INTERNATIONAL TRADE REGULATION

• Topics for Discussion– General Discussion on GATT– GATT Principles– World Trade Organization Agreements– WTO Dispute Resolution System– United State’s Approach to Dispute Resolution– Criticism of WTO– Regional Expansion

General Discussion of GATT

• General Agreement on Trade and Tariff– Originated in 1947 to reduce tariffs among

trading nations involving “goods”– Effective is establishing “binding amounts”

among trading nations– Uruguay Round expanded into non-tariff areas

such as services and intellectual property

GATT PRINCIPLES

• Three Basic Principles• Most Favored Nation-requires member nations to of

the WTO to offer all member nations their most favorable tariff rates

– Exceptions

» Countries can raise barriers to the importation of goods from specific countries that are considered in violation of GATT principles-illegal subsidies and dumping of goods

» Formation of Free Trade Areas that do not apply to goods from outside the regional group.

GENERAL PRINCIPLES

• General Principles-continued– National Treatment-once a product, service, or

intellectual property right enter into a foreign market they must be given the same treatment given to domestically produced product service or intellectual property.

– Transparency-prohibits a country from making its import standards and requirement secret.

WTO AGREEMENT

• WTO Agreements– Agreement on Technical Barriers to Trade-

technical specifications contained in documents that specifies characteristics of a product such as levels of quality, performance, safety or dimensions. Standards may include terminology, symbols, testing, packaging, marking or labeling requirements.

WTO AGREEMENT

• WTO Agreement continued– Agreement on the Application of Sanitary and

Phytosanitary Measures-promoting international standards to import restrictions aimed at protecting human, animal and plant life and health. Promotions of international measures to protect human and animal life.

• See Case on Oregon Natural Resource Council

WTO AGREEMENT

• WTO Agreement continued– Customs Valuation Code-attempts to standardize

how countries challenge the value of a good being imported

– Agreement on Pre-Shipment Inspection-pertains to a country’s right to pre-shipment inspection

– Agreement on Import Licensing– Country of Origin

DISPUTE RESOLUTION SYSTEM

• Dispute Resolution Understanding– Time Dimensions-

– Urgent matters resolved in three months

– Maximum use of time no more than 15 months

– Dispute Resolution Structure• Mediation Body

• Dispute Resolution Panel-small tribunal who hears case and makes report

• Dispute Resolution Body-issues decision

UNITED STATE’S APPROACH

• US Approach to Dispute Resolution– US attempts to suspend tariff concession to EU

• Arbitration Panel found in favor of US in terms of same sector, imported bananas treated differently and violated national treatment principles.

– Antidumping Procedures• Dumping-price discrimination when foreign exporter

sells goods below what it sells in home country or below the cost of production.

» Lower price may constitute subsidy

U.S. APPROACH

• Antidumping Procedure– Manufacturer complains to Department of

Commerce and requests a “countervailing duty”.

• GATT Code on Subsidies and Countervailing Duties

• International Trade Commission investigates whether the dumped good causes a material injury

– Factors considered are lost profits, unemployment in the industry, lost sales, suppression of export prices

US APPROACH

• Antidumping Procedure– Section 301 of Tariff Act authorizes Office of

US Trade Representative to retaliate– Deadline to complete investigation is 18 months– Countervailing Duty can be imposed– Also, setoffs can be imposed in other industries– Section 337 of Tariff Act provides relief for

gray market goods

CRITICISM OF WORLD TRADE ORGANIZATION

• No Respect for Environmental Standards

• Lack of International Labor Standards

• Lack of Control of Movement of Production to Developing Economies with Lower Standards

• Lack of Providing for Food Safety Priority over Trade

REGIONALIZATION

• North American Free Trade Agreement– Aims at Reducing Trade Barriers Among

Mexico, Canada and United States• Tariff Free Area in 15 years

– Goods Must Be Certified as Regional Goods

– Reduce Barriers in direct and indirect investments, free flow of capital and dispute resolution system

– Committee System To Constantly Review Trade Areas

REGIONALIZATION

• Regionalization (Global)– European Union-13 European Nations with

applications for entry from other nations– MERCOSUR-Southern Common Market-

Argentina, Brazil, Paraguay and Uruguay– Andean Common Market-Bolivia, Venezuela,

Colombia, Ecuador and Peru– African Economic Community-51 African

Natioins

REGIONALIZATION

• Regionalization– COMESA-Common Market for Eastern and

Southern Africa– Southern African Development Community-

Angola, Botswana, Lesotho, Malawi, Mozambique, Namibia, Swaziland, Tanzania, Zambia, Zimbabwe, Mauritius and South Africa

REGIONALIZATION

• Regionalization– Asia Pacific Economic Cooperation Group-US,

Japan, Australia, Canada, South Korea, China and Indonesia (Bogor Declaration)-to achieve free and open trade and investment

– Central American Common Market-Guatemala, El Salvador, Costa Rica, Nicaragua, Honduras and Panama

REGIONALIZATION

• Regionalization– Gulf Cooperation Council-Saudi Arabia, Kuwait,

Bahrain, Qatar, UAE and Oman– Arab League--22 members-Algeria to Yemen– Commonwealth of Independent States-former

Soviet Union Nations– Association of Southeast Asian Nations-Indonesia,

Malaysia, Philipines, Singapore, Thailand and Brunei, Myanmar, Laos and Cambodia