1. CORE PRINCIPLES AND MAIN EXCEPTIONS
TRADE IN GOODS:
CORE PRINCIPLES AND MAIN EXCEPTIONS

2. Content Part I: Principles of Non Discrimination
Part II: Liberalization of trade
Part III: Protective Measures
Part IV: Exceptions

3. PART I: NON DISCRIMINATION

4. Contents
1. Most Favoured Nation Treatment
2. National Treatment

5. 1. MOST- FAVOURED NATION TREATMENT
(ARTICLE I:1 GATT)

6. of all other Contracting Parties.”
Article I: 1 GATT
“any advantage, favour, privilege or immunity granted by any Contracting Party to any product originating in 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 Contracting Parties.”
MFN Treatment cornerstone of World Trading System. US – Section 211 Appropriations Act, “ the obligation to provide most-favoured-nation treatment has long been one of the cornerstones of the world trading system. For more than fifty years, the obligation to provide most-favoured-nation treatment in Article I of the GATT 1994 has been both central and essential to assuring the success of a global rules-based system for trade in goods.” (DS 176. AB Report para 297).
The rationale for MFN is to ensure equality of opportunity to import from or to export to all WTO Members. This is meant to strengthen the multilateral process because all Members have an expectation of sharing the benefits and burdens of the system.

7. MFN Treatment
No discrimination between like products originating in, or destined for, different WTO members.
Each WTO member must grant all other members immediately and unconditionally the best treatment it gives to any trading partner

8. MFN 3 tier 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 in issue is granted immediately and unconditionally to all like products concerned.
Test is according to Peter Van den Bossche, The Law and Policy of the World Trade Organisation, Text, Cases and Materials.
Each ingredient of the test is explained in detail subsequently.

9. 1. Trade advantage
US – MFN Footwear, established that the MFN concept
is applicable to any advantage granted with respect to:
Imports and exports of like products originating in the territories of other Members.
Customs duties and charges of any kind.
The method of levying such duties and charges.
Rules and formalities in connection with importation and exportation.
Internal taxes or other internal charges.
Laws, regulations requirements affecting internal sales, purchases inter alia.
US – Denial of Most-Favoured-Nation Treatment as to Non Rubber Footwear from Brazil, - adopted 19 June 1992, BISD 39S/128 para 6.8.
Article I:1 covering a wide net:
There has generally been little debate about the kind of measures covered by Article I:1. In EC – Bananas III, the Appellate Body noted that a broad definition has been given to the term “advantage” in Article I:1 by the Panel in US – MFN Footwear. (Para 206)
Note that MFN covers any advantage granted to all other countries, not only to the Member countries.
In Canada – Autos the Appellate Body noted that 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. (Para 79)

10. 2. Like products’
The concept of ‘like products’ is not defined in GATT.
In EC – Asbestos the Appellate Body considered the dictionary meaning of ‘like’ and suggested that ‘like products’ are products that share a number of identical or similar characteristics.
EC – Asbestos at para 91
Canada – Aircraft at para153
Use of the Phrase ‘Like products’ in GATT and other WTO Agreements”
The phrase ‘like products’ appears in several other GATT Articles. Articles II, III, VI,IX XI, XIII, XVI and XIX with different meanings in different contexts.
In Japan – Alcoholic Beverages II, the Appellate Body illustrated the possible differences the scope of the concept of ‘like products’ between different provisions in the WTO Agreement by evoking the image of an accordion. It stated that the accordion of ‘likeness’ stretches and squeezes in different places as different provisions of the WTO Agreement are applied. The width of that accordion must be determined by the particular provision in which the term ‘like’ is encountered as well as by the context and the circumstances that prevail in any given case to which that provision may apply. (114)

11. Jurisprudence on ‘like products’.
Products have been considered to be ‘like products’ on the
basis of some of the following concepts:
1. Their physical characteristics. In EC – Bananas III where the EC import regime for bananas from Latin American countries were treated less favourably than bananas from former European colonies, it was stated that all bananas are like products irrespective of whether and how a Member categorises or subdivides them.
2. Listing of products in tariff schedules. In Australia – Ammonium Sulphate, Australia had different treatment for ammonium sulphate and sodium nitrate fertilisers and this was challenged by Chile as being contrary to Article I:1. The Working party noted that in the Australian tariff schedule, and in the tariff schedules of many other countries, these products were listed separately and enjoyed different treatment. The Working Party therefore concluded that these were not like products.
EC – Bananas III – European Communities – Regime for the Importation, Sale and Distribution of Bananas, WT/DS27/AB/R, adopted 25 September 1997, at para 190
Australia – Ammonium Sulphate - GATT Working Party Report, The Australian Subsidy on Ammonium Sulphate, adopted 3 April 1950, BISD II/188 at 191

12. Jurisprudence on ‘like products’.
3. Composition, content, purpose, chemical and synthetic origin and duties applied to products.
In EEC – Measures on Animal Feed Proteins, the Panel examined whether all products used for the same purpose of adding protein to animal feed should be considered to be like products. The Panel noted such factors as the number of products and tariff items carrying different duty rates and tariff bindings, the varying protein contents, and the different vegetable, animal and synthetic origins of the protein products under consideration. It concluded that these various protein products could not be considered as like products.
EEC – Measures on Animal Feed Proteins – GATT Panel Report, adopted 14th March 1978, BISD 25S/49, 63

13. Jurisprudence on ‘like products’.
4. End use and tariff classification practices by WTO Members.
In Spain – Roasted Coffee Spain had divided unroasted coffee into five tariff classifications. Colombian mild, other mild, unwashed Arabica, robusta and other. The first two were duty free and the other three were subject to a 7% duty. Brazil claimed that all these were like products and that different rates of duty were inconsistent with Article I. The Panel noted that the arguments given for differentiation were based on geographical factors, cultivation methods, the processing of the beans and genetic factors. The Panel did not consider such grounds as sufficient for differentiation and noted that no other Member made such a classification. It concluded that these were like products within the meaning of Article 1.
Spain – Roasted Coffee, GATT Panel Report, L/5135, adopted 11 June 1981, BISD 28S/112
Process of production as a determinant of ‘like products’- Highly debated as being of particular consideration. Prevailing view, its not relevant. Hence products produced in an environmentally unfriendly manner cannot be treated differently from those produced in an environmentally friendly manner on the sole basis of the difference in process or production methods. US – Tuna (Mexico) para 5.15.

14. 3. Immediately and unconditionally
MFN treatment has to be extended to Members immediately and unconditionally.
For example, in Belgium – Family Allowances, Belgium had a system of granting exemption from a levy to products purchased by public bodies only from countries which had a system of family allowance similar to that of Belgium. The Panel held that this practice was inconsistent with the MFN principle as it inter alia, introduced an element of conditionality in the application of an advantage.
Belgium – Family Allowances

15. Exceptions to the MFN rule
The Enabling Clause
Parties may accord differential and more favourable treatment to
developing countries, without according such favourable treatment to
other Contracting Parties (Decision of 28 November 1979).
Free Trade Areas and Customs Unions
Article XXIV GATT allows a group of Members to constitute themselves into a
customs union or a free trade area and have totally free trade or reduced
levels of duties and of other trade restrictive regulations amongst themselves
without the obligation of extending such treatment to other Members.
Frontier Traffic
Advantages accorded by Members to “adjacent countries” in order to facilitate
frontier transactions. This derogation however only refers to the facilitation of
transactions in the vicinity of the frontier and cannot cover a trade agreement
governing the entire territories of two neighbouring countries. (Article XXIB.3
GATT 1994).
The Enabling Clause covers the following treatment:
Generalised System of Preferences (GSP) which is a system of tariff preferences accorded by developed to developing countries.
Differential and more favourable treatment in respect of non tariff measures governed by the multilateral instruments negotiated under GATT/WTO.
Arrangements among developing countries as a whole or among a few of them on tariff preferences.
Special treatment of the LDCs.
A Free Trade Area is a group of two or more countries in which duties and other trade restrictive regulations are eliminated on substantially all the trade between the countries.
A customs Union is a group of countries forming themselves into one customs territory in which duties and other trade restrictive regulations are eliminated with respect to substantially all the trade between the countries or at least, with respect to substantially all the trade in products originating in these countries. Further, the members forming the customs union usually apply substantially the same duties and other trade regulations to the products of countries outside the union.
Key principles governing the formation of a Customs Union (CU) or Free Trade Area (FTA).
At the time of formation of a CU, the duties and other trade regulations applied to Members outside the union must not be on the whole, higher or more restrictive than what were applicable in these countries prior to the formation of the union.
2. For the FTA, the duties and other trade regulations in the countries forming the area should not be higher or
more restrictive at the time of formation of the area than what they were in these countries prior to the
formation of the area.

16. Exceptions to the MFN rule
Government Procurement
MFN does not apply to the import of products for immediate or
ultimate consumption in government use and not otherwise for resale
or use in the production of goods for sale.
Security Exceptions
Restrictions on imports and exports from or to specific countries can be
imposed for security reasons. (Article XXI GATT)
General Exceptions
Article XX GATT allows Members to restrict imports or exports
from or to specific sources for example for the protection of public
morals, human, animal or plant life, etc.
Measures permitted by WTO Agreements
Such as countervailing duties, antidumping duties and Retaliatory
measures.

17. Exercise (1): MFN-Treatment
Alba, Vanin, Medatia and Tristat are WTO Members and Ruritania is not
Could Alba's customs authorities levy a customs duty of 10% for imported pocket watches originating in Medatia, while levying a lower customs duty of 5% for imported pocket watches originating in Vanin? NO

18. Exercise (2): MFN-Treatment
Alba, Vanin, Medatia and Tristat are WTO Members and Ruritania is not
Could Alba levy a customs duty of 5% for Ruritania’s watches while applying a 10% rate watches originating in Vanin, Medatia and Tristat ? NO
Lower customs duties accorded to non members to be extended to members – Any advantage accorded to “ any country.”

19. Exercise (3): MFN-Treatment
Alba, Vanin, Medatia and Tristat are WTO Members and Ruritania is not
Could Alba levy a 5% duty for pocket watches from Vanin, Medatia and Tristat and a 100% duty for Ruritania’s pocket watches?
Yes.
Ruritania is not a Member. MFN not applicable to non members.

20. 2. NATIONAL TREATMENT
(Article III GATT)

21. NATIONAL TREATMENT
Prohibits Members from treating imported products directly or indirectly less favourably than like domestic products once the imported products have entered the domestic market.
i.e foreign goods must not be discriminated against vis-à-vis domestic goods

22. Article III: 1
Internal taxes, other internal charges, 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 products in specified amounts or proportions, should not be applied to imported or domestic products so as to afford protection to domestic production.
Rationale for Article III
Japan – Alcoholic Beverages II stated that the broad and fundamental purpose of Article III is to avoid protectionism in the application of internal tax and regulatory measures. More specifically to ensure that internal measures are not applied to imported or domestic products so as to afford protection to domestic producers. To this end, Article II obliges Members to provide equality of competitive conditions for imported products in relation to domestic products. The intention of the drafters was to treat imported products in the same way as the like domestic products once they have been cleared through customs. (para 109)
Distinguishing Article III:1 and III:2
Article III:1 forms the general principle of Article III that internal measures should not be applied so as to afford protection to domestic production. Japan- Alcoholic Beverages stipulated that Article III:1 was the general principle which informs the rest of Article III. The purpose of Article III:I is to establish the general principle as a guide to understanding and interpreting the specific obligations contained in Article III:2 and in other paragraphs of Article III, while respecting, and not diminishing in any way, the meaning of the words actually used in the texts of those other paragraphs. (para 111)
Article III:2 simply elaborates on the general principle illustrated in III:1, with regard to internal taxation, and III:4 with regard to internal regulation. Article III:2 mainly deals with two key obligations: non discrimination with regard to internal taxation of like products and internal taxation of directly competitive or substitutable products.

23. Article III: 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 that is contrary to Article III:1.

24. Key elements of Article III
Internal tax or charge
Imposed directly or indirectly
Affecting sale or purchase etc
Like products, directly competitive products
Discrimination against imported products, protection of domestic products

25. 1. INTERNAL TAX OR CHARGE
Article III only applies to internal measures not border measures.
Hence, there is need to determine whether a measure is an internal measure or a border measure, especially if the measure is applied to imported products at the time or point in time of importation.
The Ad Article III Note clarifies that any internal tax or charge collected or enforced on an imported product at the time or point of importation is an internal tax under Article III.
Other GATT provisions like Article II on tariff concessions and Article XI on quantitative restrictions apply to border measures.
Ad Article III Note.
US – Tuna Dolphin (Para 5.8)
US – Tuna Dolphin on determining whether the US embargoes, though applied at the border should be examined under Article III, the Panel observed that a Note to Article III extends the scope of Article III to domestic measures enforced at the time or point in time of importation. The Note however was not applicable because Article III called for a comparison of treatment between domestic and imported like products and not a comparison of policies between the country of origin with the country of importation.
Explanation of Article III:4 together with the Noted Ad Article III.
US – Restrictions on Imports of Tuna. While restrictions on importation are prohibited by Article XI:1, contracting parties are permitted by Article III:4 and the Note Ad Article III to impose internal regulations on products imported from other contracting parties provided the regulation:
a) Does not discriminate between products of other countries in violation of the MFN principle of Article I:1
b) Is not applied so as to afford protection to domestic production in violation of the national treatment principle of Article III:1
c) It accords to imported products treatment no less favourable than that accorded to like products of national origin, consistent with Article III:4. The text of Article III:1 refers to the application to imported or domestic products of laws affecting the internal sale of products and internal quantity regulations requiring the mixture, processing or use of products. (Para 5.9, 5.11).

26. 2. Directly and indirectly
Indirectly covers
Even such taxes which are not on the product as such, but on the processing of the product.
Taxation methods and rules for tax collection.
With respect to internal quantitative regulations, the term covers:
Regulations laying down the requirement of compulsory use,
Regulations which by implication, or in the process of implication, have the effect of such a requirement.

27. 3. Affecting the sale or purchase....
In Italian Discrimination Against Imported Agricultural Machinery observed that “affecting” covers not only the laws and regulations which directly govern the conditions of sale or purchase, but also any law or regulation which might adversely modify the conditions of competition between the domestic and imported products in the internal market.
This term ‘affecting’ does not only cover laws or regulations that directly regulate sale or purchase but also those which might adversely modify the conditions of competition between the domestic and imported products.
Italian Discrimination Against Imported Agricultural Machinery BISD 7S/60, 64

28. 4. Like Products
In Canada – Periodicals, two questions were established to determine whether there is a violation of Article III:2.
(a) whether the products were like products,
(b) whether the imported products were taxed in excess of the
domestic products.
In Japan –Alcoholic Beverages, the Japanese had a system of giving different tax treatment to liqueurs and sparkling wines according to alcoholic and extract content. The panel found that imported liqueurs and sparkling wines with high raw material content were subjected to higher internal taxes than domestic liqueurs and sparkling wines which had lower raw material content. They were considered like products.
First sentence, Article III:2
The concept of ‘like products’ is as crucial for National Treatment as it is for MFN. Whether a product is a like product depends on a case by case basis. The guiding principle however has been the satisfaction of the objective of Article III.
Canada – Periodicals, (468)
Japan –Alcoholic Beverages, (BISD 34S/83, 113 – 115)
Article III like products viz Article I like products. Distinction according to Bhagirth Lal Das, The World Trade Organisation: A Guide to the Framework for International Trade.
1. The coverage of like products in Article III is wider than that in Article I. Article I relates more to classification, whereas Article III relates more to competitive conditions.
2. Product coverage of Article I is a matter for negotiation between Members whereas the obligations under Article III relate to interpretation and analysis.
3. The concept of like product in Article III seems to go beyond the concept of an identical or equal product, to include also products with similar qualities.
4. Under Article III, the objective of product differentiation becomes relevant in examining a product differentiation which has a bearing on the determination of a like product.
Further case examples of like products.
The Working Party on Border Tax Adjustments in December 1970 was of the view that the interpretation of ‘like product’ should be examined on a case by case basis. It identified some criteria for the determination of like products as being end uses in a given market, consumers’ tastes and habits, and the properties, nature and quality of products. (BISD 18S/97, 102)
US – Taxes on Petroleum and Certain Imported Substances examined the differential taxation on domestic and imported petroleum and some petroleum products. It found that the domestic products were crude oil, crude oil condensates and natural gasoline, and the imported products were crude oil, crude oil condensates, natural gasoline, refined and residual oil and certain other liquid hydrocarbon products. The Panel concluded that either the domestic products and imported products were identical or they served substantially identical end uses, and were as such like products. (BISD 34S/136, 154 – 155).
US – Measures Affecting Alcoholic and Malt Beverages considered the excise tax exemption on wine made from a particular type of grape (scuppernong grapes). The panel, on the basis of the criteria of end use, consumer tastes and habits, and the properties, nature and quality of the products and the objective of Article III observed that tariff classification and tax laws in the US did not generally make a distinction between still wines on the basis of the variety of grape used in their production and that the US did not claim any public policy purpose for this tax provision except the purpose of subsidising the small local producers. The Panel concluded that unsweetened still wines were like products and that the differentiation in the tax regulation was affording protection to local products and was therefore inconsistent with Article III.2. (BISD 39S/206, 276 – 277.

29. Directly competitive or substitutable products.
Domestic production does not only mean production of a particular product, but also of directly competitive or substitutable products.
There may be cases where taxes etc are applied at the same rate on imported and like domestic products, and yet the manner of application is such that protection is afforded to the domestic production of a directly competitive or substitutable product. Such practice is prohibited under Article III:2.

30. Directly competitive or substitutable products.
For example, a country may apply a high internal tax rate on oranges, which is applied to both imported and domestic oranges, but if this country does not produce oranges, this tax in effect goes to raise the price of only imported oranges, which may in a way afford protection to its own production of apples, in so far as oranges are directly competitive or substitutable with apples.
Second sentence, Article III:2

31. Directly competitive or substitutable products.
Korea – Alcoholic Beverages established that:
Products are competitive or substitutable when they are interchangeable or if they offer, alternative ways of satisfying a particular need or taste.
Like products are a subset of directly competitive or substitutable products.
The notion of like products must be construed narrowly but the category of directly competitive or substitutable products is broader.
Korea – Alcoholic Beverages (para , and para 118)
- While perfectly substitutable products fall within Article III:2 first sentence, imperfectly substitutable products can be assessed under Article III:2, second sentence.

32. Determining whether products are directly competitive or substitutable.
Japan – Alcoholic Beverages II - factors to consider
include;
physical characteristics
common end use
tariff classifications
the nature of the compared products
the competitive conditions in the relevant market.
Japan – Alcoholic Beverages II ( para 117)
Korea – Alcoholic Beverages (para 121, and 137)

33. Exercise (1): National Treatment
Alba, Vanin, Medatia and Tristat are WTO Members and Ruritania is not
Could Alba impose a sales tax of 5% on domestically produced pocket watches while applying a sales tax of 6% on imported pocket watches from Medatia and Tristat? 33

34. Exercise (2): National Treatment
Alba, Vanin, Medatia and Tristat are WTO Members and Ruritania is not
What if the 6% sales tax only applies to imported pocket watches from Ruritania? 34

35. Exercise (3): National Treatment
Alba, Vanin, Medatia and Tristat are WTO Members and Ruritania is not. Alba traditionally produces pocket watches but does not produce wrist watches
Could Alba impose a 5% sales tax on pocket watches while applying a 10% sales tax to wrist watches? 35

36. Examples of jurisprudence on discrimination under Article III.
Discrimination against imported products, protection of domestic products
Examples of jurisprudence on discrimination under Article III.
1. Granting financial facilities like tax refunds, special credit facilities, tax exemptions etc to domestic products and not to imported products. US – Measures affecting Alcoholic and Malt Beverages examined the US tax measure providing excise tax exemption for domestic producers of beer and wine, which was not available for imported products. It was found that the tax law operated to create a lower tax rate on domestic beer and wine than on like imported products and that was discriminatory.
Discrimination is easy to detect if done through differential treatment of taxes or charges. But it is not easily seen when its in respect to laws affecting sale, purchase, transportation, distribution and use.
US – Measures affecting Alcoholic and Malt Beverages (BISD 39S/206,para 277)
Case Example 2 on Granting financial facilities
Italian Discrimination Against Imported Agricultural Machinery (BISD 7S/60, paras ) examined an Italian law providing special credit facilities to farmers for the purchase of agricultural machinery produced in Italy. It was considered that any favourable treatment granted to the domestic product had to be given to like imported products.
Case 2 on Obligations on local purchase.
Canada – Administration of Foreign Investment Review Act (BISD 30S/140, paras ) examined the Canadian requirement on investors to make written undertakings to purchase goods of domestic origin. It was held that such a requirement meant that imported goods were less favourably treated than imported goods.

37. Discrimination against imported products, protection of domestic products
2. Obligations on investors or local industry to purchase domestic products. This way, there is a denial of opportunity to like imported products for competing in the market.
EEC – Measures on Animal Feed Proteins examined a regulation requiring domestic producers or importers of oil seeds etc and importers of corn gluten feed to purchase a certain quantity of surplus skimmed milk powder held by intervention agencies. It was found that these agencies held only domestic products and concluded that this regulation protected the domestic industry.
EEC – Measures on Animal Feed Proteins (BISD 25 S/49, para 65)

38. Discrimination against imported products, protection of domestic products
3. If imported products are required to pass through certain specified wholesale or retail channels unlike domestic products.
In US – Measures Affecting Alcoholic and Malt Beverages the requirement in some US states that imported beer and wine be sold only though in state wholesalers or other middlemen while some instate like products were permitted to be sold directly to retailers was considered discrimination.
US – Measures Affecting Alcoholic and Malt Beverages (BISD 39S/206, )
Canada – Import Distribution and Sale of Certain Alcoholic Drinks by Provincial Marketing Agencies (BISD 39S/27, )
Us – Section 337 (BISD 37S/345, )

39. Discrimination against imported products, protection of domestic products
4. A regulation that both imported and domestic goods adhere to a minimum price requirement is discriminatory.
In Canada – Import Distribution and Sale of Certain Alcoholic Drinks it was established that the refusal of the sale of the imported product at a price below that of the domestic product did not accord equal conditions of competition.

40. Discrimination against imported products, protection of domestic products
5. Existence of wider choices for punitive action against imported goods.
Us – Section 337 found that the facilitation of legal action against imported products when such facilities were not available for domestic products were discriminatory against imported products.

41. Exercise (1): National Treatment
A new Alban law requires that pocket watches imported and sold in Alba have a minimum of 10% ‘local content’.
Is this compatible with the NT-obligation under GATT? 41

42. EXCEPTIONS TO NATIONAL TREATMENT
1. Government Procurement. Where products are purchased for the use of the government and not for commercial resale. Article III: 8 (a)
2. Obligation not to affect payment of subsidies exclusively to domestic producers. Article III: 8 (b)
3. Internal quantitative regulations relating to exposed cinematograph films. (Article III:10).

43. PART II: LIBERALIZATION OF TRADE

44. Contents 1. Market Access 2. Prohibition of Quantitative Restrictions:
3. Transparency
Quantitative Restrictions
A quantitative restriction is a measure that limits the quantity of a product that may be imported or exported. Examples include quotas, bans on a product,, automatic or non automatic licensing. Unlike other GATT provisions, this Article principally applies to measures and not laws or regulations.
The prohibition of quantitative restrictions also forms one of the cornerstones of the GATT system. Turkey – Textiles, (para 9.63)
Article XI GATT: “No prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licences or other measures, shall be instituted or maintained by any contracting party on the importation of any product of the territory of any other contracting party.”
In US – Tuna Dolphin, the panel found that USA embargoes were inconsistent with Article XI:1 because they were “prohibitions or restrictions” since they banned the import of tuna or tuna products from any country not meeting certain policy conditions. ( Para 5.10).
Consolidation of tariffs: Article II of GATT

45. 1. MARKET ACCESS

46. Bindings / Commitments
A country commits itself to ensure an agreed level of access to its market, on an MFN basis, for supplying countries.

47. Bindings/ Commitments GATT Art. II
Art. II: 1(a)
Each contracting party shall accord to the commerce of the other contracting parties treatment no less favourable than that provided for in the appropriate Part of the appropriate Schedule annexed to this Agreement.
Some exceptions to Art II:1
Anti dumping duties, Countervailing duties
Art XXVIII –re-negotiate concessions
Art IX:3 -Waiver

48. Exercise: Tariff Bindings
Alba, Vanin, Medatia and Tristat are WTO Members and Ruritania is not. In Alba’s Schedule, the bound duty for pocket watches is 25%
Can Alba apply a 15% tariff to pocket watches originating in Vanin and Tristat?
And to pocket watches from Ruritania? 48

49. 2. PROHIBITION ON QUANTITATIVE RESTRICTIONS

50. General Prohibition of QRs
Art. XI:1
No prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licenses or other measures, shall be instituted or maintained by any Member on the importation of any product of the territory of any other Member or on the exportation or sale for export of any product destined for the territory of any other Member.
GATT Art. XI
Non-discrimination in administration of QRs
GATT Art. XIII
Art. XIII:1
No quotas, unless when permitted. Then similarly apply to all WTO members

51. Exceptions to the Prohibition of QRs
Marrakesh Agreement Art. IX:3 (Waiver)
GATT Art. XI:2(c) (Agricultural Products and Fish)
Agreement on Agriculture (Tariffication)
GATT Art. XX (General Exception)
GATT Art. XXIV:5 (Free-Trade Area and Customs Unions)
GATT Art. XXI (Security Exception)
GATT Art. XIX (Safeguards)
GATT Art. XI:2(a) (Critical Shortage of Foodstuffs
or Other Essential Products)

52. Exercise: Quantitative Restrictions
Alba, Vanin, Medatia and Tristat are WTO Members and Ruritania is not.
Could Alba impose import quotas on fresh tuna and frozen lamb meat? 52

53. 3. TRANSPARENCY

54. Transparency: Article X of GATT
Publication of trade regulations, laws etc. Publication before application.
Notification requirements.,
Uniform, impartial and reasonable administration of laws, regulations etc.
Independent legal review
Trade policy review mechanism

55. PART III: PROTECTIVE MEASURES

56. Contents 1. Safeguard Measures 2. Dumping and Antidumping Measures
3. Subsidies and Countervailing Measures
4. State Trading Enterprises

57. 1. SAFEGUARD MEASURES

58. General Safeguard Measures
In specific situations, measures -otherwise contrary to certain basic principles- are available to Members to protect, conditionally and temporarily, their domestic industry against surge of imports

59. Legal Basis for Safeguard Action
General Safeguards: Article XIX GATT and WTO Agreement on Safeguards
BOP Safeguards: Article XII GATT; XVIII:B
Special Sector - Specific Safeguards:
Article 5 of the WTO Agreement on Agriculture

60. General Safeguards: Criteria for Application
As a result of unforeseen developments
A product is being imported in such increased quantities
As to cause or threaten to cause serious injury
To the domestic industry producing like or directly competitive products 60

61. General Safeguards: Forms of Safeguard Measures:
Increased Tariff
Imposition of Quotas
Maximum Duration (Art. 7 Safeguards Agreement):
General Rule: 4 years
Possibility of extending to 8 years if evidence of continued necessity and of adjustment on part of domestic industry
Maximum of 10 years for Developing Countries
Level of the Safeguard Measure (Art. 5 Safeguards Agreement):
“to the extent necessary to prevent or remedy serious injury and to facilitate adjustment”

62. 2. ANTIDUMPING MEASURES

63. Dumping and Antidumping Measures GATT Art VI & ADA
Measures -taking the form of additional duties at the border- are available to Members to defend themselves and/or compensate for the distortion created by unfair trade practices

64. 3. Subsidies and Countervailing Measures

65. Subsidies and Countervailing (Art VI, XVI & SCM Argt)
Subsidies may distort trade.
Some subsidies are prohibited.
Other subsidies are permitted but actions can be taken against their adverse effects.
Actions are either in the form of “direct actions” (Dispute Settlement) or “Additional duties” at the border (Countervailing duties)

66. (1) Prohibited subsidies
GATT Art. XVI (Subsidies)
Agreement on Subsidies (Countervailing Duties)
Subsidies = (i) financial contribution (ii) by Government or Public entity (iii) conferring an advantage (iv) specific to an enterprise or industry.
3 Types of Subsidies
(1) Prohibited subsidies
(2) Authorized - but actionable - subsidies
(3) Authorized - and non-actionnable - subsidies
Action
Accelerated Dispute Settlement proceedings
Countervailing Duties (+ Dispute Settlement)
In principle, None
Uruguay Round

67. 4. STATE TRADING ENTERPRIES

68. State-trading enterprise- Art XVII
State enterprises may distort trade and abuse their specific position as traders.
Disciplines regulate their trade-related activities

69. State-Trading Enterprise
Art. XVII
(a) Each Member undertakes that if it establishes or maintains a State enterprise, …, such enterprise shall, in its purchases or sales involving either imports or exports, act in a manner consistent with the general principles of non-discriminatory treatment ...
b) The provisions of sub para. (a) … shall be understood to require that such enterprises shall, having due regard to the other provisions of this Agreement, make any such purchase or sales solely in accordance with commercial considerations….
GATT Art. XVII
Note Ad Articles XI, XII, XIII, XIV and XVIII:
Throughout Articles XI, XII, XIII, XIV and XVIII, the terms "import restrictions" or "export restrictions" include restrictions made effective through state-trading operations.

70. PART IV: EXCEPTIONS

71. Contents HORIZONTAL EXCEPTIONS SPECIAL AND DIFFERENTIAL TREATMENT
1. Waivers
2. General Exceptions
3. Security Exceptions
4. Regional Integration
SPECIAL AND DIFFERENTIAL TREATMENT

72. Horizontal Exceptions
In certain specific situations - and under certain conditions, the WTO rules and obligations shall not prevent Members to take certain measures which otherwise would be illegal.

73. 1. WAIVERS

74. Waivers NB: General Council clarification: Consensus 1st
Article IX (3) of the WTO Agreement:
“In exceptional circumstances, the Ministerial Conference may decide to waive an obligation imposed on a Member by this Agreement or any of the Multilateral Trade Agreements, provided that any such decision shall be taken by three fourths of the Members...”
NB: General Council clarification: Consensus 1st

75. 2. GENERAL EXCEPTIONS

76. b. Human, animal and plant life or health c. Trade in gold or silver
Art. XX:
Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any Member of measures ….
General Exceptions
GATT Art. XX
a. Public Morals
b. Human, animal and plant life or health
c. Trade in gold or silver 76

77. Article XX: General Exceptions
d. To secure compliance with conforming laws and regulations
e. Prison labour
f. National treasures
g. Conservation of exhaustible natural resources
h. In pursuit of an intergovernmental Commodity agreement
i. Ensure essential quantities to domestic processing industry
j. For acquisition or distribution of products in local short supply.
Export restrictions
Stabilization
Short supply

78. Invoking Article XX GATT as a Defense: Two-Tier Test
Does the challenged measure fall within one of the exceptions listed in Article XX (a)-(j)?
If yes, does it satisfy the requirements of ‘Article XX-chapeau’? 78

79. Invoking Article XX GATT as a Defense: Two-Tier Test
Does the challenged measure fall within one of the exceptions listed in Article XX (a)-(j)?
(b) “measures necessary to protect human, animal, or plant life”: EC-Asbestos/ Thailand-Cigarettes
(d) “measures necessary to secure compliance with”: Korea-Various Measures on Beef
(g) “relating to the conservation of exhaustible natural resources”: US-Gasoline and US-Shrimp 79

80. Invoking Article XX GATT as a Defense: Two-Tier Test
2. If yes, does it satisfy the requirements of ‘Article XX-chapeau’? (US-Gasoline and US-Shrimp)
A means of “arbitrary or unjustifiable discrimination” between countries where same conditions prevail?
A “disguised restriction on trade”? 80

81. 3. SECURITY EXCEPTIONS

82. Article XXI: Security Exceptions
No disclosure of information contrary to essential security interests
No obstacle to any action contrary to essential security interest
relating to fissionable material
relating to arms trade
taken in time of war or other emergency international relations
Is this a “self-judging” exception?
No obstacle to UN collective security

83. 4. REGIONAL INTEGRATION

84. Regional Integration
WTO rules and obligations shall not prevent Members from taking certain measures which otherwise would be illegal, to enter closer integration of their economies

85. GATT Art. XXIV (4): Purpose
Regional integration
GATT Art. XXIV (4): Purpose
The contracting parties recognise....that the purpose of a customs union or of a free-trade area should be to facilitate trade between the constituent territories and not to raise barriers to the trade of other contracting parties with such territories 85

86. 5. SPECIAL AND DIFFERENTIAL TREATMENT

87. Special and Differential Treatment
There are 146 such provisions throughout the WTO Agreements of different nature
aimed at increasing trade opportunities
WTO Members should safeguard the interests of the developing Members
flexibility of commitments
(extended) transitional time periods
technical assistance
provisions for least-developed country Members

88. Special and Differential Treatment
Examples
Article 27 SCM Agreement contains 3 types:
Safeguarding the interests of developing countries (e.g. 27.1)
Flexibility of commitments (e.g. 27.4; 27.7)
Transitional time periods (e.g. 27.3; 27.4)
Article 27.2 DSU - Technical assistance
Article 24 DSU - Least Developed Countries
Article IV GATS - Trade opportunities

89. TAKE HOME ASSIGNMENT
In Member Z’s Schedule of Tariff Concessions, the bound duty for cars is 12%. Can Member Z apply a tariff different from the 12% listed in its schedules?
Is the bound tariff the only charge that Member Z may levy on imported cares?
Yes. Member Z can apply a tariff that is different in 2 instances:
If Z applies a tariff that is lower than the bound tariff in its schedule. But if Z offers a lower rate to Member C, it must apply this rate to all Members.
Z can charge a higher tariff (14%) on non members since WTO obligations do not extend to non Members.
2. No. Member B may, in addition to tariffs, also charge other duties and charges if they are listed in its schedule. (Antidumping duties, Internal taxes like VAT), etc.

90. END