International Trade: Expand Your Business Globally in 2022
October 8, 2020
Table of Contents
If you operate at a global level, you need to know about the pros and cons of international trade.
These can provide crucial advice and support when it comes to venturing into the global trade market.
In this article, you will learn about international trade law firms and how they can help you with your business.
What is International Trade?
At its heart, international trade is all about goods and services getting from A to B – with A and B being different countries.
International trade is a huge contributor to our growing global economy. Supply and demand are hugely influenced by what happens around the world, and this has an impact on prices.
As an example, if there were to be any political changes in Asia, the cost of labour might go up. This would then have a knock-on effect on the manufacturing costs of a European clothing company based in Vietnam.
As a consequence, the clothing items could become more expensive for European customers. And they might not be willing to pay a higher price.
Imports and exports
Exporting is when a home country or company sells its goods and services to another foreign country or company.
Importing, on the other hand, is when a country or company buys foreign products and brings them into its home country. Imports and exports are constituents of a country’s balance of payments.
Global trade enables nations to use their own resources more efficiently, through a careful balance of imports and exports. Of course, different nations have different natural resources and assets.
Global trade makes it possible for countries to produce the same goods more effectively by saving time and money. This also means they can then sell this product more cheaply.
If a country is unable to produce a good efficiently, it can enter into trade with a country providing it. Specialisation is the term used in international trade to describe this.
In 2018, the top importing countries were the US, China, Germany, Hong Kong, and the UK. The top exporting countries were China, the US, Germany, Japan and Korea.
What is the comparative advantage?
Comparative advantage is the term used to describe an economy’s ability to produce a service or product which has a lower opportunity cost than its trading partners.
This advantage makes it possible for a country to sell products and services for less than its competitors. This will increase sales and leads them to a higher sales margin.
Comparative advantage is a crucial concept of economic theory. It is also vital so that anyone, at any time, can mutually benefit from cooperation and trading with another party. It is one of the founding principles of international trade.
If you want to understand comparative advantage, you first need to understand what opportunity cost is. Put simply, an opportunity cost is a potential benefit that someone misses out on when choosing one option over another.
When considering comparative advantage, the opportunity cost for one party is lower than that of another. The party that has the lower opportunity cost, and thus the smallest potential benefit which was lost, holds the comparative advantage.
Another way to look at a comparative advantage is as the best option given a trade-off.
For instance, you have to decide between two different options, with each one having both pros and cons. The option that has the best overall package will be the one with a comparative advantage.
The advantages and disadvantages of trading globally
Trade influences all of our lives on a daily basis. And with such wide ramifications, there are of course pros and cons to import and export.
- Import and export present a smaller investment of time and money. This holds especially true when compared to other ways of entering the global trade market.
- Import and export present huge job opportunities. They are the easiest route for any country or company to enter the global trade market.
- No country can ever be fully self-sufficient in today’s world. Imports and exports are vital to the good functioning and prosperity of a country.
- Import and export provide nations access to the newest technologies and highest quality goods and services.
- Import and export, when contrasted with other paths into global trade, is less risky.
- Good can be under the obligation to conform to certain regulations and quality standards.
- Focusing too much on clients in other countries can make you lose touch with local markets and customers.
- Exporting has its limits when it comes to other country regulations and prohibitions.
- Importing and exporting goods incurs extra costs when it comes to transportation and insurance costs.
- Home companies which are more closely located can be better able to serve than companies in other countries.
- It can be a very tiresome task to sort through different documentations and trade licences.
Why do businesses trade internationally: the benefits
There are many different benefits of international trade. It can bring quite a good number of unique opportunities.
The first thing to consider is how it can increase your potential customer base. This means a growth in your revenue and cash flow.
Expanding your business overseas implies opening to an international market. This does not necessarily mean forgetting your home market, but it is a good strategy to increase sales.
The advantages of international trade are not reserved for big companies. As a small business, you can grow your business as well.
International trade can help businesses optimise their sourcing strategies and supply chain. Sometimes it can increase their access to export financing.
International trade and its legal ramifications
Just like commerce occurring within a country, international trade is governed by contracts. Yet, with goods and services delivered across international borders, which country’s law governs the contract?
Under international law, the parties involved can specify which country’s law will govern their contract. And which country’s courts will rule on any disputes.
The same country doesn’t have to be chosen in both instances. In theory, the contract could be governed by the laws of A, with disputes being heard in B’s courts. Parties are also free to pick the laws of a completely unrelated third country.
What if B doesn’t want to let A’s goods into the country? If both countries are members of the World Trade Organisation (WTO), then a lawyer’s role can be somewhat limited.
For example, they’re representing a company from country A, whose goods are being blocked from entering country B. In this situation, a legal action can’t be brought on behalf of the client directly.
Only member states can access the WTO’s dispute resolution mechanism. So the company in question would first have to lobby A’s government to bring a case against B.
The role of international trade law firms
The work of international trade lawyers is split between two main areas:
- the application of domestic law to international trade
- treaty-based international law governing trade flows
On the domestic side, work covers:
- export controls
- embargoes and economic sanctions
- import relief actions such as anti-dumping, countervailing duties and safeguards
- customs classifications
- valuation and rules of origin matters
In relation to international treaties, attorneys advise on:
- World Trade Organization (WTO) rules
- preferential trade regimes such as the North American Free Trade Agreement (NAFTA)
- bilateral investment treaties (BITs)
Lawyers advise on the implementation of these domestic and international rules, and counsel clients in disputes related to their violation.
Who does this concern?
In order to gain from trade and gain a market share, a company will often seek to develop its business internationally. This brings with it additional risks, which the company must manage.
International trade involves not only tariff barriers but non-tariff barriers. These are the different laws that apply to international commercial transactions between traders.
Companies engaging in international trade must negotiate their way through local laws, international treaties and the rules of common trade practices. Legal counsel must be versed in all three.
Top 7 International Trade Law Firms
Cleary Gottlieb Steen & Hamilton LLP
Cleary Gottlieb is an international practice in 16 different centres worldwide. They help clients effectively manage a wide range of customs and trade matters.
Thanks to their presence in both Brussels and Washington, they have easy access to the European Union and the United States. This also means they can effectively offer coordinated transatlantic advice.
Their lawyers can address a broad range of trade matters, including:
- multilateral and bilateral trade dispute settlement
- trade negotiations
- trade defence
- import and export regulations
- foreign investment restrictions
- sanctions and unfair trade practices
Akerman’s International Trade and Customs Practice offers their customers strategic advice; Thanks to it, they can gain and maintain their advantage in the global trade market.
Chambers Global singled them out for their deep expertise in international trade matters. They help both global companies and local companies with all aspects of the movement of goods, consumer goods and services across borders.
Akin Gump Strauss Hauer & Feld LLP
Akin Gump Strauss Hauer & Feld LLP offers a whole range of services. They help to:
- optimize their customers’ ability to engage in the cost-efficient
- timely trade products and services across borders, in full compliance with applicable laws and regulations
They help clients with legal matters in front of:
- the World Trade Organization (WTO)
- the Office of the U.S. Trade Representative (USTR)
- the International Trade Commission
- the departments of State, Treasury, Commerce, Justice and Homeland Security (including U.S. Customs and Border Protection)
- other federal agencies and offices that deal with international trade regulation
Van Bael & Bellis
Van Bael & Bellis is an independent law firm with offices in London and Brussels.
They were founded in 1986 and now have a multi-jurisdictional team of lawyers. These offer specialised advice to clients ranging from government bodies and global corporations to international law firms and international trade.
Van Bael & Bellis also have a third office in Geneva which takes care exclusively of World Trade Organisation matters.
Dentons work to offer their clients a competitive advantage and strong connections in the places where their clients do business. Dentons know how important it is to understand local cultures in order to do business successfully or resolve a dispute.
They are currently the largest law firm in the world. Dentons’ global team develops tailored solutions to meet the local, national and global needs. They operate for public and private clients of any size, in 188 locations serving 77 countries.
Their customers can access legal expertise within 25 sectors and 40 practices.
Norton Rose Fulbright
Norton Rose Fulbright provides global corporations and financial institutions with a full business law service. They have over 3,700 lawyers and other legal staff based in:
- the USA
- Latin America
- the Middle East
Recognized for their industry focus, their expertise spans many different industries and sectors:
- mining and commodities
- financial institutions
- technology and innovation
- life sciences and healthcare
Legal challenges come from all directions. Hogan Lovells understand and collaborate with their customers to solve the toughest legal issues within major industries and commercial hubs worldwide.
How International Trade Law Firms can support CONNECTS members
When trading internationally and doing imports and exports activities, having a single platform like CONNECTS can be a great help. On CONNECTS, you can find:
It will save you a lot of time and can really boost your imports and exports trading efforts.
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