Law, Goods and International Trade: How Products Travel the World | Harris Mahmood | Skillshare

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Law, Goods and International Trade: How Products Travel the World

teacher avatar Harris Mahmood, Law Tutor

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Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Watch this class and thousands more

Get unlimited access to every class
Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Lessons in This Class

7 Lessons (1h 18m)
    • 1. Welcome to the Class

      6:53
    • 2. Background and Setting

      7:36
    • 3. International Sale of Goods Contract

      9:57
    • 4. International Rules on Shipping

      12:43
    • 5. Sales Agents and Distributors

      13:22
    • 6. Foreign Direct Investment

      14:18
    • 7. WTO and Protectionism

      13:38
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About This Class

If you're reading this piece of text right now, chances are it is on a laptop, phone or tablet. And if that is true then it is likely that those products (or the products within them) have been transported from one end of the planet all the way to another bypassing natural borders, oceans and forests to allow you to look at my face on the top right of your screen.

Its easy to take the miracle of International Trade for granted. The fact that goods are now able to seamlessly move from one continent to another is a relatively new phenomena in human history but how this exactly happens is not without complexity.

This course is designed to show how the Law is used to facilitate and regulate International Trade and the transport of goods across the world and is perfect for beginners with little knowledge of Trade Law (or Law at all) to become accustomed to basic legal concepts.

It is taught by Harris Mahmood, a Law Graduate and Private Legal Tutor from the University of Glasgow who will follow the journey of Alex, a budding entrepreneur attempting to sell his own brand of green tea in a foreign market and weaving his way through various political, legal and logistical hurdles.

ABOUT HM LAW:

My name is Harris and I am Law Graduate from Glasgow currently working as a private law tutor. I make visually appealing, introductory law courses for students and generally curious people. My goal is to teach the law in an easy to understand manner and make legal education as accessible as possible.

USEFUL LINKS:

My Website: https://www.harrismhd.com/

My Newsletter: https://mailchi.mp/edad30abf112/law

My Youtube Channel: https://www.youtube.com/channel/UCkEwB7Qotogc0GGQyCUijdQ

My Instagram: https://www.instagram.com/harrismahmoodlaw/

Meet Your Teacher

Teacher Profile Image

Harris Mahmood

Law Tutor

Teacher

Hi, my name is Harris and I am a Private Law Tutor based in Scotland.

I have created numerous visually appealing, introductory online Law courses for students, graduates and the general public to watch and learn.

My aim is to make legal education as accessible as possible.

 

Check out Youtube Channel for lots more lectures and content:

Youtube - Law course snippets and previews and videos explaining key events in legal history

I also have a website which you can check out for more information

 

Subscribe to my Newsletter for early access and discount codes for all my online courses:

https://mailchi.mp/edad30abf112/law 

See full profile

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Transcripts

1. Welcome to the Class: Hello and welcome to this online course entitled law, goods and international trade. Have products travel across the world. And this online course, I'll be looking at some of the basic aspects of international trade law, international commercial law, and really getting to the core concept of a startup company accompany who starts from humble beginnings, becomes a multinational enterprise shopping products from one end of the globe to the other. So my name is hardest moments I am is called slow graduate from the University of Glasgow graduate with first-class honors. Currently I'm working as a law tutor and shipping these online courses to try and help students become more familiar with law and trying to help students and lawyers in general, people from across the world become more familiar with legal concepts and the law if you don't already know, I have two other online courses. One is introduction to Scottish and common law, the other introduction to international law, both I've done as areas of interest for myself, and they're both available on Udemy and Scotia. So Go on Udemy and sculpture. If you type in Introduction to Psychology, slow introduction to international law, you can purchase that course. And if you email me, I am willing to give you a coupon code as well to give you a discount. So there is this course aimed at, well, it seemed to a number of people in that undergraduate students, any students who are studying subjects related to international law or international trade. And a lot of the time, the law in this area can be very complicated. So breaking it down, it's very important. Masters students, LLM, students who are about to study international law are solving an analemma material and relations are traded over. Very, very important to get to grips with some of the fundamental concepts. Because of course and subjects like these, they get covered again in these courses and LLMs. And so to get an introductory view is very, very interesting. And general public, anyone who's interested in law, politics, country's culture, economics, that would be me just generally curious every area. So the way I'm going to structure this course is we're going to look at a guy called Alex and we're going to see how heads products or he creates on one side of the globe, namely the USA managers to travel all the way across the other side of the planet and the legal instruments and the ways he's able to do that. So let's set the scene, Let's give a scenario. So Alex theory is Stickman figure, lives in the USA and he's been drinking green tea for several years. And what Alex says is that instead of drinking green tea only, he now wants to sell it. So it becomes an entrepreneur and you know, it wants to sell his own brand of green tea. Had a problem for him. In the USA, competition for herbal teas is extremely fierce, right? It's not very easy to penetrate the domestic market in the USA that our tea brands have been around for years, hundreds of years. And so it's not very easy for Alyx to start selling is green trees straightaway. But what he does, as he notes, is that Thailand has a growing middle-class and actually does in reality as well. And what the middle-class love to do is to have extra money to spend on things that perhaps you don't need an answer. There is an emerging market for herbal teas. People are richer. They make more money, they have more free time, and so they'll drink things like green tea right there it becomes this market in Thailand. What Alex is, is, instead of focusing on the US domestic market, he decides to sell his product in Thailand, selves products internationally. Now, in reality, I believe Alex would still go for the US market, right? So he would still try and penetrate the US market and then look abroad, internationally for the sake of her presentation or the sake of our online course, we're going to take the assumption that Alex's only selling and Thailand, right? So he's gone straight to Taiwan and selling internationally. So how on earth have products such as green tea managed to travel all the way from the USA, a country and culture totally distinct from Southeast Asia. And they managed to travel all the way to Thailand at D, we take this feat for granted, the fact that products are able to move across different countries and continents, but that wasn't always the case. This is a relatively new concept in history. And I covered this in my international law course, where I say that a few 100 years ago, these countries, they wouldn't even have known about each of the remaining be, they might as well have been on different planets. And so because of globalization, we are very, very well integrated as a global community. And so we're able to trade with one another. So to summarize what Alex will have to do in order to guess product from the USA to Taiwan. As he will have to weave his way through a complicated way of, of legal, logistical, and political hurdles. Those are the things that I'm going to cover in this course. But if it works, the benefits seemed to be clear, right? Thai citizens, they get a new product. They get herbal teas or a green tea and a nice new flavor. Some green tea at the Thai government gets happy citizens. So it's beneficial for them to let Alex common to Thailand and sell those products. And of course, Alex benefits because he gets rich, right? So, and so when, when, when, at least that is the ideal scenario for international trade and this globalized economy that we have. And of course it doesn't always work out ligase. People can exploit international trade for their own benefits. But as we will see, overall, at least in my opinion, the idea of a globalized economy has lifted millions out of poverty. It's expanded products across the road and we look at why this is so important. And so the aim of this course overall is to look at how different areas of law helped to facilitate and regulate international trade. And we'll be doing this through a number of topics. And what we want to do is we want to answer some fundamental questions about how Alex exactly can get products into Thailand. So this lecture will be the background and setting. But the next one will be looking at, well, how does Alex create an international sale of goods contracts? These are some of the legal hurdles to overcome. Hydraulic ship has products internationally? Does I'll explain more foreign buyers for its product? Or how does he expand his business internationally wants and she's got a solid base. And how Alex deal with restrictions from the Thai government on his products, right? These are the questions that we're going to answer through a series of six lectures. And the way we're going to answer them, the method is by looking at, first of all, sale of goods contract law, international sale of goods contracts. Then we're going to look at international rules on shipping. Then looking at rules on sales agents and distributors, foreign direct investment and World Trade Organization. And this idea of protectionism. 2. Background and Setting: Hello and welcome to this online course entitled law, goods and international trade. Have products travel across the world. And this online course, I'll be looking at some of the basic aspects of international trade law, international commercial law, and really getting to the core concept of a startup company, a company who starts from humble beginnings, becomes a multinational enterprise, shopping products from one end of the globe to the other. So who is this course aimed at? Well, it seemed to a number of people in that undergraduate students, any students who are studying subjects related to international law or international trade. A lot of the time, the law in this area can be very complicated. So breaking it down, it's very important. Masters students, LLM, students who are about to study international law are solving an analemma material and relations are traded over. Very, very important to get to grips with some of the fundamental concepts. Because of course, in subjects like this, they get covered again in these courses and LLMs. So to get an introductory period is very, very interesting. And general public, anyone who's interested in law, politics, country's culture, economics, that would be me just generally curious about every area. So the way I'm going to structure this course is we're going to look at a guy called Alex and we're going to see how it has products or he creates on one side of the globe, namely the USA managers to travel all the way across the other side of the planet and the legal instruments and the ways he's able to do that. So let's set the scene, Let's give us scenarios. So Alex theory is step one figure, lives in the USA and he's been drinking green tea for several years. And what Alex says is that instead of drinking green tea only, he now wants to sell it. So it becomes an entrepreneur and you know, it wants to sell his own brand of green tea. And the problem for him in the USA, competition for herbal teas is extremely fierce, right? It's not very easy to penetrate the domestic market in the USA that our tea brands have been around for years, hundreds of years. And so it's not very easy for Alyx to start selling as green trees straightaway. But what he does is he notices that Thailand has a growing middle-class and actually does in reality as well. And what the middle-class love to do is to have extra money to spend on things that perhaps you don't need. And so there's an emerging market for herbal teas, right? People are richer. They make more money. They have more free time, and so they'll drink things like green tea. So there becomes this market in Thailand. And what Alyx does is, instead of focusing on the US domestic market, he decides to sell his product in Thailand, sell his product internationally. Now, in reality, I believe Alex would still go for the US market, right? So he would still try and penetrate the US market and then look abroad, internationally. But for the sake of her presentation or the sake of our online course, we're going to take the assumption that Alex's only selling Thailand, right? So it comes straight to Taiwan selling internationally. So how on earth have products such as green tea managed to travel all the way from the USA, a country and culture totally distinct from Southeast Asia. And then in managed to travel all the way to Thailand. That's D. We take this feat for granted. The fact that products are able to move across different countries and continents, but that wasn't always the case. This is a relatively new concept in history. And I covered this in my international law course, where I say that a few 100 years ago, these countries, they wouldn't even have known about Asia. The remainder b might as well have been on different planets. And so because of globalization, we are very, very well integrated as a global community. And so we're able to trade with one another. So to summarize what Alex will have to do in order to get this product from the USA to Taiwan. As he will have to weave his way through a complicated way of, of legal, logistical, and political hurdles. And those are the things that I'm going to cover in this course. But if it works, the benefits seemed to be clear, right? Thai citizens, they get a new product. They get herbal teas or a green tea and a nice new flavor. Some green tea at the Thai government gets happy citizens. So it's beneficial for them to let Alex common to Thailand and sells products. And of course, Alex benefits because he gets rich, right? So when, when, when, at least that is the ideal scenario for international trade and this globalized economy that we have. Of course it doesn't always work it ligase, people can't exploit international trade for their own benefits. But as we will see, overall, at least in my opinion, the idea of a globalized economy has lifted millions of poverty. It's expanded products across the road and we'll look at why this is so important. And so the aim of this course overall is to look at how different areas of law helped to facilitate and regulate international trade. And we'll be doing this through a number of topics. And what we want to do is we want to answer some fundamental questions about how Alex exactly can get as products into Thailand. So this lecture will be the background and setting for the next one will be looking at, well, how does other excrete an international sale of goods contracts? These are some of the legal hurdles I love to overcome. Her exotic ship has products internationally. How does I'll explain more foreign buyers for its product? Well, how does he expand his business internationally wants and she's got a solid base. And hello Alex, deal with restrictions from the Thai government on his products, right? These are the questions that we're going to answer through a series of six lectures. And the way we're going to answer them, the method is by looking at, first of all, sale of goods contract law, international sale of goods contracts. Then we're going to look at international rules on shipping. Then looking at rules on sales agents and distributors, foreign direct investment and World Trade Organization and this idea of protectionism. So it's a really, really fundamental question. And really this is the basis of these lectures on trade and globalization in general. And I is why is international trade important? Why have you decided to purchase this course? And why is it worth you learning about international CRE? Well, I've come up with a series of reasons, number of reasons. I think that is really important. There's an idea that it can reduce poverty, that there's less poverty with more international trade. Because trade investment means more money in a country. And that money is used for taxes and taxes are used for public services and creation of jobs. There's the idea that there's less war with more trade. So when countries are dependent on each other, there then less likely to go to war with each other. So if I'm going to treat, if I'm Germany in Arabic to trade with France, I'm not about to invade France because I rely on them to fund the war anyway. So there's no way I'm about to invade them. More human cooperation, trade can be used to connect different cultures and communities. People travel more frequently for different reasons. Kind of opens up borders to different cultures and better services and products when you have more competition and a domestic industry from different people across the world. So companies know they're not safe and they can't just turn out the same product because someone else will have a better product. So it means that keep innovating k and we as the consumers get better products, better services for cheaper rates. And that contributes to growth and prosperity. And you name it. 3. International Sale of Goods Contract: Welcome back to this online course. We're looking at law, goods and international trade. And Alex is green tea travels across the world, OK, and this lecture we are going to be looking at international sale of goods contracts. No quick disclaimer. The law that we're going to look at, which is the CISG, is as much, much more complex than I will cover in this lecture. And the reason for that is because it's a huge international convention which regulates international sale of goods contracts from people from across different jurisdictions. So deals with a number of different issues. And I've pretty much summarized maybe around three or 4% of this lecture. So it's really, really basic. And if you do want some more detailed information at highly recommend looking at more specialized source for international sale of goods law or contract law in general. But anyway, let's answer the question. So how does Alex create an International Sale of Goods contract, of course, needs to sell his green tea, doesn't he? So he needs a contract with someone in Thailand to sell it. So let's set the scenario. So it's very, very inefficient for Alex to sell directly to consumers in Thailand. It doesn't know the country well is not established. He doesn't have a clue about the local language, the population doesn't do anything. It's much more efficient for him to actually sell to a retailer in Thailand. You can purchase products in bulk and then sell them to customers because they are much more acclimatized local conditions, they know the language and other people. And so in order to do this, you will have to create an international sale of goods contracts. So this is assuming that is found someone in Thailand, maybe shop or retailer. And he's willing to do business with. And in order to give the products to him, you have to create a contract. And that's regulated by this thing called the UN Convention on International Sale of Goods, shortened CISG. Let's look at the product supply chain. So Alex will be acting as a manufacturer slash supplier. Normally, he may have another manufacturer, right? Giving him the green tea, but we're assuming here Alex is making the green tea as well, as well as supplying. So Alex will be acting as a manufacturer, such Supplier. He will then be shipped and off the products to a retailer in Taiwan which could be any shop and Thailand, a tea shop in Thailand. And that tissue will sell their products to consumers. And we'll sell them to consumers in Thailand. And the CISG will cover the manufacturer to retailer contract at one cover the retailer to consumer contract because it has to be a business-to-business contracts under the CISG. A quick background about the CISG, the UN convention on contracts for the international sale of goods was created in 1988. The whole purpose of this was, it was used to homogenize contracts and international trade. Because when you have a globalized economy and you have businesses in different countries or trading with each other, you have to have set contract terms because it makes the process much, much easier. And it makes the process easier in the sense that if there's a dispute between two businesses in two different countries, you then know which law to apply. Otherwise, you'd always be bickering about whether you apply one country's law over and others. And so the CISG was used homogenize this and it's been signed and ratified by 94 countries. No, of course, There's a 196 countries in the UN. So around half of sine the CISG, which means that half have not. And so what happens when you have a business and a contracting state signing a contract with the business in a non contracting state. Well, that's where problems come in. And so this is a work in progress to get more and more states signed up to the CISG. So if we look at content and what the CISG actually entails in terms of contract law. We're going to be looking at some of the basics of contract law in general. So scope CISG only applies to contracts if the following requirements are met. And that would be the contract has to be a sale of goods contracts. So if it's a sale of services, it doesn't apply. The subject matter can only concern formation of contracts. Okay, So that's a very specific area which we'll look at race and duties of the buyer and remedies of the buyer and seller at wound look at a lot of other areas of contract law which are regulated by domestic law, okay, So this is really, really the bare bones of contract law, regulates parties to the contract have to have their place of business in different states. Okay. Otherwise, if they were in the same state, that would just be regulated by domestic contract law. Since international contract lawyers be different states. And at least one of those states has to be a contracting stay as in a contracting state, the CISG. Okay, so, so one of those countries has to send up to the Cxy, otherwise CSU doesn't apply. Finally, the CISG will apply automatically as long as the parties haven't explicitly opt out of the CISG and the contract. So unless you stated in the contract that the CSC does not apply, I will apply automatically as long as the other conditions are met. Interpretation of the CISG. So judges and lawyers, they have to interpret it, the CRC based on these following characteristics. So international character of the course have to interpret the convention in line with international rather than domestic principles, promotion of uniformity. So the courts have to interpret the CISG similar to have other courts have interpreted, instead of using their own methods, the idea that the CISG, any rules that the courts make, their uniform, they all make sense. They don't contradict one another and they have to observe good faith. We have to go by the assumption that the parties have trust between each other and there's good faith between each other. So here we get into the rules, the specific rules of contracts themselves. Okay? So if we look at one of the most fundamental rules formation of contract. A contract is formed when there is an effective and ineffective acceptance. So an offer is a proposal for concluding a contract addressed to one or more specific persons. And it becomes effective when it reaches the offeree. You could write entire dissertations just about effectiveness of offer and when it's actually effective, who it has to be addressed to specifically. So I'm literally summarizing loads and loads of law and two lines. Okay, so just bear that in mind when you're learning this section of the course. And the other part is acceptance, right? So you need an offer and acceptance for a contract to be formed. And so statement or other conduct of the offeree which indicates sent to would be an acceptance, now becomes effective when it reaches the offer. So the other aspect of CSE deals with is the seller's obligations and the buyers remedies, okay? So we're the seller fails to fulfill his contractual obligations. The buyer will have a number of remedies available. So are the seller's obligations well, pretty straightforward, right? In to deliver the goods. Bio. And you need to ensure that there's conformity of the goods that the buyer asked for. The right size, the right shape, the right color ticket, or what happens if he fails to fulfill these obligations? So what happens if the goods are totally wrong or the broken? Well, the buyer has a few remedies available. He can ask for specific performance, so that is where he goes to court and he tells them to compel the seller to remedy the defect, okay? Or to compel performance obligations. So if the seller doesn't deliver the goods, American culture core and the core can tell the seller you have to deliver the goods. Basically being told off by the avoidance of contract is basically making the contract void altogether. So canceling it completely. Damages where the seller would pay money for the buyer for any damage that he's received and self-help. So the buyer can do things himself to remedy the sellers failed obligation. So for example, if the seller has delivered the goods late, then the buyer cannot pay him the full prime straight. You can just trim like half. Okay, So there'll be a self-proclaimed. Conversely, we're also looking at the buyer's obligations and the seller's remedies. So what happens if the buyer is the one this time to fulfil fear that feels different foe his contractual obligations. Well then the seller has the number remedies available to him under the sea ice sheet, right? So the buyer's obligations, again, very straightforward, is to pay the price you have to pay and to take delivery of the goods and what the sellers remedies if he fails to perform them. Well, there's thing called an action for price. It's very similar to specific performance is basically where the core will tell the buyer that he has to pay and avoidance of contracts, Metro contract boy altogether and damages. And finally, we're going to look at one more aspect of the CISG, okay? And it's called riskless and cold risk when this risk transfer. So what is transfer of risk is basically the moment at which the seller's obligations, the ones we looked at, okay, So for example, to deliver the goods actually become the buyer's obligations to pay. So what point does the seller, when he delivers the goods to the buyer than half to receive the goods or pay the price at what point? And this becomes a fundamental issue and cold cases and disputes, okay, At 1 at the cellular, FIFO has obligation and at what point the buyer that the buyer fail to fulfill his obligations. Under the CISG or contracts of carriers, that's when there's delivery of goods. Risk will be transferred from the seller to the buyer as soon as the goods are handed over to the force carrier. Essentially, it would be a scenario like this. So say for example, that is the seller. As soon as she hands over the goods to the carrier, who is going to then ship them over to the buyer. Thus, when risk is transferred, That's when the buyers under the obligation to pay and take the memory before this moment, it'll be the seller's obligation to make delivery and make sure that goods are conforming. And then the goods are put onto cargo ship and then they arrive at the buyers. So that would be the basis of risk transfer. It's a little bit complicated. So you might have to watch this petal again, but it becomes a very, very fundamental issue, especially when they're so desperate. 4. International Rules on Shipping: Hello, welcome back. We're on Lecture 3 already of this law goods and international trade online course. So in this lecture, we're going to be looking at shipping. Seems occur a little bit boring or tedious topic to look at. I usually it's one of my favorite topics. It's actually really interesting because it's all about logistics, right? It's okay seeing that this law helps you to take the products here, shipping is something practical, right? This is a practical hard, you'll probably the biggest practical hurdle of literally how to get product from one from the USA all the way to Asia array, all the way to Taiwan. So it's actually a fundamental aspects of trade. And without and with these really, really complex shipping systems, you wouldn't have all the products. And so we're answering the question, how does Alex ship has products internationally, okay, and we're looking at rules on shipping. So once Alex is actually find the reliable buyer and he's concluded his contract terms. Remember under the CISG from the last lecture, Alexander needs to find a way to actually ship has green tea to the other side of the planet. Now seems like a really, really tough task, great. But luckily, humans have refined and improved this area of logistics throughout centuries. And they've made transport really, really convenient, really easy. And so products of magnitude travel from continent to continent with pretty much seamless ease. And how Alex is going to ship his products according to a low point of view, as you rely on a set of international commercial terms called Incoterms. And that will help the shipping process around smoothly from a legal point of view. So today, shipping seems like a really straightforward process, right? But you basically take goods, you load them onto the ship. They go from point a to point B. And Bob's your uncle. Historically, this was a really long, risky and inefficient process for a long, long time. And it's really only very recently in human history, we've managed to expedite the process mid, CFR, mid, easier, and thus ever able to have several thousand products just enter in one room. So there's some key developments and shipping and traits that have made this process much more easy, much more smooth. And I've got a list of some of these developments in order to show how shipping went from this really, really risky, really unsafe journey to becoming seamless and smooth like it is today in the 21st century. So the use of small and light products was very, very interesting. Previously, whatever the product was, it was just sort of stopped in to a cargo ship or associate back then, and it was just transported all the way over. But that wasn't very efficient. It wasn't very productive use of space specifically. And so the use of small and light products sort of as a vector, means that we can utilize space much more efficiently. So give me an example, right? So let's take water. If you were to just pour water into a shipping container, does actually really, really heavy. It's heavy and actually you won't get as much volume. And what happens with water? It's, it's embedded into crops. It's called water embedding because crops take up much, much less space. So instead of you pouring water into a container, you embed the water per inch or crops to the crops in a shipping container. Dag it's transported and yet more water for less space. Okay, so it's a really, really ingenious way of shopping products. At the second development that was really interesting was the advancement of ships in general, right? So the sea vessels went from being powered by sale and to being powered by steam. And now today the paradox petrol and diesel engines. And so this is the evolution from sail ships to steamships to die, the cargo ships that we see today and that she's made the ships bigger, but it's also made them easier to control and less dependent on whether if you're a solution, as we can see in the picture, right? That's a sale. Sure. You're always hoping the weather is in your favor. And remember, we cannot control the weather. So you're basically hoping forces beyond your control will be in favor for you just to get some products across the other side of the planet. So that's a really, really risky, really, really dangerous expedition. Never cargo ships. There, there's more stability, there's more security, there's more certainty. Canals have also mids shipping the whole process much, much quicker. And we're going to look at two of these canals, but essentially is canals are totally man-made. It's land that's been hacked off and with water-filled on it so that ship can cross. And it will link to oceans that previously if we just went by physical borders, we wouldn't have had. So by linking these two oceans, we've managed to absolutely sloshed journey times for ships. And so that's what products are able to get into our house within a week of ordering them, even though they're coming all the way from China. And finally, the use of shipping containers says also made shopping much, much easier. So before shipping containers, it's crazy to imagine there was a world before shipping containers to before then there were just these individual battles, right. So products will just get stuffed into whatever Barrow was available and then just kept her on the ship with shipping containers. You can pack a cargo ship much tighter and you can load and unload it much quicker because there are cranes now on ship, on cargo ships. So they are specially designed for the shipping containers. So everything is sort of homogenized. Okay. Everything is the same. The shipping containers are very similar to each other. You've got hooks and they get unloaded, loaded very quickly with an individual barrel is the marginal barrel. It requires manpower to get them off and get them on. And you can only do one at a time, really kind of two bottles at one time, that one person shows me the whole process much more mechanized. So we said we'd look at the canals of mid shipping and journey terms of ships so much quicker. So here's one of them is the Suez Canal. It was built in 1869. And there it is on a map pancakes. So it's in the territory of Egypt. And if you can see the two C's over here and you see the Red Sea and the Mediterranean Sea without this man-made canal, these two oceans are, these two C's are not linked to one another. And so then what you would have to do if you wanted to get from the Red Sea to the Mediterranean, as you would pretty much have to go all the way around Africa if you wanted to get to the Mediterranean Sea or if you wanted to essentially get to Europe. So this can now just mix shipping so much easier now instead of going all the way around the horn of Africa, ships can go pass straight through the canal and get straight to Europe. And so that becomes a problem like we did recently when the canal became blocked by a cargo ship. So weather conditions are really bad and the canal is quite narrow. So if a cargo ship is coming, the cargo ship essentially turn 180. Okay. And it was blocking the entire canal. And it was a crazy statistic like billions of dollars worth of goods were being stopped from passing through the canal every day. It was like a week and a half or two weeks before they managed to unstuck the cargo ship canal open again. So it's a vital, vital channel for international trade. The second canal is the Panama canal. It was built in 1914, okay, and here it is. It's in Panama, of course. And here's the canal situated here. And what that does is it cuts journey times because in order to get from the Atlantic to the Pacific Ocean, you'd have to go all the way around South America. And this is totally blocked off. And no ships are able to goals through, straight through the canal and get to the Pacific Ocean. Now we again, cutting journey times, making trade soul much better. So what is the law that actually regulates shipping? With the closest thing we have is these things called incoterms are international commercial terms and what they do. And these are terms you can add them to a sales contract, which will regulate the rules of shipping. So how a product is to be shipped on specific rules surrounding that. So they were first published his Incoterms by the International Chamber of Commerce in 1936. And the International Chamber of Commerce is an international organization made up of businesses. And what they do is they have thousands and thousands of businesses signed up to them. And they all try and cooperate because they all have an interest in international trade being more smooth and more efficient. And the Incoterms were used to settle these uncertainties about rights and obligations in relation to transporting goods between the buyer and seller. And although the Incoterms are not official law rate, so officially they're not law in the sense that no one can rely on them in core, core stole do see them as quite good practice, okay, they see them in a few. Got Incoterms in your contract will see that that contract is quite a good contract, has been well thought out, okay, So there are seen very favorably, but you can't rely on them as law and itself like you can rely on the CISG. So there's different types of Incoterms. The type that you use in your contract will largely depend on the type of relationship you have with your seller or the relationship we have with the buyer. And I'm going to go through some of them. And I think there are 14 different sets of Incoterms. And I'm only going to look for, okay, four main ones. First one I'm going to look at as Ex Works, abbreviated as EX W, right? And you would use x works where you want risk when we talked about risk in the last lecture. And you want risk to pass from the seller to the buyer at the seller's own place of collection. And in this Incoterms, the buyer will pay all transport costs. So if we try and map this, and we have a green tea here and our green tea here. And this is the product this is going to represent when risk passes from the seller to the buyer. And so as soon as the products are laid by the seller for collection. So for example, if the seller has a warehouse and he's making his products, as soon as that green tea is ready, according to JxW, risk has passed to the buyer source than the buyer's obligation to find a way to get the products to annex the buyer who pay the costs for all transport for to get those products all the way to him seems like a bad deal for the buyer Ray. He not only has to go all the way to get the products from the seller, but you also have to pay for some buyers just offer this kind of as an incentive. So they will be very experienced buyers. The seller may be very inexperienced. And so just to make it easier for them, and the buyer will have this contract term. And maybe eventually as the seller becomes more experienced, you'll change it to one of the Incoterms that we're looking at. One free on boards. So another type of Incoterms FOB. And this will be a risk passes when the seller loads the goods on board the vessel, which would be a cargo ship for transport to the buyer. In terms of costs, the seller would pay the transport costs until the goods are onboard the vessel. That would be Inland transport when the buyer pays transfer courts after they are boarded the vessel. So let's look at an example again. This is when risk will pass. It's when the goods are onboard the cargo ship. That's when the buyer has to fulfill his obligations. Seller pays some of the transport costs. He'll play the cost until the goods get to that cargo ship and the buyer will pay the cost. After that point. After the goods are loaded onto the cargo ship, the bio pedals. The next one is CIF, cost insurance and freight. So the risk is the same as FOB and will pass when the seller loads of goods, goods on board the vessel for transport to the buyer. But in this scenario, the seller will pay transport costs all the way until the buyer score. Okay, So he'll pay pretty much all of the transport costs. So again, let's look at the example. Risk is the same as before. Until the goods are onboard the vessel. This time the seller pays everything. Okay? And land transport beyond, follow in. Finally, we have DDP, delivery duty paid doesn't encode term. And this is when risk will pass when the goods actually arrive at the buyers ports of Shipman. Ok, so not when they are loaded onto the basal, but when they actually arrive at the party chairman of the buyer and seller, who will pay all the costs just like before. So we have a scenario that's when rescue passes, when the goods are actually at the buyers ports of shipment, which means the seller has to fulfill those obligations all the way until there are the buyers ports of SharePoint. Right. And then on top of that, he also asked to pay. So you think he's getting quite a bad deal ERA. Why would any seller wants to go for DDP? Well, actually it's a business decision. Tellers may offer DDP Incoterms to entice buyers to come and contract with them instead of going cannot have several who might have a more favorable contract terms such as F will be. And so they can reduce their competition. Perhaps it can even charge more for their product, right? Because they're offering such favorable shipping terms. And so often it uses a business decision. And so the type of ankle term you use will depend on your circumstances. Um, but it's vital that they're included in a contract just to make the process much, much easier. 5. Sales Agents and Distributors: Hello, welcome back. We're on lecture number four of law, goods and international trade. And in this lecture, we're going to be talking about sales agents and distributors, aka people who might act as middlemen as Alex tries to expand his business. So how does he find more foreign buyers for its product? So sales agents and distributors, like I said, the scenario, where are we and Alex's life journey and selling as green tea. So Alex has been steadily selling its products to the same Thai retailer for awhile member that retail that he made a contract with during the International Sale of Goods. Or he really feels that you should be expanding, is doing well. We selling a lot of products and we should be going to a lot more retailers in different cities. You could be making 10 times, 20 times the amount of money that is making other if you started sell to more shops and all the shops or to compete with each other, those inefficient for Alex to personally search for these Thai retailers. So what he's gonna do is he's going to make use of sales agents and distributors. And they're going to act as middlemen. And they're going to help Alex find people in Thailand to sell to. Otherwise, I would have to go all the way over to Thailand and finding himself. Of course, you don't speak the language, doesn't know the culture. So Alex is gonna do use these cell more grantee. So sales agents and distributors and what actually are the right? So if you look at sales agents, an agent is a person who has the authority given to him by another person making the principal to act on his behalf. And a common example of an agent would be just an employee of a company. As an employee of a company, I am the agent of my boss, and my boss is acting as a principal. So I'm under his authority and I act on his behalf as an employee. And so in this case, the agent would be the person finding the shop in Thailand, and the principal would be Alex. And secondly, we are distributors, right? So a little bit different. So distributions, the person who buys goods from another person, the supplier, and with a view to reselling the goods to other buyers. So instead of me being a direct employee of my boss in this case, at my boss wanted me to sell goods or he wouldn't be my boss, then if someone wants me to sell goods, I would just buy from him discounted rate probably, and then go and sell them to other people. So I'll take genuinely, I'll take possession of the goods. I'm no longer under his authority. I can pretty much do what I want. I can sell them marijuana. And in the product supply chain for sales agent, remember last time we looked at manufacturer suppliers, Alex, we've got Retailer, consumer as well. There's an extra dimension level where the sales agent, you have the principle, which is Alex who gives products to the agent, who could be Alex's employee, who will then find retailers, shops and Thailand. Who will then sell it to consumers, the type tea drinkers. And then for distributors it's very similar, except this time Alex is acting as the supplier. Gives it distributors in Thailand. Shops and Thailand. They gave it to the shops and Thailand and they give it to the consumers. Okay, now, with this product supply chain, There is no just for players in the product supply chain and international transaction. Sometimes there's loads of others, wholesaler or manufacturer, etc. There's a lot of people coming together to try and get these products from one place to another. But in a simplified version. So what's the applicable law, right? So when it comes to rule surrounding sales agents and distributors, what law is applicable? We know it contracts, international sale of goods contracts is the CISG. There is a treaty for that. You know what shipping rules. It's the Incoterms, silver agents and distributors was the kind of international law that applies. Well, there isn't one, there is no international treaty or convention on rights of sales agents. So distributors right, it's regulated largely by domestic law. And in this case, the domestic law would probably be tied domestic law. But having said that, there have been some attempts to internationalized the law and both the various soon sales agents and EU law, which is kind of a form of international law. There's council directed 1986, some rules on the protection of commercial agents. And the unit draw, which is this organization to try and uniform allies contract law, international contract law principles. There was an convention double. There was an attempt at making a convention called convention agency for the entire civil goods and are pretty much very regulated international sales agents laws. The problem was only five states contracted to un-solo, not enforced on considering a discrete in 1983. I mean, you pretty much imagine, it's pretty much dead. So that wasn't a great success. With distributors. It's even less international law. The only attempt to really there has been as the CISG that we spoke about before. And there's an idea that the CISG may regulate some aspects of supplier distributor contracts instead of only regulating supplier, retailer contracts. But the lowest, very unsettled, there's different opinions. So again, it's not very clear. So largely it's regulated by domestic legal principles. Wherever the lawyers in Thailand, in terms of obligations of the parties, what each party needs to do, no doubt would obviously be in law, but there are some general obligation. So with civil agents and distributors not going to be that different, many different country, right. So, you know, they're going to be pretty similar whether it's in Thailand or the UK or wherever there will be some differences, but there will be generally similar. So we are talking about obligations of sales agents and principals are obligations of suppliers and distributors. I'm talking very, very generally and not with reference to any specific legal act or convention overall, Here's the obligations for sales agents. So these are some of the things that sales agents need to make sure that you do. So they must look out for the principal's interests. They must act in good faith after promote the sale of goods, as well as market DOM as well. They have to exercise reasonable skill and KR and some legal jurisdictions have diligence on there as well. And the after avoid conflicts of interests, there's a number of other obligations as well. But these are kind of a general list of things that the sales agents has to do enroll. And on top of this, the principle also has its own obligations, right? So he has to remunerate the agent. So wherever the agent does, I feel for him and he's finding retailers and Thailand, then he's an employee and he needs to get paid. Okay. And I know a lot of the time they'll get paid with bonuses as well. So actually find a lot of clients, so get bonuses. So the principal was under an obligation to remunerate. The agent must not interfere with or reject any agent dealings or the agent is middle of a contract and is trying to find retailers and it's in the middle of x, the principal comes and keeps butting in. The agents never gonna make any sale. So he has an obligation to just let the agent do a once given authority. And he also has to protect the agent from claims and liabilities. Because if an agent is acting under the authority of the principal, NFC Agent runs into any liabilities, legal liabilities. If there's any legal action against him, then it's not the agent that will be liable. It's the principal because the agent is only acting on behalf of the principal, really principle that's acting through the agent. So he then needs to protect the agent personally from any claims and liabilities. Now that will go and as far as the agent is actually doing his duties, for example, if the agent is meant to be looking for retailers yet, instead he kill someone, will then that's not going to be liability on the principal. Right. Because the agent wasn't doing his duties, right. That was never in the contract. So it needs to be reasonable. And the same way you also have obligations for distributors and suppliers. So for distributors, they must obtain goods from other suppliers and they must not marker resell goods outside of the territory in the contract. So if that distributor begins V0 selling goods and Vietnam instead of Thailand, The against the contract right, that would be illegal normally as to promote and market the goods. And he has to make it clear that the he's acting as a distributor and not just as an agent or no, as the principal himself or sorry, as the supplier himself. Just to make it very clear to people that it's kind of like a third party, a middleman. In terms of the suppliers obligation, you must know point other distributors to compete with the original distributor because then there's no point of the fear of starting to give your products to all the distributors and they begin competing with each other. The whole point of being a distributors or you have kind of exclusivity with the supplier, I must not supply goods to an agent to soak. So norm, I mean, it depends on which jurisdiction, but normally company won't have both. An agent under distributor. I must make sure that goods comply with statutory regulations and licenses. I asked to provide the distributed with enough information to actually sell the goods, need to give all the information what's necessary. And also for distributed have the best chance of selling the goods. So let's run it. Should Alex choose, should he choose sales agents to market the products and Thailand, when should you choose distributors? Well, entirely depends on your business model and the country that you're about to sell and the country's market and the way they do business. So it's very, very case-specific. And by HER are some of the advantages and disadvantages of each. So it seals agency has only advantages is that what is an agent you have more control and direction over how he's going to sell the products. There's also no ceiling turning products that can be sold. So the agent could theoretically at least find loads and loads of Thai retailers and you could just keep selling products so urine. But the downsides is sometimes with an agent since he has an employee, it can be hard to fire. And some countries, even when agent isn't doing his job very well. So especially in some socialist countries, that can be hard workers rights are very strong. So be hard to fire a civilization. And so that means you just get really, really crop employee that is taking your products and not selling anything normally be a waste of money for you. And with an agent, there's resonance, the rest of the products won't actually so because of course, it depends on how scaled years and what FFT don't. So that means that regardless, you'll have to pay him because he's tried need to pay the agent for their time. Yeah. You might not give them the bonuses of but you'll have to pay some sort of base salary. And so there is a possibility that you could be losing money every year with sales agents. And of course, legal liability falls on the principal. So whatever the agent does, you will have to be legally liable for, which means the FDA agent sometimes screws or MANOVA or reps and off, you might be liable. And so our cost you more money for the financial risk with this, that comes with it. Some of the advantages or a distributor contract is often easier to cancel it because it's just a contract. And so it's regulated by private law. And so the government rarely gets involved with private contracts until it easier to cancel. Having said that, there are some cases where the government has gone vote because there are some suppliers are, and what they do is they find distributors and a country distributors then find these contexts. The suppliers care hold of the list of names that distributors, distributor, and then the distributors completely and then start selling directly to the retailers. So there are some governments in a regulated that completely and make it very hard to cancel the contract, which makes sense rates quite unethical. To make someone do your target market a star on and take the rewards at the end. But distributors are also less risk whether the product will sell or not. Because remember, you're selling them in bulk to them when you sell them products and both the distributor, the distributor that takes risk of whether FBA managed to sell them on to the retailers. So I mean, you're laughing all the way to the bank because you sold these products and because what happens, you're going to get money. And of course, legal liability falls on the distributor, So you're not liable. But the opposite side is that you have less control and direction, right? So you're relying on the distributed reputation. So if he markets your products purely, are a few markets in a bad way or non-ethical way. That is not only a risk to the distributor of course, but it's also new because he's selling your brand reflects badly on your brand. You need to pick your distributors. Well, you need to pick your distributors carefully, make sure the ethical, and make sure that they are reputable as well. We have a good reputation and with distributors or payments taken as a lump sum instead of a continuous sort of payment comes with sales agents. Sales agents could find retailers all the time and keep giving you the regular source of income. Where does with distributors sell the products and engage cat lump-sum. And for some people get a big lumps on just maybe isn't the best way. So all depends on circumstances, on context. There's no easy answer, and it also depends on what the law is, not country in relation to sales agents and distributors themselves. 6. Foreign Direct Investment: Hello, welcome back. This is low goods and international trade have products travel across the world? And in this lecture, we're gonna be talking about foreign direct investment, never really getting into the meat of the topic. This is when a company finally becomes multinational. When it becomes one of those big conglomerates, people all across the world over and it's on every billboard in the country. So the question that we're going to ask now without x-ray is on Sowell to expand into Thailand with his green tea market, right, is managed to have loads and loads of people. And if Alex retired right now, if he sold the company, I'm sure he go away, a happy man. But as is often the case, people don't share holders and founders of companies. They don't just stop there. You on snow, expand his business internationally. He wants to go to the next level. What's the best way for him to do that will sustain called foreign direct investment. That's unbelievably interesting too, which has been used in international company law for businesses to just really branched out and become huge, huge names in the industry. So with Alex, he's managed to successfully cells green teal over Thailand's know, there's a well-established market for people who are drinking as green tea everywhere. And Alex finds that it's actually inefficient node to run his business from the USA member, he was making that green tea and shocking you're all the way to Thailand. But that's an efficient parameter. So if you were to move as operations to Thailand, he could decrease his transportation costs. You can make use of cheaper labor and you can help the Thai economy. You can increase time, employment. You would get jobs may be left on their poverty. Okay, So this is his dream. And Alex, what he wants to do, esa wants to directly invest in Thailand, threw his business and he wants to create a company, has own company or movies operations into Thailand. And you can do that either through a subsidiary or a branch. His parent company being the one initially registered in the USA. And a company who's made use of foreign direct investment is pretty much a company where a majority of the shareholders have their place of residence and a different state to the home state. And that will make them a multinational company. So if Alex initially emitters are registered his company in the USA, and most of the shareholders, a 100 percent of them being Alex, but most of them were US citizens. I would make a domestic company to accompany not home state as soon as he is now invested in Thailand and he's moved his operations in Thailand and it creates a new company in Thailand. He is a foreign shareholder and a foreign country. And so he would then be DIA, the company would then be classed as a multinational company having made use of FDI versus just an example of an FTI company, the domestic shareholders might have a 49 percent share for the foreign shareholders rubber 51 percent share lessons in Thailand, for example, our company would have made use of FTO. But when do companies, not just Alex's but others, when do they actually invest in another country? And when is it beneficial for them to do so? Well, there's three reasons. Actually, all three main reasons I've come up with. One is when the foreign market is large and well established. We know with Alex that's the case. He's been using distributors, selling green tea all over Thailand and shocky and Banko and all kinds of cities. And number two is when transport and shipping costs can be reduced. To remember, Alex is shipping is green tea, USA to Thailand is quite expensive. Why not just move all the operations that tile and then you have only these kinda trucks enrolled shopping center of the big cargo ship make things quicker and cheaper. And number three is when local resources might be cheaper, paying someone in the USA minimum wage, which is what, ten is $10 to much more expensive than paying minimum wage and Thailand because cost of living and solo. So you could easily get more worked on with half the price for labor, for example. Or perhaps some other resources are cheaper. So if he's making green tea, perhaps the green tea leaves are cheaper and Thailand maybe source cheap tea leaves in Thailand or perhaps water is cheaper, I don't know. So again, you need to meet accompany will weigh all of these things into account before it decides to invest in our country in terms of applicable law, like we said last time, with sales agents and distributors. Similar to this, There's no international treaty or convention. And so foreign direct investment enforced by domestic law and specific areas of a domestic law F there exists, a country might have so many foreign investors that it has its own area of cold foreign investment law or investment law. And there'll be more specialized material can help you. But some countries might not be as developed as a. And so they'll have other areas of law such as company law, labor law, or bankruptcy law, and which might be more relevant. It would all be about finding a lawyer and Thailand or a law firm in Thailand whose spear intelligent, who dealt with foreign companies, who can help you invest smoothly and that country, how exactly does he do? Well, he will set up a company in Thailand or he'll take over a company. But there's two ways that you can do. In terms of types of companies you can set all. This is a very simplistic view. But normally these are the two main ones. So if you have a parent company in the USA, in your home state, original company that would be called a parent company. And in these 2, first of all, the branch and a subsidiary with just B could say a lower level below the parent company. So their relationship with the parent company as what we'll get to them, the name, branch or a subsidiary. So if you always remember that there's a parent company and you've got a branch and you've got subsidiary. So comparing branches and subsidiaries rate what is the difference between the two and which one should Alex choose? Well, again, it will depend just like sealed agents and distributors. L depend on market conditions the country, whether it's favorable to foreign investment or Alex's business plans are for the future. For here's some differences between both. So with a branch, it's not regarded as a separate legal entity. It's taxed as a non resident entity as if it's a foreign company, reports to the head office, which would be the parent company in the USA. But often it's setup can be much easier, much easier and much cheaper. Subsidiary is regarded as a separate legal entity, is taxes are taxed as a resident company, and it can then make use of local tax benefits, has an internal admin structure, so won't necessarily report to the parent company or have its own reporting structure. Setup can be complex and expensive. The biggest difference, even though I've just mentioned, between the branch and the subsidiary, is probably overall this thing called the corporate veil. And the corporate veil as definition, if you think of a person and the company, they both have separate legal personality. So for me, as a person, I have the legal right to do things such as enter into contracts and etc, etc. So I have separate legal personality, a company in the same way, also a separate legal personality. If I can enter into a contract, Coca-Cola can also enter into a contract, or Nike can also enter into a contract. Or Adidas orange over they can also all enter into contracts as just like a separate legal person-hood. The actions of that company, if it was to enter into service, decanted to dispute a William be the shareholders of that company, the people running it wouldn't be them that reliable is the company itself. And this is a thing called a corporate veil, where the shareholders of the company are protected because they're in a company, right? So there'll be the ones making decisions, but there'll be protected. But sometimes that corporate veil, it can be what we call pierced or broken if the, if the actions of the company's owners were illegal. And so a good way to relate this back to branches and subsidiaries is if we take a mother is supposed to be a mother and if we take her family or a feature specifically look our child, if the mother was to punch someone with her left arm, if she was to punch someone with her left arm, Rayleigh, the law would prosecute the mother as a whole instead of just prosecuting her left arm? Right. Even though technically okay. I mean, you can say it was a brain that the reactions were done by the arm. They wouldn't just prosecute the arm separately and then the mother separately, they would prosecute the mother as a whole. And so you can relate that to a brunch. Think of a branch as being the arm of the parent company. So the branch, wherever the branch stones there are flakes on the parent company. So if the branch punches on one, as the parent company that gets prosecuted, branch gets into this period is the parent company. It has to be written. Now on the opposite side of that, we have the subsidiary company. So in this case, imagine the mother has a child and it's the child now that punchier someone, a Rayleigh, the law would not pointing the finger at the mother, pointing the finger at the child because the child ought to have known better than to points on. So it wouldn't be the mother gets prosecuted for the actions of a child. It would be the child that gets prosecuted for punching some subsidiary walks in the same way, even though they have this parent company, your mother, they are the ones that are legally liable. And this idea of the corporate veil is very key to understanding foreign direct investment and why a lot of companies prefer subsidiary Avenue. But once the FTI, a lot of the time, this also requires protection. And this issue became quite prominent after a very specific instance called the Suez Crisis. Let's see. Alex and based in Thailand and in the Thai government decide that actually they don't like foreign companies anymore. And they're going to sell everyone shares and take control that company because you can do with a one, it's their territory. There's, there needs to be some mechanism of protection. And that's what I grew up in the Suez Crisis. So in 1869, the Suez Canal, when we spoke about that in the shipping lecture, the Suez Canal opens, it's run by this company called the Suez Canal Company. And by 1807, 1875. Biggest shareholders in that company, or British and French. And they were making extremely healthy profits. Because if you think about a billions of dollars worth of trade is going through the Suez Canal every day. And so the shareholders are taxing obviously these ships and they are making a ridiculous amount of money. So everything was all good until Egypt, which is where the Suez Canal is located, gains independence from Britain. And so Breton as the country no longer has control of the Suez Canal, is actually technically Egypt because they're independent. And the 1950 to the Egyptian monarchy who had run Egypt since 1922. And they were quite favored by Britain, France because and they were keeping the shareholders happy and observes Canal Company. The profits were so common in quite healthy. They are toppled during the Egyptian revolution. And the revolution is led by a guy called Gamal Abdel Nasser, an Egyptian Pan-Arab revolutionary. And he made the drastic step of nationalizing the Suez Canal, which is that he took the Suez Canal company. He sold all of their shares to the shareholders so that we can make constant profits anymore. So you just gave them a lump-sum show, sold their shares and are not Canal was now in the legal possession of the Egyptian government at the time. And so instead of the British and the French profiting from the Suez Canal, the Egyptian government now and then the idea is that they wouldn't help the Egyptian people who have been persecuted through colonialism. And so this calls the Suez Crisis caused by Britain, France, and Israel to invade Egypt until it was called off by the USA. But you can clearly see how investment, capital and money can lead to full-scale war. And so after this, lots of companies in the West especially got really, really scared because they didn't realize that it was possible for them to have invested in developing countries such as Egypt, just for the governments in those countries to switch and internationalized everything, and then the company would lose all their money. They never realized this was a possibility. And the problem is that when companies are uncertain about their future and developing country is much, much safer for them just to not invest in that country at all. And as we said before, the whole idea of a globalized economy is that companies from every country are able to invest in trade with every other country because that reduces war and conflict and poverty, etc. And so you want to make the law really, really certainly don't want another, really want another situation like Suez. Because what will happen is composite get too off from investing in not just developing countries by any country where the government is not as favorable. That means there's not enough money flowing in the international system, which means there's no growth or the growth. People stay where they are and incomes don't really change. And so it's a big problem. And so one of the ways the international community tried to regulate this was through bits, bilateral investment treaties. These are literal treaties that each country makes with each other to say that they are going to protect the company's investment. And the companies are able to invest a lot of money in and provide resources until that country. So there's over 3000 bits conclude around the world. And reason is because there's no international convention. Individual countries concluded with each other. If you're Germany, you have concluded separate bits with France and Pakistan, and India and China. And they've concluded, and China and India have been concluded with different countries like France and Portugal, and Spain and the UK. And so everyone has different bits corner. And so it's like this contract almost that these countries have entered into. And the trade off in this contract is that developed countries protect the company's assets. Developing countries benefit from foreign investment, and so that's the trade-off. And also foreign direct investment is protected and also the wheel of international trade and international investment keeps spinning and you can create jobs and prosperity and growth in an idealized world. 7. WTO and Protectionism: Hello, welcome back. We're nearly at the end of this course, slow good and international trade. And in the last lecture we are going to be talking with the World Trade Organization, the WTO, and protectionism. And y actually is protectionism and how it can impact World Trade. So the question, the final question we're going to ask, and I hopefully we've covered all the other ones as well. Alex deal with foreign restrictions on his products. What is islets going to do? Thailand turn around and say, Well, actually, yeah, I know you've been selling here for ages, but we're going to start restricting your green tea and ports. There are some options that Alex has to deal with this. But first of all, let's look at the scenario and where we are in Alex's journey and becoming a rags to riches story. So Alex is multinational company remembers invested in Thailand, nose mill does operations. So Alex is multinational company is striving in Taiwan, but the locals in Thailand did not discover the secret. Alex is green tea. The magic potion that makes it's so addictive that swept different islands. And they're not creating their own Tiesto green tea, basically Alex's recipe except with a tie twists. And the problem for Aleksey or the Thailand's government favors domestic companies over foreign ones. And what it does then is it begins imposing restrictions on foreign herbal teas from coming into Taiwan. And one of those would be Alex's company because they know that it's actually a US brand originally. So they want to prop up the Typhoid Mary. You want to prop up the type of population and have their own tie, rags to riches story because who cares if an American does that all rich? So in order to counter this, Alex needs to make use of rules stipulated by the World Trade Organization. There are going to come to it and the WTO rules are going to begin to challenge the Thai government policies and ensure that Alex is able to compete fairly with domestic companies. So protectionism is one of the main themes of this topic specifically. But not many people know what it is. Protectionism is essentially covenant measures used to restrict international trade in order to help domestic industries. And its Thailand wanting to restrict foreign things from coming in in order to help tie people, have their businesses and do well in their businesses. And so really good example of seeing the impact protectionist measures is if we go all the way to Germany. So imagine we're in Germany and imagine we're in the banana mark. And we have, first of all, German, locally sourced, locally produced bananas. And we have Spanish bananas, right? Foreign bananas come in from Spain. And both are being sold in supermarkets. And before pr, any protectionist measures that the German government will have put in place. Chairman bananas, the local ones they sell for €5. Spanish one's three-year-olds. So it's clear to see which bananas the consumer is going to buy. They're obviously going to go for the cheaper option, which assuming that they all tables case like banana, right? We're going to go for the cheaper option. And so they'll go for the Spanish bananas. So what the German government does is poor because of favorite Germany is going to impose protectionist measures on foreign bananas and it's going to make them more expensive. The idea is then that the German bananas are going to sell better. So after these protectionist measures, the German bananas become cheap because banish ones become expensive. Because as soon as the Spanish will become expensive, less people start buying a gem banana start to dominate the market. And they can call their prices to three Euros. And then once it's €3, people start buying the German ones, right? But remember, it's not fair. That's not fair competition because the only reasonable German bananas have begun selling well, as because they were helped her by their government, right? It's not fair, It's not fair competition. And the German government could do this for not just Spanish bananas, but French and Dutch bananas as well. And suddenly what you've done is you've eradicated all the competition from those German bananas. So you're only propping up the German ones and all the foreign ones were pretty much grow a business. And so these protectionist measures, they can, they can help or harm companies depending on whether domestic or foreign. So the specific types of trade restrictions that governments will impose is twofold. You first of all have these things called tariff barriers. And tariff barriers are, for example, taxes and duties imposed on foreign products. And the main thing is it makes the product more expensive. So like the example we saw before in bananas are the kinda thing that the German government would impose a tariff barrier that make foreign bananas pay more tax, more customs duties at the local ones will be subject to. And so they'd become more expensive. Now that I have barriers, non-tariff barriers. And these can take the place of quarters or bands. Really, really hard to fulfill requirements on products. And maybe they have to be a specific shape or its specific size or something like that just makes it very hard for the company to enter the domestic market. I mean, if you have to go through so many regulations, and if you have to make sure it's this side and that side, and it's just you have to then pay people to do that. And that's more cost and more expenses, more time. And so some companies will just be like Forget it. We're not even going to bother going domestic market because we can't make enough profit. But the amount of time we spend tweaking these products and even if stress it causes, these are kinda barriers that some companies with purpose protections, managers. You might even be seeing right now, Homo surely is admirable that a country is looking at for its own right. Surely it's admirable that Germany, funded by German taxpayers is trying to prop up chairman companies. Surely that's admirable. Well, on the face of it, Yes, For the problem is, as we'll see, is when you have these kind of nationalist economic policies where he cared about your own all the time, actually causes more problems in the long run. And we've seen that throughout history. But let's look at the advantages of protectionism, at least from the point of view, maybe of the German government or the German population. Well as domestic companies to grow until they can compete with bigger companies, right? So just some local companies and foreign competitor comes in. It's been around for a long time. The domestic ones have no chance of rivaling them. Saddam's is protection. Protecting these measures can help the domestic companies make a level playing field. Many big band, they can release those protections measures. And then it becomes a level playing field. So it can be as tactically, it lowers the cost of importing products. So if they are created at home, so a country doesn't need to start importing bananas if they can just make them at home and they're better at home. And in general, this is really the main reason by countries have protections, measures and increases employment and in the domestic country. So if the German local companies, No doing brilliantly compared to the foreign ones, are those German local companies are going to start employing more Germans. And more employed Germans means more stability, means more taxes to be paid to the government. And so the domestic company, Windsor. And the problem is that long-term, this is actually not a great strategy because consumers will have access to fewer goods, right? Because it's only the German bananas in the supermarket. No more Spanish or Dutch and French ones. And so there's less choice. And without foreign competition and industry will stop innovating and stagnate. You take old German companies are maybe just one German banana company, no nos. The, the foreign competitors can never compete and it's banana production. And what happens then is the German local banana companies become super, super relaxed. They don't make nicer bananas. They don't make them taste better. Normally can beggar, no makeup, hair color. You don't make them cheaper. They're getting a healthy profit year in year 0 because of how the game is played. So they stop innovating for whom this is adenine and it's German consumers. Because when companies become lax and innovating, consumers get a worse product. They get bananas that are old and a to D and colored like pork or some shit, right? So they look awful and the consumers don't know what to do. They just thought they were helping a domestic companies. So you need foreign competition. And the lack of competition means higher prices. Because if there's no competition and the German company, Thanks. Well, okay, there is no competition for selling them at €5. Well, there's not gonna be any competition that we sell at €10. Let's just do a €10. So then it starts to market their pyramid bananas, kangaroos. And so the German company starts to increase their profits and consumers are worse and more expensive banana industry. And so over time, yes, My of increase employment, but it's not going to be very, very beneficial for the population of Germany, but at least that's the idea. And overall, with protectionist measures, the biggest criticism of it is that when goods don't cross borders, soldiers will. And this is the idea that if you have countries trading with each other, they're less likely to go to war with each other. And as soon as they stop trading with each other, you'll begin to find excuses to go to war. It's much RR, LR risks are going to work much, much higher. And so this idea is really the fundamental principle or the fundamental basis for the World Trade Organization headquarters in Geneva in Switzerland. It was created in 1995 with a 164 member-states. And the whole idea of the WTO is that it has to regulate and facilitate international trade for all the reasons that we mentioned in the first lecture. To reduce poverty, to learn, to reduce war, human cooperation, etc. And one of the ways that the WTO does this is that it settles disputes between states and international trade issues, has a really efficient, easy way settling disputes through its own WTO panels which you know, which see lots and lots of cases every year. And doing so, the main principles of the WTO are these things called anti-discrimination principles. And so these two principles I'm going to speak about really do underpin what the WTO is trying to achieve or trying to combat really and international trade. The first of the most important WTO principles is the most favorite nation principle. Now this is where a country can't favor the goods and products of one country over another. And it doesn't have different rules for different countries. So if I'm the Chancellor of Germany, I cannot get favorable rules to the Spanish bananas and not give favorable rule to the French bananas. That's not allowed. You can't favorite one nation over the other. The second of the two most important WTO discrimination principles is national treatment principle. That once foreign goods have actually entered the market, it country cannot favorite the domestic ones over the foreign ones. And the rules have to be ovals. And so this is very similar to our example and the banana mark, once those Spanish or Spanish or French or Dutch bananas in the German market, they have to be treated equally. You have to have the same customs and tariffs and taxes. And we have to be displayed similarly by law. But sometimes trade buyers actually are justified. Sometimes it's protectionist measures a little, I guess it wouldn't be then call protectionism. But the sum of these measures are actually justified. They're justified, for example, for the protection of public morals, right? So these are some justification. So WTO protection of public models and justify it sometimes for the protection of humans, animals, plants are held. So for example, environmental reasons. It can be justified for the protection of historical cultural artifacts. So if a product is to disrupt that and for the protection of national security interests, which is very, very important. And it's been used quite a lot by states recently, even though we live in this really, really globalized economy where teams that any nationality is able to equally trade on, on equal terms with any other nationality. And everyone's harmonized and they're all living in peace and happiness. A lot of the times people are always trying to push back against that. Things aren't as straightforward as they seem. And there's always going to be winners and losers and an international economic system. And so when you have too many of those losers, they will often rise up. I start to impose measures such as these. And whether that's good for society or maybe even our planet has a question that's in the open, debated constantly. But this is the situation that we live in, a system that we live in. And understanding, I think is what is fundamental. So thank you so much for listening to this online course. It's my third and my CDs, my introductory law series. I've put a picture of an iceberg grade That's just to signify that this course is literally just the tip of the iceberg for international trade. Every single topic, every single keywords. But I've listed an S6 part lecture. You could write an entire dissertation on 10000 nodes, okay, And people have, and so I've given you the bare bones of international trade law. If there is something in this course that you are really interested in and you want to go ahead with get some more information, then by all means, do your own research. By I genuinely hope this has given you some sort of introduction that you're slightly better informed and certainly better educated on as ever, we're learning together, right? That's the mean for him. And if you are interested, if you have any questions, if you're interested in private legal tutoring, my house, maternity model, routine woman, and rate, and review this course about.