Lesson Three | Principal Legal Obligations under WTO Law

UPH MTIC Program | Introduction to WTO Law

Principal Rights and Obligations under WTO Law

Simon Lacey

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Structure of the Present Lecture

1. Overview: the main principles of WTO law 2. Non discrimination under WTO Law3. Transparency and predictability4. Progressive liberalization through

successive rounds of trade negotiations

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Non- discrimination‒ Most Favoured Nation‒ National Treatment

Transparency and predictability‒ Requirement to publish all relevant laws‒ Notification obligations

Progressive liberalization through successive rounds of trade negotiations

‒ Binding and subsequent reduction of tariffs‒ Policing of other non-tariff measures

Overview

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Non Discrimination

• Non discrimination is key concept in WTO law, indeed one of the cornerstones upon which the whole WTO system is built.

• There are two main applications of the principle of non-discrimination in WTO law:– The most-favoured-nation (MFN) treatment obligation – The national treatment obligation

• The MFN treatment prohibits a country from discrimination between other countries.

• The national treatment obligation prohibits a country from prohibiting against other countries.

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Non Discrimination cont’

• Discrimination between and against other countries was an important characteristic of the protectionist trade policies pursued by many countries during the Great Depression of the 1930s.

• Historians now regard these discriminatory policies as an important contributing cause of the economic and political crisis that resulted in the Second World War.

• Discrimination in trade matters breeds resentment amongst the countries, manufacturers, traders and workers discriminated against.

• Such resentment poisons international relations and may lead to economic and political confrontation and conflict.

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• Discrimination makes scant economic sense, generally speaking, since it distorts the market in favour of products and services that are more expensive and/or of inferior quality.

• The importance of eliminating discrimination in the context of the WTO is highlighted in the Preamble to the WTO Agreement, where the “elimination of discriminatory treatment in international trade relations” is identified as one of the two main means by which the objectives of the WTO may be attained.

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• The key provisions of the GATT 1994 dealing with non-discrimination in trade in goods are:

– Article I on the MFN treatment obligation; and– Article III, on the national treatment obligation.

• The key provisions of the GATS dealing with non-discrimination in trade in services are:

– Article II on the MFN treatment obligation; and– Article XVII, on the national treatment obligation.

• The MFN and national treatment obligations of the GATT 1994 and the GATS prohibit discrimination on the basis of the “national origin or destination” of a product or service, or on the basis of the “nationality” of a service supplier.

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MFN under the GATT 1994

Article IGeneral Most-Favoured-Nation Treatment

1. With respect to customs duties and charges of any kind imposed on or in connection with importation or exportation or imposed on the international transfer of payments for imports or exports, and with respect to the method of levying such duties and charges, and with respect to all rules and formalities in connection with importation and exportation, and with respect to all matters referred to in paragraphs 2 and 4 of Article III,* any advantage, favour, privilege or immunity granted by any 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

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Most Favoured Nation under the GATT

GATT 1994 contains a number of other provisions requiring MFN or MFN-like treatment:

Article III:7 (regarding internal quantitative regulations); Article V (regarding freedom of transit); Article IX:1 (regarding marking requirements); Article XIII (regarding the non-discriminatory administration of quantitative

restrictions); and Article XVII (regarding state trading enterprises).

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Article I:1 of the GATT 1994 prohibits discrimination between like products originating in, or destined for, different countries. The principle purpose of the MFN obligation is to ensure equality of opportunity to import from, or to export to, all WTO Members.

Article 1:1 covers not only discrimination “in law” (de jure discrimination), but also “in fact” or de facto.


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Article I:1 of GATT 1994 sets out a three-tier test of consistency. There are three questions which must be answered to determine whether there is a violation of the MFN treatment obligation as set out in Art. I:1 GATT:

Whether the measure at issue confers a trade “advantage” of the kind covered by GATT Article I:1;

Whether the products concerned are “like” products; and Whether the advantage at issue is granted “immediately and unconditionally” to all like

products concerned.


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“Any advantage”

In brief, the MFN treatment obligation concerns any advantage granted by any Member with respect to:

Customs duties, other charges on imports and exports and other customs matters; Internal taxes; and Internal regulation affecting the sale, distribution and use of products.


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“Like Products” (“produits similaires”)

It is only between like products that the MFN treatment obligation applies and that discrimination is prohibited. Products that are not “like” may be treated differently.

The concept of “like product” is used not only in Art I.1 but also in many other articles concerning non-discrimination as well as in the relevant contingency protection provisions of the GATT and their corresponding agreements.

However the GATT does not contain any definition of “like products”. Moreover, it is generally accepted that the concept of “like product” has different meanings in the different contexts in which it is used.


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With regard to the concept of “like products” there are three questions of interpretation that need to be resolved:

Which characteristics or qualities are important in assessing “likeness”? To what degree or extent must products share qualities or characteristics in

order to be “like products”. From whose perspective should “likeness” be judged.


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The meaning of the phrase “like products” in Article I.1 has been addressed in a number of GATT working party and panel reports. It is established case law that the following elements may be considered in a like-product analysis:

‒ The characteristics of the product; ‒ Their end-use; ‒ Their treatment in tariff schedules of other Members;‒ Consumers’ tastes and habits.

The way in which a product is manufactured (so-called process or production method PPM) is generally NOT considered relevant in determining whether two products are “like” or not.


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Advantage granted “immediately and unconditionally”

Once a WTO Member has granted an advantage to imports from a country, it cannot make the granting of that advantage to imports of other WTO Members conditional upon those other WTO Members “giving something in return” or “paying” for the advantage.


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The Exceptions

Although it is one of the most fundamental principles of the multilateral trading system, the MFN treatment obligation is subject to a number of important exceptions, including:

GATT Article XXIV, which allows Members to afford more preferential treatment to countries with which they have entered into a free trade agreement or a customs union

GATT Article XX lists the general exceptions, such as public morals, human, animal or plant life or health and other public policy considerations

GATT Article XXI, which gives Members freedom to take any measure necessary in the interest of its national security

The Enabling Clause, which allows Members to provide preferential market access to developing countries.

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National Treatment under the GATT

GATT Art. III contains detailed language on the national treatment obligations WTO Members must comply with.

However, GATT Art. III is not the only source of law containing language on national treatment. Other multilateral agreements such as the TBT Agreement, the SPS Agreement and the TRIMS Agreement require national treatment.

Generally speaking, Art. III prohibits discrimination against imported products. It prohibits Members from treating imported products less favorably than like products once the imported product has entered the domestic market.

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Object and Purpose of GATT Article III

Article III of GATT 1994 prohibits discrimination against imported products; Generally speaking, it prohibits Members from treating imported products less

favorably than like domestic products once the imported product has entered the domestic market;

Article III obliges Members of the WTO to provide equality of competitive conditions for imported products in relation to domestic products (Japan - Alcoholic Beverages II);

In Korea – Alcoholic Beverages, the AB identified the objectives of Article III as being:

– Avoiding Protection;– Requiring equality of competitive conditions; and– Protecting expectations of equal competitive relationships

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“The broad and fundamental purpose of Article III is to avoid protectionism in the application of internal tax and regulatory measures. More specifically, the purpose of Article III is to ensure that internal measures ‘not be applied to imported or domestic products so as to afford protection to domestic producers’. Toward this end, Article III obliges Members of the WTO to provide equality of competitive conditions for imported products in relation to domestic products. The intention of the drafters of the Agreement was clearly to treat the imported products in the same way as the like domestic products once they had been cleared through customs. Otherwise indirect protection could be given.”

In Japan Alcoholic Beverages II, the Appellate Body stated with respect to the purpose of the national treatment obligation of Article III:

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It is generally accepted that one of the main purposes of Article III is to guarantee that internal measures of WTO Members do not undermine their commitments regarding tariffs under Article II, although Article III also covers products which have not been the subject of tariff commitments.

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Internal Measures v. Border Measures

Article III only applies to internal measures, not to border measures; Other GATT provisions, such as Article II on tariff concessions and Article XI on

quantitative restrictions apply to border measures; It is not always easy to distinguish an internal measure from a border measure when the

measure is applied to imported products at the time or point of importation; The Ad Note to Article III clarifies:

Any internal tax or other internal charge, or any law, regulation or requirement of the kind referred to in paragraph 1 which applies to an imported product and to the like domestic product and is collected or enforced in the case of the imported product at the time or point of importation, is nevertheless to be regarded as an internal tax or other internal charge, or a law, regulation or requirement of the kind referred to in paragraph 1, and is accordingly subject to the provisions of Article II

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GATT Articles III:1, IIII:2 and III:4

Article III:1 articulates a general principle that internal measures should not be applied so as to afford protection to domestic producers;

This general principle is elaborated upon in Article III:2 with regard to internal taxation and in Article III:4 with regard to internal regulations;

In Article III:2, two non-discrimination obligations can be distinguished:– One obligation is set out in in the first sentence of Article III:2, relating to internal

taxation of “like products”;– The other obligation is set out in the second sentence of Article III:2 and relates to

internal taxation of “directly competitive or substitutable products”

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Consistency with Article III:2 first sentence

Article III:2 first sentence states: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.

This provision sets out a two-tier test of consistency of internal taxation with Article III:2, first sentence:

– Whether the imported and domestic products are like products; and– Whether the imported products are taxed in excess of the domestic products.

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Internal Taxes

Article III:2 first sentence concerns “internal taxes and other charges of any kind” which are applied “directly or indirectly” on products;

Examples of such internal taxes on products are value added taxes (VAT), sales taxes and excise duties.

Income taxes or import duties are not covered since they are not internal taxes on products;

The words “applied directly or indirectly on products” should be understood to mean “applied on or in connection with products”;

According to the Panel in US – Tobacco, the Panel examined the question of whether the penalty provisions for the enforcement of a domestic law is not an “internal tax or charge of any kind” within the meaning of Article III:2 first sentence.

Also, the Panel in EEC – Animal Feed Proteins did not consider a security deposit to be a fiscal measure although the deposit accrued to the EEC when the buyers of vegetable proteins failed to fulfill the obligation to purchase milk powder.

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Internal Taxes (cont’)

The regulatory objective pursued by the tax measure is of no relevance to the question of whether the measure is an internal tax within the meaning of Article III:2 and the consistency of that measure with the national treatment obligation;

In Japan – Alcoholic Beverages II, the Appellate Body stated that Members may pursue any given policy objective through their tax measures, provided they do so in compliance with Article III:2;

In Argentina – Hides and Leather, the Panel rejected Argentina’s contention that the tax legislation at issue was designed to achieve efficient tax administration and collection and as such did not fall under Article III:2.

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‘Like Product’ under Article III:2 first sentence.

• Similar to the concept of ‘like products’ in Article I:1 of the GATT 1994, the concept of ‘like products’ in Article III:2, first sentence, is not defined in GATT 1994.

• However considerable jurisprudence sheds light on the concept;• The AB in Japan – Alcoholic Beverages II stated that the concept of likeness in Article III:2, first

sentence should be interpreted narrowly because of the existence of the concept of “directly competitive or substitutable products” used in the second sentence of Article III:2.

• A 1970 Working Party Report examined the concept of ‘likeness’ and its findings have largely been followed by Panels ever since. It stated that likeness must be determined on a case-by-case basis and suggested a number of criteria:

• A product’s end-uses in a given market;• Consumers’ tastes and habits• Product’s properties, nature and quality.• A product’s tariff classification has also been used in a number of disputes.

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Aims-and-Effects Test

• In US – Taxes on Automobiles, the Panel reasoned that the determination of likeness would, in all but the most straightforward cases, have to include an examination of the aims and effects of the particular tax measure;

• In Japan – Alcoholic Beverages II, the Panel explicitly rejected the aims and effects test for determining likeness due to a number of reasons, the most important of which was the fact that there was no basis for such a test in the language of Article III.

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Taxes “in excess of”

Pursuant to Article III:2, first sentence, internal taxes on imported products should not be ‘”in excess” of the internal taxes applied to the “like” domestic products.

In Japan – Alcoholic Beverages II, the Appellate Body established a strict benchmark for the “in excess of” requirement.:– Even the smallest amount fulfills the criteria;– Not conditional on a “trade effects test”;– No de minimis standard.

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Consistency with Article III:2, 2nd sentence

• Article III:2 second sentence states:“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.”

• Recall that the key principle contained in Article III:1 that internal taxes and other internal charges should not be applied to imported or domestic producers so as to afford protection to domestic production.

• Moreover, the Ad Note to Article III provides, with respect to Article III:2, that a “ A tax conforming to the requirements of the first sentence of paragraph 2 would be considered to be inconsistent with the provisions 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”

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Consistency with Article III:2, 2nd sentence

In both Japan - Alcoholic Beverages II and Canada – Periodicals, the Appellate Body held that the second sentence of Article III:2 contemplates a “broader category of products” than Article III:2, first sentence.

Moreover, Article III:2, second sentence sets out a different test of inconsistency, and requires an examination of:

– Whether the imported and domestic products are directly competitive or substitutable;– Whether these products are not similarly taxed;– Whether the dissimilar taxation is applied so as to afford protection to domestic

production.

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Directly competitive or substitutable products

In Canada – Periodicals, the Appellate Body ruled that to be “directly competitive or substitutable” within the meaning of Article III:2 second sentence, products do not have to be perfectly substitutable, noting that “a case of perfect substitutability would fall within Article III:2 first sentence, while we are examining the broader prohibition of the second sentence”.

The Appellate Body considers products to be “directly competitive or substitutable” when they are interchangeable, in that they offer alternative ways of satisfying a particular need or taste.

The AB also considers that, in examining whether products are directly competitive or substitutable, an analysis of latent as well as extant demand is required since it considers that competition in the market place is a “dynamic, evolving process”

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“Not similarly taxed”

Whereas under Article III:2, first sentence, even the slightest tax differential leads to the conclusion that the internal tax imposed on imported products is inconsistent with the NT obligation, under Article III:2, second sentence, the tax differential has to be more than de minimus to support a conclusion of WTO inconsistency.

The “not similarly taxed” requirement is met even if only some imported products are not taxed similarly to domestic products, while other imported products are taxed similarly

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“So as to afford protection to domestic production”

The final requirement of the test under Article III:2, second sentence, is whether the internal taxes are applied “so as to afford protection to domestic production”.

In order to determine whether the application of a tax measure affords protection to domestic production, it is the application criteria, the structure and the overall application rather than the subjective intent of the legislator or regulator that must be examined.

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Consistency with the national treatment obligation of Article III:4 of GATT 1994

The NT obligation of Article III of GATT 1994 does not only concern internal taxation as dealt with in Article III:2.

Article III also concerns internal regulation, dealt with primarily in Article III:4, which reads, in relevant part:

“The products of the territory of any [Member} imported into the territory of any other [Member] shall be accorded treatment no less favorable 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.

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Three-tier test of consistency of internal regulations with Article III:4

The three-tier test of consistency of internal regulations with Article III:4 of GATT 1994, requires an examination of whether:

– The measure at issue is a law, regulation or requirement, covered by Article III:4;– The imported and domestic products are like products; and– The imported products are accorded less favourable treatment

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Laws, regulations and requirements …

According to GATT case law, Article III:4 applies, inter alia, to:– Minimum price requirements applicable to domestic and imported beer;– Limitations on points of sale for imported alcoholic beverages;– The practice of limiting the “listing” of imported beer to the six-pack size;– The requirement that imported beer and wine be sold only through in-State wholesalers or other

middlemen;– A ban on cigarette advertising;– Additional marking requirements such as an obligation to add the name of the producer or the place of

origin of the formula of the product;– Practices concerning internal transportation of beer; and– Trade-related investment measures.

In addition to generally applicable “laws and regulations”, Article III:4 also covers “requirements which may apply to isolated cases only.

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Like products under GATT Article III:4

The determination of whether products are “like products” under Article III:4 is, fundamentally, a determination about the nature and extent f the competitive relationship between these products.

The concept of “like products” in Article III:4 has a relatively broad scope, and is broader than that of the concept of “like products” in Article III:2, first sentence.

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“Treatment no less favourable”

This has been interpreted to mean “effective equality of competitive opportunities”; Some measures found to be inconsistent in past cases include:

– Minimum price requirements– A general ban on cigarette advertising– Regulations concerning internal transportation

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Exceptions to National Treatment

Generally, the same exceptions can be said to apply to the national treatment obligation as for the MFN treatment obligations.

Thus Article XX (General Exceptions), XXI (Security Exceptions) and Article XXIV (Free Trade Areas and Customs Unions) also allow Members to derogate from their National Treatment obligations under clearly prescribed circumstances.

However the Enabling Clause, which allows Members to provide preferential market access to products from developing countries (in derogation of the MFN principle), would not be capable of providing legal cover for a derogation from the national treatment obligation.

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MFN in the GATS- Nature of the Obligation under GATS

• Article II:2 of the GATS prohibits discrimination between like services and service suppliers from different countries;

• This with respect to any measure covered by the Agreement;• As is the case with the MFN treatment obligation under GATT 1994, the

principal purpose of the MFN treatment obligation of Article II:1 of the GATS is to ensure equality of opportunity, here, for service suppliers from all WTO Members;

• The MFN treatment obligation of Article II:1 of the GATS applies to both de jure and de facto discrimination

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Consistency with GATS Article II:1

As with GATT Article I:1, GATS Article II:1 sets out a three-tier test of consistency.

There are three questions which need to be answered to determine whether or not a measure violates the MFN treatment obligation of Article II:1:– The measure is a measure covered by the GATS;– The services or service suppliers are “like” services or “service suppliers”;

and– Less favorable treatment is accorded to the services or service suppliers of

a Member

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Measures covered by the GATS

Article I:1: “This Agreement applies to all measures by Member affecting trade in services”

– A measure by a Member:– A measure affecting trade in services.

Measures by provincial or regional governments also covered; Measures taken by non-governmental bodies are covered when these

measures are taken in the exercise of powers delegated by governments or authorities;

A “measure by a Member” can be a law, regulation, rule, procedure, decision or administrative action but can also take any other form;

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Measures affecting Trade in Services

Two key issues must be examined to determine whether a measure is one “affecting trade in services”:

– Whether there is “trade in services” in the sense of Article I:2; and – Whether the measure at issue “affects such trade in services within the meaning of

Article I:1. No definition of “trade in services”, but GATT Article I:3(b) states that the term

“services” includes “any services in any sector except services supplied in the exercise of governmental authority”

– Not on a commercial basis;– Nor in competition with one or more service suppliers

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The Four Modes of Supply

Article 1:2 defines trade in services, as the “supply of a service” within one of four defined “modes of supply”:

– Cross-border supply;– Consumption Abroad– Commercial Presence– Movement of Natural Persons

Whether the measure at issue “affects” trade in services, the choice of the term “affect” has been interpreted to give the Agreement the broadest possible scope

A measure affects trade in services when the measure has a bearing (impact) on the conditions of supply of a service;

GATS Article XXVII provides a non-exhaustive list of measures by Members affecting trade in services.

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Like Services or Service Suppliers

The concept of “services supplier” is defined in GATS, Article XXVIII(g) provides that a service supplier is “any person who supplies a service”;

Includes natural and legal persons; Includes service suppliers providing their services through various forms of

commercial presence; No definition of “like service” or like service supplier, and very little jurisprudence to

date:– The characteristics of the service or service supplier;– The classification and description of the service in the United Nations Central Product

Classification (CPC) system; and– Consumer habits and preferences regarding the service or service supplier

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Treatment no less favorable

Article II of the GATS does not offer any guidance as to the meaning of the concept of “treatment no less favorable”;

However Article XVII of the GATS on the national treatment obligation contains guidance on the meaning of the concept:– Formally identical or formally different treatment shall be considered to be less

favorable of it modifies the conditions of competition in favor of services or services suppliers of the Member compared to the like services or service suppliers of any other Member

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MFN Exemptions

Unlike under GATT 1994, the GATS allows Members to schedule exemptions from the MFN treatment obligation in Article II:1, which provides:

– A Member may maintain a measure inconsistent with paragraph 1 provided that such a measure is listed in, and meets the conditions of the Annex on Article II Exemptions.

Members could list measures in the Annex on Article II Exemptions until the entry into force of the WTO

Around one third of WTO Members have listed MFN exemptions. These exemptions concern mainly transport (especially maritime), communications

(mostly audiovisual), financial and business services.

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MFN Exemptions (cont’)

A Member’s notification of an exemption must contain:– A description of the sector or sectors in which the exemption applies;– A description of the measures, indicating why it is inconsistent with Article II;– The country or countries to which the measure applies;– The intended duration of the exemption; and– The conditions creating the need for the exemption.

In principle, exemptions should not exceed a period of ten years

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National Treatment under the GATS

Article XVII of the GATS, which is entitled “National Treatment, states, in paragraph 1:

“In the sectors inscribed in its Schedule, and subject to any conditions and qualifications set out therein, each Member shall accord to services and services suppliers of any other Member, in respect of all measures affecting the supply of services, treatment no less favourable than that it accords to its own like services and service suppliers”

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Nature of the national treatment obligation of Article XVII of the GATS

The national treatment obligation of Article XVII of the GATS is different from the national treatment obligation of Article III of the GATT 1994.

As already discussed, the national treatment obligation of GATT Article III has general application to all trade in goods.

On the contrary, the national treatment obligation for trade in services of Article XVII of the GATS does not have such general application, i.e. it does not apply generally to all measures affecting trade in services.

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The national treatment obligation applies only to the extent that WTO Members have explicitly committed themselves to grant “national treatment” in respect of specific services sectors.

Members set out such commitments in the national treatment column of their Schedule of Specific Commitments”.

These specific commitments to grant national treatment are often made subject to certain conditions, qualifications and limitations, which are also set out in the Schedules.

Members can, for example, grant national treatment in a specific services sector only with respect to certain modes of supply (such as cross-border supply) and not others (such as commercial presence).

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Typical national treatment limitations included in Members’ Schedules include the following:

Nationality or residence requirements for executives of companies supplying services; Requirements to invest a certain amount of assets in local currency; Restrictions on the purchase of land by foreign service suppliers; Special subsidy or tax privileges granted only to domestic suppliers; and Differential capital requirements and special operational limits applying only to

operations of foreign suppliers.

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A Scheduling Example

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National Treatment Test of Article XVII of the GATS

In the sectors inscribed in its Schedule and subject to the conditions, qualifications and limitations set out therein, a Member must accord to services and services suppliers of any other Member, treatment no less favourable than that it accords to its own like services and service suppliers.

This obligation exists in respect of all measures by Members affecting the supply of services.

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National Treatment Test of Article XVII of the GATS

Article XVII of the GATS sets out a three-tier test of consistency with the national treatment obligation of Article XVII of the GATS.

After first having established that a national treatment commitment was made in respect of the relevant service sector, this three-tier test of consistency under Article XVII of the GATS requires the examination of:

– Whether the measure at issue is a measure by a Member affecting trade in services;– Whether the foreign and domestic services or service suppliers are “like services” or “like service

suppliers”– Whether the foreign services or service suppliers are granted treatment no less favourable

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Measures by Members affecting trade in services

As already discussed under MFN and GATS, the concept of a “measure by a Member” is broad, including not only measures of central governments or authorities but also measures of regional and local governments and authorities.

The concept of a “measure affecting trade in services” has been clarified by the Appellate Body in Canada – Autos, where it stated that two key issues must be examined to determine whether a measure is one affecting trade in services, namely:

– First, whether there is “trade in services” in the sense of Article I:2, and– Secondly, whether the measure at issue “affects” such trade in services within the meaning of

Article I:1.

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Like services and service suppliers

As is the case for likeness under GATS Article II, there is almost no relevant case law to date on the meaning of “likeness” under GATS Article XVII.

However, a determination of likeness of services and service suppliers should clearly be based, among other relevant factors, on:

– The characteristics of the service or the service supplier;– The classification and description of the service in the United Nations Central Product

Classification (CPC) system; and– Consumers’ habits and preferences regarding the service or the service supplier.

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Treatment no less favourable

Paragraphs 2 and 3 of Article XVII clarify the requirements of treatment no less favourable, set out in paragraph 1.

2. A Member may meet the requirement of paragraph 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.

3. Formally identical or formally different treatment shall be considered to be less favourable if it modifies the conditions of competition in favour of services or service suppliers of the Member compared to like services or service suppliers of any other Member.

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Transparency

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Transparency and Predictability

One of the principle objectives of the multilateral trading system is to provide transparent and predictable rules for traders, as well as an environment in which their rights and legitimate expectations can be enforced.

One way in which the first of these objectives is pursued is by the transparency obligations and notification requirements the WTO imposes on its Members.

The second of these objectives is pursued through a binding and enforceable dispute settlement mechanism.

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Requirement to publish all relevant laws

GATT Art. 10 entitled “Publication and Administration of Trade Regimes” imposes a number of important obligations on WTO Members.

First and foremost it imposes a broadly formulated publication requirement on Member governments for any measures they may take which could affect trade.

Secondly it requires Members to administer any laws regulations, decisions and rulings which could affect trade in a uniform, impartial and reasonable manner.

Finally it requires Members to establish and maintain judicial, arbitral or administrative tribunals or procedures for the review and correction of administrative actions relating to customs matters.

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GATT Article X

Publication and Administration of Trade Regulations

1. Laws, regulations, judicial decisions and administrative rulings of general application, made effective by any contracting party, pertaining to the classification or the valuation of products for customs purposes, or to rates of duty, taxes or other charges, or to requirements, restrictions or prohibitions on imports or exports or on the transfer of payments therefore, or affecting their sale, distribution, transportation, insurance, warehousing inspection, exhibition, processing, mixing or other use, shall be published promptly in such a manner as to enable governments and traders to become acquainted with them.

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GATT Article X

Note the broad scope of the Article. Firstly it covers a broad range of instruments which governments use: laws,

regulations, judicial decisions and administrative rulings of general application, made effective by any Member.

Second, it covers a comprehensive range of measures likely to affect trade: […] pertaining to the classification or the valuation of products for customs purposes, or to rates of duty, taxes or other charges, or to requirements, restrictions or prohibitions on imports or exports or on the transfer of payments therefore, or affecting their sale, distribution, transportation, insurance, warehousing inspection, exhibition, processing, mixing or other use.

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Notification Requirements

Almost all WTO Agreements require Members to notify the WTO of measures or actions covered by these agreements. A typical example of such a notification requirement can be found in Article III.3 of the GATS, which states:

“Each Member shall promptly and at least annually inform the Council for Trade in Services of the introduction of any new, or any changes to existing, laws, regulations or administrative guidance which significantly affect trade in services covered by its specific commitments under this Agreement.”

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Notification Requirements

Some WTO agreements also provide for the possibility for a Member to notify measures or actions of other Members, which the later have failed to notify. Article 12.8 of the Agreement on Safeguards for example provides:“Any Member may notify the Committee on Safeguards of all laws, regulations, administrative procedures and any measures or actions dealt with in this Agreement that have not been notified by other Members that are required by this Agreement to make such notifications.”

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Other Transparency Requirements

Some WTO agreements go even further than general notification requirements and require that institutional steps be taken to ensure traders and interested parties can get the information they need.

In this way, the TBT, SPS and GATS require the establishment of so-called enquiry points within each WTO Member, where other Members can obtain information on the specific legal framework operating in that Member with regard to the rules covered by the agreement in question.

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Enquiry Points

Article 10.1 of the TBT Agreement requires Members to set up an Enquiry Point:

“Each Member shall ensure that an enquiry point exists which is able to answer all reasonable enquiries from other Members and interested parties …”

Paragraph 3 of Annex B to the SPS Agreement requires Members to set up a an Enquiry Point:

“Each Member shall ensure that one enquiry point exists which is responsible for the provision of answers to all reasonable questions from interested Members …”

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Progressive liberalization through successive rounds of trade

negotiations

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Progressive liberalization through successive rounds of trade negotiations

One of the main purposes of the multilateral trading system, in addition to removing discrimination and promoting transparency and predictability, is the gradual reduction and removal of barriers to trade, whether they be of a tariff or non-tariff nature. This last objective is to be achieved through a number of measures, namely inter alia:

‒ Binding and subsequent reduction of tariffs through tariff negotiations;

‒ Granting of better market access conditions to foreign service providers under the GATS;

‒ The gradual reduction of trade-distorting forms of domestic support to agricultural producers and the elimination of export subsidies under the Agreement on Agriculture; and

‒ The policing of other non-tariff measures.

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Havana Conference (ITO) – 1st Round 1947

2nd Round: Annecy 1949

3rd Round: Torquay 1950

4th Round: Geneva 1956

5th Round: “Dillon Round” 1960-61

6th Round: “Kennedy Round” 1964-67

7th Round: “Tokyo Round” 1973-79

8th Round: “Uruguay Round” 1986-93

Successive Rounds of Trade Negotiations

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1947

1948

1949

1950

60-61

The Havana Conference- 1st Round

Entry into force of the GATT

2nd Round: Annecy

3rd Round: Torquay

4th Round: Geneva

5th Round: “Dillon Round”

1956

1947-67: Negotiation Rounds

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1964-67: The Kennedy Round

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1964-67:Sixth Round - the “Kennedy Round”

• 60 Contracting Parties• Results:

Further tariff reductions for the first time, non-tariff negotiations (anti-dumping) in 1965: Part IV on Trade and Development added to the GATT

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1973-79: The Tokyo Round

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1973-79:Seventh Round - the “Tokyo Round”

• 99 Contracting Parties• Results: Further tariff reductions Non-tariff negotiations

– Multilateral decisions (framework agreements)– Plurilateral agreements (codes)– (Plurilateral) sectoral agreements

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• Multilateral decisions Enabling Clause Balance of payments Safeguard (development) Dispute settlement

1973-79: Tokyo Round

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• “Codes” (plurilateral) Technical barriers to trade Government procurement Subsidies Customs value Import licensing Anti-dumping

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• Sectoral Agreements (plurilateral) Trade in civil aircraft Bovine meat Dairy products

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1986-93: The Uruguay Round

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• 123 Contracting Parties• Results:

New Tariff concessions Non-tariff negotiations New sectors covered

– Trade in Services– Trade-related Intellectual Property Rights

• WTO (Organization)

1986-93:Eighth Round - the “Uruguay Round”

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• 1986: Punta del Este Declaration Objectives and work programme

• 1988: Mid-Term Review, Montreal some “Early Harvest” (TPRM,…)

• 1990: Brussels Conference

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15/12/93: The Uruguay Round

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• 1993: Adoption of the Final Act, Geneva end of negotiations technical verifications development of future WTO structures further negotiations on some aspects

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1994: Marrakech

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• 123 Signatories of the Marrakech Agreement establishing the WTO– 23’000 pages

• The GATT (1947) coexists with WTO from 1/1/95 to 31/12/95– owing to (national) ratification procedures, and – to avoid a legal vacuum

1994: Marrakesh Conference

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19471948

1950

1960-61

1964-67

1973-79

1986-93

1994

Havana Conference (ITO) – 1st Round

The GATT enters into force

2nd Round: Annecy

3rd Round: Torquay

4th Round: Geneva

5th Round: “Dillon Round”

6th Round: “Kennedy Round”

7th Round: “Tokyo Round”

8th Round: “Uruguay Round”

Marrakesh Conference

WTO enters into force

The GATT (1947) no longer in force

1956

1 Jan 1995

1949

1 Jan 1996

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Summary of the GATT’s History

UPH MTIC Program | Introduction to WTO Law

Principal Rights and Obligations under WTO Law

Simon Lacey

Thank You

Lesson Three | Principal Legal Obligations under WTO Law

Education

Transcript of Lesson Three | Principal Legal Obligations under WTO Law