NGEE ANN - ADELAIDE EDUCATION CENTRE A PARTNERSHIP SINCE 1998

INTBUS 3502NA Legal Aspects of International Business III Trimester 3 Instructor: Dr Robert Langton

Chapter 7 Trade in Goods Chapter Questions

Prepared by: Chew Aik Sian Dickson Chung Hang Chi Nur Diyana Bte Abdul Ghani Young Swee Ling, Sarah October 19, 2011 a1613769 a1613721 a1613693 a1616205

Ngee Ann - Adelaide Education Centre

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WTO Import Restriction

Question 3 The issue of the case is whether State V can gain access to the prohibited import market of rice to State D. [State D banned importation of foreign-grown rice even after WTO admittance & charges 4 times as much versus world standards to its own citizens] With reference to the nondiscriminatory rule; 'international trade should be conducted without discrimination'. State D has clearly disregarded the rule and stubbornly refuse to lift the ban even after gaining admittance to the (WTO) World Trade Organisation. A two way trafc needs to be operated in retrospect to GATT 1994s most fundamental principles. Despite the fact that it arguably does not overrule national laws, the purpose of joining members of WTO is to reduce barriers. By charging the rice four times world standards is ridiculously high which could possibly harm the country's growth and stability. Economic, social and political consequence could follow likewise. It should not also restrict the availability of choices to its citizens. Protection only through tariffs? p.355 Pressure State D through WTO on Agreement on Agriculture p.390 Convert existing nontariff barrier to agricultural imports into equivalent customs tariff. Incorporate into Schedule of Concessions deposited with GATT Secretariat. Commit to reduce tariff rates during implementation period. Progressively integrate international trade in agricultural products into GATT system. Further elaboration of concrete forms of Nondiscrimination MFN and national treatment rules. It is noted that no waivers is submitted towards disallowing the importation of rice. State D did not explicitly or implicitly expressed its relinquishment of an obligation owed by another. With that mentioned, State V could apply the import-licensing procedures to gain admittance of exporting its rice to State D. Its application will be supervised closely to ensure that WTO member states are neutral and be administered in a fair and equitable manner. Question 4 According to Mike Moore, the former World Trade Organisation (WTO) Director General, the WTO is not a world government, a global policeman, or an agent for corporate interests. It is not a supranational government and has no authority to tell countries what trade policiesor any other policiesthey should adopt. It does not overrule national laws. In view of this, WTOs Dispute Settlement Body (DSU) will not stop State R from using prison labour to manufacture exports goods at a very low cost although State R should stop. The second major fundamental principle of the WTO Agreement Annex 1A Section 1: General Agreement on Tariffs and Trade (GATT) 1994 is that each member state may protect its domestic industries only through the use of tariffs. Quotas and other quantitative restrictions that block the function of the price mechanism are forbidden by GATT 1994 Article XI. State S, by imposing an import embargo on goods that State R uses prison labour to manufacture at low cost, is in violation of Article XI and is in conict with GATT 1994s general goal of liberalising trade. However, there are General Exceptions as provided in the GATT 1994 Article XX that excuses a member state from complying with its GATT obligations and one of the exceptions include products of prison labour. For State Ss import embargo to be justied as an exception under Article XX, it has to satisfy the chapeau (hat) of the Articlethe noncompliance is not done as a means of arbitrary or unjustiable discrimination or as a disguised restriction on international trade. The intent of State Ss import embargo was not to protect its domestic industries but to discourage State R from the use of prison labour to manufacture export goods at very low cost. The Dispute Settlement Panel should appraise State Ss import embargo as NOT as a means of arbitrary of unjustiable discrimination or as a disguised restriction on international trade. The Dispute
Legal Aspects of International Business III Chapter Questions 7 1

Settlement Panel will hence rule State Ss import embargo JUSTIFIED under Article XX and dissolve State Rs complaint.

Countervailing Duties
Question 7 The issue of the case is whether State U can impose countervailing duty on imports of plywood from State C. From Mukand Ltd. v. Council of the European Union, it is noted that countervailing duties may be imposed only if it has been concluded, through proper investigation, that the subsidized imports cause material injury to a European Community (EC) industry. In this case, as the harm was caused by other factors such as the anti-competitive conduct on the part of EC itself, and that the EC institution has neglected to take into account other factors in their assessment of the injury to the local industry, the EC was held to withdrawn the countervailing duties. Applying the case, we must rst determine if State C has been subsidizing its lumber companies. Subsidizing is dened as a nancial contribution made by a government that confers a benet on an enterprise, a group of enterprise, or an industry. Based on the case, State C does not seem to subsidise its plywood lumber industry as State C charges nominal fee for cutting lumber in its national forest. Can argue the existence of subsidy? State U on the other hand might argue that since State Cs exports of lumber products to State U has injured their domestic industry, hence there is an existence of an actionable subsidy, which means that the subsidy may be challenged as trade distorting if it injures the domestic industry of another WTO member state. It is mentioned in the case One of State Us plywood lumber companies, has lost much of its market share in State U due to imports from State C. According to WTO, a WTO state that believes that its domestic industry has been injured by actionable subsidies can independently impose countervailing duties so long as it follows the procedures specied in the Agreement on Subsidies and Countervailing Measures. Countervailing duties may be imposed only if it has been concluded, through proper investigation, that the subsidized imports cause material injury to the state. In this case, assuming that State U has conducted proper investigations and that there are no further factors that contribute to the additional 15 to 20 percent cost to the plywood lumber companies in State U, State U is then able to impose countervailing duties. On the other hand, if investigations conducted reveal that there are other factors contributing to the additional 15 to 20 percent cost to the plywood lumber companies in State U, State U will then not be able to impose countervailing duties on State C.

Legal Aspects of International Business III Chapter Questions 7

National Product Standards

Question 9 The issue here is whether newly industrialized countries (also members of WTO) do anything to get state Z to rescind its new standards. According to the most fundamental principle, international trade should be conducted without discrimination and enforced through 1) most favored nation and 2) national treatment rules. Under the MFN, GATT requires each member to apply its tariff rules to all members. However, the rule does not apply to: 1. The use of measures to counter dumping and subsidization 2. The creation of customs unions and free trade areas 3. Restrictions that protect public health, safety, welfare and national security In addition to these exceptions, GATT also provides for a special exception for developing states. To promote and protect the economies of developing states, GATT encourages the developed states not to demand reciprocity from them in trade negotiation and authorizes developed member states to adopt measures that give preferences to developing states. There are 2 preferential treatment schemes: Generalized system of preferences (GSP) allows developing countries to export all of their products to a participating developed country on a reciprocal basis in hope that the GSP will make developing countries more competitive in world market and less dependent on the production of raw materials or primary goods. The South South preferences allow developing countries exchange tariffs preferences among themselves without extending the same preferences to develop states. As seen in the case, state Z has violated the MFN rule by lobbying state Z government until it enacts new standards for the sale of cars in the country. The standards are set in such a way that only cars manufactured in state Z can meet them. By doing this, state Z has not practice the GSP at all and by having such standards set would only put a restraint on the performance of newly industrialized countries which would eventually not make them more competitive in world markets. Elaborate about Technical Barriers to Trade p.370 especially (3)creating unnecessary obstacles to trade Furthermore, according to the National Treatment Rule, once imported goods are within the territory of a state, that state must treat those goods no less favorably that it treats its own domestic goods. As such, treatment given to foreign cars manufactured by those new industrialized countries must be no less favorable than cars manufactured by state Z. I dont think the cars are even in State Z yet to mention this Rule. Since state Z and those new industrialized countries are members of WTO, these states are said to be under the jurisdiction of the WTO. Government of these states can then get the WTO to get State Z to rescind its new standards.

Legal Aspects of International Business III Chapter Questions 7