Guiyab IEL 2 Midterm Reviewer

8/18/2019 Guiyab IEL 2 Midterm Reviewer

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IEL 2 Midterm Reviewer - Guiyab

International Economic Law IIL Legal, Economic, and Politcal-Economic Aspects of

Regional Economic Integartion

Week 1

Pelkmans-Balaoing Article Summar!

"he rapid growth of intra-Asian trade, especially in the last couple of decades, represents both a

marked shift in export orientation and an increasing integration of regional markets. In 2005, half

of total Asian exports were destined for regional consumption, and a further rise can only be

expected gien the high growth rates of intraregional trade, peaking at 25! in 200" #$orld

%rade &rgani'ation ($%&) 200*+. Against such a backdrop, the surge of regionalism in Asia

today comes as no surprise. owhere in the world is the proliferation of regional integration

arrangements #IAs+ more eident than in Asia today. As of eptember 200*, the indiidual /ast

and outh Asian countries considered in this study were inoled in 01 free trade negotiations

or signed agreements. $hile political and security moties are also influential, the economic

imperatie to further feed the markets appetite for more regional trade is clearly driing policy

agents along the track toward free trade agreements #3%As+.

4reious studies on the impacts of free trade agreements #3%As+ in /ast Asia hae assumed full

utili'ation of preferences. %he eidence suggests that this assumption is seriously in error, with

the estimated uptake particularly low in /ast Asia. In this paper, we assume a more realistic

utili'ation rate in estimating impacts. $e find that actual utili'ation rates significantly diminish

the benefits from preferential liberali'ation, but in a non-linear way. eciprocity is an important

motiation for pursuing 3%As oer unilateral actions, although the oha ound could delier the

same outcome if only it could be concluded. $e isolate the impact of reciprocity, but find that

the additional benefits also depend on utili'ation rates. 3urthermore, the potential for trade

deflection combined with possible retaliatory actions could negatiely affect members and non-members. In the absence of oha, the multilaterali'ation of preferences, een without

reciprocity, is the practical route that is most likely to delier the greatest benefits to members.

6lobal liberali'ation, while difficult to attain, would maximi'e world welfare while posing no

risk in its reali'ation.

Part I

Article I! #eneral $ost-%a&oured-'ation "reatment

1. $ith respect to customs duties and charges of any kind imposed on or in connection withimportation or exportation or imposed on the international transfer of payments for imports or

exports, and with respect to the method of leying such duties and charges, and with respect toall rules and formalities in connection with importation and exportation, and with respect to allmatters referred to in paragraphs 2 and " of Article III,7 any adantage, faour, priilege 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.




Article ((I)! "erritorial Application * %rontier "raffic * +ustoms nions and %ree-

trade Areas

1. %he proisions of this Agreement shall apply to the metropolitan customs territories

of the contracting parties and to any other customs territories in respect of which this

Agreement has been accepted under Article 889I or is being applied under Article888III or pursuant to the 4rotocol of 4roisional Application. /ach such customs

territory shall, exclusiely for the purposes of the territorial application of this Agreement,

be treated as though it were a contracting party: Provided that the proisions of this

paragraph shall not be construed to create any rights or obligations as between two or more

customs territories in respect of which this Agreement has been accepted under Article

889I or is being applied under Article 888III or pursuant to the 4rotocol of 4roisional

Application by a single contracting party.

2. 3or the purposes of this Agreement a customs territory shall be understood to mean

any territory with respect to which separate tariffs or other regulations of commerce are

maintained for a substantial part of the trade of such territory with other territories.

. %he proisions of this Agreement shall not be construed to preent;

#a+ Adantages accorded by any contracting party to ad<acent countries in order tofacilitate frontier traffic:

#b+ Adantages accorded to the trade with the 3ree %erritory of %rieste by

countries contiguous to that territory, proided that such adantages are not in

conflict with the %reaties of 4eace arising out of the econd $orld $ar.

". %he contracting parties recogni'e the desirability of increasing freedom of trade by

the deelopment, through oluntary agreements, of closer integration between the

economies of the countries parties to such agreements. %hey also recogni'e that the

purpose of a customs union or of a free-trade area should be to facilitate trade between the

constituent territories and not to raise barriers to the trade of other contracting parties with

such territories.

https://www.wto.org/english/res_e/booksp_e/analytic_index_e/gatt1994_10_e.htm#article26















5. Accordingly, the proisions of this Agreement shall not preent, as between the

territories of contracting parties, the formation of a customs union or of a free-trade area or

the adoption of an interim agreement necessary for the formation of a customs union or of

a free-trade area: Provided that;

#a+ with respect to a customs union, or an interim agreement leading to a

formation of a customs union, the duties and other regulations of commerce imposed

at the institution of any such union or interim agreement in respect of trade with

contracting parties not parties to such union or agreement shall not on the whole be

higher or more restrictie than the general incidence of the duties and regulations of

commerce applicable in the constituent territories prior to the formation of such

union or the adoption of such interim agreement, as the case may be:

#b+ with respect to a free-trade area, or an interim agreement leading to the

formation of a freetrade area, the duties and other regulations of commerce

maintained in each of the constituent territories and applicable at the formation of

such free-trade area or the adoption of such interim agreement to the trade of

contracting parties not included in such area or not parties to such agreement shall

not be higher or more restrictie than the corresponding duties and other regulations

of commerce existing in the same constituent territories prior to the formation of the

free-trade area, or interim agreement as the case may be: and

#c+ any interim agreement referred to in subparagraphs #a+and #b+ shall include a

plan and schedule for the formation of such a customs union or of such a free-trade

area within a reasonable length of time.

*. If, in fulfilling the re=uirements of subparagraph 5 #a+, a contracting party proposes toincrease any rate of duty inconsistently with the proisions of Article II, the procedure set

forth in Article 889III shall apply. In proiding for compensatory ad<ustment, due

account shall be taken of the compensation already afforded by the reduction brought

about in the corresponding duty of the other constituents of the union.

https://www.wto.org/english/res_e/booksp_e/analytic_index_e/gatt1994_09_e.htm#article24A5a

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>. #a+ Any contracting party deciding to enter into a customs union or free-trade area,

or an interim agreement leading to the formation of such a union or area, shall promptly

notify the ?&%A?%I6 4A%I/ and shall make aailable to them such information

regarding the proposed union or area as will enable them to make such reports and

recommendations to contracting parties as they may deem appropriate.

#b+ If, after haing studied the plan and schedule included in an interim agreement

referred to in paragraph 5 in consultation with the parties to that agreement and taking due

account of the information made aailable in accordance with the proisions

of subparagraph #a+, the ?&%A?%I6 4A%I/ find that such agreement is not likely

to result in the formation of a customs union or of a free-trade area within the period

contemplated by the parties to the agreement or that such period is not a reasonable one,

the ?&%A?%I6 4A%I/ shall make recommendations to the parties to the

agreement. %he parties shall not maintain or put into force, as the case may be, suchagreement if they are not prepared to modify it in accordance with these recommendations.

#c+ Any substantial change in the plan or schedule referred to in paragraph 5 #c+ shall

be communicated to the ?&%A?%I6 4A%I/, which may re=uest the contracting

parties concerned to consult with them if the change seems likely to <eopardi'e or delay

unduly the formation of the customs union or of the free-trade area.

@. 3or the purposes of this Agreement;

#a+ A customs union shall be understood to mean the substitution of a single

customs territory for two or more customs territories, so that

#i+ duties and other restrictie regulations of commerce #except, wherenecessary, those permitted under Articles 8I, 8II, 8III, 8I9, 89 and 88+ are

eliminated with respect to substantially all the trade between the constituent

territories of the union or at least with respect to substantially all the trade in

products originating in such territories, and,

https://www.wto.org/english/res_e/booksp_e/analytic_index_e/gatt1994_09_e.htm#article24A5



https://www.wto.org/english/res_e/booksp_e/analytic_index_e/gatt1994_09_e.htm#article24A5c











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#ii+ sub<ect to the proisions of paragraph , substantially the same duties and

other regulations of commerce are applied by each of the members of the union

to the trade of territories not included in the union:

#b+ A free-trade area shall be understood to mean a group of two or more customs

territories in which the duties and other restrictie regulations of commerce #except,

where necessary, those permitted under Articles 8I, 8II, 8III, 8I9, 89 and 88+ are

eliminated on substantially all the trade between the constituent territories in

products originating in such territories.

. %he preferences referred to in paragraph 2 of Article I shall not be affected by the

formation of a customs union or of a free-trade area but may be eliminated or ad<usted bymeans of negotiations with contracting parties affected.7 %his procedure of negotiations

with affected contracting parties shall, in particular, apply to the elimination of preferences

re=uired to conform with the proisions of paragraph @ #a+#i+ and paragraph @ #b+.

10. %he ?&%A?%I6 4A%I/ may by a two-thirds ma<ority approe proposals

which do not fully comply with the re=uirements of paragraphs 5 to inclusie, proided

that such proposals lead to the formation of a customs union or a free-trade area in the

sense of this Article.

11. %aking into account the exceptional circumstances arising out of the establishment of

India and 4akistan as independent tates and recogni'ing the fact that they hae long

constituted an economic unit, the contracting parties agree that the proisions of this

Agreement shall not preent the two countries from entering into special arrangements

with respect to the trade between them, pending the establishment of their mutual trade

relations on a definitie basis.7

12. /ach contracting party shall take such reasonable measures as may be aailable to it

to ensure obserance of the proisions of this Agreement by the regional and local

goernments and authorities within its territories.

B "e.t of ad Article ((I)













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Ad Article ((I)! Paragrap/ 0

It is understood that the proisions of Article I would re=uire that, when a product

which has been imported into the territory of a member of a customs union or free-trade

area at a preferential rate of duty is re-exported to the territory of another member of such

union or area, the latter member should collect a duty e=ual to the difference between theduty already paid and any higher duty that would be payable if the product were being

imported directly into its territory.

Paragrap/ 11

Beasures adopted by India and 4akistan in order to carry out definitie trade

arrangements between them, once they hae been agreed upon, might depart from

particular proisions of this Agreement, but these measures would in general be consistent

with the ob<ecties of the Agreement.

+ nderstanding on t/e Interpretation of Article ((I) of t/e #eneral Agreement on

"ariffs and "rade 100

Cereby agree as follows;

1. ?ustoms unions, free-trade areas, and interim agreements leading to the formation of a customs union or free-trade area, to be consistent with Article 88I9, must satisfy, inter

alia, the proisions of paragraphs 5, *, > and @ of that Article.

ummary of $%&, egionalism and the $orld %rading ystem Article, 15.

An analysis of the growth in trade between participating countries in regional agreements and

their trade with other regions does not support the conclusion of an increasing regionali'ationof world trade, nor does it confirm the notion of the emergence of trading DblocsE centred in orth America, $estern /urope and the Asia-4acific region.In fact, trade with partners in thesame region and with partners in other regions hae both become increasingly important innational economies throughout the postwar period.
















%he legal foundations for more open trade hae been laid by the multilateral tradingsystem - global in its coerage - with regional integration agreements sering to deepenrelations with neighbouring countries. %hus, Dthe regional and multilateral integrationinitiaties are complements rather than alternaties in the pursuit of open tradeE.

%hese are among the main conclusions of a study, Regionalism and the World Trading System, published today, by the $orld %rade &rgani'ation ecretariat, in 6enea.Coweer, commenting on the $%& rules and procedures goerning regional integrationagreements, the study says, D...it may be that goernments will consider that reforms arenecessary in order to put the mutually supportie relationship between multilateralism andregionalism on a more solid foundationE.

%he share of world merchandise trade which is intra-regional #ie. conducted within ageographic region+ has risen from "0.* per cent in 15@ to 50." per cent in 1. %hisincrease is mainly accounted for by the deelopment of $estern /urope, whose internaltrade grew from 5 to >0 per cent of its oerall trade during this period. $hile this is the

only region to exhibit a clear policy-induced increase in the relatie importance of intra-regional trade, the importance of $estern /uropeFs trade with other regions in relation toits output has largely been maintained.

Getween 1"> and the end of 1", a total of 10@ regional agreements were notified to the6A%%. In looking at the complementarity between regional integration agreements and themultilateral trading system - first the 6A%% and now the $%& - the study makes anumber of points;

- the scope for achieing tariff adantages at the regional leel is much reduced since,once the Hruguay ound commitments are fully implemented, " per cent of deeloped

countriesF imports of industrial products from partners receiing B3 #Bost-3aoured ation+ treatment will be duty-free, with an aerage of only *.* per cent on the remainder:

- with the importance of tariffs reduced, attention has shifted to the issue of non-tariff trade measures, which are seldom administered preferentially, and domestic policies #suchas production subsidies+, which cannot be administered preferentially:

- few regional agreements coer serices, agriculture and the protection of intellectual property rights whereas the $orld %rade &rgani'ation has proided an integrated systemof rights and obligations at the multilateral leel in all these areas as well as merchandisetrade in general:

- at the same time, it is recogni'ed that steps taken in certain regional integrationagreements helped lay the foundations for progress in the Hruguay ound.

%he report concludes that the co-existence of regional integration agreements and theworld trading system has been Dat least satisfactory, if not broadly positieE. Coweer, theecretariat finds some reasons for concern in the manner in which the 6A%% rules and procedures on customs unions and free-trade areas hae operated. In particular, Article




88I9 of 6A%% - now subsumed within the $%& rules - re=uires that such agreementscoer Dsubstantially all tradeE between members and that the leel of trade barriers facingthose outside be Dnot on the whole higher or more restrictieE. It is noted that among the* working parties called on to examine the conformity of customs unions and free-trade

agreements with Article 88I9, only six hae been able to reach a consensus.

%he report examines arious proposals that might arise in any attempt to improe thefunctioning of the rules and procedures on regional integration agreements: among theseare;

- allowing the working parties to reiew regional agreements before signature anddomestic approal begins, in other words while there is still scope for changing them:

- clarifying the criteria laid down in Article 88I9 and perhaps introducing new proisionsto increase the protection of third country interests: and

- improing transparency through an enhanced system of $%& sureillance of the performance and effects of regional integration agreements.

ifferential and Bore 3aorable %reatment, eciprocity and 3uller 4articipation of eeloping?ountries.

Decision of 28 November 1979 (L/4903)

3ollowing negotiations within the framework of the Bultilateral %rade egotiations, the

?&%A?%I6 4A%I/ decide as follows;

1. otwithstanding the proisions of Article I of the 6eneral Agreement, contracting parties

may accord differential and more faourable treatment to deeloping countries#1+, without

according such treatment to other contracting parties.

2. %he proisions of paragraph 1 apply to the following#2+;

a) 4referential tariff treatment accorded by deeloped contracting parties to products

originating in deeloping countries in accordance with the 6enerali'ed ystem of

4references#3+,

b) ifferential and more faourable treatment with respect to the proisions of the

6eneral Agreement concerning non-tariff measures goerned by the proisions of

instruments multilaterally negotiated under the auspices of the 6A%%:

https://www.wto.org/english/docs_e/legal_e/enabling1979_e.htm#fntext1









c) egional or global arrangements entered into amongst less-deeloped contracting

parties for the mutual reduction or elimination of tariffs and, in accordance with criteria or

conditions which may be prescribed by the ?&%A?%I6 4A%I/, for the mutual

reduction or elimination of non-tariff measures, on products imported from one another:

d) pecial treatment on the least deeloped among the deeloping countries in the

context of any general or specific measures in faour of deeloping countries.

. Any differential and more faourable treatment proided under this clause;

a) shall be designed to facilitate and promote the trade of deeloping countries and

not to raise barriers to or create undue difficulties for the trade of any other contracting

parties:

b) shall not constitute an impediment to the reduction or elimination of tariffs and

other restrictions to trade on a most-faoured-nation basis:

c) shall in the case of such treatment accorded by deeloped contracting parties to

deeloping countries be designed and, if necessary, modified, to respond positiely to the

deelopment, financial and trade needs of deeloping countries.

". Any contracting party taking action to introduce an arrangement pursuant to paragraphs

1, 2 and aboe or subse=uently taking action to introduce modification or withdrawal of the

differential and more faourable treatment so proided shall;#+

a) notify the ?&%A?%I6 4A%I/ and furnish them with all the information

they may deem appropriate relating to such action:

b) afford ade=uate opportunity for prompt consultations at the re=uest of any

interested contracting party with respect to any difficulty or matter that may arise. %he

?&%A?%I6 4A%I/ shall, if re=uested to do so by such contracting party, consult

with all contracting parties concerned with respect to the matter with a iew to reaching

solutions satisfactory to all such contracting parties.

5. %he deeloped countries do not expect reciprocity for commitments made by them in

trade negotiations to reduce or remoe tariffs and other barriers to the trade of deeloping

countries, i.e., the deeloped countries do not expect the deeloping countries, in the course of

trade negotiations, to make contributions which are inconsistent with their indiidual

deelopment, financial and trade needs. eeloped contracting parties shall therefore not seek,






neither shall less-deeloped contracting parties be re=uired to make, concessions that are

inconsistent with the latters deelopment, financial and trade needs.

*. Caing regard to the special economic difficulties and the particular deelopment,

financial and trade needs of the least-deeloped countries, the deeloped countries shall exercise

the utmost restraint in seeking any concessions or contributions for commitments made by themto reduce or remoe tariffs and other barriers to the trade of such countries, and the least-

deeloped countries shall not be expected to make concessions or contributions that are

inconsistent with the recognition of their particular situation and problems.

>. %he concessions and contributions made and the obligations assumed by deeloped and

less-deeloped contracting parties under the proisions of the 6eneral Agreement should

promote the basic ob<ecties of the Agreement, including those embodied in the 4reamble and in

Article 8889I. ess-deeloped contracting parties expect that their capacity to make

contributions or negotiated concessions or take other mutually agreed action under the proisions

and procedures of the 6eneral Agreement would improe with the progressie deelopment of their economies and improement in their trade situation and they would accordingly expect to

participate more fully in the framework of rights and obligations under the 6eneral Agreement.

@. 4articular account shall be taken of the serious difficulty of the least-deeloped countries

in making concessions and contributions in iew of their special economic situation and their

deelopment, financial and trade needs.

. %he contracting parties will collaborate in arrangements for reiew of the operation of

these proisions, bearing in mind the need for indiidual and <oint efforts by contracting parties

to meet the deelopment needs of deeloping countries and the ob<ecties of the 6eneral

Agreement.

4o/a 4eclaration Summar

%he oember 2001 declaration of the 3ourth Binisterial ?onference in oha, Jatar, proidesthe mandate for negotiations on a range of sub<ects, and other work including issues concerningthe implementation of the present agreements.

%he negotiations take place in the %rade egotiations ?ommittee and its subsidiaries. &ther work under the work programme takes place in other $%& councils and committees.

%his is an unofficial explanation of what the declaration mandates.

"/e work programme

%he 21 sub<ects listed in the oha eclaration #and the paragraphs that refer to them+.Bost of these inole negotiations: other work includes actions under DimplementationE,

https://www.wto.org/english/tratop_e/dda_e/work_organi_e.htm

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analysis and monitoring;

Implementation-related issues and concerns

# par 12+

DImplementationE is short-hand for problems raised particularly by deeloping countriesabout the implementation of the current $%& Agreements, i.e. the agreements arisingfrom the Hruguay ound negotiations.

In oha this important =uestion was handled in two ways. 3irst, ministers agreed to adoptaround 50 decisions clarifying the obligations of deeloping country member goernments with respect to issues including agriculture, subsidies, textiles and clothing,technical barriers to trade, trade-related inestment measures and rules of origin.

Agreement on these points re=uired hard bargaining between negotiators oer the course

of nearly three years.

Bany other implementation issues of concern to deeloping countries hae not beensettled, howeer. 3or these issues, Binisters agreed in oha on a future work programmefor addressing these matters.

In paragraph 12 of the Binisterial eclaration, ministers underscored that they had taken adecision on the 50 or so measures in a separate ministerial document #the1" oember 2001 decision on DImplementation-elated Issues and ?oncernsE+ and pointed out that Dnegotiations on outstanding implementation issues shall be an integral part of the $ork 4rogrammeE in the coming years.

%he ministers established a two-track approach. %hose issues for which there was anagreed negotiating mandate in the declaration would be dealt with under the terms of thatmandate.

%hose implementation issues where there is no mandate to negotiate, would be the takenup as Da matter of priorityE by releant $%& councils and committees. %hese bodies areto report on their progress to the %rade egotiations ?ommittee by the end of 2002 for Dappropriate actionE.

Weeks "wo and "/ree

+ustoms nion

#A"" Article ((I) 56a7 and 86a76i7

https://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_e.htm#implementation

https://www.wto.org/english/tratop_e/dda_e/implem_explained_e.htm


https://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_e.htm#implementation






5. Accordingly, the proisions of this Agreement shall not preent, as between the

territories of contracting parties, the formation of a customs union or of a free-trade area or

the adoption of an interim agreement necessary for the formation of a customs union or of

a free-trade area: Provided that;

#a+ with respect to a customs union, or an interim agreement leading to a

formation of a customs union, the duties and other regulations of commerce imposed

at the institution of any such union or interim agreement in respect of trade with

contracting parties not parties to such union or agreement shall not on the whole be

higher or more restrictie than the general incidence of the duties and regulations of

commerce applicable in the constituent territories prior to the formation of such

union or the adoption of such interim agreement, as the case may be:

@. 3or the purposes of this Agreement;

#a+ A customs union shall be understood to mean the substitution of a single

customs territory for two or more customs territories, so that

#i+ duties and other restrictie regulations of commerce #except, wherenecessary, those permitted under Articles 8I, 8II, 8III, 8I9, 89 and 88+ are

eliminated with respect to substantially all the trade between the constituent

territories of the union or at least with respect to substantially all the trade in

products originating in such territories, and,

"urke "e.tiles +ase!

4A%I/ A6//B/% %IB/I/ &3 %C/ I4H%/ ?omplainant India 6A%% Arts. 8I,

8III and 88I9 A%? Art. 2." /stablishment of 4anel 1 Barch 1@ ?irculation of 4anel eport

1 Bay 1 espondent %urkey ?irculation of AG eport 22 &ctober 1 Adoption 1

oember 1

1. B/AH/ A 4&H?% A% IH/ K Beasure at issue; %urkeyFs =uantitatie import

restrictions pursuant to the %urkey-/? customs union.


















2. K 4roduct at issue; %extiles and clothing from India.

. HBBAL &3 M/L 4A/NAG 3II6 K 6A%% Arts. 8I #prohibition on

=uantitatie restrictions+ and 8III #non-discriminatory administration of =uantitatie

restrictions+; %he 4anel found that the =uantitatie restrictions at issue were inconsistentwith Arts. 8I and 8III. #%urkey did not deny this.+ K A%? Art. 2." #prohibition on new

restrictions+; %he 4anel found that %urkeyFs measures were new restrictions, that did not

exist at the time of the entry into force of the A%?, and, thus, were prohibited by Art. 2.".

K 6A%% Art. 88I9 #regional trade agreements+; %he Appellate Gody agreed with the

4anelFs ultimate conclusion that %urkeyFs measures were not <ustified under Art. 88I9

because there were alternaties aailable to %urkey that would hae met the re=uirements

of Art. 88I9;@#a+, which were necessary to form the customs union, other than the

adoption of the =uantitatie restrictions. %he Appellate Gody, therefore, modified the

4anelFs legal reasoning and concluded that to determine whether a measure found

inconsistent with certain other 6A%% proisions can be <ustified under Art. 88I9, a panelshould examine two conditions; #i+ whether a Dcustoms unionE, as defined in Art. 88I9;@

exists #compatibility of a customs union with the proisions of Art. 88I9+: and #ii+

whether the formation of a customs union would be preented without the inconsistent

measure #i.e. whether the measure is necessary for the formation of a customs union+.

#%he 4anel had assumed the existence of the customs union and moed on to examine the

necessity of the measure.+

". . &%C/ IH/

K Gurden of proof #6A%% Art. 88I9+; %he Appellate Gody agreed with the 4anel that

Art. 88I9 may be considered as a DdefenceE or DexceptionE to a iolation. %he 4anelalso held that the burden of proof under Art. 88I9 was on the party inoking it. K

Information from non-party Bember #H Art. 1.2+; espite the fact that the /uropean

?ommunities was not a party or a third party to the dispute, the 4anel asked the /uropean

?ommunities, pursuant to Art. 1.2, for releant factual and legal information so as to to

hae Dthe fullest possible understanding of this caseE. %he /uropean ?ommunities

proided answers to the 4anelFs =uestions.

4ifference Between +ustoms nion and %ree "rade Area










"rade in Ser&ices

#A"S Article II

Part II: enera! "b!i#ations an$ Disci%!ines

&rtic!e II: 'ostavo*re$Nation +reatment

1. $ith respect to any measure coered by this Agreement, each Bember shall accord

immediately and unconditionally to serices and serice suppliers of any other Bember

treatment no less faourable than that it accords to like serices and serice suppliers of any

other country.

2. A Bember may maintain a measure inconsistent with paragraph 1 proided that such a

measure is listed in, and meets the conditions of, the Annex on Article II /xemptions.

. %he proisions of this Agreement shall not be so construed as to preent any Bember fromconferring or according adantages to ad<acent countries in order to facilitate exchanges limited

to contiguous frontier 'ones of serices that are both locally produced and consumed.

#A"S Article )

&rtic!e ,: -conomic Inte#ration

1. %his Agreement shall not preent any of its Bembers from being a party to or entering into

an agreement liberali'ing trade in serices between or among the parties to such an agreement, proided that such an agreement;

#a+ has substantial sectoral coerage#1+, and

#b+ proides for the absence or elimination of substantially all discrimination, in the

sense of Article 89II, between or among the parties, in the sectors coered under

subparagraph #a+, through;

#i+ elimination of existing discriminatory measures, andNor

#ii+ prohibition of new or more discriminatory measures,




either at the entry into force of that agreement or on the basis of a reasonable time-

frame, except for measures permitted under Articles 8I, 8II, 8I9 and 8I9 bis.

2. In ealuating whether the conditions under paragraph 1#b+ are met, consideration may be

gien to the relationship of the agreement to a wider process of economic integration or trade

liberali'ation among the countries concerned.

. #a+ $here deeloping countries are parties to an agreement of the type referred to in

paragraph 1, flexibility shall be proided for regarding the conditions set out in paragraph 1,

particularly with reference to subparagraph #b+ thereof, in accordance with the leel of

deelopment of the countries concerned, both oerall and in indiidual sectors and subsectors.

#b+ otwithstanding paragraph *, in the case of an agreement of the type referred to in

paragraph 1 inoling only deeloping countries, more faourable treatment may be

granted to <uridical persons owned or controlled by natural persons of the parties to such

an agreement.

". Any agreement referred to in paragraph 1 shall be designed to facilitate trade between the

parties to the agreement and shall not in respect of any Bember outside the agreement raise the

oerall leel of barriers to trade in serices within the respectie sectors or subsectors compared

to the leel applicable prior to such an agreement.

5. If, in the conclusion, enlargement or any significant modification of any agreement under

paragraph 1, a Bember intends to withdraw or modify a specific commitment inconsistently with

the terms and conditions set out in its chedule, it shall proide at least 0 days adance notice

of such modification or withdrawal and the procedure set forth in paragraphs 2, and " of

Article 88I shall apply.

*. A serice supplier of any other Bember that is a <uridical person constituted under the

laws of a party to an agreement referred to in paragraph 1 shall be entitled to treatment granted

under such agreement, proided that it engages in substantie business operations in the territory

of the parties to such agreement.

>. #a+ Bembers which are parties to any agreement referred to in paragraph 1 shall

promptly notify any such agreement and any enlargement or any significant modification of that

agreement to the ?ouncil for %rade in erices. %hey shall also make aailable to the ?ouncil

such releant information as may be re=uested by it. %he ?ouncil may establish a working partyto examine such an agreement or enlargement or modification of that agreement and to report to

the ?ouncil on its consistency with this Article.

#b+ Bembers which are parties to any agreement referred to in paragraph 1 which is

implemented on the basis of a time-frame shall report periodically to the ?ouncil for %rade

in erices on its implementation. %he ?ouncil may establish a working party to examine

https://www.wto.org/english/docs_e/legal_e/26-gats_01_e.htm#ftnt1





such reports if it deems such a working party necessary.

#c+ Gased on the reports of the working parties referred to in subparagraphs #a+ and #b+,

the ?ouncil may make recommendations to the parties as it deems appropriate.

@. A Bember which is a party to any agreement referred to in paragraph 1 may not seek

compensation for trade benefits that may accrue to any other Bember from such agreement.

&rtic!e , bis: Labo*r 'ar.ets Inte#ration &#reements

%his Agreement shall not preent any of its Bembers from being a party to an agreement

establishing full integration#2+ of the labour markets between or among the parties to such an

agreement, proided that such an agreement;

#a+ exempts citi'ens of parties to the agreement from re=uirements concerning

residency and work permits:

#b+ is notified to the ?ouncil for %rade in erices.

+anada O +ertain $easures Affecting t/e Automoti&e Industr

?omplaint by Papan.

&n Puly 1@, Papan re=uested consultations with ?anada in respect of measures being taken by ?anada in the automotie industry. Papan contended that under ?anadian legislationimplementing an automotie products agreement #Auto 4act+ between the H and ?anada, only alimited number of motor ehicle manufacturers are eligible to import ehicles into ?anada dutyfree and to distribute the motor ehicles in ?anada at the wholesale and retail distribution leels.Papan further contended that this duty-free treatment is contingent on two re=uirements;

i. a ?anadian alue-added #?9A+ content re=uirement that applies to both goods andserices: and

ii. a manufacturing and sales re=uirement. Papan alleges that these measures are inconsistentwith Articles I;1, III;" and 88I9 of 6A%% 1", Article 2 of the %IBs Agreement,Article of the ?B Agreement, and Articles II, 9I and 89II of 6A%.




&n 1> August 1@, the /? re=uested consultations with ?anada in respect of the same measuresraised by Papan in $%N1 and cites the same proisions alleged to be in iolation, except for Article 88I9 of 6A%% 1", which was cited by Papan but is not cited by the /?.

&n 12 oember 1@, Papan re=uested the establishment of a panel in respect of $%N1. At

its meeting on 25 oember 1@, the G deferred the establishment of a panel.

Panel and Appellate Bod proceedings

3urther to re=uests to establish a panel by Papan and the /?, at its meeting on 1 3ebruary 1,the G established a single panel, pursuant to Article .1 of the H, to examine thecomplaints $%N1 and $%N1"2. India, Morea, and the H resered their third-partyrights. &n 15 Barch 1, the /? and Papan re=uested the irector-6eneral to determine thecomposition of the 4anel. &n 25 Barch 1, the 4anel was composed. %he report of the panelwas circulated to Bembers on 11 3ebruary 2000. %he panel found that;

•

the conditions under which ?anada granted its import duty exemption were inconsistentwith Article I of 6A%% 1" and not <ustified under Article 88I9 of 6A%% 1".

• the application of the ?9A re=uirements to be inconsistent with Article III;" of 6A%%

1".

• the import duty exemption constitutes a prohibited export subsidy in iolation of Article

.1#a+ of the ?B Agreement.

• the manner in which ?anada conditioned access to the import duty exemption is

inconsistent with Article II of 6A% and could not <ustified under Article 9 of 6A%.

• the application of the ?9A re=uirements constitutes a iolation of Article 89II of the

6A%.

&n 2 Barch 2000, ?anada notified its intention to appeal certain issues of law and legalinterpretations deeloped by the panel. %he Appellate Gody report was circulated to Bembers on1 Bay 2000. %he Appellate Gody;

• eersed the panels conclusion that Article .1#b+ of the ubsidies Agreement did not

extend to contingency Din factE.






• ?onsidered that the panel had failed to examine whether the measure at issue affected

trade in serices as re=uired under Article I;1 of the 6A%.

• eersed the panels conclusion that the import duty exemption was inconsistent with the

re=uirements of Article II;1 of the 6A% as well as the panels findings leading to thatconclusion.

%he G adopted the Appellate Gody report and the 4anel report, as modified by the AppellateGody report, on 1 Pune 2000.

Implementation of adopted reports

4ursuant to Article 21. of the H, ?anada informed the G on 1 Puly 2000 that it would

comply with the recommendations of the G. &ne of the recommendations made by the Gwas that ?anada withdraw within 0 days the export subsidy found to be inconsistent withArticle .1#a+ of the ubsidies Agreement. &n " August 2000, Papan and the /uropean?ommunities re=uested, pursuant to Article 21.#c+ of the H, that the reasonable period of time be determined by arbitration. %he arbitrator determined that the Dreasonable period of timeEwas @ months from the date of adoption of the Appellate Gody and 4anel eports, as modified bythe Appellate Gody eport. %he Dreasonable period of timeE was thus to expire on 1 3ebruary2001.

At the G meeting of 12 Barch 2001, ?anada stated that, as of 1@ 3ebruary 2001, it hadcomplied with the Gs recommendations.

Week %our

+ommentaries

Menneth am, egional /conomic Agreements and the 6A%%; the egacy of a Bisconception

A9stract!

%he last do'en years hae seen a proliferation of customs unions and free-trade areas of

unforeseen proportions. uch regional arrangements, far from being halfway houses on the road

to nondiscriminatory and freer trade, may be in direct conflict with those goals. %he 6eneral

Agreement on %ariffs and %rade has been charged with the duty to regulate the formation of customs unions and free-trade areas in order to reconcile that conflict. %he two principal

conclusions of this discussion are that 6A%% has failed to discharge that responsibility and that

its failure may be traced to a fundamental misconception of the nature and conse=uences of the

conflict between regional arrangements and nondiscriminatory freer trade.

9. ?&?HI& $e hae reiewed article 88I9 from three general points of reference. 3irst,

we hae examined the meaning of the article as presently drafted and hae found it ambiguous at




best. econd, we hae attempted to assess the soundness of the standards announced in the light

of the underlying conflict between the most-faored-nation principle of article I and the

discrimination inherent in customs unions and free-trade areas. Cere the conclusion has been that

article 88I9 makes ery little sense and that =uite different standards should be adopted. %hird,

we hae reiewed the experience of the ?ontracting 4arties in applying article 88I9.11 In

attempting to reach general conclusions concerning article 88I9, it would be appropriate todetermine what generali'ations may be made concerning this historic record. &n first impression

the historical record is a sorry one indeed. ot a single customs union or free-trade area

agreement which has been submitted to the ?ontracting 4arties has conformed fully to the

re=uirements of article 88I9.

Let the ?ontracting 4arties hae felt compelled to grant waiers of one kind or another for eery

one of the proposed agreements. It cannot necessarily be concluded, howeer, that article 88I9

has been of no conse=uence whateer. %he desire to aoid unnecessary friction with other

contracting parties may hae been a marginal influence on the structure of new customs unions

and free-trade areas. It is impossible, of course, to know what form those regional groupings

would hae taken in the absence of article 88I9. &nly in the case of the atin American 3ree

%rade Association do we hae concrete eidence aailable. ince most of the early planning was

done under the auspices of the Hnited ations /conomic ?ommission for atin America, we

hae aailable a public record which suggests that a desire to comply with article 88I9, or at

least to come respectably close to complying, was widely held among those who attended the

planning sessions. 12 It may be that, but for article 88I9, a preferential trading arrangement

with partial reduction of internal tariffs would hae been chosen in preference to a freetrade area

with complete elimination of internal tariffs.

/en assuming that article 88I9 has had a significant influence on the structure of recent

customs unions and free-trade areas, it does not necessarily follow that that influence has beenuniformly beneficent. If, for example, as appears to this writer, the oerseas territories proisions

of the %reaty of ome and the atin American 3ree %rade Association as a whole will hae, on

balance, unfaorable production effects, it may well be that the re=uirement of article 88I9 that

internal restrictions on substantially all trade among member countries be eliminated has had an

unfortunate influence. 4artial reduction of internal barriers might well hae been preferable to

complete elimination from the iewpoint of the world as a whole for the reasons examined

aboe.1

%he foregoing analysis suggests that, howeer feeble article 88I9 may hae been as a <uridical

rule in outlawing nonconforming regional economic agreements, the errors in policy underlying

the articleFs formulation hae had unfortunate conse=uences for the world as a whole. Juite asidefrom any influence on structural planning, article 88I9, by proing in practice to be a barrier to

summary 6A%% approal, has forced the members of some nascent regional groupings to discuss

their plans at length within the 6A%% framework and to report yearly on the implementation of

such plans. %hese consultations hae not only been an important dispute settlement mechanism

but also, by making aailable detailed information concerning the successes and difficulties of






would, of course, be no obligation to reach any particular agreement. 4erhaps reision of article

88I9 is impossible at this time, particularly in iew of the large number of contracting parties

which are members of existing customs unions or free-trade areas and which therefore hae a

ested interest in the legal status =uo. In that eent, some progress might be made within the

context of the existing formulation of article 88I9 by a reinterpretation of its proisions by the

$orking 4arties assigned to reiew new regional arrangements.

%he ery ambiguity of article 88I9 proides an opportunity if primary emphasis can be placed

on the statement in paragraph " that Qthe purpose of a customs union or of a free-trade area

should be to facilitate trade between the constituent territories and not to raise barriers to the

trade of other contracting parties.QF15 It has been the burden of the analysis undertaken here that

a regional arrangement with negatie production and consumption effects tends Qto raise barriers

to the trade of other contracting partiesQ whether or not it meets the tests laid down in the

remaining paragraphs of article 88I9 while a regional arrangement with positie production and

consumption effects facilitates intermember trade without raising such barriers. Garring reision,

the best approach may thus be a creatie reinterpretation of article 88I9.

:and9ook of International Economic Law +/apter on International "rade! Regionalism

;oel P "rac/tman

egional integration agreements #IAs+, like other forms of international economic

institutionali'ation or law, are generally aimed at economic integration; the reduction of barriers

to moement of economic factors across borders. Coweer, there can be other aims; the original/uropean /conomic ?ommunity and /uropean ?oal and teel ?ommunity were famously

motiated by a desire to make war between 6ermany and 3rance impossible. Bonetary union in

the /uropean Hnion has been critici'ed by financial economists, but may play a broader role in

political or social aspects of integration. egionalism is an accelerating phenomenon, as shown

in the table below, although in 1*, Menneth am was able to say that the last do'en years had

Rseen a proliferation of customs unions and free-trade areas of unforeseen proportions.

%he great ma<ority of these IAs are free trade areas #3%As+, rather than customs unions #?Hs+.

A 3%A proides 'ero tariffs among its members, but each member maintains its own tariff

schedule for application to the products of other states, whereas a ?H is a free trade area with a

common external tariff. Among the best known regional IAs are the /uropean ?ommunities#/?+,1 the orth American 3ree %rade Agreement #A3%A+, the outhern ?ommon Barket

#B/?&H+, the Association of outheast Asian ations 3ree %rade Area #A3%A+ and the

200" ?entral American 3ree %rade Area #?A3%A+. egionalism presents many faces to the

international economic law system. egional integration creates international economic law

subsystems.2 %hese subsystems are rather dierse in structure and scope. %hese subsystems hae

a complex economic relationship with the multilateral system, represented by the $%&; they




may both undermine and support multilateral economic integration. egionalism, as applied to

third countries, is broadly inconsistent with the principle of most faored nation trade; the

principle of non-discrimination among trading partners. %his is because it applies a different

tariff on goods depending on their origin. %herefore, is-S-is the global setting #as opposed to

internally+, regionalism will often be inconsistent with the operation of comparatie adantage,

since it applies tariffs to goods sourced outside the IA, but not to goods sourced within theIA. &n the other hand, regional arrangements generally reduce internal barriers to trade and

therefore are consistent with comparatie adantage internally. %he comparison between internal

trade creation, and diersion of external trade, initially analy'ed by Pacob 9iner, has been a

central, but disputed, part of the analysis of the static welfare effects of regionalism. egional

arrangements may also hae dynamic effects by inducing economic restructuring that paes the

way for deeper multilateral integration, or sering as comparatie laboratories to deelop

institutional tools for deeper multilateral integration. 3urthermore, regionalism may implicate

any or all of the Rfour freedoms; trade in goods, trade in serices, free moement of inestment

and free moement of labor. egional subsystems also hae a complex legal relationship with

the multilateral system. egionalism is regulated under $%& law. %he relationship betweenregional agreements and $%& law is important both in the application of the law of the regional

agreements and in the application of the law of the $%&.

a. %raditional ?ategoriesince its founding in 15>, the /? has been the leading example and the gold standard. of regionalism. ot only has it established in large measure the .four freedoms., but it has alsodeeloped a high leel of policy coordination, international relations coordination, andredistribution. 3urthermore, the /? has deeloped a complex federal legal system, coering a broad spectrum of sub<ect areas and dealing in a highly sophisticated way with issues of legalrelations between the IA goernance and the member states. %here are many examples of

circumstances in which other regional and multilateral integration bodies hae learned lessonsfrom, or emulated, the /?. &f course, customs unions can be precursors of states, as in theformation of 6ermany andItaly.

Galassa #1*2+ deeloped a system of categori'ing regional integration." $e begin with a 3%A,in which tariffs and =uotas are abolished for imports from within the area, but each member maintains its own external trade barriers. %he next step is to a ?H, which in addition toestablishing a 3%A, establishes a common external tariff. A common market includes additionalremoal of barriers to moement of factors of production, and may include further coordinationof external commercial policy. An economic union includes some degree of harmoni'ation of economic policy. %otal economic integration includes unification of monetary, fiscal, social and

counter-cyclical policies, plus a supranational authority that can bind member states.

%hus, the /? may be understood as an example of a common market with some features of totaleconomic integration, while A3%A is essentially a 3%A with a few additional features. %heseadditional features include coerage of inestment, intellectual property and serices. Coweer,as the multilateral system since 1" has included intellectual property and serices, theadditionality offered by A3%A is largely in the area of the intra-regional 'ero tariff treatment, plus inestment. Bore recent 3%As hae proided greater additionality, with more intense




coerage of intellectual property and serices than may be found in the multilateral system; so-called .$%& plus..

+onclusion!

$hile in 1">, Article 88I9 may not hae been ery important, and while at that time, the riseof 3%As could not be anticipated, Article 88I9 has taken on great importance. &ne of the most

important =uestions in international economic policy today is the relationship between regional

integration and multilateral integration. 3or better or worse, Article 88I9 #and its cognates in

serices and elsewhere+ proides the framework for articulation of this relationship. Article

88I9 of 6A%% presents a facially compelling case to seek to align international trade law with

the dictates of welfare economics. It would be useful to redesign or reinterpret Article 88I9 so

as to increase global welfare; permitting only those IAs that result in an increase in global

welfare. Coweer, there are two potential obstacles. 3irst, it is not clear that the goal of

goernments is to increase global welfare. econd, it is not clear that an Article 88I9 rule

oriented more directly to global welfare would be possible or administrable. Article 88I9 is notwell deeloped, and contains many uncertainties, perhaps reflecting in part the ambialence in

statesT attitudes towards IAs. %his ambialence, for example, makes it difficult to know how

Article 88I9 will deal with safeguards and with certain 4 or %G% measures in IAs. Let,

IAs may sere as laboratories of institutional deelopment, assisting our understanding of the

potential institutional solutions to international economic integration problems. %he =uestion of

whether IAs may indeed sere as building blocks toward greater integration is still open.

/6I&A %A/ A6//B/% 9. %C/ $%&; A 4&4&A 3& /3&B &3

A%I?/ 88I9 %& ?&H%/ %CI I%I%H%I&A %C/A% ?&I G. 4I?M/

Issue! %As, A%I?/ 88I9 A %C/ $%& %As include all arrangements between states

concerning their trade relations. ometimes %As are called 3ree %rade Agreements #Q3%AsQ+,

4referential %rade Agreements, or, in some circumstances, ?ustoms Hnions.1 %hese agreements

may be bilateral, trilateral, or multilateral. %heir sectoral and substantie coerage may be

significant, minimal, or illusory.12 3or purposes of this Article, the term Q%AQ includes all

regional trade arrangements except customs unions, for customs unions are significantly

different. Coweer, much of the criti=ue of %As presented in this Article could also apply to

customs unions.1 %he term Q%AQ will also be used interchangeably with the term Q3%AQ in this

examination of the benefits and harms of %As in their relationship with the $%&. .1. %he

Genefits of %As %he multilateral trade system has witnessed phenomenal growth in the number,coerage, and scope of %As.1" $hile it has been asserted that the present QfeerQ of actiity in

deeloping regional arrangements is due to globali'ation,15 there hae been other periods of

regionalism before this present burst of actiity,1* albeit none so frenetic as the period since the

birth of the $%&.F >

%here are many reasons for this growth, though in the early period of the multilateral trade

system-the post-war years-much of the growth in %As was related to continuing colonial




associations.F @ Additionally, in those post-war years, %A formation was encouraged as another

mechanism to help increase security in /urope.1 6eopolitics aside, howeer, there has been no

shortage of reasons, historically and in modem times, for countries to enter into %As.

Hnderstanding those reasons allows a greater understanding of the feasibility of any proposal to

regulate %As so as to reduce their negatie impact. uch a proposal, like the one offered in this

Article, must be able to achiee its regulatory goal, yet not detract from the many positiereasons for utili'ing %As. Cence the importance of first identifying the reasons that states enter

into %As and why the system allows %As to exist. tates enter into %As for a whole host of

reasons, including furthering economic, security, and foreign policy goals. %he conentional

wisdom is that states enter into %As to secure economic or welfare gains from exclusie access

to the other %A statesF markets. 20 tates may also <oin %As to ensure continued access to a

market already coered by an %A. 3or example, the purpose of ?anadaFs inolement in the

orth American 3ree %rade Agreement #QA3%AQ+ was, in part, to ensure it retained the access

to the H.. market that it had obtained from a preious %A - the ?anada-H.. 3%A

#Q?H3%AQ+.21 imilarly, when all other countries are perceied to be entering into such

arrangements, a country will not want to be left behind.22 %his is called Qdominoregionalism.Q2 In this way, inolement in %As ensures that a state is not Qtaken adantage ofQ

through multilateralism.2" All these reasons speak to the underlying idea that a state will seek to

establish positie preferences from other countries for the stateFs industries and interests -

sometimes non-economic interests.

In addition to proiding indiidual states with economic and welfare benefits, %As also proide

benefits for indiidual states and the global economy through their interaction with the

multilateral system and trade policy as a whole.2* As an initial matter, regionalism may sere as

an inducement for the deelopment of multilateralism. 2> %he Hnited tatesF response to

/uropean regionalism was initially to push eer harder for multilateral trade deelopment-with

some success. %hat policy led to some of the more important rounds of the 6eneral Agreementon %ariffs and %rade #Q6A%%Q+ - the illon, Mennedy, and %okyo ounds.2@ %he threat of

regionalism, and the trade diersion that goes with it, may thus encourage the conclusion and

acceptance of multilateral agreements.2 egional arrangements can also increase the bargaining

power of an %AFs constituent members within multilateral arrangements.0 Additionally, with

the recent increase in regionalism due to globali'ation, combined with the opening of economies

in the post-tariff era, economic actors suddenly hae become aware of on-%ariff Garriers

#Q%GsQ+ and the need to deal with them.

Accordingly, many consider that it is the non-economic benefits that sere as the primary

rationale for %As.@ In particular, foreign policy and national security continue to be significant

reasons for entering into %As. Indeed, as mentioned aboe, trade agreements hae played a

role in the Biddle /ast peace process."0 %As can also be employed to realign external

relations, as in the cases of %urkey with /urope, and Bexico with orth America."1 %As may

also sere as a foreign policy reward for allies. 3or example, entering into an %A with an

economic power can sere to reward countries and conince them to adopt more market oriented

domestic policies."2 %As may een be thought to assist in domestic political affairs."




+<'+LSI<' $hile there is no shortage of factors to blame for the slow deelopment of the

$%&, this Article has suggested one additional factor; the institutional conflict between %As

and the $%&. %his Article offers a 4roposal to respond to this institutional threat. %he 4roposal

suggests substantie harmoni'ation and institutional centrali'ation of %As with the $%&.

?ertainly the likelihood of the adoption of a formal amendment, this one in particular, to the

$%& is unlikely, especially one that would re=uire states to act selflessly. onetheless, this4roposal and the reasoning behind it may sere to remind $%& members of their obligations to

the $%&, and that the $%& is not immortal. %he 4roposal and the issues raised in this Article

should sere as a wake-up call to $%& members. %he Hnited tates, /urope, ?anada, Gra'il,

?hina, Papan, Australia, and the other big players should take a stand as parties with the largest

global trade and the ones most likely to suffer from the harms caused to the $%& by these %As.

Additionally, as some of the most significant users of %As, they should also take responsibility

for their role in this problem and seek to rectify the damage and aert the potential disaster their

%AFs may produce. &f course, there is another route to resole this battle between %As and the

$%&. %hat route would be through the $%& taking into account the reasons for the growth and

strength of these %As; simply put, its failure to gie its members what they want. Hnfortunately,the desires of its members are far from uniform and are often mutually exclusie. Groadly

speaking, for the deeloping world, those demands include reform of agriculture policies,

intellectual property protections that take into account the realities of deeloping countriesF

needs, and so on. Gut then, and also broadly speaking, the demands of the deeloped world

include a faster pace of liberali'ation, reduction of %Gs, expansion into new and related areas

such as competition law, and so on. Although progress on these issues is almost as unrealistic as

the 4roposal itself, perhaps the 4roposal, when compared to the alternaties, is the least harmful

way to resole the issue, and as such may not appear so unrealistic after all.

Week %i&e

SA'I"AR= A'4 P:="<SA'I"AR= $EASRES!

I%&H?%I&

Hnderstanding the $%& Agreement on anitary and 4hytosanitary Beasures

Bay 1@

%he Agreement on t/e Application of Sanitar and P/tosanitar $easures #the Q4AgreementQ+ entered into force with the establishment of the $orld %rade &rgani'ation on 1Panuary 15. It concerns the application of food safety and animal and plant health regulations.

%his introduction discusses the text of the 4 Agreement as it appears in the 3inal Act of theHruguay ound of Bultilateral %rade egotiations, signed in Barrakesh on 15 April 1". %hisagreement and others contained in the 3inal Act, along with the 6eneral Agreement on %ariffsand %rade as amended #6A%% 1"+, are part of the treaty which established the $orld %rade




&rgani'ation #$%&+. %he $%& superseded the 6A%% as the umbrella organi'ation for international trade.

%he $%& ecretariat has prepared this text to assist public understanding of the 4 Agreement.It is not intended to proide legal interpretation of the agreement.

I'"R<4+"I<' "/e Sanitar and P/tosanitar $easures Agreement

Problem: How do you ensure that your country’s consumers are being supplied with food that is

safe to eat !safe! by the standards you consider appropriate" #nd at the same time$ how can

you ensure that strict health and safety regulations are not being used as an e%cuse for protecting domestic producers"

The Agreement on the Application of Sanitary and Phytosanitary Measures sets out the basicrules for food safety and animal and plant health standards&

't allows countries to set their own standards& (ut it also says regulations must be based on

science& They should be applied only to the e%tent necessary to protect human$ animal or plant life or health& #nd they should not arbitrarily or unustifiably discriminate between countries

where identical or similar conditions prevail&

*ember countries are encouraged to use international standards$ guidelines and

recommendations where they e%ist& However$ members may use measures which result in higher standards if there is scientific ustification& They can also set higher standards based on

appropriate assessment of ris+s so long as the approach is consistent$ not arbitrary&

The agreement still allows countries to use different standards and different methods of

inspecting products&

>e %eatures

All countries maintain measures to ensure that food is saf e for consumers, and to preent thespread of pests or diseases among animals and plants. %hese sanitary and phytosanitary measurescan take many forms, such as re=uiring products to come from a disease-free area, inspection of products, specific treatment or processing of products, setting of allowable maximum leels of pesticide residues or permitted use of only certain addities in food. anitary #human and animalhealth+ and phytosanitary #plant health+ measures apply to domestically produced food or localanimal and plant diseases, as well as to products coming from other countries.

Protection or protectionism"

anitary and phytosanitary measures, by their ery nature, may result in restrictions on trade. Allgoernments accept the fact that some trade restrictions may be necessary to ensure food safety

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and animal and plant health protection. Coweer, goernments are sometimes pressured to go beyond what is needed for health protection and to use sanitary and phytosanitary restrictions toshield domestic producers from economic competition. uch pressure is likely to increase asother trade barriers are reduced as a result of the Hruguay ound agreements. A sanitary or phytosanitary restriction which is not actually re=uired for health reasons can be a ery effectie

protectionist deice, and because of its technical complexity, a particularly deceptie anddifficult barrier to challenge.

%he Agreement on anitary and 4hytosanitary Beasures #4+ builds on preious 6A%% rules torestrict the use of un<ustified sanitary and phytosanitary measures for the purpose of trade protection. %he basic aim of the 4 Agreement is to maintain the soereign right of anygoernment to proide the leel of health protection it deems appropriate, but to ensure that thesesoereign rights are not misused for protectionist purposes and do not result in unnecessary barriers to international trade.

,ustification of measures

%he 4 Agreement, while permitting goernments to maintain appropriate sanitary and phytosanitary protection, reduces possible arbitrariness of decisions and encourages consistentdecision-making. It re=uires that sanitary and phytosanitary measures be applied for no other purpose than that of ensuring food safety and animal and plant health. In particular, theagreement clarifies which factors should be taken into account in the assessment of the risk inoled. Beasures to ensure food safety and to protect the health of animals and plants should be based as far as possible on the analysis and assessment of ob<ectie and accurate scientificdata.

'nternational standards

%he 4 Agreement encourages goernments to establish national 4 measures consistent withinternational standards, guidelines and recommendations. %his process is often referred to asQharmoni'ationQ. %he $%& itself does not and will not deelop such standards. Coweer, mostof the $%&s member goernments #12 at the date of drafting+ participate in the deelopmentof these standards in other international bodies. %he standards are deeloped by leading scientistsin the field and goernmental experts on health protection and are sub<ect to internationalscrutiny and reiew.

International standards are often higher than the national re=uirements of many countries,including deeloped countries, but the 4 Agreement explicitly permits goernments to choose

not to use the international standards. Coweer, if the national re=uirement results in a greater restriction of trade, a country may be asked to proide scientific <ustification, demonstrating thatthe releant international standard would not result in the leel of health protection the countryconsidered appropriate.

#dapting to conditions




ue to differences in climate, existing pests or diseases, or food safety conditions, it is notalways appropriate to impose the same sanitary and phytosanitary re=uirements on food, animalor plant products coming from different countries. %herefore, sanitary and phytosanitarymeasures sometimes ary, depending on the country of origin of the food, animal or plant product concerned. %his is taken into account in the 4 Agreement. 6oernments should also

recogni'e disease-free areas which may not correspond to political boundaries, and appropriatelyadapt their re=uirements to products from these areas. %he agreement, howeer, checksun<ustified discrimination in the use of sanitary and phytosanitary measures, whether in faour of domestic producers or among foreign suppliers.

#lternative measures

An acceptable leel of risk can often be achieed in alternatie ways. Among the alternaties O and on the assumption that they are technically and economically feasible and proide the sameleel of food safety or animal and plant health O goernments should select those which are notmore trade restrictie than re=uired to meet their health ob<ectie. 3urthermore, if another

country can show that the measures it applies proide the same leel of health protection, theseshould be accepted as e=uialent. %his helps ensure that protection is maintained while proidingthe greatest =uantity and ariety of safe foodstuffs for consumers, the best aailability of safeinputs for producers, and healthy economic competition.

Ris+ #ssessment

%he 4 Agreement increases the transparency of sanitary and phytosanitary measures.?ountries must establish 4 measures on the basis of an appropriate assessment of the actualrisks inoled, and, if re=uested, make known what factors they took into consideration, theassessment procedures they used and the leel of risk they determined to be acceptable. Although

many goernments already use risk assessment in their management of food safety and animaland plant health, the 4 Agreement encourages the wider use of systematic risk assessmentamong all $%& member goernments and for all releant products.

Transparency

6oernments are re=uired to notify other countries of any new or changed sanitary and phytosanitary re=uirements which affect trade, and to set up offices #called Q/n=uiry 4ointsQ+ torespond to re=uests for more information on new or existing measures. %hey also must open toscrutiny how they apply their food safety and animal and plant health regulations. %he systematiccommunication of information and exchange of experiences among the $%&s member

goernments proides a better basis for national standards. uch increased transparency also protects the interests of consumers, as well as of trading partners, from hidden protectionismthrough unnecessary technical re=uirements.

A special ?ommittee has been established within the $%& as a forum for the exchange of information among member goernments on all aspects related to the implementation of the 4Agreement. %he 4 ?ommittee reiews compliance with the agreement, discusses matters with potential trade impacts, and maintains close co-operation with the appropriate technical




organi'ations. In a trade dispute regarding a sanitary or phytosanitary measure, the normal $%&dispute settlement procedures are used, and adice from appropriate scientific experts can besought.

?ES"I<'S A'4 A'SWERS Gack to top

What are sanitary and phytosanitary measures? Does the SPS Agreement cover countries’

measures to protect the environment? Consumer interests? Animal welfare?

3or the purposes of the 4 Agreement, sanitary and phytosanitary measures are defined as anymeasures applied;

•

to protect human or animal life from risks arising from addities, contaminants, toxins or disease-causing organisms in their food:

• to protect human life from plant- or animal-carried diseases:

• to protect animal or plant life from pests, diseases, or disease-causing organisms:

• to preent or limit other damage to a country from the entry, establishment or spread of

pests.

%hese include sanitary and phytosanitary measures taken to protect the health of fish and wild

fauna, as well as of forests and wild flora.

Beasures for enironmental protection #other than as defined aboe+, to protect consumer interests, or for the welfare of animals are not coered by the 4 Agreement. %hese concerns,howeer, are addressed by other $%& agreements #i.e., the %G% Agreement or Article 88 of 6A%% 1"+.

Weren’t a nation’s food safety and animal and plant health regulations previously covered by

A!! rules?

Les, since 1"@ national food safety, animal and plant health measures which affect trade were

sub<ect to 6A%% rules. Article I of the 6A%% #see note 1+, the most-faoured nation clause,re=uired non-discriminatory treatment of imported products from different foreign suppliers, andArticle III re=uired that such products be treated no less faourably than domestically producedgoods with respect to any laws or re=uirements affecting their sale. %hese rules applied, for instance, to pesticide residue and food additie limits, as well as to restrictions for animal or plant health purposes.

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%he 6A%% rules also contained an exception #Article 88;b+ which permitted countries to takemeasures Qnecessary to protect human, animal or plant life or health,Q as long as these did notun<ustifiably discriminate between countries where the same conditions preailed, nor were adisguised restriction to trade. In other words, where necessary, for purposes of protecting human,animal or plant health, goernments could impose more stringent re=uirements on imported

products than they re=uired of domestic goods.

In the %okyo ound of multilateral trade negotiations #1>"->+ an Agreement on "ec/nical

Barriers to "rade was negotiated #the 1> %G% Agreement or Qtandards ?odeQ+ #see note 2+.Although this agreement was not deeloped primarily for the purpose of regulating sanitary and phytosanitary measures, it coered technical re=uirements resulting from food safety and animaland plant health measures, including pesticide residue limits, inspection re=uirements andlabelling. 6oernments which were members of the 1> %G% Agreement agreed to use releantinternational standards #such as those for food safety deeloped by the ?odex+ except when theyconsidered that these standards would not ade=uately protect health. %hey also agreed to notifyother goernments, through the 6A%% ecretariat, of any technical regulations which were not

based on international standards. %he 1> %G% Agreement included proisions for settling tradedisputes arising from the use of food safety and other technical restrictions.

What is new in the SPS Agreement?

Gecause sanitary and phytosanitary measures can so effectiely restrict trade, 6A%% member goernments were concerned about the need for clear rules regarding their use. %he Hruguayound ob<ectie to reduce other possible barriers to trade increased fears that sanitary and phytosanitary measures might be used for protectionist purposes.

%he 4 Agreement was intended to close this potential loophole. It sets clearer, more detailed

rights and obligations for food safety and animal and plant health measures which affect trade.?ountries are permitted to impose only those re=uirements needed to protect health which are based on scientific principles. A goernment can challenge another countrys food safety or animal and plant health re=uirements on the grounds that they are not <ustified by scientificeidence. %he procedures and decisions used by a country in assessing the risk to food safety or animal or plant health must be made aailable to other countries upon re=uest. 6oernmentshae to be consistent in their decisions on what is safe food, and in responses to animal and planthealth concerns.

"ow do you #now if a measure is SPS or !$!? Does it ma#e any difference?

%he scope of the two agreements is different. %he 4 Agreement coers all measures whose purpose is to protect;

• human or animal health from food-borne risks:

• human health from animal- or plant-carried diseases:

• animals and plants from pests or diseases:

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whether or not these are technical re=uirements.

%he %G% #%echnical Garriers to %rade+ Agreement coers all technical regulations, oluntarystandards and the procedures to ensure that these are met, except when these are sanitary or phytosanitary measures as defined by the 4 Agreement. It is thus the type of measure which

determines whether it is coered by the %G% Agreement, but the purpose of the measure which isreleant in determining whether a measure is sub<ect to the 4 Agreement.

%G% measures could coer any sub<ect, from car safety to energy-saing deices, to the shape of food cartons. %o gie some examples pertaining to human health, %G% measures could include pharmaceutical restrictions, or the labelling of cigarettes. Bost measures related to humandisease control are under the %G% Agreement, unless they concern diseases which are carried by plants or animals #such as rabies+. In terms of food, labelling re=uirements, nutrition claims andconcerns, =uality and packaging regulations are generally not considered to be sanitary or phytosanitary measures and hence are normally sub<ect to the %G% Agreement.

&n the other hand, by definition, regulations which address microbiological contamination of food, or set allowable leels of pesticide or eterinary drug residues, or identify permitted foodaddities, fall under the 4 Agreement. ome packaging and labelling re=uirements, if directlyrelated to the safety of the food, are also sub<ect to the 4 Agreement.

%he two agreements hae some common elements, including basic obligations for non-discrimination and similar re=uirements for the adance notification of proposed measures andthe creation of information offices #Q/n=uiry 4ointsQ+. Coweer, many of the substantie rulesare different. 3or example, both agreements encourage the use of international standards.Coweer, under the 4 Agreement the only <ustification for not using such standards for foodsafety and animalNplant health protection are scientific arguments resulting from an assessment

of the potential health risks. In contrast, under the %G% Agreement goernments may decide thatinternational standards are not appropriate for other reasons, including fundamentaltechnological problems or geographical factors.

Also, sanitary and phytosanitary measures may be imposed only to the extent necessary to protect human, animal or plant health, on the basis of scientific information. 6oernments may,howeer, introduce %G% regulations when necessary to meet a number of ob<ecties, such asnational security or the preention of deceptie practices. Gecause the obligations thatgoernments hae accepted are different under the two agreements, it is important to knowwhether a measure is a sanitary or phytosanitary measure, or a measure sub<ect to the %G%Agreement.

"ow do governments and the interested public #now who is doing what?

%he transparency proisions of the 4 Agreement are designed to ensure that measures taken to protect human, animal and plant health are made known to the interested public and to trading partners. %he agreement re=uires goernments to promptly publish all sanitary and phytosanitaryregulations, and, upon re=uest from another goernment, to proide an explanation of the reasonsfor any particular food safety or animal or plant health re=uirement.




All $%& Bember goernments must maintain an /n=uiry 4oint, an office designated to receieand respond to any re=uests for information regarding that countrys sanitary and phytosanitarymeasures. uch re=uests may be for copies of new or existing regulations, information onreleant agreements between two countries, or information about risk assessment decisions. %headdresses of the /n=uiry 4oints can be consulted here.

$heneer a goernment is proposing a new regulation #or modifying an existing one+ whichdiffers from an international standard and may affect trade, they must notify the $%&ecretariat, who then circulates the notification to other $%& Bember goernments #oer >00such notifications were circulated during the first three years of implementation of the 4Agreement+. %he notifications are also aailable to the interested public and can beconsulted here. Alternatiely, notifications can be re=uested from the /n=uiry 4oint of thecountry which is proposing the measure.

6oernments are re=uired to submit the notification in adance of the implementation of a proposed new regulation, so as to proide trading partners an opportunity to comment. %he 4

?ommittee has deeloped recommendations on how the comments must be dealt with.

In cases of emergency, goernments may act without delay, but must immediately notify other Bembers, through the $%& ecretariat, and also still consider any comments submitted by other $%& Bember goernments.

Does the SPS Agreement restrict a government’s ability to establish food safety and plant and

animal health laws? Will food safety or animal and plant health levels be determined by the

W!% or some other international institution?

%he 4 Agreement explicitly recogni'es the right of goernments to take measures to protect

human, animal and plant health, as long as these are based on science, are necessary for the protection of health, and do not un<ustifiably discriminate among foreign sources of supply.ikewise, goernments will continue to determine the food safety leels and animal and planthealth protection in their countries. either the $%& nor any other international body will dothis.

%he 4 Agreement does, howeer, encourage goernments to Qharmoni'eQ or base their national measures on the international standards, guidelines and recommendations deeloped by$%& member goernments in other international organi'ations. %hese organi'ations include, for food safety, the <oint 3A&N$C& ?odex Alimentarius ?ommission: for animal health, the &fficeInternational des /pi'ooties: and for plant health, the 3A& International 4lant 4rotection

?onention. $%& member goernments hae long participated in the work of theseorgani'ations O including work on risk assessment and the scientific determination of the effectson human health of pesticides, contaminants or addities in food: or the effects of pests anddiseases on animal and plant health. %he work of these technical organi'ations is sub<ect tointernational scrutiny and reiew.

&ne problem is that international standards are often so stringent that many countries haedifficulties implementing them nationally. Gut the encouragement to use international standards

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does not mean that these constitute a floor on national standards, nor a ceiling. ationalstandards do not iolate the 4 Agreement simply because they differ from international norms.In fact, the 4 Agreement explicitly permits goernments to impose more stringentre=uirements than the international standards. Coweer, goernments which do not base their national re=uirements on international standards may be re=uired to <ustify their higher standard

if this difference gies rise to a trade dispute. uch <ustification must be based on an analysis of scientific eidence and the risks inoled.

What does harmoni&ation with international food safety standards mean? Will this result in a

lowering of health protection' i(e(' downward harmoni&ation?

Carmoni'ation with international food safety standards means basing national re=uirements onthe standards deeloped by the 3A&N$C& Point ?odex Alimentarius ?ommission # see note +.?odex standards are not Qlowest common denominatorQ standards. %hey are based on the inputof leading scientists in the field and national experts on food safety. %hese are the samegoernment experts who are responsible for the deelopment of national food safety standards.

3or example, the recommendations for pesticide residues and food addities are deeloped for ?odex by international groups of scientists who use conseratie, safety-oriented assumptionsand who operate without political interference. In many cases, the standards deeloped by ?odexare higher than those of indiidual countries, including countries such as the Hnited tates. Asnoted in the reply to the preious =uestion, goernments may nonetheless choose to use higher standards than the international ones, if the international standards do not meet their health protection needs.

Can governments ta#e ade)uate precautions in setting food safety and animal and plant

health re)uirements? What about when there may not be sufficient scientific evidence for a

definitive decision on safety' or in emergency situations? Can unsafe products be banned?

%hree different types of precautions are proided for in the 4 Agreement. 3irst, the process of risk assessment and determination of acceptable leels of risk implies the routine use of safetymargins to ensure ade=uate precautions are taken to protect health. econd, as each countrydetermines its own leel of acceptable risk, it can respond to national concerns regarding whatare necessary health precautions. %hird, the 4 Agreement clearly permits the precautionarytaking of measures when a goernment considers that sufficient scientific eidence does not existto permit a final decision on the safety of a product or process. %his also permits immediatemeasures to be taken in emergency situations.

%here are many examples of bans on the production, sale and import of products based onscientific eidence that they pose an unacceptable risk to human, animal or plant health. %he 4Agreement does not affect a goernments ability to ban products under these conditions.

Can food safety and animal and plant health re)uirements be set by local or regional

governments? Can there be differences in re)uirements within a country?

It is accepted in the 4 Agreement that food safety and animal and plant health regulations donot necessarily hae to be set by the highest goernmental authority and that they may not be the

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same throughout a country. $here such regulations affect international trade, howeer, theyshould meet the same re=uirements as if they were established by the national goernment. %henational goernment remains responsible for implementation of the 4 Agreement, and shouldsupport its obserance by other leels of goernment. 6oernments should use the serice of non-goernmental institutions only if these comply with the 4 Agreement.

Does the SPS Agreement re)uire countries to give priority to trade over food safety' or animal

and plant health?

o, the 4 Agreement allows countries to gie food safety, animal and plant health priorityoer trade, proided there is a demonstrable scientific basis for their food safety and healthre=uirement. /ach country has the right to determine what leel of food safety and animal and plant health it considers appropriate, based on an assessment of the risks inoled.

&nce a country has decided on its acceptable leel of risk, there are often a number of alternatiemeasures which may be used to achiee this protection #such as treatment, =uarantine or

increased inspection+. In choosing among such alternaties, the 4 Agreement re=uires that agoernment use those measures which are no more trade restrictie than re=uired to achiee itshealth protection ob<ecties, if these measures are technically and economically feasible. 3or example, although a ban on imports could be one way to reduce the risk of entry of an exotic pest, if re=uiring treatment of the products could also reduce the risk to the leel consideredacceptable by the goernment, this would normally be a less trade restrictie re=uirement.

Can national food safety and animal and plant health legislation be challenged by other

countries? Can private entities bring trade disputes to the W!%? "ow are disputes settled in

the W!%?

ince the 6A%% began in 1"@, it has been possible for a goernment to challenge another countrys food safety and plant and animal health laws as artificial barriers to trade. %he 1>%G% Agreement also had procedures for challenging another signatorys technical regulations,including food safety standards and animal and plant health re=uirements. %he 4 Agreementmakes more explicit not only the basis for food safety and animal and plant health re=uirementsthat affect trade but also the basis for challenges to those re=uirements. $hile a nations ability toestablish legislation is not restricted, a specific food safety or animal or plant health re=uirementcan be challenged by another country on the grounds that there is not sufficient scientificeidence supporting the need for the trade restriction. %he 4 Agreement proides greater certainty for regulators and traders alike, enabling them to aoid potential conflicts.

%he $%& is an inter-goernmental organi'ation and only goernments, not priate entities or non-goernmental organi'ations, can submit trade disputes to the $%&s dispute settlement procedures. on-goernmental entities can, of course, make trade problems known to their goernment and encourage the goernment to seek redress, if appropriate, through the $%&.

Gy accepting the $%& Agreement, goernments hae agreed to be bound by the rules in all of the multilateral trade agreements attached to it, including the 4 Agreement. In the case of atrade dispute, the $%&s dispute settlement procedures #click here for an introduction, click here





for details+ encourage the goernments inoled to find a mutually acceptable bilateral solutionthrough formal consultations. If the goernments cannot resole their dispute, they can choose tofollow any of seeral means of dispute settlement, including good offices, conciliation,mediation and arbitration. Alternatiely, a goernment can re=uest that an impartial panel of trade experts be established to hear all sides of the dispute and to make recommendations.

In a dispute on 4 measures, the panel can seek scientific adice, including by conening atechnical experts group. If the panel concludes that a country is iolating its obligations under any $%& agreement, it will normally recommend that the country bring its measure intoconformity with its obligations. %his could, for example, inole procedural changes in the way ameasure is applied, modification or elimination of the measure altogether, or simply eliminationof discriminatory elements.

%he panel submits its recommendations for consideration by the $%& ispute ettlement Gody#G+, where all $%& Bember countries are represented. Hnless the G decides by consensusnot to adopt the panels report, or unless one of the parties appeals the decision, the defending

party is obliged to implement the panels recommendations and to report on how it has complied.Appeals are limited to issues of law and legal interpretations by the panel.

Although only one panel was asked to consider sanitary or phytosanitary trade disputes duringthe "> years of the former 6A%% dispute settlement procedures, during the first three years of the4 Agreement ten complaints were formally lodged with reference to the new obligations. %hisis not surprising as the agreement clarifies, for the first time, the basis for challenging sanitary or phytosanitary measures which restrict trade and may not be scientifically <ustified. %hechallenges hae concerned issues as aried as inspection and =uarantine procedures, animaldiseases, Quse-byQ dates, the use of eterinary drugs in animal rearing, and disinfectiontreatments for beerages. ispute settlement panels hae been re=uested to examine four of the

complaints: the other complaints hae been or are likely to be settled following the obligatory process of bilateral consultations.

Who was responsible for developing the SPS Agreement? Did developing countries participate

in the negotiation of the SPS Agreement?

%he decision to start the Hruguay ound trade negotiations was made after years of publicdebate, including debate in national goernments. %he decision to negotiate an agreement on theapplication of sanitary and phytosanitary measures was made in 1@* when the ound waslaunched. %he 4 negotiations were open to all of the 12" goernments which participated inthe Hruguay ound. Bany goernments were represented by their food safety or animal and plant health protection officials. %he negotiators also drew on the expertise of technicalinternational organi'ations such as the 3A&, the ?odex and the &I/.

eeloping countries participated in all aspects of the Hruguay ound negotiations to anunprecedented extent. In the negotiations on sanitary and phytosanitary measures, deelopingcountries were actie participants, often represented by their national food safety or animal and plant health experts. Goth before and during the Hruguay ound negotiations, the 6A%%ecretariat assisted deeloping countries to establish effectie negotiating positions. %he 4

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Agreement calls for assistance to deeloping countries to enable them to strengthen their foodsafety and animal and plant health protection systems. 3A& and other international organi'ationsalready operate programmes for deeloping countries in these areas.

Was there public participation in the *ruguay +ound negotiations? Were private sector

interests or consumer interests e,cluded?

6A%% was an intergoernmental organi'ation and it was goernments which participated in6A%% trade negotiations: neither priate business nor non-goernmental organi'ations participated directly. Gut as the scope of the Hruguay ound was unprecedented, so was the public debate. Bany goernments consulted with both their public and priate sectors on ariousaspects of the negotiations, including the 4 Agreement. ome goernments established formalchannels for public consultation and debate while others did so on a more ad hoc basis. %he6A%% ecretariat also had considerable contact with international non-goernmentalorgani'ations as well as with the public and priate sectors of many countries inoled in thenegotiations. %he final Hruguay ound results were sub<ect to national ratification and

implementation processes in most 6A%% member countries.

%he $%& is, likewise, an intergoernmental organi'ation. 4riate business and non-goernmental organi'ations do not directly participate in its work, but can influence the work of the $%& through their contacts with their own goernments. In addition, the $%& ecretariatregularly has contacts with many non-goernmental organi'ations.

What is the SPS Committee and who is on it? What does it do?

%he 4 Agreement established a ?ommittee on anitary and 4hytosanitary Beasures #the Q4?ommitteeQ+ to proide a forum for consultations about food safety or animal and plant health

measures which affect trade, and to ensure the implementation of the 4 Agreement. %he 4?ommittee, like other $%& committees, is open to all $%& Bember countries. 6oernmentswhich hae an obserer status in the higher leel $%& bodies #such as the ?ouncil for %rade in6oods+ are also eligible to be obserers in the 4 ?ommittee. %he ?ommittee has agreed toinite representaties of seeral international intergoernmental organi'ations as obserers,including ?odex, &I/, I44?, $C&, H?%A and theInternational tandards &rgani'ation#I&+. 6oernments may send whicheer officials they beliee appropriate to participate in themeetings of the 4 ?ommittee, and many send their food safety authorities or eterinary or plant health officials.

%he 4 ?ommittee usually holds three regular meetings each year. It also holds occasional <oint

meetings with the %G% ?ommittee on notification and transparency procedures. Informal or special meetings may be scheduled as needed.

uring its first year, the 4 ?ommittee deeloped recommended procedures and a standardi'edformat for goernments to use for the re=uired adance notification of new regulations. &er >00notifications of sanitary and phytosanitary measures were submitted and circulated by the end of 1>. %he ?ommittee considered information proided by goernments regarding their nationalregulatory procedures, their use of risk assessment in the deelopment of sanitary and








phytosanitary measures and their disease-status, notably with respect to foot-and-mouth diseaseand fruit-fly. In addition, a considerable number of trade issues were discussed by the 4?ommittee, in particular with regard to boine spongiform encephalopathy #G/+. As re=uired by the 4 Agreement, the 4 ?ommittee deeloped a proisional procedure to monitor the useof international standards. %he 4 ?ommittee is continuing to work on guidelines to ensure

consistency in risk management decisions, in order to reduce possible arbitrariness in the actionstaken by goernments. In 1@, the 4 ?ommittee will reiew the operation of the 4Agreement.

Who benefits from the implementation of the SPS Agreement? -s the agreement in the interest

of developing countries?

+onsumers in all countries benefit. %he 4 Agreement helps ensure, and in many casesenhances, the safety of their food as it encourages the systematic use of scientific information inthis regard, thus reducing the scope for arbitrary and un<ustified decisions. Bore information willincreasingly become aailable to consumers as a result of greater transparency in goernmental

procedures and on the basis for their food safety, animal and plant health decisions. %heelimination of unnecessary trade barriers allows consumers to benefit from a greater choice of safe foods and from healthy international competition among producers.

pecific sanitary and phytosanitary re=uirements are most fre=uently applied on a bilateral basis between trading countries. 4e&eloping countries benefit from the 4 Agreement as it proidesan international framework for sanitary and phytosanitary arrangements among countries,irrespectie of their political and economic str ength or technological capacity. $ithout such anagreement, deeloping countries could be at a disadantage when challenging un<ustified traderestrictions. 3urthermore, under the 4 Agreement, goernments must accept imported productsthat meet their safety re=uirements, whether these products are the result of simpler, less

sophisticated methods or the most modern technology. Increased technical assistance to helpdeeloping countries in the area of food safety and animal and plant health, whether bilateral or through international organi'ations, is also an element of the 4 Agreement.

E.porters of agricultural products in all countries benefit from the elimination of un<ustified barriers to their products. %he 4 Agreement reduces uncertainty about the conditions for selling to a specific market. /fforts to produce safe food for another market should not bethwarted by regulations imposed for protectionist purposes under the guise of health measures.

Importers of food and other agricultural products also benefit from the greater certaintyregarding border measures. %he basis for sanitary and phytosanitary measures which restricttrade are made clearer by the 4 Agreement, as well as the basis for challenging re=uirementswhich may be un<ustified. %his also benefits the many processors and commercial users of imported food, animal or plant products.

What difficulties do developing countries face in implementing the SPS Agreement? Will they

receive any assistance in this regard? Are there special provisions for developing countries?




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Although a number of deeloping countries hae excellent food safety and eterinary and planthealth serices, others do not. 3or these, the re=uirements of the 4 Agreement present achallenge to improe the health situation of their people, liestock and crops which may bedifficult for some to meet. Gecause of this difficulty, the 4 Agreement delayed allre=uirements, other than those dealing with transparency #notification and the establishment of

/n=uiry 4oints+, until 1> for deeloping countries, and until 2000 for the least deelopedcountries. %his means that these countries are not re=uired to proide a scientific <ustification for their sanitary or phytosanitary re=uirements before that time. ?ountries which need longer time periods, for example for the improement of their eterinary serices or for the implementationof specific obligations of the agreement, can re=uest the 4 ?ommittee to grant them further delays.

Bany deeloping countries hae already adopted international standards #including those of ?odex, &I/ and the I44?+ as the basis for their national re=uirements, thus aoiding the need todeote their scarce resources to duplicate work already done by international experts. %he 4Agreement encourages them to participate as actiely as possible in these organi'ations, in order

to contribute to and ensure the deelopment of further international standards which address their needs.

&ne proision of the 4 Agreement is the commitment by members to facilitate the proisionof technical assistance to deeloping countries, either through the releant internationalorgani'ations or bilaterally. 3A&, &I/ and $C& hae considerable programmes to assistdeeloping countries with regard to food safety, animal and plant health concerns. A number of countries also hae extensie bilateral programmes with other $%& Bembers in these areas. %he$%& ecretariat has undertaken a programme of regional seminars to proide deelopingcountries #and those of ?entral and /astern /urope+ with detailed information regarding their rights and obligations stemming from this agreement. %hese seminars are proided in

cooperation with the ?odex, &I/ and I44?, to ensure that goernments are fully aware of therole these organi'ations can play in assisting countries to meet their re=uirements and fully en<oythe benefits resulting from the 4 Agreement. %he seminars are open to participation byinterested priate business associations and consumer organi'ations. %he $%& ecretariat also proides technical assistance through national workshops and to goernments through their representaties in 6enea.

"E+:'I+AL BARRIERS "< "RA4E! %/?CI?A /84AA%I&

%echnical Information on %echnical barriers to trade

"/e pro9lem

W/ an Agreement@ back to top

:ig/ num9er of tec/nical regulations and standards

In recent years, the number of technical regulations and standards adopted by countries has

grown significantly. Increased regulatory policy can be seen as the result of higher standards of




liing worldwide, which hae boosted consumersF demand for safe and high-=uality products,

and of growing problems of water, air and soil pollution which hae encouraged modern

societies to explore enironmentally-friendly products.

Impact on international trade

Although it is difficult to gie a precise estimate of the impact on international trade of the need

to comply with different foreign technical regulations and standards, it certainly inoles

significant costs for producers and exporters. In general, these costs arise from the translation of

foreign regulations, hiring of technical experts to explain foreign regulations, and ad<ustment of

production facilities to comply with the re=uirements. In addition, there is the need to proe that

the exported product meets the foreign regulations. %he high costs inoled may discourage

manufacturers from trying to sell abroad. In the absence of international disciplines, a risk exists

that technical regulations and standards could be adopted and applied solely to protect domestic

industries.

%rom t/e "oko Round Standards +ode to t/e W"< "B" Agreement

%he proisions of the 6A%% 1"> contained only a general reference to technical regulations and

standards in Articles III, 8I and 88. A 6A%% working group, set up to ealuate the impact of

non-tariff barriers in international trade, concluded that technical barriers were the largest

category of non-tariff measures faced by exporters. After years of negotiations at the end of the

%okyo ound in 1>, 2 6A%% ?ontracting 4arties signed the plurilateral Agreement on

%echnical Garriers to %rade #%G%+. %he tandards ?ode, as the Agreement was called, laid down

the rules for preparation, adoption and application of technical regulations, standards and

conformity assessment procedures. %he new $%& Agreement on %echnical Garriers to %rade, or

%G% Agreement, has strengthened and clarified the proisions of the %okyo ound tandards

?ode. %he %G% Agreement, negotiated during the Hruguay ound is an integral part of the $%&

Agreement. Gefore examining the Agreement in detail, it is necessary to define the meaning of

Dtechnical regulationsE, DstandardsE and Dconformity assessment proceduresE.

4efinitions back to top

"ec/nical regulations and standards in t/e "B" Agreement

%echnical regulations and standards set out specific characteristics of a product O such as its

si'e, shape, design, functions and performance, or the way it is labelled or packaged before it is

put on sale. In certain cases, the way a product is produced can affect these characteristics, and itmay then proe more appropriate to draft technical regulations and standards in terms of a

productFs process and production methods rather than its characteristics per se. %he %G%

Agreement makes allowance for both approaches in the way it defines technical regulations and

standards #Annex 1+.

4ifference 9etween a tec/nical regulation and a standard

https://www.wto.org/english/tratop_e/tbt_e/tbt_info_e.htm#top




%he difference between a standard and a technical regulation lies in compliance. $hile

conformity with standards is oluntary, technical regulations are by nature mandatory. %hey hae

different implications for international trade. If an imported product does not fulfil the

re=uirements of a technical regulation, it will not be allowed to be put on sale. In case of

standards, non-complying imported products will be allowed on the market, but then their market

share may be affected if consumersF prefer products that meet local standards such as =uality or colour standards for textiles and clothing.

+onformit assessment procedures

?onformity assessment procedures are technical procedures O such as testing, erification,

inspection and certification O which confirm that products fulfil the re=uirements laid down in

regulations and standards. 6enerally, exporters bear the cost, if any, of these procedures. on-

transparent and discriminatory conformity assessment procedures can become effectie

protectionist tools.

<9ecti&es back to top

Protection of /uman safet or /ealt/

%he largest number of technical regulations and standards are adopted to aim at protecting

human safety or health. umerous examples can be gien. ational regulations that re=uire that

motor ehicles be e=uipped with seat belts to minimise in<ury in the eent of road accidents, or

that sockets be manufactured in a way to protect users from electric shocks, fall under the first

category. A common example of regulations whose ob<ectie is the protection of human health is

labelling of cigarettes to indicate that they are harmful to health.

Protection of animal and plant life or /ealt/

egulations that protect animal and plant life or health are ery common. %hey include

regulations intended to ensure that animal or plant species endangered by water, air and soil

pollution do not become extinct. ome countries, for example re=uire that endangered species of

fish reach a certain length before they can be caught.

Protection of t/e en&ironment

Increased enironmental concerns among consumers, due to rising leels of air, water and soil

pollution, hae led many goernments to adopt regulations aimed at protecting the enironment.

egulations of this type coer for example, the re-cycling of paper and plastic products, andleels of motor ehicle emissions

Pre&ention of decepti&e practices

Bost of these regulations aim to protect consumers through information, mainly in the form of

labelling re=uirements. &ther regulations include classification and definition, packaging

re=uirements, and measurements #si'e, weight etc.+, so as to aoid deceptie practices.






<t/er o9ecti&es

&ther ob<ecties of regulations are =uality, technical harmoni'ation, or simply trade facilitation.

Juality regulations O e.g. those re=uiring that egetables and fruits reach a certain si'e to be

marketable O are er y common in certain deeloped countries. egulations aimed at

harmoni'ing certain sectors, for example that of telecommunications and terminal e=uipment, are

widespread in economically integrated areas such as the /uropean Hnion and /3%A.

4i&ergent regulations * costs for e.porters back to top

Loss of economies of scale

If a firm must ad<ust its production facilities to comply with dierse technical re=uirements in

indiidual markets, production costs per unit are likely to increase. %his imposes handicap

particularly on small and medium enterprises.

+onformit assessment costs

?ompliance with technical regulations generally needs to be confirmed. %his may be done

through testing, certification or inspection by laboratories or certification bodies, usually at the

companyFs expense.

Information costs

%hese include the costs of ealuating the technical impact of foreign regulations, translating and

disseminating product information, training of experts, etc.

Surprise costs

/xporters are normally at a disadantage is-U-is domestic firms, in terms of ad<ustments costs,

if confronted with new regulations.

"/e Agreement 617

Principles

A&oidance of unnecessar o9stacles to trade back to top

W/at are t/e sources of tec/nical 9arriers to trade@

%echnical barriers to trade generally result from the preparation, adoption and application of

different technical regulations and conformity assessment procedures. If a producer in country A

wants to export to country G, he will be obliged to satisfy the technical re=uirements that apply

in country G, with all the financial conse=uences this entails. ifferences between one country

and another in their technical regulations and conformity assessment procedures may hae






legitimate origins such as differences in local tastes or leels of income, as well as geographical

or other factors. 3or example, countries with areas prone to earth=uakes might hae stricter

re=uirements for building products: others, facing serious air-pollution problems might want to

impose lower tolerable leels of automobile emissions. Cigh leels of per capita income in

relatiely rich countries result in higher demand for high-=uality and safe products.

"B" pro&isions on tec/nical regulations

%he %G% Agreement takes into account the existence of legitimate diergences of taste, income,

geographical and other factors between countries. 3or these reasons, the Agreement accords to

Bembers a high degree of flexibility in the preparation, adoption and application of their

national technical regulations. %he 4reamble to the Agreement states that Dno country should be

preented from taking measures necessary to ensure the =uality of its exports, or for the

protection of human, animal, and plant life or health, of the enironment, or for the preention of

deceptie practices, at the leels it considers appropriateE. Coweer, BembersF regulatory

flexibility is limited by the re=uirement that technical regulations Dare not prepared, adopted or

applied with a iew to, or with the effect of, creating unnecessary obstacles to tradeE.

#Article 2.2+.

A&oidance of unnecessar o9stacles to trade

3or a goernment, aoiding unnecessary obstacles to trade means that when it is preparing a

technical regulation to achiee a certain policy ob<ectie - whether protection of human health,

safety, the enironment, etc - the negotiations shall not be more trade-restrictie than necessary

to fulfil the legitimate ob<ectie. According to the %G% Agreement, specifying, wheneer

appropriate, product regulations in terms of performance rather than design or descriptie

characteristics will also help in aoiding unnecessary obstacles to international trade

#Article 2.@+. 3or example, a technical regulation on fire-resistant doors should re=uire that the

door passes successfully all the necessary tests on fire resistance. %hus it could specify that Dthe

door must be fire resistant with a 0-minute burn through timeE: it should not specify how the

product must be made, e.g., that Dthe door must be made of steel, one inch thickE. Aoidance of

trade obstacles means also that if the circumstances that led a country to adopt technical

regulations no longer exist or hae changed, or the policy ob<ectie pursued can be achieed by

an alternatie less trade-restrictie measure, they should not be maintained.

W/en is a tec/nical regulation an unnecessar o9stacle to trade@

Hnnecessary obstacles to trade can result when #i+ a regulation is more restrictie than necessary

to achiee a gien policy ob<ectie, or #ii+ when it does not fulfil a legitimate ob<ectie. A

regulation is more restrictie than necessary when the ob<ectie pursued can be achieed through

alternatie measures which hae less trade-restricting effects, taking account of the risks non-

fulfilment of the ob<ectie would create. /lements that Bembers can use for risk assessment are;









aailable technical and scientific information, technology or end-uses of the products. Article 2.2

of the Agreement specifies that legitimate ob<ecties include inter alia; national security

re=uirements, preention of deceptie practices, protection of human health or safety, protection

of animal and plant life or health or the enironment.

"B" pro&isions on conformit assessment procedures

%he obligation to aoid unnecessary obstacles to trade applies also to conformity assessment

procedures. An unnecessary obstacle to trade could result from stricter or more time-consuming

procedures than are necessary to assess that a product complies with the domestic laws and

regulations of the importing country. 3or instance, information re=uirements should be no greater

than needed, and the siting of facilities to carry out conformity assessment, and the selection of

samples should not create unnecessary inconenience to the agents #Articles 5.2. and 5.2.*+.

'on-discrimination and national treatment back to top

"ec/nical regulations

ike many other $%& Agreements, the %G% Agreement includes the 6A%%Fs Bost 3aoured

ation #B3+ and national treatment obligations. Article 2.1 of the Agreement states that Din

respect of their technical regulations, products imported from the territory of any Bember be

accorded treatment no less faourable than that accorded to like products of national origin and

to like products originating in any other countryE.

+onformit Assessment Procedures

%he B3 and national treatment proisions also apply to conformity assessment procedures.

4rocedures for conformity assessment shall be applied to products imported from other $%&

Bembers Din a manner no less faourable then that accorded to like products of national origin

and to like products originating in any other countryE #Article 5.1.1+. %his means that imported

products must be treated e=ually with respect to any fees charged to assess their conformity with

regulations. imilarly, Bembers must respect the confidentiality of information about the results

of conformity assessment procedures for imported products in the same way as for domestic

products so that commercial interests are protected #Articles 5.2." and 5.2.5+.

:armoniation 617 back to topProducersC 9enefits

%he arguments for harmoni'ation of technical regulations are well-known. Carmoni'ation is

necessary for the connection and compatibility of parts of products, i.e. telecommunications

e=uipment or car parts. ack of technical compatibility might otherwise generate barriers to

international trade. 3or example, teleision sets suitable for the H market would be unsaleable

in /urope due to diergences in colour broadcasting formats #%? s 4A or /?AB+.




imilarly, in order to be marketable in the Hnited Mingdom, 3rench or 6erman motor ehicles

need to be ad<usted to right-hand drie. %he costs of designing, manufacturing, and deliering the

same product in arious configurations may be high.

+onsumersC 9enefits

%echnical harmoni'ation may increase consumer welfare. $ithin a harmoni'ed regulatory

enironment, competition ensures that consumers hae a wide and economically attractie

choice of products. %his presupposes, howeer, that harmoni'ed standards do not go beyond

fulfilling their legitimate regulatory ob<ectie, i.e. that they do not stifle innoation or otherwise

discourage producers from introducing new products or product ariants.

:armoniation 627 back to top

Introduction

3or many years, technical experts hae worked towards the international harmoni'ation of standards. An important role in these efforts is played by the International tandardi'ation

&rgani'ation #I&+, the International /lectrotechnical ?ommission #I/?+ and the International

%elecommunication Hnion #I%H+. %heir actiities hae had ma<or impact on trade, especially in

industrial products. 3or example, I& has deeloped more than ,*00 international standards

coering almost all technical fields.

:armoniation and t/e "B" Agreement

%he Agreement encourages Bembers to use existing international standards for their national

regulations, or for parts of them, unless Dtheir use would be ineffectie or inappropriateE to fulfil

a gien policy ob<ectie. %his may be the case, for example, Dbecause of fundamental climaticand geographical factors or fundamental technological problemsE #Article 2."+. As explained

preiously, technical regulations in accordance with releant international standards are

rebuttably presumed Dnot to create an unnecessary obstacle to international tradeE. imilar

proisions apply to conformity assessment procedures; international guides or recommendations

issued by international standardi'ing bodies, or the releant parts of them, are to be used for

national procedures for conformity assessment unless they are Dinappropriate for the Bembers

concerned for, inter alia, such reasons as national security re=uirements, preention of deceptie

practices, protection of human health or safety, animal or plant life or health, or protection of the

enironment: fundamental climatic or other geographical factors: fundamental technological or

infrastructural problemsE #Article 5."+.

Participation in international standardiing 9odies

$idespread participation in international standardi'ing bodies can ensure that international

standards reflect country-specific production and trade interests. %he %G% Agreement encourages

Bembers to participate, within the limits of their resources, in the work of international bodies








for the preparation of standards #Article 2.*+ and guides or recommendations for conformity

assessment procedures #Article 5.5+.

Special and differential treatment

Implementing and enforcing international standards may re=uire technical and financial

resources beyond the capabilities of deeloping countries. %he %G% Agreement eases the impact

of certain proisions whose full application would not be compatible with deeloping country

BembersF deelopment, financial and trade needs. Boreoer, in iew of their particular

technological and socio-economic conditions, deeloping country Bembers may adopt technical

regulations, standards or test methods aimed at presering indigenous technologies and

production methods and processes compatible with their deelopment needs #Article 12."+.

3inally, deeloping country Bembers may re=uest international standardi'ing bodies to examine

the possibility of, and if practicable, prepare international standards for products of special trade

interest to them.

EDui&alence back to top

W/at is eDui&alence@

%he process leading to the preparation of an international standard can be lengthy and costly.

eaching consensus on technical details can take seeral years. %he time gap between the

adoption of an international standard and its implementation by national regulators can also be

significant. 3or these reasons, negotiators introduced in the %G% Agreement a complementary

approach to technical harmoni'ation, known as e=uialence. %echnical barriers to international

trade could be eliminated if Bembers accept that technical regulations different from their own

fulfil the same policy ob<ecties een if through different means. %his approach, based on the

/uropean ?ommunityFs 1@5Dnew approachE to standardi'ation, is contained in Article 2.> of

the %G% Agreement.

:ow does eDui&alence work@

et us assume that country A, wishing to protect its enironment from high auto emission leels,

re=uires that cars be e=uipped with a catalytic conerter. In country G, the same ob<ectie is

achieed through the use of diesel engines in motor ehicles. ince enironmental concerns are

identical in the two countries O to reduce the leels of pollutants in the air O A and G can agree

that their technical regulations are essentially e=uialent. %hus, if car manufacturers in country Awant to export to G, they will not be obliged to satisfy country GFs re=uirement to fit diesel

engines, and ice ersa. %his will eliminate the costs of ad<usting production facilities to fulfil

foreign regulations.

"/e Agreement 627





$utual recognition back to top

+osts of multiple testing

As explained in the preious section, demonstrating compliance with technical regulations may

impede international trade. In particular, if products are to be exported to multiple markets,

multiple testing may be re=uired. Banufacturers can hae difficulties in securing approal for

their products on foreign markets, for instance because testing experts disagree on optimal

testing procedures, from bureaucratic inertia, or een from manipulation of the testing process by

protectionist groups. $hateer the reason might be, such diersity of procedures and methods

significantly increases the costs of producers who sell in multiple markets.

W/at is mutual recognition of conformit assessment procedures@

&ne of the main difficulties exporters face is costly multiple testing or certification of products.

%hese costs would be drastically reduced if a product could be tested once and the testing results be accepted in all markets.

:ow does mutual recognition work@

In practice, countries would agree to accept the results of one anotherFs conformity assessment

procedures, although these procedures might be different.

$utual recognition and t/e "B" Agreement

Article *. of the %G% Agreement strongly encourages $%& Bembers to enter into negotiations

with other Bembers for the mutual acceptance of conformity assessment results. %he presence of

a high degree of confidence in testing and certification bodies is, in fact, a prere=uisite for the

good functioning of an BA. 3or this reason, Article *.1 of the %G% Agreement recogni'es that

prior consultations may be necessary to arrie at a mutually satisfactory understanding regarding

the competence of the conformity assessment bodies. It also points out that compliance by

conformity assessment bodies with releant guides or recommendations issued by international

standardi'ing bodies can be regarded as an indication of ade=uate technical competence.

"ransparenc 617 back to top

'otifications

"ec/nical regulations and conformit assessment procedures

Bembers must notify when two conditions apply; #1+ wheneer a releant international standard

or guide or recommendation does not exist, or the technical content of a proposed or adopted

technical regulation or procedure is not in accordance with the technical content of releant







international standards or guides of recommendations: and #2+ if the technical regulation or

conformity assessment procedure may hae a significant effect on the trade of other Bembers

#Articles 2. and 5.*+. raft regulations should be notified to the $%& ecretariat, if possible

sixty days prior to their formal adoption so as to allow time for other Bembers to make

comments. egulations can also be notified ex-post wheneer urgent problems of safety, health,

enironment protection arise #Articles 2.10 and 5.>+. ocal 6oernments at the leel directly below central goernment are re=uired to notify technical regulations and conformity assessment

procedures which hae not been preiously notified by their central goernment authorities

#Article .2 and >.2+.

Statements on t/e implementation and administration of t/e Agreement

/ach $%& Bember must, promptly after the Agreement enters into force for it, notify Bembers

of the measures in existence or taken to ensure the implementation and administration of the

Agreement and of any subse=uent changes to them #Article 15.2+. %his written statement has toinclude, inter alia, all releant laws, regulations, administratie orders, etc., to ensure that the

proisions of the Agreement are applied: the names of the publications where draft and final

technical regulations, standards and conformity assessment procedures are published: the

expected length of time for the presentation of written comments on technical regulations,

standards or conformity assessment procedures: and the name and address of the en=uiry points

established under Article 10.

Bilateral or plurilateral agreements

Hnder Article 10.>, a Bember who has reached an agreement with any other country or countries

on issues related to technical regulations, standards or conformity assessment procedures which

may hae a significant effect on trade must notify other Bembers through the $%& ecretariat

of the products to be coered by the agreement, and proide a brief description of the agreement.

+ode of good practice

%he ?ode of 6ood 4ractice for the 4reparation, Adoption and Application of tandards lays

down disciplines in respect of central goernment, local goernment, non-goernmental and

regional standardi'ing bodies deeloping oluntary standards. %he ?ode is open for acceptance by any of these standardi'ing bodies. ?entral goernment standardi'ing bodies must accept and

comply with the proisions of the ?ode. A standardi'ing body wishing to adhere to, or withdraw

from, the ?ode has to notify its acceptance of, or withdrawal from, the ?ode using the

appropriate notification format #paragraph ? of the ?ode+. tandardi'ing bodies which hae

accepted the ?ode must notify at least twice a year the existence of their work programme, and

where details of this programme can be obtained #paragraph P+. otifications hae to be sent






either directly to the I&NI/? Information ?entre in 6enea, or to the national member of

I&NI/? or, preferably, to the releant national member or international affiliate of I&/%.

"ransparenc 627 back to top

EnDuir points

As a complement to the obligation to notify, each $%& Bember must set up a national en=uiry

point. %his acts as a focal point where other $%& Bembers can re=uest and obtain information

and documentation on a BemberFs technical regulations, standards and test procedures, whether

impending or adopted, as well as on participation in bilateral or plurilateral standard-related

agreements, regional standardi'ing bodies and conformity assessment systems #Article 10+.

/n=uiry points are generally goernmental agencies, but the releant functions can also be

assigned to priate agencies. %he obligation to set up en=uiry points is particularly important for

deeloping countries. &n the one hand, it is the first step by a deeloping country Bember

towards implementation of the %G% Agreement. &n the other, deeloping countries can ac=uire

information from other BembersF en=uiry points on foreign regulations and standards affecting products in which they hae a trade interest.

"/e +ommittee on "ec/nical Barriers to "rade

3inally, transparency is also ensured through the existence of a %G% ?ommittee. %his allows

$%& Bembers the possibility of consulting on any matters relating to the operation of the

Agreement or the furtherance of its ob<ecties. %he ?ommittee holds on aerage two to three

meetings a year and, if necessary, can establish working parties to carry out specific functions.

"/e +ode of #ood Practice back to top

W/ a +ode of #ood Practice@

4roduct standards can be prepared by goernmental or non-goernmental standardi'ing bodies.

&er the years there has been a proliferation of priate standardi'ing bodies. %he ?ode of 6ood

4ractice, contained in Annex of the $%& %G% Agreement proides disciplines, including those

related to transparency, for the preparation, adoption and application of standards by all central

goernmental, local goernment, non-goernmental and regional standardi'ing bodies.

W/o can accept t/e +ode@

%he ?ode is open for acceptance to any standardi'ing bodies, whether central goernment, local

goernment or non-goernmental and regional standardi'ing bodies. %he ?ode of 6ood 4ractice

contained in Annex of the $%& %G% Agreement seeks to bring all standards within its puriew

and proides for (and gies) transparency in the preparation, adoption and application of

standards.






W/at does mem9ers/ip entail@

Bembers of the %G% Agreement are responsible for the acceptance and compliance with the

?ode of 6ood 4ractice by their central goernment standardi'ing bodies. 3urthermore, they are

re=uired to take such reasonable measures as may be aailable to them to ensure also that local

goernment and non-goernmental standardi'ing bodies within their territories, and regionalstandardi'ing bodies of which they are members, accept and comply with the ?ode.

"ec/nical assistance

W/o /as t/e rig/t to tec/nical assistance@

Any Bember, and especially deeloping country Bembers, can re=uest technical assistance from

other Bembers or from the $%& ecretariat, on terms and conditions to be agreed by the

Bembers concerned #Article 11+. e=uests for technical assistance receied from least-

deeloped Bembers hae priority.

W/at tpe of assistance@

%he coerage of technical assistance ranges from the preparation of technical regulations and the

establishment of national standardi'ing bodies to the participation in international standardi'ing

bodies and the steps to be taken by deeloping country Bembers to gain access to regional

international conformity assessment systems. %echnical assistance can help firms in deeloping

country Bembers to manufacture products in accordance with the technical re=uirements

existing in an importing country, thus ensuring that the products are accepted on the importing

BemberFs market.

W"< SecretariatCs tec/nical assistance acti&ities

%he $%& ecretariatFs assistance to deeloping and least-deeloping countries on %G% matters

often takes the form of regional or sub-regional seminars. ecently, technical assistance

"oward <pen Recognition@ Standardiation and Regional Integration nder Article ((I)

of #A""

A9stract

%his paper proides a legal analysis of the significance of standards, technical regulations and

4 proisions #collectiely, D%G%4E proisions+ in regional trade agreements #D%AsE+ in

relation to the multilateral trading system. It first examines the ways in which %A regulation of national %G%4 measures may contribute to or detract from liberali'ation goals. It then

describes how 6A%% Article 88I9 and the Hnderstanding on the Interpretation of Article 88I9

#the DHnderstandingE+, as presently understood, regulate %A regulation of national %G%4

measures. Gased on its analysis, this paper makes the following recommendations; 1. Interpret

Article 88I9;5 of 6A%% to proide an exception from obligations contained in the %G%

Agreement and 4 Agreement, principally the B3 obligation, in accordance with the %urkey-

%extiles necessity test. %his aoids imposing an inappropriate barrier to formation of %As. 2.






Interpret Dother restrictie regulations of commerceE and Dother regulations of commerceE in

Articles 88I9;5 and @ to include only discriminatory and unnecessary %G% or 4 measures.

%his aoids re=uirements to eliminate or harmoni'e non-protectionist %G% or 4 measures. It

aoids imposing an inappropriate barrier to formation of %As. . Interpret Article I;1 of 6A%%

and the B3 proisions of the %G% Agreement and 4 Agreement to clarify authori'ation for

only DopenE mutual recognition agreements, similar to the permission contained in Article 9II of 6A%. %his ensures that recognition arrangements will not proide an aenue of discrimination

or other defection from $%& multilateral free trade principles. %oday, it is not clear that any

mutual recognition agreements are authori'ed.

%his paper proides a legal analysis of the significance of standards, technical regulations and

4 proisions #collectiely, D%G%4E proisions+ in regional trade agreements #D%AsE+ in

relation to the multilateral trading system. It first examines the ways in which %A regulation of

national %G%4 measures may contribute to or detract from liberali'ation goals. It then

describes how 6A%% Article 88I9 and the Hnderstanding on the Interpretation of Article 88I9

#the DHnderstandingE+,2 as presently understood, regulate %A regulation of national %G%4

measures. %his paper concludes by suggesting how Article 88I9 and the Hnderstanding might

be reinterpreted or reised to conform more closely with the normatie goal, expressed in Article

88I9;", of balancing regional integration goals with multilateral liberali'ation goals. %his paper

finds that most of the Dfortress %AE types of concerns, as they relate to %G%4 measures, are

addressed if not precluded by $%& law as presently understood, and that the remaining potential

Dfortress %AE concerns relating to %G%4 measures are of uncertain significance. Coweer,

policymakers continue to express concern.

+onclusion

%he re=uirements of Article 88I9 of 6A%% and the Hnderstanding with respect to %A

regulation of national %G%4 measures are somewhat unclear, in large measure due to theimprecision of the definitions of Dother restrictie regulations of commerceE in Article 88I9;@,

and Dother regulations of commerceE in Article 88I9;5 and @. %his paper suggests that the $%&

law be read to re=uire %As internally to impose a rule of national treatment-type

nondiscrimination and necessity. Coweer, it must be recogni'ed that the $%& system already

proides this anti-protectionism discipline, and so this re=uirement has little traction. &n the

other hand, Article 88I9;@ does not appear to re=uire harmoni'ation or mutual recognition

arrangements. %o the extent that %As engage in harmoni'ation, their harmoni'ed %G%4

measures must conform to the re=uirements of $%& law, namely the 6A%%, the %G% Agreement

and the 4 Agreement. %he regulation of %A rules of mutual recognition, under the B3

obligation of Article I;1 of 6A%%, and under Article 88I9, is unclear, and rules of mutualrecognition may present some opportunities for %A protectionism. It would be useful to clarify

the meaning of Dother restrictie regulations of commerceE in Article 88I9;@, and Dother

regulations of commerceE in Article 88I9;5 and @ in order to clarify what Article 88I9 re=uires

and what it prohibits. %he core =uestion raised by this paper has to do with the treatment of

recognition arrangements. hould %As be permitted to maintain exclusie recognition

arrangements, effectiely discriminating against similarly-situated third states and DlikeE third




state productsV &r should they be re=uired, as under Article 9II of the 6A%, to practice what

might be termed Dopen recognitionEV &pen recognition would establish %A conditions for

recognition, but permit third states to meet those conditions. %his paper has suggested that,

although the legal re=uirements are not clear, open recognition may be re=uired under Article I;1

and 88I9 of 6A%%. It might be useful to clarify these re=uirements. In order to ensure that %A

%G%4 measures do not unnecessarily inhibit trade with outside parties, and in order to ensurethat $%& re=uirements for B3 and Article 88I9 re=uirements do not unnecessarily inhibit

regional integration, the following three initiaties are recommended; 1. Interpret Article 88I9;5

to proide an exception from obligations contained in the %G% Agreement and 4 Agreement,

principally the B3 obligation, in accordance with the %urkey-%extiles necessity test. %his

aoids imposing an inappropriate barrier to formation of %As.

2. Interpret Dother restrictie regulations of commerceE and Dother regulations of commerceE in

Articles 88I9;5 and @ to include only discriminatory and unnecessary %G% or 4 measures.

%his aoids re=uirements to eliminate or harmoni'e nonprotectionist %G% or 4 measures. It

aoids imposing an inappropriate barrier to formation of %As. . Interpret Article I;1 of 6A%%

and the B3 proisions of the %G% Agreement and 4 Agreement to clarify authori'ation for

only DopenE mutual recognition agreements, similar to the permission contained in Article 9II of

6A%. %oday, it is not clear that any mutual recognition agreements are authori'ed. %his ensures

that recognition arrangements will not proide an aenue of discrimination or other defection

from $%& multilateral free trade principles. %hese initiaties could be effected by the dispute

settlement process, or by action of the member states of the $%&. %hese initiaties would assist

in ensuring that %A %G%4 integration contributes to global welfare, and that $%& rules do

not inappropriately inhibit the formation of %As. Coweer, this papers analysis does not

purport to answer the =uestion of building blocks or stumbling blocks in connection with

regional integration in the %G%4 field. %his paper has also not addressed the dynamic time

path issue; whether %A integration of %G%4 issues will help to achiee greater welfarethrough institutional growth. &ne problem with this =uestion is that it is not clear that either %A

or multilateral standardi'ation would increase welfare in any particular circumstance. $hile

Mindleberger suggests that world standards are a public good,@* ykes,@> tephan@@ and others

point out that harmoni'ation may diminish welfare through suppression of efficient ariation and

regulatory competition. In a sense, both perspecties are correct, but depend on the particular

type of product, and the preferences of indiiduals and states.

Week Si.

H/%AI6 %C/ $%&; %C/ A6//B/%

Anti-dumping, subsidies, safeguards; contingencies,

Ginding tariffs, and applying them e=ually to all trading partners #most-faoured-nation

treatment, or B3+ are key to the smooth flow of trade in goods. %he $%& agreements uphold

the principles, but they also allow exceptions O in some circumstances. %hree of these issues

are;




- actions taken against dumping #selling at an unfairly low price+

- subsidies and special DcounterailingE duties to offset the subsidies

- emergency measures to limit imports temporarily, designed to DsafeguardE domestic

industries.

Anti-dumping actions

If a company exports a product at a price lower than the price it normally charges

on its own home market, it is said to be DdumpingE the product. Is this unfair

competitionV &pinions differ, but many goernments take action against dumping

in order to defend their domestic industries. %he $%& agreement does not pass

<udgement. Its focus is on how goernments can or cannot react to dumping O it

disciplines anti-dumping actions, and it is often called the DAnti-umping

AgreementE. #%his focus only on the reaction to dumping contrasts with the

approach of the ubsidies and ?ounterailing Beasures Agreement.+

%he legal definitions are more precise, but broadly speaking the $%& agreement

allows goernments to act against dumping where there is genuine #DmaterialE+

in<ury to the competing domestic industry. In order to do that the goernment has

to be able to show that dumping is taking place, calculate the extent of dumping

#how much lower the export price is compared to the exporters home market

price+, and show that the dumping is causing in<ury or threatening to do so.

6A%% #Article *+ allows countries to take action against dumping. %he Anti-

umping Agreement clarifies and expands Article *, and the two operate together.

%hey allow countries to act in a way that would normally break the 6A%% principles of binding a tariff and not discriminating between trading partners O

typically anti-dumping action means charging extra import duty on the particular

product from the particular exporting country in order to bring its price closer to

the Dnormal alueE or to remoe the in<ury to domestic industry in the importing

country.

%here are many different ways of calculating whether a particular product is being

dumped heaily or only lightly. %he agreement narrows down the range of

possible options. It proides three methods to calculate a products Dnormal

alueE. %he main one is based on the price in the exporters domestic market.

$hen this cannot be used, two alternaties are aailable O the price charged bythe exporter in another country, or a calculation based on the combination of the

exporters production costs, other expenses and normal profit margins. And the

agreement also specifies how a fair comparison can be made between the export

price and what would be a normal price.

?alculating the extent of dumping on a product is not enough. Anti-dumping




measures can only be applied if the dumping is hurting the industry in the

importing country. %herefore, a detailed inestigation has to be conducted

according to specified rules first. %he inestigation must ealuate all releant

economic factors that hae a bearing on the state of the industry in =uestion. If the

inestigation shows dumping is taking place and domestic industry is being hurt,

the exporting company can undertake to raise its price to an agreed leel in order

to aoid anti-dumping import duty.

etailed procedures are set out on how anti-dumping cases are to be initiated,

how the inestigations are to be conducted, and the conditions for ensuring that

all interested parties are gien an opportunity to present eidence. Anti-dumping

measures must expire fie years after the date of imposition, unless an

inestigation shows that ending the measure would lead to in<ury.

Anti-dumping inestigations are to end immediately in cases where the authorities

determine that the margin of dumping is insignificantly small #defined as less than

2! of the export price of the product+. &ther conditions are also set. 3or example,the inestigations also hae to end if the olume of dumped imports is negligible

#i.e. if the olume from one country is less than ! of total imports of that

product O although inestigations can proceed if seeral countries, each

supplying less than ! of the im ports, together account for >! or more of total

imports+.

%he agreement says member countries must inform the ?ommittee on Anti-

umping 4ractices about all preliminary and final anti-dumping actions, promptly

and in detail. %hey must also report on all inestigations twice a year. $hen

differences arise, members are encouraged to consult each other. %hey can also

use the $%&s dispute settlement procedure.

ubsidies and counterailing measures back to top

%his agreement does two things; it disciplines the use of subsidies, and it

regulates the actions countries can take to counter the effects of subsidies. It says

a country can use the $%&s dispute settlement procedure to seek the withdrawal

of the subsidy or the remoal of its aderse effects. &r the country can launch its

own inestigation and ultimately charge extra duty #known as Dcounterailing

dutyE+ on subsidi'ed imports that are found to be hurting domestic producers.

%he agreement contains a definition of subsidy. It also introduces the concept of a DspecificE subsidy O i.e. a subsidy aailable only to an enterprise, industry,

group of enterprises, or group of industries in the country #or state, etc+ that gies

the subsidy. %he disciplines set out in the agreement only apply to specific

subsidies. %hey can be domestic or export subsidies.

%he agreement defines two categories of subsidies; prohibited and actionable. It

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originally contained a third category; non-actionable subsidies. %his category

existed for fie years, ending on 1 ecember 1, and was not extended. %he

agreement applies to agricultural goods as well as industrial products, except

when the subsidies are exempt under the Agriculture Agreements Dpeace

clauseE, due to expire at the end of 200.

4rohibited subsidies; subsidies that re=uire recipients to meet certain export

targets, or to use domestic goods instead of imported goods. %hey are prohibited

because they are specifically designed to distort international trade, and are

therefore likely to hurt other countries trade. %hey can be challenged in the

$%& dispute settlement procedure where they are handled under an accelerated

timetable. If the dispute settlement procedure confirms that the subsidy is

prohibited, it must be withdrawn immediately. &therwise, the complaining

country can take counter measures. If domestic producers are hurt by imports of

subsidi'ed products, counterailing duty can be imposed.

Actionable subsidies; in this category the complaining country has to show thatthe subsidy has an aderse effect on its interests. &therwise the subsidy is

permitted. %he agreement defines three types of damage they can cause. &ne

countrys subsidies can hurt a domestic industry in an importing country. %hey

can hurt rial exporters from another country when the two compete in third

markets. And domestic subsidies in one country can hurt exporters trying to

compete in the subsidi'ing countrys domestic market. If the ispute ettlement

Gody rules that the subsidy does hae an aderse effect, the subsidy must be

withdrawn or its aderse effect must be remoed. Again, if domestic producers

are hurt by imports of subsidi'ed products, counterailing duty can be imposed.

ome of the disciplines are similar to those of the Anti-umping Agreement.

?ounterailing duty #the parallel of anti-dumping duty+ can only be charged after

the importing country has conducted a detailed inestigation similar to that

re=uired for anti-dumping action. %here are detailed rules for deciding whether a

product is being subsidi'ed #not always an easy calculation+, criteria for

determining whether imports of subsidi'ed products are hurting #Dcausing in<ury

toE+ domestic industry, procedures for initiating and conducting inestigations,

and rules on the implementation and duration #normally fie years+ of

counterailing measures. %he subsidi'ed exporter can also agree to raise its

export prices as an alternatie to its exports being charged counterailing duty.

ubsidies may play an important role in deeloping countries and in the

transformation of centrally-planned economies to market economies. east-

deeloped countries and deeloping countries with less than W1,000 per capita

64 are exempted from disciplines on prohibited export subsidies. &ther

deeloping countries are gien until 200 to get rid of their export subsidies.

east-deeloped countries must eliminate import-substitution subsidies #i.e.




subsidies designed to help domestic production and aoid importing+ by 200 O

for other deeloping countries the deadline was 2000. eeloping countries also

receie preferential treatment if their exports are sub<ect to counterailing duty

inestigations. 3or transition economies, prohibited subsidies had to be phased

out by 2002.

X more on subsidies and counterailing measures

X ee also oha Agenda negotiations

afeguards; emergency protection from imports back to top

A $%& member may restrict imports of a product temporarily #take DsafeguardE

actions+ if its domestic industry is in<ured or threatened with in<ury caused by a

surge in imports. Cere, the in<ury has to be serious. afeguard measures were

always aailable under 6A%% #Article 1+. Coweer, they were infre=uentlyused, some goernments preferring to protect their domestic industries through

Dgrey areaE measures O using bilateral negotiations outside 6A%%s auspices,

they persuaded exporting countries to restrain exports DoluntarilyE or to agree to

other means of sharing markets. Agreements of this kind were reached for a wide

range of products; automobiles, steel, and semiconductors, for example.

%he $%& agreement broke new ground. It prohibits Dgrey-areaE measures, and it

sets time limits #a Dsunset clauseE+ on all safeguard actions. %he agreement says

members must not seek, take or maintain any oluntary export restraints, orderly

marketing arrangements or any other similar measures on the export or the

import side. %he bilateral measures that were not modified to conform with theagreement were phased out at the end of 1@. ?ountries were allowed to keep

one of these measures an extra year #until the end of 1+, but only the

/uropean Hnion O for restrictions on imports of cars from Papan O made use of

this proision.

An import DsurgeE <ustifying safeguard action can be a real increase in imports

#an absolute increase+: or it can be an increase in the imports share of a shrinking

market, een if the import =uantity has not increased #relatie increase+.

Industries or companies may re=uest safeguard action by their goernment. %he

$%& agreement sets out re=uirements for safeguard inestigations by nationalauthorities. %he emphasis is on transparency and on following established rules

and practices O aoiding arbitrary methods. %he authorities conducting

inestigations hae to announce publicly when hearings are to take place and

proide other appropriate means for interested parties to present eidence. %he

eidence must include arguments on whether a measure is in the public interest.

%he agreement sets out criteria for assessing whether Dserious in<uryE is being




caused or threatened, and the factors which must be considered in determining

the impact of imports on the domestic industry. $hen imposed, a safeguard

measure should be applied only to the extent necessary to preent or remedy

serious in<ury and to help the industry concerned to ad<ust. $here =uantitatie

restrictions #=uotas+ are imposed, they normally should not reduce the =uantities

of imports below the annual aerage for the last three representatie years for

which statistics are aailable, unless clear <ustification is gien that a different

leel is necessary to preent or remedy serious in<ury.

In principle, safeguard measures cannot be targeted at imports from a particular

country. Coweer, the agreement does describe how =uotas can be allocated

among supplying countries, including in the exceptional circumstance where

imports from certain countries hae increased disproportionately =uickly. A

safeguard measure should not last more than four years, although this can be

extended up to eight years, sub<ect to a determination by competent national

authorities that the measure is needed and that there is eidence the industry isad<usting. Beasures imposed for more than a year must be progressiely

liberali'ed.

$hen a country restricts imports in order to safeguard its domestic producers, in

principle it must gie something in return. %he agreement says the exporting

country #or exporting countries+ can seek compensation through consultations. If

no agreement is reached the exporting country can retaliate by taking e=uialent

action O for instance, it can raise tariffs on exports from the country that is

enforcing the safeguard measure. In some circumstances, the exporting country

has to wait for three years after the safeguard measure was introduced before it

can retaliate in this way O i.e. if the measure conforms with the proisions of theagreement and if it is taken as a result of an increase in the =uantity of imports

from the exporting country.

%o some extent deeloping countries exports are shielded from safeguard

actions. An importing country can only apply a safeguard measure to a product

from a deeloping country if the deeloping country is supplying more than !

of the imports of that product, or if deeloping country members with less than

! import share collectiely account for more than ! of total imports of the

product concerned.

%he $%&s afeguards ?ommittee oersees the operation of the agreement andis responsible for the sureillance of members commitments. 6oernments hae

to report each phase of a safeguard inestigation and related decision-making,

and the committee reiews these reports.

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&bstract

o far $%& <urisprudence has not resoled the pu''le of how $%& Bembers that are part also

of a regional trade agreement #such as A3%A or B/?&H+ should conduct safeguard

inestigations and apply eentual safeguards in line with $%& rules. ?an or must they exclude

regional imports from the in<ury determinationV ?an or must they apply the eentual safeguard

only to third parties, or are they under an obligation rather to apply all safeguards on a non-

discriminatory basisV %hose are the =uestions examined in this paper. %he paper refocuses some

of the attention to 6A%% Article 8I8 and critici'es the Appellate Godys re=uirement of

parallelism as well as its <urisprudence under 6A%% Article 88I9. It also offers an alternatie

way forward and ends with a list of options for $%& safeguards by members of customs unions

or free trade areas.

$hat are the safeguard options, under $%& rules, for a $%& Bember that is part also of a preferential

trade arrangementV 3or example, when the Hnited tates decides to impose import restrictions on steel to

safeguard the H steel industry from serious in<ury, can it e%clude Bexican and ?anadian steelV &r rather, must it exclude these A3%A imports to ensure the ery =ualification of A3%A as a Zfree trade

areaV &r conersely, is the Hnited tates prohibited from faoring its A3%A partners gien the blunt

statement in the $%& Agreement on afeguards that Z(s)afeguard measures shall be applied to a product

being imported irrespective of its sourceV1

%hose are the =uestions that this paper tries to answer. %hey were raised in all fie Appellate Gody

proceedings under the Agreement on afeguards so far 2, but each time skillfully #though not always

conincingly+ aoided in the final Appellate Gody ruling.

%he analysis begins with a reminder of why the $%& permits safeguards in the first place, focusing on

6A%% Article 8I8, Zunforeseen deelopments and the existence of prior 6A%% concessions #ection I+.

I next examine Articles 2, " and 5 of the Agreement on afeguards and the re=uirements and limits theyimpose on the origin of imports to be #1+ examined in a safeguards inestigation #ection II+ and #2+ made

sub<ect to any eentual safeguard measure #ection III+. ection I9 sets out and critici'es the in case law

deeloped re=uirement of Zparallelism between the imports inestigated, on the one hand, and the

1 &rtic!e 22 of te &#reement on afe#*ar$s em%asis a$$e$

2 +ese ve cases are: (1) &%%e!!ate o$5 6e%ort Argentina – Safeguard Measures on

Imports of Footwear +/D121/&/6 a$o%te$ 12 an*ar5 2000 (&r#entina oot;ear

(-<) )= (2) &%%e!!ate o$5 6e%ort Korea – Denitive Safeguard Measure on Imports of

Certain Dairy Products (>orea Dair5 ) +/D98/&/6 a$o%te$ 12 an*ar5 2000= (3)

&%%e!!ate o$5 6e%ort United States – Denitive Safeguard Measures on Imports of !eat"#uten from t!e $uropean Communities +/D1??/&/6 a$o%te$ 19 an*ar5 2001 (@A

eat !*tenB)= (4) &%%e!!ate o$5 6e%ort United States – Safeguard Measures on Imports

of Fres!% C!i##ed or Fro&en 'am( Meat from )ew *ea#and and Austra#ia +/D177/&/6

+/D178/&/6 a$o%te$ 1? 'a5 2001 (@A LambB)= an$ (C) &%%e!!ate o$5 6e%ort

United States – Denitive Safeguard Measures on Imports of Circu#ar e#ded Car(on +ua#ity

'ine Pipe from Korea +/D202/&/6 a$o%te$ 8 'arc 2002 (@A Line Pi%eB) &t te time

of ;ritin# te Pane! on United States – Denitive Safeguard Measures on Imports of Certain

Stee# Products +/D248/6 circ*!ate$ on 11 *!5 2003 ;as sti!! *n$er a%%ea!





imports eentually made sub<ect to the safeguard, on the other. 3inally, ection 9 analyses how 6A%%

Article 88I9 on regional trade agreements affects the possibility for $%& Bembers to impose

safeguards. In conclusion, I summari'e the different safeguard options aailable to $%& Bembers that

are part also of a preferential trade arrangement.

Importantly, this paper is limited to safeguard measures permitted under WT- rules. Bany regional trade

agreements include their own safeguard mechanism limited to intra-regional trade only and focused =uite

often on safeguard measures during a transitional period." Additional safeguard options under such intra-

regional mechanisms are not coered in this paper. onetheless, their consistency with $%& rules is

addressed in ection I9.A.

+onclusion

$hat are the safeguard options for a $%& Bember that is part also of a preferential tradearrangementV %he different pieces of this rather complex pu''le analy'ed aboe can now be puttogether in the following eight points;

1.Gased on re=uirements in 6A%% Article 8I8 itself -- in particular Zthe effect of the obligationsincurred under .#TT re=uirement and possibly also that of / unforeseen deelopments -- $%&Bembers part also of a regional arrangement must e%clude imports from within the region as a basis for $%& safeguards if such imports are coered also by the preferential trade deal andmade sub<ect there to liberali'ation commitments e=ual to or exceeding 6A%% concessions. %hisshould normally lead to less $%& safeguards #since, as a conse=uence of regional free trade,regional imports may hae increased most and may cause most in<ury, excluding those regionalimports may make it more difficult to meet $%& re=uirements+. At the same time, safeguardmechanisms under regional deals may still permit regional safeguards #see below point 5+.

2. %he Agreement on afeguards, in contrast, is silent on the source of imports that must beta+en into account in a safeguards inury determination. All imports can be considered, but onecan also e%clude regional imports #as adocated under point 1+ or take account only of importsfrom one source. ?rucially, howeer, een if only third-party imports are considered in thedetermination itself, the in<urious effects of other imports #in casu, regional imports+ must still beealuated so as not to attribute them to third-party imports. Boreoer, if only third-party importsare considered in the in<ury determination, they alone must meet the causal link re=uirement withserious in<ury or threat thereof #that is, it must be demonstrated that third-party imports Zplayed a

3 In tis &rtic!e I *se te terms %referentia! tra$e arran#ementsE re#iona! tra$e

a#reementsE an$ re#iona! $ea!sE intercan#eab!5 +ese terms as te5 are *se$ere cover bot c*stoms *nions an$ free tra$e areas as $ene$ in &++ &rtic!e

FFI,:8

4 ee for eGam%!e &rtic!e 801 of N&+& (i!atera! &ctionsE) an$ &rtic!e 29 of te

-*ro%e &#reement estab!isin# an association bet;een te -*ro%ean <omm*nities

an$ teir member tates of te one %art an$ te <Hec 6e%*b!ic of te oter %art

" L 3?0 (1994)




part in, or contributed to, bringing about serious in<ury so that there is a causal DconnectionE or DnexusE 5+.

.In principle, the eventual safeguard measure itself must be applied to all imports, on a non-discriminatory basis #pursuant to Article 2.2 of the Agreement on afeguards, sub<ect, of course,

to 6A%% Article 88I9 discussed in point @ below+. At the same time, if the in<ury determinationconsidered only third-party imports, the ensuing safeguard measure itself can only offset thein<ury caused by third party imports #not in<ury caused by regional imports+.

". %he Appellate Godys re0uirement of parallelism [ that is, e=uialence between theimports considered in the in<ury determination and those made sub<ect to the safeguard measure [ is an unnecessary complication to deal with a problem better resoled under either 6A%%Article 8I8 itself #and the obligation there to exclude regional imports in certain circumstances+or Article 2.2 of the Agreement on afeguards in combination with 6A%% Article 88I9.4arallelism has not aoided, let alone resoled, the problem of selectie safeguards and therelationship between the Agreement on afeguards and Article 88I9. 4arallelism may lead to

absurd situations and complicates the problem more than it resoles it. %he re=uirement of parallelism should be abandoned. 5. 6A%% Article 88I9 does not prohibit safeguards on trade within a regional trade

arrangement . In particular, Article 88I9;@ permits some internal restrictions #including intra-regional safeguards+ as long as Zsubstantially all the trade is liberali'ed.

*. In addition, 6A%% Article 88I9 may operate as a ustification not only for iolations of 6A%% Article 8I8 but also of the Agreement on afeguards.

>. /xamining the conditions for <ustification under 6A%% Article 88I9, the current

#ppellate (ody re0uirements expressed in its report on Tur+ey 1 Te%tiles #the measure must be #i+Zintroduced upon the formation and #ii+ Znecessary for the formation, of a customs union or freetrade area in line with Article 88I9+ would not permit safeguards that exclude regional imports.uch exclusion is neither #i+ Zintroduced upon the formation of the regional arrangement: nor #ii+Znecessary for such formation.

@. Coweer, the #ppellate (ody re0uirements for #rticle 22'3 ustification are supported

by neither the te%t nor the spirit of #rticle 22'3 . %hey ought to be oerturned. In particular, there=uirement that exclusion of regional imports must be Znecessary for the formation of aregional arrangement in line with Article 88I9, ought to be replaced with the re=uirement thatsuch exclusion is Zpart of the formation of a regional arrangement in line with Article 88I9. &nthat basis, excluding regional imports from a safeguard measure can be <ustified under Article88I9 #the =uota on Indian textiles in the Tur+ey 1 Te%tiles dispute cannot : nor can the iolationof parallelism or 6A%% Article 8I8 in the eent an in<ury determination takes account of all

imports, but the safeguard measure e%cludes regional imports+. An Appellate Gody finding thatArticle 88I9 can, indeed, <ustify safeguards that e%clude regional imports would keep regionaltrade free from $%& safeguards and proide an important incentie for $%& members to signregional trade deals especially with members that are heay users of safeguards. At the same

C &%%e!!ate o$5 re%ort on US – !eat "#uten above n 2 at %ara ?7




time, a close eye should be kept on possible trade diersion so as to ensure that the exclusion of regional imports from $%& safeguards does not run counter the ob<ectie in 6A%% Article88I9;".* 3inally, it should be recalled that the absence of WT- safeguards on regional tradedoes not preclude the imposition of regional safeguards under a safeguard mechanism proidedfor in the regional deal itself.

%he aboe conclusions lead to the following options for $%& Bembers>, part also of a customsunion #?H+ or free trade area #3%A+, wanting to impose a $%& @ safeguard #6+. ote that inmost cases only &ption 2 will be aailable #since the product in =uestion is most likely to becoered also under the ?HN3%A+ and that between &ption 2.a and &ption 2.b, the most obiouschoice will be &ption 2.a, that is, to exclude regional imports from the actual safeguard #sinceregional imports will be excluded also from the in<ury determination and hence be better tackledunder a regional safeguard mechanism, if such mechanism exists+;

? ee above n Error! Bookmark not defned.

7 +e tab!e sets o*t te o%tions for a +" 'ember itse#f to im%ose a safe#*ar$

6emember o;ever tat %*rs*ant to footnote 1 of te &#reement on afe#*ar$s

a customs union can a!so im%ose a safe#*ar$ eiter as a ;o!e or on bea!f of one

or more of its member states ee above teGt at n Error! Bookmark not

defned. an$

Error! Bookmark not defned.

8 6emember o;ever tat even if &++ &rt FIF eGc!*$es re#iona! im%orts as a

basis for a safe#*ar$ under "A,, s*c re#iona! im%orts ma5 sti!! co*nt to;ar$s an

intrare#iona! safe#*ar$ under t!e CU-F,A (as !on# as te re#iona! safe#*ar$

mecanism res%ects te ri#ts of oter +" 'embers an$ is in !ine ;it &rtic!e 11

of te &#reement on afe#*ar$s see above n 4 an$ Error! Bookmark not

defned.)

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https://www.wto.org/english/tratop_e/dda_e/negotiations_summary_e.htm



https://www.wto.org/english/tratop_e/dda_e/negotiations_summary_e.htm





I';R= 4E"ER$I'A"I<'

#during the safeguard inestigation+SA%E#AR4 $EASRE

#as eentually applied+

#&ption 1+

etermination based on

ALL I$P<R"S

#&ption 1.a+ALL I$P<R"S

are sub<ect to the safeguard

7 If the inestigated product is coered also by the?HN3%A, there is a iolation of 6A%% Art. 8I8#regional imports must then be excluded+ #if not socoered, consistent with Art. 8I8+

7 %he iolation of Art. 8I8 cannot be <ustifiedunder Art. 88I9

7 ?onsistent with parallelism re=uirement7 ?onsistent with 6 Article 2.2 #non-discrimination+7 Intra-regional safeguards are not per se

prohibited by 6A%% Art. 88I9

#&ption 1.b+RE#I<'AL I$P<R"S E(+L4E4

7 9iolation of parallelism re=uirement,not <ustified under Art. 88I97 9iolation of 6 Article 2.2 but <ustifiedunder Art. 88I9 #though iolation of parallelism and Art. 8I8 remain+

#&ption 2+RE#I<'AL I$P<R"S

E(+L4E4

#&ption 2.a+RE#I<'AL I$P<R"S E(+L4E4

7 If the inestigated product is coered also by the?HN3%A, then regional imports must be excludedunder Art. 8I8

7 Agreement on afeguards #Arts. 2.1 and "+ doesnot prohibit exclusion of regional imports

?onsistent with parallelism re=uirement 9iolation of 6 Article 2.2 #non-discrimination+ but <ustified under Art. 88I9

#&ption 2.b+ALL I$P<R"S

sub<ect to the safeguard

9 +e o%tion of a%%!5in# a +" safe#*ar$ on!5 to re#iona! im%orts is not inc!*$e$ in

tis tab!e &s note$ above in n Error! Bookmark not defned. s*c safe#*ar$

;o*!$ r*n co*nter to &rtic!e 22 of te &#reement on afe#*ar$s an$ not be

*stie$ *n$er &++ &rtic!e FFI, & safe#*ar$ eGc!*sive!5 im%ose$ on re#iona!

im%orts ma5 o;ever be %ossib!e *n$er te re#iona! tra$e $ea! itse!f




7 9iolation of parallelism re=uirement but <ustified under Article 2.27 ?onsistent with 6 Article 2.2 #non-discrimination+7 Intra-regional safeguards are not per se

prohibited by 6A%% Art. 88I97 4otentially in iolation of rules in the?HN3%A itself #prohibiting regionalsafeguards, albeit under certainconditions+

Week Se&en

Anti-4umping Actions, Su9sidies, and +ounter&ailing $easures # see previous sections+

Agreement on implementation of Article )I of t/e #eneral Agreement on "ariffs and

"rade 100

#%he Anti-dumping Agreement+

%he Agreement on Implementation of Article 9I of the 6eneral Agreement on %ariffs and%rade 1" #the DA AgreementE+ goerns the application of anti-dumping measures byBembers of the $%&. Anti-dumping measures are unilateral remedies which may beapplied by a Bember after an inestigation and determination by that Bember, inaccordance with the proisions of the A Agreement, that an imported product isDdumpedE and that the dumped imports are causing material in<ury to a domestic industry producing the like product.

%he A Agreement sets forth certain substantie re=uirements that must be fulfilled inorder to impose an anti-dumping measure, as well as detailed procedural re=uirements

regarding the conduct of anti-dumping inestigations and the imposition and maintenancein place of anti-dumping measures. A failure to respect either the substantie or proceduralre=uirements can be taken to dispute settlement and may be the basis for inalidation of the measure. Hnlike the Agreement on ubsidies and ?ounterailing Beasures, the AAgreement does not establish any disciplines on dumping itself, primarily becausedumping is a pricing practice engaged in by business enterprises, and thus not within thedirect reach of multilateral disciplines.

Su9stanti&e rules

Article 1 of the A Agreement establishes the 9asic principle that a Bember may not

impose an anti-dumping measure unless it determines, pursuant to an inestigationconducted in conformity with the proisions of the A Agreement, that there are dumped

imports, material inur to a domestic industr, and a causal link between the dumpedimports and the in<ury.

4etermination of dumping




Article 2 contains substantie rules for the determination of dumping. umping iscalculated on the basis of a Dfair comparisonE between normal &alue #the price of theimported product in the Dordinary course of tradeE in the country of origin or export+and e.port price #the price of the product in the country of import+. Article 2 contains

detailed proisions goerning the calculation of normal alue and export price, andelements of the fair comparison that must be made.

4etermination of inury

Article of the A Agreement contains rules regarding the determination of material

inur caused by dumped imports. Baterial in<ury is defined as material in<ury itself,threat of material in<ury, or material retardation of the establishment of a domesticindustry. %he 9asic reDuirement for determinations of in<ury, is that there be an ob<ectieexamination, based on positie eidence of the &olume and price effects of dumped

imports andt/e conseDuent impact of dumped imports on t/e domestic industr.Article contains specific rules regarding factors to be considered in makingdeterminations of material in<ury, while specifying that no one or seeral of the factorswhich must be considered is determinatie. Article .5 re=uires, in establishing the causal

link between dumped imports and material in<ury, known factors other than dumpedimports which may be causing in<ury must be examined, and that in<ury caused by thesefactors must not be attributed to dumped imports.

A significant new proision, Article ., establishes the conditions in which acumulati&e

e&aluation of the effects of dumped imports from more than one country may beundertaken. Hnder the rules, authorities must determine that the margin of dumping from

each country is not de minimis, that the olume of imports from each country is notnegligible, and that a cumulatie assessment is appropriate in light of the conditions of competition among the imports and between the imports and the domestic like product.

4efinition of industry

Article " of the A Agreement sets forth a definition of the domestic industr to beconsidered for purposes of assessing in<ury and causation. %he domestic industry isdefined as producers of a Dlike productE, which term is defined in Article 2.* as a productthat is identical to, or in the absence of such a product, one that has characteristics closelyresembling those of, the imported dumped product under consideration. Article " contains

special rules for defining a DregionalE domestic industry in exceptional circumstanceswhere production and consumption in the importing country are geographically isolated,and for the ealuation of in<ury and assessment of duties in such cases. Article " alsoestablishes that domestic producers may be excluded from consideration as part of thedomestic industry if they are DrelatedE #defined as a situation of legal or effectie control+to exporters or importers of the dumped product.




Procedural reDuirements

<&er&iew

A principal ob<ectie of the procedural re=uirements of the A Agreement is to ensuretransparency of proceedings, a full opportunity for parties to defend their interests, andade=uate explanations by inestigating authorities of their determinations. %he extensieand detailed procedural re=uirements relating to in&estigations focus on the sufficiency of petitions #through minimum information and DstandingE re=uirements+ to ensure thatmeritless inestigations are not initiated, on the establishment of time periods for thecompletion of inestigations, and on the proision of access to information to allinterested parties, along with reasonable opportunities to present their iews andarguments. Additional procedural re=uirements relate to the offering, acceptance, andadministration of price undertakings by exporters in lieu of the imposition of anti-dumping measures.

%he A Agreement re=uires inestigating authorities to gie pu9lic notice of and e.plain their determinations at arious stages of the inestigatie process insubstantial detail. It also establishes rules for the timing of the imposition of anti-dumpingduties, the duration of such duties, and obliges Bembers to periodically re&iew thecontinuing need for anti-dumping duties and price undertakings. %here are detailed proisions guiding the imposition and collection of duties under arious duty assessmentsystems, intended to ensure that anti-dumping duties in excess of the margin of dumpingare not collected, and that indiidual exporters are not sub<ected to anti-dumping duties inexcess of their indiidual margin of dumping. Article 1 of the A Agreement re=uiresBembers to proide for udicial re&iew of final determinations in anti-dumping

inestigations and reiews. &ther proisions establish that Bembers may, at their discretion, take anti-dumping actions on behalf of and at the re=uest of a third country, andrecognise that Dspecial regardE must be gien by deeloped country Bembers to thesituation of de&eloping countr $em9ers when considering the application of anti-dumping duties.

Specific Pro&isions

'nitiation and conduct of investigations

Article 5 establishes the re=uirements for the initiation of inestigations. %he AAgreement specifies that inestigations should generally be initiated based on a writtenre=uest submitted Dby or on behalf ofE a domestic industry. %his DstandingE re=uirement issupported by numeric limits for determining whether there is sufficient support bydomestic producers to conclude that the re=uest is made by or on behalf of the domesticindustry, and thereby warrants initiation. %he A Agreement establishes re=uirements for eidence of dumping, in<ury, and causality, as well as other information regarding the product, industry, importers, exporters, and other matters, in written applications for anti-

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dumping relief, and specifies that, in special circumstances when authorities initiatewithout a written application from a domestic industry, they shall proceed only if theyhae sufficient eidence of dumping, in<ury, and causality. In order to ensure that meritlessinestigations are not continued, potentially disrupting legitimate trade, Article 5.@

proides for immediate termination of inestigations in the eent the olume of imports isnegligible or the margin of dumping is de minimis, and establishes numeric thresholds for these determinations. In order to minimi'e the trade disruptie effect of inestigations,Article 5.10 specifies that inestigations shall be completed within one year, and in nocase more than 1@ months, after initiation.

Article * sets forth detailed rules on the process of in&estigation, including the collectionof eidence and the use of sampling techni=ues. It re=uires authorities to guarantee theconfidentiality of sensitie information and erify the information on whichdeterminations are based. In addition, to ensure the transparency of proceedings,authorities are re=uired to disclose the information on which determinations are to be

based to interested parties and proide them with ade=uate opportunity to comment, andestablishes the rights of parties to participate in the inestigation, including the right tomeet with parties with aderse interests, for instance in a public hearing.

'mposition of provisional measures

Article > relates to the imposition of pro&isional measures. Article > includes there=uirement that authorities make a preliminary affirmatie determination of dumping,in<ury, and causality before applying proisional measures, and the re=uirement that no proisional measures may be applied sooner than *0 days after initiation of an

inestigation.

Price underta+ings

Article @ establishes the principle that undertakings to reise prices or cease exports atdumped prices may be entered into to settle an inestigation, but only after a preliminaryaffirmatie determination of dumping, in<ury, and causality has been made. It alsoestablishes that undertakings are oluntary on the part of both exporters and inestigatingauthorities. In addition, an exporter may re=uest that the inestigation be continued after an undertaking has been accepted, and if a final determination of no dumping, no in<ury,

or no causality results, the undertaking shall automatically lapse.

'mposition and collection of duties

Article establishes the general principle that imposition of anti-dumping duties isoptional, een if all the re=uirements for imposition hae been met, and establishes thedesirability of application a Dlesser dutE rule. Hnder a lesser duty rule, authorities




impose duties at a leel lower than the margin of dumping but ade=uate to remoe in<ury.Article . establishes that anti-dumping duties may not exceed the dumping margincalculated during the inestigation. In order to ensure that anti-dumping duties in excessof the margin of dumping are not collected, Article . re=uires procedures for

determination of the actual amount of duty owed, or refund of excess duties paid,depending on the duty assessment system of a Bember, normally within 12 months of are=uest, and in no case more than 1@ months. Article ." establishes rules for calculatingthe amount of duties to be imposed on exporters not indiidually examined during theinestigation. Article .5 proides for expedited reiews to calculate indiidual margins of dumping for exporters or producers newly entering the market of the importing Bember.

Article 10 establishes the general principle that both proisional and final anti-dumpingduties may be applied only as of the date on which the determinations of dumping, in<ury,and causality hae been made. Coweer, recogni'ing that in<ury may hae occurredduring the period of inestigation, or that exporters may hae taken actions to aoid the

imposition of an anti-dumping duty, Article 10 contains rules for the retroacti&eimposition of dumping duties in specified circumstances. If the imposition of anti-dumping duties is based on a finding of material in<ury, as opposed to threat of materialin<ury or material retardation of the establishment of a domestic industry, anti-dumpingduties may be collected as of the date proisional measures were imposed. If proisionalduties were collected in an amount greater than the amount of the final duty, or if theimposition of duties is based on a finding of threat of material in<ury or materialretardation, a refund of proisional duties is re=uired. Article 10.* proides for retroactieapplication of final duties to a date not more than 0 days prior to the application of proisional measures in certain exceptional circumstances inoling a history of dumping,massie dumped imports, and potential undermining of the remedial effects of the final

duty.

4uration$ termination$ and review of anti5dumping measures

Article 11 establishes rules for the duration of anti-dumping duties, and re=uirements for periodic reiew of the continuing need, if any, for the imposition of anti-dumping dutiesor price undertakings. %hese re=uirements respond to the concern raised by the practice of some countries of leaing anti-dumping duties in place indefinitely. %he DsunsetEre=uirement establishes that dumping duties shall normally terminate no later than fieyears after first being applied, unless a reiew inestigation prior to that date establishes

that expiry of the duty would be likely to lead to continuation or recurrence of dumpingand in<ury. %his fie year DsunsetE proision also applies to price undertakings. %he AAgreement re=uires authorities to reiew the need for the continued imposition of a dutyupon re=uest of an interested party.

Public notice




Article 12 sets forth detailed re=uirements for pu9lic notice by inestigating authorities of the initiation of inestigations, preliminary and final determinations, and undertakings.%he public notice must disclose non-confidential information concerning the parties, the product, the margins of dumping, the facts reealed during the inestigation, and the

reasons for the determinations made by the authorities, including the reasons for acceptingand re<ecting releant arguments or claims made by exporters or importers. %hese publicnotice re=uirements are intended to increase the transparency of determinations, with thehope that this will increase the extent to which determinations are based on fact and solidreasoning.

"/e committee and dispute settlement

Article 1* establishes the ?ommittee on Anti-dumping 4ractices, and sets forth

re=uirements for Bembers to notif wit/out dela all preliminar and final actionstaken in anti-dumping inestigations, and notif semi-annuall all actions taken duringthe releant reporting period.

Article 1> establishes that the ispute ettlement Hnderstanding is applicable to disputesunder the A Agreement. Coweer, Article 1>.* establishes a special standard of

re&iew to be applied by panels in examining disputes in anti-dumping cases with regard both to matters of fact and =uestions of interpretation of the Agreement. %his standardgies a degree of deference to the factual decisions and legal interpretations of nationalauthorities, and is intended to preent dispute settlement panels from making decisions based purely on their own iews. A Binisterial ecision, which is not part of the A

Agreement, regarding this proision establishes that its operation will be reiewed after three years with a iew to consideration whether it is capa ble of general application.

%inal pro&isions

Article 1@. establishes the effectie date of the A Agreement, proiding that it isapplicable to inestigations and reiews of existing measures initiated pursuant toapplications made on or after the entry into force of the A Agreement. Article 1@."re=uires Bembers to bring their laws into conformity with the A Agreement by the dateof entry into force of the A Agreement. Hnder Article [email protected], Bembers are re=uired

to notif t/eir anti-dumping laws and regulations to the ?ommittee.

Annex I to the A Agreement establishes procedures for Don-the-spotE inestigations,which are generally undertaken in the territory of an exporting Bember to erifyinformation proided by foreign producers or exporters. Annex II to the A Agreementsets forth proisions on the use of Dbest information aailableE in inestigations,specifying the conditions under which inestigating authorities may rely on informationfrom a source other than the person concerned.




%he Binisterial ecision on Anti-+ircum&ention, which is not part of the AAgreement, noted that the negotiators had been unable to agree on a specific text dealingwith the problem of anti-circumention, recogni'ed the desirability of applying uniformrules in this area as soon as possible, and referred the matter to the ?ommittee for

resolution. %he ?ommittee has established an Informal #roup on Anti-+ircum&ention,which is open to participation by all Bembers, to carry out the task assigned by theBinisters.

Antidumping and +ounter&ailing 4uties in Regional "rade Agreements! +anadaS %"A, 'A%"A

and Beond #il9ert R Win/am :eat/er A #rant

%he use of antidumping #A+ and counterailing duties #?9s+ to preent or remedy unfair trade

practices has been an important issue during recent multilateral and regional trade negotiations. It is a

particularly difficult issue because parties differ on the role unfair trade remedies should play in trade

policy. &ne approach is to iew these measures as an attempt to remedy or offset unfair trade practices by

foreign goernments or exporters. Alternatiely, exporters may iew these measures as politically

motiated contingency protection, or as Qmeasures of Fstand-by protectionF or techni=ues of administered

trade.QF Hnfair trade remedies are proided on the initiatie of specific industries on the basis of a

complicated body of trade regulation. %he system is discrete and highly legalistic, and is an alternatie to

a more general approach to trade policy based on multilateral tariff reductions or codes of conduct.

Gecause parties differ on the role unfair trade remedies should play in trade policy, these remedies hae

been applied uneenly among the ?ontracting 4arties #?4s+ to the 6eneral Agreement on %ariffs and

%rade #6A%%+. 2 %he result is an Quneen playing fieldQ among trading partners, and it has become

eident that more standardi'ed rules and procedures goerning the application of these remedies are

re=uired. A considerable step in the direction of greater standardi'ation has been achieed in the

Antidumping and ubsidies ?odes negotiated in the Hruguay ound. /lsewhere, other measures hae been considered in regional agreements to achiee the desired security of access to a trading partnerFs

market in order to foster economic growth in a competitie enironment. %he application of A and

?9s by the Hnited tates was one of the ma<or ?anadian grieances that surfaced during the negotiation

of the ?anada-H.. 3ree %rade Agreement #3%A+.

Initially, ?anada tried unsuccessfully to gain a blanket exemption from H.. trade remedy laws. As an

alternatie, ?anada placed considerable emphasis on negotiating a dispute settlement mechanism into the

3%A that would reduce ?anadaFs exposure to the use of A and ?9s by the Hnited tates. %he dispute

settlement mechanism ultimately incorporated into ?hapter 1 of the 3%A proides for <udicial-like

reiew of A and ?9 actions by binational panels. 5 Bore specifically, it proides exporters and

importers the option of taking a disputed A or ?9 action to a binational panel with binding powers in

lieu of seeking <udicial reiew by a domestic court.* Gecause indiiduals from both the Hnited tates and

?anada sit on the panels, it is generally assumed that binational panels promote greater consistency and

ob<ectiity in A and ?9 practices. Although the panels are not authori'ed to create substantie law, the

reiew mechanism helps to ensure that each nation is applying its own laws fairly and consistently.

eterminations of dumping and subsidi'ation can be different in each country, but will be upheld as long

as the administratie agency made its determination in accordance with domestic law.> &wing to these

arious characteristics, ?hapter 1 has been one of the most uni=ue dispute settlement mechanisms

deeloped in recent years.




:IS"<R= A'4 4E)EL<P$E'" <% A4 A'4 +)4s A A4 A'4 +)4s '4ER ":E #A""

&ne of the primary ob<ecties of the 6A%% is to promote secure access to foreign markets so that

businesses will feel confident that they can export their products to other countries without encountering

any unfair or unforeseen impediments in competing for a portion of the consumer market. umping and

unrestricted subsidi'ation hae long been recogni'ed as serious obstacles to this ob<ectie. umping is

generally understood as the sale of goods on a foreign market at a price which is less than that at whichthe product is sold on the sellerFs domestic market. A subsidy is the granting of a non-commercial benefit,

usually by the goernment, at any stage of a goodFs manufacture, production or export. A general concern

about the harmful effects of dumping and subsidi'ation resulted in their inclusion in the 6A%%

negotiations in 1">. %hese negotiations concluded with the insertion of a remedy under Article 9I of the

final Agreement, which allows ?4s to the 6A%% to take unilateral action to offset the effects of dumping

or subsidies on their domestic industries through the use of A and ?9s. 10 6A%% Article 9I allows

the application of an A duty against an imported good where it is being dumped on the foreign market

and is causing or threatening to cause Qmaterial in<ury to an established industry . . . or materially retards

the establishment of a domestic industry.Q1 A ?9 may be applied to an imported good to offset the

effects of a foreign subsidy where the subsidy causes, or threatens to cause, in<ury to the domestic

industry or the potential deelopment of such industry. 12 %he 6A%% proisions for A and ?9srepresented minimal commitment to any real control oer these practices.

+<'+LSI<'

%he similarities in how ?anada and Bexico approached A and ?9s in a regional trade

agreement may proide clues as to how this issue might play out in a broader context, such as

a hemispheric or multilateral trade agreement. 3irst, both ?anada and Bexico recogni'ed that

resort to unfair trade remedies by the larger trade partner - the Hnited tates - could threaten

security of access to the H.. market, and therefore undercut the alue of a trade agreement.

econd, both ?anada and Bexico sought an exception from H.. unfair trade legislation, and

failed. %hird, both ?anada and Bexico tried to negotiate a broader understanding oer the use

of A and ?9s, but also failed.

3inally, both countries settled on a binding dispute settlement mechanism, built around an

internationali'ed form of <udicial reiew of domestic agency actions, as a surrogate for a

more permanent solution to the problem of A and ?9s between close trading partners.

If other hemispheric nations were to accede to A3%A or negotiate a new hemispheric trade

agreement, it is likely that a ?hapter 1-like mechanism would appeal to them for the same

reason it appealed to ?anada or Bexico. %rade remedy actions like A and ?9s arguably

amount to increased protectionism, and they are on the increase in international trade. It is in

the interest of most nations to hae A and ?9 actions conform to high standards of due

process, een more so if the substance of these actions may hae a harmful impact on

international trade relations. 6ien the widespread use of A and ?9s, in particular by theHnited tates, and the difficulties in establishing standardi'ed substantie rules in this area, it

seems probable that other countries will consider negotiating a ?hapter 1-like mechanism.

%he ?anada-H.. 3%A negotiation demonstrated that it is easier to adopt a ?hapter 1

mechanism for A and ?9s where legal systems are similar, while the A3%A negotiation

illustrated how accommodation can be made where systems are different.

Any attempt by hemispheric nations to accede to A3%A would raise some of the same

issues faced in the A3%A ?hapter 1 negotiation, such as the role of amparo #which has




been widely adopted in outh America from the Bexican legal system+, as well as the nature

and procedural standards of A and ?9 inestigations and their conse=uent impact on the

standards of <udicial reiew and due process under a ?hapter 1-like mechanism. 6ien the

Bexican example, it seems likely that sufficient accommodation could be made for other

countries to accede to a ?hapter 1 mechanism, especially if new accessions were negotiated

on a serial basis. &wing to the greater diersity of legal systems and the greater complication

of negotiating detailed matters of administratie law on a multilateral basis, it is less likely

that a ?hapter 1 mechanism would be amenable to multilateral negotiation in the 6A%%.

Coweer, the pressures to establish due process in trade remedy practices are undeniable. %he

conditions for the rise of ?hapter 1 initially in ?anadian-H.. relations, which then extended

to Bexico, were an increase in domestic trade regulatory actions coupled with an increase in

international economic interdependence. %hese conditions are not abating in the international

system. %o the extent that foreigners can be affected by the domestic administratie

regulations of their neighbors, it is possible that they will seek forums like ?hapter 1 which

are intended to ensure as much as possible that their due process rights will be protected.

"ariff and +ustoms +ode # 6rom P* Reyes+

pecial duties; a+ umping duties b+ ?ounterailing duties c+ Barking duties d+

etaliatoryNdiscriminatory duties e+afeguard duties

J; $hat are special dutiesV %hese are additional import duties imposed on specific kinds of imported

articles under certain conditions. It cannot be applied without the regular customs duties. It can only be

applied in the presence of a special order from goernment officers.

J; $hat are the kinds of special dutiesV

%he following are special duties; 1. Anti-umping #ection 01, %??+

2. ?ounterailing #ection 02, %??+

. Barking #ection 0, %??+

". iscriminatory #section 0", %??+

5. afeguard uties #A @@00+ ead ection 01, %??

J; $hat is an anti-dumping dutyV It is a special duty imposed on the importation of a product,

commodity or article of commerce into the 4hilippines at less than its normal alue when destined for

domestic consumption in the exporting country which is the difference between the export price and the

normal alue of such product, commodity or article. #see ection 01#s+#1+, %??+

J; $hat are the re=uisites for the imposition of anti-dumping dutyV

%he re=uisites are the following; a. $here the product, commodity or article of commerce i. Is exported

into the 4hilippines ormal alue for purposes of imposing the anti-dumping duty is the comparable

price at the date of sale of like product, commodity or article in the ordinary course of trade when

destined for consumption in the country of export #see ection 01#s+#+, %??, as amended by A @>52+

ii. At a price less than its normal alue iii. $hen destined for domestic consumption b. And such

exportation i. Is causing or ii. Is threatening to cause material in<ury to a domestic industry iii. Baterially




retards the establishment of a domestic industry producing like product #see ection 01#a+, %??, as

amended by A @>52+

ote; #1+ %he imposing authority for the anti-dumping duty is the %I ecretary in the case of non-

agricultural product, commodity, or article or the A ecretary in the case of agricultural product,

commodity or article. #2+ /en when all the re=uirements for the imposition hae been fulfilled, the

decision on whether or not to impose a definitie anti-dumping duty remains the prerogatie of the %ariff ?ommission #+ In the determination of whether to impose the antidumping duty, the %ariff ?ommission

may consider among others, the effect of imposing an anti-dumping duty on the welfare of the consumers

andNor the general public, and other related local industries #"+ %he amount of anti-dumping duty that may

be imposed is the difference between the export price and the normal alue of such product, commodity,

or article. ead ection 02, %??

J; $hat is a counterailing dutyV

It is a special duty imposed on the importation of a product, commodity or article of commerce into the

4hilippines when the same is granted directly or indirectly by the goernment in the country of origin or

exportation any kind or form of specific subsidy upon the production, manufacture or exportation of such

product, commodity or article, and the importation of such subsidi'ed product, commodity or article hascaused or threatens to cause material in<ury to a domestic industry or has materially retarded the growth

or preents the establishment of a domestic industry as determined by the %ariff ?ommission. #see

ection 02, %??, as amended by A @>51+

ote; #1+ %he counterailing duty shall be in addition to any ordinary duties, taxes, and charges imposed

by law on such imported product or article #2+ %he counterailing duty is e=uialent to the bounty #cash

award paid to an exporter+, subsidy #fiscal incenties, not in the form of cash award, to encourage

manufacturers or exporters+ or subention #any assistance other than bounty or subsidy+. #+ %he

imposing authority for the counterailing duties is the %I ecretary in the case of non-agricultural

product, commodity, or article or the A ecretary in the case of agricultural product, commodity or

article. ead ection 0, %?? J; $hat is a marking dutyV A marking duty are the additional customs

duties imposed on foreign articles #or its containers if the article itself cannot be marked+ not marked in

any official language in the 4hilippines in a conspicuous place as legibly, indelibly and permanently in

such manner as to indicate to an ultimate purchaser in the 4hilippines the name of the country of origin.

#ee ection 0, %??+

J; $hat are the exceptions to marking of articlesV

1. %he article is incapable of being marked

2. %he article cannot be marked prior to importation to the 4hilippines without in<ury

. %he article cannot be marked prior to importation to the 4hilippines except at an expense economically

prohibitie of its importation

". %he marking of the container of such article will reasonably indicate the origin of such article

5. %he article is of a crude substance

*. uch article is for the use of the importer and not intended for sale in its imported or other form

>. uch article is to be processed in the 4hilippines by the importer or for his own account and not for the

purpose of concealing the origin of such article




@. %he ultimate purchaser by the ?haracter of the article necessarily know the country of origin of such

article

. uch article was produced more than 20 years prior to its importation into the 4hilippines 10.uch

article cannot be marked after importation except at an expense economically prohibitie and the failure

to mark the article before importation was not due to any purpose of the importer, producer, seller or

shipper to aoid compliance.

ote; #1+ &nly the ?o? may impose marking duties

#2+ %he marking duty is e=uialent to 5! ad alorem ead ection 0", %?? J; $hat is a discriminatory

dutyV It is an additional customs duty imposed upon articles wholly or in part, the growth or product of,

or imported in a essel of any foreign country wheneer the 4resident shall find as a fact that such

country; a. irectly or indirectly upon any 4hilippine product unreasonable charge, exaction, regulation or

limitation which is not e=ually enforced upon like articles of other foreign countries b. iscriminates in

fact against the commerce of the 4hilippines as o place the 4hilippines at a disadantage compared with

the commerce of any foreign country #ee ection 0", %??+ ote; It is the 4resident who imposes the

discriminatory duties.

J; $hat are safeguard measuresV

afeguard measures are emergency measures including tariffs to protect domestic industries and

producers from increased imports which inflict or could inflict serious in<ury on them.

ote; #1+ %he ?%A is ested with <urisdiction to reiew decisions of the %I ecretary imposing

safeguard measures as proided under A @@00, the afeguard Beasures Act #see outhern ?ross ?ement

?orporation . 4hilippine ?ement Banufacturers ?orp (Puly @, 200")+ #2+ %he imposing authority for the

safeguard measures is the %I ecretary in the case of non-agricultural product, commodity, or article or

the A ecretary in the case of agricultural product, commodity or article. #+ %he %I ecretary cannot

impose the safeguard measures if the %ariff ?ommission does not faorably recommend its imposition.

















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Guiyab IEL 2 Midterm Reviewer