International Business Law EXAM FOUR

World Trade Organization (WTO)

- The most important intergovernmental organization for world trade - Provides the framework by which we regulate world trade and provides rules countries must follow - If rules aren't followed, then the WTO steps in to assist - Headquarters are in Geneva, Switzerland

Technical Regulations

- a technical regulation is a law or regulation regarding the technical chrematistics of the item meaning its performance (why it performs well), design, construction, and packaging that must be met before a product can be imported into a country - this means testing of a product's is required beforehand as well as inspect of product

How world trade organization functions

1. They administer WTO agreements - WTO agreements are the agreements its member nations have agreed to abide by - once WTO agreements are made, the WTO will make sure the agreements are followed 2. Provides a forum that carries out future trade negotiations - forms negotiation rounds where member countries come together and agree on trade agreements 3. Provides a forum for the settlement of trade disputes - if member countries agree to WTO agreements and one member country violates the agreement, it has nullified (deprived them of value) or impaired the rights of the other member country. then the impaired country will contact the WTO for assistance.

WTO Must Perform Investigation First Before We Can Legally Discriminate Against Foreign Imports

1. WTO needs evidence that increased imports caused injury: an exception to WTO discrimination occurs under limited circumstances, and a country may use temporary safeguards to protect a domestic industry from injury caused by increased imports 2. If the WTO allows us to discriminate, it will allow us to use temporary safeguards against injury: - safeguards are used as emergency remedies only and the protect us from harm or damage, usually in the form of tariffs ( tax levied on an imports), that are used to protect a domestic industry from injury resulting from increased imports of similar products - Increased tariffs may last no longer than 4 years - can extend for four additional years if WTO allows us - tariffs must be placed on all countries importing that particular product causing a market disruption safeguards against injury allow home industry time to recover 3. Trade compensation required in return: the act of lowering import tariffs on certain products coming from a foreign country for the purpose of offsetting increased tariffs imposed on other products from that country

The process of Impaired Country using WTO for dispute

1. the WTO will request both countries enter into a trade negotiation - a trade negotiation is the process in which countries meet together with the goal of reaching a trade agreement 2. if trade negotiations fail, will use the WTO dispute settlement body - the WTO dispute settlement body is made up of representatives of member countries that listen to all of the evidence and issue a binding descion (must by obeyed)

WTO Dispute Settlement Body

1. the purpose of the WTO dispute settlement body is to prevent a trade war - a trade war is when other countries retaliate against other countries by raising higher tariffs or imposing non-tariff trade barriers without the WTO's consent 2. if the WTO's dispute settlement body's binding decision is not followed, then WTO will authorize sanctions - a sanction is a penalty for disobeying a law or rule - the type of sanction used is a withdrawal or suspension of a concession this means that the countries affected by one countries bad act will be allowed to legally increase their tariff rates on that particular county; this includes withdrawing (taking back agreement) or suspending (stopping for certain amount of time) a tariff concession

Ad Valorem Tariff vs Specific Tariff

Ad valorem tariff: - computed on a fixed percentage of the value (purchase price) of the imported good - ex: we important care bears from another country and the U.S. adds a 10% ad valorem tariff to each bear. This means that if the bear costs $100 and the ad valorem tax is 10% the care bear will cost $110. Specific tariff: - computed on the basis of physical units - physical characteristics of units include the weight, size, and quantity of the imported product - ex: U.S. has a specific tariff of $20 per pound of care bears, we buy one care bear and it weighs one pound so the care bear will cost $100 + $20 (specific tax) making it $120.

Regulating Import Competition

Import competition: occurs when a private or domestic firm is competing with imports of the same good from a foreign company Import Competition is an exception to WTOs rule against discrimination: - we can use an exception to WTO discrimination under limited circumstances when a domestic/home industry is injured due to increased imports When a domestic/home industry is injured due to increased imports: - the injury is a market disruption and when increased imports of foreign goods cause decreased sales volume, lower profits, or lower wages in our home market - ex: we make product's here and an identical foreign good is coming in and hurting our market

Barriers to Trade Regarding Intellectual Property Rights

Intellectual Property Rights: - the legal rights resulting from intellectual activity of the owner Types of Intellectual Property Rights: - patents (inventions) - copy rights (literary/artistic) - trademarks (brand names/logos) - trade secrets (secret formulas to a product) The WTO Agreement on Trade-Related Aspects of Intellectual Property (TRIPS): - refers to government rules or regulations on intellectual property rights that have an effect on trade in goods and requires that all domestic and foreign intellectual property right owners, regardless of their citizenship, be treated the same under other member countries intellectual property rights laws - all domestic and foreign intellectual property rights owners are equal

Membership rights of WTO countries

Nondiscrimination and Unconditional Most-Favored-Nation Trade: - one of the basic rights of membership in the WTO is non discrimination - non discrimination means every WTO member country must treat the goods of other WTO member countries equally and without discrimination - a WTO member country can't choose favorites by just trading with some member countries but not all member countries -a WTO member country can't choose favorites by giving lower tariff rates to some member countries but not all member countries Another membership right is having Most-Favored-Nation Status: - when a country grants a country "Most-Favored-Nation Status" then items imported from the nations will be given most favorable treatment (lowest tariff rates). - when one member country grants a Most-Favored-Nation status to one country regarding a particular item, it must grant Most-Favored-Nation status to ALL WTO member countries regarding the same item

Why the WTO exists

The WTO exists to encourage world trade: - assists by reducing barriers to trade - reciprocal tariff reductions and bound commitments meaning to reduce tariffs through tariff concessions Tariff Concession: each country's promise to reduce tariffs on specific imported items from member countries in return for those member countries reducing their tariffs on some other specific item; the agreed upon tariff rates are known as tariff bindings Bound Rate: the maximum tariff rate a country may charge on an item

Must Get WTOs approval for antidumping first

The WTO will first do an investigation: 1. must show that dumped products have injured domestic industry producing like products - Like products: similar/identical products made by different countries 2. How to prove the existence of like products: - The U.S. International Trade Adminsitration (ITA) will ensure fair trade at home and abroad by enforcing U.S. trade laws and agreements and compare the two products by examining the following: - physical characteristics of the two products (are they similar?) - whether the two products are made of similar material - whether the two products are equal commercial value - whether the two products are used for the same purpose - Must prove that like products impaired domestic market - the WTO will investigate to determine whether domestic market was impaired

World Trade Organization Market Access Agreements

WTO agreements: - are agreements that member countries have agreed to abide by WTO market access agreements: - are a specific type of WTO agreement - these are agreements that provide exporters of goods with market access (the ability of countries to sell goods and services across borders) so that goods and services can be exported there - countries agree to follow the principle of least restrictive trade in WTO market access agreements

Subsidies

a financial contribution of any form of income or price support by not collecting taxes, made by a government which confers a benefit on a specific domestic enterprise or on a specific domestic industry Price support: the minimum legal price a seller may charge and, if there is a surplus of goods, the government will purchase the surplus Surplus: the amount of something left over when requirements have been met Domestic enterprise: is the government only giving money to a specific companies in a certain industry Domestic industry: is the government giving money to all companies in a specific industry

Multilateral Trade Negotiation

a specific form of a WTO agreement, where several countries that are members of the WTO come together and agree to trade in a certain way - this involves member countries - negotiation is a discussion aimed at reaching an agreement

Subsidized Business

a subsidized business is a business that receives some form of monetary benefit from its domestic government Subsidized businesses have an unfair advantage over unsubsidized business: - subsidized business can sell their products in markets in foreign countries at lower prices than unsubsidized businesses 1. prohibited subsidies are not permissible and banned under all conditions: - export subsidy: domestic firm receives export subsidy - Import substitution subsidy: government pays business if the business uses or purchases domestically made goods over foreign goods imported into the country 2. if you believe a country is using prohibited subsidies: - go to the WTO dispute settlement body - WTO will conduct an investigation - the WTO will order the country to remove the subsidy if the country doesn't remove subsidy, a country will be sanctioned with counter measures Counter measures: are increased and punitive tariffs in an amount needed to offset the subsidies to make international trade fair again - increasing tariffs so high that they become punitive

Import Trade Barrier

a trade barrier is any obstacle to trade in goods and services; a import trade barrier is any impediment (hindrance or obstacle) to the entrance of imported goods or services into the importing country Reasons for Import Trade Barriers: - to collect revenue/money - to retaliate against a foreign governments trade barriers against us - to carry out foreign policy - to protect public health Types of Import Trade Barriers: - Ad Valorem Tariff - Specific Tariff

Types of trade barriers

a trade barrier is any obstacle to trade in goods or services Technical Barrier to Trade: - this is a technical regulation that applies to imported foreign goods

WTO Agreement on Technical Barriers to Trade (TBT Agreement)

an agreement between all member countries of the WTO that prohibits countries from using their regulations or standards to discriminate against the import of foreign goods to one another Goal of TBT Agreement is to Minimize Technical Barriers to Trade: 1. providing harmonization 2. providing equivalence meaning the WTO members will agree to accept and recognize that the other countries foreign standards that are equivalent of their own 3. providing mutual recognition which mans that WTO members will mutually recognize the certifications of foreign inspection firms rather than making the import obtain certifications in each country they export too conformity assessments: occurs when one country recognizes the certification of products from another countries

Non-Tariff Import Trade Barrier

any impediment to trade other than tariffs Types of Non-tariff Import Trade Barriers: 1. Direct Non-Tariff Import Trade Barrier: - specifically limits imports of goods or services (we don't want specific product's coming in or imports from certain countries) - used for the sole and apparent purpose of limited the importation of goods or services - an example of this is an embargo (an official ban on trade with a particular country) - These direct trade barriers are discouraged 2. Indirect Non-Tariff Import Trade barrier: - a barrier that seems perfectly neutral and not targeted at keeping out particular goods from a specific country - an example is an ad in a newspaper saying everyone can apply that is at least six feet tall - These non direct barriers are discouraged 3. If countries agree, then it is legal to do direct or indirect non-tariff import barriers

Unfair Trade Practices

generally refers to any fraudulent, deceptive, or dishonest trade practices that is prohibited by law Forms of International Unfair Trade Practices: - Dumping: the selling of goods in a foreign country for less than the price charged for "like" or comparable products in the producer's home market. Those law prices make it harder to compete with and drives out all competition; allowing foreign competitors to become a monopoly - Monopoly: the exclusive possession or control of the supply or trade of a commodity or service; this then allows the monopoly to charge high prices

WTO Dispute Settlement Body

if a country violates a WTO Agreement, they go through the WTO dispute settlement body process Dispute settlement process steps: - negation between involved countries - dispute settlement body hearing - WTO approves injured country to issue punitive tariffs Use section 301 of the U.S. Trade Act of 1974: allows the U.S. to take retaliatory trade action against other countries that have discriminated against the U.S.; the purpose of Section 301 is to discourage foreign countries from violating their agreements with the U.S.

Principle of Least Restrictive Trade

this means that if a country is gong to set a valid restriction, they should not make that restriction more burdensome than necessary to achieve the goals for which the restriction was imposed - the principle of least restrictive trade is one of the most important legal concepts in international trade - countries make rules regarding exports to protect its citizen and these rules are called trade restrictions - all these trade restrictions should not be more burdensome than necessary - all WTO member countries must agree to use this principle of least restrictive trade with other WTO member countries

Antidumping duties

to remedy dumping, a country can impose antidumping duties Duty: a tax levied on an imported good;( a tariff) Antidumping duties: are special import tariffs assessed in addition to normal tariffs (ad valorem/specific) already imposed on those particular goods, for the purpose of offsetting the unfairly low priced of dumped goods Dumped Product: the imported product that is being sold extremely low in the domestic country while the foreign producer actually sells it for much lower in their own country

Barriers to Trade in Services

trade in services: is in engaging in trade selling services (professional and non professional), not goods Categories of Trade in Services: 1. Cross-Border Supply when services are supplied from one country to another country 2. Consumption Abroad when there is use of a service in one country 3.Commercial Presence when a foreign company sets up branches to provide services in another country 4. Presence of natural persons occurs when individuals travel from their own country to supply services in another WTO General Agreement on Trade in Services (GATS): this is an agreement that establishes rules for intonational trade in services, and states that countries may not treat foreign provides less favorably that domestic providers