International Business Law Case Study

Introduction

Since the age of globalization and climate change there have been wide changes in economies and trade policies between two countries. Trading in accordance with policies set by countries and changes in them due to factors like political events and effects of climate change have a huge impact on the trade of businesses that are trading from one country to another. Now in this assessment there will be discussed over Drink It Limited which is a very organic soft drink company based in Lalaland. The assessment will talk about changing effects of trade policies, conventions and deals in which Drink It Limited is operating in such as it is operating in the Republic of Solia. There will also be discussion how these economic, political and environmental factors affect the business of the company in the market where the role of WTO regulatory system in the trade will be discussed.  The applicability of GSP act over the firm’s trade under the WTO law will be discussed to know whether the act is disputed or not.

Overview of the relevant WTO regulatory

World Trade Organization is an organization that oversees global and international trade that is being conducted all around the world. It is important to understand that WTO regulates principles. Laws, agreements and policies that codify the international and global trade practice. Mainly there are three agreements that are key parameters based on which creation of overall WTO regulation is done in an evident manner. These agreements are the General Agreement on Tariffs and Trade (GATT),  General Agreement on Trade in Services (GATS) and Trade-Related Aspects of Intellectual Property Rights (TRIPS). The main aim of these agreements is to prevent anti import tariffs, simplify the customs process, and reduce subsidies to enhance international trade (Flentø & Ponte, 2017). It is important to understand that in the current case there is discussion over Drink It Limited which is trading its organic soft drink product from Lalaland to Republic of Solia which is supposed to be a critical market to the firm hence this trade is covered under the GATT which encourages good and effective trade between these two countries.  It can be said that WTO regulation promotes ease of trade hence there is WTO regulation that intervenes in cases of trade conflicts to make sure that the trade is not affected in a bad manner affecting the operations of the firms. Now it is seen that LaLaLand is a Least Developing Country as per the World Bank and UNCTAD this will have an huge implication n its trade status as WTO has taken measures to that LDC countries are able to operate in an effective manner and that they are able to help them in increasing the trade and attract investment within their economy. Hence the WTO wants to safeguard the trade interest of LDC to boost an equal trade and effective economic distribution of trade in different countries. It is important to consider that WTO regulation for LDC to enhance their thread is only limited till the time a country is least developed or it develops into a developing country the regulations changes and there different norms that are w applicable to the countries trade. It is expected and forecasted that with good growth in economic activities the firm will soon become a developing country and then LalaLand will have to follow norms and agreements that will be under the WTO regulatory framework for developing countries (Nelson, 2019). Now The Republic of Solia has implemented a new GSP policy in which the tariffs of soft drinks will increase from 5% to 7% for developing countries and this is in accordance to the Global System of Trade Preferences (GSTP).

Description of the likely impacts on Drink-it’s business stemming from regulatory changes

The 70% sales of the Drink-it company come from the export of the soft drinks to other countries among which 60% exports in the Republic of Solia.  The GDP of the Lalaland comes most of the parts from the country Solia. Being a Least Developing Country La La Land because of its hard work has achieved the success rate for which for the coming time it will be listed among the developing countries. The sudden changes in GSP can create a negative impact on the trade of products of Drink-it Company in Lalaland. As the new GSP made in the Republic of Solia 5 to 7% will increase the import tariffs for all the products including the soft drinks. The problem is still under control since the Lalaland is considered as the least developing country, but very soo the country will be considered as one of the developing countries due to its increase of success rate. The Drink-it country will face problems once it is termed as the developing countries. Firstly due to the new GSP made in the Republic of Solia which states that there will be an increase of 5-7% of GSP tariff in regards to the soft drinks products so the Drink-it company of La La Land will face financial problems.

The Drink-it company will face financial problems the time when it will export the products in the Republic of Solia as the increase of GSP has increased to 5-7%. The increase of GSP will harm the Drink-it company because the company is a medium sized business company and among 70% of the trade the Republic of Solia has 60% of the exported products of the Drink-it company of La La Land (Punt & Wesseler, 2016). At the present situation the Lalaland is a least developing country for which it gives 0% of tariffs regime but as soon as it becomes a developing country then it will have to pay 5-7% of the total 60% of the product that is exported to Republic of Solia country by Drink-it Company based in Lalaland. The Drink-it company after paying the new percentage of tariff regimes will be earning less profit for which it can be said that it will negatively impact on the company as well as the country. After being a developing company the national income rate will be less since it has to pay the new tariff regimes to one of its largest export partners.

Another new policy adopted by the Republic of Solia is about environmentally friendly products. According to the new climatic change policy, reducing 30% of the national greenhouse gas by the year 2030will be provided with an opportunity of tariffs regime free imports. One of the biggest competitors of the Drink-it company is the LeDrinks Ltd Company based in Dodoland. The Dodoland country also adopted a new National Climate Change Act which focuses on environmental friendly policy. This can affect the marketing condition of the Drink-it company since the Lalaland is not that much of an environmentally friendly country and it will be a bit difficult for the Lalaland to control 30% of the national greenhouse gases by the end of the year 2030. The Lalaland country is on the path of being a developing country and such a policy needs time to improve and implement (SCOTT & HANNAH, 2017). The main impact of the changes of trade policy and environmental policy by Republic of Solia is the tough marketing competition for the Drink-it company. Dodoland is one of the most environmentally friendly countries and it’s LeDrinks Ltd Company also exports soft drinks in the Republic of Solia. The Lalaland might face some major issues once it becomes a developing country. On one hand the La La Land has to pay a tariff regime of 5-7% as new policy made by the Solia country and the environmental policy of the country will also affect the Drink-it as 30% reduction of greenhouse gases and countries who will follow this can have an opportunity of free trade.

Legality of Solia’s GSP Act under WTO Law, according to a detailed analysis of the relevant WTO case law

It is important to consider that through the help of analysis the GSP act and its stance under the WTO framework there will be a distinct knowledge over whether the GSP act that has been implemented by the Republic of Solia is legal or not. Now it is important to understand that the Generalized System of preference is a way through which the Republic of Solia will provide special preference to LDC countries. On the other hand it increases traffic from 5% to 7% over the import of organic soft drinks over the developing countries.  Currently Lalaland is a least developed country although it is executed to become a developing country in some time. Now the GSP Act is an act that is legalized under the WTO laws as per the Global System of Trade Preferences (GSTP) (McDaniels, Molina & Wijkström, 2018). The Global System of Trade Preferences is a stated preferential trade agreement creating a framework that is to enhance trade between developing countries. Now in accordance with the legislation of this act it is important that trade is enhanced with the developing nation and even though the company is listed to developing countries they would still benefit from GSP acts and policies set by countries that are in trade agreement with them. The GSTP promotes zero tariffs and zero barrier to trade policies to make sure that there is free trade among the developing countries. It is important to understand that through the application of GSP policies a country can enhance the preferences towards developing and LDC countries to make sure the trade is enhanced between the two nations. Hence giving preferences and preferential rights to developing and LDC countries as per the GSP policies is legalized framework through which a country can provide specific preference to countries from LDC and developing country’s list (Nyugha, 2019).  This law makes sure there is tariff reduction and other measures that the country can take like tariff measures and direct trade measures by creating medium and long term contracts and agreement of trade. Through this simulation of trade can be done between developing and LDC nations to make sure that the trade is enhanced between the two nations. In the current scenario it is seen that the Republic of Solia has effectively created GSP policy in order to stimulate and regulate its trade between the LDC and developing countries. The country has increased tariffs for developing countries whereas it has exempted tariffs over soft drink import from LDC countries like Lalaland. It is imperative to comprehend that through the use of GSP approaches a nation can improve the inclinations towards creating and LDC nations to ensure the exchange is upgraded between the two countries. Subsequently giving inclinations and particular rights to creating and LDC nations according to the GSP approaches is an authorized system through which a nation can give explicit inclination to nations from LDC and building up nation's rundown. This law ensures there is levy decrease and different estimates that the nation can take like duty gauges and direct exchange quantifies by making medium and long haul agreements and understanding of exchange. It is important to understand that it has made sure that it has low barriers for trade when operating and trading with LDC countries. On the other hand, it has increased the tariffs for import over organic soft drinks of the developing countries. Now this is perfectly legal as per the GSTP provisions and legislation that that country can simulate trade with other LDC and developing countries.  As per the GSTP there can be simulation of tariffs, provision for direct or free trade and special preference given to LDC and developing countries so that the trade is enhanced between the two nations and there are for the economic benefits that are related to trade. The GSP policy can effectively simulate the trade it is being conducted in relation with different types of listed countries to make sure it is able to manage trade processes and gain benefits from it. Hence the GSP policy is an effective way that the Republic of Solia has used to manage trade with different countries (Lauria, 2018).

It is important to understand that although the GSP practice and policy that has been taken up by the Republic of Solia to regulate and simulate the operations of the trade. It is important to consider that it has also implemented an environmental waiver policy to make sure that it is able to provide trade preferences to countries that are complying with the environmental trade norms and standards of the country.  The country’s ‘climate change action waiver’ under the GSP framework offers a free trade tariff regime to the countries that are able to decrease the environmental footprint by 30%. It is important to consider that even though there is provision of environment friendly waiver under the GSTP act it is important that the agreements are non discriminatory and protect trade against the other. Consider that it has likewise executed an ecological waiver strategy to ensure that it can give exchange inclinations to nations that are agreeing to the natural exchange standards and norms of the nation. The nation's 'environmental change activity waiver' under the GSP system offers an international commerce tax system to the nations that can diminish the environmental impression by 30%. It is critical to think about that despite the fact that there is an arrangement of conditions inviting waiver under the GSTP demonstration it is significant that the understandings are non unfair and secure exchange against the other. Now looking at the current situation it is seen that in 2018 the country has imposed such GSP policies and because of which La La Land that is currently exempted from the GSP being an LDC country will face an increase of tariffs when it develops into a developing country. This is because it will not be able to match the environmental standards of the Republic of Somalia and this will adversely affect the trade of Drinks Limited, increase the cost of their overall operations and trade effectively the profitability and revenue.  On the other hand LeDrinks Limited which is a competitor of the firm in the market will get benefits as it is based on Dodoland which is an environmentally advanced country and complies to the norms of Republic of Solia. Now this will give LeDrinks an advantage over the Drinks Limited in the market which affect the business of the firm (Klasen, Martínez-Zarzoso, Nowak-Lehmann & Bruckner, 2016). Now currently the firm is getting zero tariffs over its export but soon there will be trade barriers and tradeoffs implicated over the trade of the firm and this will have a great impact over the financial and operational structure of the firm. Hence it can be said that as per the WTO law and the GSTP conventions and arrangement the moves taken by Republic of Solia are legal in nature.

Clarification as to whether Drink-it can directly or indirectly initiate a dispute under the WTO

It is possible to some extent that the Drink-it company can directly or indirectly create a dispute under the WTO because being a Least Developing country the La La Land was exporting 60% of the Drink-it soft drinks product to the Republic of Solia without any tariff regimes. As soon as the country started developing itself the republic of Solia took out new rules on the basis of tariff regimes where all the developing or the developed countries need to pay at least 5% to 7% of tariff regimes in order to continue their export business. This tariff regimes was also followed by the another rule that was based on the environmental policy where all the developing countries has to reduce 30% of greenhouse gases and these policy also states that countries who will reduce 30% of greenhouse gases by the year 2030 will be rewarded as 0% of tariff regimes which means that these specific countries does not need to pay any tariff regimes.

Since there is a problem for the Drink-it company based in La La Land another competitor of the Drink-it is the LeDrinks Ltd which is based on Dodoland. So there are chances that the Drink-it company might directly or indirectly initiate a dispute under the World Trade Organization (WTO). It is obvious that at the present time the Lalaland is succeeding in becoming one of the developing countries but these major changes by the Republic of Solia in their tariff regimes and environmental regimes will affect the financial condition of the Drink-it directly. There are chances due facing financial and marketing issues the Drink-it company might not agree with the new terms and condition of the Republic of Solia. In order to understand the dispute the WTO might take a look at the problem that the Drink-it company will face after it becomes a developing country (SCOTT & HANNAH, 2017). There are chances that the Drink-it company might come to any agreement and compromise with the Republic of Solia under the help and advice of the WTO. Hence it can be said that even if there is any dispute created or initiated by the Drink-it company under the WTO due to the changes in tariff regimes and environmental policy in the Republic of Solia the WTO would possibly find a solution to remove the dispute.`                                              

Conclusion

Concluding in the light of above context it can be said that the scenario that exists is very complex in nature. It can be said that through Drinks Limited will face trade problems when La La Land will become a developed country there will tariffs over the export of the firm leading to hike in overall operational cost of the firm. On the other hand due to the GSP and environmental waiver policies of Republic of Solia LeDrinks will be benefited as it is based in Dodoland which will comply with the firm’s operations.

 

 

References

Flentø, D., & Ponte, S. (2017). Least-developed countries in a world of global value chains: are WTO trade negotiations helping?. World Development, 94, 366-374.

Klasen, S., Martínez-Zarzoso, I., Nowak-Lehmann, F., & Bruckner, N. (2016). Trade preferences for least developed countries. are they effective? Preliminary econometric evidence. Policy Review, (4).

Lauria, L. B. D. M. (2018). The relationship between regional trade agreements, non-tariff measures, and WTO ministerial conferences.

McDaniels, D., Molina, A. C., & Wijkström, E. (2018). How does the regular work of WTO influence regional trade agreements? (No. ERSD-2018-06). WTO Staff Working Paper.

Nelson, D. R. (2019). Facing up to Trump administration mercantilism: The 2018 WTO trade policy review of the United States. The World Economy, 42(12), 3430-3437.

Nyugha, P. G. (2019). Cameroon Trade Policy Compliance with WTO’s Principles: Challenges for Trade Liberalization. Journal of Corporate Governance & International Business Law, 1(2), 16-32.

Punt, M. J., & Wesseler, J. (2016). Legal but costly: an analysis of the EU GM regulation in the light of the WTO trade dispute between the EU and the USA. The World Economy, 39(1), 158-169.

SCOTT, J., & HANNAH, E. (2017). From Palais de Nations to Centre William Rappard: Raúl Prebisch and UNCTAD as sources of ideas in the GATT/WTO. In The Global Political Economy of Raúl Prebisch (pp. 134-152). Routledge.

SCOTT, J., & HANNAH, E. (2017). From Palais de Nations to Centre William Rappard: Raúl Prebisch and UNCTAD as sources of ideas in the GATT/WTO. In The Global Political Economy of Raúl Prebisch (pp. 134-152). Routledge.

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