World trade law

Dr. Tabrez Ahmad
Professor of Law
www.technolexindia.com
tabrezahmad7@gmail.com
technolexindia.blogspot.com

Dr. Tabrez Ahmad, http://corpolexindia.blogspot.in

Agenda
 What is WTO
 Tariff and non-tariff barriers
 What is meant by DUMPING ?
 How is dumping measured ?
 The role of material injury and de-menimis in AD
 The steps in an AD investigation and duty imposition
 A brief history of AD
 Various minuses of the AD measurement laws.
 AD Duties and their IMPACT.
 Increasing use of AD in WTO
 Top 10 users of AD in the world.
 Subsidies and countervailing measures
 Principles of Non-discrimination under WTO
 GATT Exceptions
 Case study
 Conclusions & Recommendations


Members (148)
Applied Countries
(28)

WTO Members

WTO-AoA NEGOTIATIONS

CREATING WEALTH FROM
FARM GATE TO FOOD PLATE

GENESIS

 WTO Came into existence on 1-1-1995 with the conclusion of
Uruguay Round Multilateral Trade Negotiations at Marrakesh
on 15th April 1994, to :

 Provide common institutional framework for conduct of
trade relations among members

 Facilitate the implementation, administration and
operation of Multilateral Trade Agreements

 Lay down Rules and Procedures Governing Dispute
Settlement

 Provide Trade Policy Review Mechanism

GATT WTO
GATT was ad hoc and WTO and its agreements are
provisional permanent.
GATT had contracting parties WTO has member countries
GATT system allowed existing WTO does not permit this.
domestic legislation to
continue even if it violated a
GATT agreement.
GATT was less powerful, WTO is more powerful, dispute
dispute settlement system was settlement mechanism is fast
slow and less efficient. Its and more efficient. It is very
ruling could be easily blocked. difficult to block the rulings.

OBJECTIVES
Raising Standards of living
Marrakesh Agreement establishing the WTO

Ensuring full employment

Ensuring large and steadily growing volume of real income and effective demand

Expanding the production of and trade in goods and services, while allowing for the
optimal use of the world’s resources (sustainable development)

… seeking both to protect and preserve the environment and to enhance the means for
doing so in a a manner consistent with their (the Parties to the Agreement) respective
needs and concerns at different levels of economic development.


FUNCTIONS (1)
Framework to facilitate the implementation, administration and operation of WTO
Agreements

Framework to further the objectives of the WTO Agreements

Forum for negotiations in matters dealt with under the WTO Agreements


FUNCTIONS (2)
Forum for further negotiations (new rules and disciplines)

Framework to facilitate the implementation, administration and operation of new

agreements


FUNCTIONS (3)
Framework to administer the Understanding on Rules and Procedures Governing the
Settlement of Dispute (DSU)

Framework to administer the Trade Policy Review Mechanism (TPRM)


MINISTERIAL CONFERENCE

GENERAL COUNCIL

PLURILATERAL
INTELLECTUAL

AGREEMENTS
HORIZONTAL

PROPERTY
SERVICES
GOODS
ISSUES

MEMBERS
OBSERVERS
SECRETARIAT


The WTO Principles

Transparency
Environment MFN
Protection Treatment

Competition
On BoP
National
Principles Treatment
Of
Treatment WTO
For LDCs

Rule Based Free
Trading Trade
System Principle
Dismantling
Trade
Barriers


Background: Period between the First and Second World
Wars:
– 1920s: Attempt to organize world trade on a liberal
basis.
– at the beginning of the 1930s, the monetary system
broke down
– Reciprocal Trade Agreements and trade restrictions
were introduced
– Many countries retreated towards an autarkic pattern of
production
France Germany Spain Italy USA

1913 20% 13% 41% 18% 44%

1925 21% 20% 41% 22% 37%

1931 30% 21% 63% 46% 48%

Table: Average tariff rates in selected countries on manufactured
products Dr. Tabrez Ahmad, http://corpolexindia.blogspot.in

Period following the Second World War (WW II):

1– Memories of the pre-war period: economic reason as
major cause from World War-II
• High reparations from WW I
• High inflation rate
• High unemployment rate

2– Victorious countries (US, Britain) were determined to
learn from mistakes:
• Economic success
• Strong trade relation
• Economic interdependency


Bretton Woods conference (1944) as starting point for a new
order of then world economy with the cornerstones:
 International Monetary Fund (IMF)
 International Bank for Reconstruction and Development
(IBRD)
 International Trade Organization (ITO)

• IMF was designed to take care of short term problems in
connection with international liquidity
• IBRD is one of 5 institutions that comprise the World Bank
Group
• During negotiations on the ITO in 1946, some countries saw a
need for immediate tariff reductions :-
 US took the initiative in preparing a document on a
―general agreement on tariffs and trade‖
 Subsequent negotiations in Geneva between a group of
23 countries resulted in a set of mutual tariff reductions
(GATT) Dr. Tabrez Ahmad, http://corpolexindia.blogspot.in

1. Foundation of the GATT
The GATT was signed by its 23 founding members on 30
October 1947 and entered into force on 1 January 1948

23 Founding member countries of the GATT:
United States, Canada, Cuba, Brazil,
Chile, Australia, New Zealand, China,
India, Myanmar, Sri Lanka, Pakistan,
Syria, Lebanon, South Africa, Zimbabwe,
United Kingdom, France, Belgium, Luxembourg,
Netherlands, Norway, Czechoslovakia

GATT was introduced as a stepping stone
towards the establishment of the ITO and embodied many
principles of the proposed ITO.


Conference in Havana (1947/48):
1. What should be the authority of the proposed ITO?
2. Disagreement between the US and the UK prevented
the ratification of the charter by the US

That is why ITO never came into existence and GATT was
left as the framework for trade relations (though it was a
less ambitious organization than would have been the ITO)


2. Geneva Round (1947)
Time - April 1947 – October1947
Duration – 7 months
Countries – 23
Negotiations in this and the succeeding 4 Rounds were on a
bilateral basis -: ―product-by-product, request-offer‖
• members completed 123 negotiations and established 20
schedules containing the tariff reductions. which became an
integral part of GATT.
• The Agreement covered some 45,000 tariff concessions and
about $10 billion in trade.
• First Round was successful since the US was ..
– enthusiastic for free trade
– was willing to cut its tariffs on imports from Europe
– did not put pressure on European countries to abandon their
trade restrictions

Development of average tariffs in the US from 1865-
1967

Geneva round


3. Annecy Round (1949)
Time - April 1949 – August1949
Countries –Accession of ten more country (From 23 to 33 )
Denmark, Finland, Sweden, Greece,
Nicaragua, Uruguay Haiti, Liberia,
Dominican Republic, Italy,
All Members negotiated an additional 13,000 tariff
reductions from last round.
Agreement that the accession of a new member country
does only two-third majority of all existing member countries
If a member votes again accession it does not need to
extend trade policy concessions to this country
Denmar N.land USA France Austria UK Italy Germany
k
1950 3% 11% 14% 18% 18% 23% 25% 26%

Table: Average tariff rates in selected countries on
manufactured products Ahmad, http://corpolexindia.blogspot.in
Dr. Tabrez

4. Torquay Round (1950/51)
Time - September 1950 – April1951
Countries – Accession of five more countries (33+5 = 38)
Austria, Germany, Turkey, Philippines, Peru
• Participants completed some 500 negotiations
• Additional tariff reductions emerging from these
negotiations were modest: Negotiations were not considered
to be a ―success―
• Major problem of that Round: Dispute between the US and
the UK ―no bilateral tariff cuts on US—UK trade‖
• Contracting parties exchanged some 8,700 tariff reductions
of about 25% in relation to the 1948 level.
• During the Torquay Round, the US indicated that the ITO
Charter would not be re-submitted to the US Congress: End
of ITO.

5. Geneva Round (1955/56)
Time - January 1956 – May 1956
From 1951 to 1955, GATT membership increased by only
one country on net, with the withdrawal of Libeia being
balanced by the accession of Japan
• The momentum toward lower tariffs was lost
• Important factor behind the passivity during this period:
Growing protectionism in the US (Feeling that the US had
given away concessions, while European countries were
reluctant in eliminating their trade barriers)
• Low-tariff countries were frustrated by their inability to
bargain effectively with high-tariff countries.
• Fourth Round produced similarly not sufficient results
($2.5 billion worth of tariff reductions)

6. Dillon Round (1960-62)
Time - September 1960 – July 1962
Background (late 50s): Average tariff rates differed sharply
within the European Economic Community (EEC), ranging
from 6% for Germany to 19% for Italy:
Table: Average tariff rates in European countries on manufactured
productsDenmar N.land France Austria UK Italy Germany
k
1950 3% 11% 18% 18% 23% 25% 26%

1958 6% 10% 17% 15% 17% 19% 6%

The Round was divided into two phases:
– First phase was concerned for negotiations with EEC member
states for the creation of a single schedule of concessions for the
EEC based on its Common External Tariff (CET)
– Second phase was a further general round of tariff negotiations

• Round resulted in 4,400 tariff concessions covering $4.9
billion of trade.
• Last round of negotiations which were undertaken on a
bilateral basis:
I. Participants came up with lists demanding tariff
reductions from their main trading partners.
II. These list were the basis for bilateral trade
negotiations.
III. The Most favored nation principle ensured that all
member countries were granted with all trade
advantages. In effect, that means no nation will be
treated worse than another.
• As a result of Dillon Round, tariff rates on manufactured
goods came down sharply (e.g. common external tariff of
the EEC fell to 10.4% in 1968)
• Agricultural and textile sectors were still not considered

7. Kennedy Round (1964-67)
Time - May 1964 – June1967
Countries – 66
•A very ambitious round. It had 4 major goals:
 To slash tariffs by half with minimum number of
exceptions.
 To break down farm trade restrictions.
 To strip off non tariff regulations.
 To aid developing nations.
• The participating countries presented 80% of world
trade.
• Round named after President John F Kennedy who
died the year before the round.
• It aimed to increase trade between the US and the
European Economic Commission(EEC).

•The round had introduced the linear tariff reduction or
across- the-board which was a formula based approach.

Problems:
• Tariff reduction in agricultural products was the main
bone of contention for US and EEC. Agriculture was by
an large left out from tariff cuts.
• Disagreement on the linear tariff reductions which
resulted in agriculture being treated separately.

Achievements:
• Industrial tariffs were reduced by 35 percent across the
board over a period of 5 years. Tariff concessions were
worth $40 billion of world trade.


• An Anti-Dumping code was agreed upon however US
never agreed upon it so it had little practical implications.
American Selling Price had also been eliminated.
• A short lived International Wheat Agreement was
intended to stabilize world wheat prices.
• Large reductions in grains and chemical products.
• Reduction of tariff in tropical products, primary
materials and manufactured goods of interest to the
less developed countries.
• Food aid programme totaling 4.5 million tons a year for
developing countries.
• As a result of Kennedy Round, the Common External
Tariff of the European Community fell to 6.6%.
• Kennedy round agreement was signed on June
30,1967; last day of the US negotiating authority
under the Trade Expansion Act.


Multilateral Tariff Reductions
(Simple Average MFN Tariff Rates, Industrial products)

1958 Dillon Round 1968 Ext. Tariff Kennedy Round
--------------------------------------------------------------------------------------------------
--------
Belgium 9.7 8.7 10.4 6.6
France 17.0 15.3 10.4 6.6
Germany 6.4 5.8 10.4 6.6
Italy 18.7 16.8 10.4 6.6
Netherlands 9.7 8.7 10.4 6.6
UK 16.5 14.9 14.9 9.2
Denmark 5.6 5.2 5.2 3.2
Austria 14.9 11.4 11.4 8.2
Sweden 6.5 6.3 6.3 4.2
Norway 10.3 10.3 10.3 6.4


8. Tokyo Round (1973-79)
Time - September 1973 – November1979
Countries – 102
• Discouraging economic climate during Tokyo Round :

– Oil crisis (1973); World-wide ―stagflation‖(Crisis)

– Proliferation of non-tariff barriers during the early 1970s.

– Strained trade relations between the US, the EC and
Japan


Main agreements, understandings,
decisions & declarations of Tokyo Round:
 Agreement on Govt. Procurement,
 Agreement on Anti-dumping Code,
 Agreement on Customs Valuation Code,
 Agreement on Import Licensing procedures,
 Agreement on Subsidies Code,
 Agreement on Trade in Civil Aircraft,
 Declaration on Trade measures taken for Balance of
payment purposes,
 International Dairy Agreement,
 International Bovine meat agreement,
 Safeguard Action for development purposes.

US argued for further linear tariff cuts
– EC sought greater harmonization of tariffs
• After 4 years, an agreement was reached: The ―Swiss
formula‖
t1 = c*t0/(c+t0)
– where t0= original tariff and t1 = final tariff (both in
percentage terms)
Negotiations resulted in the value of c being set at 16

Table: Tariff changes in the Tokyo Round; averages,
weighted by MFN imports
Pre-Tokyo (%) Post-Tokyo (%) Reduction
Finished manufactures 10.3 6.9 33%
Semi-manufatures 5.8 4.1 30%
Raw materials 0.8 0.4 52%
Total industrial products 7.2 4.9 33%


9. Uruguay Round (1986-94)
Time - September 1986 – December1993
Countries – 123
• Period following the Tokyo Round
– World-wide recession
– Trade conflicts between three major trading blocs: US, EC,
Japan
– US-EC trade disputes centered on agricultural issues (EC
became exporter)
– US wanted Japan to open its domestic market for US exports
– EC wanted to limit Japanese export growth
• GATT ministerial meeting (1982): Attempt to meet problems
left by the Tokyo Round failed in ―Resurgence of protectionism‖
• US reacted to protectionist pressure and considered the
initiation of a new round of negotiations

• Japan favored a new GATT round: Multilateral negotiations
were preferred to bilateral pressure from the US and the EC
• Other countries were mostly in favor of new round:
– Smaller industrial countries wished to curtail the tendency of
the ‗big three‘ to ignore GATT principles
– Agricultural-exporting countries were concerned about US
producer subsidies and EC export subsidies
– Developing countries wanted to secure greater tariff
preferences
• A committee was established to determine the objectives of
a new round of negotiations to be launched in 1986
• There was little agreement between the ‗big three‘
• Initiative was taken by G9 group of mid-sized industrial
nations and G10 group of developing countries led by India
and Brazil


Negotiating groups in the Uruguay Round

a) Trade barriers and related matters
1) Subsidies and countervailing measures
2) Non-tariff measures
3) Safeguards
4) Tariffs

b) Sector specific matters
5) Agriculture
6) Natural resource products
7) Services
8) Textiles and clothing
9) Tropical products


c) Procedures
10) Dispute settlement
11) GATT articles
12) Functioning of the GATT
13) Multilateral Trade Negotiations

d) Others
14) Trade related aspects of intellectual property
(TRIP‗s)
15) Trade related investment measures (TRIMs)


• The goals set at the Uruguay Round were ambitious:
– Inclusion of services and intellectual property rights
– Better integration of agriculture, textiles and clothing into
the system
• The prominence given to agriculture reflected the interests
of the US and the Cairns Group (agricultural net-exporting
countries)
• The objectives for agricultural commodities were:
– Improved market access for imports
– Discipline in direct and indirect producer subsidies
– Bringing of all measures affecting import access and export
competition within GATT rules and disciplines
• Meeting of trade ministers in Montreal in 1988: Four
negotiating groups faced serious problems to find an
agreement (Textiles and clothing, safeguards, agriculture,
TRIP‘s)

• An agreement on agriculture seemed out of reach:
– US wanted abolition of all trade distorting subsidies in
agriculture
– EC was unwilling to negotiate on the substance of the CAP
– Cairns Group threatened to leave all negotiations if an
agreement on agriculture was not found
• The failure of the US and the EC to reach an agreement led
to the suspension of the Round in December1990 which was
the intended date for its completion
• At the end of 1991 the Secretary General of the GATT,
Arthur Dunkel, tabled a Draft Final Act (Dunkel Text):
– Reduction of specific agricultural tariffs
– Ratification of non-tariff barriers
– Cuts in domestic support
– Reductions in export subsidy expenditures and the volume
of subsidized exports


• US and Cairns Group were willing to accept the Dunkel
Text
• EC was reluctant and had an internal debate over reform of
its agricultural policy (MacSharry Reform of the CAP)
• In November 1992 the US and the EC reached finally a
bilateral agreement on agriculture (Blair House Accord)
which led to the final agreement of the Uruguay Round on
15 December 1993
• The Uruguay Round Agreements was signed on 15 April
1994 in Marrakesh
• The delay of the Uruguay Round allowed some
negotiations to progress further than would have been
possible in 1990:
It allowed the replacement of the GATT by the World Trade
Organization (WTO)


Ministerial
General Council meeting as Conference
General Council meeting as
Dispute Settlement Body
Trade Policy Review Body
General
Appellate Body Council
Dispute Settlement panels

Committees on Council for Council for Council for
•Trade and Environment
•Trade and Development
Trade in TRIPS Trade in Services
•Subcommittee on Goods
Least-Developed Countries Committees on
Committees on
•Regional Trade Agreements •Trade in Financial
•Balance of Payments Restrictions •Market Access
services
•Budget, Finance and •Agriculture
•Specific Commitments
Administration •Sanitary and Phytosanitary Measures
•Technical Barriers to Trade
Working parties on Working parties on
•Subsidies and Countervailing
•Accession •Domestic Regulation
Measures
•GATS Rules
Working groups on •Anti-Dumping Practices
•Trade, debt and finance •Customs Valuation
•Trade and technology transfer •Rules of Origin
•(Inactive: •Import Licensing
(Relationship between Trade •Trade-Related Investment Measures
and Investment,
(Interaction between Trade
•Safeguards
and Competition Policy
(Transparency in Government Working party on
Procurement) •State-Trading Enterprises

Year Name Sub. Countri Achievements
Covered es
1947 Geneva Tariffs 23 Signing of GATT,
45,000 tariff
concessions affecting
$10 billion of trade
1949 Annecy Tariffs 13 Countries
exchanged some
5,000 tariff
concessions
1950 Torquay Tariffs 38 Countries
exchanged some
8,700 tariff
concessions,
cutting the 1948
tariff levels by 25%

Year Name Sub. Countri Achievements
Covered es
1956 Geneva Tariffs, 23
$2.5 billion in tariff
admission
of Japan reductions
1960 Dillon Tariffs 26 Tariff concessions
worth $4.9 billion
of world trade
1964 Kennedy Tariffs, 66 Tariff concessions
anti- worth $40 billion
dumping of world trade


year Name Sub. Covered coun Achievements
tries
1973 Tokyo Tariff, non-tariff 102 Tariff reductions worth
measures, more than $300 billion
"framework" dollars achieved
1986 Uruguay Tariffs, non-tariff 123 the creation of WTO,
measures, rules, and extended the
services, range of trade
intellectual negotiations, leading
property, dispute to major reductions in
settlement, tariffs & agricultural
textiles, subsidies, to allow full
agriculture, access for textiles
creation of WTO, from developing
etc countries, and an
extension of
intellectual property
rights.

Uruguay round versus Earlier rounds
• The spirit of opposition.
• The agenda was made very heavy and oppressive for
the developing country.
• Major focus of negotiations shifted from tariff cutting to
reduction in non-tariff barriers.
• It covered every outstanding policy issue.
• Developing countries were required to actively
participate in negotiation, meaning that they were to give
concession in order to receive additional concessions,
something which they had not done before.
• Rush of new members in the last round had showed that
multilateral trade agreement was considered an
anchor for development.


• Streamlined dispute settlement mechanism and Trade
Review Policy Mechanism.
• Proposed creation of a new institution WTO.
• More transparent rules for dumping investigation and
rules for determining the injury to the industry.
• The coverage of government procurement widened.
• It appeared that developing countries may have made
more concessions.


Agreement on Agriculture (AoA)

 To establish a fair and market oriented
agricultural trading system through substantial
progressive reduction in agricultural support and
protection resulting in correcting and preventing
restrictions and distortions in world agricultural
markets

AREAS OF COMMITMENTS

 Domestic Support

 Market Access

 Export subsidies

Introduction:
 International Trade policies deals with the
policies of the national governments relating to
exports of various goods and services in various
countries either on equal terms and conditions or
on discriminatory terms and conditions.

 Trade policies also aim at protecting the domestic
industry from the competition of the advanced
countries through imposing quotas and build
competencies by providing subsidies.


Instruments of Trade Policy:
 Broadly classified into…..
 Tariff
 Non-Tariff


Tariff Barriers
 What are tariff barriers?
 Refers to the tax imposed on the goods when they enter or
leave the national frontier or boundary.

 What is the purpose of tariffs?
 To protect the domestic industry by increasing the cost of
imported goods.
 Example: GoI imposed tariffs to protect domestic
automobile industry, sugar industry, cement industry and
steel industry.


Types of Tariffs:
 On the basis of Purpose:
 Revenue Tariff:
 To provide state with the revenue.
 Levied on luxury goods.
 Protective Tariff:
 To maintain and encourage those branches of home industry
protected by the duties.


 On the Basis of Origin and Destination:
 Ad Valorem Duty:
Levied as the percentage of the total value of the
imported common duty.
 Specific Duty:
 Levied per physical unit of the imported commodity.

 Compound Duty:
 Levied a percentage ad valorem duty plus a specific duty
on each unit of the commodity. Eg. 1 lac + 10% of the
price.


 On the Basis of Country-wise Discrimination:
 Single Column Tariff:
 A uniform rate of duty is imposed on all similar
commodities irrespective of the country from which
they are imported.
 Double Column Tariff:
 Two different rates of duty have been imposed.

 Triple Column Tariff:
 Two or more tariff rates are levied on each category of
commodity.


Who Gain from Tariff?
 Government of the importing country earns in the form
of the revenue.
 Industries of the importing country would find market
for their products as the imported goods will be
expensive.
 Jobs in the domestic markets are saved.
 Business for the ancillary industry, servicing, market
intermediation etc. is also protected.


Who are adversely affected?
 Consumers

 Industries of the exporting country.


Other Impacts of Tariff Barriers
Tariff Barriers tend to Increase:
1. Inflationary pressures
2. Special interests’ privileges
3. Government control and political considerations in
economic matters.

Tariff Barriers tend to Weaken:
1. Balance-of-payments positions
2. Supply-and-demand patterns
3. International relations (they can start trade wars)

Tariff Barriers tend to Restrict:
1. Manufacturer’ supply sources
2. Choices available to consumers
3. Competition

Non- Tariff Barriers
Non-Tariff measures include all measures, other than
tariffs, the effect of which is to restrict imports, or to
significantly distort trade.


Different Types of Non-Tariff
Barriers:

(1) Specific Limitations on Trade:
1. Quotas
2. Import Licensing requirements
3. Proportion restrictions of foreign to
domestic goods (local content requirements)


(2) Customs and Administrative Entry Procedures:
1. Valuation systems
2. Antidumping practices
3. Documentation requirements
4. Fees

(3) Government Participation in Trade:
1. Government procurement policies
2. Export subsidies
3. Countervailing duties
4. Domestic assistance programs

(4) Charges on imports:
1. Prior import deposit subsidies
2. Administrative fees
3. Special supplementary duties
4. Import credit discriminations
5. Border taxes

(5) Others:
1. Voluntary export restraints
2. Monetary Barriers


Impact of NTBs:
 Have emerged as potent Protectionist tool.

 It being less transparent, its difficult to identify and
quantify its impact.


The Meaning of Dumping?
 “Dumping is a situation of international price
discrimination, where the price of a product when sold to
the importing country is less than the price of the same
product when sold in the market of the exporting
country.”


Why does dumping take place?
 As a short-term predatory pricing strategy to drive
competitors out of the market

 As a result of market intervention or state subsidies
that enable companies to artificially lower their prices


But there is something MORE!
 When the price causes or threatens to cause material
injury to the domestic industry of the importing country
can there be an action against dumping.

 An anti-dumping investigation can be started only if
there is a written complaint on behalf of the domestic
industry.(a significant share of the domestic producers
have to support the complaint).


Certain terms to be defined
 Normal Value: The comparable price at which the goods
under complaint are sold in the domestic market of the
exporting country.

Can be determined by:
• domestic sales
• comparable representative export price to an
appropriate third country.
• constructed normal value, i.e. the cost of
production in the country of origin with
reasonable addition for administrative, selling and
general costs and reasonable profits.

 Export price: The price at which it is exported to the
importing country.
 Dumping Margin: The margin of dumping is the
difference between the Normal value and the export
price of the goods under complaint. It is generally
expressed as a percentage of the export price.


Dumping Margin Calculation
Compare Exporter Price
to Normal Value
Exporters Price Normal Value

Normal Value $110.00

Exporter Price $90.00

Difference Attributable
$20.00
to Dumping

Dumping Difference Attributable
= to Dumping/exporter price $20.00 / $90.00=22.22%
Margin


How is Dumping Measured?
fundamental parameters are determined.
a) Normal domestic selling price of the product or
similar products in the exporting country.
b) Export price being offered in the importing country.
Both these elements have to be compared at the same
level of trade, generally at ex-factory level, for
assessment of dumping.


 Domestic price of exporter > export
price
 Dumping = price discrimination
between national markets


what is Injury?
 Injury parameters include factors such as:
o Actual or potential decline in sales
o Loss of profits
o Market share
o Capacity utilization
o Employment
o Wages
o Ability to raise capital
o Lost contracts

Non-injurious Price

 NIP is that level of price, which the industry is,
expected to have charged under normal circumstances
in the exporter market during the period defined.
 The Injury Margin is the difference between the Non-
Injurious Price due to the Domestic Industry and the
Landed Value of the dumped imports.


Anti-dumping
(Article VI of GATT 1994)

Dr. Tabrez
Ahmad, http://corpolexindia.blogspot.in

Legal framework
 Based on article VI of GATT, 1994
 Customs tariff act, 1975 sec 9A, 9B (as amended in
1995)
 Investigations by designated authority, Ministry of
Commerce
 Imposition and collection by Ministry of Finance


Factors affecting Comparison of
normal value and export price
 Export price and normal value must be compared at he
same level of trade, such as at the ex-factory level
 allowance made for differences that effect price
comparability. These are
 Physical characteristics
 Taxation
 Quantities etc..


How did it all begin?
 In the 19th century European Sugar Industries appealed
to their respective governments for protection against
sugar being dumped at unfairly low prices.
 In 1902, there was a formal agreement on anti-dumping.
Canada adopted the first anti-dumping law in 1904
followed by the European countries and then the US in
1916.
 Formed the basis for the original GATT article (Article
VI of GATT) on anti-dumping in 1947.


 Subsequently, codes on anti dumping were developed
during the Kennedy Round (1962-67) and Tokyo
Round (1973-79).

 However, these were not binding on all GATT
members; they were open to signature by those
countries that wished to do so.

 But the Uruguay Round, (1986-94) anti-dumping
agreement is an agreement binding on all GATT or
WTO members.


What is anti dumping ??
 It is a measure to rectify the situation arising out of
the dumping of goods and its trade distortive effect.
 Re-establish fair trade.
 The use of anti dumping measure as an instrument of
fair competition is permitted by the WTO.
 It provides relief to the domestic industry against the
injury caused by dumping.


difference between anti dumping
duty and Normal Customs duty
Antidumping duty Normal customs duty
 To guard against unfair trade  means of raising revenue and
practices for overall development of the
 trade remedial measures. economy.
 not necessary in the nature  trade and fiscal policies of the
 levied against exporter /
Government
country in as much as they  Necessary in nature
are country specific and  universally applicable to all
exporter specific. imports irrespective of the
country of origin and the
exporter.


Imposition of duty

 If there is dumping but no injury then no duty can be
imposed.

 Duty remains in force for 5 years.
 Re-determination at a “sunset review”.

 Yearly administrative reviews if requested by
domestic industry or exporter.


Essentials for initiating an anti
dumping investigation
Sufficient evidence to the effect that ;
 there is dumping
 there is injury to the domestic industry; and
 there is a causal link between the dumping and the
injury, that is to say, that the dumped imports have
caused the alleged injury.


Link between dumping and injury

 No anti dumping duty shall be recommended without
a finding of this causal relationship. That is to say,
 Dumping should lead to Injury
 The causal link is to be established generally in terms
of the following effects of dumped imports on
domestic industry: -
 volume effect
 price effect


 The volume effect of dumping relates to the market
share of the domestic industry.
 for price effect, significant price under cutting by the
dumped imports as compared with the price of the like
product in the importer country.


Stakeholders
Against In Favour

 Consumers  Importing country
 Exporters currently protected
 Economists
industries
 Importing country Labor
 Regional Agreements
(NAFTA) Unions


Relief under Anti Dumping
mechanism
 anti dumping duty imposed against those countries,
which could go up to the dumping margin.
 may terminate investigation if the exporter concerned
furnished an undertaking to revise his price


ALSO !!!
de-minims margin
 Any exporter whose margin of dumping is less
than 2% of the export price shall be excluded
 Investigation is terminated if the volume of the
dumped imports from a particular country
accounts for less than 3% of the total imports
of the like product.
 The cumulative imports of the like product
from all these countries who individually
account for less than 3%, should not exceed 7%
of the import of the like product.

Suo-Motu cases
 Rule 5(4) of the Anti Dumping Rules provides for suo-
motu initiation of anti dumping proceedings by the
Designated Authority.
 The Authority can initiate the anti dumping
investigation on its own without any
complaint/petition filed in this regard


Period of Investigation
 Should not be less than six months and not more than
eighteen months.
 The most desirable period of investigation is a
financial year. (period should be as representative a
possible)
 For the purposes of injury analysis, the domestic
industry has to furnish the relevant data for the past
three years.


Analysis of Lodging of
complaint complaint
45 days
Preparation and Initiation
sending of
questionnaires
Sending of
Analysis of questionnaires
questionnaire
9 responses Steps in an
months On-spot verification
visits Anti-Dumping
Internal decision +
consultation of MS + Imposition of investigation
translation provisional measures
if warranted and
Analysis of disclosure disclosure of
reactions
decision to interested
AD 6 months Additional on-spot parties
verification visits if
AS 4 months needed

Internal decision
+ consultation of Final disclosure to
MS + translation interested parties
Imposition of
Total Duration Measures
Measures are definitive measures
AS 13 months normally
normally if warranted
AD 15 months
imposed for 5
imposed for 5
years Tabrez Ahmad, http://corpolexindia.blogspot.in
Dr.

Stages of the investigation process
A. Preliminary Screening:
 The application is scrutinized to ensure that it is
fully documented
 provides sufficient evidence for initiating an
investigation.
 If evidence not adequate, then a deficiency letter is
issued.
 Till then cannot be considered as application
pending before authority.


B. Initiation:
 Designated Authority determines that the
application has been made by or on behalf of
the Domestic Industry.
 It also examines the accuracy and adequacy of
the evidence provided
 The Initiation notice will be issued normally
within 5 days from the date of receipt of a
properly documented application.


C. Access to Information:
 The Authority provides access to the non-confidential
evidence
 available for inspection to all interested parties on
request after receipt of the responses.
D. Preliminary Findings:
 The Designated Authority will proceed expeditiously
with the conduct of the investigation
 It makes a preliminary finding containing the detailed
information on the main reasons behind the
determination.

E. Provisional Duty:
 A provisional duty not exceeding the margin of
dumping may be imposed by the Central Government
on the basis of the preliminary finding
 Can be imposed only after the expiry of 60 days from
the date of initiation of investigation.
 The provisional duty will remain in force only for a
period not exceeding 6 months, extendable to 9
months under certain circumstances.


F. Oral Evidence
 Interested parties can request the Designated
Authority for an opportunity to present the relevant
information orally.
 Such information shall be taken into consideration
only when it is subsequently reproduced in writing.
G. Disclosure of information:
 Based on these submissions and evidence gathered the
Authority will determine the basis of its final findings.


 the Designated Authority will inform all interested
parties of the essential facts, which form the basis for
its decision before the final finding is made.
H. Final Determination:
 The interested parties submit their response to the
disclosure and
 The Authority examines these final submissions of the
parties and comes out with final findings.


Where does Anti-dumping stand
today ?
 Anti-dumping measures taken by WTO members
have increased from 129 in 1994 to 208 in 2008; 83%.

 New users: Argentina, India, Brazil, South Africa.

 Traditional users: Canada, U.S., European Union,
Australia, Mexico.

 Most affected industries: Metal, Chemical, plastic,
textiles, machinery and equipment, agriculture and
food.


Anti-Dumping Measures Who used them more?


Most Affected Sectors

17%

4% 39%
7%

9%
11% 13%

METAL CHEMICAL PLASTIC TEXTILES M&E A&F OTHER

Source: WTO Secretariat, Rules Division Anti-dumping
Dr. Tabrez Ahmad,
Database http://corpolexindia.blogspot.in

ANTI–DUMPING
INITIATIONS BY SECTOR
1995 - 2006
160
140
120
100
80
60
40
20
0
95

96

97

98

99

00

01

02

03

04

05

06
19

19

19

19

19

20

20

20

20

20

20

20
Metals Chemicals Plas Tex/Cloth

Dr. Tabrez
Database Ahmad, http://corpolexindia.blogspot.in

ANTI–DUMPING NUMBER OF CASES
1979 - 2008

Dr. Tabrez Ahmad,

ANTI–DUMPING NUMBER OF MEASURES

1979 - 2008

Dr. Tabrez Ahmad,

Who makes the most USE ?
 Developing Countries Use Antidumping more
intensely than developed countries.


ANTI-DUMPING
MEASURES 1995 - 2006
Developed / Developing Members

Total 1 400
MEASURES:1 900

Developing
75%
Developing
75%

Total 500
Developed Developed
25% Developing
80% 25%

Source: WTO Secretariat,
Developed
Rules Division Anti- 20%
dumping Database
Developed Members Developing Members

Top 10 Users of AD Law (by
initiations) 1995 - 2006

Database Dr. Tabrez Ahmad, http://corpolexindia.blogspot.in

ANTI–DUMPING
Initiations by Importing Member
1995 – 2000

218

Total 1 529 181
173
150
139
116

77 79

43 44

a i co da il
Aust
r nt S Af
r
India US EC
Kor e Mex Cana Braz Arge

Source: WTO Secretariat, Tabrez
Dr. Rules Division Anti-dumping
Database Ahmad, http://corpolexindia.blogspot.in
107

ANTI–DUMPING
Initiations by Importing Member
2001 – 2006
284

Total 1 516
192

144
127

89
80
73
65
55

il da Aust
r nt ey a EC US Inda
Braz Cana Arge Turk Chi n

Source: WTO Secretariat, Tabrez Ahmad,
Dr. Rules Division Anti-dumping
108

DISPUTE SETTLEMENT
Trade Remedy Disputes
(Panels Established, 1995 - 2006)

Total 55
Countervailing
Measures Safeguards
11 11

Anti-Dumping
33

Source: WTO Secretariat, Tabrez Ahmad,
Dr. Rules
Division Anti-dumping Database
http://corpolexindia.blogspot.in
109

Impact of Anti-Dumping Laws
Pros Cons

 Prevents Monopolies  Against Free Trade
 Protects Vulnerable Concept
Industries  Trade Barrier – Lowers
 Allows Firms to Compete Economic Growth
 Preserves Jobs  Distorts the Market
 Protects Firms from
Competition
 Hurts Consumers


Notice INDIA’s proportion
Proportion of AD cases initiated by the countries

0.3

0.25

0.2

0.15
0.1

0.05

0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

India United States Canada China European Community

Database Dr. Tabrez Ahmad, http://corpolexindia.blogspot.in

Anti-Dumping Related Disputes
Panels Established 1995 - 2006

6 6
Total 33 5 5

2 2 2 2 2
1

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Database 112

Various minuses of AD
measurement law
 Unclear concept of “ordinary course of trade”.
 For computation of the normal value
complicated cost calculations and allocations
 Arbitrariness steps in especially when there is a
conflict between accounting practices in the
exporting country and the importing country.
 This is so because investigating authorities
typically follow accounting practices of the
importing country


Business Standard - 15
December, 2009


 India to impose antidumping duties on some
equipment imported from China.
 Chinese companies entered the Indian telecom
market, offering products and services at prices about
a third cheaper than that of global competitors.
 Indian manufacturers hurt as well


 Fibrehome Telecommunication Technologies Ltd. will
have to pay a duty of 236%, Alcatel-Lucent Shanghai
Bell Co. 29% and Israel's ECI Telecom Ltd. 93% on
equipment imported from China


The Indian Shrimp
Industry Organizes to
Fight the Threat of Anti-
Dumping Action
(CASE STUDY)


History
 The Ad Hoc Shrimp Trade Action Committee
(ASTAC), an association of shrimp farmers in eight
southern states of the United States, filed an anti-
dumping petition against six countries — Brazil,
China, Ecuador, India, Thailand and Vietnam.
 The petition alleged that these countries had dumped
their shrimps in the US market.


History
 on 21 January 2004 the US Department of Commerce
(DOC) announced the initiation of anti-dumping
investigations against the six countries.
 The Department notified the International Trade
Commission (ITC) of its decision on initiation.
 On 17 February 2004 the International Trade
Commission announced its decision that there was a
reasonable indication that the US shrimp industry was
affected due to Anti-dumping.


 The Department of Commerce continued with its
investigations and gave its preliminary determination
on 28 July 2004.
 The ratio of preliminary duty varies between 3.56%
and 27.49% by the DOC.


 The weighted average rate for India is 14.2%,
 The average rate for
 China is 49.09%,
 Brazil 36.91%,
 Vietnam 16.01%,
 Ecuador 7.3%
 Thailand 6.39%.


II. The National and International context
 On 26 February 2002, Reggie Dupre, a Louisiana state
senator, alleged that tainted farm-raised Asian shrimp
was being diverted from Europe and dumped on the
US market.


The national and international context
 Vietnam, one of the countries identified almost at the
beginning of the SSA(South America Shrimp
Association) exercises and also highly dependent on
the US market for shrimp exports, was the first to
protest.
 Foreign Ministry spokeperson Phan Thuy Thanh said
in a statement on 12 September 2002 that ‘I can say
with certainty that Vietnam has never dumped its
shrimp, and its shrimp have been sold at market
prices.’


Source: WTO Secretariat, Rules
Division Anti-dumping Database

Indonesia protests as well
 Rokhmin Dahiri, the Indonesian Maritime and
Fisheries Minister, denied allegations that the
Indonesian government subsidized its shrimp farmers.
 He said that the price of shrimp on the domestic
market was much lower than the export price.
 “The dumping charge was baseless and, therefore, the
United States should exclude Indonesia from the
proposed anti-dumping investigations. ”


 The Indian government and the Indian shrimp
industry were aware of the threat.
 Arun Jaitley, the then Minister for Commerce, made
a statement in June 2003 after his official visit to the
United States: ‘We are anticipating an action against
our shrimp exports because our share in the US
market is on the rise.


The main contentions of the petitioners
 The six named countries accounted for 74% of shrimp
imports in the US market.
 Imports from the six countries increased from 466 million
lbs. in 2000 to 650 million lbs in 2002.
 Import prices of the targeted countries had dropped by
28% in the previous three years.
 The average unit value of the targeted countries in 2000
was $3.54; this had fallen to $2.55 in 2002, on a headless,
shell-on equivalent basis.


The main contentions of the petitioners

 The average dockside price for one count size of gulf

shrimp dropped from $6.08 to $3.30 per pound from 2000
to 2002.

 The United States was the most open market in the world.

 High tariff rates in other large importing countries

provided a powerful incentive for exporters to increase
shrimp shipments to the United States.

III. The Indian shrimp industry and its response
 The anti-dumping investigations against Indian shrimp imports
might be initiated was hinted at during bilateral talks when the
then Commerce and Industry Minister Arun Jaitley had met his
counterpart in Washington at that time.

 The reason given was that India’s shrimp exports to the United
States had been rising rapidly during the previous three years,
from $255.93 million during 2000-1 to $299.05 million during
2002-3.


III. The Indian shrimp industry
response
 The United States, traditionally a buyer of small-sized
shrimp from India, has now started buying many other
varieties, including black tiger shrimp, resulting in its
occupying the top slot in India’s export markets of
marine products, replacing Japan in 2002-3.


 Commerce Minister on the possible threat to Indian
shrimp exports to the United States, SEAI(Seafood
Exporters Association of India (Kochi, Kerala, India).
and MPEDA(The Marine Products Export
Development Authority) went into action.


 The SEAI (Sea food export Association of India) has
estimated a total budgetary requirement of Rs. 70
million to fight the case. Of this, SEAI would mobilize
Rs. 40 million internally and the remaining Rs 30
million would be collected from its members,
depending on the volume and value of their individual
exports to the US market.


Indian argument
 First, there are specific variations between the shrimp
caught off the south-west coast of the United States
and in Indian waters, so that prices are bound to be
different.
 India’s shrimp exports are predominantly of black tiger
and scampi varieties which are not cultivated in the
United States’, according to the president of SEAI.


Even more arguments…
 Second, while fishing in the United States is a capital-
intensive activity calling for major investment, in India
shrimp capture is carried out with a very low level of
capital and requiring hardly any investment.
 This makes the cost of production considerably lower in
India compared with that for shrimp sea-caught off the
US coast.


DOC is confident
 Department of Commerce observed that India had a
strong case as India was exporting mainly ‘tiger
shrimps which are not found there and that too, in
unprocessed form’. Noting that 80% of shrimp
consumption in the United States is met through
imports.


 Shrimp exports to the United States had come almost
to a standstill due to the uncertainty regarding the
contingent applicability and incidence of the anti-
dumping duty.


US Has Quarreled Before
 In 1976 US banned shrimps ,It was on the ground that
trawling for shrimp by mechanized means had been
adversely affecting certain varieties of sea turtles.
 The WTO ruled against the United States and asked it
to make the regime WTO-compatible.
 However, since that had not yet happened, India’s
exports to the United States of aqua-culture shrimp
and shrimp caught by non-mechanized means were
being made on the basis of certification by the
MPEDA, as required under the law.


IV. Lessons learnt
 Several visits by the representatives of those two bodies
to Washington at critical points also helped to bring an
understanding of the nature of the problem and how to
face it.
 This resulted in the selection and appointment of the
legal counsel, in September 2003.


Lessons learnt
 The speedy resolution of the issue of financing helped
Indian case.
 The shrimp industry in India shouldn’t have been
focused on only one or two major markets for growth.
 Previously it was Japan and during the last few years, it
has been the United States.


Finally
 India learnt the importance of diversification.

 A. J. Tharakan, the SEAI president, has said that they
are exploring alternative markets to make up for the
loss of the lucrative US market.

 ‘But it will be a long drawn-out process. It is not easy to establish
your presence.’


VICTORY for INDIA!!
“On 27 th Jan exports to US
were resumed.”
Business line newspaper– 1st Feb,
2010


Export Subsidies

• Cut in value of subsidies
– Developed countries - 36 % (1995 - 2000)
– Developing countries - 24 % (1995 - 2004)

• Cut in subsidized quantities

Developed countries - 21 % (1995 - 2000)
Developing countries - 14 % (1995 - 2004)
(Base Period : (1986 - 1990)

To develop internationally agreed
disciplines to govern export
credits, guarantees or insurance
programmes


Domestic Support
In WTO terminology, subsidies in general are identified by “boxes” which
are given the colours of traffic lights: green (permitted), Blue (slow down
— i.e. be reduced),
Amber -( Forbidden)
 Green Box - Research, Extension,
PDS, Decoupled Payments etc;

 Blue Box - Production Limiting
Subsidies ;

 Amber Box - AMS-subject to
reduction commitments , Viz.
 Product specific (MSP)
 Non product specific (input
subsidies-fertilizer, Power,
irrigation)

Dr. Tabrez Ahmad,
http://corpolexindia.blogspot.in

Anomaly in WTO Provision

•Developed countries still continue to heavily
subsidize their agriculture.

•As per the World Trade Organisation provision
these countries were required to reduce their
subsidy considerably, so that the developing
countries could get a chance to export their
products to these countries.


RESULTS OF THESE ANOMALIES
There were three problems with the AoA –

1. it ignored the realities of global agricultural markets,

2. it reinforced industrial agriculture at the expense of
sustainable agriculture, and

3. It failed to acknowledge the widely differing needs of
countries at different levels of development.


Agricultural Subsidies
•Agricultural subsidies have affected developing country farmers both by
denying access to rich markets and allowing farmers from advanced countries
to sell to developing countries at suppressed prices.
•This is particularly relevant to India because agricultural products account
for nearly 20% of Indian exports.
Agricultural Support in the US ($US million)

1998 1999 2000 2001 2002
Total value of production (at farm gate) 190,082 185,258 189,318 197,037 200,903
Producer Support Estimate (PSE) 48,272 55,932 49,673 51,683 39,559
Percentage of government support 25.4 30.2 26.2 26.2 19.7

Source: OECD


INDIA SEEKS

•Protecting our food and livelihood security by having sufficient
flexibility for domestic policy measures.

•Protecting domestic producers from the surge in imports or
significant decline in import prices.

•Substantial reduction in export subsidies and domestic support
to agriculture in the developed countries for greater market
access to products of developing countries.

• Finally, a more equitable & fair trading framework for
agricultural commodities

MARKET ACCESS ISSUES CAN NOT BE SEEN IN ISOLATION TO
SUBSIDY REGIME


Domestic support
•The negotiations on domestic support should include the following
elements:

•Substantial reductions in all forms of domestic support should be
undertaken by the developed countries.

•Subsidies excluded from the discipline introduced by the AoA, i.e.
those appearing in the “Blue Box” and the “Green Box”, need to be
re-assessed, particularly from the point of view of their influence on
production.

• The Peace Clause “Article 13 (a) and 13 (b)” shall not be extended
beyond implementation period.

Export Subsidies
The negotiations on export subsidies should include the following
issues:

Countries using export subsides should phase out this form of
farm support within two years of implementation of the
revised disciplines to be followed by countries in the
agricultural sector.

Export subsidies discipline should include all forms of
spending that enhances the capacities of exporters to
increase trade, e.g. export credit, guarantees and
insurance programmes.

The Peace Clause “Article 13 (c)” shall not be extended
beyond implementation period.

Present Stage of Negotiations
 The Cancun Ministerial failed to arrive at any
agreement on modality for agriculture.

 There was no willingness on part of developed
countries to recognize the genuine concerns of
the developing countries, especially in
agriculture

 The US & EU attempted to drive their own
agenda, at the expense of Doha Declaration

 The concerns of the developing countries were
expressed by a group viz. G-20 at Cancun.

Why much of the focus must be on
agriculture…
•Even though it provides less than 4% of global GDP
and 9% of int’l merchandise trade

•OECD manufacturing tariffs have fallen by 9/10ths
over the past 60 years to <4%, while agricultural protection has
risen, Agric. applied (bound) tariffs now average nearly 5 (10)
times manufactures tariffs globally

•Also, the vast majority of the world’s poor rely on farming for
a living, and may be hurt by agric protection policies of rich
countries


Why focus on agriculture
• True, the harm to some DC farmers from
rich-country agricultural protection is reduced
via non-reciprocal preference schemes such
as the ACP‘s Lome Agreement, EBA and
AGOA

• But those schemes contravene the core WTO
rule of non-discrimination

• In particular, they exclude numerous populous
D.C‘s (e.g. Brazil, China, India, Indonesia,
Pakistan, Vietnam)
• Hence they may harm more poor farmers
(through trade diversion) than they help.

1)
Disputes in WTO: total 194
As complainant As defendant

70

60

50

40

30

20

10

0
USA EU Japan Developing
countries


Which agreements are subject to disputes?
Antal

30

25

20

15

10

5

0
SPS/TBT Agriculture Textiles TRIMS TRIPS GATS


Basic Principles
 Non-Discrimination Principle
 MFN treatment

 National Treatment
 Security and predictability of market access
 Increasing the participation of developing countries in
the multilateral trading system
 Fair trade – possibility to respond to unfair trading
practices such as dumping and subsidization
 Transparency


MFN Treatment
 No discrimination between like
products / services originating in or
destined for other WTO Members. Each
trading partner gets immediately and
unconditionally the best treatment
given to any trading partner even if not a
WTO Member


MFN Treatment – a three-tier test
 Whether the governmental measure at issue confers a
trade advantage of the kind covered by Article I:1 of the
GATT 1994
 Whether the products concerned are “like products”
 Whether the advantage at issue is granted immediately
and unconditionally to all like products originating in
other WTO Members


MFN Treatment – Trade Advantage
 Panels and the Appellate Body have interpreted the
term “advantage” broadly to encompass not only
tax/customs advantages, but also laws, regulations and
requirements that affect importation and exportation
and alter the scales of competition


MFN Treatment – “Like Products”
 Not defined in the GATT, but guidance provided by
case law
 In Japan-Alcoholic Beverages, the Appellate Body
likened the concept of “likeness” to an accord, as it
“stretches and squeezes in different places”
 Among the factors which have been taken into
account by panels are the following:
 the properties, nature and quality of the products
 the end-uses of the products
 consumers' tastes and habits
 the (international) tariff classification of the products


MFN Treatment – “Immediately and
Unconditionally”
 The words “immediately “ and “unconditionally” have
been interpreted broadly to mean that a Member
cannot demand reciprocal treatment as a condition for
extending MFN treatment
 Likewise, extension of MFN treatment cannot be made
conditional on a Member having or passing a specific
legislation or undertaking a certain action


MFN Treatment-Exceptions
 GATT Art. I:2-4 (Historical Preferences)
 GATT Art. IV(c) (Cinematographic Films)
 GATT Art. XX (General Exception)
 GATT Art. XXIV:3 (Frontier Traffic)
 GATT Art. XXIV:5 (Free-Trade Area and Customs
Unions)
 GATT Art. XXI (Security Exception)
 “Enabling Clause” (1979 Decision)
 Marrakesh Agreement Art. IX:3 (Waiver)


MFN Treatment - GATS
 Art II:1 of the GATS
 For any measure covered by the GATS, each
Member shall accord immediately and
unconditionally to services and service suppliers of
any other Member treatment no less favourable
than that it accords to like services and service
suppliers of any other country.
 The Appellate Body held in EC – Bananas III that
the obligation imposed by Article II is unqualified,
and does not exclude de facto discrimination.


MFN Treatment – Exceptions under GATS
 GATS Art. II:2 (Specific List of MFN Exemptions)
 GATS Art. II:3 (Advantages to Adjacent Countries)
 GATS Art. V (Economic Integration)
 GATS Art. V bis (Labour Market Integration)
 GATS Art. XIV (General Exception)
 GATS Art. XIV bis (Security Exception)


MFN Treatment - TRIPS
 Art 4 of the TRIPS Agreement
 With regard to the protection of intellectual property,
any advantage, favour, privilege or immunity granted by
a member to the nationals of any other country shall be
accorded immediately and unconditionally to the
national of all other Members
 Exceptions: Art. 4(a)-(d) of the TRIPS Agreement;
TRIPS Art. 73 (Security Exception) and Marrakesh
Agreement Art. IX:3 (Waiver)


National Treatment
 As a general rule, imported products must not be
discriminated against vis-à-vis domestic products
 Members cannot impose higher internal taxes or more
burdensome obligations on imported “like” products
 Determinants of likeness - the properties, nature and
quality of the products; the end-uses of the products;
consumers' tastes and habits and the tariff classification
of the products
 None of these elements is dispositive


MFN Treatment v. National Treatment

Non- Discrimination Non-Discrimination
at the Border: Inside Border:
Equal Treatment between Equal Treatment
WTO Members’ Products between Imported
and Domestic
Goods

Article I GATT Article III GATT
(Article II GATS (Article XVII GATS
Article IV TRIPS) Article III TRIPS)

Internal v. Border Measure
 Difficult at times to distinguish between the two: would an
import ban enforced at the border be subject to Article III or
XI of the GATT 1994?
 Basic rule
Applied at the border Applied inside the border

Article XI GATT Article III GATT
or

Article III GATT


Article III:2 of the GATT 1994 – First Sentence
– tax discrimination of like products
 The products of the territory of any Member imported
into the territory of any other Member shall not be
subject, directly of indirectly, to internal taxes or other
internal charges of any kind in excess of those applied,
directly or indirectly, to like domestic products
 In Canada – Periodicals, it was held that the following
conditions have to be satisfied: (i) whether the
imported and domestic products are like products; and
(ii) whether the imported products are taxed in excess
of the domestic products


Article III:2 of the GATT 1994 – Second Sentence –
directly competitive or substitutable products

 Article III:2: Moreover, no Member 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.
 Ad Art. III:2: A tax conforming to the requirements of
the first sentence of para. 2 would be considered to be
inconsistent with the provision of the second sentence
only in cases where competition was involved between,
on the one hand, the taxed product and, on the other
hand, a directly competitive or substitutable product
which was not similarly taxed.


Article III:2 of the GATT 1994 – Second Sentence –
directly competitive or substitutable products

 Held in the Japan-Alcoholic Beverages II case that
the following elements have to be satisfied:
 Whether the imported and domestic products are
directly competitive or substitutable
 Whether these products are not similarly taxed
 Whether dissimilar taxation is applied so as to afford
protection to domestic producers


Article III:4 of the GATT 1994 – Discriminatory
domestic rules/regulations
“The products of the territory of any contracting party
imported the territory of any other contracting party shall
be accorded treatment no less favourable than that
accorded to like products of national origin in respect of
all laws, regulations and requirements affecting their
internal sale, offering for sale, purchase, transportation,
distribution or use…”.


Article III:4 of the GATT 1994 – Discriminatory
domestic rules/regulations
 Held in the Korea - Beef that the following elements
have to be satisfied:
 Whether the measure at issue is a law, regulation or
requirement covered by Article III:4 GATT
 Whether the imported and domestic products are ‘like
products’
 Whether the imported products are accorded less
favourable treatment


Exceptions to the National Treatment Principle
under GATT
 GATT Art. III:3 (“Grandfathering”)
 GATT Art. III:8(a) (Government Procurement)
 GATT Art. III:8(b) (Production Subsidies)
 GATT Art. III:9 (Prejudicial effect of internal
price control measures)
 GATT Art. III:10 and Art. IV (Cinematographic
films)


National Treatment Principle under the GATS and
TRIPS
 As a general rule, foreign goods, services and service
providers, as well as IPR holders must not be
discriminated against vis-à-vis domestic goods,
services, and services providers, as well as IPR holders
 Unlike the GATT, NT principle flexible under GATS
 Article XVII:1 of the GATS: In the sectors inscribed in
its Schedule, and subject to any conditions and
qualifications set out therein, each Member shall accord
to services and service suppliers of any other Member,
in respect of all measures affecting the supply of
services, treatment no less favourable than that it
accord to its own like services and service suppliers
 .


National Treatment Principle
under the GATS
 Art XVII:2: A Member may meet the requirement of
para.1 by according to services and service suppliers
of any other Member, either formally identical
treatment or formally different treatment to that it
accords to its own like services and service suppliers
 Article XVII:3 of the GATS: Formally identical or
formally different treatment shall be considered to be
less favourable if its modified the conditions of
competition in favour of services or service suppliers
of the Member compared to like services of service
suppliers of any other Member


Exceptions to the National Treatment Principle
under the GATS

 GATS Art. XIV bis (Security
Exception)
 GATS Art. XXI (Modifications of
Commitments)
 Marrakesh Agreement Art. IX:3
(Waiver)


Binding of Commitments / Concession
 Members commit themselves not to raise duties or make
concessions more restrictive than indicated in their
schedules of commitments / concessions
 Art. II: 1(a) of the GATT: 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
 Exceptions to the “binding” principle are the following:
 GATT Art. II:1(b) (Other Duties and Charges - ODCs)
 GATT Art. II:2 (Internal Tax, Anti-Dumping or Countervailing
Duty, Customs Fees)
 GATT Art. XXVIII (Modifications of Concessions)


Binding of Commitments / Concession
 Art XX:1 of the GATS: Each Member shall set out in a Schedule
the specific commitments it undertakes under Part III of this
Agreement (GATS). With respect to sectors where such
commitments are undertaken, each Schedule shall specify
terms, limitations and conditions on market access …
 Art XX:3: Schedules of specific commitments shall be annexed to
this Agreement and shall form an integral part thereof.
 Exceptions
 GATS Art. XIV bis (Security Exception)
 GATS Art. XXI (Modifications of Commitments)


Prohibition of Quantitative Restrictions
 Art. XI:1of the GATT: No prohibitions or restrictions
other than duties, taxes or other charges (regardless of
form – quotas, import/export licenses, other measures)
shall be instituted or maintained on imports/exports
 Art. XIII:1: Limited exceptions permitted but Members
must respect the non-discrimination principle in their
imposition of QRs. They must be similarly applied to
all third countries
 Art. XIII:2 Allocation of QRs or TRQ’s as close as
possible to expected shares that would have been
obtained in absence of restrictions.


Prohibition of Quantitative Restrictions - Exceptions
 GATT Art. XIX (Safeguards)
 GATT Art. XI:2(a) (Critical Shortage of Foodstuffs
 or Other Essential Products)
 GATT Art. XI:2(b) (Removal of a Temporary Surplus
 of a Like Domestic Product for which the Imported
Product
 can be Directly Substituted)
 GATT Art. XI:2(c) (Agricultural Products and Fish)
 -- Agreement on Agriculture (Tariffication)
 GATT Art. XXIV:5 (Free-Trade Area and Customs
Unions)
 Agreement on Textiles and Clothing (Progressive
Integration)

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