International Trade Outline

DISPUTE SETTLEMENT

Dispute Settlement Under GATT

GATT Art. XXII: Consultations are first step in dispute settlement; sympathetic consideration should be given to
any member that has a problem

GATT Art. XXIII: GATTs principal procedural dispute resolution clause; very little detail; General principle serves
as the basis for DSU and other WTO-related provisions. If one party feels it is suffering nullification or
impairment of its benefits under the agreement, the matter may be referred to the CONTRACTING
PARTIESreplaced, in practice, with the DSU.
Nullification or impairment under GATT seen as:
1) Failure of a CP to carry out its obligations (prima facie case under DSU)
2) Non-violation measure
3) Existence of any other situation (never used or talked about)
A violation is neither necessary nor sufficient.
There must be an injury.
Under GATT, there were no real enforcement mechanisms, as the offending party could stop any
enforcement. Under the WTO, this has changed. Now, an offending party may be forced to suspend
any violative measure, and perhaps pay restitution. The strategy now for an offending party is to
buy time, as much as possible.

Dispute Settlement Understanding of the WTO

WTO DSU:
Principles:
1) Goal is to preserve rights and obligations of members
2) Cannot add to or diminish rights found in WTO agreements
3) Removal of disputed provisions is the main objective, with retaliatory
action the last resort.

DSU Procedures
1) Consultations (DSU Art. 4): Preferred manner of dealing with a dispute.
a. Method of consultations is up to the parties. Must be in good
faith. Many cases end here.
b. DSU Art. 4:3If request for consultation is made, party must reply
w/in10 days and enter into consultations w/in 30 days. If a
respondent fails to do this, complainant may proceed to a panel request.
c. DSU Art. 4:7If consultations fail to resolve dispute w/in 60
days, complainant may request establishment of a panel
d. DSU Art. 4:8---In case of emergency, including perishable goods, members shall enter into
consultations no more than 10 days. If failed consultations after 20 days, the complaining pary may
esblish a panel.
e. DSU Art. 4:11---A party that has a substantial trade interst may join in the consultations. The
other member must agree the substantial interst to join in well founded.
2) Panel Process: DSU Art. 6:1 provides for the establishment of panel at
members request.
a. 3 members to a panel (unless parties want 5), appointed by SecretariatDir.Gen. may appt. if
there is no panel within 20 days of establishment
b. Mostly government officials (~80%), some former Secretariat officials, some trade
lawyers/academics
c. Complainants win ~90% of cases
d. Panel Procedures:
i) Burden on party claiming the affirmative
ii) Any violation is prima facie evidence of
nullification/impairment
iii) Panel must make an objective assessment
iv) DSU Art. 12:8Panel must make its decision w/in 6 mos.
v) Panel issues an interim report for comment; then panel
submitted to DSB, which gains force if there is no action
w/in 60 daysunless there is an appeal.

3) Appellate Body: DSU Art. 17:1 establishes a standing appellate body

Limited to issues of law (DSU Art. 17:6)
7 Body members; 3 to a panel; must decide w/in 60 days (90 tops)
Most appeals affirmed (~80%); no remand possible
Binding, unless DSB decides, by consensus, not to adopt
No binding precedent, but similar cases handled similarly
App. Body (or panel) may suggest ways in which a country can comply with a ruling

4) Implementation and Suspension of Concessions

a. A ruling usually recommends that the offending member cease its
violations. This is monitored, and expected w/in 8 to 10 mos (15 mos.
max.)
b. DSU Art. 22:2Consultation w/ prevailing party possible before end
of time-limit in order to decide on compensation
c. If recommendation are not implemented, prevailing party may seek
compensation, or request DSB authority to suspend concessions
previously made to that member(retaliation) (DSU Art. 22:1).
d. Compensation/suspension of concessions can only be for the amt of
damage being done currently,
e. Retaliation authorized pursuant to DSU Art. 22:6 if parties cannot
agree on compensation.
f. A country cant retaliate for harms occurring prior to the end of the
dispute settlement process
g. The original panel acts as arbitrator during this process to
adjudicate disputes arising regarding compensation/retaliation
procedures (DSU Art. 21:5)
Critical Issues in Dispute Settlement
1) Concept of Nullification and Impairment
a) Violation
b) Non-violation

To prevail under Art. XXIII, complainant must show that either:

1) benefits accruing to it are being nullified or impaired
2) the attainment of an objective of the GATT is being impeded (rare)
And that the nullification or impairment (or impedance) results from:
1) a breach of obligation by the respondent (violation)
2) the application of any measure regardless of its adherence to GATT (non-
violation)
3) any other situation (forget it)
Benefit accruing to it after being nullified or impaired:
European Economic Community Payments and subsidies Paid to Processors and Producers of Oilseeds and
Related Animal-Feed Proteins:
o EC has zero tariff concessions on oil-seeds imported from US. Then provided subsidies. US argued
that they impaired tariff concessions because they upset the competitive relationship between
domestic and imorted oilseeds.
Change in competitive conditions through subsidies is enough to show impairment.
JapanMeasures Affecting Consumer Photographic Film and Paper
Three Elements to demonstrate a claim under GATT XXIII:
1. Application of a measure by a WTO member;
Law or regulation. Doesnt have to be binding, but can e non-binding actions.
Ex: non-violation cases involved subsidies.
2. A benefit accruing under the relevant agreement and
Exsistence of a benefit accruing to a WTO member under the relevant agreement. Must
have legitimate expectations arising out of relevant tariff concessions. specific
measures.
3. Nullification or impairment of the benefit as the result of the application of the measure.
Must show a clear correlation between the measures and the adverse effect on the
relevant competitive relationships. Causation Question:
Must be shown but for or less
The relevance of the origin neutral nature of a measure to causation of
nullification or impairment
Relevance of intent to causality
Extent to which measures may be considered collectively in an analysis of
causation.
In order for an expectation of a benefit to be legitimate in a non-violation case, the complainant must
not have reasonably anticipated the measure complained of at the time of concession negotiations.
Otherwise, it should have known and negotiated about it. Whether a complainant should have known
cannot be determined by looking at a past general policy. But if the measure is clearly w/in the bounds
of a past policy, a complainant might have anticipated it. Case by case determination.
 So, here, What were reasonable expectations of U.S? If the Japanese measure were already in existence,
U.S. should have known. If not, presumed not to be able to have known. Presumption rebuttable if
Japan can show it is a logical next step. Because Japan introduced measure prior to completion of
negotiations, the U.S. should have known about it.
Causation: Burden on U.S. to show that Japans measure upset the expectations of a competitive
relationship. Four issues related to causation:
1. Have the Japanese governments measures had more than de minimis impact on the
nullification/impairment?
2. If, as here, there is no de jure discrimination (measures which on their face discriminate as to
origin), U.S. must show de facto discrimination (measures wich have a disparate impact on
imports.
3. No intent requirement to discrimination.
4. Measures may be looked at in combination with one another.
U.S. loses on causation grounds. Only had expectations w/ regard to B&W film anyways. Not shown
that the various measures have upset competitive relationships.1

As a comlainant, one wants to bring a violation claim, as opposed to a non-violation one. Non-violation cases have
higher BoP.

Implementation and Retaliation Procedures

DSU 21.3: Once a report is adopted, the DSB must meet w/in 30 days to hear D speak about their
intentions re: violation. Three options: a) D can suggest a time period, which must be approved by
DSB; b) a time mutually agreed upon by the parties to the dispute; c) a period determined through
binding arbitration, not to exceed 15 months for the most part.
DSU 21.5: Where there is a dispute about the consistency of the remedial measures,
it shall be referred back to the original panel, if possible. It must report w/in 90 days
DSU 22.2: If D fails to comply then negotiation for compensation must begin; If no
compensation has been agreed to, P may request authorization from DSB to suspend concessions,
pursuant to 22.6.
DSU 22.4: The suspension of concessions can only equal the level of nullification or
Impairment
DSU 22.6: The DSB, upon request, shall authorize suspension of concessions upon
expiry of reasonable period of time. If D objects to process, matter shall be sent to arbitration, which
will be carried out by original panel if possible. Panel must report w/in 60 days, before which
concessions may not be suspended.

Unilateral Retaliation under the nations own laws for trade dispute:
Consistent with the WTO?
o When it cloflicts it must file a parallel action in the WTO
Section 301 of U.S. Trade Act of 1974
Invoking 301: 1) party petitions USTR (or sua sponte); 2) USTR investigates; 3) Need not decide in reference to
intl commitments, can find an injury by itself; 4) USTR takes action: a) mandatory when U.S. trade rights are
being denied (tho prez has final say); b) discretionary when other countrys measures are unreasonable,
discriminatory, or burdensome
Special 301: IP issues
Super 301: Against certain priority nations

USTR can conceivably take any trade-related measure it wishes under 301. Good or bad?
Good: Weakness of GATT demanded ability to respond to violations of other countries obligations (this
argument is moot after WTO); 301 simply determines which part of the government will act, here the executive
branch (like in all other countries); Good outcomes in the form of liberalized trade?
Bad: Escape clause that undermines confidence in system; Non-violation route under WTO provides a
route for U.S. to take so that 301 is unnecessary; Unfair for one country to call its own shots

U.S.Sections 301-310 of the Trade Act of 1974

EU argues that USTR can determine whether US rights have been denied even absent a DSB report. $ lost
from such a violation cannot be compensated; Panel agrees, but recognizes that such a finding is not
mandatory.
Panel: Under Art. XXIII, the WTO has exclusive authority to determine if an inconsistency has occurred, the
reasonable time period in which a nation can implement DSB recommendations and the level of
suspension of concessions that can be imposed as a result of a violation.
Legislation may be found to be violative, even if never applied; Thus, an Art. XXIII violation can occur by an
ad hoc action or a general measure
Issue, then, is whether only mandatory or also discretionary national laws are prohibitedDoes 304
violate DSU Art. XXIII?
Because 304 allows the U.S. to exercise its discretion whether to violate Art. XXIII, Panel finds it
presumptively violative.
Panel finds it a bad faith action to maintain a system that provides for the possibility of circumventing
the U.S.s WTO obligations, even if U.S. promises not to do so (counterargument: any country can, if it
chooses, create and implement policies that violate WTO obligations; 301 just streamlines process)
Though 301 is presumptively, a violation, an SAA submitted to Congress promises to base any
determination of violation on DSB findings. Since the USTR could not find discrimination absent a DSB
finding the same thing, 301 was all good.

DOMESTIC IMPLEMENTATION OF WTO TREATIES

Executive--President: Article II vest the President with particular responsibilities over foreign affairs and
the power to negotiate and make treaties and international agreements.
Legislative Branch: Aritcle 1, section 8 of the U.S. Constitution grants Congress the power to regulate
commerce with foreign nations. Legislative approval by 2/3 of the Senate.
The Judicial Branch: United States Court of International Trade (CIT), a national court established under
Article III of the Constitution.
Trade Promotion Authority:
Congress accords the President authority, limited in time, to negotiate an international trade agreement
and the President agrees to involve key members of Congress in the negotiations as they progress.
Elements are as follows:
o Notification by the President of intent to negotiate;
o Continuous contemporaneous consultations with key congressional committees;
o Notification of intent to conclude an agreement;
 o Expedited congressional action by both the House of Representatives and the Senate, and a vote in
both Houses on the agreement in question, without amendment or reservations, within a limited
period (usually sixty legislative days). Must be only majority vote instead of the usual 2/3 approval
of the Senate.

United States v. Capps, Inc.

Facts: Government agreed to purchase all potatoes grown by eligible American farmers that could not be
sold at commercial prices. To protect US market from foreign competition, the secretary of state entered
into an agreement with Canada that it would buy potatoes, but that they could only be used for seed and
not for food. A US company bought Canadian potatoes and resold them. US gov sues.
Breach of power by the executive. The power to regulate interstate and foreign commerce is not among
the powers incident to the Presidential office, but is expressly vested by the Constitution in the Congress.
No breach of contract between US corporation and Canadian Corp. No relief granted to gov.

Dames & Moore v. Regan

Facts: President Carter issued a series of executive orders to negotiate the release of US hostages. Part of
the agreement was to suspend all existing claims of Iranian defendants in federal courts. Dames & Moore
had brought a breach of contract action against several Iranian defendants, so they filed suit against gov.
Arguments:
o Companies: actions are beyond the presidents constitutional power
o Government: relies on IEEPA as authorization for these actions-this is a congressional act.
Rule of IEEPA:
o The President may void or nullify the exercising by any person of any right, power or privilege with
respect to any property in which any foreign country has any interest.
Holding: Court thinks both the legislative history and cases interpreting the TWEA fully sustain the broad
authority of the Executive when acting under this congressional grant of power. However, even though
there is authorization to the President to nullify the attachments and order the transfer of Iranian assets,
the President cannot authorize to suspend claims pending in American courts.
Reasoning: The claims of American citizens against Iran are not in themselves transactions involving
Iranian property or efforts to exercise any rights with respect to such property.

Crosby v. National Foreign Trade Council

Facts: state of Massachusetts adopted a law to bar entities from buying goods or services from any person
identified on a restricted purchase list of those doing business with Burma. Federal government had a law
where it imposed three sanctions on Burma and gave the president discretion on waiving sanctions if
there were humanitarian improvements or would be contrary to national interests.
Can Massachusetts impose a law that affects international trade and commerce?
Rule: General principle of the Constitution is that Congress has the power to preempt state law. There are
at least two circumstances in which state law must yield to a congressional Act:
o When congress intends federal law to occupy the field, state law is naturally preempted to the
extent of any conflict with a federal stattue
o Preemption where it is impossible for a private party to comply with both state and federal law and
 o Where under the circumstances of a particular case, the challenged state law stands as an obstacle
to the accomplishment and execution of the full purpose and objectives of Congress.
First: There is an obstacle to the accomplishment of Congress full objectives. Congress gave consent to the
President to waive or further increase measures against Burma depending on humanitarian goals. The
statute is permanent and restrains the objectives of Congress. Second: Congress has exempted certain
conduct from sanctions & state law conflicts with that. Third, the state Act is at odds with the Presidents
intended authority to speak for the US (Congress express command).

MOST-FAVORED NATION TREATMENT (MFN)

GATT Ar.t I: With respect to customs duties and charges the method of levying such duties and charges all
rules and formalities all matters referred to in Art. III (2) and (4) ANY advantage, favor, privilege or immunity
granted by an y 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.
GATT Art. III (2) internal taxes or other internal charges
GATT Art. III (4) laws, regulations and requirements affecting internal sale, offering for sale, purchase,
transportation, distribution or use.
Guiding Principles:
Unconditional treatment. The favor that you accord one country must be applied unconditionally to
the like products of all Member nations. Belgian Family Allowance.
o MFN applies to imports from ALL WTO countries equally. (EC Bananas)
o A WTO Member is obligated not to charge a WTO member country a better measure than ANY other
country (including non-members).
There is no MFN obligation to non-Members of the WTO.
MFN In Three Major Agreements:
o Article 1.1 of GATT.
o Article 2 of GATS.
o Article 4 of TRIPS.
Elements: (1) any trade advantage given by a contracting party to a product originating in (2) any other
country must be (3) immediately and unconditionally given to (4) like products originating in WTO
member states.
Doctrine of Legitimate Expectations: If the importing country does not give the exporting country the
treatment that country expected, then that will be a non-violation compensable under GATT Article 23.
Scope of Art. 1:
o Border measures applied at a point of entry that are fiscal (e.g., customs duties) or non-fiscal (e.g.,
methods for levying duties, rules, and formalities);
o Internal measures that are fiscal (e.g., internal taxes or non-fiscal (e.g., internal law and regulations).

Value Provided by MFN:

Transparency/Predictability: Both governments and private actors are better able to predict
tariffs.
Promotes Trade Liberalization.
Fairness: Avoid disputes through equal treatment and non-discrimination.
Simplification: There is no checking of whether tariff schedules have change or complicated
calculation of avoiding penalties its all there on one schedule.
Problems with MFN:
Free-Rider Effect: Countries wont give concessions because everyone has to meet the same
standard.
Disturbs Foreign Policy: Removes foreign policy discretion from governments who wish to use
their tariffs as a means to promote human rights or other policies.

Exceptions to MFN in GATT:

GATT Article VI : Anti-dumping or countervailing duties under GATT Article VI may be levied
only on goods from certain targeted countries, when warranted, without regard to Article I.
GATT Article XIV: Discrimination is permitted allowing some targeting in connection with
applying safeguard trade restrictions and balance of payments trade restrictions.
GATT Article XXI: National security trade restrictions may also be targeted.
GATT Article IX: Establishes permission of WTO members to request authorization for a waiver,
on a temporary basis, of WTO obligations, including MFN obligation.
GATT Article I:2, I:3, I:4 allow special treatment for trade with certain current and former
colonies and associated states:
o Preferences for developing countries under the Enabling Clause and
Enabling Clause: allows countries to give preferential treatment to developing countries
without having to extend the same treatment to all other WTO members.
o Preferences for customs unions and free trade area.
TRIPS: Does not contain explicit exception to MFN for intellectual property rights
o Footnote 1 of TRIPS: it is possible for members to form a separate customs area and to treat all
nationals in the customs area effectively as one group of nationals for National Treatment
purposes.
Ex: would allow the European Union, itself a member of the WTO, to provide a certain
level of treatment for intellectual property rights to all nationals from all EU member
states without being required to extend the same treatment to all other WTO members.

Comparing Bindings and MFN:

GATT Article I: MFN (about the actual tariffs that are imposed)
o Cannot charge another WTO member country a higher tariff than is imposed on ANY other
country (member or not).
GATT Article II: Bindings (maximum limitation on tariffs)
o Each contracting party shall accord to the commerce of the other contracting parties
treatment no less favorable than that provided for in the GATT schedule.
o Government is obliged to adhere to this schedule, and this schedule applies to all member
countries.

HYPO: Country A has a 10% tariff on widgets from country B, and a 5% tariff on widgets from country C.
Is there a MFN violation? (GATT applies)
Rule: A country cannot exceed its bindings.
o If As binding for widgets is 15%, then A has not violated its binding under the WTO schedule.
 Rule:
o Actual tariffs are what is at issue in GATT (1:1) and are of concern in MFN violation cases.
o The tariffs listed in the hypo are the actual tariffs that A is imposing.
The validity of these tariffs depends on whether the countries are parties to the WTO.
o There is no MFN obligation to non-parties.
o However, a WTO nation is obligated not to charge a WTO member country a better tariff rate
than ANY other country.
Cannot charge a non-party less than it charges a party country, or some WTO countries
better tariff rates than others.

Belgian Family Allowances

o Facts: Norwegian and Danish sued because Belgium put a levy on foreign goods purchased
by public bodies when the goods originated in a country whose system of family
allowances did not meet specific requirements.
o Holding: The levy was to be treated as an internal charge within the meaning of paragraph
2 of article III of the general agreement, and not as an import charge within the meaning of
paragraph 2 of Article II. But internal measures are included as discriminatory.
o Belgian legislation would have to be amended insofar as it introduced a discrimination
between countries having a given system of family allowances and those which had a
different system or no system at all, and made the trading of the exemption dependent on
certain conditions.
o Tax treatment inconsistent with GATT Article I:1.

Regime for the Importation, Sale and Distribution of Bananas (EC Bananas Case): EC had a
preference program, that the bananas from their traditional supplying countries were getting better
treatment than other importers. EC Argument: (Separate Regime Argument) We have a regime for
these traditional suppliers, and then a separate regime for all other bananas. Thus, the MFN requirement
should be applied individually to each regime. Holding: Cannot subdivide MFN treatment. Importance:
MFN applies to imports from ALL WTO countries equally.

Resolving MFN Claims: Unroasted Coffee Case and Dimension Lumber Case

Factors to Look at to Determine Like Products that Should Fall Under Same Actual Tariff
Schedule:
Are the products sold together, such as in a blend? (Spanish Coffee)
Are the products generally considered the same product by consumers? (Spanish Coffee)

Unroasted Coffee Case (Brazil v. Spain): Leading case on treating as like products, products that
had different tariff classifications. Spain imposing a different tariff on coffee depending on various
organic factors, such as its geography, cultivation and aroma. Issue: Whether the unroasted coffee from
one country was different from the unroasted coffee of another. Holding: The different coffees were
like products.
Rationale:
o The beans are sold as a blend.
o Coffee is generally accepted as the same product.
 Charnovitz says this case would be a much closer call today: Now the market for coffee
differentiates on very subtle traits, such as geography and how the coffee is grown.

Doctrine of Legitimate Expectations

Doctrine of Legitimate Expectations: If the importing country does not give the exporting country the
treatment that country expected, then that will be a non-violation compensable under GATT Article 23.

Treatment by Germany of Imports of Sardines:

Holding: The Norwegian Government is justified in expecting the four preparations of sardines
the same because it had a reasonable expectation Germany would do so.
There was not a violation of Article 1, but rather a reasonable expectation on Norways part
that Germany would not treat the preparations less favorably.

NATIONAL TREATMENT

National Treatment Clause: Internal taxes applied to the imported product, cannot be in excess of the
taxes imposed on the domestic like product.

Guiding Principles:
National Treatment in the WTO:
o GATT Art. 3.
o GATS Art. 17.
o Scope of imports covered between GATS and GATT is different:
GATT covers ALL imported products.
GATS applies just to services in the schedule. (narrower rule)
National Treatment Claim has got to be predicated on the fact that the import once inside the
market, is not being treated as well as a like or substitutable product in the domestic market.
There need not be any actual domestic product, if the law is facially in violation of Art. 3. (e.g.,
imports will be sold at 10% higher price than domestically-produced product).
Benefits of National Treatment: Prevents Circumventing of Tariff Commitments. If governments
were able to place internal taxes on imports higher than the domestically-produced product, this would
have the effect of placing a protectionist tariff on the imports.
Drawbacks of National Treatment: Restricts the Sovereignty of a Government. Prevents use of
taxes in certain circumstances when trying to promote domestic policies and improve domestic
economies.
o States should be deserved the flexibility to exercise taxes and regulations to protect domestic
producers and improve its economy.
GATT Art. 3 is not about tariffs, its about internal taxes and regulations.
Scope of National Treatment:
o National treatment is generally about how a product is treated, once it crosses the border.
o However, if there is a domestic policy that prevents a product from coming into the country, this will
also be treated under Article III National Treatment policy.
 Border Tax Adjustment: This sort of adjustment is permitted on the principle that imports must be
taxed to come into compliance with the taxes domestic producers face.
National Treatment is Not About Trade Impact, Its About the Ability to Compete on Equal
Footing: So any different treatment is going to be a violation of Article III.4 even though it might not
actually diminish exports. (Korean Beef)
See page 492 for analysis of modern interpretation of Article III (National Treatment).

GATT Article 3:
1) Internal taxes, regulations, other internal charges, and requirements affecting internal sale should
not be applied to imported or domestic products so as to afford protection to domestic
production.
Not a rule that can be violated in itself, but rather is a principle that infuses the other parts of
Art. 3.
2) Tax Policy. (Divides into First and Second Sentence.)
If a government places a different, less-favorable tax on products made abroad, versus like
products made domestically, then the tax on the domestic product would be a violation of
Article 3.
First Sentence: 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.
o Per se violation where like products.
Second Sentence: 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.
o Only inquire as to an alleged violation of the second sentence, once its been determined there
is no violation of the 1st sentence.
o Ad Note: You can be inconsistent with the 2nd sentence only where competition was
involved between the taxed product and a directly competitive or substitutable product
which was not similarly taxed.
Where these circumstances exist, you can get an Art. III(2) second sentence violation.
3) Regulations. The imported product should be accorded treatment no less favorable in laws,
regulations, and requirements than that accorded the like domestic product. (See Italian
Agricultural Machinery Case: Affect is interpreted liberally.) Includes in jure like Italian case
where it was given loans for agricultural machinery at low percentages with the condition they
had to buy Italian machinery not foreign.
The imported and domestic products must be like products
The measure in question must be a law, regulation, or requirement affecting their internal
sale, offering for sale, purchase, transportation, distribution, or use and
The imported products must be accorded treatment that is less favorable than treatment
accorded to domestic products.
Means differences in treatment for imports and domestic products are not conclusively in
violation of article II:4, but the WTO member applying differential treatment has the
burden of showing that the no less favorable standard is satisfied.
Analysis Under GATT Art. 3.2 First Sentence: Where Like Products.
Have to determine whether like products.
o Likeness is determined by weighing factors, such as products end-use, consumer taste
habits; property, nature, quality, and tariff classification.
o Accordian Concept: Construe likeness narrowly because there exists a second sentence
which gives a broader application of the Article.
o Intent does not matter in determining whether the products are like products.
And have to show that imported product has a tax in excess of the domestic product.
o Any higher tax, no matter how incremental, would be a violation.

Three-Part Analysis Under GATT Art. 3.2 (Second Sentence): Only do second sentence analysis where
youve already determined no violation of the first sentence.
Are they directly competitive or substitutable products?
o Look at the market to determine.
o Substitutability: Would a consumer look to price or availability to determine whether to
buy one or the other?
Are the products similarly taxed?
1. The difference in taxation may not be de minimus.
2. Requires taxes not be similar, rather than merely in excess as the first sentence requires.
So as to afford protection to domestic production.
o The design, the architecture and the structure of the measure reveal its protective
application.
o Do not consider intent of the tax.
o EX: That the taxes are so much higher for the imported products reveals a protective design.

Two Types of GATT Article 3 Discrimination:

De Facto/Implicit Discrimination: Compare the actual treatment given to see what effect the
domestic laws are actually having.
o Look at the burden the taxes have on the import.
o OK if the law itself states that certain imports pay higher taxes that domestic products do not
have.
EX: Border Tax Adjustment: This sort of adjustment is permitted on the principle that
imports must be taxed to come into compliance with the taxes domestic producers face.
Facial de Jure/Explicit Discrimination: The law on its face is fundamentally unfair.
o High tax on imports, low tax on domestic product.
o Does not matter if the Member does not produce the imported product domestically, because
the tax scheme is facially unfair.

GATT Art. 3.2 Cases

HYPO: A WTO member has an excise tax (domestic tax).

The tax is 15% on foreign apples.
0% tax on domestically produced apples.
 Is the tax an Art. III(2) violation? YES.
o Other issues:
Article 20 provides exceptions.
What if A does not domestically produce apples?
o This is not relevant to the analysis.
o The law, on its face, violates Article III(2) without knowing how many apples member A has.
What if you are attorney to a country that does not have a domestic apple production?
o Re-write the language to say all apples are taxed at 15%.
o Thus makes the tax equally applicable to everyone.
o It does not matter that, in practice, this tax only affects foreign producers.

HYPO: WTO Member A has the following excise tax:

15% on apples from USA
10% on apples from other countries
0% on domestically produced apples
What WTO/GATT violation might exist?
o Violates GATT Art. 1.1: USA is being treated less favorably than other countries.
o Violates GATT Art. 3.2: Places higher tax on imports than on domestically-produced like
products.

GATT Art. 3.4 Cases

HYPO: Taxed imported product is apples, which are not domestically produced. The country does
domestically producer pears, and the excise tax on pears is 0%.
Is this a violation of GATT Art. III(2) second sentence? NO
Art. 3.4Analysis:
o Are they similarly taxed?
Not similarly taxed.
o Are they directly competitive or substitutable products.
Not clear. Have to look at the market.
Japan---Taxes on Alcoholic Beverages: Japan imposed a liquor tax on vodka, looked at both first and second
sentence above.

Italian Discrimination Against Imported Agricultural Machinery: (GATT Art. 3.4 Case) Britain
challenged the special credit terms given for the purchase of Italian agricultural machinery is a de jure
violation of Art. 3 because it treated imports differently from domestic machinery. Holding: Because the
credit terms favor the ability to the domestic product to be bought over the import, this activity is in
violation of Art. 3.4. Importance: GATT Art. 3.4 applies to all requirements relating to the sale of
imported products.

Panels Analysis:
Credit Arrangement Argument. Italy contends that GATT Art. 3 does not apply to credit
arrangements, only to trade itself.
o Article 3.4 provides that a domestic measure that affects the ability of an imported product
to be bought or sold in your country, will be treated as a regulation coming into the behavior
 proscribed by Art. III.
o Because the credit terms favor the ability to the domestic product to be bought over the
import, this activity is in violation of Art. 3.4.
Subsidy Argument. Italy contends that this is a form of subsidy given directly to the
manufacturer, legal under GATT Art. 3(8)(b).
o Doesnt fit with Art. 3(8)(b) because the subsidy in fact goes to the purchaser of the product,
not the manufacturer.
KoreaMeasures Affecting Imports of Fresh, Chilled and Frozen beef: Korean law required existence of two
distinct retail distribution systems where small retailers had to choose between imported beef or local. The
majority chose local, so panel said separation is does not conclude treatment less favorable, but had to ask
whether or not the Korean dual retail system modifies the conditions of competition at the disadvantage of
imported product. Concluded it was less favorable. The law is a violation of Art. 3.4. Exceptions: (1) The
measure must be required to secure compliance with laws or regulations that are not themselves inconsistent
with some provision of the GATT. (2) The measure must be necessary to secure such compliance.
Necessary means determined by whether a WTO consistent alternative measure, which the member
concerned could reasonable be expected to employ is available, or whether a less WTO inconsistent measure is
reasonably available.
Korea has to prove other measure is not reasonably available or this law is not unreasonably burdensome. Korea
did not demonstrate that.

United States Section 337 of the Tariff Act of 1930: (This is a case against the law, as such, not about
a specific product.) The law gave complaining parties claiming patent violation of imported products, a
right to choose which forum it wished to bring its case in it could even chose to bring the claim in both.
This also resulted in a different procedure being available to the claimant. H: The law is a violation of
Art. 3.4. The Panel stated that the Italian Case controls because the laws affect the internal sale of
imports.

Central Point that Makes This Case Easy for the Panel: The fact that the domestic claimant had a
choice and the exporting country did not, gave the domestic claimant a clear advantage over the foreign
party. (facial violation)

GATT Art. III(4) TEST: Is the treatment given the foreign product/manufacturer less favorable than the
procedure/treatment for domestic goods?

Customs and Tariff Law

Examine the reduction or elimination of barriers to the trade in goods.

Barriers to trade in goods:
o Tariffs: a duty tax imposed on goods at the point of entry.
o Non-tariffs barriers: a catch all category comprising the myriad ways of limiting imports other
than by using tariffs.
Tariff Concessions:
o Bound means limited to ceilings on tariffs
Developed country members have agreed to bind 99% of their tariffs
Developing countries have bound 73%
Economies with transition have bound 98%
 Types of Tariffs
o Ad valorem: a charge that is expressed as a percentage of the value of the product in
question.
o Specific tariff: a flat charge on a quantity of the good. E.g. $10 per item, $3 per kilo.
o Mixed tariff: combines aspects of ad valorem and specific tariff; e.g., $5 kilogram plus 10% of
value.
o Tariff rate quota (TRQ): is a sliding scale tariff; e.g., a 10 percent ad valorem tariff imposed
on the first 10k tons of imported product, then an 80% ad valorem imposed on all quantities
above the quota limit (the out of quota amount).

Problems of Tariff Negotiation

MFN obligation restrains willingness to make concessions because of free rider
effect. Formula reductions (linear negotiations) are meant to deal with this, calling for a
presumptive reduction of X%, with exceptions to be negotiated. This can be unsatisfactory because
countries start w/ different tariff levels
Reciprocity principle: equally beneficial cuts are sought, but it is unclear how
much of an effect cuts in tariffs actually have in light of the numerous
other factors that impact price levels (e.g. exchange rates).

Obligation to Limit Tariffs (Tariff Bindings)

Codified in Art. II of GATT
A countrys GATT schedule is the highest level of tariffs that may be levied vis--vis the relevant trading
nation. The tariff actually levied, the national tariff schedule, may be lower (e.g. if applied to a nation in the
same FTA/Customs Union).
NTBs are limited to protect effect of tariff bindings
A subsidy granted on products covered on a nations schedule (after it has been negotiated) is a prima
facie nullification for purposes of Art. XXIII.

Art. II:1(a)Tariff levels shall be no higher than the relevant schedule indicates
Art. II:2(a)Internal taxes on imported products are allowed as long as the same tax is
applied to domestic products

Renegotiation of Tariff Bindings

Art. XXVIII governs this
Two types of modification:
1) Temporary suspension
2 Permanent modification

New Bindings: May result from a) new negotiating round; b) new member accession;
c) ad hoc negotiations not conducted under auspices of WTO (though MFN will still apply).

Renegotiations/Modifications/Rectifications of Bindings:
1. Reopening every 3 yrs. (XXVIII:1)Every 3 years, bindings may be reconsidered/adjusted/withdrawn.
These triennial rights may also be reserved for later.
2. Art. XXVIII:2the general level of trade should remain about the same after renegotiations occur
 3. Suspension of concessions in response to a XXVIII:1 withdrawal if a binding is withdrawn, countries
who suffer from its withdrawal may suspend concessions to an extent equal to their loss (XXVIII: 3(a))
4. Special Circumstances Negotiations (XVIII:4) Subject to 1 & 2, with authorization from the CP, a party
may seek withdrawal of concessions granted; negotiations required; if none achieved, party may
withdraw its concessions, and any party affected may do the same in an equivalent manner.

Upon the formation of a CU, XXVIII is meant to provide the guidelines through which concessions may be
renegotiated. But it is not very helpful, partly because it is so skeletal. When the EU established its CAP, it raised
the tariff on chicken parts, hurting the U.S. The U.S. then indicated its intention to withdraw some concessions to
the EU, but the parties could not agree on the right value. A special panel was set up that split the difference, and,
because MFN applies to the withdrawal of concessions, the U.S. tried to target EU-supplied products.

A similar problem arose when the UK, Ireland and Denmark joined the EU. Under the CAP, U.S. agricultural
products faced higher tariffs, which it sought to be compensated for.

Customs Law
Customs law has a major impact on trade flows.
Customs officials must make three crucial determinations:
1) Classification of goods according to tariff schedule
2) Valuation of goods to apply ad valorem tariff
4) Origin determination to apply correct rate

The GATT imposes some intl standards on customs procedures to be followed by GATT parties. Art. X, for
instance, requires that regulations be published promptly, be made available and that appeals be heard by
competent tribunals. There are also limits on the fees, formalities and penalties than be imposed (Art. VIII) and
limits on origina marking requirements by imposing MFN requirements (Art. IX).

US Law:
o Most tariffs in the Us are ad valorem.
o Calculation of the amount of duty depends on three issues:
Classification
Valuation
Origin of the goods
o Read for Valuation
WTO Agreement on Implementation of Artcle VII of the General Agreement on Tariffs and
Trade 1994 (Valuation Agreement)
WTO Agreement on Rules of Origin
o Classification: adhere to the Harmonized System Classification.
Argentina--Measures Affecting Imports of Footwear, Textiles, Apparel and Other Items
o Facts: Argentinas GATT Schedule provided for ad valorem duty rates, but used minimum specific
import duties know as DIEM.
o Issue: Whether the DIEM system is a violation of GATT Article II.
o Rule:
Article II:1(a) require that a member accord to the commerce of the other Members
Schedule.
 Article II:1 (b)the products described in Part I of the Schedule shall, on their importation
into the territory to which the Schedule relates, be exempt from ordinary customs duties in
excess of those set forth and provided therein. That means that it requires a member to
refrain from imposing ordinary customs duties in excess of those provided for in that
members schedule.
A tariff binding in a members schedule provides an upper limit on the amount of duty that
may be imposed, and a Member is permitted to impose a duty that is less than that provided
for its Schedule.
o Analysis: DIEM when applied makes lower priced produced have a tariff duty that is higher. Ex: a
specific duty of $10 collected on all imported products in a certain tariff category, is equivalent to
10 percent ad valorem if the price of the imported product is $100; however, it is equivalent to 20
per cent ad valorem if the price is only $50.
o Conclusion: The application of a type of duty different from the type provided for in a Members
Schedule is inconsistent with Article II:1 (b), to the extent that it results in ordinary customs duties
being levied in excess of those provided for in that members schedule.
Problem 5-4
o Country Fs GATT bound rate for agricultural products is 10% ad valorem, but it also imposes a 1%
administrative charge for shipments over a certain size to cover expenses by its customs
authorities. It argues that it is so that they are processed rapidly so that the products won't go
spoiled. Is this practice lawful?
o Yes. GATT Article II:2(c): Nothing in this Article shall prevent any contracting party from imposing
at any time on the importation of any product:fees or other charges commensurate with the cost of
services rendered.
commensurate with the cost of services rendered: have to show the cost of additional
services.
o STANDSTILL: exempt from all other duties or charges of any kind
Exceptions for taxes on like domestic products, antidumping or countervailing duties, fees
for inspection and other similar services.

The Harmonized Tariff System of the United States

Structure of the HTSUS

o General: is the applicable GATT bound rate. These are the rates that the United States applies under
the Most Favored Nation principle to goods from all WTO members.
o Special: is the rate that applies to countries what enjoy preferences, either as a member of a free
trade agreement with the US or as a beneficiary of a special program of preferences for developing
countries.
Under the exception to the Most Favored Nation principle contained in GATT Article XXIV:5,
the US is not required to extend preferences and trade benefits created under free trade
agreements to other WTO members.
o Column 2 is the rate for non-WTO members. This is also referred to as the statutory rate and is
the tariff rate imposed by the Smoot-Hawley Tariff Act of 1930, which set the prevailing rates in the
US prior to the GATT 1947.
US Custom Proceedings
o Customs duties assessed at port of entry
 o U.S. Customs and Border Protection Service
o Importer determines classification of goods and pays estimated duties; can request binding letter
ruling
o Customs Service makes the final determination of duty
o Liquidation can be protested at agency level in administrative proceeding
o Judicial Review of Agency Determination
Court of International Trade
Art III court with subject matter jurisdiction over trade cases
Exclusive jurisdiction to review denial of protest in customs duty cases
Conducts de novo review
Court of Appeals for Federal Circuit
Supreme Court

Factors to Look at to Determine Like Products that Should Fall Under Same Actual Tariff
Schedule:
Are the products sold together, such as in a blend? (Spanish Coffee)
Are the products generally considered the same product by consumers? (Spanish Coffee)

Unroasted Coffee Case (Brazil v. Spain): Leading case on treating as like products, products that
had different tariff classifications. Spain imposing a different tariff on coffee depending on various
organic factors, such as its geography, cultivation and aroma. Issue: Whether the unroasted coffee from
one country was different from the unroasted coffee of another. Holding: The different coffees were
like products.
Rationale:
o The beans are sold as a blend.
o Coffee is generally accepted as the same product.
Charnovitz says this case would be a much closer call today: Now the market for coffee
differentiates on very subtle traits, such as geography and how the coffee is grown.

Dimension Lumber Case (Canada v. Japan): Canada challenged that Japan charged different tariffs for
the same quality lumber. Specifically, it wanted the same 0% tariff on dimension lumber that Japan put on
similar types of lumber, used for similar purposes. Japan had different tariffs on different lumber, based
on factors it claims made the lumber not like products.
Canadas Argument: Japan should treat all dimension lumber the same.
o Canada failed to prove likeness
o Canada likely didnt argue likeness because it was worried about reciprocity that it had all
sorts of distinctions in its code that it did not want abrogated.
Japans Argument: Japan contended that it does not have a tariff classification for dimension
lumber, and the panel found that Canada cannot invent new categories for Japans trade code it
must work within Canadas trade code.
Holding: Because Canada did not argue its case well, the panel found for Japan and held the
lumber was not a like product.
Importance: Panel said countries can go beyond the Harmonized System, but cannot
discriminate among like products originating in different contracting parties. The panel aslo said
that a claim should be based on the classification of the importing countrys tariff.
ECCustoms Classification of Frozen Boneless Chicken Cuts
EC reclassified chicken cutes of chilled or frozen boneless chicken under Aricle 5 of the WTO Agreement
on Agriculture that creates a special safeguards permitting much higher tariffs. EC invoked Article 5. The
other much lower tariff is salted for the purpose of preservation.
Panel put constrain on WTO members both from reclassifications that move products into higher tariff
categories and from automatically generating, high-tariff classification for new products.

Valuation

Applied to ad valorem: customs valuation is a customs procedure applied to determine the customs value of
imported goods. If the rate of duty is ad valorem, the customs value is essential to determine the duty to be paid
on an imported good. Ad valorem: a charge that is expressed as a percentage of the value of the product in
question.

(1) Tokyo Round Valuation Code: Custom Valuation based on the price actually paid or payable for the
imported goods. Based on the transaction value.
Applies only to the valuation of imported goods for the purpose of levying ad valorem duties on such
goods, not valuation for purposes of determining export duties or quota administration etc.
(2) Deductions from transaction value are also permitted under some circumstances.
(3) Exception (Customs Valuation Agreement Articles 1-6): If transaction value cannot be used (because, for
example, the sale is not an arms length sale but is between related parties) then the following methods are used
in order:
Transaction value of identical goods;
Transaction value of similar goods;
Deductive value
o Defined as the price at which the imported goods, identical, or similar goods are sold in greatest
aggregate quantity to unrelated persons in the country of importation with deductions for
commissions, profits, general expenses, transportation, insurance, customs duties, and other costs
incurred as a result of selling the goods;
Computed value
o Determined by summing the cost of producing the goods in the country of export, including an
amount for general expenses, profit, and other expenses.

Colombia-Indicative Prices and Restrictions on Ports of Entry:

Against WTO Customs Valuation Agreement since Colombian customs authorities valued certain imported
products based upon the average production price of imported goods, when data was available, or on the lowest
price actually negotiated for exportation of the product into Colombia.

Problem 5-16
Article 8.1(b) says that an importer should not be allowed to circumvent payment of a duty on the full value of
the import by providing certain materials on a cost-free basis to a foreign-based manufacture. If the costs of these
materials are excluded from dutiable value, the importer might be able to avoid payment of duties that are
lawfully due.
1. In determining the customs value under the provisions of Article 1, there shall be added to the price actually
paid or payable for the imported good
(b) the value, apportioned as appropriate, of the following goods and services where supplied directly or
indirectly by the buyer free of charge or at reduced cost for use in connection with the production and sale for
export of the imported goods, to the extent that such value has not been included in the price actually paid or
payable(59):
(i) materials, components, parts and similar items incorporated in the imported goods;
(ii) tools, dies, moulds and similar items used in the production of the imported goods;
(iii) materials consumed in the production of the imported goods;
How to apply Article 8.1(b): Concerning the value of the element, if the importer acquires the element from a
seller not related to the importer at a given cost, the value of the element is that cost. If the element was produced
by the importer or by a person related to the importer, its value would be the cost of producing it. If the element
had been previously used by the importer, regardless of whether it had been acquired or produced by such
importer, the original cost of acquisition or production would have to be adjusted downward to reflect its use in
order to arrive at the value of the element.

Rules of Origin
Once classification and valuation determinations are made, the last step in the tariff calculation is to determine
the origin of the goods. (1) Goods entering the U.S. from other WTO members are subject to GATT rates; (2) Duty-
free if origin of goods are from a free trade agreement or preferential trade program; (3) Non-WTO member are
subject to pre-GATT statutory rate.
Last substantial test must be used to determine origin (EU & US have this test)
1304: Requires all articles imported into the US to be marked in a conspicuous place as legibly, indelibly, and
permanently as possible to indicate to an ultimate purchaser in the US to the English name of the country of
origin of the article. The country of origin of an article is defined as the country of manufacture, production, or
growth of any article of foreign origin entering the US. Can change if there is substantial transformation:
Whether substantial transformation has occurred:
Where the articles lose their identity as such and become new articles having
o A change in name, or
o Character or
o Use
No article or material of a beneficiary developing country shall be eligible for GSP by virtue
of having merely undergone a simple combining or packaging operation.
Koru North America v. United States full transformation
Fish captured outside waters with the flags of the soviet union, new Zealand and japan, but fish went through
further processing in Korea where they were skinned, boned, trimmed, glazed refrozen and packaged for
exportation to the US. Court found products were from Korea since the name and character of the fish changed.
At first it process the characteristics of a hole fish and then it was transformed by the name headed and gutted
Hoki and the character no longer possessed the essential shape of the fish.
SDI Technologies, Inc. v. United States no transformation
Combination of electronics from China put together as a final product in Mexico. Court said it ws not a product of
Mexico because did not become transformed.
Specific Rule of GSP for Beneficiary developing countries (BDC): (1) article must be the growth, product
or manufacture of a beneficiary developing countryapply substantial transformation test; (2) the
articles must be imported directly from a BDC into the customs territory of the US; (3) the sum of the cost or
value of the material produced in the BDC plus the direct costs of processing operations performed in the BDC
must not be less than 30% of the appraised value of such article at the time of its entry into the US.

NON-TARIFF TRADE BARRIERS

Quota also known as quantitative restrictionmost common of non-tariff barrier (considered protectionist). It is
a govt-imposed limit on quantity traded between countries.

GATT XIGeneral Elimination of Quantitative Restrictions:

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 contracting
party on the importation of any product of the territory of any other contracting party or on the
exportation or sale for export of any product destined for the territory of any other contracting party.
a. Application is not only for quotas, but also other measures and restrictions.
b. Exceptions:
i. Permits WTO members to maintain quotas on films in the form of screen quotas
ii. Safeguards: temporary trade restrictions to protect domestic industries threated by a surge
in imports
iii. Security
iv. Concers over civil society and policies related to globalization.
JapanSemiconductors (p. 388) (VER case)
Pursuant to an agreement with U.S., Japan agreed to a VER on semiconductors
EU upset, as purchasers of semiconductors; EU happy with Japanese dumping
Japan argued that because the VERs were not imposed by the government and were voluntarily instituted
by exporters, so it was not a measure that could be challenged.
The Panel found that the administrative guidance constituted a measure because sufficient incentives
existed for the non-mandatory measures to take effect.
Japanese exporters knew of the Japan-U.S. agreement and that the Japanese government watched export
prices carefully. The Panel found that governmental involvement was crucial to the maintenance of export
restraints. The only difference between Japans system and one that was an explicit Art. XI violation was
that Japans system was not administered by formal limits.
Japans system was therefore in violation

VERs are grey area measures; not explicitly illegal, but still trade distorting. Bilateral trade deals usually bring these about. They are
usually opaque, and not transparent as required by Art. X (?)

Must quotas be applied consistent with MFN obligation of Art. I? Usually, when quotas are administered, it is done through a licensing
procedure figured out in accordance with the exporting country.

ColombiaPort of entry Case

Colombia limited certain imports from Panama to two ports of entry out of a total of 26 ports in Colombia. Did it
violate XI? Yes. There is a restriction when there is a limiting condition on importation itself. It cannot merely
mean only prohibition or restriction

Three measures on Agricultural Trade

Quotas and other non-tariff barrriers (NTBs) applied at the border
Domestic Support Programs; and
o Govt payments to farmers as income support
Export Subsidies
o Payments by a govt to farmers contingent upon export of the agricultural product. Allows the
exporter to charge a lower price for the export, creating a competitive advantage in the iport
market and a trade distortion
o
WTO Agreement on Agriculture (AoA): Art. 2.4 require that all customs access barriers on agricultural products
be converted into ordinary customs duties.- Chile case below
1) Convert all non-tariff barriers into tariffs and
2) Reduce tariffs by fiat and through further negotiations.
a. Tariff rate quotas (TRQ), are generally permitted on agricultural products.
3) Then requires tariff rates to be reduced during an implementation period
a. By an average of 36% over 6 years for developed countries
b. 24% for 10 years for developing countries
c. Min on a single product: 15% for developed and 10 for developing
4) Exceptions:
a. Special safeguard measures and
b. Special treatment for designated products singled out by a WTO member

Domestic Support AoA

Allowed: support with no or minimal trade distorting effect (Green Box Subsidies)
o Examples: government provided agricultural research or training, pest and disease control,
training, extension and advisory services, marketing and promotional services, domestic food aid,
insurance schemes, regional assistance, environmental programs, structural adjustment assistance,
and income support payments not linked to agricultural production.
Blue Box Subsidies: AoA exempts domestic payments to producers that are required to place limits on
production. Must be for the production limits on crops based upon fixing the area or yields. Limits on
livestock are based on a fixed number of heads.
De Minimis Exceptions: Article 6.2
o Exempts government measures used to encourage agricultural and rural development
o Exempts subsidies to encourage investment in low income areas or areas with a concentration of
resource-poor producers.
Special and Differential Treatment Box Subsidies
o Exempts govt measures used to encourage agricultural and rural development
o Exempts subsidies to encourage investment in low-income areas or areas with a concentration of
resource-poor producers.
Amber Box Subsidies: NON-EXEMPT!!!!!
o ALL MEMBERS MUST MAKE REDUCTION COMMITMENT THAT ARE SET FORTH IN SCHEDULE
 Members with an AMS have to reduce base period support by 20% over six years
(developed countries) or by 13% over ten years (developing countries).
Export Subsidies
o Art 8 & 9: place limits on export sub for agriculture.
Developed countries: Export subsidies must be reduced 36% by value and 21% subsidized
quantities
Developing countries: reduce by an average of 24% by value and 14% by volume.

ChilePrice Band System and Safeguard Measures Relating to Certain Agricultural Products
Rule art 2.4: border measures that must be converted into ordinary customs duties are
Quantitative import restrictions, (turkey)
Variable import levies, (chile)
Min import prices,
Discretionary import licensing, (turkey)
Nontariff measures maintained through state trading enterprises,
Voluntary export restraints, and
Similar border measures other than ordinary customs duties.
Court ruled that Chile had not converted into ordinary customs duties because it had a variable import levie, but
if it was higher than the WTO tariff band system (31.5%) than this would be the cap charging ad valorem. This
made the variable import levy burdensome since exporters from Argentina could not reasonably predict what
the amount of duties will be. Even though ordinary customs duty can vary, they are subject to discrete changes in
applied tariff rates, but are not automatically and continuously variable like Chile.

TurkeyMeasures Affecting the Importation of Rice

In addition to TRQ for imports of rice, importers of rice had to obtain a certificate of control. Rice shipments
would be subject to the highest MFN duty. In the application US certificates of rice were rejected. Panel said it
constituted a violation of AoA bc the measures constituted both quantitative import restriction and as
discretionary import licensing.

Tariffs where they are applied must be administered on a non-discrimination basis.

NON-TARIFF TRADE BARRIERS:
Technical Regulations and Product Standardscan be non-tariff barrier whn the regulations are
burdensome, overly complex, opaque, or impose requirements that create competitive
disadvantage for imports.

WTO Agreement on Technical Barriers to Trade

1. Technical regulations must not discriminateno less favorable treatment can be accorded than that
accorded to like products of national origin or to like products originating in other countries. (art 2.1)
2. If international standards exist or are being developed, members must use them as a basis for their
national technical regulations except when the international standards would be ineffective or
inappropriate means for the fulfillment of the legitimate objectives pursued by the member. (art 2.4) EC
Description of Sardines Marketing Case
3. Technical regulations must not create unnecessary obstacles to international trade and must not be
more trade restrictive than necessary to fulfill a legitimate objective. National security; prevention of
deceptive practices; protection of human health or safety, animal or plant life or health or the
environment (art. 2.2) US Measures Clove Cigarettes Case

US---Measures Affecting the Production and Sale of Clove Cigarettes: US had a regulation that banned
cigarettes other than regular tobacco and menthol because the other flavors appealed to kids.
a. Whether clove cigarettes and menthol cigarettes are like products & US is discriminating:
i. The measure at issue must be a technical regulation;
ii. The imported and domestic products at issue must be like products and
iii. The imported products must be accorded less favorable treatment than the like domestic
product.
1. De jure and de facto discrimination applies
2. Court said detrimental impact on competitive opportunities is not enough. Must ask
whether the detrimental impact stems exclusively from a legitimate regulatory
distinction, considering the design, architecture, revealing structure, operation, and
application of the technical regulation at issue.
a. Regulation is not legitimate bc menthol cigarettes have the same
characteristics as clove cigarettes.

European CommunitiesTrade Description of Sardines

EU adopted a regulation that established marketing standards for preserved sardines. The only products
prepared from Sardina pilchardus may be marketed as preserved sardines. That means that other types of
sardines could not be called sardines. There was an international standard by the World Health Organization
that indicated other types of sardines would be able to marketed as X sardines of a country, a geographic area,
the species etc.

International standard rule as basis for enacting technical regulations:

1. Must be a technical regulation:
a. The document must apply to an identifiable product or group of products. The identifiable product
or group of product need not, however be expressly identified in the document
 b. The document must lay down one or more characteristics of the product. These product
characteristics may be intrinsic, or they may be related to the product. These product
characteristics may be intrinsic, or they may be related to the product.
c. Compliance with the product characteristics must be mandatory.
2. Does a relevant international standard exist?
a. Standards defined by explanatory note may be mandatory or voluntary. Are defined as voluntary
and technical regulations as mandatory documents. Standards prepared by the international
standardization community are based on consensus.
b. Relevant means bearing upon or relating to the matter in hand; pertinent.
i. It is pertinent bc both refer to preserved sardines & the other species are legally affected by
the exclusion of the regulation.
ii. Burden of Proof is On the Complainant Party to show:
1. The international standard has not been used as a basis for the regulation at issue.
2. The International standard is effective and appropriate to fulfill the legitimate
objectives pursued through the regulation
3. Except when the international standards would be ineffective or inappropriate means
a. Ineffective means: is a means which does not have the function of accomplishing the legitimate
objective pursued
b. Inappropriate means is a means, which is not especially suitable for the fulfillment of the legitimate
objective pursued.
i. Effectiveness bears upon the results of the means employed, whereas appropriateness
relates more to the nature of the means employed.
4. Legitimate objectives pursued
a. Not limited to the following:
i. National security requirements; the prevention f deceptive practices; protection of human
health or safety, animal or plant life or health, or the environment.
ii. Transparency, consumer protection, and fair competition.

EXCEPTIONS

Guiding Principles:
GATT Policy Exceptions Articles 20 and 21 (POSSIBLE DEFENSES)
o Art. 20: General Policy Exceptions
o Art. 21: Security Exceptions
GATT Article 20 Chapeau: The Chapeau limits the exceptions under Article XX, not allowing the exceptions to
hold where the practice is arbitrary or unjustifiable.
It is not right to use an import ban to protect the people and environments of foreign nations under 20(b) or (g).
(Tuna Dolphin Case)
Purpose of Exceptions: Intended to preserve sovereignty to any extent possible. Also intended to make sure that
trade does not interfere with national security. Article XX is there to make sure that countries will be able to use a
trade measure that they would not otherwise be able to use because of potential violations of MFN or national
treatment.
Key difference between GATT 20 and 21:
o The absence of the chapeau in Art. 21 (and its discrimination test) makes it easier to apply than Art. 20.
Art. 21 is a subjective test (dependent upon the discretion of the party taking the national security
exception).
Security concerns are of more fundamental importance, and thus the exceptions are easier to invoke.
 o Art. 20 can be determined objectively by panels, however, panels are not empowered by the provision of Art.
21 to determine whether action taken in the interest of national security is acceptable.

GATT Article 20: General Exceptions

Allows members to use a trade measure that they would not ordinarily be allowed to use so long as they
do not constitute arbitrary or unjustifiable discrimination between countries where the same conditions
prevail, or a disguised restriction on international trade. (Chapeau)
o The chapeau limits the circumstances and nature of exceptions that may apply.
Exceptions Include:
(j) To protect public morals.
(k) To protect human, animal or plant life or health.
(l) Relating to the importation or exportation of gold or silver.
(m) Necessary to ensure compliance with laws or regulations which are not inconsistent with GATT
provisions.
(n) Relating to the products of prison labor.
(o) Protection of national treasures.
(p) Conservation of exhaustible natural resources (must complement similar domestic measures).
(j) Essential to acquisition or distribution of products in general short supply. (subject to some
limitations.

ASBESTOS CASE (General Policy Exceptions/Defenses based on Health Concerns)

Issues: Whether the Panel is qualified to assess the credibility and weight of scientific evidence presented before
it, and whether the measure at issue was necessary to protect public health within the meaning of Article 20(b).
Arguments: Canada alleged that this import restriction was also a violation of GATT Art. 3(4) (national treatment).
The EC alleged that it was not and furthermore that Art. 20(b) allows the ban on importation of asbestos. Panel
Decision: The Panel said that XX(b) allowed a ban on importation of asbestos, even though asbestos was a like
product and normally would be a violation of Art. 3:4. Appellate Body Decision: Art. 20(b) defense was
applicable, but that asbestos was not a like product to one used in France.
Rule:
1. Whether the use of X product poses a risk to human health sufficient to enable the measure to fall
within the scope
2. Whether the measure at issue is necessary to protect public health within the meaning of article
20b
3. Whether there is an alternative measure that would achieve the same end and that is less
restrictive of trade than a prohibition
4. Whether the country should reasonably be expected to employ the alternative measure that the
restriction wants to halt?

Art. 20(b) Inquiry: For the EC to invoke Art. 20(b) defense, it must show
1. Whether it is within the scope of the exception (whether the good is a hazard to human, animal or plant
life), and second, and
2. Whether the action that the EC took is necessary (is there a reasonable alternative).

The Appellate Body held:

1. French measure is in the range of policies covered by Art 20(b).
The Appellate Body would not overrule that determination unless the panel had clearly exceeded the
bounds of its discretion.
2. French measure is necessary.
Frances chosen level of health protection is to halt the spread of asbestos related health risks.
 No alternative measure reasonably available to achieve Frances objective. (Easier to find necessity)
Food Safety: Sanitary and Phytosanitary Measures (SPS) Agreement
Made to compliment article 20b on the issue of food safety (to protect human and animal health)
SPS Agreement
Art. 2 Basic Rights and Obligations
2.1- Members have the right to take SPS measures nec. for the protection of plant, animal, & human life
not inconsistent w/ provisions of this agmt.
2.2- SPS measures allowed only to the extent necessary. based on scientific principles and not w/o
sufficient scientific evidence except as provided for in 5.7
5.7- In absence of scientific principles, restrictions are provisional and member shall seek to
obtain additional information necessary for more objective risk assessment. (implicit Precautionary
Principle)
5.8- if another member suspects restrictions are overly constraining to its exports and not based
on intl standards or such standards do not exist (5.7) an explanation of the SPS measures may be
requested and will be provided by the offending member.
2.3- SPS measures may not be discriminatorily applied against/between members where identical or
similar conditions prevail (cannot be used as veiled sanction or protectionist measure).

Art. 3 Harmonization
3.1/3.2- SPS to be based on intl standards. If based on intl standards, shall be deemed to be necessary
and presumed consistent with SPS agmt. and GATT.
3.3- More stringent standards may be erected if in accord with 5.1-5.8 Risk Assessment, based on
scientific justification, and not more than necessary or inconsistent w/ any other provisions of SPSagmnt.

Art. 5 Assessment of Risk and Determination of the Appropriate Level of Sanitary or Phytosanitary
Protection
5.1- Assments to be based on techniques developed by relevant intl organizations.
5.2- Members shall take into acct:
available scientific evidence
relevant processes and production methods
relevant inspection
sampling and testing methods
prevalence of specific diseases or pests
existence of pest or disease free areas
relevant ecological and environmental conditions
quarantine or other treatment
5.4- Members should make efforts to minimize negative trade effects
5.5- Revisits 2.3- avoid arbitrary or unjustifiable distinctions if measure results in discrimination or
disguised restriction on trade (could there be a 5.5 violation w/o a 2.3 violation?)
5.6- Measures shall not be more trade restrictive than necessary to achieve nec. level of SPS protection
5.7-Precautionary Principle, supra