Transcript Slide 1
TRADE IN GOODS: CORE PRINCIPLES AND MAIN EXCEPTIONS
Content
Part I: Principles of Non Discrimination
Part II: Liberalization of trade
Part III: Protective Measures
Part IV: Exceptions
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PART I: NON DISCRIMINATION
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Contents
1. Most Favoured Nation Treatment 2. National Treatment 4
1. MOST- FAVOURED NATION TREATMENT (ARTICLE I:1 GATT)
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Article I: 1 GATT
“any advantage, favour, privilege or immunity granted by any Contracting Party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other Contracting Parties.” 6
MFN Treatment
No discrimination between like products originating in, or destined for, different WTO members.
Each WTO member must grant all other members immediately and unconditionally the best treatment it gives to any trading partner
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MFN 3 tier test
1. Whether the measure at issue confers a trade advantage of the kind covered by Article I:1.
2. Whether the products concerned are like
products.
3. Whether the advantage in issue is granted immediately and unconditionally to all like products concerned.
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1. Trade advantage
US – MFN Footwear,
established that the MFN concept is applicable to any advantage granted with respect to: Imports and exports of like products originating in the territories of other Members.
Customs duties and charges of any kind.
The method of levying such duties and charges.
Rules and formalities in connection with importation and exportation. Internal taxes or other internal charges.
Laws, regulations requirements affecting internal sales, purchases inter alia.
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2. Like products’
The concept of ‘like products’ is not defined in GATT. In
EC – Asbestos
considered the dictionary meaning of ‘like’ and suggested that ‘like products’ are products that share a number of identical or similar characteristics. the Appellate Body 10
Jurisprudence on ‘like products’.
Products have been considered to be ‘like products’ on the basis of some of the following concepts: 1. Their physical characteristics. In or subdivides them.
EC – Bananas III
the EC import regime for bananas from Latin American countries were treated less favourably than bananas from former European colonies, it was stated that all bananas are like where products irrespective of whether and how a Member categorises 2. Listing of products in tariff schedules. In
Australia – Ammonium Sulphate,
Australia had different treatment for ammonium sulphate and sodium nitrate fertilisers and this was challenged by Chile as being contrary to Article I:1. The Working party noted that in the Australian tariff schedule, and in the tariff schedules of many other countries, these products were listed separately and enjoyed different treatment. The Working Party therefore concluded that these were not like products.
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Jurisprudence on ‘like products’.
3. Composition, content, purpose, chemical and synthetic origin and duties applied to products.
In
EEC – Measures on Animal Feed Proteins
Panel examined whether all products used for the same purpose of adding protein to animal feed should be considered to be like products. The Panel noted such factors as the number of products and tariff items carrying different duty rates and tariff bindings, the varying protein contents, and the different , the vegetable, animal and synthetic origins of the protein products under consideration. It concluded that these various protein products could not be considered as like products.
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Jurisprudence on ‘like products’.
4. End use and tariff classification practices by WTO Members.
In
Spain – Roasted Coffee
Spain had divided unroasted coffee into five tariff classifications. Colombian mild, other mild, unwashed Arabica, robusta and other. The first two were duty free and the other three were subject to a 7% duty. Brazil claimed that all these were like products and that different rates of duty were inconsistent with Article I. The Panel noted that the arguments given for differentiation were based on geographical factors, cultivation methods, the processing of the beans and genetic factors. The Panel did not consider such grounds as sufficient for differentiation and noted that no other Member made such a classification. It concluded that these were like products within the meaning of Article 1.
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3. Immediately and unconditionally
MFN treatment has to be extended to Members immediately and unconditionally. For example, in of an advantage.
Belgium – Family Allowances,
Belgium had a system of granting exemption from a levy to products purchased by public bodies only from countries which had a system of family allowance similar to that of Belgium. The Panel held that this practice was inconsistent with the MFN principle as it inter alia, introduced an element of conditionality in the application 14
Exceptions to the MFN rule
The Enabling Clause
Parties may accord differential and more favourable treatment to developing countries, without according such favourable treatment to other Contracting Parties (Decision of 28 November 1979).
Free Trade Areas and Customs Unions
Article XXIV GATT allows a group of Members to constitute themselves into a customs union or a free trade area and have totally free trade or reduced levels of duties and of other trade restrictive regulations amongst themselves without the obligation of extending such treatment to other Members.
Frontier Traffic
Advantages accorded by Members to “adjacent countries” in order to facilitate frontier transactions. This derogation however only refers to the facilitation of transactions in the vicinity of the frontier and cannot cover a trade agreement governing the entire territories of two neighbouring countries. (Article XXIB.3 GATT 1994).
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Exceptions to the MFN rule
Government Procurement
MFN does not apply to the import of products for immediate or ultimate consumption in government use and not otherwise for resale or use in the production of goods for sale.
Security Exceptions
Restrictions on imports and exports from or to specific countries can be imposed for security reasons. (Article XXI GATT)
General Exceptions
Article XX GATT allows Members to restrict imports or exports from or to specific sources for example for the protection of public morals, human, animal or plant life, etc.
Measures permitted by WTO Agreements
Such as countervailing duties, antidumping duties and Retaliatory measures.
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Exercise (1): MFN-Treatment
Alba, Vanin, Medatia and Tristat are WTO Members and Ruritania is not
Could Alba's customs authorities levy a customs duty of 10% for imported pocket watches originating in Medatia, while levying a lower customs duty of 5% for imported pocket watches originating in Vanin?
Exercise (2): MFN-Treatment
Alba, Vanin, Medatia and Tristat are WTO Members and Ruritania is not
Could Alba levy a customs duty of 5% for Ruritania’s watches while applying a 10% rate watches originating in Vanin, Medatia and Tristat ?
Exercise (3): MFN-Treatment
Alba, Vanin, Medatia and Tristat are WTO Members and Ruritania is not
Could Alba levy a 5% duty for pocket watches from Vanin, Medatia and Tristat and a 100% duty for Ruritania’s pocket watches?
2. NATIONAL TREATMENT (Article III GATT)
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NATIONAL TREATMENT
Prohibits Members from treating imported products directly or indirectly less favourably than like domestic products once the imported products have entered the domestic market. i.e f oreign goods must not be discriminated against vis-à-vis domestic goods
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Article III: 1
Internal taxes, other internal charges, regulations and requirements affecting the internal sale, offering for sale, purchase, transportation, distribution or use of products, and internal quantitative regulations requiring the mixture, processing or use of products in specified amounts or proportions, should not be
applied to imported or domestic products so as to afford protection to
domestic production. 22
Article III: 2.
The products of the territory of any contracting party imported into the territory of any other contracting party shall not be subject, directly or indirectly to internal taxes or other internal charges of any kind in excess of those applied directly or indirectly, to like domestic products. Moreover, no contracting party shall otherwise apply internal taxes or other internal charges to imported or domestic products in a manner that is contrary to Article III:1.
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Key elements of Article III
1.
2.
3.
4.
5.
Internal tax or charge Imposed directly or indirectly Affecting sale or purchase etc Like products, directly competitive products Discrimination against imported products, protection of domestic products
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1. INTERNAL TAX OR CHARGE
Article III only applies to internal measures not border measures. Hence, there is need to determine whether a measure is an internal measure or a border measure, especially if the measure is applied to imported products at the time or point in time of importation.
The Ad Article III Note clarifies that any internal tax or charge collected or enforced on an imported product at the time or point of importation is an internal tax under Article III.
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2. Directly and indirectly
Indirectly covers Even such taxes which are not on the product as such, but on the processing of the product.
Taxation methods and rules for tax collection.
With respect to internal quantitative regulations, the term covers: Regulations laying down the requirement of compulsory use, Regulations which by implication, or in the process of implication, have the effect of such a requirement.
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3. Affecting the sale or purchase....
In
Italian Discrimination Against Imported Agricultural Machinery
observed that “affecting” covers not only the laws and regulations which directly govern the conditions of sale or purchase, but also any law or regulation which might adversely modify the conditions of competition between the domestic and imported products in the internal market.
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4. Like Products
In
Canada – Periodicals,
two questions were established to determine whether there is a violation of Article III:2.
(a) whether the products were like products, (b) whether the imported products were taxed in excess of the domestic products.
In
Japan –Alcoholic Beverages,
the Japanese had a system of giving different tax treatment to liqueurs and sparkling wines according to alcoholic and extract content. The panel found that imported liqueurs and sparkling wines with high raw material content were subjected to higher internal taxes than domestic liqueurs and sparkling wines which had lower raw material content. They were considered like products.
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Directly competitive or substitutable products.
Domestic production does not only mean production of a particular product, but also of directly competitive or substitutable products.
There may be cases where taxes etc are applied at the same rate on imported and like domestic products, and yet the manner of application is such that protection is afforded to the domestic production of a directly competitive or substitutable product. Such practice is prohibited under Article III:2.
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Directly competitive or substitutable products.
For example, a country may apply a high internal tax rate on oranges, which is applied to both imported and domestic oranges, but if this country does not produce oranges, this tax in effect goes to raise the price of only imported oranges, which may in a way afford protection to its own production of apples, in so far as oranges are directly competitive or substitutable with apples.
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Directly competitive or substitutable products.
Korea – Alcoholic Beverages
established that: Products are competitive or substitutable when they are interchangeable or if they offer, alternative ways of satisfying a particular need or taste. Like products are a subset of directly competitive or substitutable products. The notion of like products must be construed narrowly but the category of directly competitive or substitutable products is broader. 31
Determining whether products are directly competitive or substitutable.
Japan – Alcoholic Beverages II
include; physical characteristics - factors to consider common end use tariff classifications the nature of the compared products the competitive conditions in the relevant market.
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Exercise (1): National Treatment
Alba, Vanin, Medatia and Tristat are WTO Members and Ruritania is not
Could Alba impose a sales tax of 5% on domestically produced pocket watches while applying a sales tax of 6% on imported pocket watches from Medatia and Tristat?
Exercise (2): National Treatment
Alba, Vanin, Medatia and Tristat are WTO Members and Ruritania is not
What if the 6% sales tax only applies to imported pocket watches from Ruritania?
Exercise (3): National Treatment
Alba, Vanin, Medatia and Tristat are WTO Members and Ruritania is not. Alba traditionally produces pocket watches but does not produce wrist watches
Could Alba impose a 5% sales tax on pocket watches while applying a 10% sales tax to wrist watches?
Discrimination against imported products, protection of domestic products
Examples of jurisprudence on discrimination under Article III.
1.Granting financial facilities like tax refunds, special credit facilities, tax exemptions etc to domestic products and not to imported products.
US – Measures affecting Alcoholic and Malt Beverages
examined the US tax measure providing excise tax exemption for domestic producers of beer and wine, which was not available for imported products. It was found that the tax law operated to create a lower tax rate on domestic beer and wine than on like imported products and that was discriminatory.
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Discrimination against imported products, protection of domestic products 2. Obligations on investors or local industry to
purchase domestic products. This way, there is a denial of opportunity to like imported products for competing in the market.
EEC – Measures on Animal Feed Proteins
examined a regulation requiring domestic producers or importers of oil seeds etc and importers of corn gluten feed to purchase a certain quantity of surplus skimmed milk powder held by intervention agencies. It was found that these agencies held only domestic products and concluded that this regulation protected the domestic industry.
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Discrimination against imported products, protection of domestic products 3. If imported products are required to pass through certain specified wholesale or
retail channels unlike domestic products. In
US – Measures Affecting Alcoholic and Malt Beverages
discrimination.
the requirement in some US states that imported beer and wine be sold only though in state wholesalers or other middlemen while some instate like products were permitted to be sold directly to retailers was considered 38
Discrimination against imported products, protection of domestic products 4. A regulation that both imported and domestic goods adhere to a minimum price requirement is discriminatory.
In
Canada – Import Distribution and Sale of Certain Alcoholic Drinks
equal conditions of competition.
it was established that the refusal of the sale of the imported product at a price below that of the domestic product did not accord 39
Discrimination against imported products, protection of domestic products 5. Existence of wider punitive action against imported goods. choices for
Us – Section 337
products.
found that the facilitation of legal action against imported products when such facilities were not available for domestic products were discriminatory against imported 40
Exercise (1): National Treatment
A new Alban law requires that pocket watches imported and sold in Alba have a minimum of 10% ‘local content’.
Is this compatible with the NT-obligation under GATT?
EXCEPTIONS TO NATIONAL TREATMENT
1. Government Procurement. Where products are purchased for the use of the government and not for commercial resale. Article III: 8 (a) 2. Obligation not to affect payment of subsidies exclusively to domestic producers. Article III: 8 (b) 3. Internal quantitative regulations relating to exposed cinematograph films. (Article III:10).
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PART II: LIBERALIZATION OF TRADE
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1. Market Access
Contents
2. Prohibition of Quantitative Restrictions: 3. Transparency 44
1. MARKET ACCESS
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Bindings / Commitments
A country commits itself to ensure an agreed level of access to its market, on an MFN basis, for supplying countries.
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Bindings/ Commitments GATT Art. II Art. II: 1(a)
Each contracting party shall accord to the commerce of the other contracting parties treatment no less favourable than that provided for in the appropriate Part of the appropriate Schedule annexed to this Agreement.
Some exceptions to Art II:1
• Anti dumping duties, Countervailing duties •Art XXVIII –re-negotiate concessions •Art IX:3 -Waiver
Exercise: Tariff Bindings
Alba, Vanin, Medatia and Tristat are WTO Members and Ruritania is not. In Alba’s Schedule, the bound duty for pocket watches is 25%
Can Alba apply a 15% tariff to pocket watches originating in Vanin and Tristat?
And to pocket watches from Ruritania?
2. PROHIBITION ON QUANTITATIVE RESTRICTIONS
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General Prohibition of QRs
GATT Art. XI
Art. XI:1 No prohibitions or restrictions other than duties, taxes or other charges
or other measures, , whether made effective through quotas, import or export licenses
shall be instituted or maintained
by any Member on the importation of any product of the territory of any other Member or on the exportation or sale for export of any product destined for the territory of any other Member.
Non discrimination in administration of QRs
GATT Art. XIII
Art. XIII:1
No quotas, unless when permitted. Then similarly apply to all WTO members
Exceptions to the Prohibition of QRs
Marrakesh Agreement Art. IX:3 (Waiver) GATT Art. XI:2(c) (
Agricultural Products
and Fish) Agreement on Agriculture (Tariffication) GATT Art. XX (General Exception) GATT Art. XXIV:5 (Free-Trade Area and Customs Unions) GATT Art. XXI (Security Exception) GATT Art. XIX (Safeguards) GATT Art. XI:2(a) (Critical Shortage of Foodstuffs or Other Essential Products)
Exercise: Quantitative Restrictions
Alba, Vanin, Medatia and Tristat are WTO Members and Ruritania is not.
Could Alba impose import quotas on fresh tuna and frozen lamb meat?
3. TRANSPARENCY
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Transparency: Article X of GATT
Publication of trade regulations, laws etc. Publication before application.
Notification requirements., Uniform, impartial and reasonable administration of laws, regulations etc.
Independent legal review Trade policy review mechanism 54
PART III: PROTECTIVE MEASURES
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Contents
1. Safeguard Measures 2. Dumping and Antidumping Measures 3. Subsidies and Countervailing Measures 4. State Trading Enterprises 56
1. SAFEGUARD MEASURES
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General Safeguard Measures
In specific situations, measures otherwise contrary to certain basic principles- are available to Members to protect, conditionally and temporarily, their domestic industry against surge of imports
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Legal Basis for Safeguard Action
General Safeguards:
Article XIX GATT and WTO Agreement on Safeguards
BOP Safeguards:
Article XII GATT; XVIII:B
Special Sector - Specific Safeguards:
Article 5 of the WTO Agreement on Agriculture
General Safeguards: Criteria for Application
As a result of unforeseen developments A product is being imported in quantities such increased As to cause or threaten to cause serious injury To the domestic industry producing competitive products like or directly
General Safeguards:
Forms of Safeguard Measures:
Increased Tariff Imposition of Quotas
Maximum Duration (Art. 7 Safeguards Agreement):
General Rule: 4 years Possibility of extending to 8 years if evidence of continued necessity and of adjustment on part of domestic industry Maximum of 10 years for Developing Countries
Level of the Safeguard Measure (Art. 5 Safeguards Agreement): “to the extent necessary to prevent or remedy serious injury and to facilitate adjustment”
2. ANTIDUMPING MEASURES
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Dumping and Antidumping Measures GATT Art VI & ADA
Measures -taking the form of additional duties at the border- are available to Members to defend themselves and/or compensate for the distortion created by unfair trade practices
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3. Subsidies and Countervailing Measures
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Subsidies and Countervailing (Art VI, XVI & SCM Argt)
Subsidies may distort trade. Some subsidies are prohibited.
Other subsidies are permitted but actions can be taken against their adverse effects.
Actions are either in the form of “direct actions” (Dispute Settlement) or “Additional duties” at the border (Countervailing duties) 65
Uruguay Round GATT Art. XVI (Subsidies) Agreement on Subsidies (Countervailing Duties) Subsidies = (i) financial contribution (ii) by Government or Public entity (iii) conferring an advantage (iv) specific to an enterprise or industry.
3 Types of Subsidies (1) Prohibited subsidies (2) Authorized - but actionable - subsidies (3) Authorized - and non-actionnable - subsidies Action Accelerated Dispute Settlement proceedings Countervailing Duties (+ Dispute Settlement) In principle, None
4. STATE TRADING ENTERPRIES
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State-trading enterprise- Art XVII
State enterprises may distort trade and abuse their specific position as traders.
Disciplines regulate their trade related activities
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State-Trading Enterprise GATT Art. XVII Art. XVII
(a) Each Member undertakes that if it establishes or maintains a State enterprise, …, such enterprise shall, in its purchases or sales involving either imports or exports, act in a manner consistent with the general principles of non-discriminatory treatment ... b) The provisions of sub para. (a) … shall be understood to require that such enterprises shall, having due regard to the other provisions of this Agreement, make any such purchase or sales solely in accordance with commercial considerations….
PART IV: EXCEPTIONS
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Contents
HORIZONTAL EXCEPTIONS 1. Waivers 2. General Exceptions 3. Security Exceptions 4. Regional Integration SPECIAL AND DIFFERENTIAL TREATMENT 71
Horizontal Exceptions
In certain specific situations - and under certain conditions, the WTO rules and obligations shall not prevent Members to take certain measures which otherwise would be illegal.
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1. WAIVERS
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Waivers
Article IX (3) of the WTO Agreement:
“ In exceptional circumstances, the Ministerial Conference may decide to waive an obligation imposed on a Member by this Agreement or any of the Multilateral Trade Agreements, provided that any such decision shall be taken by three fourths of the Members ...” NB: General Council clarification: Consensus 1 st
2. GENERAL EXCEPTIONS
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General Exceptions GATT Art. XX
measures are
Art. XX:
Subject to the requirement that such not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction prevent on international trade, nothing in this Agreement shall be construed to the adoption or enforcement by any Member of measures ….
a. Public Morals b. Human, animal and plant life or health c. Trade in gold or silver
Article XX: General Exceptions
d. To secure compliance with conforming laws and regulations e. Prison labour f. National treasures g. Conservation of exhaustible natural resources h. In pursuit of an intergovernmental Commodity agreement i. Ensure essential quantities to domestic processing industry j. For acquisition or distribution of products in local short supply.
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Invoking Article XX GATT as a Defense: Two-Tier Test
1.
Does the challenged measure fall within one of the exceptions listed in Article XX (a)-(j)?
2.
If yes, does it satisfy the requirements of ‘Article XX-chapeau ’ ?
1.
Invoking Article XX GATT as a Defense: Two-Tier Test
Does the challenged measure fall within one of the exceptions listed in Article XX (a)-(j)?
(b) “measures necessary to protect human, animal, or plant life”: EC-Asbestos/ Thailand-Cigarettes (d) “measures necessary to secure compliance with”: Korea-Various Measures on Beef (g) “ relating to the conservation of exhaustible natural resources”: US-Gasoline and US-Shrimp
Invoking Article XX GATT as a Defense: Two-Tier Test
2. If yes, does it satisfy the requirements of ‘Article XX-chapeau’? ( US-Gasoline and US Shrimp ) A means of “ arbitrary or unjustifiable discrimination ” between countries where same conditions prevail?
A “ disguised restriction on trade ”?
3. SECURITY EXCEPTIONS
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Article XXI: Security Exceptions
No disclosure of information contrary to essential security interests No obstacle to any action contrary to essential security interest relating to fissionable material relating to arms trade taken in time of war or other emergency international relations Is this a “self-judging” exception?
No obstacle to UN collective security 82
4. REGIONAL INTEGRATION
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Regional Integration
WTO rules and obligations shall not prevent Members from taking certain measures which otherwise would be illegal, to enter closer integration of their economies
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Regional integration GATT Art. XXIV (4): Purpose
The contracting parties recognise....that the customs union or of a free-trade area should be the constituent territories and raise barriers to the trade of other contracting parties territories purpose to facilitate trade between with such of a not to
5. SPECIAL AND DIFFERENTIAL TREATMENT
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Special and Differential Treatment
There are 146 such provisions throughout the WTO Agreements of different nature aimed at increasing trade opportunities WTO Members should safeguard the interests of the developing Members flexibility of commitments (extended) transitional time periods technical assistance provisions for least-developed country Members 87
Special and Differential Treatment
Examples
Article 27 SCM Agreement contains 3 types: Safeguarding the interests of developing countries (e.g. 27.1) Flexibility of commitments (e.g. 27.4; 27.7) Transitional time periods (e.g. 27.3; 27.4) Article 27.2 DSU - Technical assistance Article 24 DSU - Least Developed Countries Article IV GATS - Trade opportunities 88
TAKE HOME ASSIGNMENT
1.
In Member Z’s Schedule of Tariff Concessions, the bound duty for cars is 12%. Can Member Z apply a tariff different from the 12% listed in its schedules?
2.
Is the bound tariff the only charge that Member Z may levy on imported cares?
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END
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