1 GATT Law and the World Trade Organization: Basic Principles Chapter 9 © 2005 West Legal Studies in Business/Thomson Learning

2 Trade Barriers Tariff or import duty Non-tariff barrier –Embargoes –Quotas –Auctioned quotas –Tariff rate quota Indirect non-tariff barriers: Japanese retail store law

3 GATT Post War Solution Multilateral trade negotiations- reduce tariffs and Non-tariff barriers (NTB) Nondiscrimination and unconditional MFN National Treatment Eliminate quotas and NTB (convert NTB to tariffs and then reduce), transparency very critical

4 Role of Regional Trade Agreements Conflict? GATT recognized Special preferences may coexist Also preferences for developing countries

5 GATT: Then and Now What now WTO? WTO, January 1, 1995 BEFORE- not cover trade in services Not agriculture Not textiles Not intellectual property Not foreign invest. regulation Not effective dispute settlement

Agreement Made Changes Agriculture Textiles Technical barriers to trade Services Trade related intellectual property rights (TRIPS) Trade related investment measures (TRIMS)

Agreement Made Changes Financial services Government procurement (Not a complete list)

8 Gradualism Textiles phased in 2004 After 2000, TRIPS disputes settled by WTO

9 GATT/WTO Dispute Settlement To avoid the possibility of trade wars, the dispute settlement process was strengthened Includes timetables and drops the possibility of one country blocking a decision

10 GATT 1994: Reaffirms Major Principles Multilateral trade negotiations Predictability of trade opportunities Non-discrimination and unconditional MFN National treatment Elimination of quotas and other non-tariff barriers (first convert to tariffs (tariffication) and then negotiate to reduce)

11 Multilateral Negotiations What was the Doha Agenda? What happened in Cancun 2003? Normal Trade Relations: NTR

12 Cases Banana case, (1997) where Appellate Panel found that the United States was entitled to challenge the EU restrictions on banana imports. Panel decisions are “relevant” to future cases but not “binding.”

13 MFN/ NTR Unconditional MFN: if a member extends privilege to another member then that privilege automatically is extended to all members Exceptions- may deny MFN based on national security, foreign policy, or a government’s denial of human rights to its citizens Now referred to as Normal Trade Relations or NTR

14 China and MFN Temporary MFN granted in Tiananmen Square massacre 1994 Clinton delinked human rights and trade for China’s annual renewal of MFN 2000 Congress granted permanent normal trade status to China effective on China’s admission to WTO

15 Quota Loophole GATT’s attempt to eliminate quotas Balance of payment exception allows quotas“ to safeguard its external financial position and its balance of payments necessary to forestall the imminent threat...or a serious decline in its reserves.”

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

17 GATT and the Elimination of Quotas Article XI But must abide by non-discrimination Used for economic and political reasons Balance of payments exception

18 India- Quantitative Restrictions on Imports 1999 The U.S. challenged India’s restriction on imports that it claimed were necessary because of the balance of payments exception to GATT. The panel found that the restrictions were not necessary and gave them a reasonable period of time to implement the changes. This ruling was affirmed by the WTO Appellate body.

19 Politics and Trade Trade is often a political football in the United States and other countries When U.S. approved GATT agreement also passed a bill to review WTO every 6 months Fears of “multilateralism”- why is that a “dirty word” to some?

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

21 Politics and Trade Labor and environmental issues linked to trade? Furthers whose agenda? Is it protectionism in disguise? Conflict between the developing and developed world?