more
countries in an effort to fairly govern their commerce. They usually seek to reduce trade
barriers and, as a result, enhance economic integration between member nations.

3) International Trade Agreements:

• General Agreement on Tariffs and Trade (GATT): The GATT, a trade agreement signed
in 1947 by 23 industrialized countries, sought to lower tariffs and other trade restrictions in
the conviction that increased commerce will inevitably raise living (socio-economic)
standards for/in all member states.

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 The industrialized countries' average tariff has decreased over the course of eight "rounds" of
trade negotiations since 1947, from 40% in 1947 to about 5% in 1995. The GATT was later
superseded in 1995 by the World Trade Organization (WTO). The GATT has increased global
trade by 1500% and the world's output by 600% throughout the course of its existence.

Source: (Tekçe and Acar, 2008)

• North American Free Trade Agreement (NAFTA): The North American Free Trade
Agreement, which was ratified by Canada, Mexico, and the United States, created a trilateral
economic union in North America. On January 1, 1994, the new deal took the place of the
1988 Canada-United States Free Trade Agreement (Hufbauer and Schott, 2005).

2.9 Protectionism and Trade Liberalisaion:

1) Protectionism: Formerly known as "Mercantilism," protectionism seeks to defend nations

from unfair low-cost labor from overseas, the risk of overspecialization, and dumping
while increasing tax revenues. Protectionism seeks to improve economic growth while
simultaneously preserving domestic employment and standards for locally produced
goods (EconplusDal, 2015; Abboushi, 2010).
As eluded by Abbboushi (2010) and Williams (2019), protectionism may yield several
benefits, such as:

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 • If a country increases its import tax (tariff), it might shift demand to domestic sources.
• Consumers will buy less imported goods as a result of higher import levies, which will
increase demand for domestic production.
Additionally, employment growth and economic expansion will benefit.
• If the US imposes tariffs on imports of foreign automobiles, for example, there will be a
shift to domestic automobile production, which will enhance domestic demand.

Source: (LJMU Lecture)

2) Trade Liberalisation: Free trade can lead to the creation, development, or invention of
new goods, fostering prosperity and economic growth. It enables countries to specialize
in goods or services that they are well-known for and are "great at" in terms of the
competitive market. However, free trade can have disadvantages that lead to job losses
and even fatalities when cheaper goods tend to "flood the market" as a result of free trade
since many economies, especially those of developing countries, may not be able to
compete with free trade (Madeley, 2000).

Source: (LJMU Lecture)

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2.10 Governmental and Transnational bodies and regulatory agencies: Filling the Gaps

1) Bretton Woods Conference (BWC): The United Nations Monetary and Financial
Conference is the official name of the BWC, which first took place in 1944. It had 730
representatives from 44 Allies (including the USA, UK, and Commonwealth countries)
and concentrated on two key issues: a. establishing a stable exchange rate system and b.
funding the recovery of post-World War II damaged European economies (Thomson,
2018).
Out of the meeting came the General Agreement on Tariffs and Trade (GATT), the
International Monetary Fund (IMF), and the World Bank (Rofe, 2017). It appears that it
failed to create a "International Trade Organization" at the time. (1994, Mikesell).

2) World Bank vs IMF, and where they intertwine in similarities: While the IMF
oversees the international monetary system, the WBG seeks to promote the economic
development of the poorest countries of the world.

Source: Bond (2022)

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 3) WTO vs UNCTAD (Bello, 2000):

World Trade Organisation (WTO) UN Conference on Trade and Development (UNCTAD)

a rules-based intergovernmental body that Research on various trade and development-related issues
negotiates to establish legally binding
multilateral trade laws (“legislative” role)
The process for resolving conflicts with Consensus-building on all UNCTAD problems among the
predetermined decisions and the authority to 192 member States through discussions and experience
impose fines (judicial role) sharing
Trade Policy Review Mechanism keeps track Technical assistance on all UNCTAD work-related subjects
on national policies. Every 4 years (policy and legal advice, training, institution building,
(“executive role”) support to negotiations)
work constrained to the negotiation's = wide mandate working on the integrated treatment of
parameters and the trade agreements in effect trade, investment, and other related issues (dealing with
issues left out of the ITO and the GATT)
= narrow mandate based on existing trade rules

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 4) Some steps to Regional Integration:

(Source: [Link]

Type Description
Free trade area An agreement signed between several
countries to abolish trade restrictions.
Customs union A pledge made by several countries to remove
trade restrictions and enact a single external
tariff.
Common market An agreement among a group of countries to
remove trade restrictions, enact a single
external tariff, and allow unrestricted
movement of people and products inside the
group.
Monetary union A market that is widespread, uses a common
currency and follows a common monetary
policy.

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Economic union A process for harmonizing domestic policies,
such as tax and spending laws and domestic
regulations, is implemented by a monetary
union.

5) Some Prominent Regional Trade Blocs and their Objectives (Jackson, 1993; Whalley,
1998):

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