INTERNATIONAL TRADE FINANCE LAW Essay Example | Topics and Well Written Essays - 3000 words

INTERNATIONAL TRADE FINANCE LAW - Essay Example Buy-back and the countertrade, are long-phase trade agreements with the mutual trade flows happening at varied phases of the period. Where readily viable credit facilities and readily acknowledged forms of money exchange are available, markets eschew inefficient and cumbersome countertrade transactions. However, due to governmental restrictions on operation of markets and due to international liquidity issues have motivated many nonmarket economies ( NMEs) and majority of the less-developed countries and industrially developed nations, to usher â€Å" creative â€Å" business transactions that bypass the normal exchange medium of contemporary markets2. It is estimated that about 25 to 30% of international trade are carried through unofficially by way of countertrade or barter system and various empirical evidence prove that whenever there is a financial or economic crisis, there is an increased practice of these kinds of trade. As per Aggarwal, government may persist on countertrad e to safeguard or to kindle the output of domestic industries. This kind of protectionism may kindle counter-purchase or offset deals which in turn may facilitate to purchase much required skills to develop the economy further. According to Lecraw, countertrade practices can be employed to override other guises of protectionists’ trade policies and finally the government policies which attempt to balance and plan its foreign trade, may involve statutory countertrade3. From what has been mentioned above, this research essay, an earnest attempt will be made to find out the legal principles involved in the financing of countertrade transactions in the international oil and gas business with a particular emphasis to whether the present law is adequate to support business in this province with decided cases on the subject, in order to discuss the issue adequately before coming to a conclusion. Legal Principles involved in Countertrade The legal principles in the financing of count ertrade transactions 1. Discrimination principle As per IMF estimates , the countertrade is presently employed by half of its members and is viewed as a guise of exchange restriction and trade which is especially condemned in cases of debt rescheduling by a member nation as in the case of Romania in 1982-1983. In the countertrade , the export revenue will not be distributed fairly and hence there is a legal principle of discrimination exists in countertrade. 2. Protection of domestic industries The WTO Anti-Dumping Agreement states that Member nations may levy anti-dumping duties, where dumping is considered to create ‘material damage’ to the domestic industry. countertrade is frequently said to be means of destabilising or evading anti-dumping law, because countertraded goods lack a translucent, arms-length export price. Hence , countertrade has the legal principle of offering no protection to domestic industries . 3. Consultation principle Countertrade like any other export or import transactions includes negotiation of disputes through alternate dispute mechanism like arbitration etc. 4. Stable basis of trade Countertrade helps to maintain stable prices during the period of extreme exchange volatility and also helps to attain a stable export revenue for a nation. 5. Types of letters of credit framework of agreement obligations Letter of Credits are significant in countertrade transactions concerning parallel L/Cs and are also significant to make sure payment on