IEC Lec 4: The GATT and the WTO

What are the principles governing the SPS agreement ?

*1. Countries can set their own standards (cf. the WTO should respect its member countries' sovereignty in this matter)* *2. However, the WTO defines strict limitations in view of preventing protectionist misuse:* • Standards should have a clear scientific justification The WTO itself does not decide on scientific legitimacy, but in such matters refers to three international scientific organisations whose mandates are to develop both international standards and international standards-setting guidelines in their relevant areas • Standards should be applied only to the extent necessary to protect human, animal or plant life or health. They should not be "unreasonable". For instance, if a product has negative effects on a small subset of consumers (e.g. people with a certain allergy), a general import ban for that product is not acceptable and instead labelling should be thought of • Standards should not arbitrarily or unjustifiably discriminate between countries where identical or similar conditions prevail *3. Member countries should use international standards, guidelines and recommendations where they exist:* • Trade policy is not the first-best instrument to deal with such issues (and also, for instance, not for environmental issues) since international treaties are superior. E.g. trade restrictions per definition do not limit the catch of endangered animals for domestic consumption • Differences in national standards can create an unstable environment for trade. Example: can an exporter be sure that the standards of his/her home country are also acceptable in the country that imports? • If the exporting country can demonstrate that the measures it applies to its exports achieve the same level of health protection as the measures in the importing country, then the importing country is expected to accept the exporting country's standards and methods *4. The precautionary principle ("better safe than sorry") can be applied when scientific uncertainty exists.* However, restrictions should be: • Based on what is known • Proportionate to the suspected risks (should be "reasonable")

What are the five principles of the WTO ? Describe them.

*1. Multilateral approach to trade liberalisation* The WTO pursues trade liberalisation at the level of its entire membership within elaborate trade rounds. Reasons: • Worldwide free trade maximises welfare creation at the level of the world economy as well as at the level of each nation • Trade liberalisation via bilateral approaches as in the pre-GATT period would inevitably favour larger countries in view of their larger bargaining power Practically: The WTO desires a multilateral approach coupled with a single-undertaking approach. The latter means that agreements on specific issues are tied to the overall success or failure of the other negotiations (i.e. "nothing is agreed until everything is agreed"). The deadlock in the Doha Round (2001-2008(?)) seems to have led to two new developments: - Emergence of single-issue multilateral deals (e.g. Trade Facilitation Agreement (2017)) - Emergence of more plurilateral deals that embody commitments within a (large) group of member countries (e.g. E-commerce) *2. Non-discrimination* Three principles: • The *principle of "like products" or "like goods"*: Goods are grouped according to their end-use and not according to the Process and Production Methods (PPM) that created them. Thus, trade restrictions can never be based on differences of the PPM when goods are identical in terms of end-use. Example: the production of textiles in developed countries is capital- intensive, whereas it is labour-intensive in developing nations. However, no distinction can be made between textiles in function of the underlying PPM (e.g. no trade restrictions for textiles based on labour conditions in developing nations not being at the level of labour standards in developed nations) • The *principle of national treatment*. Equal treatment of imported goods and locally produced goods should apply after the imported goods have entered the domestic market of the importing country, i.e. after the imposition of potential tariffs such that there is no discrimination behind the border. Examples: no different VAT rates, safety standards for imported goods should not differ from those that apply to domestically- produced goods, etc Note: Guaranteeing also a "level playing field" ("behind-the-borders liberalisation") is turning into the main focus of the newer type of preferential trade agreements such as the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) • The *Most-Favoured-Nation principle (MFN)*: Countries are not allowed to discriminate between trading partners. When a member country of the WTO grants a special favour, such as a reduced import duty, to another member country, the favour is automatically extended to all other member countries. Phrased differently, every member country remains the most-favoured nation of every other member country such that there is no discrimination at the border. Exceptions: • Preferential Trade Agreements (PTA, Article XXIV of the GATT): The trade preferences within the PTA only apply to the member countries of the PTA. Phrased differently, PTA discriminate against outsiders. Two types of PTA: - Free trade area: internal visible trade restrictions are abolished, but there is no harmonised external trade policy. Most prominent example: the North-American Free Trade Agreement (NAFTA, will be rebranded as the Unites States - Mexico - Canada Agreement (USMCA)?) - Customs union: internal visible trade restrictions are abolished and there is a harmonised external trade policy (the Common External Tariff, CET). Most prominent example: the European Union (EU) *3. Reciprocity* • If one member country grants a concession, other member countries should offer equivalent concessions. Similarly, if one member country withdraws a concession, the other member countries are allowed to withdraw concessions or to demand compensatory concessions Exception to the principle of reciprocity: the differential treatment of developing nations in, for instance, the GSP (i.e. unilateral advantages) and the "less-than-full- reciprocity"-principle in the Doha Round (2/3rd of the effort by developed nations, 1/3rd of the effort by developing nations). *4. Prohibition of trade restrictions other than tariffs: Tariffication* Advantages of tariffs over other types of restrictions: • Tariffs and their effects on prices are easier to quantify since they are percentages of the price (ad valorem) or specific (in function of metric tonnes, etc.): the price effect of a tariff is clear, whereas the price effect of an import quota of 2000 cars is less straightforward to assess. This advantage of tariffs facilitates negotiations on trade liberalisation. • Tariffs are market-conform since they do not obstruct functioning of the price mechanism. In the case of tariffs (that act as a tax upon the world market price), the quantity demanded is still determined by market forces, whereas in the case of quotas the quantity demanded cannot exceed the size of the quota. *5. Predictability* Establishing a stable and predictable environment for international trade via: • "Tariff binding" or "bound tariffs": - Ceilings are defined ("bound tariffs") such that sudden and/or substantial increases are ruled out. Note: actual tariffs may be (substantially) below the bound tariffs ("binding overhang"). - Bound tariffs can only be changed in negotiation with the trading partners that are allowed to demand compensation for the loss of trade. Result: bound tariffs in practice do not increase again such that any decrease in bound tariffs is "locked in" and backsliding in times of economic hardship is in practice prevented. At the moment, the percentage of tariffs that is bound amounts to 99%in developed nations, 98% in transition economies and 73% in developing nations • Increasing transparency on member countries' trade regulations: - Public disclosure and notification to the WTO of all relevant policies and practices - Regular surveillance through the WTO's Trade Policy Review Mechanism (TPRM) in which national trade policies are critically examined - Most documents are made available on the internet (e.g. Accession Protocol of China), extensive databases on tariffs are publicly accessible, etc

What are the perceived benefits of the DSB for poorer nations ?

It is argued that the DSB has especially enabled smaller and poorer nations to achieve changes in the trade policies of much larger countries since in the DSB there is no difference in terms of bargaining power between small and large countries. Note that the Director-General (i.e. the WTO) does not have the authority to initiate a dispute settlement case even in the case of blatant violations of the WTO's principles. Only the member countries can initiate case (cf. the WTO being member-driven and the fear of letting the WTO to become too powerful).

What are the conditions for the imposition of safeguards ?

A WTO member may temporarily restrict imports of a product, i.e. take safeguard actions: • When a "surge" in imports takes place • When the surge is unforeseen. Increases in imports that could have been foreseen cannot justify safeguard measures since the domestic importing-competing sector has had time to prepare itself to face the new challenges • When the surge in imports injures the domestic industry or threatens to injure the domestic industry. The complaining government must also provide evidence that such measures are in the public interest • The injury has to be "serious"

What is dumping ? How can we assess the occurrence of dumping ?

Dumping takes place when a product is exported at a price that is lower than the price at which the identical or a similar product is sold by the same producer on the exporting country's domestic market. The relevant price for comparison is the "normal value", which is: - The price in the exporter's domestic market - If such price is not available (e.g. the product in that form is not sold on the exporter's domestic market when, for instance, a more elaborate variety of the product is exported whilst only a less advanced variety is sold on the domestic market): • The price charged by the exporter in another country • The price calculated on the basis of determining the sum of the exporter's production costs, other expenses and normal profit margins

What can a country do if dumping is proven ?

If dumping is proven, antidumping measures can be imposed. Antidumping measures are *(extra) import duties* that bring import prices closer to the "normal value" and thus remove the injury to the import-competing industry

Why was the TRIPS agreement made ?

Ideas and knowledge are an increasingly important element of trade as, for instance, most of the value of new medicines and other technology-intensive products lies in innovation, research, design and testing. Hence, the desire to safeguard innovation by providing international protection for intellectual property rights such as patents, blueprints and trademarks.

What can a country do in the face of adverse subsidies ?

In order to offset the effect of subsidies, a special import tax can be imposed (countervailing duties). Note: all subsidies given by developing nations within the spirit of the infant-industry argument for protection are allowed for

What are the conditions to be followed when imposing countervailing duties on subsidies ?

In the case of prohibited subsidies: • No need for proving injury • When the WTO confirms the presence of prohibited subsidies and when they are not withdrawn immediately, countervailing duties can be imposed by the member country that is negatively affected In the case of actionable subsidies: • The complaining country has to show that the subsidy has an adverse effect on its interests • When the WTO confirms the presence of actionable subsidies that have an adverse effect on the complaining country and when they are not withdrawn immediately, countervailing duties can be imposed by the member country that is negatively affected

What fundamental WTO principle lead to the apparition of the "debate on standards" or "regulatory protection" ?

One of the fundamental principles of the WTO is the principle of non-discrimination: • The principle of "like products" or "like goods" • The principle of national treatment • The Most-Favoured-Nation principle (MFN) Two WTO agreements define legitimate violations to the "like-goods" principle of non-discrimination. They allow member countries to restrict trade in order, for instance, to protect human, animal or plant life or health, and take into account the process and production methods (PPM) of the goods (which is officially not allowed under the "like-goods" non-discrimination principle). This flexibility leads to the "debate on standards" or "regulatory protection". Again, we have a difficult balancing act: allowing countries to set their own standards whilst guaranteeing that such standards are not misused for protectionist purposes (note: danger of "regulatory capture" by powerful interest groups). This is a fairly technical topic, but its importance should not be underestimated especially in a world in which the role of the "traditional" instruments of trade policy is on the decrease.

What are safeguards ? What form can they take ?

Safeguards are emergency measures that temporarily limit imports in order to "safeguard" the domestic import- competing industries from a major disruption due to an unforeseeable surge in imports. Safeguards take the form of import tariffs and quotas.

Why was the GATS put in place ?

The GATS was a response to the substantial growth of the services economy and the greater potential for trading services that is brought about by, for instance, the telecommunications revolution. However, obtaining an agreement was not an easy process since many countries believed that the GATS could undermine their ability to pursue national policy objectives and could constrain their regulatory powers (balancing act: economic efficiency versus national sovereignty) E.g. the huge reservations of member countries concerning granting foreign banks access to domestic financial markets

What is the goal of the SPS agreement ?

The SPS agreement should ensure health and safety, but it should also guarantee that health and safety concerns do not develop into a smokescreen for protecting domestic producers.

Explain the recent US steel tariff and the EU complaint against it.

The US introduced tariffs on steel at 25% in the first half of 2018 in which it invoked Section 232 of its Trade Expansion Act of 1962. This Section 232 allows for tariffs if "an article is being imported into the United States in such quantities or under such circumstances as to threaten or impair the national security". The EU initiated a complaint at the WTO (DS548) in which it argues that the tariffs violate the rules of the safeguard mechanism. The US argued that the tariffs were not introduced on the basis of the safeguard mechanism, but out of security concerns and that this is compatible with the Security Exceptions in Article XXI of the GATT. "Curious" elements: • The EU's argument via the safeguard mechanism • Steel from Argentina, Australia, South-Korea and Brazil is exempt from the US tariffs on steel

Why was the Dispute Settlement Body (DSN) put in place ? In what context ?

The Uruguay Round (1986-1994) fundamentally reformed the then existing system of dispute settlement that threatened to endanger effectiveness, legitimacy and credibility of the GATT Until 1995: o No fixed timetable o Rulings were easy to block since they had to be adopted by consensus o Many cases dragged inconclusively on for a long time

What is the definition of subsidies ? What are the types of subsidies considered by the WTO ?

The WTO only deals with so-called specific subsidies that are made available to an enterprise, industry, group of enterprises, or group of industries in the country. The WTO will thus not deal with general R&D subsidies, etc. These specific subsidies can take the form of domestic or export subsidies: • Prohibited subsidies (red category) require recipients to meet certain export targets or to use domestic goods instead of imported goods. Such subsidies are prohibited since they are specifically designed to distort international trade. • Actionable subsidies (orange or amber category) are permitted unless the complaining country shows that the subsidy has an adverse effect on its interests.

What is the goal of the TRIPS agreement ?

The basic goal of the TRIPS agreement is to provide more order and predictability via the principle of non-discrimination.

What is contentious about the TRIPS agreement ? What are the consequences of this contention for the functioning of the TRIPS ?

The probably most contentious dimension: TRIPS and pharmaceutical products in which a difficult balancing act arises between trade concerns and humanitarian concerns - Protection of intellectual property rights should stimulate innovation - Protection of intellectual property rights should not make medication unaffordable for poor nations, i.e. the desire to protect public health and promote access to medicines for all Prime and most visible example of this balancing act: the access to pharmaceutical products in the field of epidemics (tuberculosis, HIV/AIDS, malaria, etc) for poorer countries Hereto, the member countries of the WTO in 2003 extended the so-called TRIPS flexibilities ["flexibilities" is the WTO's term for deviations from general rules]: Production under compulsory licensing: a country can allow production of the patented pharmaceutical product on its territory without the consent of the patent owner. Initially, the production could solely target the domestic market in order to safeguard the interests of the patent holder in other markets (e.g. production under compulsory licensing in India for India). Since 2005, also exports are allowed to countries that lack the required productive capacities (e.g. exports from India to Uganda). Allowing for parallel imports, i.e. importing the patented products outside, and thus parallel to, the distribution channels that are authorised by the patent holder. This implies the purchase of a patented product abroad, rather than directly from the patent-holding company or the local authorised distributor. Advantage: a country can take advantage of the fact that pharmaceutical companies tend to charge different prices across countries for identical products ("pricing-to-market") Notes: • The WTO members decided in 2005 that this amendment to the TRIPS agreement of 2003 should become permanent. This amendment will enter into force when at least two thirds of the member countries accept this amendment. • The Least-Developed Country (LDC) members are freed from offering drug patent protection (i.e. from applying the TRIPS arrangements in this field) until at least January 2033.

What are the characteristics of the trade in agricultural products currently ? What is the WTO member countries' stance towards this market ?

Trade in agricultural products still is *highly distorted*. Trade is distorted if prices are higher or lower than "normal" and if quantities produced, bought, and sold are higher or lower than "normal" in which "normal" refers to the situation that would characterise a competitive market (i.e. without government intervention): • Domestic agricultural output in many developed economies (especially EU, US and Japan) is higher that "normal" due to various support measures (e.g. import tariffs and export subsidies). • The *supporting import tariffs* also cause local prices to be higher than "normal" in many developed nations. • The *supporting export subsidies* have the effect that export prices are lower than "normal" The WTO member countries have agreed upon the principle of moving away from support that distorts international trade. This is a clear break with the practices of the past. However, there still is a long way to go before trade in agricultural products will be completely liberalised. Note: there is the fear that removal of the traditional instruments of protection may in the future be undone by using (health) standards as alternative protectionist instruments (see below).

What is the recurring point of critique regarding the way decision-making is made within the WTO ? What are (partial) solutions to these matters ?

o A recurring point of critique is that the sheer number of negotiations and meetings as well as the huge volumes of highly technical and complex texts are beyond the financial and administrative capacities of the poorer member states. E.g. more than 2000 meetings take place every year. (Partial) Solutions: • coalitions of developing nations to share the financial burden and to concentrate expertise in their delegations • targeted subsidies to the WTO by some of the richer member states to increase administrative capacities of the poorest member states

What are the characteristics of the Dispute Settlement Body (DSN) set up in 1995 ?

o Clearly defined rules within an impartial panel of three to five experts from different countries. In the first, preliminary, stage consultations are held that in most cases already lead to the settlement of the dispute o Clear timetables for completing a case (maximum 1 year, extendable to 1 year and 3 months in the case of appeal) o Rulings are automatically adopted unless there is a consensus to reject them (which would also require the plaintiff to reject the ruling!!!)

What are the 3 agreements on which the WTO is based ?

o The General Agreement on Tariffs and Trade (GATT) that deals with trade in goods o The General Agreement on Trade in Services (GATS) that deals with trade in services o The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) that deals with the protection of intellectual property rights

What does it mean for the WTO to be a "sanctions-based" organisation ?

o The member countries take on contractual obligations (e.g., not to discriminate other member countries) o The WTO has an enforcement mechanism via its Dispute Settlement Mechanism (see below) that allows for multilaterally authorised trade sanctions if member countries violate the WTO's rules Notes: - this make the WTO different from the IMF, for instance, that only has leverage when a member country actually borrows. - the presence of an enforcement mechanism explains also to a large degree why frequently calls arise to give the WTO also a mandate on other issues such as labour conditions, etc.

Who has joined the WTO ? How is it set up (staff, location) ?

• 164 members (98% of world trade). China joined in December 2001, the Russian Federation joined in August 2012, last entrant: Afghanistan on 29 July 2016 • Director-general: Roberto Carvalho de Azevêdo (Brazil, 1 September 2013 - ) • Location: Geneva (Switzerland), staff: 625 (cf. the WTO is a forum): specialised trade lawyers and economists, and support staff such as interpreters, etc.

What are the conditions for the imposition of safeguard measures ? Why are safeguards generally unattractive ?

• A safeguard measure should in principle not last more than four years since such period should suffice for giving the domestic industry some "breathing space" in order to reform itself in order to regain competitiveness • Measures imposed for more than a year must be progressively liberalised (this is more or less a gesture of "goodwill" towards the exporting country). E.g. the quotas should increase by 10% per year • The exporting nation should receive something in return. This is to be determined via consultations or retaliation by equivalent action by the exporting country if no agreement is reached. Especially the need for offering the exporting nation something in return has made safeguards unattractive. In fact, member countries of the WTO in the past had a clear preference for "grey-area" measures (bilateral negotiations outside WTO's/GATT's auspices to establish "Voluntary" Export Restraints or other market- sharing arrangements) since they circumvented the obligation for giving something in return

What was the goal of the GATT when it was created ?

• Already before talks on the ITO ended, 23 of the 50 participants decided in 1947 to reduce tariffs via the General Agreement on Tariffs and Trade (GATT) that entered into force in January 1948 [the GATT is an agreement, not an organisation] • Even though it was intended to be merely provisional (until the ITO would be created), the GATT remained the only multilateral framework for international trade from 1948 until the WTO was created on 1 January 1995

What are the goals of the WTO's action on subsidies ?

• Disciplining the use of subsidies such that governments are discouraged from using subsidies that distort international trade • Regulating the actions countries can take to counter the effects of subsidies in order to provide a stable environment for trade and limit the misuse of countervailing duties

What are the goals of the WTO's action on dumping ?

• Discouraging private enterprises from pursuing dumping • Regulating the actions countries can take to counter the effects of dumping in order to provide a stable environment for trade and limit the potential misuse of antidumping measures

What are the goals of WTO ?

• Establishing a forum for multilateral negotiations (the so- called trade rounds) with the goal of progressively liberalising international trade via decreasing and removing trade barriers (tariffs, quotas, administrative impediments, etc) • The WTO has trade liberalisation as its leitmotiv, but trade restrictions can be allowed for. However, clear and objective conditions then must be followed in order to prevent misuse. For instance, imports of goods that are seen as harmful to consumers can be halted when sufficient scientific proof exists concerning the proclaimed harmful effects on consumers (see below). • Monitoring national trade policies and handling disputes: providing a stable, transparent and predictable climate for international trade. Note: transparency is also vital for guaranteeing ownership and legitimacy of the WTO. • Encouraging development of and reform in developing nations whilst taking account of their weaker position: - Developing countries typically receive longer transition periods and less ambitious targets to fulfil when new agreements on the decrease in barriers to trade have been reached - Allowing for trade barriers within the infant-industry argument - Special assistance and trade concessions for developing countries (see below) - Technical assistance and training for developing countries ("aid for trade") • The WTO is to cooperate with the IMF, the WBG and other multilateral institutions in view of creating greater coherence in global economic policy making. WTO and UN: "On essentially political matters ... [the WTO member countries] ... follow the policy expressed in article 86 of the Havana Charter, namely, to avoid passing judgement in any way on such matters and to follow decisions of the United Nations on such questions." Note: the sanctions of the US versus Cuba, of the EU versus Yugoslavia (1991), etc, were made under the WTO's security clause in article XXI (see below)

What are some legitimate reasons for trade restriction to occur ?

• Genuinely unfair trade practices exist. For instance, export subsidies can negatively affect import-competing industries. • Member countries of the WTO that experience an unforeseen and damaging surge in imports should be allowed to obtain "breathing space" via import restrictions in order to allow their import-competing industries to restructure. • Countries should be allowed to restrict trade if human health, animal welfare and the environment are at risk.

How does decision-making work within the WTO ?

• Highest decision-making body: the bi-annual Ministerial Conference in which all member countries are represented, typically by their Trade Minister. Thus: member-driven (unlike the IMF and WBG that are staff-driven) • All member countries have one vote, but in practice also here voting is absent. Advantage of consensus building: stronger legitimacy. Disadvantage of consensus building: risk of paralysis. • All principles within this code of conduct thus have been approved by all member countries • For a limited number of issues: a three-quarters or a two- thirds majority suffices (e.g. decisions on membership)

How is consensus usually reached within the WTO ?

• Informal consultations in various forms play a vital role in allowing consensus to be reached. o Tentative agreements between the major players for which the issue at hand is "critical" are negotiated first. E.g. for agricultural products, the most important users of trade restrictions (in absolute terms) are the US and the EU and in a first step these two evaluate which decrease in trade restrictions would be "acceptable" to them o Subsequently, the tentative agreement is extended by including other member countries for which the issue is "important but not critical". This is a process of adding concessions and adjustments in order to take account of the desiderata of these other member countries. E.g. Any tentative agreement on liberalisation of trade in agricultural products that is acceptable for the US and EU is then submitted to the member states for which the topic is "important but not critical" (Australia, Brazil, China, India, Japan, ...) o The tentative agreement then moves further towards including all other member states within a "concentric circles process" or "Green Room process". o Advantage of this process: it is more efficient in reaching a conclusion when compared with a negotiation process where all member countries would be included right from the start. o Disadvantage of this process: member countries feel excluded and dislike the fact that they are confronted with something that feels like a done deal. o The current Director-General appears to lean more towards the critics of the "traditional" approach

What are examples of misuse of legitimate trade restrictions as protectionist measures (since the use of non-tariff barriers is increasingly restricted) by member countries ?

• Local industries may be tempted to claim, without justification, that the strong competitive position of foreign firms is not due to their higher efficiency but is the result of export subsidies. They then may lobby at the local government for obtaining trade barriers to restrict imports that are facilitated via proclaimed unfair trade practices • Import bans in the EU on beef that is treated with natural growth hormones are claimed to protect consumers' health. Is that beef really harmful or are the import bans rather installed to protect domestic producers? • Developing nations fear that the gradual liberalisation of trade in agricultural products may be undone in the future by trade barriers that will be based on ever-expanding new health and safety standards. Examples: o The European Union could try to ban the import of agricultural products that contain residues of chemical agents from herbicides of which the health hazard is not clear, but for which the developing nations have no alternatives in view of their cash constraints. o Also, developing nations may simply not have the (expensive) physical and administrative machinery for testing their agricultural exports on an ever-increasing number of chemical agents o Moving targets (shifting focus imposes huge costs of compliance) Note on the terminology: the (mis)use of antidumping measures, countervailing duties, health and safety standards, etc, for protectionist purposes is called "administered protection": protection results from the application of statutes that respond to specified market circumstances or events as determined by an administrative agency.

Why was the ITO created ? In what context ?

• Sharp contraction of international trade in the 1930s and the first half of the 1940s (cf. the spider web figure for the early 1930s): this led to a sharp decrease in worldwide welfare that deepened the already dire consequences of the Great Depression • Bretton Woods conference: "a separate international organisation is needed in order to deal international trade".

What are examples of efforts that are made to ensure such violations do not turn into disguised forms of protectionism ?

• The Sanitary and Phytosanitary Measures Agreement (SPS) deals with food safety, animal and plant health and safety. E.g. can imports of beef that is treated with natural growth hormones be banned out of health concerns? • The Technical Barriers to Trade Agreement (TBT) deals with technical regulations and technical standards E.g. the "matter of concern" expressed by Korea, Japan, Israel and China according to which the new and tough US measures on packaging and labelling for transport by air of lithium batteries are claimed to favour US producers that rely less on air transport. For brevity and given the highly technical nature of the topic, no detail will be given on the TBT (and TBT is also no exam material)

What sort of balancing act is the WTO forced to play in the face of this trade restrictions misuse ? How can it achieve this balancing act ?

• The WTO should obviously allow for trade restrictions in the case of health risks, when unfair trade practices occur and when unforeseen surges in imports arise • The WTO should at the same time guarantee that such legitimate restrictions to trade are not misused for protectionist purposes How to achieve this balancing act? • Specifying clear definitions, procedures and rules. E.g. what exactly is dumping? How are countries to react towards genuine cases of dumping? • Allowing for impartial and specialised rulings. E.g. letting the question on what is or what is not harmful to human health be examined by a specialised scientific body of which legitimacy and expertise is beyond suspicion • Developing an impartial and fast procedure for dealing with disputes (cf. the DSB)

What are the conditions to be followed when taking antidumping actions ?

• The government that complains must be able: o To show that dumping is taking place according to the definition of the WTO (and thus not according to the "potentially more flexible" definition of the country in question) o To calculate the extent of dumping • The government must be able to show that there is "material injury" to the domestic import-competing industry or that there is the threat thereof • The government must be able to show that there is a causal link between dumping and the "material injury"

What are the main characteristics of the trade rounds ?

• The initial focus was on lowering tariffs on goods. This was a success since the average tariff rate on industrial goods in the industrialised countries fell to less than 4% already in the mid 1990s • From the 1980s onwards, more attention was also given to non-tariff barriers, services and intellectual property rights (cf. the development of FDI, increase in trade of services, etc) • However, progress in the liberalisation of trade in agricultural products still is slow due to opposition of the EU, US, Japan, India, China, etc • Trade rounds take more and more time (will the Uruguay Round of 1986-1994 be the lost one that finished?). Reasons: - The increase in the size of international trade and the number of internationally tradable goods due to for instance technological innovations (cf. cooling techniques for perishable agricultural products), the reduction in tariff levels and the decrease in transportation costs. - The initial focus of the GATT was on the reduction of tariffs concerning the trade in goods, but gradually the scope of negotiations within the GATT and later the WTO extended to other fields as well (e.g. services, intellectual property rights, etc.) - Increase of the number of participants in international trade. See for instance the sharp increase in the number of WTO member countries (124 in 1995) including countries that previously hardly participated in international trade such as China, Vietnam and Poland - The easiest issues were dealt with first in the past and the topics at hand thus are increasingly becoming more contentious ("first picking the low-hanging fruits")

What are the main characteristics of the GATS ?

• The most-favoured-nation principle should apply to all services. When a country allows foreign competition in a sector, equal opportunities should be given to service providers from all other WTO member countries. • A cautious approach with a substantial degree of flexibility in for instance market access commitments. Reason: allowing foreign competition in the banking sector may have effects beyond that sector in terms of, for instance, the ability to conduct monetary policy, etc. • Governmental services are not included in the GATS and no privatisation can be required via the WTO • Limitations on market access are "bound". Departures from the principle of national treatment are possible, e.g. limiting the number of branches of foreign banks, but they are bound such that they can only be made more restrictive again after negotiations with the affected country • National regulations have to be objective, reasonable and impartial

How does the GATT still allow for violations of the non-discrimination principle ?

• When a country is negatively affected by for instance dumping, the country that is negatively affected can be allowed to impose *penalty taxes* on the imports in question (see below). These penalty taxes violate the non-discrimination principle since they only apply to the products of one specific member country. • *Special access for developing countries* via the Generalised System of Preferences (GSP, 1968). The richest countries, in casu the members of the Organisation for Economic Co-operation and Development (OECD), apply preferential tariffs to imports of primarily manufactures and semi- manufactures from developing nations • Developing countries are allowed to use *restrictions on imports* to "safeguard" the balance of payments on condition that the restrictions are temporary and are progressively relaxed when conditions improve • Trade restrictions in developing nations are allowed for within the *infant-industry argument* for protection