intl trade outline
TRANSCRIPT
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Table of Contents
INTRODUCTION; THEORY; THE CASE FOR TRADE ((JDS) 4-28; 31-41; JDS 41-56) .......................... 3
WTO HISTORY; STRUCTURE (JDS 217-22; 224-28; 232-33)....................................................................... 3STRUCTURE/BASICS OF THE GATT/WTO ........................................................................................................................ 3WTOGOVERNING STRUCTURE ............................................................................................................................................ 3I. WORLD TRADE ORGANIZATION....................................................................................................................................... 3
Bretton Woods conference .......................................................................................................................................... 3 OECD ...................................................................................................................................................................................... 3 General Agreement on Tariffs and Trade (GATT) ............................................................................................ 4o WTO was created from the 1994 Uruguay Round ........................................................................................... 4
GATT dispute resolution pre-1995 ........................................................................................................................... 4DECISION MAKING IN GATT/WTO .................................................................................................................................... 5ACCESSION AND MEMBERSHIP ............................................................................................................................................. 5
DISPUTE SETTLEMENT UNDER THE WTO (JDS 267-85; JDS 306-26; 340-48;)................................... 5WTODISPUTE SETTLEMENT BODY (DSB) ....................................................................................................................... 5DISPUTE SETTLEMENT UNDER GATT ................................................................................................................................ 6DISPUTE SETTLEMENT UNDERSTANDING OF THE WTO ................................................................................................. 6CRITICAL ISSUES IN DISPUTE SETTLEMENT ....................................................................................................................... 8IMPLEMENTATION AND RETALIATION PROCEDURES ....................................................................................................... 9SECTION 301 OF U.S.TRADE ACT OF 1974 ...................................................................................................................... 9U.S.SECTIONS 301-310 OF THE TRADE ACT OF 1974 ............................................................................................ 10
ART. XXIII NULLIFICATION AND IMPAIRMENT IN DISPUTE SETTLEMENT(ART. 26; JDS 285-
300) ........................................................................................................................................................................... 10
TARIFFS AND CUSTOMS RULES (JDS 374-76; 382-83; 386-401, 403-404 (QUESTION5); JDS 404-
422) ........................................................................................................................................................................... 10Renegotiation of Tariff Bindings ..................................................................................................................................... 11Customs Law ........................................................................................................................................................................... 12
QUOTAS AND NON-TARIFF BARRIERS (JDS 423-31, 433-43;) ............................................................... 13EXPORTS UNDER GATT....................................................................................................................................................... 13TRANSPARENCY..................................................................................................................................................................... 14
THE MOST FAVORED NATION PRINCIPLE (GATT 1947, ART. I:1; JDS 467-71; 475-89; 491-92)14LIKE PRODUCTS..................................................................................................................................................................... 15
Safeguards ............................................................................................................................................................................... 16
REGIONAL TRADE AGREEMENTS (GATT 1947, ART. XXIV; JDS 497-515) ..................................... 18Consequences of Regionalism .......................................................................................................................................... 19
TRADE AND LABOR STANDARDS .................................................................................................................. 21
LINKAGES BETWEEN INTL TRADE POLICY AND ENVIRONMENT, HUMAN RIGHTS, LABOR
STANDARDS AND NATIONAL SECURITY ..................................................................................................... 21
HUMAN RIGHTS AND LABOR .......................................................................................................................... 22
LABOR STANDARDS AND INTERNATIONAL TRADE POLICY. .............................................................. 25 GSP-Worker Rights Review Summary: Indonesia: Examines the procedure that may lead to the
withdrawal of GSP benefits if a developing country fails to afford worker rights. ................................ 26
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ARTICLE XX; TRADE AND THE ENVIRONMENT (GATT 1994, ART. XX; JDS 591-600; 605-11;
614-25; 628-35; 637-46) ....................................................................................................................................... 26General exceptions, Art. XX ............................................................................................................................................... 26Free trade and the environment .................................................................................................................................... 28
ARTICLE XX DEFENSES AND EXCEPTIONS ......................................................................................................................... 30XX: Chapeau............................................................................................................................................................................ 33
SANITARY AND PHYTOSANITARY AGREEMENT (SPS) .......................................................................... 34Consumer safety .................................................................................................................................................................... 36
NATIONAL TREATMENT(GATT 1947, ART. III; ART. XX JDS 537-39; 551-86) ............................. 38National treatment, GATT Art. III ................................................................................................................................. 39Intent to discriminate ......................................................................................................................................................... 39Transparency, GATT various articles .......................................................................................................................... 40
BASIC RULE CASES................................................................................................................................................................ 40DISCRIMINATORY REGULATIONS:ART.III:4 ................................................................................................................... 42
TRADE AND DEVELOPMENT: (JDS 1149-60; 1163-72;JDS 848-57; 880-81; 884-894) ...................... 43SUBSIDIES &COUNTERVAILING DUTIES .................................................................................................................... 43
B.SCMAGREEMENT PART I-SUBSIDIES.......................................................................................................................... 46Art. I:1 Subsidies defined-.................................................................................................................................................. 46Art. 2: Specific subsidies targeted; general ones alright...................................................................................... 46
C.SCMPART V-COUNTERVAILING MEASURES .............................................................................................................. 47How to identify illegal export subsidy ......................................................................................................................... 47Domestic subsidies ............................................................................................................................................................... 48
D.TRAFFIC LIGHT SYSTEM &SCM.................................................................................................................................... 48I. red light subsidies (SCM part II) ................................................................................................................................ 48II. DARK amber/yellow light subsidies (SCM part III) ......................................................................................... 49III. green light subsidies (SCM part IV) ....................................................................................................................... 50General Points of importance: ........................................................................................................................................ 50
DEVELOPMENT ...................................................................................................................................................................... 51
DEVELOPING COUNTRIES IN THE WTO: ........................................................................................................................... 52GENERALIZED SYSTEM OF PREFERENCES (GSP) ............................................................................................................ 53
SERVICES (JDS 940-42 (FOR BACKGROUND ON THE GATS); 972-89) .......................................... 54
TRADE AND INTELLECTUAL PROPERTY: TRIPS AND PUBLIC HEALTH (JDS 1003-1007; 1036-
39) ............................................................................................................................................................................. 56COMPULSORY LICENSING AND PHARMACEUTICALS........................................................................................................ 57
THE FUTURE OF INTERNATIONAL TRADE ................................................................................................ 58
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Introduction; Theory; the Case for Trade ((JDS) 4-28; 31-41; JDS
41-56)
WTO History; Structure (JDS 217-22; 224-28; 232-33)
Structure/Basics of the GATT/WTOGATT: Series of agreements, protocols, understandings, etc.; 38 ArticlesWTO: Charter deals only w/ institutional measures. But Annexes contain
substantive rules.Annex 1: Multilateral Agreements. Impose binding obligations on the
Members
Annex 1A: GATT 1994 w/ side agreements on 12 topics (e.g. agriculture,SPM, textiles, TBT, TRIMS, dumping, preshipment inspection,rules of origin, countervailing measures, subsidies, safeguards); scheduleof tariffs
Annex 1B: GATSAnnex 1C: TRIPSAnnex 2: Dispute settlement rulesAnnex 3: Trade Policy Review Mechanism (TPRM): periodic, regular
review of countrys trade policies. Focus not on
consistency/legalisms, but on general impact of trade policies.Annex 4: Plurilateral Agreements. Optional. Deal with governmental
procurement and civil aircraft.
WTO Governing Structure
I. World Trade Organization Post-WWII
o Needed to prevent another economic crisiso Crisis of the 1920s and 30s led to the Nazis rise and WWIIo Create an economic buttress against world wars
Bretton Woods conferenceo Created the IMF and World Bank
IMF to coordinate monetary policy, currencies, and exchanges World Bank for fiscal policy, capital to rebuild Failed as conceived Only country in a position to finance it was the US, who didnt want to transfer its
responsibility and instead used the Marshall Plan and the Japanese Dodge Plano USSR didnt join, not universal, Western
OECDo Formerly Marshall Plankept organization but with new name
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o Club of the rich world HQd in Pariso Two important functions
Coordinates economic policy Statistical resource
General Agreement on Tariffs and Trade (GATT)o HQd in Genevao History
Not part of Bretton Woods, but they assume something like it would come about Originally envisioned as the ITO
1947 Protocol of Provisional Application set out the principleso Grandfather clause includedo GATT would not apply to current, pre-existing lawo Included CVD law (Tariff Act of 1930)
Created at the Havana conference, signed in Geneva Signatories signed protocol, but not charter ITO died, GATT existed
1979 and 1994 Subsidies Codes brought US under this discipline and more
No grandfather clause US must reconcile practice with codes But, 1979 was a plurilateral, not universal, agreement
o Not all members signed US argued that no it had no obligation to treat imports from non-signatories
under this Codeo GATT was originally just an agreement signed in 1947, which operated without a body for 47
yearso GATT now is the current organization in Genevao GATT is also a concept: economic liberalizationo Transition from tariff reduction to governance
Initial goal to undo the damage from the Great Depression: trade barriers, high tariffsto protect domestic markets Transition occurred over years during each Roundmultinational trade negotiationsto reduce trade barriers
Now the important mission is to resolve disputeso WTO was created from the 1994 Uruguay Round
Rules remain GATT 1947 is still relevant1994 just brought it up to present Previous decisions are still good law Minimal institutional development until 1970s Expectations built up over time based on discrete problem solving Original focus on trade in goods changed over time New architecture, especially dispute resolution, in 1994
Decisions no longer advisory GATT Art. I
o Most Favored Nation (MFN) treatmento All members of WTO receive the most preferential treatment as accorded to any one member
GATT Art. IIIo Principle of national treatmento No discrimination against products of foreign origin
GATT dispute resolution pre-1995
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o Contracting parties could bring an issueo Panel produced an advisory opiniono Council of Representatives reviewed Panels report and discussed with disputants, then was
supposed to adopt under a majority-rule governance mechanism Tradition evolved of making decisions through consensusno one would veto but no
one would vote
Decision Making in GATT/WTO5 Techniques for decision-making and rule formulation/modification
1) Decisions: Article IX:1Consensus the norm for MC and GC, butmajority vote when this is impossible.
2) Interpretations: Article XI:2MC, GC may adopt interpretations w/ 3/4vote of all members
3) Waivers: Article IX:3MC may waive an obligation; w/o consensus,3/4 vote required; IX:4 requires waivers to specify the circumstances
justifying it and the termination date4) Amendments: Article X2/3 usually required; Some require
unanimous consent (decision making/amendment rules (arts. IX,X), GATT Arts. I (MFN) & II (Tariff schedules); GATS Art II:1(MFN); TRIPS Art. 4 (MFN).
Accession and MembershipAll GATT members are members of WTO
If a country wants to join, usually becomes an observer first, then consultations,then bilateral negotiations, then a schedule of commitments is submitted,then a protocol is submitted, which GC must adopt by 2/3.
Art. XXXV of GATT allows a country, on a one-time basis, to opt out of makingconcessions to any newly joined country (e.g. Pakistan refused to dealwith S. Africa)
Dispute Settlement Under the WTO (JDS 267-85; JDS 306-26; 340-
48;)
WTO Dispute Settlement Body (DSB)o Unified system created under the Dispute Settlement Understanding (DSU)o DSB is a special assembly of the WTO General Council and includes all WTO memberso Five stages of dispute resolution
1. Consultation2. Panel establishment, investigation, and report
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3. Appellate review of the panel report4. Adoption of the panel and appellate decision5. Implementation of the decision adopted
o Also a parallel process for binding arbitration if both parties agree to submit to ito DSU assures the adoption of unmodified panel and Appellate Body decisions
Requires the DSB to adopt the decisions automatically w/out amendment unless theyare rejected unanimously by all members
inverted consensus requires all members, including the winning party, to reject thedecision
o Outcomes Range from a mutually satisfactory solution agreed to by the parties in Stage 1 To authorized retaliation under Stage 5 After a final decision, 3 types of remedies available to the prevailing party
Loser can change the law found to be a violation to conform with the GATT Winner can receive compensation from loser, which both parties agree is
sufficient to compensate for the injury
Winner may be authorized to suspend some of its concessions under theGATT toward the loser = authorized retaliation
o Only if the other remedies do not worko Can retaliate against the same sector or even across all sectors and
agreements
GATT Art. XXIV(8)(b) authorizes the formation of free trade areas
Dispute Settlement Under GATTGATT Art. XXII: Consultations are first step in dispute settlement; sympathetic considerationshould be given to any member that has a problem
GATT Art. XXIII: GATTs principal procedural dispute resolution clause; very little detail;
General principle serves as the basis for DSU and other WTO-related provisions. If one partyfeels it is suffering nullification or impairment of its benefits under the agreement, the mattermay be referred to the CONTRACTING PARTIESreplaced, in practice, with the DSU.
Nullification or impairment under GATT seen as:1) Failure of a CP to carry out its obligations (prima facie case under DSU)2) Non-violation measure3) existence of anyother situation (never used or talked about)
A violation is neither necessary nor sufficient. There must be an injury. Under GATT, there were no real enforcement mechanisms, as the offending party
could stop any enforcement. Under the WTO, this has changed. Now, an
offending party may be forced to suspend any violative measure, and perhaps payrestitution. The strategy now for an offending party is to buy time, as much aspossible.
Dispute Settlement Understanding of the WTOWTO DSU:Principles:
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1) Goal is to preserve rights and obligations of members2) Cannot add to or diminish rights found in WTO agreements3) Removal of disputed provisions is the main objective, with retaliatory
action the last resort.
DSU Procedures1) Consultations (DSU Art. 4): Preferred manner of dealing with a dispute.a. Method of consultations is up to the parties. Must be in good
faith. Many cases end here.b. DSU Art. 4:3If request for consultation is made, party must reply
w/in10 days and enter into consultations w/in 30 days. If arespondent fails to do this, complainant may proceed to a panel request.
c. DSU Art. 4:7If consultations fail to resolve dispute w/in 60days, complainant may request establishment of a panel
2) Panel Process: DSU Art. 6:1 provides for the establishment of panel at
members request.a. 3 members to a panel (unless parties want 5), appointed bySecretariatDir.Gen. may appt. if there is no panel within 20 days of
establishmentb. Mostly government officials (~80%), some former Secretariat officials, some
trade lawyers/academicsc. Complainants win ~90% of casesd. Panel Procedures:
i) Burden on party claiming the affirmativeii) Any violation is prima facie evidence of
nullification/impairmentiii) Panel must make an objective assessmentiv) DSU Art. 12:8Panel must make its decision w/in 6 mos.v) Panel issues an interim report for comment; then panel
submitted to DSB, which gains force if there is no actionw/in 60 daysunless there is an appeal.
3) Appellate Body: DSU Art. 17:1 establishes a standing appellate body
Limited to issues of law (DSU Art. 17:6) 7 Body members; 3 to a panel; must decide w/in 60 days (90 tops) Most appeals affirmed (~80%); no remand possible Binding, unless DSB decides, by consensus, not to adopt No binding precedent, but similar cases handled similarly App. Body (or panel) may suggest ways in which a country can comply with a
ruling
4) Implementation and Suspension of Concessionsa. A ruling usually recommends that the offending member cease its
violations. This is monitored, and expected w/in 8 to 10 mos (15 mos.max.)
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b. DSU Art. 22:2Consultation w/ prevailing party possible before endof time-limit in order to decide on compensation
c. If recommendation are not implemented, prevailing party may seekcompensation, or request DSB authority to suspend concessionspreviously made to that member(retaliation) (DSU Art. 22:1).
d.
Compensation/suspension of concessions can only be for the amt ofdamage being done currently,e. Retaliation authorized pursuant to DSU Art. 22:6 if parties cannot
agree on compensation.f. A country cant retaliate for harms occurring prior to the end of the
dispute settlement processg. The original panel acts as arbitrator during this process to
adjudicate disputes arising regarding compensation/retaliationprocedures (DSU Art. 21:5)
Critical Issues in Dispute Settlement1) Concept of Nullification and Impairment
a) Violationb) Non-violation
To prevail under Art. XXIII, complainant must show that either:1) benefits accruing to it are being nullified or impaired2) the attainment of an objective of the GATT is being impeded (rare)
And that the nullification or impairment (or impedance) results from:1) a breach of obligation by the respondent (violation)2) the application of any measure regardless of its adherence to GATT (non-
violation)3) any other situation (forget it)
In early cases (e.g.Italian Agricultural Machinery) it seemed as if an injury was required.Now, a violation presents a prima facie case ofIn order for an expectation of a benefit to belegitimate in a non-violation case, the complainant must not have reasonably anticipated themeasure complained of at the time of concession negotiations. Otherwise, it should have knownand negotiated about it. Whether a complainant should have known cannot be determined bylooking at a past general policy. But if the measure is clearly w/in the bounds of a past policy, acomplainant might have anticipated it. Case by case determination.
So, here, What were reasonable expectations of U.S? If the Japanese measure werealready in existence, U.S. should have known. If not, presumed not to be able to haveknown. Presumption rebuttable if Japan can show it is a logical next step. Because Japanintroduced measure prior to completion of negotiations, the U.S. should have knownabout it.
Causation: Burden on U.S. to show that Japans measure upset the expectations of acompetitive relationship. Four issues related to causation:
1. Have the Japanese governments measures had more than de minimis impact onthe nullification/impairment?
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2. If, as here, there is no de jure discrimination, U.S. must show de factodiscrimination.
3. No intent requirement to discrimination.4. Measures may be looked at in combination with one another.
U.S. loses on causation grounds. Only had expectations w/ regard to B&W film anyways.As a comlainant, one wants to bring a violation claim, as opposed to a non-violation one. Non-violation cases have higher BoP.
Implementation and Retaliation ProceduresDSU 21.3: Once a report is adopted, the DSB must meet w/in 30 days to hear D speakabout their intentions re: violation. Three options: a) D can suggest a time period,which must be approved by DSB; b) a time mutually agreed upon by the parties to thedispute; c) a period determined through binding arbitration, not to exceed 15 monthsfor the most part.
DSU 21.5: Where there is a dispute about the consistency of the remedial measures,it shall be referred back to the original panel, if possible. It must report w/in 90 days
DSU 22.2: If D fails to comply then negotiation for compensation must begin; If nocompensation has been agreed to, P may request authorization from DSB to suspendconcessions, pursuant to 22.6.
DSU 22.4: The suspension of concessions can only equal the level of nullification orImpairment
DSU 22.6: The DSB, upon request, shall authorize suspension of concessions uponexpiry of reasonable period of time. If D objects to process, matter shall be sent toarbitration, which will be carried out by original panel if possible. Panel must reportw/in 60 days, before which concessions may not be suspended.
Section 301 of U.S. Trade Act of 1974Invoking 301: 1) party petitions USTR (or sua sponte); 2) USTR investigates; 3) Need notdecide in reference to intl commitments, can find an injury by itself; 4) USTR takes action: a)
mandatory when U.S. trade rights are being denied (tho prez has final say); b) discretionarywhen other countrys measures are unreasonable, discriminatory, or burdensome
Special 301: IP issuesSuper 301: Against certain priority nations
USTR can conceivably take any trade-related measure it wishes under 301. Good or bad?Good: Weakness of GATT demanded ability to respond to violations of other countries
obligations (this argument is moot after WTO); 301 simply determines which part of thegovernment will act, here the executive branch (like in all other countries); Good outcomes in theform of liberalized trade?
Bad: Escape clause that undermines confidence in system; Non-violation route underWTO provides a route for U.S. to take so that 301 is unnecessary; Unfair for one country tocall its own shots
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U.S.Sections 301-310 of the Trade Act of 1974
EU argues that USTR can determine whether US rights have been denied even absent aDSB report. $ lost from such a violation cannot be compensated; Panel agrees, but
recognizes that such a finding is not mandatory. Panel: Under Art. XXIII, the WTO has exclusive authority to determine if an
inconsistency has occurred, the reasonable time period in which a nation can implementDSB recommendations and the level of suspension of concessions that can be imposed asa result of a violation.
Legislation may be found to be violative, even if never applied; Thus, an Art. XXIIIviolation can occur by an ad hoc action or a general measure
Issue, then, is whether only mandatory or also discretionary national laws areprohibitedDoes 304 violate DSU Art. XXIII?
Because 304 allows the U.S. to exercise its discretion whether to violate Art. XXIII,Panel finds it presumptively violative.
Panel finds it a bad faith action to maintain a system that provides for the possibility ofcircumventing the U.S.s WTO obligations, even if U.S. promises not to do so(counterargument: any country can, if it chooses, create and implement policies thatviolate WTO obligations; 301 just streamlines process)
Though 301 is presumptively, a violation, an SAA submitted to Congress promises tobase any determination of violation on DSB findings. Since the USTR could not finddiscrimination absent a DSB finding the same thing, 301 was all good.
Art. XXIII nullification and impairment in dispute settlement(Art.26; JDS 285-300)
Tariffs and Customs Rules (JDS 374-76; 382-83; 386-401, 403-404
(question5); JDS 404-422)
GATT 1947, Art. II -XII, paras 1-2 ; GATT 1947, Arts. VII, IX;Tariffs
Preferred trade barrier; most common; Major goal of GATT/WTO to turn trade barriers intotariffs
Three Types of Tariffs:1) Ad Valorem: Value added; % of value of goodsii) Specific: Flat charge per unit/quantity of goodsiii)Mixed: % plus charge per unit/quantity
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iv)Tariff Quotas: % levied depending on quantity of goods already allowedinto country (e.g. X% up to Y quantity and Z% thereafter)
Benefits of Tariffs:
Tariffs more transparent; easy to see; quotas less so, more susceptible tocorruption
Difficult to determine who gets/fills quotas Effects of tariffs are clear in $ terms; allows super-efficient firms to make
up for them
Provide $ to government, as opposed to firms like quotas doTariffs After GATT/WTO
Tariffs have fallen some 90% since inception of GATT Developed country tariffs ~3-4% Developing countries pay ~4.5% to developing countries Developing country tariffs~11%
Problems of Tariff NegotiationMFN obligation restrains willingness to make concessions because offree rider
effect. Formula reductions (linear negotiations) are meant to deal with this,calling for a presumptive reduction of X%, with exceptions to be negotiated. Thiscan be unsatisfactory because countries start w/ different tariff levels
Reciprocity principle: equally beneficial cuts are sought, but it is unclear howmuch of an effect cuts in tariffs actually have in light of the numerousother factors that impact price levels (e.g. exchange rates).
Obligation to Limit Tariffs (Tariff Bindings)
Codified in Art. II of GATT A countrys GATT schedule is the highest level of tariffs that may be levied vis--vis therelevant trading nation. The tariff actually levied, the national tariff schedule, may belower (e.g. if applied to a nation in the same FTA/Customs Union).
NTBs are limited to protect effect of tariff bindings A subsidy granted on products covered on a nations schedule (after it has been
negotiated) is a prima facie nullification for purposes of Art. XXIII.
Art. II:1(a)Tariff levels shall be no higher than the relevant schedule indicatesArt. II:2(a)Internal taxes on imported products are allowed as long as the same tax is
applied to domestic products
Renegotiation of Tariff Bindings
Art. XXVIII governs thisTwo types of modification:
1) Temporary suspension2 Permanent modification
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New Bindings: May result from a) new negotiating round; b) new member accession;c) ad hoc negotiations not conducted under auspices of WTO (though MFN will still apply).
Renegotiations/Modifications/Rectifications of Bindings:1. Reopening every 3 yrs. (XXVIII:1)Every 3 years, bindings may be
reconsidered/adjusted/withdrawn. These triennial rights may also be reserved for later.2. Art. XXVIII:2the general level of trade should remain about the same afterrenegotiations occur
3. Suspension of concessions in response to a XXVIII:1 withdrawalif a binding iswithdrawn, countries who suffer from its withdrawal may suspend concessions to anextent equal to their loss (XXVIII: 3(a))
4. Special Circumstances Negotiations (XVIII:4) Subject to 1 & 2, with authorizationfrom the CP, a party may seek withdrawal of concessions granted; negotiations required;if none achieved, party may withdraw its concessions, and any party affected may do thesame in an equivalent manner.
Upon the formation of a CU, XXVIII is meant to provide the guidelines through whichconcessions may be renegotiated. But it is not very helpful, partly because it is so skeletal. Whenthe EU established its CAP, it raised the tariff on chicken parts, hurting the U.S. The U.S. thenindicated its intention to withdraw some concessions to the EU, but the parties could not agreeon the right value. A special panel was set up that split the difference, and, because MFN appliesto the withdrawal of concessions, the U.S. tried to target EU-supplied products.
A similar problem arose when the UK, Ireland and Denmark joined the EU. Under the CAP, U.S.agricultural products faced higher tariffs, which it sought to be compensated for.
Customs Law
Customs law has a major impact on trade flows.Customs officials must make three crucial determinations:
1) Classification of goods according to tariff schedule2) Valuation of goods to apply ad valorem tariff4) Origin determination to apply correct rate
The GATT imposes some intl standards on customs procedures to be followed by GATT parties.Art. X, for instance, requires that regulations be published promptly, be made available and thatappeals be heard by competent tribunals. There are also limits on the fees, formalities andpenalties than be imposed (Art. VIII) and limits on origina marking requirements by imposingMFN requirements (Art. IX).
Harmonized System (HS) basic schedule used. It classifies virtually all conceivable goods.Under Art. II:5 provides for negotiations with a view to compensatory adjustment when a newclassification prevents implementation of a negotiated concession. A legitimate tariffclassification could impair the expectations of a party, giving rise to an Art. XXIII claim. Raiseslike product issues.
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Quotas and Non-Tariff Barriers (JDS 423-31, 433-43;)
GATT 1994, Arts. XI, XII(a), XIII(a);
NTBs (non-tariff barriers) come in many forms: 12 broad categories, which include customsvaluation, licensing rules, subsidies, government procurement requirements, quality standards,health/safety standards, inspection/testing requirements, etc.
Article XI:1No prohibitions or restrictions other than duties, taxes or other charges, whethermade effective through quotas, import or export licenses or other measures shall be [allowed]This includes quotas and voluntary export restraints (VERs)
Art. XI:2Exceptions to 1a) temporary export restraints allowed on food and other essential products (of
little importance today, due to tariffication commitment of Uruguay Rd.)b) restraints necessary for standards/regulations for marketing of commoditiesc) import restrictions on agriculture
JapanSemiconductors (p. 388) (VER case) Pursuant to an agreement with U.S., Japan agreed to a VER on semiconductors EU upset, as purchasers of semiconductors; EU happy with Japanese dumping Japan argued that because the VERs were not imposed by the government and were
voluntarily instituted by exporters, so it was not a measure that could be challenged. The Panel found that the administrative guidance constituted a measure because
sufficient incentives existed for the non-mandatory measures to take effect.
Japanese exporters knew of the Japan-U.S. agreement and that the Japanese governmentwatched export prices carefully. The Panel found that governmental involvement wascrucial to the maintenance of export restraints. The only difference between Japans
system and one that was an explicit Art. XI violation was that Japans system was not
administered by formal limits. Japans system was therefore in violation
VERs are grey area measures; not explicitly illegal, but still trade distorting. Bilateral trade deals usually bring theseabout. They are usually opaque, and not transparent as required by Art. X (?)
Must quotas be applied consistent with MFN obligation of Art. I? Usually, when quotas are administered, it is donethrough a licensing procedure figured out in accordance with the exporting country.
Exports Under GATT Art. I applies MFN to exports; Art. XI prohibits quantitative restrictions on exports as well as imports. But there is no prohibition on export taxes/fees and the exceptions are pretty broad. Art. XI allows for restrictions on foods and other essential products
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Art. XX allows for restrictions on exports when the government is trying to keepdomestic prices down as part of a stabilization plan, as well as restrictions on productsthat are or might be in short supply.
Few complaints over this issue, but growing concern now, particularly w/ regard tosanctions/natl security issues (e.g. State Dept. is in charge of arms exports; Prez can
impose sanctions on other countries
TransparencyArt. X: General requirement fore transparency and availability of regulations/tariffs, etc.;
Requires publication of laws, rulings, regulations pertaining to trade issues. Alsorequires mechanism to review customs decisions
Most WTO agreements require notification of laws and regulations; stored in centralRegistry at WTO
TPRMs: Trade Policy Review Mechanism. 4 largest trading countries trade policiesreviewed every 2 years; the next 16, every 4 years; the rest every 6 years. OtherWTO agreements also require periodic reviews
The Most Favored Nation Principle (GATT 1947, Art. I:1; JDS 467-
71; 475-89; 491-92)
The cornerstone of the GATT/WTO
Basic Rationale:
Allow operation of comparative advantage Less likelihood of trade disputes W/o MFN, discrimination results, undermining free trade Ease of administration Idea of sovereign equality; reduced intl tensions Constraint of executives trade power
Problems with MFN: Extensive use of exceptions o MFN (most significantly CUs and FTAs) Free Rider Problem: nations benefit from the agreements of other nations, even if they
dont give up anything themselves
Foot Dragger Problem: Because consensus is reqd, one nation can hold out for moreconcessions or for a different outcome if it is opposed to the measureGeneral Notes: MFN under WTO is unconditional, meaning that concessions given to A must be given
to B, even if B has not given anything in return.
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Code conditional MFNapplies to nations that have joined side agreements, but not tothose who havent (Only two plurilateral agreements w/ ltd. membership: Government
Procurement and Civil Aircraft) Non-WTO countries can be charged anything (in the absence of a bilateral agreement to
the contrary
A non-WTO member cannot be given better treatment than a member.
Hypos: U.S. wants to sanction Ghana for using child labor; seeks to sanction their coffee exports
by raising tariffs on Ghanaian coffee. Prohibited under WTO, b/c the method ofproduction is not a valid reason for applying a higher tariff.
Non-WTO countries can be charged anything (in the absence of a bilateral agreement tothe contrary
A non-WTO member cannot be given better treatment than a member. Thai export tax on squash to US in order to keep squash in Thailand; U.S. would at least
have claim, though limiting exports in the face of a national food shortage is allowable.
Maverick custom agent insists on a higher tariff for Thai squash; This would be anunacceptable method of levying duty, prohibited under Art. I(1). Libya joins WTO; Must US grant Libya MFN? yes, but Art. XXXV allows a one-time
non-application to a nation upon their ascension to the WTO. Price controls on particular nations goods? Also illegal under 4 of Art. III(could try for
across-the-board price, but this could be brought as a non-violation claim or a discounttaxless obvious, though.
Squash A gets a 25% tariff while Squash B gets 15%. Squash Bs producer might have aviolation claim if the two types of squash are like products
Like Products
Purpose of MFN: To assure that like products should be treated equally, regardless of
their origin.
MFN applies to like products Factors that go into consideration:
1. Use put to by consumers2. Look, feel, smell3. Consumers taste for the product4. If in the same category in Harmonized System, more likely
Questions about like productso Should the difference be by the way the market reacts?o Consumer tasteso What if products are close substitutes (coffee/tea, e.g.)? Why not?o As you move towards substitutability, you open the door more and morebut not
too many cases along these lines.
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Like Products; The definition also comes up in
o Art. III (natl treatment),o Art. VI, (AD & CVDs on dumped or subsidized products that materially injure
domestic producers)o
Art. XIX lets parties restrict imports when they seriously threaten a domesticindustry. Should these be treated similarly throughout? There is an argument that in Arts. I and III,
like products defined more broadly.
Classification systems becoming more and more narrow, to cut down on free-riding. See,.e.g.German-Swiss treaty of 1904.
Biggest exception to MFN: Art. XXIVCUs and FTAs.
Two primary issues in Art. I disputes:
1. Likeness2. De facto discrimination
Exceptions to general rule of nondiscrimination: Art. VI: CVDs and AD duties Art. XIV: quotas for balance of payment purposes Art XIX: Allows a country affected by anothers invocation of the Escape Clause to
suspend its concessions to that country. XXI: national security exception to MFN XXIII (2): Suspension of concessions allowed in response to another partys nullification
and impairment of that members benefits.
Safeguardso Quotas, tariffs, etc. are sometimes allowedo But only under certain circumstances and within limitso An escape clause
Empowers a country to suspend its commitment to liberalization under unanticipatedimport pressure
Risk of scapegoating imports during economic downturns i.e., dont want to let countries blame imports for regular recessions Risk of vicious circlee.g., depression Smoot-Hawley Great
Depression Basically, this is a way to use protectionist methods legally under GATT if imports
hurt domestic producers Dont have to prove how or why, just that imports are winning
o Original standard: Art. XIX Requisites to implement
1. Developments must be unforeseeno Surge of imports does not qualify
2. Effect must be tied to previous concessions made under GATT3. Must see an absolute or relative increase in imports4. Must have actual injury to domestic producers and evidence of it
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Immediately, first 2 requirements were whittled away Fur Hats, 1947
o Surge of Czech fur hats in USo Subsequent to US lowering tariffso Dispute Body settled
Stated that surge was due to a change in hat preferences infavor of the type made in Czechoslovakia
But, held that US had acted in good faith and was justified intaking action
Basically, unforeseen and previous concession elements ignored Voluntary Export Restraints (VERs) common
Not voluntary Import restrictions, quotas Importing country threatened to impose safeguard or duties Then exporting country asked what it could do to prevent duties Importer asks exporter to voluntarily implement restrictions on exports Raises prices for exporters domestic consumers, revenues for exporters
(now its like a monopoly) and revenues/prices for domestic producerso Current standard: 1994 Agreement on Safeguards Basically codified state practice after 1947 No more unforeseen or traceable 2.1increased quantities, absolute or relative to domestic production of import and
conditions as to cause or threaten to cause serious injury to the domestic industrythat produces like or directly competitive products
4.2(b)demonstrates, on the basis of objective evidence, the existence of the causallink
Must establish a causal link Not just that 2 factors exist, but that imports actually caused injury to
domestic producers
11.1(b)forbids VERs 11.1(c) seems to permit VERs if in response to ADD or CVD rather than a
safeguard
Scholars: dont need to ban them b/c VERs are stupid and self-limiting Barred but hard to enforce
JapanLumber
CAN complains that JAP has structured its lumber classification system so as todiscriminate against Canadian dimension lumber, which was charged 8% v. 0% for
other, supposedly similar, types of lumber.
Panel: Gatt system allows parties wide discretion in classifying goods for their tariffstructure.
BoP falls on complainant to show that the tariff arrangement has been diverted from itsnormal purpose so as to become a means of discrimination.
Japan showed that CANs dimension lumber didnt fit into any of its classificationcategories, which can be written as the country pleases (though great deviation from HSwould be a problem).
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Panel: If a country raises a claim, the claim should be based on the importers categories.Japan was further justified b/c CANs lumber didnt fit into any widely accepted intl
category. The Panel did not address the issue of whether the different treatment was justified in a
broader context of like products b/c CAN insisted on basing its argument on its specific
type of dimension lumber. Guzman: Thinks the test should be whether the products compete.SpanCoffee
Spain had one category for unroasted, caffeinated coffee, then split it into five. 3 faced notariff, but two faced a 7% tariff. The tariff was not bound under Art. II.
Brazil was main supplier of the coffee subjected to the duty and complained. Spain tried to base its claim on geographic, genetic and organoleptic differences. Panel: Differences in such things are common in commodities. The important
consideration is that the coffee was I) often blended; 2) identical in its end use. Unroasted,non-decaf beans were like products concluded the Panel. Found Art. I violation.
GermanySardines
Germany imposed different types of tariffs on different types of sardines. Norwaycomplained.
Panel passed on the like product issue and instead proceeded on nullification andimpairment
Although it found the parties did not consider them to be like products, Norway hadreason tobelieve they would be treated similarly. Norways sardines werecompetitive with the rest, the parties had discussed the question and Norway hadcalculated the expected tariff into its own concessions. Thus, violation.
CanadaAutos
Complicated scheme;; Can content requirements for particular importers CAN argues: 1) facially neutral; 2) obligation applies to companies, not countries Panel: Doesnt matter if facially neutral; Art. I refers to products not countries
IndonesiaAutos
Taxes and tariffs lower for one Korean company than for everyone else; violation Higher tariffs cannot be conditioned on anything but the product itself.
Regional Trade Agreements (GATT 1947, Art. XXIV; JDS 497-515)
Art. XXIVCustoms Unions and FTAs
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Consequences of Regionalism1. Trade Creation: expansion of trade inside the area2. Trade Diversion: diversion from supplies who were more efficient before
creation of area, but are now more expensive to buy from
The real, net effect of these two phenomena is disputed.Krugman: trade diversion would usually result when countries form CU or FTAs because,because there is an incentive to have higher external barriers than before, to take advantage ofthe size of their new market. Other countries might follow suit, perhaps leading to a tariff war.Pessimistic view.Jackson responds: Can govts really do this to attain a monopoly power?
Lawrence: Optimistic view. Growth results from increased trade and investment. Lowerexternal barriers, because regions may be more willing to adopt lower external barriers thancountries. EU, e.g. Should spur imitation. Easier for outsiders to deal with the arrangements ofone trading bloc than w/ all the individual nations w/in it.Jackson: Danger of special interest groups that threaten LT multilat. liberalization.
Guzman: Since most trade is regional anyway, on balance this is probably good.
Promotes discipline in monetary policy, too.Jackson: The more restrictive the terms of the CU, the more 3d parties will prefer lessrestrictive rules of origin. Opposite position of the members of the CU, though.Definitions: Customs Territory: Territory w/ its own tariffs (U.S., NAFTA). In a territory, no all
tariffs must be eliminated, but a substl amount must be. How much no one knows.
Customs Union:a. Art. XXIV (8)(a): Definition
i. Tariffs harmonized across all members;ii. Substantially all the same duties/regs. are applied by each member to
outsidersb. Art. XXIV (5) (a): Duties/regs. should not on the whole be higher or more
restrictive w/ respect to outsiders than before.c. In considering on the whole, the applicable rates must be based on an overall
assessment of weighted average tariff rates and of customs duties collected.Tariffs in CU are weighted to market size.
d. Common external barrier reqd. Countries must give up ability to set own tariffs.e. Harder to achieve than a free-trade agreement. EU is a CU, US is not.
Free Trade Area: Art. XXIV (8)(b)a. (5)(a): Tariffs can be no higher than before w/o outside ,b. (8)(b): Must reduce barriers on substantially all trade between membersc. No common external tariff reqd.
Questions that arise:i. Q: What is a reasonable time for an interim agreement to become a CU or
FTA under 5? A: About 10 years
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ii. What is substantially all trade under 8? Whatother restrictiveregulations of commerce must be eliminated?
iii. Rules of Origin? Big one. Are there any constraints on them?
Hypo:Brazil, Chile and Bolivia want to create a:
(1) FTABefore FTA, tariffs were: Brazil-5%, Chile-10%, Bolivia-15%. They cant raise theirbound tariffs just because they enter a FTA. They would reduce the barrier between oneanother.
(2) CU
If they want to form a CU, the avg. tariff rate AND the size of the market in each countrywould have to be taken into account. So a 10% average above would be too high if Brazil,with lowest tariff, was largest market. Tariffs in CU are weighted to market size.
TurkeyTextiles: (1999) Turkey and EU set up CU. Turkey had to bring its customs reqs. into line w/ EU. To do so, it says it had to institute
the same border measures as the EU and thus imposed quotas on Indian textiles. Turkeys quota not defensible under Art. XXIV just because it joined a CU AB: Looks at 5 of Art. XXIVThe agreement shall not preventthe formation ofa
customs union AB recognizes that a CU is committed to reducing barriers on substantiallyall trade,
not all trade. 8(a)(i) thus provides for flexibility 8(a)(ii) creates standard for treatment of 3d countries following formation of a CU;
again, the obligation is to have substantially the same treatment of 3d party countries,not all the same
5 chapeau: that nothing shall prevent the formation of a customs unionprovided thatobligations to 3d parties are substantially the same. Same standard for CUs common
external tariff So Art. XXIV can be invoked as a defense only if:
o It is introduced upon the formation of a CUo Treatment of 3d parties is substantially the same
In determining whether a CU is acceptable under XXIV:5(a), an economic test is usedto measure the effects and to see if the new policies are more trade restrictive overall.
Purpose of a CU is to facilitate trade between the members, not to protect against 3dcountriesCountries should not be allowed to treat other members worse than before.
To have the benefit of the defense of Art. XXIV, two conditions must be met:o The measure is introduced upon the formation of the CUo The formation of the CU would be prevented w/o new restriction
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Turkey argues that Indian textiles would be excluded from free trade w/in the EU; sincetextiles make up 40% of Turkeys trade with EU, not a substantial enough chunk of
trade would have been liberalized. Thus, a CU would have been prevented. AB responds that rules or origin requirements and labeling would allow Turkish goods to
flow through freely, while subjecting Indias to the EUs tariff. Turkey did not do what it
could to avoid trade diversion. Rules of origins requirements, rather than quotas, were the proper way to deal with theproblem.
Invocation of Art. XXIV is a defense.
Trade and Labor Standards
Linkages Between Intl Trade Policy and Environment, Human
Rights, Labor Standards and National Security
Article XX (b), (g) exceptions applicable.(b)- Human, animal, and plant life(g)- environment and natural resources
XX Chapaeu- No arbitrary discrimination. Consistent with domestic limits (See Shrimp Turtle,US wins; US-Gasoline, conservation/natural resources- US wins)
Production methods, i.e. labor conditions, are not a valid exception for measures
A.ENVIRONMENT CONSIDERATIONS(p. 1008) WTO Secretariat Special Studies no. 4 Trade and Environment 1-7 (1999)Issues:
1. Is economic integration through trade and investment a threat to the environment?2. Does trade undermine the regulatory efforts of governments to control pollution
and resource degradation?3. Will economic growth driven by trade help us to move towards a sustainableuse
of the worlds environmental resources
Hindrances to environmental improvement: Political Economy argument- competitive pressure from the world market sometimes
makes it impossible to forge the necessary political support at home to upgradeenvironmental standards. Trade-off: environmental well-being and economic well-being. Economic growth
driven by trade may speed up the process of environmental degradation unlesssufficient environmental safeguards are put in place
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Market Failures- situations in which market forces of supply and demand fail to deliveran optimal outcome for society as a whole. Occur when producers and consumers do nothave to bear the full cost of their actions, such as pollution inflicted on 3rd parties.
Undefined Property Rights- overexploitation. tragedy of the commonsDiffuse Sources of Pollution- sources of pollution diffuse and difficult to identify or
victims may be difficult to organize, a market solution may be difficult to find. Policy Failure- governments not only omit to correct market failures, may add a fewdistortions of their own: subsidization of energy, agriculture, fishing, which aggravatespollution problems and resource degradation rather than solving them.
GuzmanExternal Treaties- apart from the WTO exist which demand concession and provide forretaliatory sanctions/measures. What result if not a WTO environmental exception?Sanctions imposed may/can/will trip WTO violation and result in return sanctions.
Should WTO take external agmts into account which do not provide sanctions and thenapply WTO substitute sanctions? G If WTO does this then the App Body has been
empowered to adjudicate environmental disputes and intl environmental law. LDCs are virulently opposed to bringing in environmental regulations into WTO.
Inability to comply Developed nation protectionist policies can be disguised w/ environmental
policy GMadness that West should impose set environmental standards/policy on the world.
Standards differ from region to region. Environmental unilateralism Minimum levels of environmental protection are difficult to achieve. Prospect of creating an environmental agmnt la TRIPS is disliked by both sides (LDCs
and DCs) for the potential acrimony it would create. (this sounds like true bullshit. Thedeveloping world and most of the developed world was able to come up with substantive
agmnts at both Rio and Kyoto. We all know who sank Kyoto).
Rio principles States should reduce and eliminate unsustainable patterns of production and consumption Polluter Pays principle- those responsible for pollution shouldpay for its consequences
and elimination Precautionary Principle- where there are threats of serious or irreversible damage, lack
of full scientific certainty shall not be used as a reason for postponing cost-effectivemeasures to prevent environmental degradation. EU invokes this regarding GMO.
Human Rights and Labor
GATT XX: List of Exceptions
I. WHY LINK HUMAN RIGHTS AND TRADE?
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Arguments against linking:
State sovereignty. Unclear as to whether sanctions have a real impact on states behavior. Excuse for protectionism.
Arguments for linkage Jus cogens norms: bind everybody, whether they consent to them or not Something universal about rights
i. WHAT ARE INTERNATIONAL HUMAN RIGHTS?Most of human rights law develops after WW2, such as the Universal Declaration of HumanRights. Some debate as to whether the human rights articulated by the Universal Declarationare, in fact, universally applicable to all cultures, given the Western concepts of individual rightsas opposed to group (family, community or state) rights.
ii. LINKING TRADE AND HUMAN RIGHTS: THE JACKSON-VANIK AMENDMENTThe most important link between international human rights and U.S. trade law is found in titleIV of the Trade Act of 1974 (Jackson-Vanikprovision). J-V establishes a complicated schemefor determining when Communist countries may be given MFN treatment under U.S. trade lawand requires annual consideration of whether to renew such treatment.
1. Title IV, 402 of the 1974 Trade Act: in order for a non-MFN country to receiveMFN treatment, it must comply with the freedom of emigration requirements andenter into a trade agreement with the U.S.. Section 402 requires that a country notdeny its citizens the right or opportunity to emigrate and not impose more than anominal tax on emigration, or on visas or other documents required for emigration.
2. Case Study: Chinaa.
1980: U.S. gives MFN treatment to Chinese goods.b. 1989: MFN treatment made controversial by Tiananmen Square.
c. 1992: Clinton makes MFN treatment conditional on Chinas improvinghuman rights, claiming it was the best opportunity to lay the basis for long-term sustainable progress in human rights and for the advancement of otherinterests in China.
d. ----: Clinton delinks human rights from the annual extension of MFN tradingstatus. China is the fourth largest supplier of goods to the U.S., andtherefore general denial of MFN would have been quite disruptive for U.S.businesses selling Chinese products in the U.S., as well as for the Chineseexporters themselves. Expanding trade with China strengthened its private
sector, which would ultimately weaken the authority of the centralCommunist government and over time lead to more freedom in China. Should there have to be a connection with international trade, (e.g. exports of prison
labor) before it is appropriate to use trade sanctions to promote human rights? Should there be a WTO/GATT review of trade sanctions imposed for human rights
purposes to ensuer that similarly situated countries are treated the same in order to ensurethat trade sanctions obstensibly for human rights purposes are not really for protectionistpurposes.
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The Chinese may one day threaten to withold most-favored-nation status from the U.S. unless it
does more to improve living conditions in Detroit, Harlem and South Central Los Angeles.
-Goh Chok Tong, P.M. of Singapore.
The Appellate Body is a bunch of trade people making decision about human rights; butthey rely on experts to inform their decision about public health, etc. Why is thisdifferent? Absent the WTO, you could sanction any country you wanted. The nationalsecurity exception- can be invoked without any review by A.B. (but there are politicallimits of transparency, etc.)
Public morals exception already encompasses human rights. In prison labor, Non trade-violations (summary excecution, etc.) what kind of sanctions fit?
II. SYKES PAPER:Relationship between WTO and Human RightsArguments of the anti-WTO camp:
o You cant use sanctionso Free trade causes environmental degradation and less worker protectionrace to the bottom claimo Free trade exacerbates income inequality.
But, free-trade cheerleaders like Guzman respond:
Rights come at a price. Increase trade in goods leads to increased trade inideas (like concepts of human rights). Wealthier countries are willing andable to purchase more rights.
Trade liberalization raises living standards in aggregate; empiricalevidence that trade makes you richer.
H.R. sanctions dont make things better, and may in fact, make it worse. Broad protection opens door to protectionism. Distribution of income problem should be solved by a progressive income
tax, few efficiency losses; restrictions on trade are inferior. Solve it allwith tax policy.
III.HOWSE AND MUTUA PAPER:Jus cogens, evolving concept that trumps all other norms.Erga omnes: all states have an interest in the protection of human rights.
o Art XX (a): Public Morals. Used to block pornography, whynot child labor? Public morals should be an evolving concept,like in Shrimp-Turtle.
o Chapeau Art. XX: must be necessary, no other way to protectpublic morals that is less violative of the GATT.
o Art. XX (b):Define life as not just existence of life, butrather, as an evolving concept to include issues surrounding thequality of life.
Art. XXs scope is unclear, but besides you dont want to cut off trade, want more tradeto help solve economic and political problems. And, of course, sanctions are ineffective.
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Why would a country want business to come without any benefit to its people Mostnavepoint of paper. Doesnt account for politics of power.
Labor as a human rights issue is sticky in that they are linked to production methods.Labor rights increases the cost of production. Not obvious that these things are good forlabor (childrens families in poor countries worse off because kids are not working)
Abolition of child labor decreases the wealth of the country.
Labor Standards and International Trade Policy.
a. LABOR STANDARDS AND THE WTODeveloping countries perceived the movement by the US and France at the end of the Uraguayround to consider the relationship between trade and labor standards as an attempt to repealdeveloping countries comparative advantage and restrict their exports to the developed world.At the WTO Seattle ministerial, the US proposed the creation of a WTO working party on labor
rights, while the EU proposed the creation of a standing forum on labor involving the WTO andthe ILO. Nothing was agreed upon, and the issue was not raised again at Doha.
INTERNATIONALLY RECOGNIZED CORE LABOR STANDARDS:
1) Right of Association2) Right to organize and bargain collectively3) Prohibition of forced labor4) Prohibition of exploitive child labor5) Nondiscrimination in employment GATT Art. XX(e) allows a country to ban imports of prison labor. 307 of the Tariff Act of 1930bars entry into the US of goods mined produced, ormanufactured wholly or in part in any foreign country by convict labor or/and forced labor
or/and indentured labor under penal sanctions. Forced labor is defined as all work or
service which is extracted from any person under the menace of any penalty for itsnonperformance and for which the worker does not offer himself voluntarily.
NAFTA: Annex 1 lists guiding principles that the parties are committed to promote, eachin its own way. The eleven principles are:
i. Freedom of association and protection of the right to organizeii. The right to bargain collectively
iii. The right to strikeiv. Prohibition of forced laborv.
Labor protections for children and young personsvi. Minimum employment standards (e.g. minimum wages and overtime pay)
vii. Elimination of employment discriminationviii. Equal pay for men and women
ix. Prevention of occupational injuries and illnessesx. Compensation for occupational injuries and illnesses
xi. Protection of migrant workers
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b. LABOR STANDARDS AND THE GSPThe concept of internationally recognized worker rights is defined in Title V of the Trade Actof 1974, which established the U.S. GSP for developing countries.
GSP-Worker Rights Review Summary: Indonesia: Examines the procedure that may lead tothe withdrawal of GSP benefits if a developing country fails to afford worker rights.
Congress intended for level of development to be taken into account in assessing whetherSGP beneficiary countries meet the taking steps standard.
Subcommittee found abuses of the following workers rights in Indonesia: Right ofAssociation; Right to organize and bargain collectively; Prohibition of any form of forcedlabor; Child Labor; Minimum wage; Occupational safety and health laws.
But, even after the litany of abuses, all the Subcommitte was able to say was that withoutsubstantial concrete progress in the key issue areas in the future, Indonesias continued
GSP eligibility will be in serious jeopardy. Lame and grossly ineffectual. Ultimately, GSP benefits were not withdrawn from Indonesia, presumably because of
political concerns. Indonesia is the fourth largest country in the world in terms ofpopulation, and is a country with whom the US wants to maintain good relations. Matter ofinfluence, not a matter of law.
Although many investigations are made of BDC labor practices, relatively few countrieslose GSP benefits. Countries tend to lose benefits only when they have other politicalproblems in their relationship with the US.
Article XX; Trade and the Environment (GATT 1994, art. XX; JDS
591-600; 605-11; 614-25; 628-35; 637-46)
General exceptions, Art. XXo Pressure release valueo Built exceptions into the agreement rather than imply themo Subject to two limitations in the chapeau: not a defense if
Arbitrary or unjustifiable discrimination Disguised form of restriction on international trade
o List of reasons that a nation can deviate from GATT obligations, although not exclusive norexhaustive
o Identifies public policies sufficient to derogate from GATT policieso Only get to XX if III is violated
Basically like a defenseo European CommunitiesMeasures Affecting Asbestos and Asbestos-Containing Products
WTO Appellate Body 2000, p. 884
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Canada bring claim against EC over Frances restriction of certain asbestos imports Although it is a French law at issue, EC b/c it must defend a national law that
is in conflict with WTO obligations
Asbestoso There are 3 types of asbestos fibers: chrysotile, PCG, amphiboleso Usually goes in products to strengthen them, e.g., cement or
insulationo Chrysotile is carcinogenic, but amphiboles are the worst kindo PCG dangerous also but not as bad
France restricts chrysotile importsnot a ban but it can only be imported ifno feasible alternative
Amphiboles are completely banned PCG is made in France
Panel holds that all 3 are like products but can be discriminated against under Art.XX
Like products under Art. III(4) b/c they are structurally similar They can be discriminated against under Art. XX for health reasons, since
some are more carcinogenic than others
AB affirmed outcome but revised Panels analysiso AB: wrong analysis of finding like products
Panel only wanted an end-use analysis AB wants fact specific, 4-part test
Properties, nature, qualities of products End uses Consumers tastes and habits Tariff classification
Panel focused on substitutability, AB insists on all 4 factorso AB: can use Art. XX to analyze Art. III
Panel thought that Art. XX factors should not be considereduntil after Art. III(4)
Must consider them separately Art. III must be satisfied first before looking to
exceptions AB uses Art. XXs health factor as a factor in considering
Art. III(4)s consumer preferences criteria and qualitycriteria
Consumers wont prefer lethal products Lethality is a quality of the product Burden on Canada to demonstrate otherwise
o AB: XX chapeau requires scientific standards, not just conjecture Substitutability
o 90% of French imports were for cement products, which can usePCG as substituteo Canada argued that panels should focus on this use specificallyo AB focuses on other uses of PCG that do not substitute w/ chrysotile
fibers Fire retardation, etc. Not true substitutes
Concurring opinion: let health threat of chrysotile do all the work Art. XX must be based on proven science
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If no science, then no exception This then allows consumer concerns matter when there is no science, even if
concerns are irrational
Free trade and the environment Two categories of restrictions
Contento Restrictions usually fit comfortably w/in Art. XX(b) or (g)o E.g., ivory from elephants
Production methodso Production restrictions do not fit as comfortably when there are no
overflow problemso E.g., gasoline by-productso E.g., greenhouse gases will affect each country differently
Other regulations Transportation of hazardous wastes Pollution by transports
Why important now? Intrinsic value of protecting environment Protection of eco-systems and the food chain Bio-diversity: keep plants and animals, may be useful to us later
Basic GATT issues Environmental rules can be pretextual trade barriers Content rules raise Art. III questions if different content standards apply to
imports
Art. I issues if some countries pass while others do not Production process rules may also constitute QRs under XI Art. XX exceptions can apply to all tese rules
USImport Prohibition of Certain Shrimp and Shrimp Products WTO AB 1998, p. 906 India, Malaysia, Pakistan, and Thailand brought claim against US for
domestic legislation prohibiting importation of shrimp that does not meetsafe-turtle standards
o Background: complex battle in US domestic arena Between Administration, interest groups, Congress, courts All focused on 609
Import ban on shrimp harvested with commercialfishing technology which may adversely affect seaturtles, and requiring Admin to negotiate agreementsto further goal
Importer must be either a certified country or qualifyfor certification-substitute
Shrimp has to come from certified country or fromfisher that uses proper nets
Interest groups included both fishers and net producers Brought Admin to court Based on open-ended legislation that allows
Commerce to promote regulationso Procedural issues
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Step away from diplomatic efforts to judicial model GATT intended to foster state-to-state agreements Diplomatic efforts are secret, judicial procedures are
public First case where NGOs were allowed to participate
Panels allowed to solicit info from anyone US NGOs got support of federal govt, even though
in domestic litigation they were opponents (ctdecided that regulations should be implementedworldwide by 1996, Exec. opposed but orgssupported)
Panel held that US restrictions threatened the security and predictability ofthe WTO system
AB re-analyzed, found 609 violated GATT and did not qualify as exceptiono AB did not like Panels analysis
Panel did not look at ordinary meaning of the language Went straight to the chapeau without looking to the
exceptions Analysis would make the exceptions meaningless
o Environmental restrictions are a violation of Art. XIs quantitativerestrictions
o Could possibly be justified under Art. XXs exception US justifies w/ Art. XX exceptions(g) or (b) Exhaustible natural resources (sea turtles) Leg authorized unilateral efforts to save turtles Preambular reference to sustainable development supported
USs goal of saving turtles 609 relates to conservation under XX(g)
o But law violated requirements of chapeau Chapeau deals with how the regulation is applied
Cannot be (a) arbitrary or (b) unjustifiablediscrimination or (c) disguised restriction oninternational trade
Focuses on application of a measure otherwiseacceptable under XX
Policy objectives alone are not sufficient to avoidchapeau
609 = unjustifiable discrimination Lack of flexibility
o US required US-type regulatory regime inforeign country to qualify for certification
o Regardless of countrys current status,needs, etc
o Did not accept fishers who self-certified(justified: no accountability, fishers will justlie)
Focus on source rather than on productiontechnology used
Failure to negotiate with non-Caribbean countries
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Failure to extend collective action under Inter-American Convention model to other countries
Different phase-in and technology-supportapproaches in Caribbean and elsewhere
Gap between statute and behavior of government(really the orders of the CIT)
Essentially a MFN issue Arbitrary
Lack of transparency and predictability No due process
o No recourse for denied certificationso No opportunity to be heardo No specific notice or reasons given
PBS: AB reigned in an aggressive panelo Panels are unique, dissolve after 1 caseo May be composed of opinionated members who take case in one
directiono Also, dont want to piss off too many members: AB does take into
account some political implications b/c of nature of fragile
agreement
US responseo New regulations shifted focus from origin to shipso CIT believed that producer regulation was unjusitified b/c of
difficulties in monitoring compliance Ignored WTO, focused on 609 only
o Fed. Cir. reversed Seems to have read into statute WTO requirements New regulations satisfied WTO requirements
Environmental regulation under WTO Does GATT lead to race to the bottom?
o Inherently hostile to environmental concerns?o Or can it include them?
Is there a demand for green production? Does Engels law (as income increases, demand for goods changes) apply to
green demands?i.e., does wealth lead to preference for cleaner environment
Article XX defenses and exceptionsAffirmative defenseWhen examining a measure that appears to contravene WTO obligations:
1) look at whether it fits into one of the exceptions,2) if it appears to, then it is provisionally justified and must be testedby the chapeau, meaning 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 on international trade
Art. XX Exceptions:a) necessary to protect public morals
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b) necessary to protect human, animal or plant life or health
c) relating to gold/silverd) necessary to secure compliance with laws or regulation s which are not
inconsistent with GATT rules themselves (Enforcement)e) relating to the products of prison labor
f) imposed for protection of natl treasuresg) relating to the conservation of exhaustible natural resources if such measuresare made effective in conjunction with restrictions on domestic production or
consumption
i) export restrictions necessary to ensure domestic suppliesj) essential to acquisition/distribution of products in short supply
b, d, g the most important; a has never been interpreted at all, the rest are marginal for now Chapeau is important Should valid exceptions be limited to localized harms? Should there be different standards.
Also applies to SPS; If a measures complies with SPS, it is assumed to comply with XX(b)
XX(b): necessary=country sets level, but Panel weighs justification and harmXX(d): necessary same as above, pretty muchXX(g): relating to=primarily aimed at
XX(b): Necessary to protect Human, Animal or Plant Life and Health
FranceAsbestos
What mean necessary?o France made a prima facie case that there was no reasonable alternative to the ban,
which CAN did not rebuto No need to quantifyrisk to justify a restriction; A risk may be evaluated either in
quantitative or qualitative terms Members can decide for themselves what level of health measures they feel is
appropriate; Canada tries to argue controlled use, but Panel rejects, saying France justified in
wanting no risk; only way to have no risk is to prohibit In determining measures, govts can rely on opinion of qualified and respected sources,
even if a minority opinion A measure does not cease to be reasonably available just b/c administrative difficulties
result Restriction okay only if there were no alternative measure consistent with the GA, or
less inconsistent with it[that] could reasonably be expected to employ to achieve its
health policy objectives (quoting from ThailandCigarettes) Reasonable efficacy of measure, weighed with the importance of the risk, should be
considered in determining necessity
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ThailandCigarettes
Thailand not allowed to impose discriminatory taxes on foreign cigarettes under XX(b)because there were less discriminatory means of achieving its health objectives.
XX(d): Enforcement:measures necessary to secure compliance with laws or regulation swhich are not inconsistent with GATT rules themselves Protects enforcement of customs, patents, trade marks, copyrights, laws against deceptive
practices, permitted monopolies
KoreaBeef
Was Koreas dual system necessary to secure compliance with GATT consistentregulations?
Here, necessary looked at as closer to indispensable than helpful towards Like in France-Asbestos, the importance of the measure itself is weighed to adduce
whether the restriction is necessary The effect on imported goods (natl treatment) is also an important consideration Recognizing that Korea is justified in wanting the elimination of fraud in the sale of beef,
the AB still says that devoting more resources to enforcement and being smart about itcould get Korea the level of elimination it wants (Panel takes over determination ofreasonableness here, as opposed to inAsbestos)
Moreover, Korea put the cost of its requirement squarely on the suppliers and retailers ofimported beef, and did not distribute the cost evenly amongst conveyers of domestic beefand the rest of the public.
So enforcement costs cant just be shifted by imposing trade restrictionsXX(g): Conservationrelating to the conservation of exhaustible natural resources if such measures are made
effective in conjunction with restrictions on domestic production or consumption
U.S.Gasoline
U.S. charges more for imported gas to be refined; claims XX(g) related to = primarily aimed at air an exhaustible natural resources AB: rejects old approach that the discrepancy had to be primarily aimed at the
conservation efforts
Now, it is the measure itself that must be primarily aimed at conservation , not thediscrepancy No effects test necessary under XX(g) US still loses, because the measure failed under the chapeau
Shrimp-Turtle (for purposes of conservation; for chapeau, see below)
Living resources are exhaustible natural resources
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natural resources an evolutionary definition Says its applying U.S.Gasoline, but uses language not disproportionately wide in
scope relative to the ends and reasonably relating to (seems looser) Panel does not consider a jurisdictional limitation, here finding a sufficient nexus
between the U.S. and the sea turtles
XX: ChapeauLook to chapeau after establishing a presumptive exceptionSubject to the requirement that such measures are not applied in a manner which wouldconstitute a means ofarbitrary or unjustifiable discrimination between countries where the sameconditions prevail, or a disguised restriction on intl trade, nothing in this this Agreement shall
be construed to prevent the adoption or enforcement by any Member of measuers: [a-j]
Shrimp-Turtle I
U.S. adopted measures to exclude importation of shrimp not caught using methods thatwould protect sea turtlespasses on the question of extraterritoriality
Ban would not apply to countries that were certified as having a fishing envt that didntpose a threat to sea turtles or that complied with US procedures to prevent killing of seaturtles andhaving a rate of incidental taking similar to US vessels
The goal itself was okay, but the way it was implemented was not; notes that Art. XX is alimited and conditional exception, but, again, depends on the importance of the measure
AB: In order for a measure to violate the chapeau, and apply arbitrary or unjustifiablediscrimination between countries where the same conditions prevail there must be:
1. Discrimination2. Arbitrary or Unjustifiable in character3. Occurring in countries where the same conditions prevail (can apply between
importer and exporter, or between exporters)
Unjustifiable Discrimination here because:1. In 1991, Caribbean cos. granted a 3-yr. phase-in period, which was not given to
other countries; this phase-in period was highly beneficial2. U.S. negotiated with favored countries before instituting the ban, but didnt with
others (here India, Thailand, et al); Major factor in ABs decision; this flouted notonly Congressional intent, but the commonly recognized that efforts to protect theenvt should be made multilaterally (cites Inter-American Convention as a good
example)3. U.S. essentially reqd, in practice, the use of TEDs, making the requirement hinge
on US method; this was too strict and inflexible a standard, because it did not takeother countries conditions into account
4. US assisted in tech transfer with Caribbean cos., but not others5. US even excluded shrimp caught using TEDs if they were caught in countries not
certifiedas taking effective measures.
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Due process problems, too, as there was no way to appeal a denial of certification, nor anexplanation of why certification deniedHow far will this go?
Import ban the heaviest weapon in the trade arsenal; shouldnt be used lightly (KoreaBeef another case in which costs to imports not adequately taken into account)
ShrimpTurtle II(Enforcement) US enforcement measures deemed okay
1. US participated in extensive negotiations with other countries;a. negotiations made in good faith need not be identical, just comparable;b. need not result in an accord
2. No longer was there a requirement to adopt essentially the same policies;a. the new measures provided much more flexibilityb. comparable in effectiveness the new standard, giving cos. flexibility to
meet standard; no discrimination with this approachc. Also, US officials could now take into account the specific conditions of
Malaysian shrimp production and any other effects a country took to assist
the sea turtle populations
So, essentially, to avoid an adverse ruling under XX,1) Go negotiate equally w/ everyone2) Treat them the same3) Regulate the relevant domestic producers equally4) Have a fair, transparent process for importing/certification
What should environmentalists be concerned with?1. Makes it harder to implement environmental regulations2. Highly technical formulations for doing it right3. Bad precedentwhat comes next?
Sanitary and Phytosanitary Agreement (SPS)
Basic idea: To give states flexibility in health matters- plant, animal, and human life w/in freetrade agreement context.
G inconsistent w/ WTO mission for WTO to be able to review matters relating to health/tradeexception scenarios.
SPS Agreement
Art. 2Basic Rights and Obligations2.1- Members have the right to take SPS measures nec. for the protection of plant, animal, &human life not inconsistent w/ provisions of this agmt.2.2- SPS measures allowed only to the extent necessary. based on scientific principlesand not w/o sufficient scientific evidence except as provided for in 5.7
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5.7- In absence of scientific principles, restrictions are provisional and member shallseek to obtain additional information necessary for more objective risk assessment. (implicitPrecautionary Principle) 5.8- if another member suspects restrictions are overly constraining to its exports and notbased on intl standards or such standards do not exist (5.7) an explanation of the SPS
measures may be requested and will be provided by the offending member.2.3- SPS measures may not be discriminatorily appliedagainst/between members whereidentical or similar conditions prevail (cannot be used as veiled sanction or protectionistmeasure).
Art. 3Harmonization3.1/3.2- SPS to be based on intl standards. If based on intl standards, shall be deemed to benecessary and presumed consistent with SPS agmt. and GATT.3.3- More stringent standards may be erected if in accord with 5.1-5.8Risk Assessment, basedon scientific justification, and not more than necessary or inconsistent w/ any other provisions ofSPSagmnt.
Art. 5Assessment of Risk and Determination of the Appropriate Level of Sanitary orPhytosanitary Protection
5.1- Assments to be based on techniques developed by relevant intl organizations.5.2- Members shall take into acct:
available scientific evidence relevant processes and production methods relevant inspection sampling and testing methods prevalence of specific diseases or pests existence of pest or disease free areas relevant ecological and environmental conditions quarantine or other treatment
5.4- Members should make efforts to minimize negative trade effects5.5- Revisits 2.3- avoid arbitrary or unjustifiable distinctions if measure results indiscrimination or disguised restriction on trade (could there be a 5.5 violation w/o a 2.3violation?)5.6- Measures shall not be more trade restrictive than necessary to achieve nec. level of SPSprotection5.7-Precautionary Principle, supra
ECBeef Hormones
Risk considerations: How harmful is product? What is the risk to the population? 186- effects mustbe at least ascertainable, not necessarily identifiable or
scientifically identifiable, if member is detecting and trying to impose measure. Magnitude or threshold of risk is not required by SPS agmnt. Only that a given SPS
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measure is based on a risk assessment.
189- based on- taken to refer to a certain objective relationship between two elements,that is to say, an objective situation, that persists and is observable between an SPSmeasure and a risk assessment.
193-rational relations