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Unit 3: Treaties - GATT

Unit 3: Treaties - GATT. Werner Raza Werner.raza@akwien.at WS 2009/10. Basic Structure of WTO agreements. Basic Principles - Overview. Tariff reduction (No formal obligation, best endeavours approach) Non-Discrimination: Most-Favoured-Nation (MFN) Principle National Treatment

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Unit 3: Treaties - GATT

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  1. Unit 3: Treaties - GATT Werner Raza Werner.raza@akwien.at WS 2009/10

  2. Basic Structure of WTO agreements

  3. Basic Principles - Overview • Tariff reduction (No formal obligation, best endeavours approach) • Non-Discrimination: • Most-Favoured-Nation (MFN) Principle • National Treatment • Prohibition of Quantitative Restrictions • Trade Remedy Measures • Special & Differential Treatment for LDCs • General Exception: public order, health etc

  4. Non-Discrimination: MFN-Principle • GATT Art I: any concession (esp. tariffs) must be immediately and unconditionally extended to like products of all other Member States • Exemptions: • Safeguard provision (Art XIX) • Free trade areas/costums unions (Art XXIV) • Tariffs not higher than prior to formation of FTA/CU • Elimination of duties on substantially all trade

  5. Non-Niscrimination: National Treatment • Art III GATT: products imported from any MS shall be accorded treatment no less favorable than that accorded to the like products of its own territory in respect of all laws, regulations, and requirements affecting their internal sale • “problem” technical standards  Agreement on Technical Barriers to Trade • “Problem” phytosanitary/sanitary measures: Agreement on Phytosanitary and Sanitary Measures • Exception of Art III:8 – Government purchases (but: GPA)

  6. Quantitative Restrictions • Examples: quotas, import/export licences • Art XI: prohibits use of quantitative restrictions • Exceptions: • Art XII: balance of payment crisis • Art XVIII: LDCs for BOP or infant industry protection • Art XIX: safeguard provision • Major deviation: voluntary export restraint agreements, e.g. in textiles and clothing (Multi-Fibre-Agreement 1974 and predecessors)

  7. Trade Remedy Measures • Art VI GATT: right to unilateral action in case of unfair foreign trade practices, eg dumping or subsidization, which seriously injures domestic industries • Dumping: sale of products abroad at prices below domestic sales price  unilateral imposition of anti-dumping duties (difference between export and domestic sales price) • Subsidization: foreign governments subsidize production of export goods  unilateral imposition of counterveiling duties (A. on Subsidies and Counterveiling Measures)

  8. Special & Differential Treatment for LDCs • Non-reciprocity in tariff reduction commitments (Art XXXVI) • Imposition of quantitative restrictions for BOP, infant industry protection (Art XVIII) • Art XXXVII: elimination of tariffs on products of export interests to LDCs by DCs (Establishment of GSP in early 1970s)

  9. General Exceptions (Art XX) • Protection of public morals • Protection of public safety • Protection of human or animal health or life • Protection of national treasures • Conservation of exhaustible natural resources  But must not be arbitrary, unjustifiable discrimination or disguised restriction on international trade • Art XXI: allows any action necessary for protecting national security, traffic in arms and munitions • Art XXV: GATT obligation may be waived by two-thirds majority vote

  10. Tariff Reduction – Effects of a non-prohibitive tariff

  11. Tariff Reduction – Technical Issues • No formal obligation, but best endeavours: GATT preamble commits Members to enter into “reciprocal and mutually advantageous arrangements directed to substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international commerce” • Technical Provisions: • Tariff Binding • Tariff Classification (Harmonized System 1984, “intrinsic nature”, only one category per product) • Tariff Valuation (Customs Valuation Code; UR Agreement on Implementation of Art VII GATT stipulate “transaction value” as basis) • Rules of Origin (Agreement on Rules of Origin, criteria: last substantial transformation, ie. Change in tariff classification and percentage of value-added)) • Tariff Administration (approx. factual cost)

  12. Tariffs – a typology

  13. Formula/coefficients Flexibilities for DCs applying the formula/sensitive products Unbound tariffs (+20%?) Least Developed countries: exempt from tariff reduction, but tariff binding Sectors for deeper tariff reduction or elimination: 13 sectors, reduction to 0? Doha Round NAMA negotiations – key issues ICs: If t0 = 4% and a=8  t1 = 2,67% (-33%) DCs: If t0= 15% and b=19  t1 = 8,38% (-44%)

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