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Key words and expressions Multilateral trade negotiation, Uruguay Round, WTO Agreement, direct effect, nondiscrimination, MFN, tariff, transparency, escape clause, exceptions, multilateral trade agreements, preshipment inspection, technical barriers to trade, sanitary and phytosanitary measures, trade-related investment measures, antidumping, subsidies and countervailing measures
SEC. I History of contemporary international trade law • International trade has grown dramatically in the last 50 years. In great measure, this is because the world’s nations have cooperated in eliminating protectionist domestic legislation and in promoting the free exchange of goods. US, UK raised their tariffs The Great Depression: US President Franklin Roosevelt’s New Deal led to Bilateral reciprocal agreements. Recovery from GD:
Just before the end of World War II. Roosevelt and Churchill met at Atlantic to make a blueprint in Atlantic Charter for the future reconstruction after the World War II. Protectionist sentiments of 1930s were rejected and multinational trade agreements were in the process.
The Bretton Woods System • The 1947 GATT In Bretton Woods in July 1944, 44 countries participated the UN monetary and financial conference. IMF, IBRD were created, and the ill-fated International Trade Organization then was facing a series of problems ahead of it. In stead of ITO, the developed market-economy countries entered into an accord in 1947, the General Agreement on Tariffs and Trade, which was a multilateral convention governing the international trade, and set out the principles under which the contracting parties, on the basis of reciprocity and mutual advantage, were bound in world trade in goods
Multilateral Negotiations : The first 5 rounds were exclusively devoted to the tariff reductions, while the last 3 rounds expanded theirs agenda to non-tariff matters. ROUND : 1947, Geneva Round 1949 Annecy ,France 1950-1951 Torquay, England 1955-1956 Geneva 1961-1962 Dillon Round in Geneva 1964-1967 Kennedy Round in Geneva 1973-1979 Tokyo Round in Geneva 1986-1994 Uruguay Round in Montevideo, Geneva, Montreal and Marrakesh （at which WTO was established ）
Sec. II WTO • Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations • 1. Concluded on April 15, 1994, 108 states signed the Final Act (FA) • FA consists of 3 parts that form a single whole • 1st part is FA itself, a one-page umbrella that introduces the other two • 2nd part is WTO Agreement and its Annexes: Multilateral Trade Agreements (MTA) and the Plurilateral Trade Agreements (PTA). MTA is integral parts and binding on all members, which consists of GATT, General Agreement on Trade in Services (GATS), Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), the Trade Policy Review Mechanism (TPRM) • The 3rd , Ministerial Declarations and Decsions
Nature and Functions of WTO • Nature: • Functions of WTO: • It is an umbrella organization governing the world trade • It has similar legal capacity as other international economic organization • To implement, administer and carry out the WTO Agreement and its annexes • to act as a forum for ongoing multilateral trade negotiations • To serve as a tribunal for resolving disputes • To review the trade policies and practices of member states
The WTO Agreement: the Agreement Establishing the World Trade Organization, called a “mini-charter”, because it is much less complex than International Trade Organization Charter, namely Havana Charter. More details: see P. 363
Structure of the WTO Five main organs: • Ministerial Conference • General Council functions as Dispute Settlement Body and Trade Policy Review Body • Council for Trade in Goods • Council for Trade in Services • Council for Trade-Related Aspects of Intellectual Property Rights See p. 365
SEC. III GATT 1994 • GATT 1994 • Direct effect: some of the provisions are directly effective, which may be relied on by private persons to challenge the actions of a member state if the state adopts implementing legislation authorizing such a challenge. • Essentially followed GATT 1947 with some changes in the terminology • The legal distinct between the two is that: (1) the WTO is not the legal successor of old GATT; (2) The member states of GATT 1994 owe no obligations to the contracting parties of GATT 1994, those parties who accepted GATT 1947 without withdrawing from GATT1947 are bound by the two
Principles of GATT • Nondiscrimination : 1.The Most-favored-Nation Rule: meaning and exceptions (See: p.371) 2.The National Treatment Rule: See Art. III, paragraph 4 of GATT 1994 The fundamental principle of AGTT which is given the concrete form in the most-favored-nation (MFN) and National Treatment
Protection through tariffs: each member state may protect its domestic industries only through the use of tariffs at the time or point of importation. • The exceptions to this are : • The imposition of temporary export prohibitions or restrictions to prevent or relieve critical shortages of foodstuff or other essential products • The use of import and export restrictions related to the application of standards or regulations for classifying, grading, or marking commodities • The use of quantitative restrictions on imports of agricultural and fisheries products to stabilize national agricultural markets. • The use of quantitative restrictions to safeguard a state’s balance of payments. • The use of quantitative restrictions by a developing state to further its economic development.
Transparency: governments of member states must make their rules, regulations and practices open and accessible to the public and other governments. (Free Trade Area ) • Regional Integration: GATT seeks to promote international trade through economic integration, which encourage WTO member states to participate in free trade areas and customs unions. Free trade area means a few of states reduce or eliminate their tariffs between themselves, but maintain their own individual tariffs as to other states.
Exceptions • Escape Clause: Art. XIX of GATT 1994: Emergency Action on Imports of Particular Products. (safety valve) • Exceptions: generally called general exceptions, which excuse a member state from complying with its GATT obligations so long as this is done in accordance with requirements granted by GATT. (See p.380. ) Allows a WTO member state to temporarily escape from its GATT obligations when there is a surge in the number of imports coming from other member states and cause injury or threat to it domestic industries.
Sec. IV Multilateral Trade Agreements • Scope of Agreements on Trade in Goods annexed to the WTO Agreement: 9 1.Customs valuation; 2. preshipment inspection; 3. technical barriers to trade;4.Sannitary and phytosanitary measures; 5.trade-related investment measures; 6.import-licensing procedures; 7.subsidies and countervailing measures; 8. antidumping. 9. safeguards.
Customs valuation: When goods cross international frontier, they are charged a tariff that is based on a percentage of their value. The customs valuation code, or Agreement on Implementation of Article VIIof GATT 1994, is designed to harmonize the methords used by WTO member states to determine the value of those goods
Preshipment inspection (PSI): Developing states frequently engage private companies to verify price, quantity, quality, customs classifications, and other characteristics of goods before the goods are shipped from other states. This is often used by developing countries to prevent over –and-underinvocing and fraud, and thus prevent the flight of capital and evasion of customs duties.
PSI shall not be allowed unless: 1.PSI is carried out in a nondiscriminatory manner. 2.Products subject to PSI and imported from other members shall be accorded no less favorable treatment than national products. 3. Inspections shall be carried out either in the state of export or the state of manufacturer. 4. Quantity and quality inspections are performed in accordance with the standards defined by the buyer and seller in their purchase agreement or relevant international standards 5.PSI activities shall be carried out in a transparent manner 6.informatio, guidelines and regulations relating to PSI shall be readily available to exporters. 7.Unreasonalbe delays shall be avoided in carrying out PSI activities.
Agreement on Technical barriers to trade (TBT): Establishes rules dealing with the way the WTO members draft, adopt and apply technical regulations to ensure (1) they provide an appropriate level of protection for the life and health of humans, animals, plants and environment as well. (2) the regime prevent deceptive practices and (3) the rules do not create unnecessary obstacles to trade.
Agreement on the Application of Sanitary and Phytosanitary Measures (SPS): • Trade-related investment measures: TRIMs Agreement, is aimed at facilitating foreign investment and eliminating some of the provisions commonly found at foreign investment laws that distort or reduce international trade. The agreement usually forbids provisions in investment laws that discriminate unfavorably against foreigners, for example: rejection of national treatment, quantitative restrictions, local contents requirements, trade-balancing requirements, foreign exchange balancing restrictions. • Which is drafted to complement the TBT to by defining the measures that are probably taken by WTO members to protect human, animal, and plant life and health. But they shall not be used as a disguised means for restricting international trade .
Antidumping : • Initiation of antidumping investigation 1.Written application by or on behalf of the domestic industries, or in special circumstances by governmental authority of the affected state. 2. By an application made by authorities of an affected state. Requirements: ⑴Fact of dumping; ⑵material injury or threat of injury to or material retardation to the establishment of , a domestic industry; ⑶ a causal link between the dumped imports and the alleged injury. a product is to be considered as being dumped, i.e. introduced into the commerce of another country at less than its normal value, if the export price of the product exported from one country to another is less than the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country.
Subsidies and countervailing measures: • Examples of subsidies: direct transfers of fund; potential direct transfers of fund; the forgoing of revenues; the providing of goods or services; the conferring of any form of income or price support A subsidy is a financial contribution made by a government or other public body that confers a benefit on an enterprise, group of enterprises, or an industry.
Categories of subsidies. Prohibited subsidies (red subsidies: 1.dependingon exports performance; 2.contingent upon the use of domestic instead of imported goods. ) Actionable subsidies (yellow subsidies: depending on whether injuring domestic industries of another member party;1.injure a domestic industry of another member state of WTO; 2. nullify or impair benefits due another member state under GATT 1994;3,cause or threaten to cause serious prejudice to the interests of another member state.) Nonactionable subsidies (green subsidies: consists of nonspecific subsidies and certain specific infrastructural subsidies: assisting the costs of research activities carried on by or on behalf of business firms; 2.aid disadvantaged regions;3.help existiing facilities adapt to new environmental requirements.)
Safeguards: are emergency actions that a WTO member many take to protect its domestic industries from serous injury from a sudden increase in the quantity of an imported product. In stead of withdrawing concessions in the manner provided for by Art.19, states found it easier to resort to alternative protectionist device that limited exports instead of imports, such as “orderly marketing arrangements” (OMAs), and “voluntary export restraints”(VERs)
Chapter Questions • Principles of GATT 1994 (WTO) • The WTO Agreement • Nondiscrimination • What is Transparency • What is Exception, and the types of exceptions • Technical barriers to trade • Trade-related intellectual property rights • What are safeguards? Under what conditions can they be applied?
