WTO Law - uni
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The Course –
Contents, Sources and Facts
The grading:
Closed-book examination after the course
Mixture of multiple choice questions and essays
The Textbook:
van den Bossche, P, The law and policy of the World
Trade Organization : text, cases and materials (2. ed.,
2008).
The venue:
Tuesday, 14:00 – 15:30 and Wednesday 13:00 -14:30 in
the lecture hall of the Europa-Institut (3rd floor)
WTO Law
Int. Business Transactions
WTO
GATT
TBT / SPS
GATS
Trade & Environment
TRIPS
Trade Remedies
Dispute
Settlement
Antidumping
SubsidiesCMA
Intellectual and industrial property
•
Introduction, History
Legal Order (1-74)
Institution (75-167)
Dispute Settlement (DS) (168 – 319)
Market Access (401 – 506)
Non-Discrimination (320 – 400)
Trade Remedies ((507 – 613)
Exceptions (615 – 739)
GATS, TRIPS
Harmonization (740 – 891)
Jackson, J.H. et al., Legal problems of international
economic relations : cases, materials, and text on the
national and international regulation of transnational
economic relations (5th. Aufl., 2008)
Matsushita, M. et al., The world trade organization : law,
practice, and policy (2nd. Aufl., 2006)
Cottier, T. et al., International trade regulation : law and
policy in the WTO, the European Union, and Switzerland :
cases, materials, and comments (2005)
Hilf, M./Oeter, S., WTO-Recht, Rechtsordnung des
Welthandels (1. Aufl. Aufl., 2005)
Stoll, P.-T./Schorkopf, F., WTO - Welthandelsordnung und
Welthandelsrecht (2002)
Guzman, A./ Pauwelyn, J., International Trade Law (2009=
The WTO Website
http://www.wto.org/index.htm
Legal Texts
http://www.wto.org/english/docs_e/legal_e/legal_e.ht
m
Information on key substantive issues by the WTO
http://www.wto.org/english/tratop_e/tratop_e.htm
„What is the WTO ?“
http://www.wto.org/english/thewto_e/whatis_e/whatis_e.h
tm
WTO in brief
http://www.wto.org/english/thewto_e/whatis_e/inbrief_e/i
nbr00_e.htm
Understanding the WTO
http://www.wto.org/english/thewto_e/whatis_e/tif_e/tif_e.
htm
Decisions
http://www.wto.org/english/tratop_e/dispu_e/dispu_e.
htm
One-page summaries
http://www.wto.org/english/res_e/booksp_e/dispu_su
mmary06_e.pdf
After that with every case in its web presentation
Newest book edition hardcopy
(http://onlinebookshop.wto.org/shop/article_details.a
sp?Id_Article=721&lang=EN )
Abridged selected decisions
http://www.law.georgetown.edu/iiel/students/material
s/reports.html
http://www.worldtradelaw.net/dsc/main.htm
Most valuable secondary sources
http://www.worldtradelaw.net/
http://www.tradelawguide.com/index.asp?toc=content
&id=88&autologin=n
http://www.tradelawguide.com
Teaching Materials in the Internet
J.H.H. Weiler, S. Cho and I. Feichtner 2007, The Law of
the World Trade Organization Through the Cases
http://www.jeanmonnetprogram.org/wto/Units/ind
ex.html
Weekly information
Bridges etc (ICTSD)
http://ictsd.org/news/
WTO Training Package
http://www.wto.org/english/thewto_e/whatis_e/whatis_e.htm
„Researching international and foreign Law“
http://www.llrx.com/international_law.html
IIEL Research websites
http://www.ll.georgetown.edu/intl/iiel/home.htm
Research guide from GATT to WTO
http://www.ll.georgetown.edu/research/browse_topic.cfm?109
One of the pillars of an international economic
order
Monetary: IMF and World Bank
Trade: WTO
Investment? No MAI. No inclusion in the WTO Law
Particularly developed legal order
Mandatory and exclusive dispute settlement with two
levels (instances) of jurisprudence
But: no lawmaking power
Zone of reduced barriers to trade
No common market structures
But second best: reduction of the Trade
Institutional features
„Member driven“
„consensus driven“
Legal order and institution common to big and
small, rich and poor states
Influence
„Green room talks“
Formation of interest groups
Capacity problems
Representation
Sophistication of a legal order
Diversification of the developing world
Economic Advantage of Foreign /
International Trade
Historical Development
Particular features of International
Trade Law / WTO Law
Opening of larger markets
Economies of scale
Division of Labor (Adam Smith!)
Better supply
Better allocation of resources
Comparative Advantage (David Riccardo)
http://internationalecon.com/index.html
„It is not from the benevolence of the butcher, the
brewer, or the baker that we expect our dinner,
but from their regard to their own interest.
...by directing that industry in such a manner as its
produce may be of the greatest value, he intends
only his own gain, and he is in this...led by an
invisible hand to promote an end which was no
part of his intention.“
View: Wealth of Nations, chapter IV.2
David Ricardo (1772-1823), On the principles of
political economy and taxation (1817)
See:
the text:
(http://socserv2.socsci.mcmaster.ca/~econ/ugcm/3ll3/ri
cardo/Principles.pdf)
a brief summary:
(http://www.systemics.com/docs/ricardo/david.html )
Country
Wine
Wheat
Cost Per Unit In Man Hours
Cost Per Unit In Man Hours
England
15
30
Portugal
10 (33 % -)
15 (50 % -)
Protection of young and still weak industries
through tariffs or NTBs
Practised in the US in the first half of the 19th
century as well as in Europe
New example: Airbus
Problem:
Dangers of retaliation
No urge for the protected industries to face the steering
forces of the market
Dangers of perpetuation beyond need
Dangers of abuse
Particular position of a country on the market
Raising tariffs leads to higher import prices
Higher prices lead to less demand
Less demand lowers the prices
The country will be better off: higher income and
lower prices
Only if the country is a dominant demander
And if there is no potential for retaliation
Because it is an exploitative intervention
Trade barriers for protection domestic enterprises
Since they can produce more they can cut cost
(economies of scale)
They may be able to undercut the prices of foreign
competitors on foreign markets
Only if economies of scale are sufficiently high
(like in aircraft, car and semiconductors markets)
Since the intervention is exploitative, there is a
high risk of retaliation from other states
Creating self-sufficiency for times of crisis or wars
Reducing the dependence on foreign goods,
services and commodities
Cost-Benefit Analysis: higher domestic prices may
be a higher loss than the cost for stockpiling
strategic goods
1948: world exports of goods 48 million USD, of
services only a minor figure
2006: Goods 12 trillion USD, services 2,7 trillions
Shares: North and South America decreasing,
Europe and Asia increasing
Foreign Direct Investment (FDI)
1982: 59 mio USD
2006: 1,3 trillion USD
Developed countries have a higher share than DCs
LLDCs: less than 1 % of incoming investment on the
global scale
Factors:
Transport and communication
Free movement of capital: investment where it is most
profitable
But also
Social problems by losses on the markets
Winners and Loosers
Job losses to cheaper countries
Restraints of competition
Loss of regulatory leverage of the states
Public services?
Power of multinational companies (MNCs) vs. developing states
International Trade is improving international
welfare
But does it also increase the welfare in all the
participating states?
There are winners and loosers
Loosers may be compensated by additional
demand from the winners
So that may be a positive sum game
But the addressees of the demand will not be the same
than the loosers in the compensated state
Necessity for a social policy in market economy?
A milennium goal: reducing poverty in the world by 50 % until 2015
Real poverty: people live on less than 1 $ a day
There are improvements, but still almost 1 billion people are really poor
Increase of the income gap btw. the 20% richest and the 20 % poorest
of the world states:
1820: 3:1
1913: 11:1
1970: 30:1
1990: 60:1
1999: 86:1
94 % of world income -> 40% of the population
6 % -> 60%
Half of them live on 2 $ a day, about a billion on less than 1 $
Even if world trade is increasing (with some stagnations in newer
times), it does not increase the wealth of the majority of people
Thus: there would be a need for social policy
In the states as well as on an international level
More than transfer of charitable funds
World Bank
No trade barriers
Increase global income by 2.8 trillion USD
Lift 320 million people out of poverty by 2015
From the 1.101 billion poor people in 2001
DCs share is rising (20-30 %)
South-South trade amounts to more than 10 % with
inceasing tendency
LLDCs (48) share has decreased (0.5 %)
LDCs / LDCs – qualification?
Need to protect feeble agriculture and small
business?
If free trade is an advantage to every national
economy, why is protectionism then so attractive?
Market failures (competition, information etc.)
Opportunism of agents: catering for rent
seekers who are better organised
Industrial policy
Infant industry protection
Safeguards
Overriding public concerns: environment,
nature, health, culture etc.
Protection of national interests: security, supply
Market failures require institutions.
The law is one of the possible
institutions.
Government (policy) failures also
require legal control
Competition needs regulation because
of market imperfections
Lowering prices by lowering security or
health standards
Insufficient information of the customers
Markets do not function as theory would like
them to do
E.g.: no unlimited and totally transparent
information about prices and qualities
Distortions of competition by private actors as
well as by state intervention
See also J.M. Keynes
Because of asymmetric information
Rational ignorance
Pressure potential of the loosers in
competition
opportunism of the agents
Politicians seeking re-election
Change in public opinion about open international
trade
Even in export-dependent states: critical majority fearing the
loss of jobs and their „export“ to other states
The consumers do not realize their advantage
Many consumers are also workers that may be threatened
Particularly NGOs are hinting at
The absence of a serious development policy in the
international economy
The relative losses of shares of the poorer DCs and the
LLDCs
The lack of protection for infant industries and small
farmers
Trade Barriers
Tariffs
Non-tariff barriers (NTBs)
Distorting aid to trade or
competitors
Subsidies
Payments
Tax breaks etc.
Tariffs
Income for
state budgets
Additional cost
for imports
The main conceptual focus of GATT and now the
WTO is
trade liberalization
better allocation of economic resources
integration of the developing countries
management of the risks of globalization
securing peace
Preserve the beneficial effect of comparative advantage
by choosing a second best solution, i.e. the
tariffication of NTBs and the reduction of tariffs
Withstand the lobbyism of protectionist rent seekers
Reducing transaction costs
Restrain and reduce trade barriers
Abolish all discrimination
between domestic and foreign goods and services
between goods and services from different foreign
countries
Reducing distortions of competition and policy
failures
Controlling free-riding and principal-agentproblems
Preamble of the WTO Agreement
• entering into reciprocal and mutually
advantageous arrangements directed to the
substantial reduction of tariffs and other barriers
to trade and to the elimination of discriminatory
treatment in international trade relations
• develop an integrated, more viable and durable
multilateral trading system encompassing the
General Agreement on Tariffs and Trade
• the results of past trade liberalization efforts,
• and all of the results of the Uruguay Round of
Multilateral Trade Negotiations
Post-war International Economic Order
Avoiding the fatal errors of the 1920s
Devaluation race
Loss of the gold standard
Improving the competitiveness of national goods
by devaluating the currency
“Beggar-thy-neighbour“ trade policy
Protectionism race
Discouraging international trade
Reducing world welfare
Bretton Woods Conference (1944): Ministers of Finance
Monetary Order
IMF
IBRD
Fixed exchange rates
Mentioning trade, but leaving it to the next
conference in Havana
Geneva (1947)/ Havana Conference (1948): Trade
Order
Comprehensive: trade, competition, tariffs,
NTBs
ITO (Int. trade organization)
GATT: Tariff Reduction Treaty –
Part IV of the ITO Charter, but also
independently meaningful
Set in force earlier for 23 Member States
By a "Protocol of Provisional Application"
Speeding up the tariff reduction
Without parliamentary procedure (administrative
agreement)
Therefore formally no international
establishment of working bodies
But therefore with a "grandfather clause"
And withdrawal with only 60 days notice
Relation to the Havana Charter: cf. Art. XXIX GATT
GATT remained provisional for > 45 years
Protocol of provisional application was the basis of
accession for most new MS.
1951: Truman ends the unsuccessful attempt to get
approval of Congress
1955: OTC attempt unsuccessful
GATT with ICITO (transferred from Lake Placid)
remained in Geneva (av. de Lausanne)
International Gouvernemental Organization which
could not be called so, although it was:
Founded by states
To work for common goals
With common bodies
ICITO became the GATT Secretariat
CONTRACTING PARTIES as plenary body
Result of the enlarged membership after decolonization
More difficulties to change the rules of GATT (Art.
XXV)
1960s: independence of DCs
1965 Part IV last change of the GATT text
But still successful tariff reductions rounds
From about 47 % to 3.6 %
Arts. II, XXVIII bis GATT
Beginning with Kennedy Round (1960): Side
agreements with varying membership
Several Rounds for Tariff Reduction (Art. XXVIII bis
GATT/XIII WTO)
Reduction of bound tariffs
New commitments concerning bindings
Side agreements (Dumping, Subsidies etc.)
Rift in the structure: scattered obligation structure
A la carte principle
Free rider behaviour
Particularly in the Tokyo Round (1973-1979)
Year/Place/Name
Subjects covered
Countries
1947 Geneva
Tariffs
23
1949 Annecy
Tariffs
13
1951 Torquay
Tariffs
38
1956 Geneva
Tariffs
26
1960-1961 Geneva
Tariffs
26
Tariffs and antidumping measures
62
1973-1979 Geneva
Tariffs, non-tariff measures,
102
(Tokyo Round)
“framework” agreements
1986-1994 Geneva
tariffs, non-tariff measures,
(Uruguay Round)
rules, services, intellectual property,
(Dillon Round)
1964-1967 Geneva
(Kennedy Round)
dispute settlement, textiles, agriculture,
creation of WTO, etc
Doha – Round
123 +
Major Reform by the Uruguay Round (1986-1994)
WTO
Single undertaking (unitary structure)
Dispute settlement
Tariffication in the agricultural sector
Ending the "grey area agreements" (11 Safeguards
Agreement)
Clarifying and intensifying the open, unclear and
incomplete rules
Seattle (1999): unfinished and tumultuous
The Doha working program (2001)
Cancun 2003: interruption
The 2004 July program – resumption of negotiations
2005 Hongkong – some achievements
The stop-and-go in 2006 - 2008 with unclear finality?
2008: unsuccessful attempt to finalize the negotiations
2009: another resumption
Major stumbling stones: agriculture and development
Problem of further rounds
Consensus rule
Implementation problem
Capacity problems
Scope of the legal order (competition, trade, environment,
investment)
Complexity of the norms
Representation in the WTO bodies
Dispute settlement, but see the „Advisory Centre on WTO – Law “
Agriculture
Developing countries