1

GATT Law and the World Trade Organization: Basic

Principles

GATT Law and the World Trade Organization: Basic

Principles

Chapter 9

© 2005 West Legal Studies in Business/Thomson Learning

2

Trade BarriersTrade Barriers

• Tariff or import duty

• Non-tariff barrier– Embargoes– Quotas– Auctioned quotas– Tariff rate quota

• Indirect non-tariff barriers: Japanese retail store law

3

GATT- 1947 Post War Solution

GATT- 1947 Post War Solution

• Multilateral trade negotiations- reduce tariffs and Non-tariff barriers (NTB)

• Nondiscrimination and unconditional MFN

• National Treatment

• Eliminate quotas and NTB (convert NTB to tariffs and then reduce), transparency very critical

4

Role of Regional Trade Agreements

Role of Regional Trade Agreements

• Conflict?

• GATT recognized

• Special preferences may coexist

• Also preferences for developing countries

5

GATT: Then and NowWhat now WTO?

GATT: Then and NowWhat now WTO?

• WTO, January 1, 1995

• BEFORE- not cover trade in services

• Not agriculture

• Not textiles

• Not intellectual property

• Not foreign invest. regulation

• Not effective dispute settlement

6

1994 Agreement Made Changes

1994 Agreement Made Changes

• Agriculture• Textiles• Technical barriers to trade• Services• Trade related intellectual property rights

(TRIPS)• Trade related investment measures

(TRIMS)

7

1994 Agreement Made Changes

1994 Agreement Made Changes

• Financial services

• Government procurement

• (Not a complete list)

8

GradualismGradualism

• Textiles phased in 2004

• After 2000, TRIPS disputes settled by WTO

9

GATT/WTO Dispute Settlement

GATT/WTO Dispute Settlement

• To avoid the possibility of trade wars, the dispute settlement process was strengthened

• Includes timetables and drops the possibility of one country blocking a decision

10

GATT 1994: Reaffirms Major Principles

• Multilateral trade negotiations

• Predictability of trade opportunities

• Non-discrimination and unconditional MFN

• National treatment

• Elimination of quotas and other non-tariff barriers (first convert to tariffs (tariffication) and then negotiate to reduce)

11

Multilateral Negotiations

• What was the Doha Agenda?

• What happened in Cancun 2003?

• Normal Trade Relations: NTR

12

CasesCases• Banana case, (1997) where Appellate

Panel found that the United States was entitled to challenge the EU restrictions on banana imports.

• Panel decisions are “relevant” to future cases but not “binding.”

13

MFN/ NTRMFN/ NTR

• Unconditional MFN: if a member extends privilege to another member then that privilege automatically is extended to all members

• Exceptions- may deny MFN based on national security, foreign policy, or a government’s denial of human rights to its citizens

• Now referred to as Normal Trade Relations or NTR

14

China and MFN China and MFN

• Temporary MFN granted in 1980

• 1989 Tiananmen Square massacre

• 1994 Clinton delinked human rights and trade for China’s annual renewal of MFN

• 2000 Congress granted permanent normal trade status to China effective on China’s admission to WTO

15

Quota LoopholeQuota Loophole

• GATT’s attempt to eliminate quotas

• Balance of payment exception allows quotas“ to safeguard its external financial position and its balance of payments necessary to forestall the imminent threat...or a serious decline in its reserves.”

16

Japan Taxes on Alcoholic Beverages- 1996 WTO

• Japan taxed vodka and other imported liquors 7 times higher than shochu (similar to vodka). This practice challenged. Held that Japan's practice violated national treatment provisions GATT Article III. U.S. had to go to arbitration. In 1997 Japan agreed to revise its system.

17

GATT and the Elimination of Quotas

• Article XI

• But must abide by non-discrimination

• Used for economic and political reasons

• Balance of payments exception

18

India- Quantitative Restrictions on Imports 1999

• The U.S. challenged India’s restriction on imports that it claimed were necessary because of the balance of payments exception to GATT. The panel found that the restrictions were not necessary and gave them a reasonable period of time to implement the changes. This ruling was affirmed by the WTO Appellate body.

19

Politics and TradePolitics and Trade

• Trade is often a political football in the United States and other countries

• When U.S. approved GATT agreement also passed a bill to review WTO every 6 months

• Fears of “multilateralism”- why is that a “dirty word” to some?

20

Politics and TradePolitics and Trade

• Conflict between international and national law

• Law and politics

• What is the appropriate connection between human rights and trade? European and Japanese model vs. United States’ historical approach?

21

Politics and TradePolitics and Trade

• Labor and environmental issues linked to trade?

• Furthers whose agenda?

• Is it protectionism in disguise?

• Conflict between the developing and developed world?