CHAPTER 9 GATT Law and the World Trade Organization: Basic Principles

1. CHAPTER 9 GATT Law and the World Trade Organization: Basic Principles

2. Introduction • Trade barrier is any impediment to trade in services or goods. • Import trade barrier is any impediment, direct or indirect, to the entrance or sale of imported goods or services. • What are some of the Reasons for Regulating Imports?

3. Nontariff Barriers to Trade • Embargoes. • Quotas. • Auctioned quotas. • Tariff-Rate quotas. • Indirect nontariff barriers: Japanese large-scale retail stores law (now repealed). • Import Licensing Schemes.

4. General Agreement on Tariffs and Trade • Multilateral trade negotiations- reduce tariffs and nontariff barriers (NTB). • Nondiscrimination and unconditional MFN. • National Treatment. • Eliminate quotas and NTB (convert NTB to tariffs and then reduce), transparency very critical.

5. WTO Replaced GATT in 1995 • WTO is an umbrella organization that sets rules of international trade and dispute resolution. • Organization of the WTO  • Overseen by the Ministerial Conference which appoints the Director-General.

6. Structure of the WTO

7. GATT/WTO Dispute-Settlement Procedures • Dispute mechanisms and procedures attempt to avoid retaliation or “trade wars.” • Have quasi-judicial process for resolving disputes when deadlocked. • Only a government can bring a “complaint” against another government. See the European Communities-Regime for the Importation, Sale, and Distribution of Bananas case.

8. GATT 1994: Major Principles of Trade Law • 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).

9. Multilateral Trade Negotiations • What was the Doha Development Agenda? • What happened in Cancun 2003? • Normal Trade Relations: NTR.

10. Tariff Concessions, Bound Rates, and Tariff Schedules • Article II of GATT calls for member nations to cooperate in lowering tariffs through negotiations. • Tariff concession: one country promises not to levy a tariff at a higher level then agreed upon. • See the GATT Report on European Economic Community-Import Regime for Bananas.

11. Nondiscrimination, MFN, and National Treatment • Unconditional MFN: if a member extends privilege to another member then that privilege automatically is extended to all members. Now Normal Trade Relations or NTR. • WTO Exceptions- may deny MFN based on national security, foreign policy, or a government’s denial of human rights to its citizens.

12. Normalization of Trade with China • 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.

13. National Treatment • 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.

14. GATT and the Elimination of Quotas • Article XI. • But must abide by non-discrimination. • Used for economic and political reasons. • Balance of payments exception. • Quantitative Restrictions: Balance of Payments Exception and Developing Countries. 

15. India- Quantitative Restrictions on Imports (WTO,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.

16. Conclusion • 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?

17. Conclusion • Conflict between international and national law. • Law vs politics. • What is the appropriate connection between human rights and trade? European and Japanese model vs. United States’ historical approach?

18. Conclusion • Should labor and environmental issues be linked to trade? • Furthers whose agenda? • Is it protectionism in disguise? • Conflict between the developing and developed world?