Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. CHAPTER 10 Laws Governing Access to Foreign Markets

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 2 The General Principle of Least Restrictive Trade WTO mandates a balancing test. Thailand: Restrictions on Importation of Cigarettes –The U.S. challenged Thailand's restrictions on imports of cigarettes. Thailand defended them on the basis that they were necessary to protect Thai peoples’ health from the additives in imported cigarettes.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 3 The General Principle of Least Restrictive Trade The WTO panel found the licensing system violated GATT and were more restrictive than necessary. Thailand was encouraged to bring its requirements in line with GATT. Why were they only recommended?

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 4 Technical Barriers to Trade Technical regulation is a MANDATORY law/regulation affecting a product’s characteristics. Standard is a VOLUNTARY guideline established by a private or administrative body.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 5 Protection of Public Health, Safety, or Welfare Testing, Inspections, and Certifications for Compliance with Product Safety, Quality, and Technical Standards and Regulations Sale. –Different countries have different philosophies and take different approaches. In U.S., regulations are set by federal agencies (USDA, FCC, Dept of Commerce, etc.) Why are standards and technical regulations barriers to trade?

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 6 EU Standards and Technical Regulations EU efforts to reduce technical barriers to trade is critical because of the multi-national brands and consolidation of the euro. The EU is attempting to increase its standardization through the “CE Mark”. Once the CE mark is received, the product can be sold throughout Europe without impediment.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 7 Japanese Standards and Technical Regulations U.S. – Japan have long history of disputes. Product standards in Japan are usually based on design characteristics. U.S, in contrast, has standards of performance. What happens when Japanese regulations lack “transparency”? What does the “JIS” mark signify?

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 8 Chinese Standards and Technical Regulations China is still socialist/communist and has a very bureaucratic regulatory framework. Laws are administered by AQSIQ. –Product Quality. –Standardization. –Food Hygiene. Standardization Administrative of China –Coordinate development of standards.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 9 WTO Agreement on TBT 1994—Technical Barriers to Trade (TBT) Agreement. Harmonization, Equivalence, and Mutual Recognition. –Conformity of Assessments. –Main Provisions of TBT apply to all products, agricultural, industrial, and consumer goods.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 10 European Communities:Measures Affecting Asbestos 2001 The WTO found French retsrictions on asbestos a valid technical regulation.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 11 International Organization for Standardization (ISO) International standardization makes design and building and products cheaper and trade easier. ISO certification makes selling in Europe much easier. ISO environmental standards.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 12 Import Licensing Procedures Article XI permits a country to use licensing in a nondiscriminatory, MFN, and transparent fashion to regulate some imports. –Example: a country may want to only allow importation of health products made from sterilized materials. GATT requires “transparency” (published materials available to all countries). WTO Agreement on Import Licensing Procedures.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 13 Government Procurement GATT allows exception to national treatment allowing government to favor domestic supplier. But the new Agreement on Government Procurement (2006) applies only to those countries that signed and applies to goods and services worth 205,000 SDR’s (US $205,000) and construction contracts over 5 million SDR’s (US $7 million).

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 14 Agencies Excluded from the Procurement Rules Department of Defense. Department of Energy. States that have specific exclusions e.g. N.Y. subway cars. Must be Transparency in Procurement Procedures.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 15 General Agreement on Trade in Services (GATS) Includes professional services (e.g., law, accounting, architecture, engineering, etc), health care, insurance, travel, and many others. In 2006 over 80% of U.S. GDP was in services. Similar to GATT rules. First attempt to open up services is very helpful to U.S. Overseen by Council for Trade in Services. Agreement on financial services and telecommunications are separate.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 16 Trade in Services: GATS Recognition of Licensing and Professional Qualifications. The WTO Agreement on Trade in Financial Services. –Signed by over 100 nations. –Promotes efficiency and reduces cost. –Provides consumers with greater choice. WTO Agreement on Basic Telecommunications. –Open telcom markets to foreign competitors.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 17 Trade in Agriculture (1994) Agreement will increase export opportunities. Reduce government subsidies that distort market competition. –Cut domestic programs that support higher prices. –Cut subsidies of exports of farm products. –Convert quotas and non-tariff barriers. U.S.-Brazil Dispute Over Cotton Subsidies (2007). WTO panel agreed that U.S. was not in compliance.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 18 Sanitary Measures Agreement on Application of Sanitary and Phytosanitary Measures (SPS Agreement): a country has the right to protect human, animal and plant life but may not be used to justify otherwise discriminatory conduct.  Codex Alimentarius: International standards for the protection of plants animals and foodstuffs.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 19 EC Measures Concerning Meat and Meat Products (hormones) WTO Panel held that The EC’s ban on the sale of beef containing residues of growth hormones violates the Application of Sanitary and Phytosanitary Measures. The Panel decision was upheld by the WTO Appellate Body in What action has taken place since then?

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 20 Trade in Textiles and Clothing 1974 Multifiber agreement: contained quota limits by country and product GATT agreement on Textiles ends Quota system over 10 year period textiles will be covered by GATT’s regular rules on safeguards and unfair trade. WTO Textile monitoring body.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 21 What about illegal transshipment? Countries try to avoid quotas by shipping to a 3 rd country, relabeling the goods as origination from the 3 rd country, and reshipping. Trade in Textiles and Clothing

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 22 TRIMSTRIMS Uruguay Round of talks. Does not set broad rules. Prohibits laws which condition a company’s right to import foreign goods on the volume of goods exported.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 23 WTO countries agree to abide by intellectual property conventions. Domestic and foreign IPR (intellectual property rights) treated the same. Enforcement strengthened. Members are bringing their laws into compliance with TRIPS. 2000, WTO Dispute Settlement process.TRIPS

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 24 Information Technology Agreement Signed by 70 nations. Called for elimination of all tariffs on computers, telecommunications, software, scientific instruments, etc. by 2005.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 25 Trade Sanctions and Section 301: Threat of Retaliation Section 301 Trade Act Basic 301: USTR retaliate against foreign country. It is discretionary and may be imposed when USTR finds unreasonable discrimination that burdens or restricts U.S trade. –Procedures: filing a petition by company or USTR. Investigation commences and decision within 18 months. –Sanctions are imposed to end illegal foreign practice.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 26 U.S. Trade and Development Act of 2000: The Carousel Law The TDA amends section 301 by requiring USTR to periodically review list of products subject to retaliatory action and revise them 120 days after inception, and every 180 days thereafter. EU and some American importers object to the law.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 27 Special 301 Used by USTR against countries that fail to protect American intellectual property. Each year USTR identifies countries. –Worst offenders are tagged “priority foreign countries” which requires a Section 301 investigation. –USTR also maintains a “watch list.”

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 28 Telecommunications 301 Telecommunication 301: identify foreign barriers to telecommunications firms and requires mandatory retaliation Case: Access to Japanese markets for U.S. cellular phones.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 29 Super 301 Super 301: USTR identifies priority trade practices which pose barriers to U.S. trade. Priority countries with pervasive pattern of discrimination triggers investigation. If no action, then retaliation. Law has since lapsed and is not in effect.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 30 IssuesIssues What should the connection be between human rights or environmental issues and trade law and policy? First, what is a human rights violation? Can you agree? Second, what is the appropriate national, regional, international action? Is unilateral action ever appropriate? Military action?