Int Econ Law Final Outline 09

International Economic Law • architecture of buying goods from abroad. Historical forthcoming of protectionist regimes People are personal effected by international trade. More and more economist are being called upon to testify. IEL part of public international law. Beginnings of international trade Cobden treaties—“tariff disarments” • series of treaties • agricultural is still protected. • lobbying power is great Protectionism • specific duties v. ad valorem • until 1914 you had a high degree of protectionism. • Hawley• Smoot Tariff Act (1930)—KNOW • protectionist measure: • buy America clause: federal, state and military must buy American. • need to protect home industry. • reciprocity!! • beggar• thy• neighbor• policy • lead to high unemployment and violence 1934—Reciprocal Trade Agreements Act Bretton Woods institutions Next Time Section 2 • read book and cites. SEPTEMBER 10TH• • • MEETING AROUND 6:30 TUESDAY• • Efficient allocation of resources • Ricardo's theory has yet to be really challenged. • mercantilism: increasing the amount of exports, while decreasing imports via tariffs. • bartering goods for goods. • Wealth of Nations by Adam Smith • everyone is better of through rational trade. • monopoly does not create a benefit for society. • we are better off if we trade with one another. "the general industry of the society never can exceed what the capital of the society can employ" "no nation was ever ruined by the balance of trade"• • Doesn't buy into this notion!!! • might not be true today• • • agricultural subsides. • Comparative Advantage • it will always fluctuate• • • average will always go up?? • Smith: says there is a zero• sum game • MUST TAKE INTO CONSIDERATION PRODUCTION UNITS. • Ricardo says there is no zero• sum game. • More efficient to specialize in a particular trade. • even if one country is better at making all products, it might still be more efficient to trade for a particular product. • Allen Sykes Article • tracks Ricardo• • • Distinction: Efficiency vs. General/National Welfare • Efficiency depends on who you take into account. • Examples: Mexico experience shortfall in cornflower. • Supply and Demand• • Note: tariffs effect this! • equilibrium point • convergence with domestic and international price • if price is higher outside, export more, domestic prices go up. • Legal Theory • trade law is a relatively new field.

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• left largely to the discretion of governments • end up with an incoherent background. • sources of international law are treaties, customary international law, gen. principles. • Customary international law: state practice and conviction that what you are doing is based on a legal obligation. • Treaty law prolly reigns supreme for our purposes. • Are individual subject to international law? NGOs? • TWO SCHOOLS OF THOUGHT: realpolitik v. international law • Wagner likes international law. • Political Theory • governments, individual citizens (maximization of personal welfare), common interest groups (lobbying groups), foreign government (). NEXT TIME• • • law of WTO, basic principles, rules of non• fair trade,

Chapter 1 1.2.2. Economic globalisation: a blessing or a curse? (CB 9) • Americans worry about a race to the bottom, labor standards, enviromental standards. Whether agreeing to IP rights is really in their best interest. . Fred Bergsten (CB 9) • In Europe the popular backlash against economic globalization, in FRANCE the preception is that is is a conspiracy of Anglo• Saxons. • perception of increased competition and outsourcing labour• intensive services. • TWO CAMPS • glopaphiles: trade is already making globalization work for the poor. • globaphobes: trade is inherently bad for the poor. Trade simply leads to more poverty and inequality. 1.2.2.2. Problems of current economic globalisation • Bill Jordan (CB 11)• globalization is neither entirely beneficial nor entirely harmful. • globalisation of trade and investment affects labour standards, working conditions, the enviroment, human health and many other aspects of our lives...We need to ensure there are global rules to govern the effects of a global economy. • globalisation seems to only benefit Transnational Corporations and often spells disaster for industries in developing countries. • TNC treat the world like their assembly line• • manufacturing goods where labour is cheapest, basing operations where taxes are lowests and selling goods where the price is highest. Can simply more to another country if unfavorable laws are erected. • Stiglitz: Trade liberalization, conducted the wrong way, too fast, in the absence of adequate safety nets, with insufficient reciprocity and assistance on the part of developed countries, can contribute to an increase in poverty. • developing countries typically have weak safety nets or none at all. • easy to get things across borders• • • good and bad (i.e. terrorism) • Money should flow from Rich countries to Poor ones, but flow is typically opposite. Pascal Lamy: Globalisation GOOD: 1. allows individuals, corporations and nation• states to influence actions and events around world. 2. break down of trade barriers that expanding freedom, democracy, innovation, etc. BAD: 1. scaricity of natural resources, deterioration of enviroment 2. migratory movements provoked by insecurity, poverty and political instability 1.2.3 Trade Liberalisation versus protectionism • Comparative Advantage • Absolute Advantage: Each country is best a making at making a particular item. • What if one country is bad a making everything? • B should still invest in what it does best even if A is better at it. **A country does not have to be the best at at anything to gain a comparative advantage. *Virtually impossible to have NO comparative advantage over anything. • Generally trade liberalisation is a positive contributor to alleviating poverty. • It allows people to exploit their productive potential, assits economic growth, curtails arbitrary policy interventions and helps to insulate against shocks in the domestic economy. • bound to be some "losers" in this process, but simply means they need more reform. • International Trade has non• economic incentives as well • incentives for not making WAR • intensifies cross• border contacts and exchanges of ideas which contribute to better mutual understanding.

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• countries often see each other as business partners rather than enemies. • Trade protectionism hurts exporting countries "...if goods do not cross frontiers, soldiers will." • In China, several cities are starting to monitor the single party rule • multinational corporations setting up high teach factories need to protect their Intellectual Property. • 1.2.3.2. Reasons and excuses for protectionist trade policies • Prime reason for adopting protectionist trade policies • protect a domestic industry and employment in that industry, from competition arising from imported products, foreign services or service suppliers. • e.g. steel industry in US, 45,000 workers lost their jobs as imports of steel were on the rise. • While import competition will likely benefit most of their constituents, it is likely to hurt a small group of their constituents significantly. • This small group (companies) are typically vocal and well organised, exert a great deal of pressure on decision makers. • Sometimes Political logic prevails over Economic Logic: even though a country as a whole might be better off under free trade, some special interests will actually be worse off. • Protect infant industry • argument used by developing countries • should only be temporary protection, until industry becomes strong enough to compete with foreign competition. • PROBLEMS • hard to determine which industries merit protection • uncompetitive industry might stay uncompetitive. • industry never grows up, temporary protection becomes permanent. • Optimal Tariff • if country raises tariffs, they may be able to manipulate the world price for a product, thereby tilting the terms of trade in their favor. • country simply need be one with a good share of world trade in markets that exports and imports. • but if all countries pursue this policy• • • All are likely to lose. • Strategic Trade Policy • government reserves the domestic market for domestic firms, allows the firm to better compete in the world markets. • business yields national benefits • Business is also very profitable • Government taxes • Trade Tax • generate substantial revenue for some countries. • National Security • Self• Suufficiency Argument• • • WAR TIME ARGUMENT • governmetn will be able to rely on its domestic industry in times of crisis. • BUT government might be able to simply stock up on cheap imports by opening trade. • Trade restrictions also come from protection of societal values • public morals, public health, consumer safety, a clean enviroment and cultural identity. 1.2.4. Globalization and trade to the benefit of all? • Kofi Annan: The reality of the international trading system today (2003) does not match the rhetoric of improving the quality of life. Instead of open markets, there are too many barriers there are subsidies by rich countries tha tilt the playing field aganist the poor. And instead of global rules negotiated by all, there is too much closed• door decision making, too much protection of special interests, and too many broken promises. • global rules are too one sided, made by developed countries the the benefit of developed countries. • WTO is a broken systems. • Rich countries have a disproportionate influence. • Oxfam argues that the European Union is the most protectionist of the large trading entities • How can we ensure we encourage the right type of Globalization? • Wolfensohn: 1. better governance 2. reduction of trade barriers 3. more development 4. better international cooperation • Pascal Lamy • need fairer multilateral trade rules and building of trade capacity in developing countries.

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• better focused aid to developing countries. • trade is a crucial ingredient in a policy mix which must nevertheless contain many other ingredients to achieve successfully this objective. • NO BLIND ADHERENCE TO Free Trade or Protectionism. • Economic openness is a necessary but not a sufficient condition for economic development and prosperity. • NEED functioning State institutions and a legal system that protects fundemental rights and property and enforces contracts, globalisation will not bring prosperity but corruption and exploration. • Example: Inida, has shifted since the late 1980s from protectionism and State control towards pro• market policies, thereby raising annual economic growth to more than 9.4 per cent in 2006. • MUST take into consideration cultural views towards Globalization • inherent resistance to opening up markets. • Human Rights must also be an ingredient. • We have no world government accountable to the people in every country. • WHO DO WE HOLD ACCOUNTABLE? • "Global Governance WITHOUT Global Government" • Highway metaphor• • world• wide highway • free• for• all highway, giant trucks run by the powerful with take over. • Must have traffic rules, traffic police, and traffic authority for this global highway. Notes THURS. • Plurality trade agreements • Agreement on Government Procurement: caused lots of problems. • US, Cananda, China, etc. Lots of countries have started. • Substantial reduction of Tariffs• • does not mean free trade. • After some time, non• tariff measures became more prolific. • everyone self• classifies themselves 1.3 International Trade and Law of the WTO *Summary: need and existence of international rules & basic rules and disciplines of WTO law. • What is the need for International Rules? 1. trade rules restrain countries from taking trade• restrictive measures. • forces country to resist influence of interest groups, kinda. • help to avoid ALL countries making trade• restrictions. 2. Gives traders and investors a degree of security and predictability. • predictability encourages investments. 3. National Governments alone cannot cope with the challenges presented by economic globalisation. • public health, labor wages• • • differ from country to country. • international trade rules promote an effective, international protection of these social values. 4. help achieve a greater measure of equity in international relations. • trade rules are binding on rich and poor countries alike. • Reciprocity is a big factor. • helps protect developing countries from the "law of the jungle" • Its simply a balance between domestic policy objectives and international commitments. • International economic law: international rules pertaining to economic transactions and relations, as well to governmental regulation of economic matters. • Multilateral trade agreement• • • Marrakesh Agreement Establishing the WTO 1.3.2• • Basic Rules and Principles of WTO Law • complex set of rules dealing with trade in goods and services and the protection of intellectual property rights. • 5 Groups of Basic Rules 1. the principles of non• discrimination 2. the rules of market access 3. the rules of unfair trade 4. the rules on conflicts between trade liberalisation and other societal values and interests, including rules on special treatment for developing countries 5. rules promoting harmonisation of national regulation in specific fields. • rules on decision making and dispute settlement. • WTO is considered the head of a multilateral trading system. • WTO rules limit protectionist measures because Countries have a means by which to complain to the WTO. What is WTO? WTO agreement – preamble –“ 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…” aspirations (that’s why it’s in preamble); strives for sustainable dev; disparate goals?

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• • • •

criticism: job loss Ricardo wants to take barriers down, every country will figure out what it’s best at word “free trade” (no barriers) doesn’t appear in preamble. Arguably some barriers in preamble. Does not say you have to take down all barriers!! 1. Principles of Non• Discrimination • most• favored nation (MFN) treatment obligation and National treatment obligation. • MFN requires a WTO member that grants most favorable treatment to ONE nation to grant the same treatment to ALL WTO MEMBERS! • MFN is the SINGLE MORE IMPORTANT WTO RULE. • • National Treatment Obligation• • • GIVES RISE TO MANY TRADE DISPUTES • requires a WTO Member to treat foreign products, services and services suppliers no less favorably than it treats 'like' domestic products, services and service suppliers. • i.e. once goods enter a domestic market, they must be taxed and regulated the same as 'like' domestic goods. • Trade in goods• • • rule typically applies to ALL • Trade in services• • • dos not apply to all. ONLY if national government has committed to give national treatment to some specific service. 2. Rules on Market Access• • • Four groups of rules regarding market access 1. Rules on customs duties• • • tariffs 2. rules on other duties and financial charges 3. rules on quantitative restrictions• • • QUOTAS • Generally forbidden unless one of many exceptions apply. 4. rules on other 'non• tariff barriers', such as rules on transparency of trade regulation. • lack of transparency of national trade regulations. • uncertainty and confusion regarding the trade rules • arbitrary application of these rules • custom formalities and practices of government procurment *imposition of custom duties ARE NOT prohibited, but members are called upon to negogiate mutually beneficial reductions of customs duties. 3. Rules on Unfair Trade • WTO does not currently have GENERAL Rules for unfair trade practices, but it does have a number of detailed rules that relate to specific forms of 'unfair' trade.• • • DUMPING AND SUBSIDISED TRADE. • DUMPING: bringing a product onto the market of another country at a price less than the normal value of that product, is condemned BUT NOT PROHIBITED by the WTO. • Wal• mart Tactic. • When dumping threatens to cause material harm to the domestic industry, WTO allows that member to impose ANTI• Dumping duties on the dumped products. • SUBSIDIES: financial contributions by governments or public bodies that confer benefit, are subject to an intricate set of rules. • export subsidies are PROHIBITED by WTO. • if threatens to cause material harm to member, member can impose extra duties to equalize. • agricultural products have more lenient rules. 4. Trade Liberalisation versus other Societal Values and Interests • rules that address conflict between the two• • • referred to as 'Exceptions' **Allows Members to deviate • under specific conditions• from basic WTO rules and disciplines in order to take account of economic/non• economic values that compete with free trade. • morals, enviroment, public health, national security, protection of industry 5. Rules Promoting Harmonisation of National Regulation • TRIPS agreement lays down minimum requirements for the protection of intellectual property rights. • venture into 'behind• the• border' regulatory areas. 1.4. Sources of WTO Law • Marrakesh Agreement• • principal source of WTO law • other sources: dispute settlement reports, acts of WTO bodies, customary international law, general principles of law • Marrakesh Agreement Establishing the WTO • consists of short basic agreements (sixteen articles) and numerous other agreements (ANNEXes) *Annexes 1, 2 and 3 (Multilateral Trade Agreements) are binding on ALL MEMBERS. • Annex 4 (Plurilateral Trade Agreement) binding on those who accept it.

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• In the Event of a Conflict with this agreement and any other Multilateral Trade Agreements, this provision of this agreement shall prevail. • Annex 1• • most important • Annex 1A• • 13 multilateral agreements on trade in goods, contains General Agreement on Tariffs and Trade (GATT). • Annex 1B• • General Agreement on Trade in Services (GATS) • Annex 1C• • Agreement on Trade• Related Aspects of Intellectual Property Rights (TRIPS) General Agreement on Tariffs and Trade • GATT 1994 sets out the basic rules for trade in goods. • 1st paragraph references GATT 1947. • SHOULD HAVE DRAFTED A NEW INSTRUMENT! • but allows drafters to limit the debate on the provisions. • GATT 1994 contains rules on most• favoured nation treatment (art. 1); tariff concessions (art. II).. Other Agreements • Agreement on Agriculture • SPS agreement• • • Agreement on the Application of Sanitary and Phytosanitary Measures• • regulates the use by WTO members of measures adopted to ensure food safety and protect the life and health of humans, animals... • Agreement on Textiles and Clothing, gradual elimnation of quotas on textiles and clothing • TBT• • • Agreement on Technical Barriers to Trade• • regulates the use by WTO members of technical regulations and standards and procedures to test conformity with these regulations and stds. • TRIMS• • Agreement on Trade• Related Investment Measures provides that WTO members regulations dealing with foreign investments must respect the obligations in Article III • Anti• dumping agreement: detailed rules on the use of anti• dumping measures. • SCM agreement: Agreement on Subsides and Countervailing Measures provides for detailed rules on subsides and the use of countervailing measures. **THESE agreements prevail if in conflict with GATT 1994. 1.4.1.3 General Agreement on Trade in Services (GATS) • totally new agreement, first multilateral agreement on trade in services. • establishes a regulator framework where WTO members can undertake and implement commitments for liberalisation of trade in services. • Trade in Services • territory of one Member into the territory of any other member (cross• border supply) • territory of one Member to service consumer of any other member (consumption abroad) • service supplier of one member through commercial presence in territory of any other member (supply through a commercial presence) • a service supplier of one member through the presence of natural persons of a member in territory of any other members (supply through the presence of natural persons) • Exclude services supplied in the exercise of governmental authority. • includes foreign investment by suppliers of services. • GATS and GATT 1994 are mutually exclusive agreement but may overlap in certain senarios. • analysis must be agreement specific • GATS• how it relates to supply of the service • GATT• how it affects goods involved. • e.g. Trade in Bananas• • • must be analyzed under both! 1.4.1.4. Agreement on Trade• Related Aspects of Intellectual Property Rights • specifying minimum standards of protection of intellectual property rights and requiring the effective enforcement of these rights. • Covers 7 types of Intellectual Property 1. copyright and related rights 2. trademarks 3. geographical indications 4. industrial designs 5. patents 6. layout• designs of integrated circuits 7. undisclosed information, including trade secrets. • e.g. Copyright: protection term. • REQUIRES enforcement procedures and remedies to permit effective action against any act of infringement of intellectual property rights referred to above.

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1.4.1.5. Dispute Settlement Understanding (DSU)• • VERY IMPORTANT • applies to ALL disputes between WTO Members arising under the WTO agreements. • compulsory jurisdiction, short timeframes, appellate review process and an enforcement mechanism. 1.4.1.7. Plurilateral agreements • binding only on those members that are a party to these agreements. • e.g. Agreement on Trade in Civil Aircraft. • provides duty free trade in civil aircraft and parts thereof; • prohibits quotas; ***Addresses the issue of government support to aircraft manufacturers. ***Disputes CANNOT be brought to the WTO dispute settlement system for resolution. • e.g. Agreement on Government procurement• • free to discriminate in favour of domestic products in the context of government procurement. • CAN be brought to DSU. 1.4.2. Other Sources of WTO Law • WTO Dispute Settlement Reports: reports of WTO panels and Appelllate body. • While not binding except on parties to the dispute, they are HIGHLY PERSUASIVE for future cases. • tells WTO members what to expect. 1.4.2.2. Acts of WTO Bodies, organs of WTO • sources of WTO law which give rise to rights and obligations for WTO members 1.4.2.3. Customary International Law • WTO DSU specifically cites customary rules of interpretation of public international law. • generally fill gaps left in treaties. 1.4.2.4 General Principles of Law Blustein Aritcle• • • How the WTO's Doha Rounds Negogiations Went Awry in July 2008

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Chapter 3• • WTO Dispute Settlement INTRO • WTO agreements provide for many wide ranging rules but WTO members do not always agree on the correct interpretation and application of these rules. • WTO dispute settlement used be developed and developing countries alike. • related to bans on certain products or subsides to Boeing and Airbus. Article 3.1 of DSU • Members affirm their adherence to this dispute system. • Problem with GATT dispute settlement, findings and conclusions ONLY became binding when adopted by consensus by the GATT Council. • Responding party could prevent any unfavourable conclusions from becoming legally binding. • DSU is attached as ANNEX 2. Article 3 General Provisions 2. The dispute settlement system of the WTO is a central element in providing security and predictability to the multilateral trading system. The Members recognize that it serves to preserve the rights and obligations of Members under the covered agreements, and to clarify the existing provisions of those agreements in accordance with customary rules of interpretation of public international law. Recommendations and rulings of the DSB cannot add to or diminish the rights and obligations provided in the covered agreements. 3.2. Principles of WTO Dispute Settlement Object and Purpose of the WTO dispute settlement system • prompt settlement of disputes between WTO members concerning rights under WTO law. • Article 3.3 of DSU: prompt settlement of disputes is essential. • Article 3.2 of DSU • Provides secutiry and predictability to the multilateral trading system. • clarifies existing provisions in accordance with customary rules of interpretation of public international law. Settlement of disputes through multilateral procedures • Object and purpose is for members to settle disputes through multilateral procedures of the DSU rather than through unilateral action. **Article 23.1 of DSU IMPOSES a general obligation to redress a violation of WTO law through the multilateral DSU procedures, and NOT through unilateral determination. • Violation of WTO law requires DSU settlement if applicable. • GATT's consensus system in dispute settlement had been too weak. Settlement of Disputes through consultations if possible • Article 3.7 of the DSU states • the aim of dispute settlement is to secure a positive solution. • preference for mutually acceptable solutions reached through negogiations, rather than solutions resulting from adjudication. • NOTE: mutually agreed solution needs to be consistent with WTO LAW. Settlement of disputes and the clarification of WTO law• cannot add or diminish rights. • Dispute settlement also serves to clarify the existing provisions of the agreements. **Recommendations and rulings of the DSB CANNOT add or diminish the rights and obligations provided in the covered agreements. **DSU specifically councils AGANIST judicial activisim, i.e. against taking on the role of legislator. Settlement of disputes in good faith • Article 3.10 requires members to engage in Dispute Settlement in good faith, i.e. with genuine intention to see the dispute resolved. • e.g. failure to bring procedural deficiencies to the attention of the panel. REQUIRES 1. Member must have violated a substantive provision of the WTO agreements 2. must be somehting more than mere violation. 3.2.2 Methods of WTO dispute settlement • DSU provides many ways for dispute settlement 1. consultations or negotiations 2. adjudication by panels and the Appellate body 3. arbitration

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4. conciliation and and mediation *Consultations, or at least an attempt to have consultations MUST ALWAYS precede resort to adjudication. • Dispute settlement methods in Articles 4, 6 and 20 of the DSU are the most used. • parties can also agree to aribtration. • BUT arbitration MUST be consistent with the WTO agreements. • mediation can also be used while the panel process proceeds. Jurisdiction of the WTO Dispute Settlement System • scope and nature of the jurisdiction of the WTO dispute settlement system. *The WTO dispute settlement system has juris OVER ANY DISPUTE between WTO members ARISING UNDER COVERED AGREEMENTS. • includes WTO agreements, GATT 1994 and all other multilateral agreements on trade, GATS, TRIPS and DSU. • NOTE: covered agreements may provide for a few special and additional rules and procedures. • These special or additional rules and procedures prevail over the DSU rules and procedures to the extent there is a differnece between them, i.e. ONLY IF THERE IS A CONFLICT BETWEEN THEM. • General applicable rules and Special provisions FORM a comprehensive, integrated dispute settlement system for the WTO Agreement. Compulsory Jurisdiction • jurisdicition is Compulsory by nature. Members automatically fall under the juris of WTO. • MEMBERS are obligated to bring a dispute to the WTO dispute settlement system. • Membership in WTO constitutes CONSENT Exclusive Jurisdiction • WTO disptue settlement system exlcudes any other system of dispute settlement. Contentious Jurisdiction • NO advisory opinions, can only "clarify" the existing provisions within the context of solving the dispute. Access to the WTO dispute settlement system• • mermber involved in dispute and members with a substantial interest in dispute. • Access or use of WTO dispute settlement system is limited to MEMBERS of the WTO. • Third Parties: only members have a substantial interest in a matter before a panell amy become third parties in the proceedings before that panel. Causes of Action • covered agreements contian provisions setting out when a Member can have recourse to the WTO dispute settlement system. • THREE TYPES OF COMPLAINTS 1. violation complaints 2. non• violation complaints 3. situation complaint • non• violations and situation complaints must be show before hand • violations• • complaint must state violation. creates prima facie case. • IN NO CASE has the respondent be successful in rebutting the presumption of nullification or impariment. • NONE of the non• violations complaints have been successful. • Member have discretion whether or not to bring action. • Panel is not authorized to question decision to bring action. Measures Subject to WTO dispute settlement 1. Can private parties challenge measures since countries are abound by international agreements. • NO, private parties cannot bring action. • HOWEVER, government involvement in a private action may allow WTO dispute settlement. 2. Can measures no longer in force be challenged? • YES, if they currently affect the operation of a covered agreement. • expiration may affect recommendations a panel might make. • YES, panels can still make findings of fact with respect to the terminated or amended measure. • whether measure is in force is NOT DISPOSITIVE. • whether measures whose legislative basis has expired affect the operation of a covered agreement currently is an issue. 3. challenges to legislation as such, not requiring application of legislation• • • • standing • TWO TYPES 1. legislation that mandates a violation CAN BE CHALLENGED whenever 2. legislation that gives discretion to the executive authority to violate can ONLY be challenged upon actual application. • discretion legislation can still be challenged because it can have a chillin effect. The Amicus Curiae Brief issue**

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• WTO dispute settlement system is government• to• government dispute settlement system • individuals, companies, international organisations and non• governmental organisations have no direct access to the WTO dispute settlement system. • DO NOT HAVE A RIGHT be heard or to participate in the proceedings. • ALTHOUGH, panels and Appellate body have the authority to accept and consider written briefs submitted by individuals, companies or organization. • Panel has authority to accept or reject any information or advice which it may have sought and received. • As long as the Panel acts consistently with the provisions of the DSU and the covered agreements, we have the legal authority to decide whether or not to accept and consider any information that we believe is pertinent and useful in an appeal. • VAST majority oppose amicus curiae briefs • REASONS WHY most oppose 1. need to consider and react to amicus briefs will eat up scare legal resources, will favor members with the most legal resources. 2. most vocal and best funded NGO's often take positions that are considered unfriendly to the interests and policies of developing countries. • • Question: who should participate in the WTO legal system? • Amicus Curiae Brief from Members not a party to the dispute and/or individuals seems to be at the discretion of the Panels. • Cannot accept brief if it would interfere with 'fair, prompt and effective resolution of trade disputes.' Indirect Access for private parties • Many of the disputes heard by the WTO are disputes brought by the government at the instigation of an industry or a company. • disputes driven by narrow interest groups. • Some WTO member's legal systems allow for industries to lobby government to bring action. Interpretation of WTO law (impt!) • textualist approach (look into text of agreements) • context secondary • very little use of object and purpose The WTO Dispute Settlement Process • 4 MAJOR STEPS 1. consultations 2. panel proceedings 3. appellate review proceedings 4. implementation and enforcment • Chart on Page 199 Timeframe for the WTO dispute settlement process • short timeframes within which the proceedings of both panels and the Appellate body must be completed. • Operates with severe time limits RULES of Interpretation and Burden of Proof Rules of Interpretation • Article 3.2 of the DSU: to clarify the existing provisions of covered agreements in accordance with customary rules of interpretation of public international law. • e.g. Vienna Convention on the Law of Treaties has attained the status of a rule of customary international law; therefore, it applies to DSU. • Article 31 of the Vienna Convention of the Law of Treaties applies to the DSU because it has become customary international law. Burden of proof • DSU does not contain any specific rules concerning the burden of proof in the WTO dispute settlement system. • The burden of proof shifts based on presumption and rebutted presumptions. • prima facie case, rebut or court must rule as a matter of law. • US• Gambling: prima facie case is based no evidence and legal argument put forward by the complaining party in relation to each of the elements of the claim. Confidentiality and Rules of Conduct Confidentiality of the proceedings • Consultations, panel proceedings and appellate review are ALL CONFIDENTIAL.

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• Parties may only make their own admissions available to public. • The final panel report only becomes a public document when it is circulated to all WTO Members. • WTO is big on conficentiality. • CREDIBILITY and INTEGRITY • Too much confidentiality can also be damaging• • • lack of transparency. • A party can decide that private counsel forms part of its delegation and will represent it in WTO dispute settlement proceedings. Rules of Conduct • To preserve the integrity and impartiality of theWTO dispute settlment system, the Rules of Conduct require that panellists, arbitrators and Appellate Body members: shall be independent and impartial, shall avoid direct or indirect conflicts of interest and shall respect the confidentiality of proceedings. Remedies for Breach of WTO Law • DSU provides 3 types of remedy for breach of WTO law: 1. one final remedy, withdrawal of the WTO• inconsistent measure 2. two temporary remedies a. compensation b. suspension of concessions or other obligations. Article 3.7 of the DSU • in absence of a mutually agreed solution, the first object of the dispute settlement mechanism is usually to secure the withdrawal of the measures concerned if these are found to be inconsistent with the provisions of any covered agreements. • typically withdrawal or amendment of the inconsistent aspects suffice. • Reasonable time for compliance is usually determined by the parties, or by binding arbitration. • must consider "reasonableness" and "prompt "compliance" • Member is not required to utilise extraordinary legislative procedures, rather than the normal procedure, in order to shorten the period of implementation. • But if not legislation is required, simply administrative means, the reasonable period should be considerably less than 15 months. • global economic crisis can have an effect on the reasonable period. Compensation and Retaliation • Only withdrawal or amendment of the WTO• inconsistent measure constitutes a final remedy for breach of WTO law. • DSU provides the possibility of recourse to temporary remedies: • compensation • suspension of concessions or other obligations. • Compensation is voluntary, i.e. both parties have to agree on the compensation and the compensation concerns only damages that will be suffered in the future RETALIATION • suspension of concessions or other obligations• • allowed if a reasonable period of time has passed and parties have not been able to agree on compensation. CROSS• RETALIATION • same sector retaliation is not possible, can go after another sector having nothing to do with the agreement. • e.g. France went after the Florida orange industry close to the election even though it had nothing to do with the agreement. Aim of DS: • secure a positive solution to the dispute mutually acceptable solution to be reached♠ an end to breach of substantive WTO law compensation as a temporary relief member may suspend application of its own concessions or other obligations on a discriminatory basis vis• à• vis the other Member • don’t have damages! • retaliation – problem – chose iconic symbolistic products to induce compliance (Roqfort cheese), but to what extend can u hurt industries that have nothing to do w dispute at hand? Steel manuf – hurt car manufacturers, bc had to pay additional tariff  cross retaliation happens on completely different industry and product limitation of DSU (Art 3.2 DSU) – “cannot add or diminish” any of the rights or decisions– don’t want activist judges; especially in int’l sphere US• Gambling

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• Antigua observed that retaliating against US goods and services would only hurt Antigua. • Therefore, cross• retaliation against US IP protection would give it the most leverage. • i.e. can legally break US patents, trademarks, and copyrights. • serves to give smaller countries more leverage. • Article 22.4 of the DSU: the level of the suspension of concessions or other obligations authorized by the DSB shall be equivalent to the level of the nullification or impariment. • CAN BE VERY EXPENSIVE! Antigua requested 3.4 billion a year. • ultimate award given was 21 million dollars. Juanuary 1995 to October 2007, the DSB authorised the taking of retaliation measures in seven cases. **Retaliation measures often take the form of a drastic increase in the customs duties on selected products of exports interest to the offending party. • can also take the form of suspension of 'obligations' rather than the suspension of tariff 'concessions.' EC• Bananas III: Ecuador was authorised to apply (cross• sector) retaliation measures for an amount of $201.6 million US a year but found it impossible to make use of this possibility without causing severe damage to its own economy. PROBLEM: retaliation often cannot replace losses and does effect relations with particular State. • Seem to only work when big countries retaliate against each other. Other Remedies for Breach of WTO Law • Restitution in kind: the wrong• doing State has to re• establish the situation that existed before the illegal act was commited. • OR compensation for the damage caused by the act. • Australia• Automative Leather II• • • the DSU not only provides 'prospective' but also for 'restrospective' remedy. 3.2.9. Special rules and Assistance for developing country Members • developing members then dto bring more disputes to the WTO than developed• country members. • developing countires• • even some of the most poorest• • are increasingly taking on the most powerful. • Article 24.1 of the DSU requires Members to 'exercise due restraint' in using the WTO dispute settlement system in disputes involving a least• developed country Member. Special Rules for Developing country Members • See several articles Legal Assistance for Developing country Members • many developing country members do not have the in house expertise to participate effectively in WTO dispute settlement. • representation by private counsel has its costs, sometimes too much for developing countries. • Article 27.2 of the DSU requires the Secretariat to make qualified legal experts available to help any developing country that so request. • Advisory Centre on WTO Law (ACWL) an independent group that offers help to developing countries at a discount rate. 3.3 Institutions of WTO Dispute Settlement • Political institutions • Dispute Settlement Body • Judicial type institution • dispute settlement panels • appellate body The Dispute Settlement Body • WTO dispute settlement is administered by the Dispute Settlement Body. • ALTER EGO of the WTO's GENERAL COUNCIL • authority to establish panels, adopt reports, appoint members of the appellate body, adopt rules of conduct for WTO dispute settlement. **ARticle 2.4 of the DSU• • where DSU provides for the DSB to take a decision, it is taken by consensus. • watch for 'reverse' consensus• • • accepted unless consensus not to accept. • meets as often as necessary to carry out its function. • involvement of DSB serves two purposes 1. keeps all WTO members directly informed of WTO dispute settlement 2. gives WTO members a designated political forum in which issues arising from the use of the dispute settlement system can be debated. • check on the dispute resolution system. 3.2 WTO Dispute Settlement Panels (CB 238)

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• actual adjudication is carried out by ad hoc panels. (ad hoc• • • for a specific purpose, cannot be adopted for other purposes) Request for the Establishment of a Panel • Panels are ad hoc bodies established for the purpose of adjudicating a particular dispute and are dissolved once they have accomplished this task. • Article 6.2 of the DSU • request must be made in writing and must: indicate whether consultations were held; identify the specific measures at issue; and provide a brief summary of the legal basis of the complaint sufficient to present the problem clearly. • well• pleaded complaint rule, kinda, but no chance for amended pleadings. • panel must be able to at least identify the precise measures at issue. • might have to specify the products at issue in some cases. • EC• Bananas III, listings articles of the agreements alleged to have been breached was sufficient to satisfy the minimum requirement of Article 6.2 of the DSU. • but its a case• by• case basis. • STD: EC • Tube or Pipe Fittings: 'ability of the respondent to defend itself' • is the respondent's ability to defend itself prejudiced by the alleged lack of specificity in the text of the panel request. **subsequent submissions CANNOT cure a defective panel request BUT a complaint's first written submission may confirm the meaning of the words used in the panel request. ARTICLE: The Nine• day Misadventure of the Most Favored Nations, Blustein • Problem with Doha Round of global talks • specter of widespread protectionism looms • recession might trigger more protectism. • Doha was the last chance for a while to globally reduce trade barriers. recesion will prevent reductioin of trade barriers for a while. • Failure was attributed almost entirely to discord over one technical matter, which involved poor countries' rights to raise emergency tariffs when their framers are deluged by imports. • Powerful US farm and industrial groups were profoundly dissatisfied with one proposal that came close. Establishment of a panel (CB 242) • panel is established by DSB unless reverse consensus says otherwise. • if multiple members are involved in the same dispute, a single panel can be formed to resolve such a dispute. • However, multiple panels can still be formed to resolve similar complaints. • typically only on respondent, even though several members may be responsible. • Canada• Wheat Exports….can submit a second panel request to extend the scope of the first panel. Composition of a panel • Article 8.5, panels are normally composed of three persons, although parties may agree to five. *Nationals of Members that are parties or third parties to the dispute shall not serve on a panel concerned with the dispute UNLESS the parties to the dispute agree otherwise. *Developing country can request a country member to serve on panel • Only if up against a Developed Country. • Special Preference to Developing Country. • Typically the CASE. • European Communities seek Reform • Move from ad hoc panelist to a system of permanent panelists. • Has received Little Support. Terms of Reference of a Panel (CB 247) • Article 7.1 of the DSU • Unless parties agree otherwise, a panel is given the following STANDARD terms of reference: To examine in light of the relevant provisions in covered agreements, the matter referred to the DSB by PARTY in Document… • Document is the Panel Request Document• • • MUST identify in Panel Request. • Important for two reasons: 1. due process objective: give sufficient information concerning the compliant. 2. establish jurisidiction of the panel by by defining the precise claims at issue. • Standard review for panels • not 'de novo or complete deference • Panel simply required to make an objective assement.

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• not every evidentiary error harms the case. • judicial economy and ultra petitia • panel must only resolve the complaints necessary to resolve the dispute. • however, must be careful not to resolve to little issues. • must be clear that the panel report suffuciently considered the claim• • ok • does not mean the panel needs to address the arguement. • does not make an objective assement of the matter before it • Role of the WTO secretariat • Article 27.1 of the DSU: WTO secretariat has the responsibility of assisting panels and providing technical support. 3.3.3. The Appellate Body • The appellate body is a standing, permanent, international tribunal. • 7 members, must be broadly representatives of membership in the WTO. • appointed to four year terms, reappointed at most, one time. • institutional structure of the appellate body • Access to appellate review • ONLY parties to the dispute may appeal. • third parties that have notified the DSB of a substantial interest can participate in the appellate proceedings. EC • Hormones: findings of fact are not subject to appellate review. • Article 11 of DSU: allows for appellate review as to whether a Panel has made an objective assesment of the facts before it. • cannot submit new facts on appeal. 3.4. WTO Dispute Settlement Proceedings Four Separate Stages 1. consultations• • mandatory 2. panel proceedings, only if consultations fail. 3. appellate review proceedings 4. implementation and enforcement of the recommendations and rulings of the panel. 3.4.1. Consultations • Dispute Settlement ALWAYS starts with Consultations or at least attempt to have consultations. • here, parties exchange information, assess the strengths and weaknesses of their respective cases, narrow the scope of differences, etc… • most cost effective, more satisfactory for the long• term trade relations. • serves as on informal pre• trial discovery mechanism. • Quality of consultation is not reviewable but consultations must be made in good faith. • sixty days after consultations request to resolve Right of Third Parties • any WTO member having a substantial interest in a matter before a panel and having notified its interest in a timely manner shal have an opportunity to be heard by the panel. • ONLY a right to receive the first written submissions—Very limited. • Grant of enchanced third party rights is within the sound discretion of the Panel. Submission and Admissibility of Evidence • Article 11 of the DSU does not establish time limits for the submission of evidence to a panel. • Article 12.1 DSU directs panel to follow procedures in Appendix 3 DSU, but even there, no precise deadlines are set. Argentina – Textiles and Apperal • Two stages in proceedings 1. first stage during which the parties should set out their case in chief. 2. second stage which is generally designed to permit rebuttals by each party of the arguments and evidence submitted by the other party. Use of Experts • Article 13 DSU gives panels authority to seek information and technical advice from any individual or body which it deems appropriate. • Article 13 DSU a panel may ALSO consult with Specialised International Organizations. • LIMIT: panel cannot use experts to make a case for the complaining party—i.e. party required to make prima facie case, not panel. Protection of Confidential Business Information • panel proceedings are confidential but may get additional protection for sensitive business information submitted to panel. • HOWEVER, in order to abstain from providing confidential information, that party abstaining must first request confidential procedures from the panel. See Turkey – Rice. Panel Deliberations and interim review

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• Panel deliberations are also confidential. • panels issue interim reports for review by the parties, these are not published, members can submit comments• • • afterwards, panel makes final report. Adoption or Appeal of the Panel Report • After 60 days from circulation of panel report—party can no longer appeal. • DSB can also within 60 days, decided by consensus not to adopt the report. Duration of Panel Proceedings • As a General rule, entire proceeding shall not exceed 6 months. • can extend to 9 months. • Typically last longer than 9 months. 3.4.3. Appellate Review • FOLLOWS “Working Procedures” • over 70% of panel reports appealed. DISCUSS • Workign procedures for appellate review • initiation of appellate review • withdrawal of an appeal; • written submissions and the oral hearing; • rights of third participants; • exchange of views, deliberations and the adoption of appellate report • duration of appellate review proceedings. Working Procedures for Appellate Review. • Appellate body has detailed standard working procedures. Initiation of Appellate Review • 20(1) of Working Procedures: review proceedings start with a party’s notification in writing to the DSB of its decision AND filing of notice of appeal. • Rule 20(2)(d) Workign Procedures: must identify alleged legal errors. • serves to give notice to other side. • if it fails to give notice of a specific claim, it will not be considered by the appellate body. US – Offset Act: a panel may consider on its own if a panel has exceeded its jurisdiction. Withdrawal of an Appeal • Rule 30(1) Working Procedures: member can withdraw an appeal at ANY stage of the appellate review process. EC – Sardines: European Communites withdrew in order to refile a “clearer” appeal. Written Submissions and the Oral Hearing • within 7 days after filing notice of appeal, MUST file a written submission. • sets out a precise statement of the grounds of appeal, i.e. more specificity. • 35• 45 days after notice of appeal, have oral hearings. Rights of Third Participants • Third parties participating in appellate review have have MUCH broader rights. Exchange of View, Deliberations and the Adoption of Report • 30 Days after appellate report is circulated it is adopted UNLESS the DSB decides by consensus not to adopt the reports, including panel report. Duration of Appellate Review Proceedings • generally complete proceedings within 60 days, have 90 days max 3.4.4. Implementation and Enforcement • Arbitration on the ‘reasonable period of time for implematation’ • surveillance of implementation by the DSB • disagreement on implementation • arbitraitno on suspension of concession and other obligations • ‘sequencing’ issue. Arbitration on the ‘resaonble period of time for implementation • violating member is expect to promptly comply with Panel report. • Article 21.3: gives violating Member a reasonable period of time to comply with Report. • Article 21.3(c): if parties cannot agree on a ‘reasonable period’ can submit matter to arbitration. Surveillance of Implentation by the DSB • six months have reasonable period of time is established, review gets automatically put on the DSB’s agenda.

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Disagreement on the Implementation • Article 21.5 allows referal to more dispute proceeding if members DO NOT agree if new measure taken correct violation. • BACK to articles 4 to 20 of DSU, also get original panel. **Under Article 21.5, reviewing panel can review new inconsistent measure, not soley the inconsistent measure that was dropped. EC – Bed Linen • new cliams, arguments different from those raised in the original proceeding may be raised becase a ‘measure taken to comply’ may be inconsistent in ways different from the orignal measure. Allows panel to property analysis under Article 21.5 DSU. US – Gambling • absent some change, panel cannot look at new arguments, i.e. cannot relitigate. Arbitartion on, and authorisation of, suspension of concessions/obligations • FAILURE of party to implement rulings within a reasonable period of time, violator can request negotiations to come to an agreement on compensation. • FAILURE to agree on compensation, 20 days later, complaintant can request retaliation!! • authorisation or retaliate is by reverse consensus. The ‘sequencing’ Issue • conflict between timeframe for Article 21.5 DSU (review of alleged STILL inconsistent measure) and authorisation from suspension of concessions must be requested. • i.e. NOT REQUIRED to have to first determine via Article 21.5 DSU that measure is still inconsistent BEFORE retaliation (Article 22 DSU) can be requested. EC – Bananas III. 3.5. Main Challenge to the WTO Dispute Settlement System • so far DSU has been a great success offering ‘security and predictability’ • gives security to weaker members (developing countries) that have often lacked the political or economic clout to enforce their rights. REMEDIES • aim of sactions if to get compliance, that’s it! • Sanctions: Must be proportional to value. Sanctions need to be proportional. Equivalence (DSU 22:4 – levels) • no compensation for the breach of primary norms of WTO law, but for non• compliance after finding of DSB.

1. 2. 3. 4. 1. 2.

3.

3.6 Summary DSU provides four different methods to settle disputes consultation or negotiations (Article 4 of DSU) adjudication by panels and appellate body (Article 6 to 20 DSU) arbitration (Articles 21.3(c), 22.6 and 25 DSU) good offices, conciliation and mediation (Article 5 DSU) DSU provides three types of remdies one final remedy—withdrawal of WTO inconsistent measure compensation suspension of concessions• • • retaliation! Panels terms of reference—must refer back to the complaint’s request to establish a panel. Standard of Review of panels set forth in Article 11. Settlement process ALWAYS begins with consultations or at least an attempt to have consultations. • Sixty after request for consultations may a panel be requested. RULES on panel Proceedings• • • Article 12 DSU Recommendations by the panel and/or appellate body must be implanted promptly• • • or if impracticable, within a ‘reasonable period of time’ *if parties CANNOT agree to a reasonable period of time—Article 21.3(c) provides binding arbitration. **NOT REQUIRED to wait to retaliate, but practice has arisen where compliantant will first resort to Article 21.5 Compliance procedures. Article 21.5 calls for a panel to decide if measures are still inconsistent.

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Chapter 4: Principles of non• discrimination (CB 320) 4.1 Introduction • There are two principles of non• discrimination in WTO Law: 1. most• favored nation (MFN) treatment obligation • prohibits a country from discriminating between other countries 2. the national treatment obligation • prohibits a country from discriminating against other countries NOTE: there are exceptions to these two principles! • Discrimination in trade breeds resentment among the countries, manufacturers, traders and workers discriminated against. • poisons international relations and may lead to conflict. • Eventually, it is the citizens of the discriminating country that end up ‘paying the bill’ for the discriminatory trade policies pursued. • Key provisions of GATT 1994 (GOODS) Article I, on the MFN treatment obligation Article III, on the national treatment obligation • Key provisions in GATS (SERVICES) Article II, on the MFN treatment obligation Article XVII, on the national treatment obligation 4.2 Most• Favored Nation treatment under the GATT 1994 (horizontal MFN) • treat all nations the same• • simply. • …any advantage, favour, privilege or immunity granted by any Member to any product originating or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other members. • other MFN or MFN like provisions in GATT 1994 Article III:7 (international quantitative regulations) Article V (regarding freedom of transit) Article IX:1 (regarding marking requirements) Article XIII (regarding the non• discriminatory administration of quantitative restrictions) Article XVII (regarding State trading enterprises) 4.2.1 Nature of the MFN treatment obligation of article I:1 EC – Tariff Preferences: MFN is the corner stone of the GATT and one of the pillars of the WTO trading system. • however, the proliferation of customs unions, free trade agreements and other preferential arrangements in the last fifteen years has led to a situation in which much of world trade is not conducted in accordance with the MFN treatment obligation. • MFN is almost becoming an exception rather than the rule. Principle purpose is to ensure equality of opportunity to import from, or to export to, all WTO Members. • EC – Bananas III: like products should be treated equally, irrespective of their origin. FACTS: import regime for bananas of the European Communities under which bananas from Latin American countries were treated less favorably than bananas from, former European colonies. • APPLIES to both in law discrimination (discrim. on its face), but ALSO to ‘in fact’ or de facto discrimination (appear ‘origin neutral’ but are in fact discriminatory). • EXAMPLE: de factor: Canada – Autos: an import duty exemption accorded by Canada to imports of motor vehicles by certain manufactures. 4.2.2. MFN treatment test of Article I:1 of the GATT 1994 • Three Part TEST 1. whether the measure at issue confers a trade ‘advantage’ of the kind covered by Article I:1; 2. whether the products concerned are ‘like products’’ 3. whether the advantage at issue is granted ‘immediately and unconditionally’ to all like products concerned. • violation, need: YES, YES, NO • ‘Any advantage with respect…Article I of GATT 1994 • customs duties, other charges on imports and exports and other customs matters; • internal taxes; • internal regulations affecting the sale, distribution and use of products. • EXAMPLE: US – Customs User Fee

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• merchandise processing fee was a charge imposed on or in connection with importation with in the meaning of Article I:1. Exemptions from the fee fell within the category of advantage, favour, privilege or immunity which Article I:1 required to be extended unconditionally to all other contracting parties. • EC – Bananas III: procedural and administrative requirements for importing third• country and non• traditional ACP bananas GO SIGNIFICANTLY beyond, those required for importing ACP Bananas. • ‘Advantage’ in Article I:1 has been given a broad definition. • SCOPE OF ARTICLE I:1 • Canada – Autos: The words of Article I:1 refer not to some advantages but to ‘any advantage’; not to some products but to ‘any product’; and not to like products from some other Members, but to like products originating in or destined for ‘all other’ Members. • Even in Anti• dumping duties: duties should be levied equally to all those who are dumping. • Article I:1 does not cover subsidies to domestic producers (Cover by Article III:8(b)) *INLUCDES advantages granted to non• WTO Members as well. • ‘Like Products’ Question: are four car doors like two car doors? Is orange juice like tomato juice???? • NOT DEFINED IN GATT 1994 • EC – Asbestos: ‘like’ suggests that ‘like products’ are products that share a number of identical or similar characteristics. • BUT…Canada• Aircraft: three questions still remain 1. which characteristics or qualities are important in assessing ‘likeness’ 2. to what degree or extent must products share qualities or characteristics in order to be ‘like products’ 3. from whose perspective ‘likeness’ should be judged. • WILL depend on the FACTS and on which provision of GATT 1994 is using ‘like’. **Products such as orange juice and tomato juice may be ‘like’ under one provision of the GATT 1994 and not ‘like’ under another provision. • like products (characteristics, end• use, tariff regimes of members, consumers) • substitutable or interchangeable products • to what extend will consumers substitute products, e.g. if you raise the price on a product will consumers shift and buy a similar product. Spain – Unroasted Coffee• • FACTS: Spain imposed a duty on certain types of coffee. HOLD: Like products under Article I:1 Panel considered • the characteristics of the products, e.g. region, etc. • not sufficient • their end use • single end use• • drinking • tariff regimes of other Members• • • members help decide. • no other member uses different tariffs • different processes that produce the same products are LIKE products • e.g. environmental friendly vs. non• environmental friendly. • Advantage granted ‘immediately and unconditionally’ • cannot grant advantage based on conditions• • • based on similar tax laws. • custom tax duties cannot be made conditional on any criteria that is not related to the imported product itself. • Canada – Autos: not all conditions are prohibited. *conditions that do not discriminate between products on the basis of their origin is not inconsistent with Article I:1. • conditional if ‘limited by or subject to any conditions’ 4.3 Most• Favored Nation treatment under the GATS 4.3.1. Nature of the MFN treatment obligation of Article II:1 of the GATS • Article II:1 of the GATS prohibits discrimination between like services and service suppliers from different countries. • purpose is to ensure equality of opportunity for services and service suppliers from all WTO Members. • Applies both to de jere (on its face) and de facto (discrim in fact) • test of consistency • covered measures

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• like services make a service suppliers • what factors to use • less favorable treatment • measure affect the competitive relationship. • exermption from MFN treatment obligation • services have MORE exemptions. • e.g. legal services, • build in mechanism allowing countries to discriminate against each other based on a schedule. *any service redered can fall under more than one! • Factors • characterisitics of the service or service supplier • consumer consumption 4.3.2. MFN treatment test of Article II:1 of the GATS • Three Tier TEST 1. whether the measure at issue is a measure covered by the GATS; 2. whether the services or service suppliers concerned are ‘like services’ or ‘like service suppliers’; 3. whether less favourable treatment is accorded to the services or service suppliers of a Member. • ‘Measures covered by this Agreement’ • a measure by a Member • a measure affecting trade in services • INCLUDES measures taken by central government, regional or local governments and authorities. • Can be a law, regulation, rule, procedure, decision or administrative action, but can take any other form. Canada – Autos: import duty on certain manufactures • TWO KEY ISSUES 1. whether there is ‘trade in services’ in the sense of Article I:2 2. whether the measure in issue ‘affects’ such trade in services within the meaning of Article I:1. • GATS does not define what ‘trade in services’ is. • but includes any service in any sector except services applied in the exercise of governmental authority. • e.g. health care, basic education. • TREND: privatization of governmental services might fall under GATS. • FOUR MODES OF SERVICES 1. from territory of one Member into the territory of any other Member• • • ‘cross border’ mode of services (e.g. lawyer services from one country to another) 2. in the territory of one Member to the service consumer of any other Member• • • ‘consumption abroad’ mode of supply (e.g. medical treatment given to patient from country B) 3. by a service supplier of one Member, through commercial presence in the territory of any other Member• • • • ‘commercial presence’ mode of supply (financial services by bank in country A supplied in Country B) 4. by a service supplier of one Member, through presence of natural persons of a Member in the territory of any other Member.• • • ‘presence of natural persons’ mode of supply (e.g. programming services) • includes legal services from lawyer in Country A to Country B. **A measure is covered by GATS if it affects trade in services, even though the measure may regulate other matters. • includes measures in respect of: • purchase, payment or use of a service • access to and use of services which are required by those Members to be offered to the public generally • presence, including commercial presence, of persons of a member for the supply of a service in the territory of another Member. • ‘Like services or service suppliers’ • are classic ballet performances ‘like’ jazz dance? • services is not defined but includes ‘any service in any sector except services supplied in the exercise of governmental authority.’ • ‘service supplier’ is any person who supplies a service, including natural and legal persons as well as service supplier provide their services through forms of commercial presence. • likeness should be based on: • characteristics of the service or service supplier

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• classification and description of the service in the UN central product classification system • consumer habits regarding the service or service supplier. • must also consider size of service supplier, their assets, their use of technology… • Treatment no less favorable under Article II:1 • Article XVII: modifies conditions of competition in favour of services or service suppliers of the Member. • includes both de jure (on its face) and de facto (discrimination in fact) GATS • MODES OF SERVICES • ARTICLE 2 • trying to create a relatively level playing field. FOLLOW AIRBUS!! • borrowing lower than the Market rate could have given them. • jockying for interpretation • dispute here soley deals with A380, but does it apply to the A350 • Depends were the important claims rest, did they get upheld. • CHART ON CB 199 • even if one parties wins, can always aruge 21.5: dispute over implementation. 4.3.3. Exemptions from the MFN treatment obligation under the GATS • exemptions made by nations upon entering the WTO agreement. • ‘a member may maintain a measure inconsistent with paragraph 1 provided that such a measure is listed in, and meets the conditions of, the Annex on Article II Exemptions. • exemptions should not exceed 10 years. See paragraph 6 of the Annex on Article II Exemptions. • HOWEVER, many members continue to apply exemptions. 4.4. National Treatment Under The GATT 1994 (deals with internal charges, taxes applied directly or indirectly to like products• • • no less favorable treatment) *prevent protection to domestic products. • Article III of GATT 1. members recognize that internal taxes and other internal charges, and law, regulations and requirements…so as to afford protections to domestic production. 2. the products of the territory of any Member imported into the territory of any other member shall NOT BE SUBJECT, directly or indirectly, to internal taxes or other internal charges of any kind in excess of those applied, directly or indirectly, to like domestic products. 3… 4. products shall be accorded treatment no less favorable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering… • paragraphs 8(b): subsides to domestic producers • does not prevent the payment of subsidies exclusively to domestic producers. Article III:1 GATT • general principle • don't treat products from outside any differently. • Article III:2 GATT • NT re: internal taxation • Article III:4 GATT • NT re: regulations affecting sale and use of goods • rationale • ad article III GATT• • • clarify provisions • have same weight as actual text • shouldn't be overlooked • internal v. domestic • would a domestic product be subject to same measure. • applies to de facto and de jure measures Object and Purpose of Article III • prohibits discrimination against imported products. • prohibits members from treating imported products less favourably than like domestic products once the imported product has entered the DOMESTIC MARKET. Japan – Alcoholic Beverages II: the broad and fundamental purpose of Article III is to avoid protectionism in the application of internal tax and regulatory measures. • Provide equality of competitive conditions for imported products in relation to domestic products. • Same treatment once products have passed through customs—ELSE you get indirect protection. • Make sure members DO NOT undermine through internal measures their commitments under Article II. • Protection extends also to products not bound under Article II. De jure and de facto discrimination—Article III covers both

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• covers both de jure (discrim on face) and de facto (as applied) Korea – Various Measures of Beef (Origin Based Measure) • dual retail distribution system measure under which imported beef was to be sold in specialist stores selling ONLY imported beef or in separate sections of supermarkets. Japan – Alcoholic Beverages II (Origin Neutral Measure) • provided higher taxes on vodka (domestic and imported) than on shochu (domestic and imported). Internal Measures vs. Border Measures *Article III ONLY applies to internal measures, not border measures. • Article II and others apply to border measures. **MUST FIRST DETERMINE IF A MEASURE IS INTERNAL OR A BORDER MEASURE!! • hard to determine when measure is applied to imported products at time of importation. • Any internal tax or internal charges even at point of importation is still covered under Article III. • INCLUDES import ban for public health or consumer safety. • Article III• • • where competitive opportunities on the domestic market are affected • Article XI• • • where the opportunities for importation itself are affected • possible overlap with Article III Articles III:1, III:2, III:3 • • • likeness III:2 different from likenss III:4 • Article III:1 articulates a general principle that internal measures should not be applied so as to afford protection to domestic production. • Article III:2 internal taxation Article III:2:2 GATT Discriminatory Taxation • directly competitive or substituable products • case by case analysis • common end uses, tariff classifications• • in addition "market place" i.e. competivie conditions • cross price elasticity • important • relationship with 'like products'in ARticle III:2, first sentence GATT • III:2 first sendtence is a accordian. Tires Problem • New tax on imported tires starting at 35%, gradually going down over three years • an effort to protect US jobs • Safe Guard investigation: safe guard industry • short term measure: only need to cite injury to industry • do not have to prove. • WTO also realizes the political implications in each country, no way to full get rid of protectionist measures. • Article III: 4 internal regulation National Treatment test for internal taxation on like products Canada – Periodicals (Two Tier Test for Internal Taxation) 1. whether imported and domestic products are like products 2. whether the imported products are taxed in excess of the domestic products • IF yes to both, violation of Article III:2. 1st Step: If measure an ‘Internal Tax or other charges of any kind…’ • Examples: Value added taxes, sales taxes and excise duties • “directly or indirectly” means applied on or in connection with products • indirectly: taxes applied to processing of the product. **The regulatory objective pursued by the tax measure is of no relevance to the question of whether the measure is an internal tax within the meaning of Article III:2 and the consistency of that measure with the national treatment requirement. • • like products • why should 1st sentence be construed narrowly, compared to 2nd sentence? III:2:1, narrow interpretation: ‘like products’ • not defined, CASE BY CASE determination! Japan – Alcoholic Beverages II • should shochu and vodka be considered ‘like products.’ • IF so, vodka could not be taxed MORE than shochu. • ‘like products’ should be construed narrowly. • found them to be like products

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Border Tax Adjustments Case • factors: product’s end• uses in a given market; consumers’ tastes and habits, which change from country to country; the product’s properties, nature and quality. • Other factor: tariff classification Dominican Republic – Import and Sale of Cigarettes • quality if a factor • market price of products if price indicates quality US – Malt Beverages • includes favoring small firms over large firms • introduced “regulatory intent” approach• • • reason for measure in the first place US – Taxes on Automobiles • US imposed a retail tax on cars OVER 30,000 • Are cars BELOW 30,000 ‘like products’? FACTORS • end• use of the products • their physical characteristics • tariff classification • should be examined in terms of whether the less favourable treatment was based on regulatory distiniction made so as to afford protection to domestic production. • HOLD: NOT LIKE PRODUCTS • burden of ‘Taxes ‘in excess of’ Article III:2 • internal taxes on imported products should not be in excess of internal taxes applied to like products. Japan – Alcoholic Beverages II • even the smallest amount of ‘excess’ is too much. • de minimis standard or ‘trade effects test’ is not applicable. • Article III protects equal competitive relationship NOT expectations of trade volume. EXAMPLE: US – Superfund • 3.5 cents per barrel higher than rate applied to the like domestic products is inconsistent with US obligations under Article III:2. ***Member who applies higher taxes on imported products in some situations but ‘balances’ this by applying lower taxes on the imported products in other situations also acts inconsistently with the national treatment obligation of Article III.2. Differences • like products vs. directly competive • like products is more narrow • direclty competive: Article III:4 discrim reg EC • Asbestos • like products• • must look at all factors • properties, nature and quality of the products • end uses of the products • consumers tastes and habits • tariff classificaiton *these are the main. *typically only product and production methods • what if the end use is different. • De Facto discrimination: Dominican Republic – Import and Sale of Cigarettes • legislation which added tax on cigarettes was not found discriminatory on its face. • actual practice showed tax exceeded that of Dominican Republic cigarettes. 4.4.3. National Treatment Test for Internal Taxation on directly competitive or substitutable products. • internal taxes should not be applied to imported or domestic products so as to afford protection to domestic production. TEST 1. whether imported and domestic products are like products 2. whether the imported products are taxed in excess of the domestic products • Yes to both means violation of Article III:2 THREE ISSUES must be addressed in Article III:2 second sentence

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1. 2. 3.

the imported products and the domestic products are ‘directly competitive or substitutable products’ which are in competition with each other; the directly competitive or substitutable imported and domestic products are ‘not similarly taxed’ the dissimilar taxation of the directly competitive or substitutable imported and domestic products is ‘applied…so as to afford protection to domestic production.”

• Summary 1. whether the imported and domestic products are directly competitive or substitutable 2. whether these products are not similarly taxed 3. whether the dissimilar taxation is applied so as to afford protection to domestic production. • Must first determine if measure is an internal tax. ‘Internal Taxes…’ • ‘Directly competitive or substitutable products’ Canada – Periodicals • imported split• run periodicals and domestic non split run periodicals at issue in the case. Japan – Alcoholic Beverages II • schochu and soju respectively were found to be directly competitive or substitutable with imported liquors, such as whisky, vodka, brandy, cognac, rum, genever and liqeueurs. NOTE: a case of perfect substitutability would fall within Article III:2, first sentence, while we are examining the broader prohibition of the second sentence. Korea – Alcoholic Beverages • ‘like’ products are a subset of directly competitive or substitutable products • not only current substitutes but ALSO capable of being substituted for one another. • ‘directly’ suggest a degree of proximity in the competitive relationship between the domestic and the imported products. • Must analyze both latent and extend demand since competition in the marketplace is dynamic. • i.e. consumer do not need to currently think products are substitutes. • cross• price elasticity: involve assessment of latent demand. • attempt to predict the change in demand that would result from a change in the price of a product following from a change in the relative tax burdens on domestic and imported products. • HOWEVER, this is simply one factor, non• decisive factor • OTHER MARKETS may be relevant to analysis of the market at issue • if another market displays characteristics similar to the market at issue. NOTES: tariff classification. Can products be grouped together or must they be examined item by item? • depends—case by case basis as to whether and to what extent they can be grouped. Korea – Alcoholic Beverages • analysis between distilled and diluted soju was analyzed as a group. • where appropriate the panel did take into account of individual product characteristics. ‘Not similarly taxed’ • next element of the national treatment test under Article III:2, second sentence is whether the products at issue are ‘not similarly taxed’ *the tax differential has to be more than de minimus to support a conclusion that the internal tax imposed on imported products is GATT• inconsistent. *to interpret “in excess of” and ‘no similarly taxed’ identically would DENY any distinction between the first and second sentences. • whether tax is de minimus must be determined on a case by case basis. ‘So as to afford protection to domestic production’ • the last element of the test under Article III:2, second sentence, of the GATT is whether the dissimilar taxation is applied ‘so as to afford protection to domestic production.’ Japan – Alcoholic Beverages II: • Although it is true that the aim of a measure may not be easily ascertained, nevertheless its protective application can most often be discerned from the design, the architecture, and the revealing structure of a measure. • i.e. don’t simply look at the subjective intent of the legislators, look at application. • panels typically dont get into intent, to messy. Article III*: National Treatment on Internal Taxation and Regulation back to top 1. The contracting parties recognize that internal taxes and other internal charges, and laws, regulations and requirements affecting the internal sale, offering for sale, purchase, transportation, distribution or use of products, and internal quantitative regulations requiring the mixture, processing or use of

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products in specified amounts or proportions, should not be applied to imported or domestic products so as to afford protection to domestic production.* 2. The products of the territory of any contracting party imported into the territory of any other contracting party shall not be subject, directly or indirectly, to internal taxes or other internal charges of any kind in excess of those applied, directly or indirectly, to like domestic products. Moreover, no contracting party shall otherwise apply internal taxes or other internal charges to imported or domestic products in a manner contrary to the principles set forth in paragraph 1.* **Must also look at ad articles!! 4.4.4. National Treatment Test for Internal Regulation • Article III:4 states the products of the territory of any member imported into another territory shall be same treatment with respect to all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use. Three Tier TEST Korea – Various Measures on Beef Elements 1. the imported and domestic products at issue are ‘like products’ 2. the measure at issue is a law, regulation, or requirement affecting their internal sale, offering for sale, purchase, transportation, distribution or use 3. the imported products are accorded less favourable treatment than that accorded to like domestic products. Summary of Test 1. whether the measure at issue is a law, regulation or requirement covered by Article III:4 2. whether the imported and domestic products are like products 3. whether the imported products are accorded less favourable treatment. ‘Law, regulations and requirements…’ • Article III:4 of GATT applies to regulations affecting the sale and use of products. Italy – Agricultural Machinery • paragraph 4 refers to regulations and requirements affecting internal sale, purchase. • meant to cover regulations and requirements that directly and indirectly adversely modify the conditions of competition between domestic and imported products on the internal market. • Scope of Article III:4 is broad including all measure that may modify the conditions of competition. US• Section 337 • ISSUE: whether only substantive laws, regulations and requirements OR also procedural laws, regulations and requirements can be regarded as ‘affecting’ the internal sale of imported goods. ***HOLD: procedural law is ALSO COVERED under Article III:4. Article III:4 applies to: • minimum price requirements applicable to domestic and imported beer • limitations on points of sale for imported alcoholic beverages • a ban on cigarette advertising • regulation resulting in higher railway transportation costs for imported grain. • a prohibition on the ‘marketing’ of retreaded tyres EC – Bananas III • Article III:4 is applicable to the EC import licensing requirements at issue • European Communities argue that import licensing was a border measure and NOT an internal measure within the scope of Article III:4. HOLD: distribution of import licenses for imported bananas fall under this provision. • EC licensing intended to give EC banana riperners a share of the quota rents. Canada – Autos (future affect still considered) • Panel held that a measure can be considered to be a measure affecting the internal sale or use of imported products even if it is not shown that under the current circumstances the measure has an impact on the decisions of private parties to buy imported products. • i.e. includes measures that MAY adversely modify affect the conditions of competition between domestic and imported products. • showing of trade effects is NOT necessary to establish a violation of this obligation. ‘Like Products’ EC – Abestos: ‘like products’ is to be construed narrowly under Article III:2. • III:2, scope of ‘like products’ is affected by both sentences. • therefore, III:2, first sentence should be construed narrowly so as not to affect the second part.

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• III:4, is textually different from III:2’s two distinct obligations, therefore cannot be interpreted the same as III:2. • PURPOSE OF Article III:2, first sentence, is to avoid protectionism in the application of internal tax and regulatory measures. • REQUIRES WTO members: to provide equality of competitive conditions for imported products in relation to domestic products. ***’Likeness” under Article III:4 is a determination about the nature and extent of a competitive relationship between and among products. • Broader than the first sentence of Article III:2, but is certainly NOT broader than the combined product scope of the two sentences in Article III:2. *Determining ‘likeness’ under Article III:4, FOUR Criteria 1. the properties, nature and quality of the products, i.e. physical properties of the products 2. the end• uses of the products, i.e. extent to which products can serve same or similar uses. 3. CONSUMER tastes and habits, i.e. extent to which consumers perceive and treat the products as alternative means of performing particular functions to satisfy a their particular demand. 4. tariff classification of the products, i.e. international classification of the products for tariff purposes. • could be more criteria… e.g. health risk associated with similar products, • Must Consider ALL relevant evidence. *CONCURRENCE: the deadly nature of one fiber compared to the other should end the inquiry into ‘likeness’ *Strictly economic view of ‘likeness’ has its problems as shown in this case. Consumer Taste and Habits is a highly relevant factors because without showing of competitive relationship between products, you cannot show protection of domestic production via regulation. • really needed if products are physically different. Japan – Alcoholic Beverages II: the concept of ‘like products’ in WTO law is indeed like an accordion whose width varies depending on the provision under which the term is interpreted. • e.g. Article III:4 ‘like products’ is very broad. EC – Asbestos: confirmed the market• based, economic interpretation of the concept of ‘likeness’ (confirmed the market based approach to determining likeness) • look at characteristics. • also considered non• economic• interests and values. Panels today don’t use the regulator intent or aim• and• effect test anymore to examine products under Article III:4. US – Tuna (Mexico): must treat Mexico Tuna the same as US tuna regardless if the incidental taking of dolphins by Mexican vessels does not correspond to that of US vessels. • HOWEVER, later cases might take into account processes and production methods that do not affect the characteristics or properties of the products concerned• • • e.g. consumers want to eat dolphin safe tuna, therefore, unsafe tune will be LESS competitive than other safe tuna. • BUT most consumers will be guided by price and other aspects not related to the conditions under which the products were produced. • ‘likeness’ is typically not an issue in de jure discrimination (e.g. origin based) • Tougher in de facto discrimination (origin• neutral) • ‘likeness’ is typically at the core of the dispute. ‘Treatment no less favorable’ • even if measure distinguishes between ‘like’ products, this still does not breach III:4, e.g. MUST STILL ESTABLISH that like imported products were accorded ‘less favorable treatment’ US – Section 337: ‘treatment no less favourable’ means effective equality of opportunities for imported products in respect of the application of laws, regulations and requirements affecting the internal sale, offering, etc. • LATER opinions have interpreted ‘treatment no less favourable’ the SAME WAY. EC – Asbestos: ‘less favourable treatment’ inherently protects a group of ‘like’ domestic products. Korea – Various Measures on Beef (Article III:4) • formal difference in treatment of imported products did not necessarily constitute less favourable treatment while the absence of formal difference in treatment did not necessarily mean that there was no less favourable treatment. • Must look at conditions of competition! US – Section 337 • possible for identical legal provisions might accord less favourable treatment to imported products.

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• THEREFORE, subject products to different legal provisions is NOT conclusive in establishing inconsistency with Article III:4. • Nor can you balance less favourable treatment for one product with less favourable treatment for another. Dominican Republic • Import and Sale of Cigarettes (DON'T LIKE) • tax stamp affixed to all cigarette packets marketed in the Dominican Republic. • STILL inconsistent with Article III:4 • tax stamp requirement imposes additional processes and costs on imported products. • It also leads to imported cigarettes being presented to final consumers in a less appealing manner. • De Facto discrimination!!! • NOTE: per• unit cost was higher for imported products than domestic• • • still not discrimination. NEED to consider market share in this particular analysis. **What time frame should you look at in order to determine de facto discrimination? • particular time frame might be determinative. *NOT INCONSISTENT with III:4 if 'less favourable treatment' can be explained by factors or circumstances unrelated to the foreign origin of the products (e.g. market share). *'less favourable treatment MUST be explained by the foreign origin of the imported product in order to be inconsistent with Article III:4 *TO SHOW INCONSISTENCY WITH ARTICLE III:4, must show 1. measure adversely affects the condition of competition for the imported products; AND 2. adverse effects are explained by the foreign origin of the product. • if adverse measure has a different explaination, the measure cannot be found inconsistent with the national treatment obligation of Article III:4. Canada • Provincial Liquor Boards • minimum prices applied to equally to imported and domestic beer did not necesasrily accord equal conditions of competition to imported and domestic beer. *whenever they prevented imported beer from being supplied at a price lower than that of domestic beer, they accorded in fact treatment to imported bear less favourable than that accorded to domestic beer. BECAUSE imported beer could in fact be suppplied at a lower price. • Giving an advantage to domestic products similarly affects the condition of competition. 4.5 National treatment under the GATS • Article XVII of the GATS • service and service suppliers, must accord treatment no less favourable than that it accords to its own like services and service suppliers. 4.5.1. Nature of the national treatment obligation of Article XVII of the GATS **DIFFERENCE BETWEEN GATT and GATS • GATT applies generally to all trade in goods • GATS applies ONLY to the extent that WTO members have explicitly committed themsels to grant 'nationlal treatment' in respect of specific service sectors. • Typical National Treatment Limitations 1. nationality or residence requirements for executives of companies supplying services 2. requirements to invest a certain amount of assets in local currency 3. restrictions on the purchase of land by foreign service suppliers. • NOTE: when commitments are made, they are often accompanied by extensive limitations. ***Negotiations on more ambitous national treatment commitments are a substantial element of the ongoing negotiations on trade in services in the Doha Development Round. 4.5.2. National Treatment test of Article XVII of the GATS (CB 392) EC – Bananas III • To breach Article XVII, must show three elements 1. the EC has undertaken a commitment in a relevant sector and mode of supply• • • COMMITMENT 2. the EC has adopted or applied a measure affecting the supply of services in that sector and/or mode of supply. • • • MEASURE 3. the measure accords to service suppliers of any other member treatment less favourable than that is accords to the EC’s own like service supplier. • • • LESS FAVOURABLE TREATMENT ‘measure by a Member’ is broad • includes measures by Central Government and regional and local governments, MAYBE even measures by non• governmental authorities. ‘Measures by Members affecting trade in services’

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Canada – Autos 1. 2.

whether there is “trade in services” in the sence of Article I:2 whether the measure at issue ‘affects’ such trade in services within the meaning of Article I:1. • a measure affects trade in services when the measure bears ‘upon the conditions of competition in supply of a service’ ‘Like services and service suppliers’ • No relevant case law but factors might include 1. the characteristics of the service or the service supplier 2. classification and description of the service in the United Nations Central Product Classifications system 3. consumers’ habits and preferences regarding the service or the service suppliers. • look at competitive relationship between the services and service suppliers. ‘Treatment no less favourable’ • whether the foreign services of service suppliers are granted treatment no less favourable. • Same or different treatment is considered ‘treatment less favourable’ IF it modifies the conditions of competition in favour of services or service suppliers of the Members compared to like services or service suppliers. • What about inherent competitive disadvantage resulting from the fact that the services or service supplier is foreign and not domestic?? • A Member is NOT required to compensate for any inherent competitive disadvantage which results from the foreign character of the relevant services or service suppliers. • In footnote 10 of Article XVII, limited scope. Summary • MFN treatment prohibits a country from discriminating between other countries • National Treatment prohibits a country from discriminating against other countries. WRITE DOWN FACTORS ARTICLE: Report on G20 Trade and Investment Measures Japan Lumber Case Criteria for assessing "likeness" considered by the parties Canada requested the panel examine whether Japan’s application of 8% tariff on spruce• pine• fur (SPF) was consistent w Art. 1 of GATT. • Japan based tariff rates on dimension lumber imports on the species of tree from which the dimension lumber was produced. Japan applied 8% tariff to SPF dimension lumber, but not to dimension lumber from other tree species • Canada argues: SPF dimension lumber was “Like” dimension lumber from other tree species. Japan violated MFN obligation by discriminating “like” products o most of Canada’s dimension lumber exports were subject to the 8% tariff, most dimension lumber exports from US were not o Japan’s policy of using tree species as the basis for differentiating b/t dimension lumber imports de facto discriminated against Canadian products Japan defended its tariff: SPF dimension lumber was not “like” dimension lumber from other species; Art 1 concerned w prohibiting discrimination b/t countries, not b/t “like products” and its measures didn’t discriminate against countries. Panel: GATT “left wide discretion to the contracting parties” to design their national tariff structures and goods classifications • tariff differentiation was a legitimate means of trade policy, which allowed nations to accomplish its protection needs and conduct successful tariff and trade negotiations (Paragraph 5.9) • Tariff classification = policy tool. • those challenging a tariff classification had burden of proving that the tariff classification was being used as a means of discrimination in int’l trade (5.10) • Canada erred in trying to apply its concept of dimension lumber to Japan’s tariff classification scheme. • Canada’s concept of dimension lumber was “extraneous” to Japan’s tariff, was not an appropriate basis for establishing “likeness” under Art 1:1. • Japan could differentiate b/t dimension lumber based upon whether the lumber came from specific tree species

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•

unlike Spain – Coffee, Lumber seems to recognize that contracting parties should be able to use their tariff systems to serve certain national interests by giving states that flexibility Canada explained that "dimension lumber", of whatever species, had the same physical origin. Japan had contended that differences in strength between lumber of different species' groups dictated different end• uses in construction. FINDINGS Japanese Tariff was defined in conformity with the Harmonized System Panel could not establish that the tariff treatment of Canadian dimension lumber applied by Japan under its tariff number 4407.10• 110 was inconsistent with Article I:1 of the General Agreement. Spain – Unroasted Coffee Brazil argues: Spain’s method of classifying unroasted coffee for tariff purposes violated MFN clause in Art. 1:1 of GATT. Spain divided unroasted coffee into 3 categories: mild, unwashed Arabica and Robusta coffees (subject to higher tariffs than mild) Brazil argues: all 3 types of unroasted coffees are “like products” and that by treating “like products” differently under its tariff classification system, Spain violated Art. 1:1 Spain argues: 3 types of coffees are not “like products” • grown in different areas, cultivation different, preparation, different tastes and aromas, different qualities • in Spain domestic mkt, consumer preferences supported the view that 3 categories were not “like” Panel: each contracting party had rt to establish its own tariff classification system, yet was obligated to provide the same tariff treatment to “like products” Spain’s system violated Art 1:1 – provided different tariff treatment to mild, unwashed Arabica and Robusta coffees – products were “like” differences in cultivation, production, process or what kind of plant they came from – did not justify conclusion that coffees were “unlike” differences in taste and aroma did not warrant different tariff treatments all types of unroasted coffee had same end use – DRINKING no other contracting party’s regime treated unroasted coffee in a similar manner as Spain’s system (4.8) Brazil exported all 3 types of unroasted coffees, its primary exports were the categories subject to higher tariff duties. Distinguish b/t “like products” was discriminatory dismissed product• related PPMs as a basis upon which to distinguish b/t “like products” Lumber panel was deferential to Japan’s decisions regarding how it structured its tariff regime In the Coffee Panel case, Brazil's coffee, unlike coffee from other countries, was "almost entirely" subject to a higher duty. In the lumber case, Canada exported large quantities of lumber to Japan duty• free. Spain was the only country the Coffee Panel found to operate duty• rate differentiation among types of unroasted coffee. In the lumber case Japan was not the only country which distinguishes in tariff classification, and tariff• rate treatment, between wood and lumber by species. In the Coffee Panel case there had been no attempt by the complainant to create "like products" by introducing tariff sub• classifications of its own making into the tariff schedule of the importing country and, unlike in the Coffee Panel case, differences between lumber species were not just minor, or organoleptic, but properties of, and end• uses for, wood of different species were significantly different. exceptions – customs unions; free trade areas; border traffic; limited regional arrangements • discrimination justified on balance of payments grounds • national security reasons AIRBUS ARTICLE • some launch aid given for the A380 passenger jet (Airbus) from European governments is an illegal subsidy. • Launch AID: According to the United States, launch aid takes the form of long• term unsecured loans at zero or below market rates of interest, with back• loaded repayment schedules that allow Airbus to repay the loans through a levy (or “royalty”) on each delivery of the financed aircraft. In addition, if Airbus fails to sell enough of the aircraft to repay the loan, the outstanding balances are indefinitely extended or forgiven. • vio of SCM agreement: subsidies and countervailing measures. ***Might affect future launch aid for A350. • offering launch aid at commercial rates might be OK • Boeing's main competitor ***The panel also went on to rule that most launch aid support for the A380 super jumbo jet and the A340• 500/600 constituted prohibited export subsidies because repayment of the loans was dependent on export sales • loans given by European governments • launch aid given to Airbus.

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• Panel found the launch aid program invalid • KEY QUESTION: • US trying to protect BOEING, suite against 'reimbursement investment' payment made to AIRBUS. • future launch aid by European governments • is it non• compliance with this ruling OR is it simply be the start of a new complaint?? • non• compliance mean the US can bring immediate sanctions • new complaint means starting the 5 year process ALL OVER AGAIN. • can these findings be used to ATTACK launch aid not challenged by this dispute?? • UNDER 21.5?? ***Panel also found that launch aid is a viable option for financing aircraft!! • viable option for partnering with governments? Private entities? • did panel dismiss 70% of US claims? • Is reimbursable launch aid an illegal subsidy in its totality?? • Were only specific payments found illegal?? ARTICLE:

Keynes at Home, Smith Abroad Domestic stimulus spills over to protectionism. • The revival of big government in domestic policy will spill into new age of protectionism. • return to non• tariff barriers via discriminatory SUBSIDIES, "buy local product" initiatives, voluntary export restraints, and orderly market arrangements. • example: car subsidies at home, intended to boost home production might also affect foreign overseas production and employment. • bailed out banks have been lending less money overseas, instead focusing on domestic lending! • food safety standards. • GREEN Protectionsim • high fuel efficiency caps • subsidies to domestic producers of renewable energy • Need to curb protecti

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Chapter 5: Rules on Market Access (CB 401) 5.1. Introduction • There can be no international trade without access to the domestic markets of other countries. • That’s why rules of market access are at the core of WTO law. Market access for goods and services can be impeded in several ways: • tariff• barriers • custom duties • non• tariff barriers • quantitative restrictions (e.g. quotas) • other non• tariff barriers, e.g. lack of transparency of trade regulation, unfair and arbitrary application of trade regulation, customs formalities, technical barriers to trade). WTO Preamble “…entering into reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade.” *Schedule binding: countries are bound to stay below • countries typically stay much below these levels. • laid out in schedule of concessions 5.2. Tariff barriers to trade in goods • The most common and widely used barrier to market access for goods is customs duties. • typically not imposed on trade in services 5.2.1. Custom duties or tariffs • A custom duty, or tariff, is a financial charge imposed on products at the time of, and/or because of, their importation. *Market access is conditional upon the payment of the customs duty. • Specific customs duty, e.g. based on a particular characteristic. • easier for special interest groups to obtain governmental support. • ad valorem, e.g. based on the value of that good. • MOST COMMON. • helps government revenue • more transparent than specific duties. • easier to assess the protectionist impact and negative effect on prices. **this type of tariff keeps up with fluctuations in prices, thereby providing the same level of protection. • MFN duties are the ‘standard’ customs duties applicable to all other WTO members in compliance with the non• discrimination MFN treatment obligation of Article I:1 of the GATT 1994. • Preferential duties are customs duties applied to specific countries pursuant to conventional or autonomous arrangements under which products from these countries are subject to duties lower than MFN duties. • Non• MFN Duties applicable to non• WTO members Purpose of Customs Duties or Tariffs • Customs duties serve three purposes 1. customs duties are a source of revenue for governments • more important for developing countries • easy to collect and monitor 2. customs duties are used to protect domestic industries • make ‘like’ domestic products cheaper 3. customs duties can be used to promote a rational allocation of scarce foreign exchange. • allows countries balance the types of goods that are being imported, e.g. industrial machines vs. luxury cars. National Tariff • Tariff also refers to list of customs duties • countries tend to follow the structure set out in the Harmonised Commodity Description and Coding System. 5.2.2. Negotiations on Tariff Reductions Tariffs as a Lawful Instrument of Protection • WTO members are free to impose customs duties on imported products. • customs duties, unlike quantitative restrictions, represent an instrument of protection against imports generally allowed by the GATT 1994. A Call For Tariff Negotiations • GATT 1994 calls upon WTO members to negotiate the reduction of customs duties.

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Success of Past Tariff Negotiations • The eight GATT Rounds of trade negotiations were very successful e.g. drop from 40% to about 3.9% ad valorem. Customs Duties Remain Important Trade Barriers • Customs duties still remain an important barrier • most developing country Members still maintain high customs duties. • developed country members still have high, very high, duties on specific groups of ‘sensitive’ industrial and agricultural products. • common for textiles, clothing, leather, etc. • very competitive markets and in trade between neighbouring countries, a very low duty may still constitute a barrier. • Tariff Escalation: discourages manufacturing or processing in developing countries by imposing higher duties on processed products when compared to non• processed products. Basic Principles and Rules Governing Tariff Negotiations • Principle of reciprocity and mutual advantage • when a Member request another Member to reduce its customs duties on certain products, it must be ready to reduce its own customs duties on products which the other Member exports, or wishes to export. • each member determines for itself whether the economic value of the tariff reductions received is equal to the value of the tariff reductions granted. **Final assessment of the ‘acceptability’ of the outcome of tariff negotiations is primarily political in nature. • most• favoured nation treatment obligation • Developed country members shall not seek, neither shall developing• country members be required to make, concessions that are inconsistent with the latter’s development, financial and trade needs. • RELATIVE RECIPROCITY, i.e. developing country members are only required to ‘reciprocate’ only to the extent consistent with their development, financial and trade needs. • during Uruguay Rounds, developing countries finally started reducing tariffs in part because there development allowed and due to change in trade policy. Article I:1 of the GATT 1994 • any tariff reduction a Member would grant to any country as the result of tariff negotiations with that country must be granted to all other Members, immediately and unconditionally. • Complicates things, i.e. other members will get the benefit without getting something in return. • ‘free• rider problem’ Organisation of tariff negotiations • product• by• product request• and• offer approach: each of the participants in the tariff negotiations submits firs its request list and then its offer list. Negotiations take place between the principal suppliers. • Disadvantage: number of products to be negotiated are limited. • still used in bilateral agreements • Linear Reduction approach: negotiations aim at agreeing on a reduction of customs duties across the board, i.e. reduction in custom duties on all products. • Problem: members with already low tariffs do not want to cut tariffs by the same percentage. • Solution: Harmonisation formula approach: non• linear approach which requires larger cuts of higher customs duties than of lower customs duties. • formulas, such as the Swiss formula are not well received. 5.2.3. Tariff concessions and Schedules of Concessions Tariff Concessions or Tariff Bindings • tariff concession or binding is a commitment not to raise the customs duty on a certain product above an agreed level. • bound: denotes the maximum tax allowed. Schedules of Concessions • tariff concessions or bindings are set out in the Member’s Schedule of Concessions. • Contains 4 parts: I. MFN concessions with respect to agricultural products; II. Tariff quotas; III….. Interpretation of Tariff Schedules and Concessions *Tariff schedules constitute a ‘covered agreement’ under the DSU. EC – Computer Equipment • concessions are reciprocal and result from mutually advantageous negotiation between importing and exporting members. • general rules of treat interpretation set out in the Vienna Convention must be used. 5.2.4. Protection of Tariff Concessions

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• WTO rules on customs duties relate primarily to the protection of tariff concessions or binding agreed to in the context of tariff negotiations. • Article II:1 of the GATT 1994 sets out the basic rules • schedule sets forth the maximum tariff that may be charged. • Some of the disputes under Article II:1 do not directly stem from duties or charges imposed in excess of those contained in the Schedules. EC – Chicken Cuts • EC classified chicken cuts in the wrong category, there imposing higher custom duties. • Panel looked to the Vienna convention on treaty interpretation to interpret the word “salted” listed in the tariff heading. Tariff Concessions and Customs Duties Actually Applied • For many Members, tariff bindings for industrial products are considerably higher than the customs duties actually applied to these products. • The Economist reported: • in WTO negotiations, countries haggle not over tariffs, but over tariff ceilings. 5.2.5. Modification or Withdrawal of Tariff Concessions • The GATT 1994 provides a procedure for the modification or withdrawal of the agreed tariff concessions. • negotiations on modification or withdrawal of tariff concessions are to be conducted with: • the Members that hold so• called ‘Initial Negotiating Rights’ • those Members with which the concession was bilaterally negotiated, initially. • also to any member having a principal supplying interest… in a concession which is modified or withdrawn shall be accorded an initial negotiating right. • any other Member that has a principal supplying interest • member has had a larger share in the market of the applicant Member than a Member with which the concession was initially negotiated have had such a share in the absence of discriminatory quantitative restrictioins. • members are allowed to consult with other members who have a substantial interest. • members are free to modify or withdraw without agreement. 5.2.6. Imposition of customs duties (CB 428) • WTO rules on the manner in which customs duties must be imposed. • imposition of customs duties may require three determinations to be made: 1. determination of the proper classification of the imported good 2. determination of the customs value of the imported good; and 3. determination of the origin of the imported good. Customs Classification Spain – Unroasted Coffee • no obligation under the GATT to follow any particular system for classifying goods, and a contracting party has the right to introduce new custom tariff positions as appropriate. • International Convention on the Harmonized Commodity • also includes: • general rules for the interpretation of the Harmonised system • interpretation shall be governed by the following principles: • incomplete or unfinished goods are classified as finished goods when the goods already have the essential charter of the complete or finished goods. • how to classify goods falling under two or more headings. • explanatory notes give the official interpretation of the Harmonised System agreed by the WCO. • even though not part of WTO law, explanatory notes can be considered in interpreting provisions. • imposition of custom duties • valuation of the imported goods • value added process, higher tariff on manufactured products. • II:8 GATT • classification • 1st step • not bound to pick a particular system but have to make it clear • determination of origin Valuation for Customs Purposes • Most customs duties are ad valorem, therefore total value of goods must be calculated. ** WTO agreements provide the rules on customs valuation

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• Article VII of the GATT • ad Article VIII • Article VII: 2a • customs should be based on the ACTUAL value of the imported merchandise on which duty is assessed, or of like merchandise, and should NOT be based on the value of merchandise of national origin or on arbitrary or fictitious values. • 2b: ‘actual value’ of goods is the price at which such or like goods are sold or offered for sale in the ordinary course of trade under fully competitive conditions. • Order of valuation • transactional cost on paper/invoice • value of identical goods • value of similar goods • deductive value method • computed value method • fall• back method • additional cost to be added to transactional cost • commissions, cost of packing, license fees Determination of Origin • customs duties applied may differ depending on country of export. • e.g. goods from developing countries often get lower import duties • Problem: many industrial products are produced in more than one country. • Rules of Origin typically based on • principle of value added • if certain percentage of value is added in particular country • principle of change in tariff classification • if result of processing in country changes tariff classification. • WTO Agreement on Rules of Origin • differentiates between preferential and non• preferential origin rules. • non• preferential rules are those used in non• preferential trade policy instruments, e.g. MFN treatment • preferential rules for products that fall under preferential trade regimes US – Textiles Rules of Orgin • India claimed the US applied rules inconsistent with its obligations under Article 2 of Agreement on Rules of Origin. • Country that is the “origin” of a product is the country where the last substantial transformation has been carried out. 5.2.7. Other duties and charges • Tariff barriers can also take the form of “other duties and charges” Definition and Types • financial charges other than ordinary customs duties imposed on or in the context of the importation of goods. EXAMPLES • import surcharges, i.e. a duty imposed on an imported product in addition to the ordinary customs duty; • security deposit to be made on the importation of goods; • statistical tax imposed to finance the collection of statistical information; • a customs fee, i.e. a financial charge imposed for the processing of imported goods by the customs authorities; • transitional surcharge for economic stabilization imposed on imported goods; • a foreign exchange fee imposed on imported goods. Rules Regarding ‘other Duties or Charges’ • to protect tariff binding set forth in the Schedules and prevent circumvention of Article II:1(b), first sentence, of GATT • LOOK TO Article II:1(b), second sentence *products subject to binding in Schedule SHALL be exempt from ALL other duties or charges of any kind imposed on in excess of the agreement. Understanding on Article II:1(b)• • • • separate interpretation • transparency: requires members to record their schedules. Chile – Price Band System • was Price Band System duties not ‘ordinary customs duties’?

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• IF duties or charges were not recorded but were nevertheless leived, this is inconsistent with Article II:1(b) and interpretation, • HOLD: inconsistent• • • ‘other duties or charges’ Dominican Republic – Import and sale of Cigarettes • transitional surcharge for economic stabilization and foreign exchange fee• • • • NOT recorded in a legally valid manner in Schedule of Concessions. • Transitional surcharge• • • MORE than zero that was listed in schedule. Exceptions to the Rule • Despite obligations under Article II:1(b), pursuant to Article II:2 GATT members may impose on imported products: 1. any financial charge that is not in excess of internal tax imposed on like domestic products 2. WTO• consistent anti• dumping or countervailing duties; or 3. fees or other charges matching the cost of the services rendered. • Article VIII:1(a) GATT: ok to charge appox cost of services rendered in connection with import or export. US – Customs User Fee • while most government regulatory activities are not considered ‘services’ in connection with export or import, some do fall within this category when they endow goods with safety or quality characteristics necessary for commerce. • Article VIII:1(a) has a dual requirement 1. the fee or charge in question must first involve a ‘service’ rendered; and 2. the level of the charge must not exceed the approximate cost of that service. • service must be rendered to the individual exporter in question. • here, merchandise processing fee cause fee in excess of cost of services rendered, inconsistent with Article II:2(c) and VIII:1(a). Argentina – Textiles and Apparel • ad valorem charge with no maximum limit violates Article VIII because such a charge cannot be related to the cost of the service rendred. 5.3. Non• Tariff Barriers to Trade in Goods • besides customs duties and other duties, we also have non• tariff barriers. DISCUSS • quantitative restrictions; • rules on quantitative restrictions • administration of quantitative restrictions; and • other non• tariff barriers. NTBs: Quantitative Restrictions (non• tariff barriers) • classic NTBs • prohibition of import • quota • licensing • state trading enterprising, mixing regulation, minimum requirements *are being phased out but typically find mixing regulations 5.3.1. Quantitative Restrictions Definitions and Types • Quantitative Restrictions limit quantity that may be imported or exported. Types: • prohibition or ban on a product, i.e. when certain conditions are not fulfilled. • quota, i.e. measure indicating quantity that may be imported • automatic and non• automatic licensing; • other quantitative restrictions • quantitative restriction can be based on # of units, weight or volume or value. Customs Duties versus Quantitative Restrictions • WTO clearly favors Customs Duties over Quantitative Restrictions. REASONS WHY • duties more transparent, • impact of duties is clear • unclear how much quantitative restrictions will increase price. • PRICE • custom duties goes to government

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• Quantitative Restrictions benefits Importers • Quantitative Restrictions based on import licensing, which are more open to corruption. • Quantitative Restrictions impose Absolute Limits. Tariff Quotas • Tariff• rate Quotas: quantity that can be imported at a certain duty. EC• Bananas III • duty free up to 90,000 tonnes; after tariff rate was 693 ECU per tonne. 5.3.2. Rules on Quantitative Restrictions General Prohibition on Quantitative Restrictions • Article XI:1 GATT “general elimination on QR” • one of the cornerstones of GATT system • “no prohibitions or restrictions other than duties, taxes or other charges. India – Autos • scope covers more than border measures—‘other measures’ US – Shrimp • US import ban on shrimp caught by non• approved vessels inconsistent with Article XI:1. India – Quantitative Restrictions • non• automatic import licensing system are restrictions prohibited by Art. XI:1 GATT. EEC – Oilseeds I • even if it does not impede trade, can still be prohibited under article XI:1 GATT. • import quota constituted an import restriction. Brazil – Retreaded Tyres • Scope of Article XI:1 broad • even if fees not administered at border, can still fall under Article XI:1 HERE: level of fines unproportional. • de facto restrictions are also prohibited under Article XI:1 GATT. Rules on Quantitative Restrictions on Specific Products Voluntary Export Restraints • self imposed Quantitative Restriction on Exports. *WTO Agreement on Safeguards specifically prohibits voluntary export restraints— Article 11.1(b) Agreement on Safeguards. 5.3.3. Administration of Quantitative Restrictions • Article XI:1 GATT prohibits quantitative restrictions, but many exceptions exists. DISCUSS • rule of non• discrimination • rules on the distribution of trade; and • rules on import licensing procedures Rules on Non• Discrimination • Article XIII:1 GATT provides that QR should a applied in a non• discriminatory manner. i.e. if a member imposes a quantitative restriction on products to or from another Member, products to or from all other countries are ‘similarly prohibited or restricted’. EEC – Apples I: “similarly prohibited” • ‘similarly’ FACTORS • difference in transparency of two types of action; • difference in the administration of the restrictions, the one being an import restriction, the other an export restraint; and • import restriction was unilateral and mandatory while other was voluntary negotiated. Rules on the Distribution of Trade IF Quantitative Restrictions ARE applied, how is trade distributed among the members???? • Chapeau of Article XIII:2 • “in applying import restrictions to any product, [Members] shall aim at a distribution of trade in such product approaching as closely as possible the shares which the various [Members] might be expected to obtain in the absence of such restrictions.”

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**must mirror Market Share = relative trade flows if restriction had not occurred. Article XIII:2(d)• • • members can also negotiate allocation of shares with Members having a “substantial interest in supplying the product concerned.” ELSE must use market share approach. • EC – Bananas III: can also allocate to members without a substantial interest, Article XIII:2(d) only refers to supplying countries—minor market share—but Member must then allocate to all such members. *no obligations to member without substantial interest. *Despite Article XIII:1, non• discrim prin., discrimination between members is allowed. Import• Licensing Procedures • Quotas and Tariff quotas are typically administered via import• licensing procedures. Article 1.1 of Agreement on Import Licensing Procedures (Import Licensing Agreement) • applies to procedures requiring submission of application to the relevant administrative body as a prior condition for importation into the customs territory of importing member. • Article 1 sets out rules procedures, • Article 1.3 “shall be neutral in application and administered in a fair and equitable manner” • Article 1.4: procedures must be published. EC – Poultry: constant changes in rules do not constitute a per se violation of Article 1.4, 3.3, etc.. Import Licensing Agreement. Article 1.7 and 1.8 Import Licensing Agreement • ‘common sense” must prevail, i.e. cannot refuse license for minor error. Automatic vs. non• automatic license • auotmatic: import license where approval of the application is granted in ALL cases. • non• automatic: approval is not granted to all. OTHER Requirements for non• automatic licensing • non• discrimination among applicants for import licenses • obligation to give reasons for refusing an application • right of appeal or review of the decisions on applications • time• limits for processing applications • validity of import licenses • desirability of issuing licenses for products in economic quantitites. 5.4. Other non• Tariff Barriers 9/24 • In addition to customs duties and other duties and charges and quantitative restrictions you ALSO have “other non• tariff barriers” • residual category, coves TBT, SPS as well. DISCUSS • lack of transparency • unfair and arbitrary application of trade measures • customs formalities and procedures; and • other measures or actions, such as preshipment inspection, marks of origin, government procurement practices… Lack of Transparency • ignorance, uncertainty or confusion with respect to trade laws, regulations and procedures are barriers to trade. • 4 kinds of WTO rules on procedure • Publication requirement • notification requirement • enquiry points • trade policy review process • Article X GATT: laws, regs, etc “shall be published promptly…to enable governments and traders to become acquainted with them.” • Article X:2 requires public notice of quotas. ***Article X:2 GATT: CANNOT enforce measure before it is published • Article 10.1 TBT agreement requires enquiry points where further information is needed. Unfair and Arbitrary Application of Trade Measures • To help prevent trade barriers, WTO law provides a requirement for impartial and reasonable administration, AND requirement for procedures and impartial review.

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• Article X:3(a): members shall administer in a uniform, impartial and reasonable manner all its laws, regulations… ***LOOKING at administration, not laws themselves. Argentina – Hides and Leather: can challenge substance of measure under Article X:3(a). *Article X:3, doesn’t require actual damage, can simply look that the possible impact on the competitive situation. • Article X:3(b): Member shall maintain judicial, arbitral or administrative tribunals for prompt review and correction of administrative action relating to customs matters. Customs Formalities and Procedures • another important type of ‘other non• tariff barrier’ to trade is customs formalities and procedures. • administrative barriers for companies who do not regularly export large quantities, are often simply too high to make foreign markets appear attractive. Article VIII:2 only requires ‘review’ of the operation of laws to make sure they minimize complexity of customs formalities and decreasing and simplifying documentation. Other Measures or Actions • ‘other non• tariff barriers’ also include many other measures or actions, or the lack thereof. DISCUSS • preshipment inspection • marks of origin; • government procurement practices; • measures relating to transit shipments. Preshipment Inspection • employing private companies to check the price, quantity…primarily used to prevent fraud or evasion of customs duties. • may give rise to delays and unequal treatment. Marks of Origin • Article IX:2, inspections on marks of origin should be reduced to a minimum, only to prevent fraud or misleading indicators. Procurement of Goods • govt buying domestic rather then imported, but Article III:4 GATT (national treatment) does not apply to government procurement. • Agreement on Government Procurement• • • for those who are signed up in it. • 10• 15% of international trade is govt procurement. • plurality agreement. Traffic in Transit • Article V GATT, Transit of goods from Country A to C, through B. • obligations for members not to impede transit of goods. 5.4. Barriers to Trade in Services • Barriers in trade and services are primarily the result of domestic regulations. • SERVICES DEPENDS ON schedule of commitments Example • restrictions on number of drugstores allowed within a geographical area; • obligation for all practicing lawyers • sanitation standards for restaurants • technical safety requirements for airline companies; • professional qualification requirements for accountants. 5.4.1 Market Access Barriers to Trade in Services—Article XVI GATS DISCUSS • definition and types of market access barriers • rules on market access barriers • negotiations on market access • schedules of specific commitments Definition and Types of Market Access Barriers • Article XVI:2(a) to (f) provides an exhaustive list of measures. Rules on Market Access Barriers • Service Schedule • binds the level of market access specified in the Schedule • Article XVI GATS, no less favorable treatment Negotiations on Market Access

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• Article XIX GATS, negotiations of specific commitments XIX:1, shall be directed an reduction of adverse effects on trade in services. Interpretation of Services Schedules • XX:3 GATS, schedules of specific commitment shall be annexed to agreement. Modification or Withdrawal of Commitments • Article XXI GATS, member may modify or withdraw any commitment in its Schedule at any time after three years have elapsed 5.4.2. Other Barriers to Trade in Services DISCUSS • lack of transparency • unfair or arbitrary application of measures affect services • domestic regulations • lack of recognition of diplomas and professional certificates; • other measures and actions; Lack of Transparency • Similar to Article X GATT Unfair and Arbitrary application of measures • Article VI:1 GATS, ensure that all measures of general application affecting trade in services are administered in a reasonable, objective and impartial manner. Domestic Regulation • Article XVI:2 GATS, Lack of Recognition of foreign dipomas • Article VII:1, can regonize education etc from particular country.

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CHAP 6: Rules on Unfair Trade (cb 507) 6.1. Intro • WTO provides rules on dumping and sbusidation. TIRE CASE • dispute over dumping • dumping: ITC investigation, but dispute goes to Safeguards! • safeguards: do not have to show someone is selling below. • simply have to cite injury **Safeguard is an internal investigation. • dumping: have to show injury, causal link, etc. • measures apply ONLY to China • disadvantage lower individuals • lower income families have to pay more • Retaliation from China • breeds inefficiency, one raises, the other person raises • we are heavily dependent on them, debt • China still has no domestic economy, need US to buy• • so maybe China can't do much. 6.2. Dumping and Anti• Dumping Measures • Dumping: bring a product onto the market of another country at a price less than the normal value of that product. *Dumping is NOT prohibited, only condemned if it causes injury to domestic industry. • Members are allowed to take WTO• inconsistent measures to protect domestic injury from the injurious effects of dumping. • China has been by far the biggest target of anti• dumping measures. *Anti• dumpng law is one of the most controversial and politically sensitive areas of WTO law. *need to be careful that antidumping measures do not a protectionist tool rather than a protection measure. 6.2.1. Basic Elements of WTO Law on Dumping DISCUSS • history of the law on dumping • concept of dumping • WTO treatment of dumping; • response to injurious dumping. History of the Law on Dumping • WTO law on dumping is set out in Article VI GATT and Anti• dumping agreement (agreement on interpretation of Article VI) Determination of Dumping • Dumping: situation of international price discrimination involving the price and cost of a product in the exporting country in relation to its price in the importing country. *introduction of a product into commerce of another country at less than its ‘normal value’ WTO treatment of Dumping • WTO does not regulate dumping itself, REGULATES measures and actions taken by WTO members. • Article VI GATT, condems dumping • Article VI GATT provides a framework fo substantive and procedural rules for anti• dumping measures. **ARTICLE VI GATT, requires following before measures taken, investigation MUST SHOW: 1. there is dumping 2. domestic industry producing the like product in the importing country is suffereing injury; 3. there is a causal link between the dumping and the injury. Response to Injurious Dumping • Article VI, VI:2, read in conjunction with Anti• dumping agreement limits responses to dumping to: • provisional measures • price undertakings; and • definitive anti• dumping duties.

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1. 2. 3. 4.

1. 2.

• Article 18.1, Anti• Dump Agree, measure must be in accordance with GATT, specificially Article VI GATT. 6.2.2. Determination of Dumping • Article VI:1 GATT and Article 2.1 Anti• dump agree, define ‘dumping’ as the introduction of a product into the commerce of another country at less than its ‘normal value’. • Dumping exist when normal value exceeds the export price. DISCUSS • how ‘normal value’ is determined • how relevant ‘export price’ is determined • how existence of dumping is determined; • how ‘dumping margin’ is calculated Remember: • dumping determination is made irrelevant of harm to domestic injury and intent of dumper. • Article VI GATT and Anti• dump, only come into play IF a domestic industry is injuried. Determination of the ‘normal value’ • Article 2.1, Anti• Dump, defines ‘normal value’ of product as: “the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country” • i.e. the price of the like product in the home market of the exporter or producerl• • • does not required home country to be producing it! Article 2.1. four conditions on domestic trans to determine normal value sale must be ‘in the ordinary course of trade’; sale must be of the ‘like product’’ product must be ‘destined for consumption in the exporting country’; and price must be ‘comparable’. ‘ordinary course of trade’ • Article 2.1., excludes sales not made in ordinary… e.g. sales to affiliated parties, aberrationally high priced sales or low priced sales or sales below cost. ‘like products’ • Determination involves 1. examining the imported products or product alleged to be dumped; and 2. establishing the product that is ‘like’. • Article 2.6 Anti• dump, DEFINES ‘like product’ as: “a product that is identical…OR antoher product which, although not alike in all respects, has characteristics closely resembling those of the product under consideration.” **DIFFERENT from Article III GATT, here need closer resemblance. ‘comparable’ • Article 2.4, Anti• dump, requires that a ‘fair comparasion’ be made between export price and normal value• • • shall be made at the same level of trade, normally at the ex• factory level. Alternative Rules for the Determination of the ‘normal value’ • Alternative IF NO propert comparasion available. • e.g. no sales in ‘ordinary course of trade’, low voume of sales, particular market situations. • no• market economy: where straight comparision with home market prices not appropriate when imports from a country are fixed by state. **Article 2.1 Anti• dump, an importing member may select one of two alternatives for determining normal value comparision with export price: using a third country price as the normal value; and constructing the normal value. • Regarding 1, Article 2.2. antidimp, does not offer any criteria for determining whether a 3 country is ‘appropirate’ • Regarding 2, Article 22. antidump, normal value must be constructed based on: cost of production in country of origin plus a reasonable amount for administrative, selling and general costs and for profits. Determination of the ‘export price’ • exprot price is normally based on the transaction price at which the producer in the exporting country sells the product to an importer in the importing country. Article 2.3 antidump, provides alternative method to calculate ‘export price’

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• based on the price at which the product is first sold to an independent buyers. Comparision between the ‘export price’ and the ‘normal value’ • Article 2.4. antidump, ‘fair comparasion shall be made between export price and normal value… made at the same level of trade, normally at the ex• factory level, and in respect of sales made at as nearly as possible the same time. • under Aritcle 2.4, panel can adjust price due to taxation, levels of trade, quantities. • can adjust for ‘any other differences’ that affect price comparability. • MUST be anticipated by exporter! US – Stainless steel Calculation of the Margin of Dumping • the margin of dumping is the difference between the export price and the ‘normal value’ • Article 2.4.2, first sentence, anti• dump, comparision generally requires: • either a comparasion of the weighted average ‘normal value’ to the weighted avarege of prices of all comparable export transactions; OR • a transaction• to• transaction comparasion of ‘normal value’ and export price. • CAN compare individual dumping transaction only if targeted dumping occurred. ***Practice of zeroing comes into play under Article 2.4.2 anti• dump • treating a negative dumping margin for a certain product as ‘ 0’ instead of negative, i.e. where export price is above the ‘normal value’ **For the most part, the appellate body has found that zeroing is inconsistent with Article 2.4.2 anti• dump—mandate to make a ‘fair comparaision’ **IMPORTANCE: telling Member how to calculate its dumping margin. **US is STILL Zeroing. • artificially inflates dumping margin. ZEROING• • • calculated over a period of time• • • different values 1. calculate a weighted average normal value AND a weighted average export price FOR EACH MODEL OR TYPE of product 2. Compare for each product by subtracting the normal value from the export price Normal (bigger) – Export = positive dumping Normal (smaller) – Export =negative dumping OR NO dumping **Indicate how much the export price is above the Normal Value 3. SET negatives to zero— 3. ADD UP to determine an overall dumping margin for the product as a whole. 4. DIVIDE SUM by cumulative total value of ALL Export transactions involving all types of that product. • • not allowing for reduction in percentage by adding the negative numbers. • inflating the percentage. • Exporting at a higher price than Normal value• • • GOOD • exporting at a lower price than Normal value• • • dumping. • weighted average• • • same as calculating the mean (add up elements, divide by number of elements) except that certain elements get more weight/important (e.g. percentage of weight). 6.2.3. Detemrination of Injury • only dumping that causes injury, OR threatens to cause injury to the domestic injury is condemned and potentially subject to anti• dumping measures under Article VI GATT, and antidump Agree. AFTER DUMPING HAS BEEN DETERMINED, MUST ESTABLISH 1. existence or threat, of injury to the domestic industry; and 2. causal link between the dumping and the injury. Concept of ‘Domestic Industry’ • domestic industry must be definedin accordance with Aritcle 4.1 anti• dump: “domestic producers as a whole of the like products or…those of them whose collective output fo the products constitutes a major proportion of th total domestic production of those products.” • domestic industry can be domestic producers whose output makes up a major proprotionof the domestic production. • Article 4.1. antidump, suggest there can be more than one “major proportion”, each individual does not have to exceed 50% of market. See Argentina – Poultry anti• dumping duties. *Article 4.1. antidump, producers ‘related’ to importers or exporters might not be appropriate to consider, i.e. directly or indirectly controls the other, both directly controlled by third person Determination of Injury • An affirmative determination of injury to the domestic industry is a fundamental pre• condition for the imposition of anti• dumping measures, along with determing of causal link. Anti• dump agree, DEFINES ‘inury’ to mean three things: 1. material injury, i.e. genuine injury, to domestic industry; 2. threat of material injury to a domestic industry; or

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3.

material retardation of the establishment of a domestic industry. Article 3.1. anti• dump requires determination to be based on positive evidence and objective examination of value of dumped imports and effect on dumped imports on prices in domestic market for like products. • Appellate body will put limits on what can be used. Article 3.1 anti• dump, MEMBERS MUST SHOW: determination of the volume of dumped imports and effect on prices

1. (Article 3.2 anti• dump)

2.

investigations of imports from more than one country (Article 3.3. anti• dump)

3.

impact of dumped imports on the domestic industry (Article 3.4 anti• dump) • Article 3.4. antidump list relevant factors to consider in examining impact of dumped exports (MANDATORY MIN to evaluate): • factors and indicies having bearing on stat of industry, i.e. actual or potential drop in sales, market share. • Factors affecting the domestic prices; • magnitude of the margin of dumping; and • actual or potential negative effects on cash flow, inventories, … • STATES LIST IS NOT EXHAUSTIVE! causality between dumped imports and injry (Article 3.5 anti• dump) assessment of the domestic production of the like products (Article 3.6 anti•

4. 5. dump) 6.

determination of the threat of material injury (Article 3.7, 3.8) *positive evidence relates to quality of evidence that authorities may rely on. *objective examination—examination process must conform to the dictates of the basic principles of good faith and fundamental fairness. Mexico – Antidumping Measure • investigation inconsistent with Aritcle 3.1 antidump because period of investigation ended to early, and excluded six months of data from each year, and used assumptions on evaluation of export volumes. *Need to use ‘current data’ Determination of a Threat of Material Injury • Article 3.7 anti• dump, based on facts AND would create a stitutation in which dumping would cause injury must be clearly foreseen and imminent. Article 3.7 anti• dump, FACTORS in determing threat • significant rate of increase of dumped imports • imminent substantial increase • whether imports are entering at prices that will suppress effect on domestic prices, • inventories of the product being investigated *Mexico – Corn Syrup: must conclude how absence of measure will lead to injury—US – Softwood Lumber VI. Determination of Material Retardation • from anti• dumping code: retardation of the establishment of a new industry, and indicates that a finding must be based on ‘convincing evidence’ that such a new industry is actually forthcoming. 6.2.4. Demonstration of a Causal Link • Article 3.5 Anti• dumping agree, requires demonstration of a causal link between: 1. dumped imports; and 2. injury to domestic industry • Artile 3.5 antidump, ‘non• attribution’ requirement that investigating authorities MUST examine any known factors other than the dumped imports AND must not attribute the injury caused by these factors to the dumped imports. • prove injury is not being caused by other factors ***Anti• dumping agree DOES NOT require dumping of imports to be the principal cause of the injury, only that it caused some of the injury. Relevant Factors • Article 3.5 antidump, some factors that “may be relevant” in determining causual link… • volume and prices of imports not sold at dumping prices; • contraction in demand or changes in pattern of consumption; • trade• restrictive practices of and competition between domestic and foreign producers;

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• developments in tech; and • export performance and productivity of domestic industry. **This list is NOT mandatory, unlike Article 3.4. antidump. ‘Non• Attribution Requirement’ • Article 3.5 antidump, US – Hot• Rolled Steel • ‘non• attribution’ requirement applies soley in situations where dumped imports and other known factors are causing injury to the domestic injury AT THE SAME TIME. **Required to separate effects of dumped imports AND other factors ELSE cannot prove causal link. • must separate EVEN if interwined with other the other factors ELSE cannot prove causal link. Cumulation• permitted analysis technique, controversial. **Way to help show effects of dumped imports. • when two countries do the same thing at the same time, e.g. which one of the countries caused the dumping, which dumping margin is to be allocated to them?? • Cumulative analysis consideres effects of dumped imports from more than one country in determining whether dumped imports are causing injury to domestic industry. • Article 3.3 of Antidump agree • cumulation is NOT mandatory but permitted • increases the volume of imports whose impact is being considered, increases the possibility of an affirmative inury detemrianton. • IN order to use cumulation, Article 3.3 antidump requires: 1. dumping margin for each country must be more than de minimus 2. volume of import from each individual country must not be negligible; and 3. cumulation must be appropriate in the light of the conditions of competition. 6.2.5. Anti• Dumping Investigation • Anti• dump agree, sets out in detail how to intitiate and conduct anti• dumping investigations. DISCUSS • initiation of an anti• dumping investigation; • period of an investigation; and • conduct of an investigation. Initiation of an Investigation • Article 5 antidump, requirements for initiation of investigation. • while domestic authorities can instigate investigation on their own initiative, GENERALLY must submit written application on behalf of domestic industry as defeind under Article 4 antidump. • Application Requires: • evidence of dumping • evidence of injury to domestic industry and • evidence of causal link between dumped imports and injury to domestic industry. • Article 5.2 simply requires information, in the sense of evidence, in support of allegations. *Simple assertion, unsubstantiated by relevant evidence, cannot be considered to meet the requirements of Article 5.2 antidump. • Article 5.8 provides for prompt termination of investigations IF margin of dumping is de minimis (i.e. less than 2% of export price.); and volume of imports form each country is negligible (i.e. less than 3 % of imports of the like products of importing member.) Period of Investigation • Recommendations Concerning...article: • should not exceed 12 months • no less than 6 months • ending close to initiation of investigation Conduct of Investigation • Article 6 Antidump, deatlied rules concerning the process of investigation, including evidence, information and procedural elements. Article 6.1 antidump, all interested parties in investigation must be given notice of the information as well as opportunity to present written evidence. 6.2.6. Anti• Dumping Measures • Anti• dump agreement provides for 3 types of anti• dump measures: 1. provisional measures 2. price undertakings

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3. definitive anti• dumping duties. Imposition of Prvisional Anti• Dumping Measures • Article 7 antidump, rule son provisional measures. 1. investigating authorities must make preliminary affirmative determination of dumping, injury and causation AND 2. must be necessary to prevent injury. • Article 7.4 antidump, provisional measures shall be limited in time, not exceeding 4 months or up to 6 months. Price Undertakings • Article 8 antidump, possibility of member offer and accepting price undertakings as alternative to anti• dumping duties. • AGAIN, requires affirmative preliminary determinationof dumping, injury and causation. Imposition and Collection of Anti• dumping duties • Article 9 antidump governs imposition and collection of anti• dumping duties. • Imposition of anti• dumping duties are ALWAYS optional. • AD duty shall remain in force as long as and to the extent necessary to counteract dumping whtih is causing injury. **Most FAvoured Nation applies to collection, must collect duties from ALL sources found to be dumping. • Article 9.3 antidump: anti• dumping duties shall NOT exceed the dumping margin. • Article 9.4 not possible to calauclate dupming margin for each exporter, can apply dumping duty based on weighted average dumping margin, even to uninvestigated sources. *Retroactive application of anti• dumping duties is PROHIBITED, but Article 10 antidump contains rules for retroactive application in specific instances. Duration , termination and review of anti• dump measures • Article 11 antidump, governs duration and review• • • prevent members from simply leaving measures in place. US – DRAMS, continued imposition of anti• dumping duty MUST be shown via evidence. • Article 11.2 antidump, first sentence, members must review measures, interested parties can also intiate review. • Article 11.3 antidump, “sunset privision” members must terminate anti• dumping duties no later than 5 years from imposition UNLESS review finds otherwise. Problem of Circumvention of anti• dumping Duties • exporter OR producer can try to change the characteristics of the product concerned so it no longer fall under anti• duming duties OR can move production to another country. Public Notice and Judicial Review • Article 12 antidump, requirements for public notice of initiation of investigation, preliminary findings and determinations. • Article 12.2 antidump, report requirements. • Article 13 antidump, judical review, each member imposing anti• dumping measure MUST maintain judical system for prompt review of determinations. 6.2.7. Special and Differential Treatment for Developing Country Members • Article 15 antidump, Members must look at constructive remedies set out in this Agreement before application of anti• dumping duties that would affect essential interest of devleopng countires. • Article 15 antidump, DOES NOT require members to take specific action, besides that listed in second sentence, i.e. explore constructive remedies. 6.2.8 Standard of Review for WTO panels (CB 556) • Disputes regarding anti• dumping measures are subject to DSU • Art. 17.1 of anti• dumpling agreement • Art. 11 of DSU: “objective assessment” std • NOT De Novo Review • If decision rest on one of several permissible interpretations, then decision should be upheld. 6.3. Subsidies and Countervailing Measures (CB 557) • WTO Law includes rules on ANOTHER unfair trade practice, subsidization. • Subsidies can distort trade flow if they give an artificial competitive advantage to exporters or import• competing industries. • COMPLICATED • some subsidies are strictly prohibited while other are allowed so long as they do not cause adverse affects, or if threat is apparent, country can impose countervailing measures via duties.

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6.3.1. Basic Elements of WTO Law on subsides The History of the Law on subsidies • Set out in Articles VI and XVI of GATT 1994 and in Subsidies and Countervailing Measures (SCM) agreement Brazil• Aircraft • purpose of SCM agreement: to impose multilateral disciplines on subsidies which distort international trade. Concept of ‘subsidy’ • • • anti• competative • SCM Agreement, for the first time, contains a detailed definition • SUBSIDY: a financial contribution by a government or public body, which confers a benfit. • can be private: Art. 1.1. a, entrust or direct • HYPO: look up definition, • entrust: outsourcing of governmental functions • what are governmental functions? • wider degree of discretion • directing: • less discretion, • DRAMS case! • conferral of a benefit • look into agreement • look at benefit to receipent, not cost to government. • high cost to government does not mean conferral of a benefit • benefit v. advantage: look to Art. 1.1. b • can narrowly define as in DRAMS! • advantage• • over others in market • benefit• • • just better off than you would have been without subsidy • specificity• • of subsidy • Article 2.1.c • de facto applies as well. **A subsidy that is widely available within an economy is presumed not to distort the allocation of resources within that economy. • if you do not skew the competitive playing field• • • its OK. • Article 1.2• • • RULES ONLY apply to ‘specific’ subsidies, subsidies granted to an industry, enterprise, etc. WTO Treatment of subsidies • Art. XVI of GATT and Art. 3, 9 of SCM • Certain subsidies are prohibited, others may be challenged when they cause adverse effects to the interests of other members. Response to injurious subsidies • members may impose countervailing duties on the subsidized imports to offset the subsidization. • Countervailing measures REQUIRE • subsidised imports • causal link between subsidized imports and injury. 6.3.2. Determination of Subsidisation (CB 562) • Article 1.1.—subsidy exist if 1. Financial Contribution: there is a financial contribution by a government or any public body within the territory of a Member 2. Financial contribution by a government or any public body 3. Financial contribution conferring a benefit. Financial Contribution • Foregone revenue• • • e.g. agreement not to tax a particular entity Korea – Commercial Vessels and Japn – DRAMS • ‘financial contributions’• • • interest reductions, debt forgiveness **CONCEPT of Financial Contributions is BROAD. Financial Contribution by a Government • Must be made by a government or a public body, including regional and local authorities as well as STATE• OWNED companies. Korea – Commerical Vessels • ‘public body’ if it is controlled by the government.

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• can ALSO be a PRIVATE body: when government entrusts or directs the private body to carry out one or more of the type of functions illustrated in Art. 1.1. *uses the private body as a proxy to effectuate one of the types of financial contributions. ***ARticle 1 (IV) 'normally be vested" problematic!!!! • scope Financial Contribution Conferring a Benefit • Hard to determine in situations besides actually just giving money. • Art. 14 of SCM agreement sets forth guidelines for calculating the amount of subsidy in terms of benefit. **MUST LOOK at benefit to recipient, NOT cost to government!!! Canada – Aircraft: a ‘financial contribution’ can be identified by determining whether the recipient has received a ‘financial contribution’ on terms more favourable than those available to the recipient in the market. • i.e. a government loan is a financial contribution conferring a benefit ONLY if the terms of the loan are more favourable than the terms of a comparable commercial loan. • NEED to look at custom standards of investment or fair market price. Requirement of ‘specificity’ of the subsidy • the rules do not apply to all subsidies • Art. 2: a subsidy is specific when it has been specifically provided to an enterprise, an industry or a group of enterprises or industries. **A subsidy that is widely available within an economy is presumed not to distort the allocation of resources within that economy. • if you do not skew the competitive playing field• • • its OK. FOUR TYPES of Specificity—Must fall with one 1. enterprise specificity: government targets a particular company 2. industry specificity: government targets a specific sector 3. regional specificity: government targets producers in specified parts of its territory. 4. prohibited subsidies: government targets export goods • objective criteria: number of employees, size of enterprise • SCM applies to de jure and de factor subsidies • de facto, can use ‘other factors’ • use of a subsidy programme by limited number of enterprises • predominant use of a subsidy programme by a certain enterprises. • discretion in granting subsidy • whether a subsidy is specific must be determined on a case by case basis. Transparency and notification requirement • 6.3.3. Prohibited Subsidies (CB 571) • The SCM agreement distinguishes between prohibited subsidies, actionable subsidies and non• actionable subsidies. • Article 3 of SCM agreement addresses prohibited subsidies 1. subsidies conditioned upon export performance 2. subsidies conditioned upon use of domestic over imported products. **WTO Members cannot maintain export subsidies OR import substitution subsidies. *They aim to affect trade and are most likely to cause adverse effects to other members. Export Subsidies • subsidies contingent upon export performance, e.g. direct export subsidies, provision of goods. • ‘contingent’ means conditional or dependent for its existence on something else. • de jure contingency is demonstrated on the basis of the words of the relevant legislation, regulation or other legal instrument. • can also be derived by necessary implication from the words actually used in the measure. • de facto contingency is met if the facts demonstrate that the subsidy is in fact tied to actual or anticipated exportation earnings. Australia – Automotive Leather II • de facto requires there be a ‘close connection’ between the granting of, or maintenance of, a subsidy and export performance. Require 3 substantive showings 1. ‘granting of a subsidy’ 2. ‘is…tied to…’ 3. ‘actual or anticipated exportation or export earnings’ Import Substitution Subsidies

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• import substitution subsidies are subsidies contingent upon the use of domestic over import goods. e.g. government gives American company $ to produce a specific product more cheaply, therefore, domestic producer will use these instead of importing. Multilateral remedies for prohibited subsidies • SET out in Art. 4 of the SCM Agreement 1. consultations may be requested 2. may be referred to the dispute resolution panel *Also sets out other special rules which prevail over the DSU rules **Timeframes under SCM agreement are half as long as DSU. • Remedy can be both prospective (stop subsidy) or retrospective (requiring pay back of subsidy); however, retrospective relief ONLY happen in one case. **One Time Subsidy—Panel required pay back. • typically remedy is only to get compliance• • • punitive measures. **Failure to comply with ruling timeframe might allow for appropriate countermeasures, i.e. retaliation measures, available in case of non• implementation in other WTO disputes. 6.3.4. Actionable Subsidies (CB 577)—similar to Anti• dump agree. • Subsidies that are NOT prohibited may be ‘actionable’, i.e. they are subject to challenge in the event that they cause adverse effects on the interests of another member. *Permissible UNLESS they cause adverse effects. • Art. 5, three types of ‘adverse effects’ • injury to the domestic industry of another Member • nullification or impairment of benefits accruing directly or indirectly to other members • serious prejudice, including a threat thereof, to the interests of another member. Subsidies causing injury • ‘like product’ FN 46 to SCM agreement • a product which is identical or another product which has characteristics closely resembling those of the product under consideration. • Panels use similar methodology as in Art. I and III • look at physical characteristics, end• uses, consumer habits and preferences, tariff classifications. • Art. 16.1: ‘domestic industry’ defined as the domestic producers as a whole of the like products or…those of them whose collective output of the products constitutes a major proportion of the total domestic production of those products. • ‘injury’ covers material injury, threat of material injury and material retardation of the establishment of a domestic industry. • Mandatory Factors • actual and potential decline in output, sales, market… • factors affecting domestic prices • actual and potential negative effects on cash flows Subsidies causing nullification or impairment • e.g. affecting tariff concessions bound under Art. II:1 GATT. • may undercut improved market access resulting from tariff concessions. Subsidies causing serious prejudice • Art. 6.3 SCM agreement: ‘serious prejudice’ may arise where a subsidy has one or more of the following effects: • subsidy displaces or impedes imports of a like product • subsidy displaces or impedes the export of a like product of another member from a third country market • subsidy results in significant price undercutting by the subsidizing product in comparison • subsidy leads to an increase in the world market share of the subsidizing Member…in comparison to the average share it had during the previous period of three years. **MUST find at least one!! Multilateral remedies for actionable subsidies (CB 584) • Art. 7 of SCM agreement • remedies for actionable subsidies also differ from the remedies provided for in the DSU. Multilateral remedies for actionable subsidies (CB 584) • Art. 7 of SCM agreement • remedies for actionable subsidies also differ from the remedies provided for in the DSU. 6.3.5. Countervailing Measures • • • Article VI GATT, Articles 10 and 32.1 SCM • Prohibited and actionable subsidies which cause injury to the domestic industry can be challenged and can also be offset by the application of a countervailing measure.

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• Article VI of GATT: a special duty levied for the purpose of offsetting…any subsidy bestowed, directly, or indirectly, upon the manufacture… • Article 10 of SCM Agreement • members must make sure countervailing measures are in accordance with Article VI of GATT Conditions for the Imposition of Countervailing Duties • Art. VI of GATT, Articles 10 and 32.1 of SCM Agreement, can only impose countervailing duties when: 1. there are subsidized imports 2. there is injury to the domestic injury of the like products within the meaning of Article 15 and 16 of the SCM agreement 3. there is a causal link between the subsidized imports and the injury to the domestic injury AND injury caused by other factors is NOT ATTRIBUTED to the subsidised imports. Conduct of countervailing investigations • SCM Agreement provides for detailed procedural requirements regarding the initiation and conduct of a countervailing investigation… • Requirements set out in Article 11 to 13 of the SCM Agreement. • Similar to Anti• Dumping Agreement procedures • Begins with the submission of an application. • must be made by or on the behalf of the domestic industry. • Immediate termination of investigation of subsidy is de minimis (i.e. less than 1 percent ad valorem) or where the volume of subsidised imports is negligible. • Requires: public notice of initiation of investigation, notice of information which authorities require, ample opportunity to present in writing all evidence which they consider relevant, thirty days to respond to questionare, give time for consumers or users of the product to provide information, all interested parties must be invited to participate in the hearings, obliged to make all information that is not confidential or other information which is provided on confidential basis. Application of Countervailing Measures • the SCM agreement provides for three types of countervailing measures: • provisional countervailing measures • voluntary undertakings • definitive countervailing duties • after preliminary determination, can impose provisional countervailing measures on the subsidised imports if the authorities judge such measures necessary to prevent injury being caused DURING investigation. • Members may impose definitive countervailing duties only after making a final determination that : • countervailable subsidy exists; and • subsidised imports cause, or threaten to cause, injury to the domestic industry. US – Offset Act (Byrd Amendment) • four responses to a countervailable subsidy: 1. definitive countervailing duties 2. provisional measures 3. price undertakings 4. multilaterally sanctioned countermeasures under DSU 6.3.6. Agricultural Subsidies • Biggest Issue • cutting domestic farm subsidies is one of the most pressing objects for trade ministers • US Cotton subsidies: not only to taxpayers have to pay BUT they hurt other poor farmers located around the world. Agricultural Export Subsidies (CB 601) Article: Change in Tariff Classification for Solar Panels • Small subsidiary of a Spanish company requested the customs agency notify it of the appropriate tariff classification of certain solar panels. • Customs agency: stated the solar panels no longer classify as duty free because the panels contain a basic electronic device for safety and energy efficiency• • • • They are to be treated as electrical generators. • Claims against such change in tariff classification are difficult because GATT does not provide any explicit rules on classification (unlike customs valuation). ***KEY is the precise language of the U.S. WTO Schedule in relation to the product at issue. HERE: duty• free class includes photovoltaic cells whether assembled into panels or not. • HOWEVER, Explanatory note states it does not cover panels or modules equipped with elements, however simple, i.e. diodes to control the direction of the current. • NEW Class includes DC generators, of an output not exceeding 750W. NOTE: efforts within the Doha negotiations to eliminate tariffs world• wide on clean energy products.

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Article: Solar Panels Tariff May Further Strain U.S.• China Trade **Company must keep track of such rulings in order to avoid penalties and possibly have to pay retroactive duties as well. • Change in Classification Decision was made on January 9, but only notice a few weeks ago. • companies importing solar panels now face up to 70 million in unexpected tariffs. • Even though new tariff is low, 2.5%, MANY panel manufacturers are losing money because of fierce competition from ever• expanding production in China and a worldwide downturn that has driven down prices. • PROBLEM: decision is legally binding on most solar panel imported in the US, but virtually no one in the industry became aware of it until the last few weeks. • Meanwhile, unpaid duties piled up, along with penalties that are likely to double the cost. *Duties will be doubled if customs officials determine that companies have been negligent in not paying them earlier. *Importers might also be liable for duties on all solar panels brought into US in the five years before the ruling if customs officials decide that the companies were guilty of “material misstament or omission” for failing to notice sooner. • FUTURE: could lead other countries to impose tariffs on American exports of Solar Panels. • some Chinese solar panel manufactures are already planning to move final assembly of solar modules to plants in the US. • POLITICAL: duty• free solar panels would reduce incentives for companies to manufacture panels in the US• • • at a time when American cities have been vying for panel factories even as the industry is shifting production to China. •

Chapter 7: Trade Liberalization versus other societal values and interests

(CB 614) 7.1 Intro • in order to promote and protect public health, consumer safety, the environment, employment, economic development and national security governments frequently adopt legislation or take measures that inadvertently or deliberately constitute barriers to trade. *This chapter addresses the wide ranging exceptions to the basic WTO rules allowing Members to adopt trade• restrictive legislation and measures that pursue the promotion and protection of other societal values and interest. *Article XX GATT—simply exceptions or other societal values • should NOT be standard ways of doing things but exceptional cases. LAYOUT • ‘general exceptions’ of Article XX of GATT • ‘security exceptions’ of Article XXI of GATT • ‘economic emergency exceptions’ of Article XIX of GATT • ‘regional integration exceptions’ of Article XXIV of GATT • ‘balance of payments exceptions’ of Articles XXII and XVIII:B • ‘economic development exceptions’ of Article XVIII:A • exceptions differ in scope and nature BUT all allow members to adopt and maintain legislation and measures that promote or protect other import societal values and interests, even though this legislation or these measures are inconsistent with substantive disciplines imposed by GATT or GATTS. ***Appellate Body reads Article 1, 3, 11 in conjunction with Article 20. 7.2. General Exceptions Under GATT 1994 7.2.1. Nature and Functions of Article XX of GATT • First need to examine if measure is against another article in the General Agreement, then can the panel examine if the measure is justified under XX(d), applied in conformity with Chapeu. • i.e. Last resort if measure if found to violate GATT • commitments from Articles I, III, and XI need to be balanced with the general exceptions in Article XX, e.g. cannot interpret one article so broadly as to eat up the others. *Cannot be read so broadly as to eat up other provisions of GATT. • Must societal value or interest be within the jurisdiction or can a measure protect the value outside the jurisdiction?? 7.2.2. Two• tier Test under Article XX of GATT US• Gasoline

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must the measure all under one of the particular exceptions listed under Article XX but must • • • • • look at measures itself 2. satisfy the requirements imposed by the opening clauses of Article XX. • look at application of measure. **Must first focus on the measure itself, then on the application of the measure, e.g. manner in which the measure is applied. 7.2.3. Specific Exceptions under Article XX of GATT • Different wording in the paragraphs means different degree of connection or relationship between the measure and the state policy. US – Gasoline ‘necessary’ (a)(b) and (d) ‘essential’ (j) ‘relating to’ (c)(e) and (g) ‘for the protection of’ (f) ‘in pursuance of’ (h) ‘involving’ (i) Article XX(b): ‘measures necessary to protect human, animal or plant life or health’ US – Gasoline: Two Tier Test • measure is designed to protect life or health of humans, animals or plants• • • • policy objective. (EASY TO MEET) • measure is necessary to fulfil that policy objective.(HARD TO SHOW) **NO less restrictive measures can be found. Brazil – Retreded Tyres (VERY EASY TO MEET) • regarding import ban on retreaded tyres tried to argue the accumulation of waste tryres create a risk of mosquito borne diseases because waste tyres create perfect breading grounds and tire fires harm the environment. • Panel AGREED. Thailand – Cigarettes (‘necessary’) • ‘necessary’ only if there were no alternative measure consistent with the General Agreement, or less inconsistent with it, which Thailand could reasonably be expected to employ to achieve its health policy objectives. • Panel looked to other countries’ regulations on the same issue and came up with ideas, finding less restrictive measures to accomplish the same goal. US – Gasoline • measure must also be reasonably available to the US to further its policy objectives. • level of protection sought by government cannot be challenged—up to government. • third factor: restrictive impact of measure EC – Asbestos: whether there is a less trade• restrictive measure. • measure was necessary under Thailand. • Brazil – Retryed Tyres • for alternatives: must consider cost or technical difficulties. • also may consider capacity of country to implement remedial measures. • ‘necessary’ factors • importance of interest • cost to achieve measure • trade restrictiveness • if ‘necessary’ then compare to alternatives. • Burden of proof of alternatives rest upon the complaining measure Article XX(d): ‘measures necessary to secure compliance with…’ Korea – Various Measures on Beef Two Element Test 1. measure must be designed to ‘secure compliance’ with law or regs that are not themselves inconsistent with some provision of GATT. 2. must be ‘necessary’ to secure such compliance. Mexico – Taxes on Soft Drinks • ‘laws and regulations’ ONLY include domestic laws, NOT international agreements, UNLESS international law is made domestic law via legislation. • measure can be said “to secure compliance” even if the measure cannot be guaranteed to achieve its results with absolute certainty.

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**Measure need only contribute to securing compliance. EC – Trademarks and Geographical Indications • ‘laws and regulations’ to be enforced must first be GATT consistent. US – Section 337 • ‘necessity’ in paragraph (d) is given similar meaning to that of (b). Korea – Various Measures • ‘necessity’ is a continuum, at one end is “indispensable” while at the other end is “making a contribution to”— • ‘necessity’ under paragraph (d) lies closer to indispensable. • ‘necessity’ also includes scope of restrictive effects. Article XX(d) ‘necessary’ requires balancing of factors • relative importance of common interests or values protected • extent to which measure contributes to securing compliance with law • extent to which compliance measure produces restrictive effects on international trade. Article XX(g): ‘measures relating to the conservation of exhaustible natural resources…’ • Three Tier Test 1. concerns to the conservation of exhaustible natural resources 2. relates to the conservation of exhaustible natural resources 3. be made effective in conjunction with restrictions on domestic production or consumption. US – Shrimp • ‘exhaustible natural resources’ includes living things that are capable of reproduction. **Preamble of WTO is ‘evolutionary’ means the term ‘exhaustible natural resources’ changes with time, i.e. based on modern internal conventions and declarations. • It was an even handed measure because US imposed fines on US ships for violating. • e.g. imposed restrictive measures on the domestic industry. Canada – Herring and Salmon • while a trade measure does not have to be necessary or essential to the conservation of exhaustible natural resources, it had to be primarily aimed at the conservation of an exhaustible natural resource to be considered as ‘relating to’ conversation with the meaning of Article XX(g). US – Gasoline • must be a ‘substantial relationship’ between the baseline establishment rules and the policy objective of preventing further deterioration of the level of air pollution. • ‘made in conjunction with..’ means the measures concerned impose restrictions, not just in respect of imported gasoline but also with respect to domestic gasoline. • ‘even handedness’ in imposition of restrictions on imported and domestic products. **Does not require imported and domestic products be treated equally, Other Paragraphs of Article XX • Article XX(a)• protection of public morals, member free to determine their morals, similar to determining level of public health. • Note: public morals exception under GATS Article XIV(a). • allows members to ban all kinds of products. • Article XX(e)• ‘relating to prison labour’ • not really important unless this can include child labour. • Article XX(f)• ‘imposed for’ the protection of national treasures… 7.2.4. The chapeau of Article XX of GATT 1994 TWO Teir Test 1. a measure must meet the requirements of one of the particular exceptions listed. 2. application of the measure must meet the requirements of the chapeau of Article XX. • the legal requirement imposed by the chapeau • that such measures are not applied in a manner which would constitute a means of arbitrary discrimination between countries where the same conditions prevail or a disguised restriction on international trade. Object and purpose of Chapeau of Article XX US – Gasoline • Chapeau addresses the manner in which the measure is applied

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• measures should not be so applied as to frustrate or defeat the legal obligations of the holder of the right under the substantive rules of the General Agreement. *to avoid that provisionally justified measures are applied in such a way as would constitute a misuse or an abuse of the exceptions of Article XX. • Balance between right of member to invoke an exception under Article XX AND the substantive rights of the other Members under GATT. • Must look at language • ‘arbitrary or unjustifiable discrim… • ‘a disguised restriction… ‘Arbitrary or unjustifiable discrimination between countries where the same conditions prevail’ US – Gasoline *don't discrimination between foreign and domestic production. • discrimination at issue in the chapeau of Article XX MUST nesscerialy be different from discrimination addressed in other provisions of GATT, such as Article I and III. • if so it would deprive the exceptions of meaning and would also confuse the question if inconsistency with the substantive rule existed. **discrimination is not prohibited per se, but rather arbitrary and unjustifiable discrimination. US• Shrimp: three elements must exist for ‘arbitrary…” 1. application must result in discrimination 2. discrimination must be arbitrary and unjustifiable in character. 3. discrimination must occur between countries where the same conditions prevail. Also, if regulatory program is inflexible and rigid, might also be discrimination. US – Gasoline: found Unjustifiable discrim. • US did not explore adequate means of mitigating the administratrive problems relied on as a justification for rejecting individual baselines for foreign refiners; and did not account for the cost imposed on such refiners. US – Shrimp: serious negotiations before measure is implemented is a factor in determining unjustificable discrimination. • PROBLEM: US negotiated seriously with some, but not with other Members that export shrimp to US. **Member REQUIRED to make serious efforts, in good faith, to negotiate a multilateral solution before resorting to unilateral measures. Brazil• Retreaded tyres • abuse of Article XX exceptions exists, contrary to the purpose of the chapeau, when the reasons given for discrimination ‘bear no rational connection to the objective falling within the purview of a paragraph of Article XX. *need to analysis ‘arbitrary or unjustifiable’ in light of the objective. *Whether discrimination is arbitrary or unjustifiable depends on the cause or rationale of the discrimination, NOT on the effects of the discrimination. ‘Disguised restriction on international trade’ US –Gasoline • ‘disguised restriction’ includes disguised discrimination in international trade. 7.2.5. Scope for Members to protect other societal values US – Shrimp • even though the appellate body shot down the measure as inconsistent with GATT, it noted that “members are free to adopt their own policies aimed at protecting the environment as long as, in so doing, they fulfill obligations and respect the rights of other Members under the WTO agreement.” 7.3. General Exceptions Under GATS (CB 652) • Article XIV of the GATS • Differences between GATS and GATT • In GATS: maintenance of public order, protection of safety and privacy, equitable and effective imposition or collection of direct taxes. FIRST CASE DEALING WITH Article XIV of GATS US – Gambling • previous decisions of Article XX of GATT regarding ‘necessary’ and requirements set out in Chapeax APPLY TO GATS.

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7.3.1. Two• tier Test under Article XIV of the GATS 1. determine if measure falls within the scope of one of the paragraphs of Article XIV. • requires there be a sufficient nexus between the measure and the interest protected. • THIS DEGREE of connection is specified in the language of the paragraphs. 2. does measure meet the requirements of the chapeau 7.3.2. Specific exceptions under Article XIV of the GATS • protection of public morals • maintenance of public order • protection of human, animal or plant life or health • the prevention of deceptive and fraudulent practices • the protection of the privacy of individuals • the protection of safety • the equitable or effective imposition or collection of direct taxes Article XIV(a): ‘measures necessary to protect public morals or to maintain public order’ TWO TEIR TEST 1. the policy objective pursued by the measure at issue is the protection of public morals or the maintenance of public order. 2. the measure is necessary to fulfil that policy objective. US – Gambling • members should be given some scope to define and apply for themselves the concepts of ‘public morals’ and ‘public order’ in their respective territories, according to their own systems and scales of values. • ‘public morals’ and ‘public order’ • Panel turns to Shorter Oxford English Dictionary ‘public morals’—standards of right and wrong conduct maintained by or on behalf of a community or nation. ‘public order’ may be invoked only where a genuine and sufficiently serious threat is posed to one of the fundamental interests of society. ‘necessary’ factors 1. importance of interests or values that the challenged measure is intended to protect. 2. extent to which the challenged measure contributes to the realization of the end pursued by that measure. 3. trade impact of the challenged measure. Regarding the second factor • court said US acts, at least to some extent, address the concerns pertaining to money laundering, organized crime, etc.. Regarding the third factor • a key element is “whether the United States has explored and exhausted reasonably available WTO• consistent alternatives to the US prohibition on the remote supply of gambling and betting services that would ensure the same level of protection. HOLD: measure not ‘necessary’ under Article XIV(a) GATS. FACTORS CT looked at • court looked at contribution of measure to the realization of the ends pursued by it; • the other factor is the restrictive impact of the measure on international commerce. THEN compare challenged measure with possible alternatives, the results should be considered in light of the importance of the interests at issue. ‘alternative measure’ • not ‘not reasonably avaliable’ where it is merely theoretical in nature OR where the measure imposes an undue burden on that Member, such as prohibitive cost or substantial technical difficulties. BURDEN OF PROOF • it is for the responding party to make a prima facie case that its measure is ‘necessary’ by putting forward evidence and arguments that enable a panel to assess the challenged measure in the light of relevant factors. • also point out why alternative measures are not viable. • complaining party can also present a WTO• consistent measure that the responding party will have to explain.

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HERE: US failed to explore and exhaust reasonably available WTO• consistent measures. Article XIV(c): ‘measures necessary to secure compliance with…’ THREE TIER TEST• to see if measure is provisionally justified 1. measure at issue is designed to secure compliance with national laws or regulations. 2. national laws and regulations are not inconsistent with the WTO agreement. 3. measure at issue is necessary to secure compliance with those national laws and regulations. US – Gambling • Panel looks at case law from Article XX(d) of GATT • measure does not have to be designed exclusively to secure compliance; it is sufficient that ‘securing compliance’ is part of the reason to put the measure into place. Other paragraphs of Article XIV of GATS • 7.3.3. The Chapeau of Article XIV of the GATS • chapeau requires that the application of the measure at issue does not constitute: • either ‘arbitrary or unjustifiable discrimination between countries where the same conditions prevail’ • or ‘a disguised restriction on trade services’ US – Gambling • case law from Article XX of GATT applies to GATS • in the course of examining evidence• • • the panel found the US had not prosecuted certain domestic remote suppliers of gambling services… • plus US allows horse racing• • • like conditions, so why only restrict online gambling. 7.4. Security Exceptions (CB 664) • exceptions for national and international security 7.4.1. Article XXI of the GATT 1994 • b. to prevent any Member from taking any action which it considers necessary for the protection of its essential security interests i. fissionable materials, ii. Traffic in arms, implements of war; iii. Taken in time of war or other emergency in international relations; c. to prevent any member from taking any action in pursuance of its obligations under the UN Charter for the maintenance of international peace and security. ***THERE ARE SIGNIFICANT STRUCTURAL AND INTERPRETATIVE DIFFERENCES BETWEEN ARTICLE XX AND ARTICLE XXI. Article XXI(a) and (b) of GATT 1994: national security • Article XXI(a) allows a Member to withhold information, that it would normally be required to supply when ‘it considers’ disclosure of that information ‘contrary to its essential security interests’. *Article XXI DOES NOT HAVE A CHAPEAU • while Article XXI gives broad discretion for such measures, there must be some form of judicial review. • Panels should see if measure is reasonable • At most a party can request a panel be set up; however, each party must decide if the measure is consistent with GATT XXI. • US – Helms• Burton Act • United States allowed nationals to sue over confiscated US property. • Challenged by European Communities • US did not participate saying that his matter was outside the scope of WTO law. • **This is not fundamentally a trade matter, therefore, not a WTO matter. Article XXI(c) of the GATT 1994: international peace and security • allows members to implement economic sanctions imposed by the United Nations. • e.g. allows WTO members to honor their commitments under the UN Charter requiring them to impose sanctions. • 7.4.2. Article XIV bis of the GATS • unlike Article XXI of GATT, provides for a notification requirement. 7.5 Economic Emergency Exceptions (CB 671) • • • SAFEGUARD MEASURES • allows members to adopt measures, otherwise WTO inconsistent, in situations where a surge in imports causes, or threatens to cause, serious injury to the domestic injury. “emergency” implies a narrower scope than Article XX GATT. • Example: China’s Accession Protocol• WTO members can use as safeguard mechanism to limit imports from China. *GATS does not currently provide for the possibility of safeguard measures.

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7.5.1. Article XIX of the GATT 1994 and the Agreement on Safeguards • both of these set out the rules by which Members may take safeguard measures. GATT XIX (1)(a)• • …any product being imported into the territory of that Member in such increased quantities and under such conditions as to cause OR threaten serious injury to domestic producers in that territory of like OR directly competitive products,…free…to suspend the obligation without modify[ing] concession. • “other” measures: VERs, VRAs, OMAs • voluntary export restraints • voluntary restraint arrangements • orderly marketing arrangements • Agreement on Safeguards clarifies the provisions of ARTICLE XIX and also provides for new rules. • Agreement on Safeguards sets out: 1. substantive requirements that must be met in order to apply a safeguard. 2. procedural requirements that must be met by a member applying a safeguard measure 3. characteristics of, and conditions relating to, a safeguard measure. Korea• Dairy • must comply with the provisions of BOTH agreement on Safeguards and Article XIX of GATT. • ‘unforseen developments’ are still required even though not mentioned in the Agreement on Safeguards. 7.5.2. Requirements for the use of safeguard measures • Article 2.1 of Agreement on Safeguards: …such product is being imported into its territory in such increased quantities, relative to domestic production, and causes or threatens to cause serious injury to the domestic industry that products like or directly competitive products. • Article XIX: still requires it be due to “unforeseen developments” Summary OF REQUIREMENTS under Article XIX • “increased imports” requirement (including ‘unforseen developments) • ‘serous injury’ requirement • ‘causation’ requirement ‘Increased Imports’ requirement • can be an absolute increase, i.e. increase by tones or units OR relative increase, i.e. increase in relation to domestic production. **So if domestic production goes down, imports increase relative to them even though amount is the same. QUESTIONS: how much, and over what time span, imports must increase. • US – Steel Safeguards • ‘increased imports’ requirement demands the presence of the following four elements: recent increase, sudden increase, sharp increase and significant increase. • Case by case basis. • ‘any increase’ is not sufficient. • investigation period should be the recent past. US – Fur Felt Hats • unforeseen developments’ are developments occurring after the negotiation of the relevant tariff concession which it would not be reasonable to expect that the negotiators of the country making the concession could and should have foreseen at the time when the concessions was negotiated. • change in fashion suddenly affected the competitive situation. Argentina – Preserved Peaches • increase in imports and the unforeseen developments must be two distinct elements. • must show unforeseen developments have resulted in increased imports for the specific products on which the safeguards measures are applied. FACTORS: unforeseen, which products are you looking at (i.e. broad or narrow category) and timeline (average data over specific time) ‘Serious Injury’ Requirement • Article 4.1 of the Agreement on Safeguards defines ‘serious injury’ as a ‘significant overall impairment in the position of a domestic industry. • must be greater than standard of ‘material injury’ of the anti• dumpling agreement and the SCM agreement. • Rationale: because safeguard measures are applied to ‘fair’ trade. • serous injury or threat thereof to domestic industry • 'domestic industry' 1. detemrine what are like or directly competive products (look to art. 3 GATT)

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2. what is the domestic industry quantity, argue 'major proportion' what percentage...simply state what percentage in a couple of sentences, comes from Article 19. 3. Causation • Article 4.1(c) ‘domestic industry’ 1. products at issue 2. number and representative nature of the producers of these products. • Factors for determining likeness: 1. physical characteristics of the products 2. their end• use 3. consumer habits and preferences regarding the products 4. customs classification on the products. US – Lamb • production line is not relevant as to whether products are like. • e.g. lambs and lamb meat. **’domestic industry’ 1. the totality of the domestic producers 2. at least a major proportion thereof Article 4.2(a) factors 1. rate and amount of increase in imports in absolute and relative terms. 2. share of the domestic market taken by increased imports 3. changes in the level of sales, production, productivity, profit and losses, and employment. • includes any other factor having bearing on situation. • threat of serious injury = clearly imminent. US – Lambs • clearly imminent implies the anticipated ‘serous injury’ is on the verge of occurring. ‘Causation’ requirement • Article 4.2(b) requires the existence of the causal link between increased imports of the product concerned and serious injury or a threat thereof. • Must also identify any injury caused by factors other than the increased imports and the non• attribution of this injury to these imports. US – Lamb • where SEVERAL FACTORS are causing injury ‘at the same time’, a final determination about the injurious effects caused by increased imports can only be made if the injurious effects caused by all the different causal factors are distinguished and separated. **Required to separate and distinguish the injurious effects of ‘other factors’ from the injurious effects of the increased imports. 7.5.3. Domestic Procedures and Notification and Consultation Obligations • Agreement on Safeguards sets out procedural requirements which domestic authorities must meet. • Article 3 of Agreement on Safeguards: can only apply safeguards following an investigation by the competent authorities that member. • competent authority must publish findings of fact and law. • must notify WTO Committee on Safeguard matters and consult with other members. 7.5.4 Characteristics of Safeguard Measures (CB 685) • safeguard measures are measures, otherwise inconsistent with Articles II or XI, which are justified under the economic emergency exception in Article XIX and the Agreement on Safeguards. *PURPOSE of safeguard: give ‘breathing space’ to a domestic industry to adapt itself to the new market situation by temporarily restricting imports. • Typically Safeguards • customs duties above the binding; or • quantitative restrictions Agreement on Safeguards requirements 1. duration of the safeguard measures 2. non• discriminatory application of safeguard measures 3. extent of safeguard measures 4. compensation of affected exporting Members 5. provisional safeguard measures.

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Duration of Safeguard Measures • are by there nature temporary • initial period of application must not exceed four years.. 7.5.4. Characteristics of Safeguard Measures • Safeguard measures are those inconsistent with Articles II or XI GATT which are justified under economic emergency exception in Article XIX GATT and Agree on Safeguards. • typically take 2 forms 1. customs duties above the binding (inconsistent with Aritcle II:1 GATT) 2. quantitative restrictions (inconsistent with Article XI GATT) *but not limited to these Article 5.1 Agree Safe, members shall apply safeguard measures only to the extent necessary to prevent or remedy serious injury or facilitate adjustment…members should choose measures more suituable for these objectives. *Agreement on Safeguards sets out: • Duration of safeguards • non• discriminatory application of safeguard measures • extent of safeguard measures • compensation of affected exporting Members; and • provisional safeguard measures Duration of Safeguard Measures • they are by nature temporary measures • Article 7.1 agree safe, can only be applied for such a period as necessary to prevent or remedy serious injury. • requries measures review after 3 years, after four years measure can only be kept if still necessary to prevent or remedy serious domestic injury and evidence of domestic industry adjusting. **Once measure is over with, product CANNOT subjected to another such measure for equal period of duration of measure. • cannot exceed 8 yearss, Non• discriminatory Application of Safeguard Measures • Article 2.2 Agree Safe, measures shall be applied to a product being imported irrespective of its source. • Must still adhere to MFN, unfair?? • computers from Member A cause serious injury to Member B domestic industry, Member B can apply safeguards and restriction number of imports BUT must apply to all Importers of laptops, not just to Member A. • SELECTIVE application of safeguard is in principle prohibited. • EXCEPTIONS • Aritcle 5.2(b) Agree Safe, allows selective application taken in form of quotas allocated among supplying counties ONLY IF clear demonstration to committee that imports from ceratin members have increased in disproportionate percentage to total increase. • Article 9.1 Agree Safe, shall no be applied to developing country as long as it share of imports of the product does not exceed 3% collectively, nor more than 9% of total imports of products. Safeguard Measures Commensurate with The Extent of Necessity • Article 5.1 Agree Safe, safeguard will apply to the extent necessary to prevent or remdy serious injury and to facitlate adjustment. • measures may only be applied to the extent that they address serious injury attributable to increased imports. Compensation of Affected Exporting Members • safeguard is a measure that restricts free trade from other Members. • Article 8.1 Agree Safe, Member imposing safeguard measure must endeavour to maintain substantially equivalent level of concessions, affected members may agreeon any adequate means of trade compensation for adverse effects of measure. • Article 12.3 Agree SAFe, mets adequate consulation procedures. Provisonal Safeguards Measures • Aritcle 6 Agree Safe, allows provisional safeguard measures in ceratin ‘critical circumstances’, i.e. where it would be difficult to repair. • Provisional measures can only be applied for 200 days. 7.5.5 Other Safeguard Measures • in addition to Safeguard regime in Article XIX GATT and Agree Safe, WTO has other safeguard measures.

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Speical Safeguards under the Agreement on Agriculture • Agree on Agricultural provdes special safeguards • Article 5 Agee Agricultural, can impose special safeguard in any year when agricultural imports exceed a specific trigger. China’s Accession Protocol • when products imported from China cause market disruption to domestic producers, WTO members may request consultations with China. 7.6. Regional Integration Exceptions (CB 695)—regional trade agreements good/bad • Arguements for and aganist RTAs and PTAs • comparative advantage is affected • might they be useful beside for economic purposes • social lens: e.g. European Union• • protect against another war. GOOD • political lens: might be good, more integration, EU. • economic lens: might only benefit a few BAD • threatens multi• lateral trading system. • distorts trade flows• • • • allow members to adopte measures, otherwise, WTO inconsistent, taken to pursue regional economic integration. • Article XXIV GATT and Article V GATS • Further interpretation of Article XXIV GATT• • • ‘Understanding on Aritcle XXIV’ • key attributes of Regional Trade Agreements • parties in such agreements offer each other more favourable treatment in trade matters then they offer other trading partners. • Inconsistent with MFN Treatment, yet allowed. • Purpose, helps spark regional trade liberilastion that should help global trade. • true? End up creating trade? • helps reduce chance of war—look at EU. • helps involve developing countries in WTO • Preamble of Articdle XXIV: purpose of regional trade agreements should be to facilitate trade between the constituent territories and not to raise barriers to the trade of other members;…should avoid adverse effects on trade of other members. **”spaghetti bowl” 7.6.1. Article XXIV GATT • Chapeau Article XXIV:5 GATT: “provisions of this agreement shall not prevent…the formation of a customs union or free• trade area of interim agreement necessary for free• trade area. Turkey – Textiles • XXIV:5 GATT, makes clear that under certain conditions, ok to adopt WTO inconsistent measure. • TO INOVKE Article XXIV:5 GATT defense two requirements 1. must demonstrate measure at issue is introduce upon formation of customs union/free trade area the FULLY MEETS requirements of Article XXIV:8(a), 5(a). 2. customs union would not happen unless inconsistent was introduced. Customs Unions • DEFINED in Article XXIV:8(a) GATT i. duties and othe restrictive regulations are eliminated with respect to substantially all the trade between the constituent territories of the union or at least all the products originating in such territories, and ii. …substantially the same duties and othe regulations of commerce are applied by each of the members of the union to the trade of territories not included in union. *i. requires ‘sustantially all’ but not ALL. • Flexibility here but not much. • MUST also meet the provisions of ARitcle XXIV:5(a) GATT • duties or regulations imposed on members NOT a party to RTA SHALL NOT on the whole be higher or more restrictive than the general incidence of duties and regs of commerce applicable prior to formation of such union. • i.e. RTA countries must continue duties and regs not higher than what was in place BEFORE RTA• • • member RTA get lower. Turkey• textiles • Indian sued Turkey • new agreement between Turkey and EC, Indian claims less access caused by new agreement. • Article 11 and 13 are implicated.

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• Turkey says Article 24(5) and (8) • what is required to form a customs union HOLD: Turkey had other ways to regulate trade with India Free Trade Areas • Article XXIV GATT allows inconsistent measures • if in formation of free trade area the meets req. of Article XXIV:8(b) and Aritcle XXIV:5(b). and • if would be free trade area would be impossible without inconsistent measure. • DEFEINED in Article XXIV:8(b) GATT, two or more customs territories in which duties or regs are eliminated on SUBANTIALLY ALL THE TRADE in territories regarding products. Interim Agreements • inconsistent measures may be justified if taken in context of Interim agreements leading to establishment of customs unions and free trade areas. • free trade areas are not created over night, might require interim measures. Regional Trade Agreements and Developing Country Members • ‘Enabling Clause’ notwithstanding Article 1 GATT, member may accord differential and more favourable treatment to developing countires, without according such treatment to other Members. • ALSO apply to Regional Trade Agreements, and developing countries in or out of such RTAs Prodcedural Issues 7.6.2. Article V GATS • ‘Economic Integraiton’, counter part to Aritcle XXIV GATT, deals with services. • same requirements: 1. ok’s inconsistent measures if part of union or free trade area. 2. inconsistent measures necessary in order to form union or free trade area. • internal mechanism—must eliminate substantially all restriction internally • Article V:1(a), V:1(b) • must treat others outside the same. • cannot raise for others outside agreement higher than before agreement • Article V:4 • Procedural matters • Article V:5 7.7. Balance of Payment Exceptions • exceptions set out in Article XII and XVII:B GATT • allows inconsistent measures to safeguard their external financial position and to protect their balance of payments 7.7.1. Articles XII and XVII:B GATT • safeguard financial position, may restrict quantity or value of merchandise permited to be imported, subject to provisons… 7.8. Economic Development Exceptions • Preamble WTO Agreement “need for positive efforst designed to ensure that developing countries…secure a share in the growth in international trade commensurate with the needs of their economic development. • 6 types of S&D provisions to help economic development 1. provisons aimed at increasing the trade opportunities of developing country Members; 2. provisions under which WTO developed country Members should safeguard the interests of developing country Members 3. flexibility of commitments, of action, and use of policy instruments; 4. transitional time periods 5. technical assistance; and 6. provisions relating to least• developed country Members. Developing Countries in WTO • may shut off products from outside in order to develop industries. • if you do get preferential treatment because you self declared. • is this a good or bad idea...Article XVIII• • • generalized system of preferences. • can treat all developing countries the same? • EC • Tariff Preferences • enabling clause grants an exception• • • what is discriminatory? • ARGUE what is discriminatory? come to a conclusion. • Enabling Clause and UR agreements

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7.8.1. Infant Industry Protection Exception—Article XVIII GATT • used to protection infant industries against import competition. • Article XVIII GATT allows inconsistent measures to protect infant industries against import competition. • Article XVIII:2• • • governmental assistance to Economic Development’ • Aritcle XVIII:4 GATT, developing country will be free to deviate temporarily. 7.8.2. Generalised System of Preferences Exception • ‘Enabling Clause’ paragraph 1 • notwithstanding the provisions of Article I, members may accord differential treatment and more favourable treatment to developing countries, without according such treatment to other Members. Preferential Tariff Treatment for Developing Countries under Enabling Clause • Paragraph 2(a) Enabling Clause, preferential tariff treatment accorded by developed members to products originating from developing countries. 7.9. Summary (CB 731) • Trade liberlisation and its rules on non• discrimination and market access often conflict with other important societal values and interest. • 6 main categories of exceptions ‘general exceptions’ Article XX of GATT, Article XIV of GATS ‘security exceptions’ of Article XXI of GATT, Article XIV bis of GATS ‘economic emergency exceptions; ‘regional integration exceptions’ ‘balance• of• payments exceptions’ ‘economic development except

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Chapter 8• Towards Harmonization of national regulation *THESE ARE OTHER NON• TARIFF BARRIERS! 8.1. Introduction • some ‘non• tariff’ barriers have become more problematic to international trade than tariffs and quotas. *Focus is on diminishing the negative effects on ‘other non• tariff barriers’ by increasing their transparency, ensuring their fair and non• discriminatory application and reducing unnecessary procedural delays and complexities. • rely on standards set by other (non• WTO) international bodies as a basis for their harmonization obligations. THREE 1. TRIPS: lays down mandatory minimum standards of intellectual property protection and enforcement, based on pre• existing international conventions. 2. SPS Agreement and TBT Agreement DO NOT LAY DOWN MIN. STANDARDS, they simply encourage members to harmonize measures falling under the scope of application. • these agreements venture deeper into the regulatory affairs of members. 8.2 TRIPS Agreement • Agreement on Trade• Related Aspects of Intellectual Property Rights. • imposes on Members the obligation to ensure a minimum level of protection and enforcement of IP Rights in their territories. 8.2.1. The Origins and Objectives of the TRIPS Agreement Origins of the TRIPS Agreement • Intellectual property broadly refers to legal rights that result from intellectual activity. • IP rights confer only negative rights, right to exclude • Developing countries first complained because they were not included in the process but later realized that it is better to have multilateral agreements RATHER than getting pressured into bilateral agreements. Objectives and Principles of the TRIPS Agreement • objective of TRIPS: to reduce distortions and impediments to international trade…to promote effective and adequate protection of intellectual property rights and to ensure that measures and procedures to enforce IP rights do not themselves become barriers. **Lack of adequate protection of IP Rights restrict trade. • however, it can be used to prevent importation and protect local producers. **Balancing act between people with IP rights and the Public. • balancing of different policy goals. • Article 7: Objectives • protection of IP rights should contribute to the promotion of innovation and dissemination of technology, to the mutual advantage of producers…in a manner conducive to social and economic welfare, and to a balance of rights and obligations. • Paragraph 2 of Article 8 permits members to take appropriate measures to counteract abuse of IP rights by holders. 8.2.2. Scope of Application of the TRIPS Agreement • substantive and temporal scopes of application Substantive Scope of Application of TRIPS • Article 1.3 requires Members to accord the treatment provided for in to Nationals of other Members. • “Naturals” are those natural or legal persons that would meet the criteria for eligibility for protection provided for several conventions. • TRIPS only covers IP that falls within certain sections, IP such as: *Copyright and related rights; *Trademarks; *Geographical indications; *Industrial design; *Patents; *Layout• designs of integrated circuits; and *Protection of undisclosed information. • • • including those not mentioned that are “subject to” sections 1 to 7. • US – Section 211 • Article 15 and 16 do not prohibit the US from defining who the owner of a tradename will be.

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Temporal Scope of Application of the TRIPS Agreement • Article 70 TRIPS deals with protection of existing subject matter • Article 70.1: Agreement DOES NOT APPLY TO OBLIGATIONS IN RESPECT OF ACTS WHICH OCCURRED BEFORE AGREEMENT. Canada – Patent Term • must be a limit to Article 70.1, if not Canada would be almost excluded from TRIPS obligations. 8.2.3. General Provisions and Basic Principles of the TRIPS Agreement • TRIPS lays down minimum level of harmonized IP protection. • obliges member to take min level, but members are free to provided more protection. • Article 1, members are free to choose how to comply with this minimum level of protection. *Relationship between TRIPS and WIPO conventions *national treatment obligation * most• favoured nation treatment obligation; and *issue of exhaustion of IP rights; Relationship between TRIPS and WIPO Conventions• Article 2 TRIPS • TRIPS build upon the standards developed by WIPO and embodied in their conventions. • obligations of TRIPS must be read in conjunction with other WIPO conventiosn. • TRIPS Goes Further: it supplements and updates the rules of the relevant WIPO conventions, and provides new rules in some areas. *Article 2 of TRIPS requires compliance with certain provisions of other agreements. • THEREFORE, even WTO members who are NOT Contracting members of other agreements are STILL OBLIGATED TO COMPLY. *Article 2 also contains a non• derogation clause, seeking to ensure Members DO NOT apply TRIPS obligations that results in violations. Scope – look at part 2 of areemgent; 1.3 “members sahall acoord treatment to the NATIONALS of other members “ no lnger to the goods, rights not directly to the roduct, bc its an intangible right, so a national has the right. National Treatment Obligation—Article 3 TRIPS • similar to GATT and GATS, however need to take into account the intangible nature of IP rights. • Protection includes “matters affecting availability, acquisition, scope, maintenance and enforcement of IP rights as well as those affecting use of IP rights specifically addressed in this Agreement. • IP rights are intangible rights, and attach to IP right holders, rather than to the product or service. National Treatment Obligation—Article 3 TRIPS • deals with nationals• • • • similar to GATT and GATS, however need to take into account the intangible nature of IP rights. • e.g. registration of IP, enforcement of IP, etc. US – Section 211 Appropriations Act • national treatment obligation is a fundamental principle underlying TRIPS. • Article III:4 GATT and Article 3.1 TRIPS are similar enough so that GATT case law be “useful in interpreting the national treatment obligation.” HOLD: violation of national treatment obligation under TRIPS because foreigners may have to jump through an extra hurdle. EC – Trademarks and Geographical Indications • identified two elements that must be satisfied to establish an inconsistency with national treatment under Article 3.1: 1. the measure at issue must apply with regard to protection of intellectual property; and 2. the nationals of other Members must be accorded ‘less favourable’ treatment than the Members’s own nationals. • need to keep in mind any national treatment obligation from pre• existing intellectual property conventions. • also have de jure and de factor discrim. HOLD: reciprocity requirement of EC regulation at issue modified the effective equality of the opportunities to obtain protection• • • creates an ‘extra hurdle.’ • even though EC regulation provided formally identical treatment to nationals of other Members and to EC own nationals was not sufficient to demonstrate there is not violation.

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• ‘nationals” must be interpreted in light of purpose of TRIPS, cannot simply call everyone nationals and accord different treatment between nationals. • scope of national treatment obligation is also subject to exceptions listed in TRIPS, specific exceptions in Articles 3.1, 3.2, WTO conventions listed in TRIPS, etc… The Most• Favoured Treatment Obligation• • • Article 4 • requires that any advantage or immunity with regard to IP protection granted by a Member to nationals of any other country be accorded immediately and unconditionally to nationals of all other members. • applies with respect to nationals as opposed to ‘like products’ or ‘like services’ *NONE of the IP Conventions provides for an MFN treatment obligation. TRIPS introduces a NEW obligation with respect to IP protection. The Most• Favoured Treatment Obligation• • • Article 4 • requires that any advantage or immunity with regard to IP protection granted by a Member to nationals of any other country be accorded immediately and unconditionally to nationals of all other members. US – Section 211 Appropriations Act • Noted the importance of extending the MFN obligation to TRIPS• • • it has long be the cornerstones of the World Trading System. • Similar to MFN in GATT, it is subject to exceptions. • Advantages granted by Rome Convention and Berne Convention are excluded from the obligation of MFN treatment. • MOST IMPORTANT EXCEPTION, Article 4(d) TRIPS • advantages deriving from international agreements ‘related to the protection of intellectual property’ which predate the entry into force of the WTO agreement. • however, cannot constitute an arbitrary or unjustifiable discrimination against nationals of other Members. Exhaustion of IP Rights (CB 760) • In order to balance the rights of the IP holder with the interests of the market, the doctrine of exhaustion of rights is applied to determine when IP right holder’s right to control the product ends. • 3 APPROACHES TO EXHAUSTION 1. National exhaustion of rights: lawful sale of a product exhausts IP rights to control the resale of the product only on the national market. RETAINS rights in other countries. 2. Regional exhaustion of rights: lawful sale in a country that is a party to a regional agreement exhausts IP rights to control resale in other parties to the regional agreement. 3. International exhaustion of rights: lawfully sold, whether on the domestic market or on a foreign market, the IP rights to control the resale of the product are exhausted both domestically and internationally. *Importance of International exhaustion: OK to import and resell a product without the consent of the IP rights holder, IF that product was legally bought on the market of the exporting country. • ALLOWS developing countries to buy products subject to IP rights when they are cheapest and resell them in domestic markets. • allocation of products at the lowest prices. • Members are free to choose exhaustion rights, subject to Most Favoured Nation and Nation treatment. 8.2.4. Substantive Protection of Intellectual Property Rights Copyright and related Rights • Section 1 of Part II TRIPS • incorporates and supplements the relevant provisions of the Berne Convention. • “Copyright protection shall extend to expressions and not to ideas, procedures, methods of operation or mathematical concepts as such.” • TRIPS adds to Berne, protection for computer programs and compilations of data and rights of performers and broadcasters. **EVERY party is free to determine the level of originality or artistic creativity required for the work to be subject to copyright protection. • Article 7.1 Berne Convention incorporated by reference in TRIPS Agreement, min. term of protection is the life of the author plus fifty years after death. US – Section 110(5) Copyright Act • Article 13 of TRIPS Agreement sets out three cumulative requirements for limitations and exceptions to exclusive rights. 1. be confined to certain special cases; 2. not conflict with a normal exploitation of the work; and

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3. not unreasonably prejudice the legitimate interests of the right holder. FACTS: European Communities were complaining about the “business exemption” and ‘homestyle exemption’ of section 110(5) of US Copyright Act. • permitted the playing of radio and television music in pubic places such as bars, shops and restaurants, without paying a royalty fee. • US argued that both exemptions meet the conditions of Article 13 TRIPS. HOLD: “business exemption” VIOLATED Article 13 because it did not constitute a “certain special case” because covered a majority of establishments. • “homestyle exemption”—use of “homestyle equipment” to play music broadcast OK. Trademarks • Trademarks are marks used to distinguish one’s goods and services by communicating information about their source. • Section 2 incorporates rights of trademark owners set out in Paris Convention into TRIPS. • Article 15.1 embodies the definition of what can be a trademark. • SETS BASELINE OF TRADEMARK of what is capable of registration. • Article 16—transparency. Article 16.1 limited to the right to use trademark in course of trade EC – Trademarks and Geographical Indications • exception must be limited; and • exception must satisfy the provision that ‘such exceptions take account of the legitimate interests of the owner of the trademark and of the third parties. HOLD: EC regulation was found to be limited; therefore only created a narrow exception a mandated by Article 17 TRIPS. • Article 17 only requires that exceptions “take account’ of the legitimate interests of the owner of the trademark. Geographical Indications • Geographical indications are place names that are used to identify the products that originate in these places and have the characteristics associated with that place. • Article 22.1 TRIPS • indications which identify a good as originating in the territory of a member, where a given quality, reputation or other characteristics of the good is essentially attributable to its geographical origin. • NOT required to be the place name itself; but may also be a name or symbol that is understood by the public as identifying a specific geographical origin. • not the same as indication of origin such as “made in Taiwan” • Article 22.2 TRIPS sets out the standard level of GI protection to be accorded to all products. • prevents misuse of GIs so as not to mislead the public or constitute unfair competition. • requires that members provide “legal means” to prevent: 1. use of any means in designation of the good that misleads the public as to the geographical origin of the goods; and 2. use that constitutes unfair competition under Article 10 bis of the Paris Convention. • to prevent misleading the public, must show that it is an imitation, e.g. “Roquefort• type” cheese, “Belgium• style” type ale. • Article 23 TRIPS: higher level of GI protection for wines and spirits. • Members must provide interested parties with legal means to prevent the use o f a GI identifying a wine or a spirit for a wine or a spirit not originating in the place indicated by the GI. • Doha Rounds: deep division remains, Some member advocate the extension of the higher level of protection of Article 23 to other products as a way to differentiate their products more effectively from competition. • OTHER see protection would restrict legitimate marketing practices. • Article 23.4 TRIPS, cannot diminish the protection of geographical indications that existed prior to the date of entry into force of WTO, even if the protection remains above the standards mandated by TRIPS. Patents • Section 5 of Part II of the TRIPS Article 27.1 TRIPS: patentable subject matter, new, involve inventive step, industrial application • shall be available and patent right enjoyable without discrimination as to the place of invention, the field of technology and whether products are imported or locally produced. • THREE Requirements 1. new

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2. inventive step 3. capable of industrial application. • Last sentence prohibits discrimination based on: • place of invention • field of technology • whether products are imported or locally produced. • Article 27.2 and 27.3: members allowed to exclude certain inventions from patentability. • linked to right of patentee to commercial exploit the invention. EXCEPTIONS • Article 30 TRIPS: Members may provided “limited exceptions” to the exclusive rights conferred by a patent, so long as exceptions do not unreasonably conflict with the normal exploitation of the patent & do not unreasonably prejudice the legitimate interests of the patent owner. • 3 cumulative requirements for exception to apply 1. exception must be “limited” 2. exception must not ‘unreasonably conflict with a normal exploitation of the patent; and 3. exception must not ‘unreasonably prejudice the legitimate interests of the patent owner, taking account of the legitimate interests of third parties. Canada – Pharmaceutical Patents: ‘limited exception’ is one which makes only a small diminution of the rights in question. HOLD: stockpiling pending expiry of patent was a substantial curtailment, not a “limited exception.” Canada Pharms• Reg Rev Exception Art 28 – articles conferred on patnet holders under TRIPS Art 30 – exceptions WAS a limited exception accord to Canada and panel bc only talking about a mts necessary for review testing. Was there unreasonable conflict tiwh the normal exploitation of the patenet? Problem focusesd on normal – panel decided normal exploitation not hindered bc tking into consideration that already limteid doesn’t effect the norma exploitation of the patents; sometimes almost a foregone conclusion when IS limitd would lamost hve to go overboard to conflict with normal exploitation. Not unreasonably prejudice othe legit interst of a patent holder taking into acct the legi itnerst of thirhd parites. Start with elgit interst of patent holder – if you’re the EC say legit interests are only the FULLY enjoyment of patent rights during ht entire time of the patent. Every thing art 28 gives you. Disregard the legit intest of 3rd parties bc under that view is nothing. Any exception to 28 constitutes prejeuctice, so then move to what is unreasonable; ec arues any unreasonable Ec also tired to limit who were 3rd parties – only competitors But ecs arguments didn’t go over wll with panel Started out defining legit interests – mdae cery clear that legit interests are not the samea s legal interests; if were to say legit means legal would make 28 meaningless, bc if legit interests under 31 same as legal under 28 one falls out or becomes redundant. Rather contains normative claim – interst justificable by normative interests or policy norms. • Article 31 exception for ‘other use’ of a patent without authorization. • KNOW as compulsory license • examples listed in Article 31: • public non• commercial use; • national emergency; remedying of anticompetitive practices; • dependent patents. • REQUIRES case by case basis, cannot implicate broad categories of patents.

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• Member are allowed to determine what a national emergency is. • compulsory licenses subject to several criteria: Article 31 paragraphs c• j. PROBLEM with paragraph (f): exception if ‘predominantly for the supply of the domestic market;’ HOWEVER some countries lack sufficient manufacturing capacity in pharmaceuticals to enable them to produce the necessary generic medicines for their domestic market. • Article 31(f) exception was made permanent, look at bis. 8.2.5. Enforcement of Intellectual Property Rights • IP protection is also heavily dependent on the procedures enforcing obligations. • TRIPS provides rules on enforcement of IP rights, which WIPO conventions lacked. • consist of several sections *general obligations * civil and administrative procedures and remedies * provisional measures *special requirements related to border measures *criminal procedures General Obligations • Article 41 TRIPS: requires Members to ensure that the enforcement procedures specified in Part III are available under law. Article 41.1: enforcement procedures must be applied in a way that avoids creating barriers to legitimate trade. Article 41.2 to 41.4: normal due process requirements. Article 41.5 does not oblige members to create a separate judicial system. Civil and Administrative Procedures and Remedies • usual way of enforcing IP rights is through Civil procedures. • Article 42: detailed requirements for judicial procedures US – Section 211 Appropriations Act • right holder under Section 211(a)(2) is not entitled to effective procedures as the court in ab initio not permitted to recognize its assertion of rights if the conditions of that section are not met. • i.e. right holder is prevented from having a chance to substantiate its claim. • Article 42 REQUIRES access to courts. Provisional Measures and Border Measures • Articles 50, 51• 60 contain rules with regard to provisional measures and border measures respectively. • Article 50 requires courts to have authority to order ‘prompt and effective provisional measures’ to prevent an infringement and to preserve relevant evidence. • Article 51: deals with measures applied at the border in order to prevent IP infringements. • can be applied when an owner has a valid ground for suspecting that importation of counterfeit trademark may take place. Criminal Procedures • Article 61 requires criminal procedures and penalties to be provided at least in cases of wiful trademark counterfeiting….. 8.2.6. Acquisition and Maintenance of Intellectual Property Rights • Article 62.1: members may require compliance with reasonable procedures and formalities as a condition for the acquisition or maintenance of the IP rights provided for in the TRIPS agreement. 8.2.7. Institutional and Procedural Provisions of the TRIPS Agreement *Transparency requirement—Article 63 *rules on dispute settlement under TRIPS• • • Article 64 *task of the Council for TRIPS, including with regard to review and amendment of TRIPS• • • • Articles 68 and 71. *International cooperation between Members to prevent trade in infringing goods• • • Article 69. *prohibition on reservations to the provisions of TRIPS without consent of other Members • • • • Article 72. Transparency • Article 63: transparency obligations: publish or make publicly available; notify Council of Trips of any laws and regulations. • required to publish decisions. India – Patents: had not been publishing administrative rulings. Dispute Settlement • Article 64.1 brings disputes under DSU.

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• RULES of Articles XXII and XXIII of the GATT, as elaborated and applied by the DSU, apply to the settlement of disputes under the agreement. • CONTROVERSY: because DSU allows three types of complaints: violation complaints, non• violation complaints and situation cmpliants. • developing countries strongly oppose non• violation and situation complaints because will allow STRONG WTO members to bring complaints to induce public policy changes. • HENCE, 5 year window provided for no such complaints to be brought, NOW members have simply agreement not to bring such complaints until an agreement is reached. Council for TRIPS • Article 68 establishes a council for TRIPS. • monitors operation of TRIPS; provides possibility for Members to consult on matters relating to trade• related aspects of IP rights; 8.2.8. Special Provisions for developing country Members ***Implementation of the obligations under TRIPS requires regulatory capacity and infrastructure for enforcement. • TRIPS provides transitional periods for implementation of obligations and technical cooperation. Transitional Periods • Article 65.1 provides one• year implementation period for all Members from the entry into force of the WTO Agreement except for Article 2 (IP conventions), 3 (national treatment) and 4 (MFN treatment). • Allowed for delay of up to 4 years except for 2• 4. • Some still get extensions, Council for TRIPS is authorized to accord extensions of this period upon a duly• motivated request from a least• developed country Member. • certain pharmaceutical patents do not get implementation under 2016. NOW: all provisions (except Article 3,4,5) extended until July 2013 OR until the member involved graduates from least• developed country status. Technical Cooperation • Article 67 TRIPS obliges developed country members to provide technical and financial assistance to developing and least developed country members upon request and on mutually agreed terms and conditions. • Article 66.2, developed country members are also obliged to provide incentives to their enterprises and institutions to promote the transfer of technology to least• developed country Members so that they can create a sound and viable technological base. **LITTLE HAS BEEN DONE IN THIS REGARD. 8.3. The TBT Agreement

• relationship • First look at TBT, then look at GATT • look into article 1.4 SPS, and Article 1.4 TBT • mutual exclusive * start with SPS, if yes go to GATT • SPS, no, go to TBT then regardless go to GATT. 1. SPS v. TBT= 2. look at purpose • the divergence in the regulatory requirements imposed in different countries increases the cost and difficulty of gaining market access for exporters. **Specific characteristics or manner of production of each country • e.g. standards to protect health, environment, deceptive practices, quality, etc. • these are called Technical barriers on trade • tension between legitimate objectives and technical barriers v. protectionists effects. • STANDARDS for product safety might be good but it may also have a protectionist measure. • TBT applies to general category of technical barriers to trade. **These rules go significantly beyond the GATT obligations. IMPOSE certain international disciplines on national regulation regarding products, their characteristics and production. 8.3.1. Scope of application of the TBT Agreement • subatnative scope fo applicaiton • technical regulation Annex 1.1 • standard Annex 1.2 • conformity assessment procedures 1.3

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Technical regulation Document which lays down product characteristics or their related processes and production methods, including the applicable administrative provisions, with which compliance is mandatory. It may also include or deal exclusively with terminology, symbols, packaging, marking or labelling requirements as they apply to a product, process or production method. • non• product related Standard Document approved by a recognized body, that provides, for common and repeated use, rules, guidelines or characteristics for products or related processes and production methods, with which compliance is not mandatory. It may also include or deal exclusively with terminology, symbols, packaging, marking or labelling requirements as they apply to a product, process or production method. Conformity assessment procedures Any procedure used, directly or indirectly, to determine that relevant requirements in technical regulations or standards are fulfilled. Substantive Scope of Application • rules of TBT apply to 1. technical regulations 2. standards; and 3. conformity assessment procedures. • applies to technical regulations • technical regulation: lays down product characteristic s or their related processes and production methods, including administrative provisions, with which compliance is mandatory. • e.g. regulates terminology, symbols, packaging, marking or labeling. ***law requiring batteries to be rechargeable OR requiring wine to be sold in green bottles. • “standard” approved by recognized body, rules, guidelines or characteristics for products with which compliance is not mandatory. • Voluntary standards are still subject to TBT because non• adherence would, in practice, exclude their products from the market. • “conformity assessment” procedure used, directly or indirectly, to determine that relevant requirements in technical regulations or standards are fulfilled. • TBT applies to Products AND processes and production methods. • DEBATE whether TBT applies to non• product related processes and production methods (NPR• PPMs). • e.g. products produced by non• enviromentally sources. EC – Abestos (determination if measure falls under TBT) 1. must lay down, i.e. set forth, stipulate• ‘product characteristics. ‘characteristics’ include qualities, attributes, features, or other distinguishing mark of a product. 2. ‘technical regulation’ must regulate the characteristics of products in a binding or compulsory fashion. • effect of prescribing or imposing one or more ‘characteristics’ – ‘features’, ‘qualities’, ‘attributes’ or other distinguishing mark. 3. ‘technical regulation’ must ‘be applicable to an identifiable product, or group of products, otherwise enforcement of regulation will be impossible. HOLD: measure banning certain asbestos fibres is a technical regulation under TBT. • lays down characteristics for all products, has applicable administrative provisions, mandatory. EC – Sardines: test for determining whether it is a technical measure 1. measure must apply to an identifiable product or group of products; 2. measure must lay down product characteristics; and 3. compliance with the product characteristics laid down in the measure must be mandatory. • Prohibition against labeling allows products to be identified. EC – Trademarks and Geographical Indications—applying 3 part test 1. labeling requirement: condition that the country of origin must be indicated clearly on the product label. 2. inspection structures: panel found they fell under ‘conformity assessment’ procedures therefore could NOT fall under technical barriers. Personal Scope of application

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• TBT extends beyond central governments—to “other bodies” responsible for the establishment of technical regulations, standards, or execution of conformity assessment procedures. *include any organ subject to the ‘control of such a government in respect of the activity in question.’ • Overlaps with other agreements, some of which preempt application of TBT. Temporal Scope of Application • Applies to technical regulations adopted prior to TBT adoption (1 January 1995) that are STILL in force. 8.3.2 Relationship with other WTO agreements The SPS agreement and the Agreement on Government Procurement • TBT agreement is limited in scope by the SPS agreement and Agreement on Government Procurement. • If falls under either of these two it cannot fall under TBT. • Keep in mind Gov’t Procurement is a Plurailateral agreement• • • i.e. does not apply to most members. GATT 1994 • • not mutually exclusive • if a measure is TBT consistent, must also examine under GATT. ***General Interpretative Note to Annex 1a of WTO • in case of conflict between a provision of the GATT and a provision of another multilateral agreement on trade in goods, THE LATTER WILL PREVAIL TO THE EXTENT OF THE CONFLICT. 8.3.3. Basic substantive provisions of the TBT Agreement • SIMILAR Principles: most• favored nations treatment obligation, national treatment obligation and the obligation to refrain from creating unnecessary obstacles to international trade. • TBT agreement furthers the objectives of the GATT but through a different legal regimes. *MFN Treatment *National treatment; *the necessity requirement; and *the use of international standards. • there is NO equivalent to Article XX GATT, therefore, must be different than TBT. • however, use article I, and III for guidence. Most Favored Nation Treatment (MFN) and national treatment obligations • TBT article 2.1, “any Member shall be accorded treatment no less favourable than that accorded to like products of national origin and to like products originating in any other country. • e.g. requiring labeling of products only from certain countries OR requiring testing of imported corn while such verification is not required for some other countries. • e.g. National Treatment: requiring imported furniture to be fire resistant while it is not required for domestically produced furniture. • NO RULING on the interpretation of like products under TBT, Article I and II of GATT are instructive BUT Japan Alcoholic Beverages noted that “like products” has different meanings in different contexts. ***Article I and III GATT violation can still be justified via Article XX *TBT has not such rule• exception layout! Necessity Test • Article 2.2 TBT, must ensure technical regulations are not prepared, adopted or applied which in effect create unnecessary obstacles to international trade. • AND shall not be more trade• restrictive than necessary to fulfil a legitimate objective, taking into account risk of non• fulfilment. • MEANS: members have to continually assess necessity of regulations. • should be similar to “necessity” in article XX(b), (d) of GATT Use of International Standards • Article 2.4 TBT requires members to base their technical regulation on international standards, exception if it would be ineffective. EC• Sardines: absence of contradiction between the technical regulation and the international standard, the technical regulation can be considered to be ‘based on’ the international standard. STEP 2, in analysis: whether the international std is inappropriate or ineffective means to achieve the legitimate goals. PRESUMPTION: technical regulation is presumed not to create an obstacle if 1. explicitly enumerated within Article 2.2. and 2. in accordance with relevant international standard. 8.3.3. Basic substantive provisions of the TBT Agreement • SIMILAR Principles: most• favored nations treatment obligation, national treatment obligation and the obligation to refrain from creating unnecessary obstacles to international trade. • TBT agreement furthers the objectives of the GATT but through a different legal regimes.

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*MFN Treatment *National treatment; *the necessity requirement; and *the use of international standards. Most Favored Nation Treatment (MFN) and national treatment obligations • TBT article 2.1, “any Member shall be accorded treatment no less favourable than that accorded to like products of national origin and to like products originating in any other country. • e.g. requiring labeling of products only from certain countries OR requiring testing of imported corn while such verification is not required for some other countries. • e.g. National Treatment: requiring imported furniture to be fire resistant while it is not required for domestically produced furniture. • NO RULING on the interpretation of like products under TBT, Article I and II of GATT are instructive BUT Japan Alcoholic Beverages noted that “like products” has different meanings in different contexts. ***Article I and III GATT violation can still be justified via Article XX *TBT has not such rule• exception layout! Necessity Test • Article 2.2 TBT, must ensure technical regulations are not prepared, adopted or applied which in effect create unnecessary obstacles to international trade. • AND shall not be more trade• restrictive than necessary to fulfil a legitimate objective, taking into account risk of non• fulfilment. • MEANS: members have to continually assess necessity of regulations. • should be similar to “necessity” in article XX(b), (d) of GATT Use of International Standards • Article 2.4 TBT requires members to base their technical regulation on international standards, exception if it would be ineffective. EC• Sardines: absence of contradiction between the technical regulation and the international standard, the technical regulation can be considered to be ‘based on’ the international standard. STEP 2, in analysis: whether the international std is inappropriate or ineffective means to achieve the legitimate goals. PRESUMPTION: technical regulation is presumed not to create an obstacle if 1. explicitly enumerated within Article 2.2. and 2. in accordance with relevant international standard. 8.3.3. Basic substantive provisions of the TBT Agreement • SIMILAR Principles: most• favored nations treatment obligation, national treatment obligation and the obligation to refrain from creating unnecessary obstacles to international trade. • TBT agreement furthers the objectives of the GATT but through a different legal regimes. *MFN Treatment *National treatment; *the necessity requirement; and *the use of international standards. Most Favored Nation Treatment (MFN) and national treatment obligations • TBT article 2.1, “any Member shall be accorded treatment no less favourable than that accorded to like products of national origin and to like products originating in any other country. • e.g. requiring labeling of products only from certain countries OR requiring testing of imported corn while such verification is not required for some other countries. • e.g. National Treatment: requiring imported furniture to be fire resistant while it is not required for domestically produced furniture. • NO RULING on the interpretation of like products under TBT, Article I and II of GATT are instructive BUT Japan Alcoholic Beverages noted that “like products” has different meanings in different contexts. ***Article I and III GATT violation can still be justified via Article XX *TBT has not such rule• exception layout! Necessity Test • Article 2.2 TBT, must ensure technical regulations are not prepared, adopted or applied which in effect create unnecessary obstacles to international trade. • AND shall not be more trade• restrictive than necessary to fulfil a legitimate objective, taking into account risk of non• fulfilment. • MEANS: members have to continually assess necessity of regulations. • should be similar to “necessity” in article XX(b), (d) of GATT Use of International Standards

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• Article 2.4 TBT requires members to base their technical regulation on international standards, exception if it would be ineffective. EC• Sardines: absence of contradiction between the technical regulation and the international standard, the technical regulation can be considered to be ‘based on’ the international standard. STEP 2, in analysis: whether the international std is inappropriate or ineffective means to achieve the legitimate goals. PRESUMPTION: technical regulation is presumed not to create an obstacle if 1. explicitly enumerated within Article 2.2. and 2. in accordance with relevant international standard. *"Based on" what does it mean • derive from, conditioned on, • does not mean identical to *"ineffective or inappropirate" • 2.5: "...it shall be rebuttably presumed not to create an unnecessary obstacle to international trade. • makes non• WTO standard setting organazations very powerful • necessity test 8.3.4. Other Substantive Provisions • Substantive provisions of TBT *equivalence and mutual recognition *product requirements in terms of performance; and *transparency and notification Equivalence and mutual recognition • Article 2.7 TBT: requires members to give positive consideration to accepting as equivalent technical regulations of other Members, Transparency and notification • Article 2.9 requires: publish notice, notify other Members through the WTO Secretariat; provide members copies of proposed regulation; allow a reasonable time for members to make comments. • WHEN technical regulation address an urgent problem, can give notice after regulation is implemented. • requires publishing and inquiry point. 8.3.5. Institutional and procedural provisions of the TBT Agreement TBT Committee • composed of representatives of all WTO Members and meets when necessary. Dispute Settlement 8.3.6. Special Provisions for developing country members Technical Assistance • Article 11, developing members can request assistance. Special and differential treatment • TBT committee may grant time• limited exceptions to developing countries under ARTICLE 12.4 TBT

8.4. The SPS Agreement STEPS 1. must first determine if measure falls under the first 3 elements of Annex A.1 2. if it directly or indirectly affects international trade—usually easy to meet. • sanitary and phytosanitary measures • measures aimed at the protection of human, animal or plant life or health from certain specified risks. PROBLEM: measures are increasingly used as instruments of ‘trade protectionsim’ • RULES in SPS agreement reflect an attempt to balance the sometimes conflicting interests of the protection of health against SPS risks and the liberalization of trade in food and agricultural products. *Scope of application of the SPS Agreement; *the relationship between the SPS Agreement and other WTO agreements; *the basic principles of the SPS Agreement; *risk analysis obligations under the SPS Agreement; *other substantive, institutional and procedural provisions of the SPS agreement; and *special provisions for developing• country Members. 8.4.1. Scope of Application of the SPS Agreement

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• Differences between: • substantive scope, i.e. types of measures to which the agreement applies. • personal scope, i.e. the entities to which the agreement applies. • temporal scope of application of the agreement. Substantive Scope of Application • DO NOT APPLY TO ALL MEASURES FOR PROTECTION • Article 1.1: “measures which may, directly or indirectly, affect international trade.” CRITERIA 1. sanitary or phytosanitary measure; and 2. measure that may affect international trade. • SPS Measure is defined in paragraph 1 of Annex A. • very broad, includes laws, decrees, regulations, requirements and procedures… • note, only applies to ‘within the territory of the Member. EC. Approval and Marketing of Biotech Products Three elements in definition of SPS in Annex A.1 1. the purpose of the measure, as enumerated in sub• paragraphs (a) to (d); 2. the form of the measure, as described in the second paragraph (‘all relevant laws, decrees, and regulations’, include defacto laws, decrees, and regs.) 3. the nature of the measure, also set out in the second paragraph (‘requirements and procedures, including…) negative requirements included. Personal Scope of Application • Article 13: Member are fully responsible for the implementation of the Agreement and must enact and implement positive measures to ensure the observance of its rules by bodies other than central government bodies. • e.g. Australia – Salmon: sanitary measures taken by the government of Tasmania, an Australian state, were subject to the SPS agreement and fell under the responsibility of Ausstralia. Temporal Scope of Application • Applies to ALL measures, even those adopted before SPS agreement. 8.4.2. Relationship with other WTO Agreements • SPS agreement is not the only WTO agreement of relevance to measures for the protection of human, animal or plant life or health. TBT Agreement • applies to technical regulations, standards and conformity assessment procedures in general, including those aiming at the protection of human, animal or plant life or health. • Article 1.5: TBT agreement DOES NOT apply to SPS measures. *when a measure is an ‘SPS measure’, as defined in Annex A.1 of SPS, the SPS Agreement applies to the exclusion of the TBT Agreement, EVEN if the measure would other wise be considered a ‘technical regulation’ • MUTUAL EXCLUSIVITY • note: possible measure could be separated into SPS and TBT Parts. GATT • The GATT • no mutual exclusivity between GATT and SPS, measure can fall under both. • start with SPS, then move to GATT 8.4.3. Basic Principles of the SPS Agreement • Article 2 and 3 represent a balance between the need to increase market access for food and agricultural products AND the recognition of the sovereign right of governments to take measures to protect human, animal and plant life and health in their territories. Right to take SPS Measures • Article 2.1 expressly recognizes the right of members to take SPS measures. • BURDEN on Complaining party under SPS, Burden on defending party under GATT. Necessity Requirement • Article 2.2: “any sanitary or phytosanitary measure is applied only to the extent necessary to protect human, animal or plant life and health.” • similar to necessity requirement under XX(b) Scientific Disciplines • Article 2.2. requires sufficient scientific evidence to maintain measure, except as provided for in paragraph 7 of Article 5. • Article 5.1: SPS measures must be based on risk assessment.

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*what is sufficient scientific evidence? 1. what is scientific• • ascertainable in some scientific form. 2. what is evidence 3. what is sufficient to relate? rational relationship between scientific evidence and measure. • balancing test, may be different for ALL. • DOES it depend on what the risk is? affect human life, minimal risk??? • Whether carefully negotiated balance can really be achieved, i.e. think about what scientific certainty really means. Japan – Apples • Article 2.2: “scientific”—for evidence to be scientific it must be gathered through scientific methods. • “evidence”— Japan – Agricultural Products II • Article 2.2: “sufficient scientific evidence”—it requires a rational relationship between the SPS measure and the scientific evidence. CONTEXT: “bear in mind that responsible, representative governments commonly act from perspectives of prudence and precaution where risks of irreversible, e.g. life• terminating, damage to human health are concerned. EC• Hormones • Article 2.2. proportionality test: the more serious the risk to life or health, the less demanding the requirement of ‘sufficient scientific evidence’ and vice versa. Japan – Apples • risk was negligible, therefore, more evidence was required. • exception to sufficient scientific evidence is Article 5.7. EC – Tariff Preferences • Article 5.1 is an autonomous right, and not merely an exception from the scientific obligations under Article 2.2. and Article 5.1. No Arbitrary or Unjustifiable Discrimination or Disguised Restriction on Trade. • Article 2.3 reflects the familiar GATT non• discrimination obligations of national treatment and most• favoured nation treatment and incorporates part of the chapeau. • “measures do not arbitrarily…discriminate between members where identical or simlar conditions prevail,…. Australia – Salmon (Article 2.3 violation factors) 1. measure discriminates between territories of Members other than the member imposing obligation, or… 2. discrimination is arbitrary or unjustifiable; and 3. identical or similar conditions prevail in the territory of the members compared. ***Includes discrimination between different products (here, salmonids from Canada and other dead fish from Australia) HOLD: no “identical or simlar” conditions, as there are substantial differences in the disease status of the two members. NOTE: article 2.3 is more narrow than 5.5. Broader scope of Article 2.3: dissimilar products may pose the same or similar health risks and should therefore be treated in the same way. The Goal of Harmonization • Article 3: encourages but does not oblige members to harmonize their SPS measures around international standards. • else, importers have to manipulate their products to adhere to a multitude of different SPS measures from different members. • Article 3 has three autonomous options 1. base their SPS measures on international standards according to Article 3.1; 2. conform SPS measures to international standards under Article 3.2. 3. impose SPS measures resulting in a higher level of protection than would be achieved by the relevant international standard, Article 3.3. • Article 3.1., obliges SPS measures to be based on international standards where they exist, except as provided for in Article 3.3. *International Standards are those set by international organizations.

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• “based on” • • • one that stands or is founded, or built upon or supported by the international standard. EC – Hormones. *• “based on”, in part, DOES NOT GET PRESUMPTION. • Article 3.2: “conform” means measure would embody the international standard completely and, for practical purposes, converts it into a municipal standard. EC – Hormones. • “conform” GETS PRESUMPTION. EC – Hormones. • Article 3.3: higher level of protection, EC – Hormones: right of Member to establish its own level of sanitary protection under Article 3.3 of the SPS agreement is an autonomous right and not an exception from a general obligation under Article 3.1. HOWEVER, not an unqualified right, Two alternative conditions are laid down in Article 3.3: 1. either there must be scientific justification for the SPS Meausre; OR 2. the measure must be a result of the level of protection chosen by the Member in accordance with Articles 5.1 through 5.8. • clear that a risk assessment is required, e.g. risk assessment under Article 5.1. EC – Hormones. 8.4.4. Risk Analysis Obligations RISK ANALYSIS SLIDE• • • • WAGNER breaks down very early if you start thinking about it early. • ARticle breaks down into two subsections • NOT CLEAR CUT • Risk Assessment Article 5.1 v. Risk Management• • Article 5.4• 5.5 • scientific • policy based *not that exact • determine likelihold of materializaiton • soceiteal value of danger • consideration *which side is more important. • no precautionary measures have been upheld. • Risk assessment might bleed over into risk management depending on who you hire to make this analysis. • e.g. scientist who backed smoking as being good. IF RISK ASSESSMENT go to next slide... Risk Assessment• • • paragraph 4, two sections Measrues aimed at risk from pest and disease SPS Measures aiimed at food• borne risks • no assessment of biologcial and econ • no necessity to assess the likelihood adverse effects • NOTE: NO ECONOMIC RISK considered • still can but not necessary • national regulatory process by means of which SPS measures are imposed typically involves risk analysis. • SPS consist of two TYPES: Risk assessment and Risk management. 1. Risk Assessment: refers to the scientific process of identifying the existence of a risk and establishing the likelihood that the risk may actually materialize according to the measures that could be applied to address the risk. *BASED ON SCIENTIFIC REASONING. *Articles 5.1• 5.3 2. Risk Management: is the policy• based process of determining the level of protection a country wants to ensure in its territory and choosing the measure that will be used to achieve that level of protection. *BASED ON POLICY REASONING and scientific reasoning. • i.e. consumer preferences, industry interests, relative costs, etc. can be considered. *Article 5.4• 5.5 • also subject to trade• related disciplines under Article 5.3 and 5.6. Risk Assessment—Article 5.1 • Article 5.1: members shall ensure their measures are based on an assessment of the risk to human, animal or plant life or health, taking into account risk assessment techniques developed by the relevant international organization. SPS • Risk Assessment • • • • Aritcle 5.1

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• positive proof • world where people "live and work and die" • risk must be ascertained not in lab but where people work live and die. • specificity of risk assessment • re• evaluation • measures must be "based on" risk assessment • panel: risk assessment must have been taken into consideration • all: rationl relationship between measures and risk assessment • prevalinng scientific view v. divergent scientific opinions. TO DETERMINE Article 5.1 VIOLATION, Two factors EC – Approval and Marketing of Biotech Products i. whether there is a “risk assessment” within the meaning of the SPS Agreement; and ii. whether the SPS measure at issue is “based on” this risk assessment. “risk assessment” defined in Paragraph 4 of Annex A of SPS Agreement TWO TYPES OF RISK ASSESSMENTS • evaluation of the likelihood of entry,…within territory of an importing member…; OR the evaluation of the potential for adverse effects on human or animal health arising from the presence of additives, toxins...in food, beverages or feedstuffs. • first type is applicable to SPS measures aimed at risks from pests or diseases; MUST: i. identify the pests or diseases whose entry…a member wants to prevent, as well as potential biological and economic consequences associated with entry. ii. evaluate the likelihood of entry…and the associated biological and economic consequences; and iii. evaluate the likelihood of entry, establishment or spread of these pests…according to the SPS measures that might be applied. • second type aimed to food• borne risks. MUST: i. identify the adverse effects on human or animal health arising from the additive, toxin…in food/beverages/feedstuffs at issue; and ii. if such adverse heath effects exists, evaluate the potential of occurrence of these effects. Note: the second type does not evaluate the associated biological and economic consequences. *”likehood” is a higher/tougher standard than “potential” Australia – Salmon. Japan – Apples, regarding first type • Risk Assessment not limited to measure already in place but other possible alternatives must also be evaluated. SUMMARY 1. Risk assessment must show proof of actual risk, not just theoretical uncertainty. 2. Risk assessment may go beyond the laboratory and take account of the actual potential for adverse effects in the real world “where people live and work and die.” 3. risk assessment must be specific to the particular type of risk at issue in the case and not merely show a general risk of harm. 4. Article 5.1 does not oblige members to carry out their own risk assessments. 5. Article 5.1 and 2.2. must be considered in conjunction thereby requiring assessment review of risk assessment, periodically. Article 5.2 REQUIRES certain factors to be considered in risk assessment:

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1. 2.

1. 2.

3.

• “available scientific evidence; relevant processes….; relevant inspection…; prevalence of specific diseases…; existence of pest…; relevant ecological conditions; …quarantine or other treatment.” NOTE: includes more than simply scientific, also considers real world affects. i.e. “potential for adverse effects on human health in the real world where people live and work and die.” EC – Hormones. Article 5.1, “based on” a risk assessment, means there must be a ‘rational relationship’ between the measure and the risk assessment and the risk assessment must ‘reasonably support’ the measure. *CAN BE BASED ON DIVERGENT VIEW rather than on mainstream scientific opinion. EC – Hormones. • hints that divergent opinion must come from qualified and respected sources. • must also considered the magnitude of the risk involved, i.e. life threatening or simply an inconvenience. Risk Management • entails policy decision making regarding the level of protection that a country wants to secure in its territory and the measure it will use to achieve this level of protection. • based on both scientific evidence and societal value judgments. • while national regulators are given wide latitude, there are non• scientific disciplines in place to ensure that the adverse trade effects of these decisions are limited as much as possible. • paragraph 5 of Annex A of SPS Agreement: “the level of protection deemed appropriate by the Member…” • i.e. Member chooses level of protection. • ONCE the existence of a risk has been established by risk assessment, a Member is free to choose even a zero• risk level of protection. Article 5.4: Members should…take into account the objective of minimizing negative trade effects when choosing level of protection. contained in Article 5.5: “…each Member shall avoid arbitrary or unjustifiable distinctions in the levels it considers to be appropriate in different situations, if such distinction result in discrimination or a disguised restriction on international trade. TWO ELEMENTS i. the goal of achieving consistency in the application of the ‘concept’ of appropriate level of protection. ii. The legal obligation to avoid arbitrary distinctions in the levels of protection deemed appropriate…if lead to discrimination or disguised restrictions on trade. THREE CUMULATIVE requirements must be met before violation of Article 5.5: Member has set different levels of protection ‘in different situations.’ • different situations must involve common element, i.e. same disease, or economic consequence. levels of protection show ‘arbitrary or unjustifiable’ differences in their treatment of different situations. • appellate body must examine several things: i. whether different levels of risk are at issue in the different situations compared; ii. whether the difficulty of controlling the risk differs in each case; or iii. whether the degree of government intervention necessary to achieve the same level of protection differs in each situation. arbitrary or unjustifiable differences lead to ‘discrimination or disguised restrictions’ on trade. • EC – Hormones: THIS IS THE MOST IMPORTANT ELEMENT. • Panel looks to three ‘warning signals’ 1. arbitrary character of the differences in the levels of protection (i.e. whether second element is met) 2. existence of rather substantial differences in the levels of protection; and

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3. absence of scientific justification, which indicates that the measure is a disguised restriction on trade. • Article 5.6: “…Members shall ensure such measures are not more trade• restrictive than required to achieve their appropriate level of sanitary protection, taking into account technical and economic feasibility. • Australia – Salmon TEST • no more trade restrictive than required only if: 1. is reasonably available, taking into account technical and economic feasibility; 2. achieves the Member’s appropriate level of protection; 3. is significantly less trade restrictive than the contested measure. • ALL THREE MUST BE MEET TO PROVE VIOLATION. Provisional Measures and The Precautionary Principle • Article 5.7: in cases where relevant scientific evidence is insufficient, a Member may provisionally adopt sanitary measures on the basis of available pertinent information…Members shall seek to obtain the additional information necessary for a more objective assessment of risk and review the sanitary measure accordingly with in a reasonable period of time. • scientific evidenc is insufficient • example 2:1 ratio of woman to men. • need to keep in mind insufficient of scientific evidence and NOT insufficiency of scientific certainty. • if principle: makes it a universal apporach, all people do it • IF Approach: can approach from different angles, not everyone must do it. • US says its an approach, not applicable across the board, different for everyone. Japan – Agricultural: Four Cumulative Requirements be imposed in respect of a situation where relevant scientific

1. evidence is insufficient. 2. 3. 4.

be adopted on the basis of available pertinent information; not be maintained unless the member seeks to obtain the additional information necessary for a more objective assessment of risk; and be reviewed accordingly within a reasonable period of time. Japan – Apples: clarified this • Article 5.7 established to address situations where there is a true lack of sufficient scientific evidence regarding the risk at issue, either due to small amount of evidence of new risk OR due to the fact that accumulated evidence is inconclusive or unreliable. • MUST make the performance of an adequate risk assessment impossible. • Article 5.7 “if –then” logic • if insufficient scientific evidence, provisional adoption of measure permitted. EC – Approval and Marketing of Biotech Products • second requirement under Article 5.7 is less than standard set out in Annex A(4). Japan – Agricultural Products II: “reasonable period of time” • based on facts of case, including difficulty of obtaining the additional information necessary for the review and the characteristics of the provisional SPS measure. • Article 5.1 and 5.7 are mutually exclusive, RATHER than 5.7 acting as an exception to 5.1. 8.4.5. Other Substantive Provisions • SPS has other substantive provisions. • equivalence • adaptation to regional conditions • control, inspection and approval procedures; and • transparency and notification Equivalence • effort to allow different measures to reach the same level of protection in order to allow imports with different, but equally effective measures. • Article 4

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• OBLIGES Members to accept different SPS measures as equivalent if the exporting Member objectively demonstrates to the importing Member that its measure achieve the latter’s appropriate level of protection. • In addition, Article 4.2 obliges members to enter into consultations, upon request, with the aim of concluding agreements on recognition of equivalence. Adaptation to Regional Conditions • Characteristics must be determined with reference to : i. level of pest or disease prevalence; ii. existence of eradication or control programmes; and iii. guidelines developed by international organizations. Control, Inspection and approval procedures • Article 8 SPS obliges Members to comply with the disciplines contained in Annex C as well as other provisions of the SPS in the operation of control, inspection and approval procedures. • AIMS to makes sure procedures are not lengthy and burdensome than is reasonable and necessary and do not discriminate against imports. • Annex C.1: clearly lays down a national treatment obligation, consistent to look at jurisprudence of Art. III:1 and III:4 of GATT. EC – Approval and Marketing of Biotech Products • Annex C.1(b) SPS contains ‘five separate, but related, obligations to be observed by Members in the operation of approval procedures. i. publication to applicants of the processing period of each procedure; ii. examination of completeness of the documentation. iii. transmission of results of the procedure; iv. processing of applications which have deficiencies; v. provision of information about state of procedure and the provisions of an explanation of any delay. Transparency and Notification • Lack of transparency with regard to SPS measures may constitute a significant barrier to market access since it increases the cost and difficulty for exporters in determining what requirements products must comply with on their export markets. • Article 7 SPS: obliges members to notify changes in their SPS agreement measures and provide information on their SPS measures according to Annex B of SPS. Japan – Apples • whether change is enough to fall under Annex B SPS. • must look whether the change affects the conditions of market access for the product concerned • MUST have a significant effect on trade of other Members. Annex B. 8.4.6. Institutional and Procedural Provisions of the SPS Agreement • SPS Committee; and • dispute settlement. SPS Committee • Article 12.1 SPS with a mandate to carry out the functions necessary for the implementation of the SPS agreement. Dispute Settlement • provisions of Articles XXII and XXIII GATT as elaborated by DSU apply to consultations and settlement disputes under SPS, except as otherwise provided. • ONLY DIFFERENCE• • • Article 11.2 SPS authorizes panels to consult experts to help deal with issues of scientific fact. 8.4.7. Special Provisions for Developing• Country Members • special rules exist to take account of developing country needs. *Technical assistance; and *special and differential treatment for developing country members. Technical Assistance • provide both soft and hard infrastructure • Article 9 SPS Special and Differential Treatment • SPS allows for special and differential treatment. • Article 10.1 SPS obliges Members to take account of developing country needs in preparing and applying SPS measures.

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EC – Approval and Marketing of Biotech Prodcuts • Article 10.1 simply requires members ‘to consider along with other factors before reaching a decision’ the needs of developing countires.

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