International Trade Policy

Course will focus on international regulatory activity, rather than transactions. This includes both the national government regulation of economic activity and the international law of economic institutions (which binds government instead of private actors.

The increasing relative importance of world trade has meant that the economic welfare of one country is often tied closely to that of another. As we will see, this increasing interdependence of national economies has put strains on the WTO/GATT system, particularly during times of recession and slow economic growth.

Free trade promotes a mutually profitable division of labor, greatly enhances the potential real national product of all nations, and makes possible higher standards of living all over the globe Paul Samuelson. Samuelson proposed that freer trade produced aggregate efficiencies. The two most common types of restraints on imports are tariffs (a tax levied on imports at the time of importation, which usually has the effect of increasing the prices at which imports are sold) and quotas (an upper limit on the quantity or value of imports allowed during a given time period).

Common Arguments for trade restrictions: (1) national security and self-sufficiency, (2) trade restrictions to address domestic distortions, and (3) the optimal tariff argument (if the competitive assumptions are wrong then a country might be able to extract revenue through quota that does not create harm to the importing country this might be an option for big economies, but they still face the possibility of retribution for such policies from the countries they injure).

WTO/GATT The General Agreement on Trade and Tariffs (GATT), a multinational treaty for trade, that was in force provisionally and did not create an international organization. The Uruguay Round resulted in the creation of a new and better defined international organization and treaty structure a world Trade Organization (WTO). The Uruguay round also changed the dispute settlement procedures. While the GATT was a trade in product, the Uruguay Round was also a trade in services treaty. The GATTs purpose was to constrain governments from imposing or continuing a variety of measures that restrain or distort international trade.

The Uruguay Round brought the Most Favor Nations clause, the National Treatment clause, services (embracing over a 100 different sectors) and TRIPS. By adhering to the WTO Charter, countries become subject to all of the annexed agreements, except the plurilateral agreements (adherence to those is optional).

The WTO has a mini-charter which highlights a spirit of flexibility that allows for texts to be added or subtracted over time and for the evolution of institutions necessary for implementation of the rules. The WTO charter is confined to institutional issues. Most significantly, the charter explicitly outlines four important annexes that technically contain thousands of pages of substantive rules.

Annex 1 contains the Multilateral Agreements, which comprise the bulk of the Uruguay Round results and which are all mandatory in the sense that these texts impose binding obligation on all members of the WTO. Annex 1A consist of GATT 1994, which includes the revised General Agreement with the new understanding, side agreements on 12 topics ranging from agriculture to preshipment inspection, and the vast schedules of tariff concessions with a volume of tariff listings. Aneex 1B consists of the General Agreement on Trade in Services (GATS) which also incorporates a series of schedules of concessions. Annex 1C consists of the Agreement on Trade-Related Aspects of Intellectual Property (TRIPS). Annex 2 contains the dispute settlement rules, which are obligatory on all members, and which form a unitary dispute settlement mechanism covering all the agreements listed in Annex 1, Annex2, and Annex 4. Annex 4 contains the four agreements that are optional, termed plurilateral agreements. The four agreements deal with government procurement, trade in civil aircraft, bovine meat, and dairy products.

The governing structure of the WTO is different from that of the GATT. The top organism is the Ministerial Conference followed by 4 councils. The General Council (GC) has overall supervisory authority. There is also I council per each of the Annex I agreements Council on Trade in Goods, Council for Trade in Services, and Council for Trade-Related Aspects of Intellectual Property Rights. A Dispute Settlement Body (DSB) is established to supervise and implement the dispute settlement rules in Annex2. The GC is authorized to perform DSB tasks and a TPRM Body is a Trade Policy Review Mechanism.

The WTO and the Uruguay Round treaties will not be self-executing in US law - so not automatically became part of U.S. law. Likewise, the settlement procedures automatically become part of US law. The Southerland Report concluded: The WTO will be judged on whether it was worth having some loss of policy space at the national level for the advantages of cooperation and the rule of law at the multilateral level.

Decision Making The GATT had a one-nation one-vote mechanism. This whole system was changed with the creation of the WTO. The WTO Charter specifies decision by consensus at the Ministerial Conference, and General Council, but when consensus cannot be achieved, decisions will be made on the basis of the majority of the votes cast, with each member laving one vote, unless otherwise provide. The MC and GC have exclusive authority to adopt interpretations of the WTO charter and the multilateral agreements. The MC may also waive an obligation under the WTO Charter and the Annex 1 Multilateral Trade Agreements. Amendments to the WTO charter and the Annex 1 multilateral trade agreements may be proposed to the MC by members or councils When consensus for an amendment is not reach an amendment generally requires approval of 2/3 of the members, unless it wont affect member rights and obligations. Otherwise they come into effect only for those members accepting them, unless of the members decide that members not accepting the amendment may be free to leave the WTO or stay with permission of the MC. Further, There are some rules that need 100% approval (WTO decision making rules, Tariff schedules, MFN, TRIPS-MFN). Finally, the WTO provides forum to negotiate other agreements contained in the annexes.

There were two ways to join the GATT: the regular procedure (seeking provisional accession, gaining its ticket for admission by agreeing to tariff concessions from the other members) or through sponsorship for new countries coming from former GATT members.

TO accede to the WTO nations must apply to the MC. There is no longer a sponsorship mechanism. The party must then negotiate (bilaterally) on market access for goods and services and the other terms to be agreed. When the negotiations conclude, a schedule to GATT and GATTS will be prepared and annexed to the protocol for accession. The protocol is approved by consensus (meaning a single NO keeps the nation out). A to-thirds vote is needed for the adoption of the protocol. There is also an opt-out or non-application procedure that allows member nations (only one time) not to consent to an application and have the annexes 1 and 2 not apply between those 2 nations.

Least developed nations will only be required to undertake commitments and concessions to the extent consistent with their individual development, financial and trade needs or their institutional capabilities.

Chinas Accession to the WTO For many years, China was the single largest country outside the trading system. China was admitted in 2001.

The GATT was self-executing in the U.S.

Non-Tariff Agreements of the WTO

1A Agriculture GATT 1991 SPS GATT 1987 Textiles C???? TBT - Art. VI Dumping Agreement - Art. VII Valuation Agreement - TRIMS Agreement (restates other agreements) - Pre-shipment Agreement (unimportant) Agreement on Origin (more of like an Agreement to negotiate an agreement) - Agreement on Licensing - -Agreement on subsidies - - - Agreement on Safeguards

1B GATS

1C TRIPS 2 DSI 3 TPR 4 (optional treaties) Civil aircraft and

Functions of the WTO:

h a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the worlds resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development.

1st function Faciltating impl and org 2nd function- forum for negotiations and 3rd function Dispute Settlement 4TH Function Trade Policy review 5th function Cooperation with the IMF and

Dispute Resolution Process

GATT XXIII The GATT parties stopped using working parties (parties couldnt agree by consensus) and started forming arbitration panels that became the norm in this dispute resolution process. WTO DSU The dispute settlement process in the WTO is compulsory (members must bring their cases to the DSB and not resolve it outside this forum). The process starts by a request of consultations to a country (must respond in 10 days) and then a meeting might be scheduled (must happen within 30 days). If the consultations doesnt resolve the issue, countries move to the panel process. A panel would be establish in the meeting after the negotiation (unless someone objects usually happens) or after the second meeting unless

everyone, including the party requesting the panel, objects -never happens). A panel is established and conformed taking into account the objections of the parties or have it appointed by the XXX (when the parties cant agree) and will be formed. The panel will come with a decision. The winning party will usually try to have the panels decision improved to make it more solid for appeal. The decision can be appealed to the Appellate Body (formed by 7 members from different areas). If the decision (after appeal) is not . The wining party can request retaliatory measures

Dispute Resolution Process

The EU and the U.S. have been losing the most cases and they have complied. The EU had three problematic cases (bananas competition, hormones food reg. and Biotech).

To bring a case you need

(1) Nullification or impedance and (2) violation, measure non-violation or other situation.

Nullification or Impairment in Violation Cases

U.S. Taxes on Petrolum and certain imported substances The panel established (following GATT precedent) that after establishing prima facia case then nullification was presumed. This raised the question of whether this presumption was a rebuttable one. The panel decided that the Agreements is not on effects on trade flows but on trade conditions (which were changed although minimally) Article III:2 cannot be seen as protecting expectations on export volumes; it protects expectations on the competitive relationship between imported and domestic products. Thus, there is a presumption (not really rebuttable) that a violation will bring nullification. In a violation case only the violation has to be proved as the nullification effect is implied.

Nullification or Impairment in Non-Violation Cases

Japan Measures affecting consumer photographic film and paper. The U.S. complained about the measure (anti-advertisement measure, etc). So although these measures didnt violate the Agreement per se it distorted trade and failed the expectations of the parties to the Agreement.

Article XXIII:1(b)establishes three elements that a complaining party must demonstrate in order to make out a cognizable claim: (1) application of a measure by a WTO Member; (2) a benefit accruing under the relevant agreement; and (3)nullification or impairment of the benefit as the result of the application of the measure. You need a measure, a benefit and impairment with some sort of nexus between the measure and the impairment. (1) Measure (like administrative guidance)if gov. involved and incentivizes companies to comply then it is like a binding measure. Even measures by private parties (when empowered by the government) are challengeable. (2) (3)

There has only been three non-violation cases (only 1 successful one)

Measures that can be challenged United States Measures relating to zeroing and sunset reviews.

Section 301 case The application of the measure can be challenged, but the norm can be challenge itself if it always leads to a violation. Laws that violate the Agreement can be challenged immediately and those discretional ones that may result on a violation can be challenged when applied.

The U.S. must refrain from taking unilateral actions and channel disputes to the DSB. However, 301 allows the U.S. to take action while there are ongoing cases in the DSB. So the U.S. rule saying it could decide not to wait violates the DSU; however through its commitment not to act on this provision (to Congress and to the WTO) the threat of 301 was moot. Both the EU (a commitment by the U.S. to use the DSB) and the U.S. claimed they won (the actual case).

Interpretation of WTO Agreements

The WTO treaties must be interpreted following the Vienna Convention on the Law of Treaties Art. 31 (Gral. Rules of Interpretation) A treaty shall be interpreted in good faith, in accordance with the ordinary meaning to be given to the terms of the treaty in the context and in the light of its object and purpose.

Good faith interpretation .. and can also look at subsequent agreements (context) Practice application of the treaty and .

EC Customs Classification of Frozen Boneless Chicken Cuts To determine the tariff heading, it was necessary to determine if Brazil and Thailands chicken was sufficiently salted to be considered salted. The first analytical step was to find the Ordinary Meaning of the term salted. Because the result was not dispositive, then the second analytical step is to interpret the term salted in its context pursuant to Article 31(2) of the Vienna Convention. As part of the context for the EC Custom Classification the Panel looked to another treaty, the Harmonized System, related indirectly to the WTO- The last step was to look at the treatys object and purpose of the treaty but this was not dispositive. The Panel didnt look at other subsequent agreements (there were none) or to subsequent practice as it was not generalized.

How to interpret a term in a treaty. The 3-step used in Chicken-Cuts + 2: 1. Ordinary Meaning of the term 2. Interpret the term salted in its context pursuant to Article 31(2) 3. Object and purpose to

4.Also other agreements relating to the treaty Article 31(2)(a) 5. or instrument by one or more parties Article 31(2)(b). 6. subsequent practice between the parties Article 31(3)(a).

It is noteworthy that all the GATT meetings were transcribed and published by the U.N. There is no drafting history for the WTO, although there are some materials kept by some of the delegation and whatnot.

Precedent in WTO decisions

There is no requirement that panels follow precedent from other panels or the Appellate Body, but in practice the panles must not rule aginst the previous decision of the Appellate Body (see U.S. Final Anti-Dumping Measures on Stainless Steel from Mexcio)

U.S. Final Anti-Dumping Measures on Stainless Steel from Mexico After the panel disregarded appellate decisions (condemning the U.S. zeroing practice) and alleged that panles were not strictly speaking, bound by previous Appellate Body or panel decisions and was in accordance with their obligation to Article xxx

Conflict provisions for the trade agreements

WTO over GATT

SBS over TBT

Agricultural over GATT and other Annex 1A agreements

Any Annex 1A agreements over GATT No provisions for conflicts involving GATS or TRIPS.

To interpret: 1. Should interpret the relevant agreement so that there is not conflict (so that the agreements are compatible) 2. I tis to be presumed that a lated treaty prevails over an earlier treaty. 3. Unless, a treaty provides expressly that it is to prevail over subsequent incompatible treaties.

Standard of Review for

There isnt a treaty based standard of review for the trade agreements (other than in Dumping cases). Therefore there is no general agreement on the level of deference in government decisions on different treaties.

Health and environment cases (greater level of deference see Horomones or Asbestos) Hormones: governments have to base their decisions in science (per the language of the treaty) but they do not need to follow established or mainstream sciences. Also it said that the governments are not to be seen as to restricting its ability to regulate issues of health or environment. Asbestos: Same thing on health cases (France has a reasonable level of discretion because it is health related.

Trade remedy cases (Less deference). TRANSCRIBE UNDERLYING PART OF PAGE 326

Dumping ()

Issues on WTO Disputes

Politics: Decisions should not be seen as not NOT WORTHI DISUCSSING MORE

Transparency: The panel decisions and appellate decision are made public but the filings to the panel (or oral arguments) are not made public and sometimes a short summary is presented very late. Participation: Amicus brief, developing countries.

Unilateralism. When is a member seeking redress of an Art. 23 violation. When is a country seeking redress? The question is whether a measure is trying to influence the other country to stop a violation. In that case, a measure is self-awarded redress. European Communities Measures Affecting Trade in Commercial Vessels It is a violation to seek redress outside the DSU of the WTO. Likewise measures that are unilateral acts that seek the same results that can be achieved through the DSU are a violation. The question was did the EC act in response to what it considered to be a violation uner the WTO agreement? If these is answered affirmatively, it is a violation.

Implementation and Retaliation Procedures and Remedies

If DSB recommendations are not implemented (in a reasonable period of time 15 months), the prevailing party is entitled to seek compensation from the non-complying member, and if no

compensation is agreed, to request the BSD authority to suspend concessions previously made to that member (referred to as retaliation). Art. 22.1 The suspension of obligations normally occurs in respect of obligations of the same sort were found to be violated, although cross-retaliation is permitted in certain circumstances. The timeline is RPT (15 months) + compensation discussion (20 day) +10 (to seek redress) = retaliation 30 days after the end of the Reasonable Period of Time. The level of retaliation can also be subject to arbitration. This is to be done by the same panel and to be done in 30 days. However there can be a 21.5 proceeding as an alternative to a 22 proceeding (where there is a 60 day gap) FIGURE THIS OUT. Currently countries start with an agreement on how to handle the concurrent procedures. Countries can also suspend the Art. 22 arbitration until the 21.5 is resolved. However the gap is still there and the negotiations have not solved it. Bananas was the case that tested this and it survived cause both were solved on the same day.

Ambiguities in DSU arts. 21-22 Article 21: Surveillance of Implementation of Recommendations and Rulings
1. Prompt compliance with recommendations or rulings of the DSB is essential in order to ensure effective resolution of disputes to the benefit of all Members. 2. Particular attention should be paid to matters affecting the interests of developing country Members with respect to measures which have been subject to dispute settlement. 3. At a DSB meeting held within 30 days after the date of adoption of the panel or Appellate Body report, the Member concerned shall inform the DSB of its intentions in respect of implementation of the recommendations and rulings of the DSB. If it is impracticable to comply immediately with the recommendations and rulings, the Member concerned shall have a reasonable period of time in which to do so. The reasonable period of time shall be: (a) the period of time proposed by the Member concerned, provided that such period is approved by the DSB; or, in the absence of such approval,

(b) a period of time mutually agreed by the parties to the dispute within 45 days after the date of adoption of the recommendations and rulings; or, in the absence of such agreement,

(c) a period of time determined through binding arbitration within 90 days after the date of adoption of the recommendations and rulings. In such arbitration, a guideline for the arbitrator should be that the reasonable period of time to implement panel or Appellate Body

recommendations should not exceed 15 months from the date of adoption of a panel or Appellate Body report. However, that time may be shorter or longer, depending upon the particular circumstances. 4. Except where the panel or the Appellate Body has extended, pursuant to paragraph 9 of Article 12 or paragraph 5 of Article 17, the time of providing its report, the period from the date of establishment of the panel by the DSB until the date of determination of the reasonable period of time shall not exceed 15 months unless the parties to the dispute agree otherwise. Where either the panel or the Appellate Body has acted to extend the time of providing its report, the additional time taken shall be added to the 15-month period; provided that unless the parties to the dispute agree that there are exceptional circumstances, the total time shall not exceed 18 months. 5. Where there is disagreement as to the existence or consistency with a covered agreement of measures taken to comply with the recommendations and rulings such dispute shall be decided through recourse to these dispute settlement procedures, including wherever possible resort to the original panel. The panel shall circulate its report within 90 days after the date of referral of the matter to it. When the panel considers that it cannot provide its report within this time frame, it shall inform the DSB in writing of the reasons for the delay together with an estimate of the period within which it will submit its report. 6. The DSB shall keep under surveillance the implementation of adopted recommendations or rulings. The issue of implementation of the recommendations or rulings may be raised at the DSB by any Member at any time following their adoption. Unless the DSB decides otherwise, the issue of implementation of the recommendations or rulings shall be placed on the agenda of the DSB meeting after six months following the date of establishment of the reasonable period of time pursuant to paragraph 3 and shall remain on the DSB's agenda until the issue is resolved. At least 10 days prior to each such DSB meeting, the Member concerned shall provide the DSB with a status report in writing of its progress in the implementation of the recommendations or rulings. 7. If the matter is one which has been raised by a developing country Member, the DSB shall consider what further action it might take which would be appropriate to the circumstances. 8. If the case is one brought by a developing country Member, in considering what appropriate action might be taken, the DSB shall take into account not only the trade coverage of measures complained of, but also their impact on the economy of developing country Members concerned.

Article 22: Compensation and the Suspension of Concessions

1. Compensation and the suspension of concessions or other obligations are temporary measures available in the event that the recommendations and rulings are not implemented within a reasonable period of time. However, neither compensation nor the suspension of concessions or other obligations is preferred to full implementation of a recommendation to bring a measure into conformity with the covered agreements. Compensation is voluntary and, if granted, shall be consistent with the covered agreements. 2. If the Member concerned fails to bring the measure found to be inconsistent with a covered agreement into compliance therewith or otherwise comply with the recommendations and rulings within the reasonable period of time determined pursuant to paragraph 3 of Article 21, such Member shall, if so requested, and no later than the expiry of the reasonable period of time, enter into negotiations with any party having invoked the dispute settlement procedures, with a view to developing mutually acceptable compensation. If no satisfactory compensation has been agreed within 20 days after the date of expiry of the reasonable period of time, any party having invoked the dispute

settlement procedures may request authorization from the DSB to suspend the application to the Member concerned of concessions or other obligations under the covered agreements. 3. In considering what concessions or other obligations to suspend, the complaining party shall apply the following principles and procedures: (a) the general principle is that the complaining party should first seek to suspend concessions or other obligations with respect to the same sector(s) as that in which the panel or Appellate Body has found a violation or other nullification or impairment;

(b) if that party considers that it is not practicable or effective to suspend concessions or other obligations with respect to the same sector(s), it may seek to suspend concessions or other obligations in other sectors under the same agreement;

(c) if that party considers that it is not practicable or effective to suspend concessions or other obligations with respect to other sectors under the same agreement, and that the circumstances are serious enough, it may seek to suspend concessions or other obligations under another covered agreement;

(d)

in applying the above principles, that party shall take into account:

(i) the trade in the sector or under the agreement under which the panel or Appellate Body has found a violation or other nullification or impairment, and the importance of such trade to that party;

(ii) the broader economic elements related to the nullification or impairment and the broader economic consequences of the suspension of concessions or other obligations;

(e) if that party decides to request authorization to suspend concessions or other obligations pursuant to subparagraphs (b) or (c), it shall state the reasons therefor in its request. At the same time as the request is forwarded to the DSB, it also shall be forwarded to the relevant Councils and also, in the case of a request pursuant to subparagraph (b), the relevant sectoral bodies;

(f)

for purposes of this paragraph, sector means:

(i)

with respect to goods, all goods;

(ii) with respect to services, a principal sector as identified in the current Services Sectoral Classification List which identifies such sectors;

(iii) with respect to trade-related intellectual property rights, each of the categories of intellectual property rights covered in Section 1, or Section 2, or Section 3, or

Section 4, or Section 5, or Section 6, or Section 7 of Part II, or the obligations under Part III, or Part IV of the Agreement on TRIPS;

(g)

for purposes of this paragraph, agreement means:

(i) with respect to goods, the agreements listed in Annex 1A of the WTO Agreement, taken as a whole as well as the Plurilateral Trade Agreements in so far as the relevant parties to the dispute are parties to these agreements;

(ii)

with respect to services, the GATS;

(iii)

with respect to intellectual property rights, the Agreement on TRIPS.

4. The level of the suspension of concessions or other obligations authorized by the DSB shall be equivalent to the level of the nullification or impairment. 5. The DSB shall not authorize suspension of concessions or other obligations if a covered agreement prohibits such suspension. 6. When the situation described in paragraph 2 occurs, the DSB, upon request, shall grant authorization to suspend concessions or other obligations within 30 days of the expiry of the reasonable period of time unless the DSB decides by consensus to reject the request. However, if the Member concerned objects to the level of suspension proposed, or claims that the principles and procedures set forth in paragraph 3 have not been followed where a complaining party has requested authorization to suspend concessions or other obligations pursuant to paragraph 3(b) or (c), the matter shall be referred to arbitration. Such arbitration shall be carried out by the original panel, if members are available, or by an arbitrator appointed by the Director-General and shall be completed within 60 days after the date of expiry of the reasonable period of time. Concessions or other obligations shall not be suspended during the course of the arbitration. 7. The arbitrator acting pursuant to paragraph 6 shall not examine the nature of the concessions or other obligations to be suspended but shall determine whether the level of such suspension is equivalent to the level of nullification or impairment. The arbitrator may also determine if the proposed suspension of concessions or other obligations is allowed under the covered agreement. However, if the matter referred to arbitration includes a claim that the principles and procedures set forth in paragraph 3 have not been followed, the arbitrator shall examine that claim. In the event the arbitrator determines that those principles and procedures have not been followed, the complaining party shall apply them consistent with paragraph 3. The parties shall accept the arbitrator's decision as final and the parties concerned shall not seek a second arbitration. The DSB shall be informed promptly of the decision of the arbitrator and shall upon request, grant authorization to suspend concessions or other obligations where the request is consistent with the decision of the arbitrator, unless the DSB decides by consensus to reject the request. 8. The suspension of concessions or other obligations shall be temporary and shall only be applied until such time as the measure found to be inconsistent with a covered agreement has been removed, or the Member that must implement recommendations or rulings provides a solution to the nullification or impairment of benefits, or a mutually satisfactory solution is reached. In accordance with paragraph 6 of Article 21, the DSB shall continue to keep under surveillance the implementation of adopted recommendations or rulings, including those cases where compensation has been provided or

concessions or other obligations have been suspended but the recommendations to bring a measure into conformity with the covered agreements have not been implemented. 9. The dispute settlement provisions of the covered agreements may be invoked in respect of measures affecting their observance taken by regional or local governments or authorities within the territory of a Member. When the DSB has ruled that a provision of a covered agreement has not been observed, the responsible Member shall take such reasonable measures as may be available to it to ensure its observance. The provisions of the covered agreements and this Understanding relating to compensation and suspension of concessions or other obligations apply in cases where it has not been possible to secure such observance.

Level of retaliation The level of retaliation can also be disputed. The Panel that authorized the measures will retake the case to see if the retaliation is appropriate or excessive.

U.S. Gambling
Antigua and Barbuda requested consultations with the US regarding measures applied by central, regional and local authorities in the US which affect the cross-border supply of gambling and betting services. Antigua and Barbuda considered that the cumulative impact of the US measures is to prevent the supply of gambling and betting services from another WTO Member to the United States on a crossborder basis. According to Antigua and Barbuda, the measures at issue may be inconsistent with the US obligations under the GATS, and in particular Articles II, VI, VIII, XI, XVI and XVII thereof, and the US Schedule of Specific Commitments annexed to the GATS. On 12 June 2003, Antigua and Barbuda requested the establishment of a panel Implementation At the DSB meeting of 19 May 2005, the United States stated its intention to implement the DSBs recommendations and indicated that it would need a reasonable period of time to do so. As the Antigua and Barbuda and the United States had failed to agree on a reasonable time of period for implementation in accordance with Article 21.3(b) of the DSU, on 6 June 2005, Antigua and Barbuda requested that the reasonable period of time be determined through binding arbitration pursuant to Article 21.3(c) of the DSU. On 30 June 2005, pursuant to the request from Antigua and Barbuda, the Director-General appointed Dr Claus-Dieter Ehlermann to act as arbitrator under Article 21.3(c) of the DSU. Compliance Proceedings the parties informed the DSB that, given the disagreement as to the existence or consistency of measures taken by the United States to comply with the recommendations and rulings of the DSB, they had agreed on certain procedures under Articles 21 and 22 of the DSU. On 8 June 2006, Antigua and Barbuda requested consultations under Article 21.5 of the DSU. On 6 July 2006, Antigua and Barbuda requested the establishment of an Article 21.5 panel. At its meeting on 19 July 2006, the DSB referred

the matter to the original panel, if possible. Article 21.5 panel report concluded that the United States had failed to comply with the recommendations and rulings of the DSB. Proceedings under Art 22 of the DSU (remedies) Antigua and Barbuda requested authorization from the DSB, pursuant to Article 22.2 of the DSU, to suspend the application to the United States of concessions and related obligations of Antigua and Barbuda under the GATS and the TRIPS Agreement. The United States (i) objected to the level of suspension of concessions and obligations proposed by Antigua and Barbuda (The U.S. has the burden of proof) and (ii) claimed that Antigua and Barbuda's proposal does not follow the principles and procedures set forth in Article 22.3 of the DSU. The Arbitrator determined that the annual level of nullification or impairments of benefits accruing to Antigua is US$21 million and that Antigua may request authorization from the DSB to suspend obligations under the TRIPS Agreement at a level not exceeding US$21 million annually (due to the particular circumstances that made it impossible for the retaliation is same area or same agreement). At the DSB meeting on 24 April 2012, Dominica read a statement on behalf of Antigua and Barbuda which stated that the United States was not in compliance with the ruling of the panel, the Appellate Body and the compliance panel. Antigua and Barbuda had formally notified the United States of its desire to seek recourse to the good offices of the Director-General in finding a mediated solution to this dispute. Antigua and Barbuda requested that this matter remain under the DSB's surveillance. So because retaliation in the same sector was authorized but not practicable due to Antiguas small economy (how would it retaliate against the U.S. gambling industry?) Because there were also a lack of concessions to the U.S. in the same agreement, the Panel had to authorize Antigua to cross retaliate. The rules for cross-retaliation are: (1) First retaliate in the same sector, (2) then retaliate in other sectors under the same agreement, and (3) finally retaliate in other agreements (like TRIPS).

Norway Procurement .. for the City of Trondheim (Pre-DSU-of-WTO) The issue was whether the Panel should recommend negotiations and authorize the withdrawal of benefits to Norway is a solution was not negotiated. The Panel did not give redress to the U.S. by only giving prospective relief (requiring that procedure be brought into compliance).

Remedies in the WTO dispute Settlement Remedies are prospective (compensation or retaliation). Its principal aims are: (1) to restore balance of concessions that was upset when one member violated its obligations (a temporary aim since compliance is the preferred result); and (2) to give that member an incentive to comply. Some issues include that retaliation diminishes the liberalization of trade (allowing tariffs) and that being prospective it give an incentive not to comply first.

Tariffs and Customs Rules Tariff: Tax imposed at the border on imported goods that can be (1) ad valorem, (2) specific-per goodor (3) mixed per good a proportion of price-. Quota: Specifies the quantity of a particular good that a country will allow to be imported during a specific period of time. It may be global or per country. Subsidy: Has the effect of making the domestic product more competitive than the imported ones. Export subsidies are generally outlawed (except the agricultural subsidies negotiated); Domestic subsidies are (in theory) unlimited but they can give rise to a non-violation WTO claim if they negate a tariff or cause harm. Examples of these non-violation claims (Korea-Airlines, U.S. Gambling).

State trading enterprises: When the monopoly over imports of a particular product is given to a company, this entity can impose a n indirect quota (by not limiting its imports), an indirect tariff (through a markup) or simply stop all imports. Although free-trade is the goal, tariffs are the preferred barrier to trade (they are visible and easier to negotiate).

GATT tariff commitments The basic purpose of the GATT was to cut tariffs significantly and to protect those cuts from indirect evasion through discriminatory internal taxes or other measures. The rounds of tariff negotiations were complicated by the MFN obligation of the system and the extremely difficulty to measure the trade effects of tariff changes. For these reasons (the MFN and the complexity) exporting members have to ensure that their corresponding rights are described in such a manner in the Schedules of importing member that their export interests, as agreed in the negotiations, are guarantees- the Panels will not look at the parties intentions ins such complex negotiations but to the documents produced -Appellate Body applying the rules of the Vienna Convention. Also the schedule represent the tariff concession not to a specific member but to all members. The BTN principle to determine where products fall in or out of a concession is: (1) new products fall within the bound Schedule where the description clearly covers them, and (2) reference will be made to national law of the party whose Schedule is under dispute to determine the principles of classification; but the national law is not determinative. Tariffs can be renegotiated for several reasons, including the formation of a customs union or single market economy (and even depart form the MFN Like the EU or NAFTA). Customs law Customs laws concerns three determinations customs official must make in order to administer the tariffs and quotas: the classification of the goods, the valuation of the goods (for the ad valorem tariff rates) and the determination of the origin of the goods (to find the appropriate tariff).

The GATT requires that: Customs regulations be published promptly and that there is a process to appeal the decisions of custom agents. That fees, formalities and penalties are limited. There are also agreements on origin markings, free transit of goods and the valuation procedures. GATT has no agreement on Rules of Origin (only an agreement to negotiate an agreement), nor anything on Customs procedure. The Doha negotiations might yield an agreement on customs clearance. In the U.S. products must be: (1) formally entered into the U.S. at a port of entry, or (2) held in a bonded facility pending later re-entry or export. The liquidation, final determination of the rate and amount of the duty can be protested with the custom agent to secure administrative review. The denial of a protest can be appealed at the Court of International Trade (CIT) and that decision can be appealed at the Court of Appeals for the Federal Circuit (CAFC). The Harmonized System This system is ran by the WCO The reclassification in the customs classification system can (1) impair or annul a benefit of another party, or (2) eliminate the MFN treatment by categorizing the same product in different headings according to . The U.S.S has joined the CC and adopted the Harmonized System. Classification under U.S. Law The U.S. has three columns in it system: the General Tariff, the special tariff (for FTA) and the tariff for countries outside the WTO. Principles governing the Tariff Schedules 1. The table of contents, alphabetical index, and tittles of sections, chapters and sub-chapters are provided for ease of reference only. For legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes, and, provided such headings or notes do not require: 2. (a) any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished provided that it has the essential character of the completed or finished article. It also refers to that article complete or finished that enters unassembled or disassembled. (b) Any reference to a material or substance includes mixtures and combinations. Any reference to the material also include goods made out of that material. 3. When goods are prima facie, classifiable under two or more headings: (a) the heading which provides the most specific description shall be preferred to headings providing a more general provision. However, when to or more headings each refer to part only of the materials or substances contained in a mixed or composite goods those are to be regarded as equally specific, in relation to the goods, even if one of them specific in relation to those goods, even if one gives a more complete or precise description of the goods. (b) mixtures, that cant be classified under 3(a), shall be classified as if they consisted of the material component that gives them their essential character, insofar as this criterion is applicable. (c) if 3(a) and(b) fail, then under the heading which occurs last in numerical order among those under equal merit under consideration. 4. Goods which cannot be classified under the above rules shall be classified under the heading appropriate to the gods they are most akin.

6 mutatis mutandis Only subheadings at the same level are comparable. Additional rules of interpretation 1. I the absence of a special language or context: (a) use is the use in the U.S. (b) ///if actual use then it must be proved up to 3 years after goods are entered, and (c) parts or parts and accessories shall not prevail over a specific provision for such part (i.e. (rearview mirror car part). Conair v. the U.S. Rule 1 was not dispositive because different parts were classifiable in different headings. Rule 2 says that if it is classifiable under different subheading they should be given equal value and thus be resolved under Rule 3. In cases such as the present one, where classification pursuant to GRI 3(a) is not possible, the concept of essential character: found in GRI(3)(b) may direct the court to the proper resolution. This case centered on the least expected characteristic: an internal pump Although the pump may not be visible, it is nonetheless indispensable to making the m erchandise what it is.

E.I. Du Pont v, Commissioners of Customs & Excise (Duponts marblelike -Corian) The determination of whether Corian should be artificial stone was decided by a very strict reading of the statute and how a comma was placed as to not modify the whole clause. The court also established that Dupont could not win regardless cause they forgot to put stone in the stone mixture anyhow. Valuation Most tariffs are ad valorem, which means that the value of the goods subjected to them must be ascertained in order to calculate the amount of tariff due. The article VII of GATT did not regulate valuation well and many countries objected to the U.S. valuation system (considering it an non-tariff barrier to trade). The Tokyo Rounds Customs Valuation Code was largely unchanged in the Uruguay round. Notional standard for valuation: the customs value to an imported product is the price at which that product would be sold if the actual transaction in question were a perfectly competitive transaction. Positive standard for valuation: customs value is usually the price at which goods are soldin an actual transaction. Methods of Customs Valuation 1. The transaction value of the imported goods (the price actually paid or payable adjusted for certain costs not reflected in the price selling commissions, licensing, etc-) (Cant use this for transactions by related parties). 2. The transaction value of identical goods sold for export to the same country, and exported at or about the same time as the imported goods.

3. The transaction value of similar goods sold for export to the same country, and exported at or about the same time as the imported goods. 4. The deductive value or computed values, as importer chooses (price should be the same under either, but the evidence necessary for either choice varies). The deductive value as determined by the price at which the imported goods, or identical or similar imported goods are sold in the greatest aggregate quantity to unrelated persons in the country of importation in the same conditions a imported, with deductions for commission or profit, general expenses, transport, insurance, customs duties and expenses incurred for reselling the goods. (Deducted is sale price minus the addede value after impportation) 5. The computed value, determined by summing the costs of producing the article in the country of exportation, an amount for general expenses and profit, and the cost or value of all other necessary expenses to reflect the valuation option chosen by the signatory?? (i.e. f.ob. or c.i.f.) (Start with production costs and add other values) If none of the 5 point allow the determination of the value, the agreement provides that the value shall be determined using reasonable means consistent with the principles and general provisions of this code The residual method should be based to the greatest possible extent on previously determined customs values. The transaction value will not be used for transactions between related parties. The U.S. uses a FOB method to calculate cost. (CIF might be unconstitutional as the Fed gov cannot make one port preferable over another.

Generra Sportsweare v. U.S. Whether a quota charges were properly included in transaction value, in a matter of statutory construction. Customs interpretation will be accepted if it is sufficiently reasonable. Unless it is clear that Congress intent was to the contrary, courts normally defer to the agencys construction of the statutory scheme it administers. As long as the quota payment was made to the seller in exchange for merchandise sold for export to the U.S. the payment properly may include the transaction value, even if the payment properly represents something other than the per se value of the goods. If quota payments were included in the transaction then they are part of the transaction value (Customs cant investigate each transaction to make the valuation). What goes into the value? (FIND THIS OUUUT)

Ospig Textilgessellschaft EC The EC reached the opposite conclusion when analyzing the same provision on the GATT code.

Rules of Origin Once goods are valued, the origin must be determined so the proper tariff rate may be applied. Article IX requires MFN treatment. Article 3 requires that rules of origin apply equally for all purposes (antidumping, valuation, safeguards, etc..) and that the last substantial transformation test is followed to determine origin. The criteria to asses this, might be the tariff subheading test, value added or completion of specific processes.

Torrington It matter whether someone is trying to do the least transformation to the product to change the origin of the goods. This is particularly true if the action violates the spirit of the program like (Old case, different in new trade agreements with more specific tests).

Superior Wire v. the U.S. The CIT applied different test to determine origin (this decisions tend to be case specific). The court applied the Anheuser-Bush test-transformation into a new article having a distinctive name. character or use, but also applied other tests (complex processing and % of value added to the good) to determine that the transformation was not substantial. Tests: (1) change in four-digit tariff heading (test used in many US and EU FTAs), (2) the value added in the claimed country of origin (test used extensively in preferential agreements and a common fall-back method) (3) special process (there is a specific process to determine the origins of textiles in the U.S.) Honda New Zeland practice problem- when did the fish became the final product quick frozen fish fillet? Well, in South Korea. It matter where the product became what it is.

Other Customs issues

The U.S. HAS Foreign Trade Zones that allow merchandise not to be subject to tariff or quotas in U.S. soil when it will be sent elsewhere or even exported into the U.S. after some transformation or work has been done this promotes the U.S. role as an exporter of manufactured goods. There is a lo a draw-back provision that allows??? ().

Border measures Quotas non-tariff barriers and transparency Article XI bans quotas (but its language includes much more) No prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licenses or other measures, shall be instituted or maintained by any contracting party on the importation of any product of the territory of any other contracting party or on the exportation or sale for export of any product destined for the territory of any other contracting party. Japan - trade in semi-conductors Any measure instituted or maintained by a contracting party which restricts the exportation or sale for exports of products is covered by art XI:1 (Japan argued the measures were not mandatory and thus outside Art. XI: 1). The panel reviewed whether (1) sufficient incentives or disincentives existed for non-mandatory measures to take effect, and (2) whether the measures to restrict export of semi-conductors at prices below company-specific costs were essentially dependent on Gov. action or intervention. This analysis lead to the conclusion that the GOV. of Jpan exerted the maximum possible pressure on the private sector to cease exporting at prices below company-specific sots (which violate Japans commitments to the U.S.). Japanese Semi-conductor case + GATT rules apply to involuntary export restraints. Article XI prohibits all these non-quota quotas too

Export controls Export controls have not been a major source of dispute on the WTO and there are many exceptions that allow countries to interfere with exports. The U.S. limits exports on weapons and technology used for war. Also, countries like N. Korea or Cuba are banned from receiving American exports.

Exceptions to Article XI Article XI:2 permits the use of (a) export restrictions to relieve critical shortages, (b) import and export restrictions necessary to apply certain commodity standards and (c) import restrictions to enforce certain government agricultural programs.

Article XII and XVIII permit the use of quotas in the event of balance-of-payments problems.

Agricultural products allows the permanence of agricultural export subsidies but there were negotiations in the Uruguay round to reduced them and to even reduce the internal subsidies. The tariffs on agricultural goods were also negotiates so a minimum percentage could still enter the market at a lower tariff.

Chile Price band system and safeguard measures on agricultural products This program was found to violate the Chilean commitment to use tariffs and not quotas or other trade barriers.

Article XVII and the relation between subparagraphs (a) and (b)

CANADA Measures relating to exports of wheat and treatment of imported grain The Canadian STE (CWB Export Regime) is not inconsistent with Canadas GATTT obligations as they violate Article XVII:1. The obligation to act with commercial considerations does not mean that if you have a monopoly you have to act nice just that you act with commercial considerations you can use you heightened commercial power.

Nondiscrimination: the most-favored-nation clause & national-treatment clause MFN Under the WTO agreements, countries cannot normally discriminate between their trading partners. Grant someone a special favor (such as a lower customs duty rate for one of their products) and you have to do the same for all other WTO members. This principle is known as most-favored-nation (MFN) treatment. This principle is in the first article of GATT -which governs trade in goods- in GATS and TRIPS. Some exceptions are allowed. For example, countries can set up a free trade agreement that applies only to goods traded within the group discriminating against goods from outside. Or they can give developing countries special access to their markets. Or a country can raise barriers against products that are considered to be traded unfairly from specific countries. In general, MFN means that every time a country lowers a trade barrier or opens up a market, it has to do so for the same goods or services from all its trading partners. National treatment Imported and locally-produced goods should be treated equally at least after the foreign goods have entered the market. This principle of national treatment (giving others the same treatment as ones own nationals) is also found in all the three main WTO agreements (Article 3 of GATT, Article 17 of GATS and Article 3 of TRIPS), although once again the principle is handled slightly differently in each of these. MFN Duty Any advantage granted by an Member to any product (from any country) shall be granted to any product originating in any other Member: With respect to duties With respect to the methods of charging those duties With respect to formalities of import/export With respect to internal taxes/internal regulations Article 3:8 has an exception for government procurement. (There is an argument that government procurement is covered in 3:4 and that the exception does not apply for matters of article 1.) However, the Legislative history and the only panel decision suggest that government procurement is exempt from the MFN requirement.

MFN Analysis Is there an obligation for MFN ? Was it violated? Is it a like product? Same tariff class? Same end use? Same physical characteristics? Consumer protection analysis.

Spain Tariff Treatment of Unroasted Coffee Spain discriminated between strong and mild coffee. Brazil, a producer of strong coffee, objected to this discrimination. The Panel agreed with Brazil, claiming that coffee is coffee and that the users drink coffee even if its slightly different. The Panel said that even if there are organoleptic differences (smells, composition, etc) coffee in its end-use, was universally regarded as a well-defined and single product intended for drinking.

Japan Tariff on Import of Spruce-Pine-Fir Dimension Lumber Japan discriminated against lumber proceeding from Canada and benefiting lumber form the U.S. The Panel decided that this alleged discrimination is something the Member States can negotiate. Japan has this system and Canada can negotiate with Japan to lower its tariff in the Canadian type of lumber. (this approach is completely opposite to the Spain Coffee decision). So how fine of a distinction can it be? Professor Williams favors the Japan approach of allowing fine distinctions and have the countries go negotiate with each other. Treatment by Germany of Imports of Sardines Different types of sardines were treated differently by Germany. Even without violation of art.1 (maybe not like products) it is recommended that they be treated the same to restore the competitive relationship which existed at the time of the negotiation and which generated the expectation for Norway that this would continue.

The breath of the MFN obligation Canada Certain Measures Affecting the Automotive Industry the conditions under which Canada granted its import duty exemption were inconsistent with Article I of GATT 1994 and not justified under Article XXIV of GATT 1994 . The manner in which Canada conditioned access to the import duty exemption is inconsistent with Article II of GATS and could not

justified under Article V of GATS. Article 1:1 also covers de facto discrimination. All like products of member states should be getting the most-favored-nation treatment and not only to those with MVTO and SROs (basically benefitting its manufacturers plants abroad?)

Indonesia Certain Measures Affecting the Automotive Industry Basically, a GATT/WTO right cannot be made dependent upon, conditional or even be affected by, any private contractual obligation. The conditions to MFN treatment cannot result in de facto discrimination.

Exceptions for developing countries 1. Countries had waivers to favor some developing areas (the EU for Africa, the U.S. for the Caribbean, etc..) this are traditional preferences and the waivers are renewed indefinitely or become FTAs. 2. The Generalized System of Preferences (GSP) was created as a waiver for 10 year but after the enabling clause it generated the opportunity to give developing countries forever. It is basically an Art 1 exception (MFN) for developing countries.

he Generalized System of Preferences, or GSP, is a formal system of exemption from the more general rules of the WTO. Specifically, it's a system of exemption from the MF principle that obliges WTO member countries to treat the imports of all other WTO member countries no worse than they treat the imports of their "most favored" trading partner. In essence, MFN requires WTO member countries to treat imports coming from all other WTO member countries equally, that is, by imposing equal tariffs on them, etc. GSP exempts WTO member countries from MFN for the purpose of lowering tariffs for the least developed countries, without also lowering tariffs for rich countries.

The enabling clause was adopted in order to permit trading preferences targeted at developing and least developed countries which would otherwise violate Article I of the GATT. Paragraph 2(a) provides a legal basis for extending the GSP beyond the original 10 years. In practice it gave a permanent validity to the GSP. The enabling clause permits developed countries to discriminate between different categories of trading partners (in particular, between developed, devloping and least developed countries) which would otherwise violate Article I of the GATT which stipulates that no GATT contracting party must be treated worse than any other (this is known as MFN treatment). In effect, this allows developed countries to give preferential treatment to poorer countries, particularly to least developed countries. Paragraph 2(c) permits developing countries to enter into preferential trade agreements which do not meet the strict criteria laid out in GATT Article XXIV for regional free-trade agreements. It allows developing countries to enter into agreements which may be non-reciprocal, or cover a very limited range of products (which would otherwise contravene the GATT).

India challenge to the GSP (Generalized System of Preferences)

The only challenge to the GSP discrimination came from India when it objected to its treatment of Pakistan (as a country negatively affected by drug-trafficking). The EU changed its system so that the preferential treatment was not arbitrary. Thus, under the new system which spelled out the requirements, Pakistan no longer qualified for the benefit and India happily dropped the case.

Note, the U.S. gives the MFN to basically every country (except Cuba and NK). Although the ..stan exsoviet republics may loose this benefit in the future (it is conditional)

Exceptions for FTAs The most important exception to the MFN principle is the Article XXIV exception for custom unions and free trade areas.

Turkey Textiles Case Facts: EU- Turkey Customs Union. Back in the 60s Turkey entered into an enhanced FTA with the EU - both agreements foresaw membership in the EU Appellate body: said key lang is in paragraph 4/5 where the desirability of FTAs is recognized and shall not be prevented. Can defend what would be a violation by saying if it wasnt done, the FTA couldnt have been formed Paragraph 5: this shall not prevent the formation

Must: 1) establish you have an FTA, 2) show that the attacked measure was needed in that without you couldnt form your FTA Panel: assumed it was a valid FTA bc it would have been very controversial to decide otherwise Appellate Body: saying Panel should have investigated whether it was a valid FTA (Unclear as to how: but would have to come up with definition of substantially all trade)

Mexico Free Trade Case: Issue: Mexico claims the US had agreed to open the US sugar market to Mexico under NAFTA. Mexico: this commitment was made in a side-letter. US: side-letter wasnt part of NAFTA S makes sure that the import of sugar is low enough (restricts market through tariff quotas) so that sugar producers in Montana can make a living. This keeps prices so high that sugar has been predominately replaced by hi fructose corn syrup bc its so much cheaper. Mexico put a tax on high fructose corn syrup. Panel: this is really a NAFTA matter and should have been considered by a NAFTA Panel BUT the US blocked the formation of a NAFTA panel NAFTA has provisions that should lead to the automatic formation of a NAFTA panel but the Parties had to agree on who would be on the Panel (still havent reached an agreement) Holding: Mexico loses case as the pan WTO Panels are not to resolve disputes outside the covered agreements.

Dispute between Brazil and Argentina. Brazil took dispute to Mercosur dispute settlement and lost. Then went to the WTO. Argentina argued that the WTO panel argued that they shouldnt hear the case bc Brazil already lost in Mercosur. Panel declined Argentinas position but noted that there is a provision that will come into force under Mercosur that requires a dispute to go to Mercosur OR cannot double -dip Can you argue that an FTA dispute settlement is a violation of Article 23?

o Different views: in the Sugar Case there wasnt an agmt to go to NAFTA and the WTO claim was diff than the NAFTA issue.

NAFTA- Extraordinary challenges ant the Standard of Review In Re Live Swine from CANADA

National treatment Imported and locally-produced goods should be treated equally at least after the foreign goods have entered the market. This principle of national treatment (giving others the same treatment as ones own nationals) is also found in all the three main WTO agreements (Article 3 of GATT, Article 17 of GATS and Article 3 of TRIPS), although once again the principle is handled slightly differently in each of these. National treatment only applies once a product, service or item of intellectual property has entered the market. Therefore, charging customs duty on an import is not a violation of national treatment even if locally-produced products are not charged an equivalent tax.

Government procurement exception

GATT Article III:8(a) permits governments to purchase domestic products preferentially, making government procurement one of the exceptions to the national treatment rule. This exception is permitted because WTO Members recognize the role of government procurement in national policy. For example, there may be a security need to develop and purchase products domestically, or government procurement may, as is often the case, be used as a policy tool to promote smaller business, local industry or advanced technologies.
And a subsidy to local producer without running afoul article III:4

Italian discrimination against imported agricultural machinery According to the panel, Italy violates its Article III:4 responsibilities b not extending credit to for the purchase of foreign machinery.

The NT is not a requirement to treat them the same but similarly. III:4 case

Likeness is relative (like an accordion) Focus on the fact that you look for a like product but also for Comparable and substitutable products.

Discriminatory Taxes (Article III:3): look at only 2 thing (1) post-import tax and (2) whether its a like product.

Japan case