Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. CHAPTER 9 GATT Law and the World Trade Organization:

Copyright © 2009 South-Western Legal Studies in Business,

a part of South-Western Cengage Learning.

CHAPTER 9CHAPTER 9GATT Law and the World Trade GATT Law and the World Trade Organization: Basic PrinciplesOrganization: Basic Principles

2Copyright © 2009 South-Western Legal Studies in Business,


IntroductionIntroduction

• Trade barrier is any impediment to trade in services or goods.

• Import trade barrier is any impediment, direct or indirect, to the entrance or sale of imported goods or services.

• What are some of the Reasons for Regulating Imports?



Nontariff Barriers to TradeNontariff Barriers to TradeNontariff Barriers to TradeNontariff Barriers to Trade

• Embargoes.• Quotas.

– Auctioned quotas.– Tariff-Rate quotas.

• Indirect nontariff barriers: Japanese large-scale retail stores law (now repealed).

• Import Licensing Schemes.



• Multilateral trade negotiations- reduce tariffs and nontariff barriers (NTB).

• Nondiscrimination and unconditional MFN.• National Treatment.• Eliminate quotas and NTB (convert NTB to

tariffs and then reduce), transparency very critical.

General Agreement on Tariffs and TradeGeneral Agreement on Tariffs and Trade



• WTO is an umbrella organization that sets rules of international trade and dispute resolution.

• Organization of the WTO – Overseen by the Ministerial Conference which appoints

the Director-General.

WTO Replaced GATT in 1995WTO Replaced GATT in 1995



Structure of the WTOStructure of the WTO



GATT/WTO Dispute-Settlement GATT/WTO Dispute-Settlement ProceduresProcedures

• Dispute mechanisms and procedures attempt to avoid retaliation or “trade wars.”

• Have quasi-judicial process for resolving disputes when deadlocked.

• Only a government can bring a “complaint” against another government. See the European Communities-Regime for the Importation, Sale, and Distribution of Bananas case.



GATT 1994: Major Principles GATT 1994: Major Principles of Trade Lawof Trade Law

• Multilateral trade negotiations.• Predictability of trade opportunities.• Non-discrimination and unconditional MFN.• National treatment.• Elimination of quotas and other non-tariff barriers

(first convert to tariffs—”tariffication”—and then negotiate to reduce).



Multilateral Trade NegotiationsMultilateral Trade Negotiations

• What was the Doha Development Agenda?• What happened in Cancun 2003?• Normal Trade Relations: NTR.



Tariff Concessions, Bound Rates, and Tariff Concessions, Bound Rates, and Tariff SchedulesTariff Schedules

• Article II of GATT calls for member nations to cooperate in lowering tariffs through negotiations.

• Tariff concession: one country promises not to levy a tariff at a higher level then agreed upon.

• See the GATT Report on European Economic Community-Import Regime for Bananas.



Nondiscrimination, MFN, and Nondiscrimination, MFN, and National TreatmentNational Treatment

Nondiscrimination, MFN, and Nondiscrimination, MFN, and National TreatmentNational Treatment

• Unconditional MFN: if a member extends privilege to another member then that privilege automatically is extended to all members. Now Normal Trade Relations or NTR.

• WTO Exceptions- may deny MFN based on national security, foreign policy, or a government’s denial of human rights to its citizens.



Normalization of Trade with ChinaNormalization of Trade with ChinaNormalization of Trade with ChinaNormalization of Trade with China

• Temporary MFN granted in 1980.• 1989 Tiananmen Square massacre.• 1994 Clinton delinked human rights and trade for

China’s annual renewal of MFN.• 2000 Congress granted permanent normal trade

status to China effective on China’s admission to WTO.



National TreatmentNational Treatment

• Japan Taxes on Alcoholic Beverages- 1996 WTO.• Japan taxed vodka and other imported liquors 7

times higher than shochu (similar to vodka). This practice challenged.

• Held: that Japan's practice violated national treatment provisions GATT Article III. U.S. had to go to arbitration. In 1997 Japan agreed to revise its system.



GATT and the Elimination of QuotasGATT and the Elimination of Quotas

• Article XI.• But must abide by non-discrimination.• Used for economic and political reasons.• Balance of payments exception.• Quantitative Restrictions: Balance of Payments

Exception and Developing Countries.



India- Quantitative Restrictions on India- Quantitative Restrictions on Imports (WTO,1999)Imports (WTO,1999)

• The U.S. challenged India’s restriction on imports that it claimed were necessary because of the balance of payments exception to GATT. The panel found that the restrictions were not necessary and gave them a reasonable period of time to implement the changes. This ruling was affirmed by the WTO Appellate body.



ConclusionConclusion

• Trade is often a political football in the United States and other countries.

• When U.S. approved GATT agreement also passed a bill to review WTO every 6 months.

• Fears of “multilateralism”- why is that a “dirty word” to some?



ConclusionConclusionConclusionConclusion

• Conflict between international and national law.– Law vs politics.– What is the appropriate connection between human

rights and trade? European and Japanese model vs. United States’ historical approach?



ConclusionConclusionConclusionConclusion

• Should labor and environmental issues be linked to trade? – Furthers whose agenda? – Is it protectionism in disguise? – Conflict between the developing and developed

world?

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Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. CHAPTER 9 GATT Law and the World Trade Organization: