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WTO Legal Order

WTO Legal Order. Overview , general Features and Principles. Legal Order – International Trade. International Trade Trans- border transactions In goods In services In capital. Legal Order Norms are an institutional framework Structuring the trade transactions

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WTO Legal Order

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  1. WTO Legal Order Overview, general Features andPrinciples

  2. Legal Order – International Trade • International Trade • Trans-bordertransactions • In goods • In services • In capital • Legal Order • Normsare an institutionalframework • Structuringthetradetransactions • As clearlyaspossible • Efficient, trustworthy, enforceable

  3. Scope of the Legal Trade Order • Global Order • Goodsand Services – WTO • Capital - IMF • Regional Orders (Art. XXIV GATT) • Free Trade Agreements • Customs Unions • Common Markets • Branch Orders • Multi-FibreAgreement • Semiconductor Agreement

  4. General Function of WTO-Law • Securingstatebehavior • Ruleorientation ≠ Power orientation • Third-partyclarification of rules • Predictabilityandsecurity • Buildingconfidenceamong private individuals • Section 301 decision (WT/DS 152) • http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds152_e.htm • Stabilizingagents (governments) againstaspirations of protectionists • WTO Law is part of International Economic Law

  5. Section 301 case • WT/DS152/R: UNITED STATES – SECTIONS 301-310 OF THE TRADE ACT OF 1974 • Sec. 301 was authorizing certain actions by the United States Trade Representative (USTR) in response to trade barriers imposed by other countries. The actions encompassed the suspension or withdrawal of concessions or the imposition of duties or other import restrictions. • The position of the individuals • The final addressees of WTO law, although they may not be able to rely on direct application • Art. 23 DSU prohibits unilateral actions • Every chilling effect by the mere threat of unlawful interference is unlawful

  6. WTO Law • WTO – Law is • International economiclaw • Public international law • A comprehensive Legal Order • With different normative character • A comprehensive legal order withrules on conflicts • It constitutes a particular legal order;

  7. International Economic Law

  8. WTO Law is Public International Law • Treaty System between Members • Subjects of PIL (Art. XI, XII) • Coordinatedbythe WTO Agreement • ParticularFlexibility – Economic Results – „Nullificationorimpairment“ (see XXIII GATT, 3.8 DSU) • Special Rules, e.g. abouttheadaptation of obligations, aboutdisputesettlementandaboutenforcement • General Rules of PIL apply • Single Undertakingprinciple – commonset of obligations • Almostworldwidevalidity (153 members) • Consensus Principle

  9. Pillars of the WTO legal order (Art. II WTOA) • The agreements and associated legal instruments included in Annexes 1, 2 and 3 (the MTAs) are integral parts of this Agreement, binding on all Members. • The PTAs are also part of this Agreement for those Members that have accepted them, and are binding on those Members. They do not create either obligations or rights for Members that have not accepted them. • GATT 1994 is legally distinct from GATT 1947

  10. Legal Order • WTO Agreement • Overarchingandcoordinatingthewhole order • Multilateral Trade Agreements • Single Undertaking • GATT 1994 (goods), GATS (services), TRIPS (Intellectualproperty) • MTAs putting GATT norms in moreconcrete form • Plurilateral Trade Agreements • Ad libitum • Sectors: governmentprocurement, trade in civilaircraft • DSU • Coveringautomatically all MTAs and, ifprovided, also the PTAs

  11. The Legal Order of the WTO

  12. Comprehensive Legal Order • Treaty System • 20 treaties • 6 understandings • 1 protocol • About 25 „decisions“ bythe TNC orthe ministerial meeting • Schedulesforeverymemberstate • Verydevelopedandefficientdisputesettlementsystem • MandatoryandExclusive • Twolevels of decidingbodies (Panels and AB) • Homogenizedjurisprudence • Limited scope of jurisdiction (the „coveredagreements“) • SupervisedEnforcement • Authorizationnecessary • Proportionality • Cross-Retaliation principles • But: onlycountermeasurespossible

  13. Conflictrules • Art. XVI.3 WTOA (Conflict WTOA – MTA) • 3. In the event of a conflict between a provision of this Agreement and a provision of any of the Multilateral Trade Agreements, the provision of this Agreement shall prevail to the extent of the conflict. • See the parallel rules in the WTOA and the GATT, e.g. Art. XIII WTOA and XXXV GATT • Annex 1A zum WTOA (Conflict GATT – MTA) • General interpretative note to Annex 1A: • In the event of conflict between a provision of the General Agreement on Tariffs and Trade 1994 and a provision of another agreement in Annex 1A to the Agreement Establishing the World Trade Organization (referred to in the agreements in Annex 1 A as the “WTO Agreement”), the provision of the other agreement shall prevail to the extent of the conflict • See e.g. Art. XIX GATT and Art. 2 Safeguards Agreement

  14. TRIPS Agreement A A A Marrakesh Agreement establishing the WTO General Agreement on Trade in Services Trade Policy Review Mechanism Dispute Settlement Understanding Subsidies & Couterv. M Import Licensing Safeguards Rules of Origin PSI Customs valuation (VII) Agriculture TRIMs Antidumping (GATT VI) SPS Textiles and Clothing TBT GATT 1994 List of specific commitments Schedule of Tariff Concessions List of MFN Exemptions Décisions, Déclarations, etc. DSU Coverage

  15. WTO Agreement • The “common roof” – • prevailing rules, see Art. XVI.3 WTOA (conflicts) • Institutional rules • Common rules about amendments to the agreements (Art. X WTOA) • Authentic interpretation (Art. IX 2 WTOA) • Membership, accession, withdrawal • Rules about particular Non-application • Rules about the force of the Treaties • Annex -> other treaty norms pertaining to the “WTO legal order”

  16. - 16 - • WTO - Agreement • GATT 1947 • GATT 1994 • Understanding Art. II 1 b • Understanding Art. XII • Understanding Art. XVII • Understanding Art. XXIV • Understanding Art. XXV • Understanding Art. XXVIII • GATS (Trade in Services) • TRIPS (Intellectual Property Rights) • DSU (Dispute Settlement Understanding) • TPRM (Trade Policy Review Mechanism) • TRIMS(Trade Related Investment Measures) • Antidumping • SCMA (Subsidies and Countervailing Measures) • Safeguards Agreement • SPS(Sanitary und Phytosanitary Measures) • TBT(Technical Barriers to Trade • Rules of Origin • Customs Valuation • Import Licensing • Textiles • Agriculture Multilateral Agreements (MTA)

  17. Plurilateral Agreements (PTA) • Agreement on Trade in Civil Aircraft • Agreement on Government Procurement • International Dairy Agreement • International Bovine Meat Agreement Not part of thesingleundertaking!!

  18. Renewingthe GATT • “The General Agreement on Tariffs and Trade 1994 as specified in Annex 1A (hereinafter referred to as "GATT 1994") is legally distinct from the General Agreement on Tariffs and Trade, dated 30 October 1947, annexed to the Final Act Adopted at the Conclusion of the Second Session of the Preparatory Committee of the United Nations Conference on Trade and Employment, as subsequently rectified, amended or modified (hereinafter referred to as "GATT 1947")” (2.4 WTOA) • State C wants to remain Member of GATT 1947, but not to become a WTO member. Why would it want to do this and is it possible?

  19. Relation between GATT 1994 and GATT 1947 An interestingtechniqueforrenewing a whole legal order consisting of a plurality of legal instruments Build a new house - Similar to the old one

  20. Relation between GATT 1994 and GATT 1947 Add some other houses to the new settlement

  21. Relation between GATT 1994 and GATT 1947 Ask the old inhabitants to move to the new settlement

  22. Relation between GATT 1994 and GATT 1947 Tear down the old building Who didn‘t move is left in the rain

  23. Continuity GATT 1994 – GATT 1947 • GATT 1994 (Introductory Note No. 1) isthe: • GATT 1947 • plus selected additional subsequent treatylaw (excluding PTAs, MTAs andthe Protocol of ProvisionalApplication), such as: • Protocolsrelatingtotariffconcessions • Protocols of accession • But not: the Protocol on ProvisionalApplication • Decisions of the CONTRACTING PARTIES • Decisions on waivers still in force • All otherdecisions • Uruguay RoundUnderstandings • Marrakesh Protocol (plus theannexedschedules of concessionsbyeachmembercountry)

  24. Modifications in GATT 1994 • GATT 1994 (Explanatory Notes, No. 2)– New terminology • Contracting Party = Member • CONTRACTING PARTIES = WTO or General Council • Less developed contracting party = Developing country member • Developed contracting party = developed country member • Executive Secretary = Director – General of the WTO • Limited “Grandfather Clause” in No.3 for prohibitions of “theuse, saleor lease of foreign-builtorforeign-reconstructedvessels in commercialapplicationsbetweenpoints in national watersorthewaters of an exclusiveeconomiczone.“ • To be reviewed and controlled

  25. Complementingthe GATT • Most MTAs: • More concreteregulation of aspects of GATT rules • Healthcontrols -> SPS • Security standards -> TBT • Controls: preshipmentinspection • Controls againstdumpingandsubsidies: ADA, SCMA • DSU • Leges speciales, seeInterpretive Note to Annex 1a WTOA (Conflict GATT – MTA) • “the provision of the other agreement shall prevail to the extent of the conflict.“ • E.g. art. XIX vs. Safeguards Agreement ?

  26. Broadeningtheregulatoryscope • GATS • Fourmodes of services (Art. I GATS) • Rules similarto GATT: MFN, NT, transparency, marketaccess, exceptions • But more limited: Scope of applicationconditionedbyconcessionsandtheirlimits (see e.g. XVI, II, VI, VII) • DSU and TPRM applicable • TRIPS • Minimum harmonization of IPL • General rules (MFN, NT etc.) • Sectoralrules • Incorporation of IP treaties (e.g. Art. 2.1, 9 TRIPS)

  27. Single Undertaking Approach • Art. 2.2 & 3 WTOA • „The agreementsandassociated legal instrumentsincluded in Annexes 1, 2 and 3 (hereinafterreferredtoas "Multilateral Trade Agreements") are integral parts of this Agreement, binding on all Members. • The agreementsandassociated legal instrumentsincluded in Annex 4 (hereinafterreferredtoas "Plurilateral Trade Agreements") are also part of this Agreement forthose Members thathaveacceptedthem, andarebinding on those Members. The Plurilateral Trade Agreements do not createeitherobligationsorrightsfor Members thathave not acceptedthem. „

  28. Single Undertaking: Accession • Art. XI, XII • Members can only become a party • to the WTOA and MTAs together • to the PTA optionally

  29. Single Undertaking: Reservations • Art. XVI.3 WTOA – Reservations • 5. “No reservations may be made in respect of any provision of this Agreement. Reservations in respect of any of the provisions of the Multilateral Trade Agreements may only be made to the extent provided for in those Agreements. Reservations in respect of a provision of a Plurilateral Trade Agreement shall be governed by the provisions of that Agreement.”

  30. Single Undertaking: Withdrawals • Art. XV.1 WTOA • WTOA – Withdrawal: not “à la carte” • Article XV WTOA Withdrawal • 1. “Any Member may withdraw from this Agreement. Such withdrawal shall apply both to this Agreement and the Multilateral Trade Agreements and shall take effect upon the expiration of six months from the date on which written notice of withdrawal is received by the Director-General of the WTO.” • 2. “Withdrawal from a Plurilateral Trade Agreement shall be governed by the provisions of that Agreement.”

  31. Flexible Obligations • Art. XXV GATT / IX.3 WTOA – Waivers • Art. XXVIII GATT Re-Negotiation • Art. XIX GATT / Safeguards Agreement • Art. XXIV GATT Regional Arrangements • Special Rules forDeveloping Countries

  32. Re-Negotiation • Art. XXVIII GATT: • Modificationofschedules • after revolvingperiodsof 3 years • upon notificationandnegotiation • eitherconsensuallywithcompensation • maintaining a ”generallevelofreciprocalandmutuallyadvantageousconcessions not lessfavourabletotradethanthatprovidedfor in this Agreement priorto such negotiations“ • orunilaterallywithcorrespondentand proportional suspensionofrelatingobligationsorconcessions • See „Understanding on the Interpretation of Article XXVIII of the General Agreement on Tariffs and Trade 1994”

  33. Performance or Compensation? •  "The onlytrulybinding WTO obligationistomaintainthebalance of concessions Judith Hippler Bello, The WTO Dispute Settlement Understanding: Less Is More, 90 Am. J. Int'l L. 416, 418 (1996) • "An adopteddisputesettlementreportestablishes an international lawobligation upon themember in questiontochangeitspracticetomakeitconsistentwiththerules of the WTO Agreement anditsannexes.". John H. Jackson, The WTO Dispute Settlement Understanding-Misunderstandings on the Nature of Legal Obligation, 91 AM. J. INT'L L. 60, 62 (1997)

  34. Performance or Compensation? - 2 • Efficientbreach of contract? • XVI.4 WTOA • 3.2 DSU • 21.1 and 3 DSU • “Prompt compliance” is recognized as essential to the credibility of the system (21.1 DSU ) • “Immediate” compliance is expected wherever practicable (21.3 DSU ) • Where immediate compliance is impracticable, the Member must implement within a “reasonable period of time” (21.3 DSU ) • Ambiguouslanguage in 3.7 and 22.1 DSU

  35. The historicargument • Underthe GATT 1947 there was nodoubtamongstates, practitionersandscholarsthatitcontainedobligationstoperformandopenednochoicefor alternative compensationwithouttheconsent of theotherstate • See Art. XVI.1 WTOA: „the WTO shallbeguidedbythedecisions, proceduresandcustomarypracticesfollowedbythecontractingpartiesto GATT 1947“

  36. Policy (teleologicalargument) • Security andpredictability (3.2) • Not onlyforthemembers, but also fortheindividuals • Function of WTO law: incentiveforincreased private activities in global trade • Insecurityaboutthecontentandtheimplementation of the legal ruleshas a „chillingeffect“

  37. Goals of WTO Law • The main conceptual focus of GATT and now the WTO is • trade liberalization • better allocation of economic resources • integration of the developing countries • management of the risks of globalization • securing peace

  38. Different types of rules • Institutional rules • Organization • Dispute settlement • Review Mechanism • Regulating state behavior • Basic principles • Non-Discrimination • Transparency • Tariffication • Level playing field • Operative rules • MTAs • PTAs • Private rights to complain: trade remedies • Dumping • Subsidies • Safeguards

  39. Structural WTO Principles • Second best: Tariffication • Binding of Tariffs (Art. II GATT) • Reduction of Tariffs (Art. XXVIII bis GATT) • Reduction of still permissible NTBs • Art. XI, XIII GATT • Various Multilateral Trade Agreements • Non-discrimination • MFN Principle (Art. I GATT, MFN) • National Treatment Principle (Art. III GATT) • Transparency (Art. II, X) • Injury avoidance • Safeguards (Art. XII, XIX GATT, SA) • Antidumping (Art. VI GATT, ADA) • Countervailing Duties (Art. VI, XVI GATT, SCMA)

  40. Non-Discrimination • Externally: MFN (I GATT) • Non-discriminationbetweenforeignproducts • Internally: National Treatment (III GATT) • Non-discriminationbetweenforeignproducts after importationanddomesticproducts • Freedom of Transit (V GATT) • Reason • discriminationdistortstheallocation of resources

  41. Safeguards • General Safeguards (Art. XIX GATT) • result of unforeseendevelopmentsand of theeffect of GATT obligations • productisbeingimported in such increasedquantitiesandunder such conditions • astocauseorthreatenseriousinjurytodomesticproducers in thatterritory of likeordirectlycompetitiveproducts • suspension of theobligationorwithdrawalormodification of theconcession • in respect of such product, andtotheextentandfor such time asmaybenecessarytopreventorremedy such injury

  42. Safeguards - 2 • ifnotifiedand after negotiation of possiblecompensation • but also unilateral and – as an answer – suspension (.3) • however: not before 3 years, • „providedthatthesafeguardmeasurehasbeentakenas a result of an absolute increase in importsandthat such a measureconformstotheprovisions of this Agreement“ • See also the „Agreement of Safeguards“ • Safeguardsfor Balance of Paymentspurposes (Art. XXII GATT) • interfaceto IMF law

  43. Antidumping Measures • Art. VI GATT • Dumping • Private Behavior: firmsaresellinggoodscheaperabroadthanathome • Export Price lowerthanDomestic Price • Reproach: • Price discrimination - unfairness • PredatoryPricing – dangerforfuturecompetition • AD (Countervailing) Dutiestoneutralizethedumpngmargin • See the „AGREEMENT ON IMPLEMENTATION OF ARTICLE VI OF THE GENERAL AGREEMENT ON TARIFFS AND TRADE 1994 “

  44. SubsidiesandCountervailingMeasures • Art. VI and XVI GATT • Subsidies • States givemonetaryadvantagestotheirenterprises • These enterprisescanthereforeselltheirgoodscheaper • Therebygaining a competitiveedgeovertheircompetitors • Thatis not based on costeffectiveness, but on statemoney • Thusdistortingcompetitivechancesandjeopardizingcompetitionas an indicator of effectiveuse of resources • The effect of subsidizationmaybeneutralizedbycountervailingduties

  45. SubsidiesandCountervailingMeasures - 2 • See also „AGREEMENT ON SUBSIDIES AND COUNTERVAILING MEASURES • „Traffic Light approach“ • red (forbidden) subsidies • yellow (countervailable) subsidies • green (in principle not countervailable) subsidies

  46. SelectiveApplication • XIII WTOA • Reservation atthe time of accession • Orexistingunder Art. XXXV GATT 1947 on theentryintoforce of the WTOA • See Botswana, Haiti, Lesotho vs. Japan, MoroccoandTunisia vs. Israel, US vs. Hungaryand Romania • Bilateral Non-Application of MTAs • PTAs: specialprovisions

  47. but a „levelplayingfield“ withconditions thatareas liberal aspossible openingup national marketsto international trade toan extentconsidered fair andjustifiabletothe national economy Restricted Nature of theInternationalisation The WTO systemdoes not (yet) create a commonandsinglemarketwithcompletelyequalopportunitiesfor all competingproducersandproducts, domesticorforeign

  48. SpecificGoodsand Services • Treaties on • Textiles (ended) • AgriculturalGoods • Aircraft • GATS – General Agreement on Trade in Services • Only Covers Services expresslycommittedbythemember States • Additional Protocolslikeeg. on • Basic Telecommunications • Financial Services • But for all theothergoods: WTO Law appliesexclusively • Art. 11.1 b Safeguards Agreement: „ ... a Member shall not seek, take or maintain any voluntary export restraints, orderly marketing arrangements or any other similar measures on the export or the import side”.

  49. *Exceptions • General policies • General Protection (XX) • Security Reasons (XXI) • Economic policy • Regional Arrangements (XXIV + A) • Waivers (XXV + A) • General Safeguards (XIX + A) • Balance of Payments Safeguards (XII) • [Re-Negotiation (XXVIII) • Selective Application (XXXV GATT + XIII WTO)]

  50. Art. XX Exceptions • Public Reasonforprotection, e.g. • „publicmorals“ (a) • human, animalor plant lifeorhealth (b) • prisonlabor (e) • national heritage (f) • exhaustible national resources (g) • Limitation bythe „chapeau“ • noarbitraryorunjustifiablediscriminationbetween countries wherethe same conditionsprevail • nodisguisedrestriction on international trade

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