Lesson Four | Market Access in the WTO (goods)


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This is lesson four of an introductory lecture series on WTO law and policy I am giving at Unviersity Pelita Harapan (UPH) Graduate School as part of the Masters in Trade, Investment and Competition Law and Policy (MTIC) Program in January 2014

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  • Technical Regulations: a law requiring that batteries be rechargeable or a law requiring that wine be sold in green glass bottles is a technical regulation within the meaning of the TBT Agreement. A law requiring that the production of pharmaceutical products meet certain criteria with regard to plant cleanliness is also a technical regulation falling within the scope of the TBT Agreement.
    Standards: The voluntary standards set by CENELEC (the European Committee for Electrotechnical Standardization), such as standards for mobile phones or handheld computers, are clearly standards within the meaning of the TBT Agreement.
    Case law on technical regulations by the Appellate Body in Asbestos
    On the basis of the definition of a “technical regulation” set out in Annex 1.1. the AB set out a number of considerations for determining whether a measure is a technical regulation.
    First, for the measure to be a “technical regulation” it must “lay down” i.e. set forth, stipulate or provide “product characteristics”. The term characteristics was held to include, any objectively definable features, qualities, attributes or other distinguishing mark of a product. Such characteristics might relate, inter alia, to a product’s composition, size, shape, color, texture, hardness, tensile strength, flammability, conductivity, density or viscosity.
    Second, a :”technical regulation” must regulate the characteristics of products in a binding or compulsory manner. Product characteristics can be prescribed or imposed with respect to products in either a positive or a negative form. Meaning a technical regulation can prescribe that products must possess certain characteristics, or that products must not possess certain characteristics.
    Third, the AB held that a technical regulation must be applicable to an identifiable product, or group of products, otherwise enforcement of the regulation will be, in practical terms, impossible.
    Case law on technical regulations by the Appellate Body in Sardines
    Confirming its case law in Asbestos, the Appellate Body in EC-Sardines established a three-tier test for determining whether a measure is a technical regulation under the TBT Agreement:
    The measure must apply to an identifiable product or group of products;
    The measure must lay down product characteristics; and
    Compliance with the product characteristics laid down in the measure must be mandatory.
  • Preamble of the SPS Agreement:
    Reaffirming that no Member should be prevented from adopting or enforcing measures necessary to protect human, animal or plant life or health, subject to the requirement that these measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between Members where the same conditions prevail or a disguised restriction on international trade;
    Desiring to improve the human health, animal health and phytosanitary situation in all Members;
    Noting that sanitary and phytosanitary measures are often applied on the basis of bilateral agreements or protocols;
    Desiring the establishment of a multilateral framework of rules and disciplines to guide the development, adoption and enforcement of sanitary and phytosanitary measures in order to minimize their negative effects on trade;
    Recognizing the important contribution that international standards, guidelines and recommendations can make in this regard;
    Desiring to further the use of harmonized sanitary and phytosanitary measures between Members, on the basis of international standards, guidelines and recommendations developed by the relevant international organizations, including the Codex Alimentarius Commission, the International Office of Epizootics, and the relevant international and regional organizations operating within the framework of the International Plant Protection Convention, without requiring Members to change their appropriate level of protection of human, animal or plant life or health;
    Recognizing that developing country Members may encounter special difficulties in complying with the sanitary or phytosanitary measures of importing Members, and as a consequence in access to markets, and also in the formulation and application of sanitary or phytosanitary measures in their own territories, and desiring to assist them in their endeavours in this regard;
    Desiring therefore to elaborate rules for the application of the provisions of GATT 1994 which relate to the use of sanitary or phytosanitary measures, in particular the provisions of Article XX(b);
    Hereby agree as follows:
    In this Agreement, reference to Article XX(b) includes also the chapeau of that Article.
  • It is interesting to note that the panel in EC – Approval and Marketing of Biotech Products (2006) disagreed with the European Communities’ argument that the SPS Agreement was not intended to cover risks to the environment in general. Instead, the panel interpreted “other damage” in sub-paragraph (d) to include not only economic damage or damage to property, nut also damage to the environment (other than to the life or health of plants and animals) encompassing adverse effects on biodiversity, population dynamics on species or biogeochemical cycles. The residual category of “other damage” referred to in sub-paragraph (d) is potentially very broad.
  • As pointed out by the Appellate Body in Australia – Apples (2010), the fundamental element of this definition relates to the purpose or intention of the measures, which is to be “ascertained on the basis of objective considerations. The AB held that the purpose of a measure “must be ascertained not only from the objectives of the measure as expressed by the responding party, but also from the text and structure of the relevant measure, its surrounding regulatory context, and the way in which it is designed and applied”.
    The broad range of possible types of measures that may fall within the definition of an “SPS Measure” once they have one of the purposes listed in Annex A (1) (a) – (d) is illustrated in the US – Poultry (China) (2010) dispute. Where the measure at issue was a provision in a US appropriations bill that prohibited the use of funds under the relevant bill to establish or implement a rule allowing Chinese poultry products to be imported into the US. This restriction was imposed due to concerns arising from serious incidents of food contamination and the high incidence of the H5N1 virus in China together with the weakness of its government controls which undermined confidence that poultry imports from China would be H5N1 free. Thus despite the fact the measure, an appropriations restriction, was not of a nature normally associated with SPS measures, the fact that it aimed to protect human and animal life and health from risks posed by contaminated poultry products from China and was of a type described in the second part of Annex A (a law), led the panel to conclude that it fell within the definition of an “SPS” measure.
  • The relationship can thus be said to be one of mutual exclusivity
    The panel in EC – Approval and Marketing of Biotech Products (2006) noted that a single measure or requirement may be imposed for a purpose that falls within the definition of an SPS measure as well as for a purpose not covered by this definition. It held that:
    “to the extent the requirement in the consolidated law is applied for one of the purposes enumerated in Annex A(1), it may be properly viewed as a measure which falls to be assessed under the SPS Agreement; to the extent it is applied for a purpose which is not covered by Annex A(1), it may be viewed as a separate measure which falls to be assessed under a WTO agreement other than the SPS Agreement. It is important to stress, however, that our view is premised on the circumstance that the requirement at issue could be split up into two separate requirements which would be identical to the requirement at issue, and which would have an autonomous raison d’être, i.e., a different purpose which would provide an independent basis for imposing the requirement.”
    According to the panel, such a requirement would simultaneously be an SPS measure and a ‘non-SPS measure’. As Article 1.5 of the TBT Agreement does not apply to non-SPS measures, if the requirement falls within the definition of a ‘technical regulation’ as defined in Annex 1.1 of the TBT Agreement, it is to be assessed under the TBT Agreement ‘to the extent it embodies a non-SPS measure’.
  • Lesson Four | Market Access in the WTO (goods)

    1. 1. UPH MTIC Program | Introduction to WTO Law Market Access in the WTO (Goods)
    2. 2. Structure of the Present Lecture 2 1. 2. 3. 4. 5. 6. 7. 8. The importance of market access Tariffs Quantitative restrictions Tariff-Rate Quotas (TRQs) Exceptions to the ban on QRs Administration of QRs Import licensing Other non-tariff barriers www.simonlacey.net
    3. 3. The Importance of Market Access 3  Van den Bossche describes rules on market access as “the core of WTO law”  The preamble to the WTO Agreement mentions, in paragraph 1, that the Parties to the Agreement recognize that “their relations in the field of trade and economic endeavor should be conducted with a view to […] expanding the production of and trade in goods and services […] “  In paragraph 3, the preamble speaks of the goal of “the substantial reduction of tariffs and other barriers to trade […]. www.simonlacey.net
    4. 4. The Importance of Market Access cont’ 4  The WTO is very much a market access organization, and much of what happens there revolves around market access: • WTO dispute settlement cases are where countries seek to restore market access that has been lost; • Trade negotiations (currently Doha), succeed or fail on the basis of the market access that WTO Members perceive they will be giving away or getting; • Accession negotiations can largely be boiled down to bilateral negotiations over market access expectations between the acceding country- who is required to open its market- and WTO Members who want to export goods and services to the applicant’s country market or lock-in/increase existing access. www.simonlacey.net
    5. 5. The Importance of Market Access cont’ 5 Historically, the General Agreement on Tariffs and Trade (GATT), was about a limited number of issues, all revolving primarily around market access and/or market access expectations:  Eliminating quantitative restrictions (GATT Art. XI);  Establishing a mechanism for locking-in tariffs (the tariff binding, GATT Art. II)) and then subsequently negotiating reductions to tariff levels (tariff negotiations, GATT Art. XXVIII bis);  Establishing binding rules limiting the ability of Contracting Parties to pursue other policies which would undermine the value of tariff concessions (rules on customs valuation, GATT Art. VII; fees and formalities connected with import and export, GATT Art. VIII; subsidies, GATT Art. XVI, state trading enterprises GATT Art. XVII. www.simonlacey.net
    6. 6. The Importance of Market Access cont’ 6  Dogmatically, barriers to market access are generally broken down into two broad categories: – Tariff / Non-tariff barriers  Otherwise, barriers to market access can be categorized in various ways, including: – Border measures / behind the border measures – De jure / de facto measures – Trade-distortive / minimally trade-distortive (particularly in the area of subsidies, which can have an important effect on market access) – Transparent / non-transparent measures (transparent measures, such as tariffs are generally published, whereas a non-transparent measure might be an obscure regulation which is not published or easily obtainable which prescribes certain conditions for the importation or sale of certain products). www.simonlacey.net
    7. 7. Tariffs 7        The most common and widely-used barrier to market access for goods is customs duties, also referred to as tariffs. A customs duty, or tariff, is a financial charge, in the form of a tax, imposed on products at the time of and/or because of, their importation into the customs territory. Market access is conditional upon payment of the duty. Customs duties can either be specific, ad valorem or mixed. A specific customs duty on a product is an amount based on the weight, volume or quantity of that product. An ad valorem customs duty on a good is based on the value of that good, and is expressed as a percentage of the value of the imported good. A mixed (or compound) duty is a customs duty comprising an ad valorem duty to which a specific duty is added (or less commonly subtracted). www.simonlacey.net
    8. 8. Tariffs cont’ 8  Ad valorem customs duties are by far the most common type of customs duties and are preferable to specific or mixed duties for several reasons: – They are more transparent (their impact and price effects are easier to determine) – They are price indexed  Ad valorem, specific or mixed duties can be MFN duties, preferential duties, or neither of the two. www.simonlacey.net
    9. 9. Tariffs cont’ 9 Customs duties or tariffs serve three different purposes:  Revenue for governments (more important for developing countries).  Protect domestic industries (tilt the playing field in favour of domestically produced like or substitutable products.  Tool for promoting a rational allocation of scarce foreign exchange (encourage spending on capital goods and discourage spending on consumer or luxury goods and thus as an instrument for economic development policy). www.simonlacey.net
    10. 10. The National Tariff - Australia 10 www.simonlacey.net
    11. 11. Tariffs cont’ 11 Tariff Bindings at the WTO www.simonlacey.net
    12. 12. The National Tariff - USA 12 www.simonlacey.net
    13. 13. Tariffs cont’ 13  The results of tariff negotiations are referred to as “tariff concessions” or “tariff bindings”.  This is a commitment not to raise the customs duty on a certain product above an agreed level.  As a result of the Uruguay Round, virtually all customs duties imposed by developed country Members are now “bound”.  The tariff concessions or bindings of a Member are set out in that Member’s Schedule of Concessions.  The obligation to refrain from imposing tariffs in excess of the tariff binding does not, however, stop WTO Members from imposing tariffs that are below this level. Thus many Members have applied tariff rates that are slightly or even considerably below their bound rates. www.simonlacey.net
    14. 14. Tariffs cont’ 14  WTO rules on customs duties relate primarily to the protection of tariff concessions agreed to in the context of tariff negotiations.  GATT Article II:1 entitled Schedules of Concessions states: (a) Each contracting party shall accord to the commerce of the other contracting parties treatment no less favourable than that provided for in the appropriate Part of the appropriate Schedule annexed to this Agreement. (b) The products described in Part I of the Schedule relating to any contracting party, which are the products of territories of other contracting parties, shall, on their importation into the territory to which the Schedule relates, and subject to the terms, conditions or qualifications set forth in that Schedule, be exempt from ordinary customs duties in excess of those set forth and provided therein.  Several other provisions in the GATT are specifically intended to protect the value of the tariff concessions agreed to, by circumscribing Members abilities to engage in practices that would undermine the value of those concessions. www.simonlacey.net
    15. 15. Tariffs cont’ 15  Although WTO Members may not impose customs duties above the tariff concessions or bindings, the GATT does provide a procedure for the modification or withdrawal of tariff concessions.  GATT Article XXVIII:1 states, in pertinent part: “a [Member] … may, by negotiations and agreement … modify or withdraw a tariff concession included in the appropriate schedule annexed to this Agreement.  Negotiations on the modification or withdrawal of tariff concessions are to be conducted with: – The Members that hold so-called Initial Negotiating Rights (INRs); and – Any other Member that has a “principle supplying interest”. www.simonlacey.net
    16. 16. Tariffs cont’ 16  The imposition of customs duties generally require three determinations to be made: – The determination of the proper classification of the imported good; – The determination of the customs value of the imported good; and – The determination of the origin of the imported good.  Specific rules on classification can be found in the International Convention on the Harmonized Commodity Description and Coding System of the WCO, which entered into force on 1 January 1988 and to which most WTO Members are a party. www.simonlacey.net
    17. 17. Tariffs cont’ 17 • • Because most customs duties are ad valorem, it is first necessary for customs officials to determine the value of the imported goods in order to be able to calculate the customs duty due. The WTO agreements contain rules on customs valuation: – Article VII of the GATT entitled Valuation for Customs Purposes” (including its Ad Note) – The WTO Agreement on Implementation of Article VII of the GATT 1994, otherwise known as the Customs Valuation Agreement. • The WTO rules on customs valuation can be quite technical in their application, but essentially require that the actual value of the imported goods be used as a basis for assessing duties (transaction value). www.simonlacey.net
    18. 18. Tariffs cont’ 18 • • • • Customs duties applied to imported goods may differ depending on the country from which the goods were exported. This is especially relevant where preferential tariffs are applied for one reason or another. Rules to determine the origin of imported goods differ from Member to Member and many Members use different rules of origin depending on the purpose for which the origin is determined. However, generally speaking, the rules of origin currently applied by Members are based on: – The principle of value added; or – The principle of change in tariff classification. www.simonlacey.net
    19. 19. Quantitative Restrictions 19  The original non-tariff barrier  In principle, eliminated by GATT Art. XI (numerous exceptions exist)  Definition: “Restrictions which limit the value or quantity of goods which can be imported or exported during a given period”  Different types of QR: •A prohibition or ban on a product which may be absolute or conditional, i.e. only applicable when certain defined conditions are not fulfilled •A quota, i.e. a measure indicating the quantity that may be imported or exported. A quota can be a global quota allocated among different countries or a bilateral quota. •Automatic and non-automatic licensing (most relevant in terms of import licensing); and •Other QRs such as those made effective through State trading operations, a mixing regulation, a minimum price triggering a QR and a voluntary export restraint. www.simonlacey.net
    20. 20. Quantitative Restrictions cont’ 20 In his 1949 book “A Charter for World Trade”, Clair Wilcox described the approach which had been taken in the 1947 negotiations (reflected in the resulting GATT and ITO Charter) towards QRs, and which explain the reasons behind the hostility the US originally felt towards them (p.81): “ The Charter condemns quantitative restrictions; it permits their employment, of necessity, under specified conditions, but only on sufferance and as an exception to the general rules of policy […] Quantitative restrictions … impose rigid limits on the volume of trade. They insulate domestic prices and production against the changing requirements of the world economy. They freeze trade into established channels. They are likely to be discriminatory in purpose and effect. They give the guidance of trade to public officials; they cannot be divorced from politics.” www.simonlacey.net
    21. 21. Quantitative Restrictions cont’ 21  As we have seen, a key objective of the postwar foreign economic policy of the US was the elimination of QRs.  In bilateral discussions between the US and Great Britain in 1943 had anticipated that, in principle, quantitative restrictions would be prohibited. But Britain insisted that they be permitted for dealing with external payment imbalances for a transitional period after the war.  By 1945 it was accepted that exceptions would be needed for three main purposes: – To cope with balance of payments difficulties; – To protect infant industries in poor countries; and – To accommodate certain agricultural programs. www.simonlacey.net
    22. 22. Quantitative Restrictions cont’ 22 The key provision in the GATT on QRs is Art. XI, entitled General Elimination of Quantitative Restrictions “No prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licences or other measures, shall be instituted or maintained by any contracting party on the importation of any product of the territory of any other contracting party or on the exportation or sale for export of any product destined for the territory of any other contracting party.” www.simonlacey.net
    23. 23. Quantitative Restrictions cont’ 23 The basic disciplines and the issues that have been clarified in the GATT and WTO case law on GATT Art. XI include the following:  Only QRs attributable to governments can be challenged, although the degree of public intervention necessary to attribute a measure to a government is not specified;  The term “measure” has been widely interpreted and a typology of the measures which qualify as QRs has been established through case law;  It is not necessary to prove that the intent of the measure is protectionist, nor is it necessary to demonstrate that the effect of the measure reduces imports (no “aims and effects” test)  The relationship between GATT Art. XI and other GATT provisions (particularly Art. III, XX and XIII) has been clarified in the case law. www.simonlacey.net
    24. 24. Quantitative Restrictions cont’ 24  In the Japan-Semi-Conductors case, the Panel ruled on the scope of GATT Art. XI:1 saying that the wording “was comprehensive: it applied to all measures instituted or maintained by a contracting party prohibiting or restricting the importation, exportation or sale for export of products other than measures that take the form of duties, taxes or other charges.” (para. 104).  In India-Autos, India tried to argue that the term “restrictions … on importation” within the meaning of GATT Art. XI:1 only applies to border measures. The Panel rejected this argument and noted that the reference to “other measures” in Art. XI:1 suggest a broad scope as to the kind of measures covered by that provision: “the nature of the measure as a restriction in relation to importation, which is the key factor to consider in determining whether a measure may properly fall within the scope of Art. XI:1.” (para. 7.261). www.simonlacey.net
    25. 25. Quantitative Restrictions cont’ 25 Some examples of measures found to be inconsistent with GATT Art. XI:1  In US-Shrimp, the Panel found that the United States acted inconsistently with GATT Art. XI:1 by imposing an import ban on shrimp and shrimp products harvested by vessels of foreign nationals not certified by the US authorities as using methods not leading to the accidental killing of sea turtles above certain levels;  In EEC-Minimum Import Prices, the Panel found that the prohibition on QRs in GATT Art. XI:1 applied to a system of minimum import prices;  In Japan – Agricultural Products I, the Panel ruled that the prohibition of GATT Art. XI:1 applied to import restrictions made effective through an import monopoly, or more broadly, through State trading operations;  In India – Quantitative Restrictions, the Panel held that non-automatic import licensing systems are import restrictions prohibited by Art. XI:1. www.simonlacey.net
    26. 26. Tariff-Rate Quotas (TRQs) 26  Tariff rate quotas are a hybrid instrument which allow a certain quantity (quota) to be imported at one (lower) tariff rate, with all other imports (the out-of-quota imports) entering at another (higher) tariff rate.  TRQs are used extensively in order to guarantee minimum market access commitments under the Agreement on Agriculture (agreed in order to counter any excesses of the tariffication process).  They are also used sometimes by Members as safeguard measures to remedy injury caused to a domestic industry by a sudden and unexpected surge in imports.  As long as the higher (out-of-quota) level does not exceed the WTO Member’s tariff binding on that good, and the quota is administered in accordance with the relevant GATT rules (see below), they will not face compliance problems. www.simonlacey.net
    27. 27. Exceptions to the Ban on QRs 27  As we have seen above, from the very early days of the GATT there was consensus that exceptions to the ban on QRs would be needed for at least three policy objectives: – To cope with balance of payments difficulties; – To protect infant industries in poor countries; and – To accommodate certain agricultural programs.  Paragraph 2 of GATT Art. XI itself circumscribes the otherwise broad scope of the ban, by stating that the provisions of paragraph 1 shall not extend to: – Export prohibitions or restrictions temporarily applied to prevent or relieve critical shortages of foodstuffs or other essential products; – Import and export prohibitions or restrictions necessary to the application of standards […] – Import restrictions on any agricultural or fisheries product necessary to the enforcement of governmental agricultural support programs. www.simonlacey.net
    28. 28. Exceptions to the Ban on QRs cont’ 28  The most important exception to the ban on QRs (at least today) is undoubtedly contained in GATT Art. XX entitled General Exceptions. The most important exceptions here are usually enacted in order to pursue or more of the following policy objectives: – Protect human, animal or plant life or health – Relating to the conservation of exhaustible natural resources  Another import exception in this regard is GATT Art. XXI entitled Security Exceptions. Here the most important exceptions will be QRs imposed in order to allow members to regulate or stop: – Trade in fissionable materials or the materials from which they are derived; – Traffic in arms, ammunition and implements of war www.simonlacey.net
    29. 29. Exceptions to the Ban on QRs cont’ 29  The Panel in Turkey – Textiles noted (para. 9.64): “ From early in the GATT, in sectors such as agriculture, quantitative restrictions were maintained and even increased … In the sector of textiles and clothing, quantitative restrictions were maintained under the Multifibre Arrangement … Certain contracting parties were even of the view that the quantitative restrictions had gradually been tolerated and accepted as negotiable and that Art. XI could not be, and had never been considered to be, a provision prohibiting such restrictions irrespective of the circumstances specific to each case”  However the economic effects of these bans, as well as other policies was becoming increasingly clear to many countries over time: –The need to integrate the clothing and textiles sector into GATT disciplines was a key concern of developing countries during the Uruguay Round –The trade-distorting effects of protectionist policies in the agricultural sectors of many developed countries had, by the 1980s, become well documented and disciplining these policies in order to mitigate their trade distorting effects was a key objective of many countries in the Uruguay Round. www.simonlacey.net
    30. 30. Exceptions to the Ban on QRs cont’ 30  The Results of the Uruguay Round contain various examples of the successes achieved in strengthening the disciplines on QRs and eliminating the exceptions to Art. XI:1 was a key objective and outcome of the Uruguay Round, which was manifested, inter alia in: – The tarrification process of the Agreement on Agriculture (Art. 3 and footnote 1 of the Agreement) – The ban on imposing new restrictions on imports of textiles and clothing contained in Art.2.4 of the ATC and the phase out of all existing restrictions together with the Agreement pursuant to Art. 9 ATC, – The ban on VERs and other grey area measures in Art. 11 of the Safeguards Agreement. www.simonlacey.net
    31. 31. Exceptions to the Ban on QRs cont’ 31   Even with the success the multilateral trading system has had on policing QRs, many such measures typically remain today. Below an exert from the USTR Trade Barrier Report (2009) for Indonesia: Quantitative Restrictions The Indonesian government requires an import permit from the Directorate General of Livestock Services for imports of animal-based food products. In approving requests for such permits, the Indonesian government arbitrarily may alter the quantity it allows to enter. U.S. industry estimates the annual trade impact of this restriction to be between $10 million and $25 million. Indonesia bans salt imports during the harvest season. It requires salt importers to be registered and to source products locally. Indonesia applies quantitative import limits to imported wines and distilled spirits. Only one registered importer, a state-owned enterprise, is authorized to import alcoholic beverages, with an annual quota set by the Ministries of Trade and Industry. As a result of new mining legislation, mining firms operating in Indonesia will face new restrictions in exporting unprocessed ore. The legislation will require them to process the ore in Indonesia before shipping it abroad. The United States will closely monitor implementation of the law to ensure that it does not constitute an export ban on raw materials. www.simonlacey.net
    32. 32. Exceptions to the Ban on QRs cont’ 32 The Japanese Ministry of International Industry and Trade also monitors trade barriers in its most important trading partners. Below an excerpt from its 2009 report concerning QRs in Canada: QUANTITATIVE RESTRICTIONS Export Restrictions on Logs <Outline of the measure> The Province of British Columbia has prohibited the export of a portion of softwood logs in order to protect its domestic industry. Specifically, provincial law requires that lumber produced from provincial forests be either used or processed within the Province. Raw materials that are not used within the province are exported as superfluous materials only in the event that permission is given by the Lieutenant Governor or Minister of Forestry. However, the export of a portion of high-quality coniferous raw materials, including all Norway spruce and yellow cedar as well as spruce-fir, is prohibited except from certain areas such as native settlements. <Problems under international rules> Since the measure may protect the Province’s domestic industry under the pretext of Forestry Resource Protection, it is highly likely to be in violation of GATT Article XI. Although the measure is that of a local government, pursuant to Paragraph 12 of GATT Article XXIV, Canada is fully responsible for the observance of all GATT provisions by British Columbia. www.simonlacey.net
    33. 33. Administration of QRs 33  In light of the numerous exceptions to the ban on QRs, GATT contracting parties set out from the very outset of the multilateral trading system, to ensure that any remaining QRs would be administered subject to certain disciplines.  GATT Art. XIII contains a number of such disciplines, the most import of which are: – The rule of non-discrimination; – Rules on the distribution of trade; and – Rules on import licensing procedures www.simonlacey.net
    34. 34. Administration of QRs cont’ 34  GATT Art. XIII:1 provides that, QRs, when applied, should be administered in a non-discriminatory manner.  What GATT Art. XIII:1 requires is that is a Member imposes QRs on products to or from another Member, products to or from all other countries are “similarly prohibited or restricted”.  This requirement is an MFN-like obligation, the idea being that like products should be treated equally, irrespective of their origin. www.simonlacey.net
    35. 35. Administration of QRs cont’ 35       The GATT Panel in EEC –Apples I (Chile) found that the EC had acted inconsistently with the non-discrimination obligations of GATT XIII:1. Apples from Argentina, Australia, NZ and SA had been restricted through VERs. The EC tried to reach an agreement with Chile on a similar VER with Chile but the negotiations failed. The EC then adopted measures restricting imports of Chilean apples to aprox. 42’000 tones. The Panel in this case found that the measures applied to Chilean imports by the EC were not a restriction similar to the VERs negotiated with other countries and was thus a violation of GATT XIII:1. The Panel largely came to this finding on the basis that: – There was a difference in transparency between the two types of action; – There was a difference in the administration of the restrictions, the one being an import restriction, the others being export restraints; – The import restrictions were unilateral and mandatory while the other actions were “voluntary” and had been negotiated. www.simonlacey.net
    36. 36. Administration of QRs cont’ 36   If QRs, other than a prohibition or ban, are applied on the importation of a product, the question arises how the trade that is still allowed is to be allocated. In this respect, the chapeau of GATT XIII:2 provides In applying import restrictions to any product, [Members] shall aim at a distribution of trade in such product approaching as closely as possible the shares which the various [Members] might be expected to obtain in the absence of such restrictions.  Moreover, GATT XIII:2 sets out a number of requirements to be met when imposing QRs. Art. XIII2(a) states: Wherever practicable, the quotas representing the total amount of permitted imports (whether allocated among supplying countries or not) shall be fixed, and notice given of their amount in accordance with paragraph 3(b) of this Article.  In cases where a quota is allocated among supplying countries, GATT XIII:2 (d) provides: The [Member] applying the restrictions may seek agreement with respect to the allocation of shares in the quota with all other [Members] having a substantial interest in supplying the product concerned www.simonlacey.net
    37. 37. Administration of QRs cont’ 37  However, where this method of allocating the shares in the quota “is not reasonably practicable”, i.e. when no agreement can be reached with all the Members having a substantial interest, the Member applying the quota must be allocated on the basis of Members’ shares of trade during a previous representative period (normally 3 years).  Quotas allocated among supplying countries must be allocated among all Members having a substantial interest in supplying the product.  There is no obligation to allocate a part of the quota to Members without a substantial interest in supplying the product concerned.  This provision can be considered as lex specialis to the general requirements of MFN, since it allows for discrimination between Members with and Members without a substantial interest in supplying the product at issue. www.simonlacey.net
    38. 38. Import Licensing 38  Quotas (and TRQs-more on this later) are usually administered by means of importlicensing procedures.  Art. 1.1 of the Import Licensing Agreement defines import-licensing procedures as: administrative procedures … requiring the submission of an application or other documentation (other than that required for customs purposes) to the relevant administrative body as a prior condition for the importation into the customs territory of the importing Member  Article 1 of the Import Licensing Agreement sets out rules on the application and administration of import-licensing rules, the most important of which (Art 1.3), reads: The rules for import licensing procedures shall be neutral in application and administered in a fair and equitable manner. www.simonlacey.net
    39. 39. Import Licensing cont’ 39  The Import Licensing Agreement distinguishes between two kinds of licensing: ‒ Automatic ‒ Non-automatic  The two underlying and dominant principles of the Import Licensing Agreement are ‒ Neutrality, fairness and equity (non-trade-distorting) ‒ Transparency (publication and notification) www.simonlacey.net
    40. 40. Import Licensing cont’ 40  Automatic import licensing is defined as import licensing where approval of the application is granted in all cases (provided all the required documentation is provided).  Automatic import licensing is used by governments for various purposes, including to collect statistical and other information on imports.  Art. 2.2 of the Import Licensing Agreement requires that automatic importlicensing procedures shall not be administered in such a manner as to have “restrictive effects on imports subject to automatic licensing”. www.simonlacey.net
    41. 41. Import Licensing cont’ 41    Non-automatic import licensing is import licensing where approval is not granted in all cases. Import licensing procedures for quotas and TRQs are by definition non-automatic import licensing procedures. Article 3.2 of the Import Licensing Agreement requires that: Non-automatic licensing shall not have trade-restrictive or distortive effects on imports additional to those caused by the imposition of the restriction  Other requirements relating to non-automatic import licensing concern: – – – – – – Non-discrimination among applicants for import licenses; The obligation to give reasons for refusing an application; The right of appeal or review of the decision on applications; Time-limits for processing applications The validity of import licenses; and The desirability of issuing licenses for products in economic quantities www.simonlacey.net
    42. 42. Other non-tariff barriers 42  As the term indicates, this is a residual category of measures and actions that restrict, to various degrees and in different ways, market access for goods and which are not administered in the form or a tariff.  This category covers numerous rather different measures and actions, such as: – – – – – – – Technical barriers to trade Sanitary and phytosanitary measures Customs formalities and procedures Government procurement practices State trading agencies Lack of transparency Other measures or actions, such as preshipment inspection et al. www.simonlacey.net
    43. 43. Why do we have an agreement on technical barriers to trade? 43    Standards, as an issue, is a relatively late edition to multilateral disciplines; The General Agreement (GATT), drafted in 1947, makes no specific reference to them; The impetus to negotiate rules on standards in the late 60s and early 70s, came from three directions: – – – General recognition of the fact that, of the 900 notifications in the GATT nontariff measure (NTM) inventory, about 150 of them involved or were linked to the application of standards. US interest in the negotiation of GATT rules for standards quickened by the action of Britain, France and Germany in concluding a tri-partite agreement (CENEL) for the harmonization and certification of electronic components European view that the US was considerably less willing to adopt international standards than the Europeans themselves. The EC Commission was keenly interested in having the US accept the standards it was formulating, as this would increase its authority vis-à-vis EC Member States. www.simonlacey.net
    44. 44. Uruguay Round and TBT 44   The Punta del Este declaration which launched the Uruguay Round in September 1986 did not contain specific language on negotiating a new standards code (unlike other areas such as agriculture, services, intellectual property). In the context of standards, the Punta del Este declaration limited itself to a statement, under a heading entitled “MTN Agreements and Arrangements”, saying: “Negotiations shall aim to improve clarify, or expand, as appropriate, Agreements and Arrangements negotiated in the Tokyo Round of Multilateral Negotiations”   Generally there was a feeling that the Tokyo Round Standards Code had worked well, and that it only needed slight improvement in a limited number of areas. Negotiating texts in the UR focused mainly on widening its scope and making its rules more effective. www.simonlacey.net
    45. 45. Substantive Scope of the WTO TBT Agreement 45  The rules of the TBT Agreement apply to a “limited class of measures”: – Technical regulations – Standards; and – Conformity assessment procedures  These three types of measure are defined in Annex 1 to the TBT Agreement. www.simonlacey.net
    46. 46. Definitions of Technical Barriers to Trade 46  Annex 1.1. defines a technical regulation as a “[d]ocument which lays down product characteristics or their related processes and production methods, including the applicable administrative provisions, with which compliance is mandatory. It may also include or deal exclusively with terminology, symbols, packaging, marking or labelling requirements as they apply to a product, process or production method.”  Annex 1.2. defines a standard as a “[d]ocument approved by a recognized body, that provides, for common and repeated use, rules, guidelines or characteristics for products or related processes and production methods, with which compliance is not mandatory. It may also include or deal exclusively with terminology, symbols, packaging, marking or labelling requirements as they apply to a product, process or production method.  Annex 1.3 defines a conformity assessment procedure as: “Any procedure used, directly or indirectly, to determine that relevant requirements in technical regulations or standards are fulfilled.” www.simonlacey.net
    47. 47. The Agreement on Sanitary and Phytosanitary Measures 47 Two-Fold Objective of the SPS Agreement To recognize the sovereign right of WTO Members to provide the level of health protection they deem appropriate; and To ensure that SPS measures do not represent unnecessary, arbitrary, scientifically unjustifiable, or disguised restrictions on international trade. www.simonlacey.net
    48. 48. Scope of the SPS Agreement 48 Article 1.1 of the SPS Agreement defines the scope of application of the Agreement and provides that: “This Agreement applies to all sanitary and phytosanitary measures which may, directly or indirectly, affect international trade. Such measures shall be developed and applied in accordance with the provisions of this Agreement.” www.simonlacey.net
    49. 49. What is an SPS measure? 49 To fall under the SPS Agreement’s scope and coverage, a measure must:  Be a sanitary or phytosanitary measure; and  Directly or indirectly affect international trade. www.simonlacey.net
    50. 50. What is an SPS Measure? – cont. 50 A sanitary or phytosanitary measure or “SPS measure” is defined in para. 1 of Annex A to the SPS Agreement as any measure applied: (a) to protect animal or plant life or health within the territory of the Member from risks arising from the entry, establishment or spread of pests, diseases, disease-carrying organisms or disease-causing organisms; (b) to protect human or animal life or health within the territory of the Member from risks arising from additives, contaminants, toxins or disease-causing organisms in foods, beverages or feedstuffs; (c) to protect human life or health within the territory of the Member from risks arising from diseases carried by animals, plants or products thereof, or from the entry, establishment or spread of pests; or (d) to prevent or limit other damage within the territory of the Member from the entry, establishment or spread of pests. www.simonlacey.net
    51. 51. What is an SPS Measure? – cont. 51 Paragraph 1 of Annex A of the SPS Agreement provides a non-exhaustive list of SPS measures. Among them: •End product criteria; •Processes and production methods; •Testing, inspection, certification and approval procedures; •Quarantine treatments including those associated with the international transport of animals or plants (or those concerning the materials necessary for their survival during transport); •Provisions on relevant statistical methods; •Sampling procedures and methods of risk assessment and packaging and labeling requirements that are directly related to food safety. www.simonlacey.net
    52. 52. Relationship between the SPS and the TBT Agreements 52 • As set out in Art. 1.5 of the TBT Agreement, the TBT Agreement does not apply to SPS measures. • When a measure is an SPS measure as defined in Annex A(1) to the SPS Agreement, the SPS Agreement applies to the exclusion of the TBT Agreement, even if the measure would otherwise be considered a “technical regulation, standard or conformity assessment procedure” for purposes of the TBT Agreement. www.simonlacey.net
    53. 53. Examples of TBT and SPS Measures 53 TBT measures typically deal with: SPS measures typically deal with: Labeling of composition or quality of food, drink and drugs;  Additives in food or drink;  Contaminants in food or drink;  Certification: food safety, animal or plant health;  Processing methods with implications for food safety;  Other sanitary requirements for imports;  Labeling requirements directly related to food safety and others. Quality requirements for fresh food; Volume, shape and appearance of packaging;  Testing vehicles and accessories; Regulations for ships and ship equipment;  Safety regulations for toys. www.simonlacey.net
    54. 54. Summary 54      Governments have proven very ingenious in finding ways to manage trade, particularly imports, and subject them to various restrictions, designed to pursue various policy objectives. Nevertheless, market access remains a key driver of much of the WTO’s activities and is at the very heart of what the Organization is about. Tariffs are the most important market access barrier, but quantitative restrictions, although subject to a general ban in theory, are also an important market access barrier. Today, traders are faced with a complex array of varying obstacles and procedures that need to be overcome or complied with before they can import (or export) their products. Trade is more highly regulated than ever, and is still anything but “free”. www.simonlacey.net
    55. 55. Thank You UPH MTIC Program | Introduction to WTO Law Market Access in the WTO Simon Lacey