International Trade Regulation Oxicorp Case - P. 6.1 Victor H. Bouganim WCL, American University.

International Trade RegulationInternational Trade RegulationOxicorp Case - P. 6.1Oxicorp Case - P. 6.1

Victor H. Bouganim

WCL, American University

© 2001 Victor H. Bouganim, WCL, American University IBT - Intro - 2

OXICORP CaseOXICORP CaseP. 6.1 , Textbook, p. 327P. 6.1 , Textbook, p. 327

Oxicorp trades with Non-Market Economies (NME) and Transition Economies (TE).

This is a business planning problem focusing on China.

Concerns about business risks while trading with NME/TE economies.


OXICORP ConcernsOXICORP Concerns

Concern over the level of risk OXICORP faces in trading heavily in goods from NME and TE countries– China and Russia– Specific goods and U.S. tariff levels

What tariff levels apply to manufactured products imported into the U.S. which do not qualify for MFN tariff treatment?


““Most Favored Nation”Most Favored Nation”

Any advantage, favor, privilege or immunity granted by a member to any other country (or its nationals) shall be accorded immediately and unconditionally to all members (or their nationals).

Exceptions Members entering:

– Customs unions– Free trade areas– Regional

arrangements Preferential treatment

– Under-developed countries


US Tariff Schedule - 1US Tariff Schedule - 1


US Tariff Schedule - 2US Tariff Schedule - 2


Reduced Tariff LevelsReduced Tariff Levels

A - Generalized System of Tariff Preferences

B - Automotive products

C - Civil aircraft

CA - Canada E - Caribbean Basin

Initiative IL - Israel J - Andean Trade

Preference Act MX - Mexico


Jackson-Vanik AmendmentJackson-Vanik Amendment

Jackson-Vanik Amendment to the Trade Act of 1974 governs–Most favored nation (MFN) tariff

status granted to NMEs and TEs if their emigration and other policies are approved by U.S.


Effects of Jackson-Vanik AmendmentEffects of Jackson-Vanik AmendmentTrade Act 1974, 19 USC § 2432Trade Act 1974, 19 USC § 2432

Sec. 402 [Mats. p. 675]Sec. 402 [Mats. p. 675]

Linkage between human rights and trade Power of president to waive the emigration

rights requirements of the Trade Act if objectives of act promoted– Waivers are reviewed and mostly renewed

annually: The case of China

– 1998: Change from MFN to NTR - Normal Trade Relations.


The Evolution of GATT/WTOThe Evolution of GATT/WTODemeret, p. 329Demeret, p. 329

1947 GATT only intended to cover interim period until Havana Charter executed– GATT based on MFN principle– Treat imports the same as domestic

products with some exceptions Havana Charter never entered into

force because U.S. never ratified it


The Tokyo RoundThe Tokyo Round

1974-79 as result of U.S. initiative– Objective: reduction of non-tariff barriers

Codification technique employed– Problem: each agreement had its own

dispute resolution procedure Resulted in “balkaniztion” of GATT or

“GATT a la carte”


Uruguay RoundUruguay Round

Completed in 1994WTO formedPuts an end to the GATT “a la carte”Countries able to accept multilateral

agreements addressing their domestic concerns


WTO AgreementWTO Agreement

Includes several multilateral agreements addressing agriculture, textiles, antidumping, subsidies, services, IP, etc.

Goals of WTO: implement and administer current agreements, and serves as a forum for negotiating further trade agreements

Dispute resolution


WTO StructureWTO Structure

DirectorDirectorGeneralGeneral

SecretariatSecretariat

CommitteeCommitteeon Tradeon Trade

& Development& Development

CommitteeCommittee on Balance of Paymenton Balance of Payment

RestrictionsRestrictions

CommitteeCommitteeon Budget, Financeon Budget, Finance

& Administration& Administration

MinisterialMinisterialConferenceConference

Trade PolicyTrade PolicyReview BodyReview Body

Dispute SettlementDispute SettlementBodyBody

Council forCouncil forTrade in GoodsTrade in Goods

Council forCouncil forTrade in ServicesTrade in Services

Council forCouncil forTRIPsTRIPs

GeneralGeneralCouncilCouncil


WTO Decision MakingWTO Decision Making

Ministerial Conference: meets biennially equal voting weight for all WTO members Responsible for all WTO functions

General Council: executive authority for daily operations equal voting weight to all WTO members Power to adopt interpretations of covered agreements Includes the Dispute Settlement Body (DSB) and Trade Policy

Review Body (TPRB) Committees:

accountable to the above


Class DiscussionClass Discussion

What is the relationship between WTO membership and “Most Favored Nation” status?

How does the European Union affect the WTO?

How do regional agreements affect the goals of the WTO?


Bhala on Free TradeBhala on Free Trade

Examines the WTO in a broad economic context “system friction” between economies of Europe,

Japan and U.S. – regional differences affect global trade

Bhala’s three conclusions concerning current global trading system:

– No such thing as free trade at law– Gap between developing and developed nations– Persistent doubts about the benefits of free trade


GATT/WTO Membership for ChinaGATT/WTO Membership for China

1986: China applies to rejoin GATT after 40 year absence

Why? – WTO membership increases export. Also Chinese attempt to join major international organizations after reentry to world community in 1970s

Communism: How does this affect relationships with other WTO members?


China’s WTO AccessionChina’s WTO Accession In 1999 and 2000 China intensified its bilateral

negotiations with WTO member governments. It is expected that WTO Ministers will take a decision on

China's terms and conditions of entry into the WTO at the Doha Ministerial Conference in November 2001.

Will China accede as a developing or developed country?


OXICORP and China OXICORP and China Accession to WTOAccession to WTO

Would adherence by the Chinese to the Dispute Settlement Understanding (DSU) be a plus to OXICORP? To China? To the U.S.?

If admitted, which of the Uruguay Round agreements and understandings would bind China? Does it matter whether China is accorded “developing country” status?

International Trade Regulation Oxicorp Case - P. 6.1 Victor H. Bouganim WCL, American University.

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