exam 2: ch. 9 international business
General Agreement on Tariffs and Trade (GATT 1947)
At international meetings held in 1947, a multilateral trade agreement was reached between 23 nations. it reflected a more international view of the world's economic and trading system than had existed, and would become the most important trade agreement of the twentieth century. However, the International Trade Organization never materialized, due in part to the lack of support in the U.S. Congress for yet another international organization. But eventually a professional staff was needed to administer the GATT 1947 agreement, and a headquarters was established in Geneva. Thus, ironically, a GATT organization arose by default in the place of the aborted International Trade Organization and functioned successfully for nearly 50 years. Interestingly, although GATT 1947 was never ratified by the U.S. Congress as a treaty, it was consistently accepted as a binding legal obligation of the United States under international law.
Hyundai Electronics Co., Ltd. v. United States, 53 F. Supp. 2d 1334 (1999)
Court of International Trade stated, "Thus, the WTO panel report does not constitute binding precedential authority for the court. Of course, this is not to imply that a panel report serves no purpose in litigation before the court. To the contrary, a panel's reasoning, if sound, may be used to inform the court's decision." This means that a U.S. court cannot strike down a U.S. law or regulation merely because a WTO decision has ruled that it is in violation of an international agreement. For instance, if a WTO panel rules that a U.S. Department of Energy regulation regarding the sale of imported oil is held to be in violation of GATT's nondiscrimination provisions, a U.S. court cannot rely on that decision in striking down the regulation. It would be a matter for the U.S. Congress or the executive branch of government, and not the judiciary, to bring that regulation into compliance with a WTO decision.
beneficiary developing countries.
Developing countries that are eligible for preferential treatment under the GSP
Exceptions Permitting Trade Restrictions
GATT Article XX provides that countries may restrict or regulate trade when necessary to meet the following public policy goals (if not arbitrary or an unjustifiable restriction on trade): • Protection of public morals • Protection of human, animal, or plant life or health • Regulation of gold or silver • Customs enforcement • To stop infringement of patents, trademarks, and copyrights • Prevention of deceptive practices • Prohibitions on trade in products made by prison labor • Protection of national artistic, historic, or archaeological treasures • Conservation of exhaustible natural resources GATT Article XXI allows countries to restrict trade or traffic in armaments, ammunition, or nuclear materials, and to protect its security in time of war.
the Harmonized Tariff Schedules of the United States
HTSUS include: - product classification numbers - article descriptions - tariff rates - special tariff programs Another requirement for GSP eligibility is that a product must be one of approximately 5,000 items approved under U.S. law for duty-free treatment. - A list of products is available directly from the USTR or in the Harmonized Tariff Schedules of the United States.
Bretton Woods Conference
In 1944, the Allied nations met at the Bretton Woods Conference in New Hampshire to create several important international economic and political institutions, including the International Monetary Fund, and the International Bank for Reconstruction and Development, also called the World Bank. The United Nations was created at about the same time. In addition to these economic and political institutions, world leaders had a vision of another international organization dedicated to preventing the kinds of protectionism and rising tariffs seen in the 1930s. So, a third specialized organization, the International Trade Organization, was planned to promote and stabilize world trade by reducing tariffs.
U.S.-Korea Free Trade Agreement (KORUS FTA).
In 2012, the United States and South Korea signed
1974 Japanese Large-Scale Retail Stores Law.
Japan has always had many small, neighborhood retail shops and grocers, many of which are "mom and pop" owned. Small local shops existed in an atmosphere that fit into the Japanese consumer's cultural expectations of quality, freshness, and personal attention. The law limited the number, location, and operations of large retail stores and supermarkets in Japan with over 500 square meters in floor space, and gave a voice to existing small shops in the approval process. The process often took seven or eight years to complete and usually required the large store operator to make many concessions to the small store owners to obtain their approval. If the government found that the proposed store posed a risk of adversely affecting nearby shops, it could require the large store to reduce its floor space or limit days and hours of operation. Of course, large retailers in the United States and Europe were not very happy about the law. After all, for a foreign retail chain to justify its investment in Japan, it would have to be a "big-box" store. Small stores are not economically feasible. In addition to protecting politically powerful small business owners, the law also perpetuated the vertically integrated distribution system in Japan by giving large Japanese manufacturers greater control over the distribution of their products being sold through many small retail stores. Large foreign retail chains, on the other hand, might favor purchasing from U.S. exporters accustomed to selling to high-volume purchasers. The law was an excellent example of a nontariff barrier that on its face was completely neutral. It was enacted for many economic, political, and cultural reasons, and it did not discriminate against products because they were of foreign origin. However, it did have the effect of limiting access to the Japanese retail market by American and other foreign big-box and discount chains. As a result of negotiations in the 1980s and 1990s, the law was eventually repealed and replaced with laws focused more on environmental and city planning policies. After the law's repeal, large-scale American and European volume discounters entered the Japanese market and almost immediately began to transform retailing in Japan.
negotiating rounds
Negotiating sessions are called "rounds." The following is an overview of the most important negotiating rounds from 1947 to the present. 1. Geneva, Switzerland, 1947 2. Annecy, France, 1949 3. Torquay, England, 1951 4. Geneva, Switzerland, 1956 5. Geneva, (Dillon Round) 1960-1961 6. Geneva, (Kennedy Round) 1964-1967 7. Tokyo Round, 1973-1979 8. Uruguay Round, 1986-1994 9. Doha Development Round (a WTO round), 2001-present (as of 2016)
multilateral trade negotiations
One of the cornerstones of the GATT system was a commitment by member countries to conduct multilateral trade negotiations, and on a regular basis, under the auspices of the GATT organization.
China—Measures Related to the Exportation of Rare Earth Tungsten and Molybdenum, WT/DS431- 433/AB/R (2014).
Such has been the case with minerals known as "rare earth elements," used in cellphones and other advanced electronics and defense products. China has controlled almost all of the world's production in what is environmentally hazardous mining. It decided to impose export quotas, arguing that it was necessary to preserve an exhaustible resource and reduce pollution from mining. That caused price increases for foreign firms, while the Chinese government was controlling and subsidizing lower prices to Chinese firms. The United States, Canada, the European Union, and Japan requested dispute settlement at the WTO. In 2014 the WTO Appellate Body upheld a panel decision that China had violated WTO rules. It held that although countries are rightly allowed to conserve their own natural resources, China's quotas actually had no effect on conservation, but merely diverted supply to its own companies and allowed China to control the international market for a scarce resource.
Harmonized Tariff Schedule of the United States
Tariff schedules for the United States are found in the Harmonized Tariff Schedule of the United States, available online from the United States International Trade Commission.
United States—Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/ AB/R (1998).
The United States banned imports of shrimp harvested by vessels of foreign nations that had not been certified by the United States as using methods that would not kill sea turtles. Although it was an import ban for good reason, conservation, it was not implemented in a fair, open, and transparent manner. The U.S. approval process was so informal, arbitrary, and discretionary, that foreign shrimpers found it very difficult to obtain approval. The U.S. restrictions were held to violate Article XI, much to the chagrin of environmental groups. When faced with foreign licensing schemes, exporters around the world use local agents and attorneys to advise them on import regulations and customs procedures in the foreign market.
WTO
The functions of the WTO are (1) to facilitate cooperation between member-nations on trade issues, (2) to administer the WTO agreements, (3) to provide a forum for future trade negotiations, (4) to monitor national trade policies, (5) to assist developing countries in complying with WTO agreements by giving technical assistance, and (6) to provide a forum for the settlement of trade disputes between members. -They meet at least once every two years to direct the policies, activities, and future direction of the WTO and to consider new applications for membership. The U.S. ambassador to the Ministerial Conference is the United States Trade Representative or his or her delegate. - The WTO monitors and periodically reviews the trade policies and practices of member countries to help assure adherence to the rules and commitments of the agreements. It provides an important forum for negotiating new agreements on trade issues that are of mutual concern, and provides a forum for member countries to either settle or dispute their trade arguments. It also provides technical assistance to developing and least developed countries as they try to integrate into world markets.
Generalized System of Preferences (GSP)
The most well-known trade preference is the Generalized System of Preferences (GSP). This program permits certain approved imports from specified developing countries to enter the United States at reduced rates of duty, or duty-free. This aids in the economic development of poorer countries while decreasing the cost of many imported goods for U.S. business and consumers. These goods are often most efficiently produced in lower cost countries and in many cases from raw materials they have in abundant supply. Congress enacted the GSP legislation in 1974 and has renewed it regularly. - Some of the specific requirements for importers wanting to take advantage of the GSP program are (1) the item must qualify for a GSP tariff preference in the U.S. tariff schedules; (2) it must be imported directly from an eligible country; (3) the country must be eligible for GSP treatment for that particular item; and (4) the item must be the "growth, product, or manufacture" of the eligible country (as strictly defined in U.S. law). Eligibility for the GSP is determined by statute and administrative regulation. The President makes the final determination of both country and product eligibility based on the recommendation of the U.S. Trade Representative, who conducts an annual review.
Dispute Settlement Body (WTO-DSB)
These governments must first engage in trade consultations with Australia at the WTO, and if no resolution is possible they may request binding dispute resolution before the WTO Dispute Settlement Body (WTO-DSB).
balance-of-payments (BOP)
When a nation's outflow of foreign exchange exceeds receipts,
nullification or impairment
When one WTO member nation acts contrary to its commitments in a WTO agreement, such as raising a tariff above the bound rate or imposing an unjustified quota on imports, that country is said to have "nullified or impaired" the rights of other WTO member countries that are affected by that country's action.
Africa Growth and Opportunity Act (AGOA)
aids in the economic growth and the establishment of political freedom in 48 poor countries in sub-Saharan Africa where the per capita annual income averages about $500 per year. The law encourages U.S. trade and investment there and improves access for African products to U.S. markets. To qualify for the benefits of the act, the African countries must try to improve their own conditions through progressive economic and social policies. The country must abide by human rights standards, eliminate abuses of child labor, not support terrorism, enforce laws against corruption, and move toward a free-market economy. Forty-seven countries are now eligible for AGOA. AGOA preferences are even more favorable than the GSP.
Global tariffs
are imposed on a particular classification of goods without regard to the country of origin of the goods.
"National Treatment on Internal Taxation and Regulation."
central concept is that once goods enter a nation's stream of commerce, they may not be subjected to greater or different taxes, charges, or regulations than those applied to domestic goods.
Free Trade Area
consists of two or more countries that are party to a free trade agreement that reduces or eliminates tariffs on goods, removes trade barriers, and usually addresses other common concerns affecting trade between them.
customs union
free trade area with a common external tariff.
North American Free Trade Agreement.
goods traded between Canada, Mexico, and the United States qualify for better-than-MFN tariff rates, or may pass duty free,
GATT Report on European Economic Community—Import Regime for Bananas (1995)
illustrates the importance of countries honoring their tariff rates granted by concession to foreign countries. The GATT Panel (pre-WTO) ruled that the change in European Economic Community (now EU) tariff schedules had "nullified and impaired" the rights of foreign banana exporters who should have been able to rely on the existing tariff structure. - Under the EEC regime, the tariff rates on bananas from the Latin American countries were increased between 20 and 180 percent. A complex licensing scheme was also set up to limit the access of foreign banana traders (e.g., Chiquita, Dole, and Del Monte) to sell in the EEC. The Latin American countries claimed that the regulations impaired their Article II tariff concessions and violated Article I, MFN principles, and other GATT provisions. - The panel held that the EEC had deprived the complaining Latin American countries of the benefits to which they were entitled under the schedule of concessions.
Global quotas
imposed by an importing nation on a particular product regardless of its country of origin.
WTO Report of the Appellate Body on European Communities—Regime for the Importation, Sale and Distribution of Bananas (1997)
involves a long-running trade dispute among the European Community, Latin America, and the United States. It addresses the issue of who may request a WTO panel in a trade dispute. - The European Community (EC) had been the world's largest importer of bananas, two-thirds of which were grown in Latin America. A large percentage came from developing countries that were once colonies of Britain, Spain, and France, located in Africa, the Caribbean, and the Pacific (known as ACP countries). Growers in the ACP countries could not compete with the highly efficient non-ACP producers, most of which are operating in Latin America. In order to encourage the import of ACP-grown bananas and to aid in the development of ACP economies, the EC devised a host of tariff and nontariff barriers aimed at non-ACP bananas. For example, a complex quota scheme was used permitting only a limited quantity of non-ACP bananas to be imported each year, while licenses to import ACP bananas were granted routinely. Whereas most ACP bananas entered duty free, other bananas had a very substantial tariff rate. Several Latin American countries requested consultations, claiming that the EC regulations violated GATT by discriminating against bananas grown in their countries. The United States joined with them, arguing that the United States also had a substantial interest in the issue because U.S. companies that grew and exported Latin American bananas would lose business. The EC maintained that the United States had no grounds for complaining about the EC regulations because it was not a producer and grower. A WTO panel was convened, and its decision was appealed to the WTO Appellate Body. -The Appellate Body held that the United States could call for the convening of a WTO panel to question EC import barriers even though its exports were not directly affected. -The United States sought WTO authorization to "suspend concessions" (i.e., impose retaliatory tariffs) on a wide range of EU products, the value of which was equivalent to the nullification or impairment sustained by the United States. Consider the impact of a trade war over bananas: In 1999 the Dispute Settlement Body authorized the United States to impose 100 percent ad valorem duties on a list of EU products with an annual trade value of $191.4 million. The range of European products included bath preparations, handbags of plastic, paperboard, lithographs not over 20 years old, certain cotton bed linens, lead-acid batteries, electric coffee-makers, and other products. In 2001, an agreement was reached to end the trade dispute. The EU restrictions were dismantled, and U.S. tariffs were lifted. The "Banana Wars" were the largest trade war to date with tremendous economic and political ramifications.
Tariff Rate Quota
is not really a quota at all, but a tariff rate that increases according to the quantity of goods imported. It is a limitation or ceiling on the quantity of goods that may be imported into a country at a given tariff rate. Unlike absolute quotas, tariff-rate quotas leave the price mechanism in effect in regulating imports. They are also allocated to specific supplying countries without discrimination.
Nondiscrimination
is one of the basic rights of membership in the WTO. It means that every WTO member country must treat the goods and services from all other WTO member countries equally and without discrimination. Simply put, nations should not "play favorites" with each other's goods or services. The principle of nondiscrimination is embodied in two important principles of international trade law: the principle of unconditional most-favored-nation trade and the concept of national treatment.
zero quota
is sometimes used when referring to a complete ban on the import of a product in that it permits zero quantities to be imported.
bound rate
is the maximum tariff rate a country may charge on an item, although tariff rates may be reduced below the bound rate.
ad valorem tariffs
levied as a proportion of the value of the imported good - common
WTO Understanding on Rules and Procedures Governing the Settlement of Disputes, also known as the WTO Dispute-Settlement Understanding (DSU):
lots of rules
indirect nontariff barriers
may seem perfectly neutral and nondiscriminatory on their face, their effect is to discriminate against foreign-made products or firms. They may take the form of laws, regulations, or rules of administrative agencies that make it difficult or costly to import foreign-made goods or services. For example, a government may enact a regulation to achieve a perfectly valid policy objective, such as the protection of human or animal health, public safety, or the environment. But the mechanism to achieve that objective may have the unintended (or intended!) effect of discriminating against foreign-made products, by making their importation more difficult or costly.
auctioned quota
one in which a country sells the quota rights through bidding.
allocated quota
one in which the total limit is "allocated" among several specific countries.
trade preferences
preferential tariff treatment, to developing countries to help further their social and economic developments. - Three important U.S. programs for developing countries are the Generalized System of Preferences, the Caribbean Basin Initiative, and the African Growth and Opportunity Act.
EXCEPTIONS TO NORMAL WTO TRADE RULES
provided for two categories of trading arrangements that provide betterthan-MFN tariff treatment. These are (1) trade preferences for developing countries and (2) free trade areas, customs unions, and common markets.
Transparency
refers to the degree to which a foreign government's import laws or regulations are made readily available to the public, including foreign firms. When a foreign government's import regulations are not readily available to the public or are hidden or disguised in bureaucratic rules or practices, the regulations are not transparent. - The WTO agreements require that a country's trade rules be transparent and that they publish all laws, regulations, administrative determinations, and judicial decisions that generally apply to imports and exports.
Unconditional MFN trade
requires that if a nation negotiates a reduced tariff rate on a certain product imported from one WTO member, that rate of duty automatically becomes applicable to like products imported from any and all other WTO members.
Direct nontariff barriers
specifically limit imports of goods or services or deny access of foreign firms to local markets. Examples are embargoes, quotas, complex and discriminatory import licensing schemes, and other prohibitions on trade. Most direct nontariff barriers are not permitted unless, as we will see later in the chapter, they fit into certain exceptions.
Common Market
takes the integration one step further: it is a customs union that also removes restrictions on the free movement of money, labor, and factors of production. The European Union is a common market and monetary union that functions at a high level of economic, legal, and political integration.
specific or flat tariffs
tariff computed on basis of physical units - Goods that are fungible (e.g., crude oil, wheat, or standard size graded lumber)
trade consultations
the first step in dealing with a potential nullification/impairment of a WTO member nation (pre-WTO dispute settlement)
trade liberalization
the process of reducing tariffs and removing artificial barriers and restrictions on trade
tariff bindings
the rates become bound, or capped, at that rate.
Absolute quotas
those that strictly prohibit imports of an item above a predetermined limit, based either on the value or quantity of specific goods (weight, number of pieces, etc.), or as a percentage of the domestic market for that item.
the United States-Central America-Dominican Republic Free Trade Agreement (CAFTA-DR)
with Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic. Unlike the GSP, CAFTA-DR is not a trade preference program, but a free trade agreement based on reciprocity and mutual agreement. The agreement phased out all tariffs on goods over a 5- to 10-year period (15 years for agricultural products). The agreement also addresses many collateral issues, such as corruption, labor standards, environmental protection, and the protection of intellectual property.
WTO
1. Multilateral trade negotiations: Nations commit to meet periodically to reduce tariffs and nontariff barriers to trade. 2. Transparency and predictability of trade opportunities: A nation's laws and regulations affecting trade in goods and services must be published and made publicly available so companies understand in advance the rules for doing business there. 3. Reciprocal tariff reductions and bound commitments: Nations commit to maximum bound tariff rates on specific products and to publish these in their tariff schedules. 4. Nondiscrimination and unconditional most-favorednation trade: Members will not give any import advantage or favor to products coming from one member over the goods of another member. 5. National treatment: Members will not discriminate in favor of domestically produced goods and against imported goods or treat the two differently under their internal tax laws, regulations, and other national laws. 6. Elimination of quotas and other nontariff barriers: Nations must first "convert" their nontariff barriers to tariffs (through a process called tariffication) and then engage in negotiations to reduce the tariff rates. 7. Consultations and dispute resolution: An agreement to resort to the WTO consultation and dispute settlement process and not to engage in unilateral retaliation against countries that violate WTO rules.
normal trade relations
In the United States, the term "most favored nation" is now referred to as normal trade relations or NTR because Congress considers it to more accurately describe the "normal" tariff treatment for most countries. The term "most favored nation" is still in use in international documents and in other countries.
U.S. Uruguay Round Agreements Act
The United States negotiated the Uruguay Rounds and adopted the WTO agreements under "fast-track" trade promotion authority. The agreements are not treaties, but were enacted into U.S. law through the "congressional-executive" process discussed in Chapter 8. The agreements were submitted to Congress by President Clinton in the U.S. Uruguay Round Agreements Act, and became effective in 1995. - "No provision of the Uruguay Round agreement... that is inconsistent with any law of the United States shall have effect. Nothing in this Act shall be construed to amend or modify any law of the United States relating to the protection of human... life, the protection of the environment, or worker safety."
Uruguay Round negotiations
The most important work of the Uruguay Round was in devising solutions to the deficiencies of GATT 1947. The first dealt with coverage: GATT 1947 applied only to trade in goods. Even though the service sector had become the fastest growing sector of the world's economy, it was not subject to GATT rules. Trade in services, such as banking, insurance, telecommunications, or professional services, was specifically excluded. In addition, GATT 1947 failed to regulate agricultural trade, an area of constant dispute among nations, especially between developed and developing countries. Until 2005, trade in textiles and apparel was also outside the scope of GATT because of the politically sensitive nature of these industries. GATT 1947 did little or nothing to address trade-related aspects of intellectual property or the use of restrictions on foreign investment that interfered with the free movement of goods. Finally, the process used to resolve trade disputes between countries was nonbinding, filled with loopholes, and often ineffective. The Uruguay Round ushered in a new era of international trade regulation. It replaced the original GATT organization with the World Trade Organization (WTO). It modernized and expanded the scope of the world trade agreements and instituted a binding dispute settlement process. The Uruguay Round resulted in the conclusion of over 60 major trade agreements that make up a large part of "WTO law."
competitive need limitation
There is a quantitative limit on imports from each beneficiary country, called a competitive need limitation although these can be waived (and are not applicable to "least developed" countries). The GSP programs of most developed countries are very similar to those of the United States.
WTO Report of the Appellate Body on Japan—Taxes on Alcoholic Beverages (1996)
addressed the status of a report that had been adopted by the WTO-DSB: We do not believe that [WTO member nations], in deciding to adopt a panel report, intended that their decision would constitute a definitive interpretation of the provisions of GATT 1947. Nor do we believe that this is contemplated under GATT 1994... Adopted panel reports can play an important part of the GATT acquis. They are often considered by subsequent panels. They create legitimate expectations among WTO members, and, therefore should be taken into account where they are relevant to any dispute. However, they are not binding... This statement is reaffirmed in the actual language of GATT 1994, which states that interpretations of the agreement may only be made by the Ministerial Conference and the General Council. Nevertheless, WTO Appellate Body reports continue to cite prior reports for their persuasive value.
Quota
is a quantitative restriction on imports
tariff
is a tax levied on goods by the country of importation. It is usually computed either as a percentage of value (ad valorem tariffs) or on the basis of physical units (specific or flat tariffs).
trade barriers
is any impediment to trade in goods or services.
WTO Report on Japan—Taxes on Alcoholic Beverages (1996)
the WTO Appellate Body undertook a thorough analysis of the Japan Liquor Tax Law and found that the Japanese tax was in violation of GATT Article III. As you read, look not only for its interpretation of national treatment but also look at the Appellate Body's reflections on GATT as international law. - The Japan Liquor Tax Law, or Shuzeiho, taxes liquors sold in Japan based on the type of beverage. There are ten categories of beverage (the categories are sake, sake compound, shochu, mirin, beer, wine, whiskey/brandy, spirits, liqueurs, and miscellaneous). Shochu is distilled from potatoes, buckwheat, or other grains. Shochu and vodka share many characteristics. However, vodka and other imported liquors fall in categories with a tax rate that is seven or eight times higher than the category for shochu. Foreign spirits account for only 8 percent of the Japanese market, whereas they account for almost 50 percent of the market in other industrialized countries. The United States, the European Union, and Canada called for consultations and brought this complaint at the WTO. The panel held that the Japanese tax law violated GATT, and Japan appealed to the Appellate Body. - The Japan Liquor Tax Law was found to violate the national treatment provisions of GATT Article III. Shochu is a "like product" and is "directly competitive and substitutable" with other imported spirits. The imported spirits were taxed higher than the shochu. The decision of the panel was upheld and Japan was requested to bring its tax law into compliance with the WTO agreements. - In 1997, the United States was forced to seek binding arbitration when it became apparent that Japan did not intend to bring its liquor tax into WTO compliance within a "reasonable period" as required by WTO rules. The arbitration ruling supported the U.S. position. Japan agreed to revise its tariff system in stages and to eliminate tariffs on most spirits. The U.S. distilled spirits industry reported that, as expected, the change in taxation has increased exports of U.S. distilled spirits to Japan.
modify or withdraw a concession
and raise its bound rate on an item, it must negotiate directly with the countries most affected (those countries which are the major suppliers of that item) and by agreement reduce or offset tariffs on other items equal to an equivalent amount in trade.
Nontariff barriers
are any impediment to trade other than tariffs. They can be direct or indirect. Some nontariff barriers serve socially beneficial purposes and are permitted by international law. Others, which violate international agreements and are not permitted, can lead to trade disputes unless removed.
import trade barrier
is any impediment, direct or indirect, to the entrance or sale of imported goods or services existing in the country of importation. Typically, trade barriers are tariffs or taxes on imported goods or laws, government regulations, or national industrial standards that make importing or selling foreign-made goods or services more difficult or that make imported goods or services more expensive to produce, market, or sell.
tariff concession
is each country's promise to reduce tariffs on imports of a given item in return for tariff concessions from other countries. Most concessions are made during the major negotiating rounds. - For example, if Honduras wants the United States to lower the tariff rate on U.S. imports of Honduran coffee beans, then the United States could request that Honduras reciprocate by lowering duties on, say, U.S.-made medical devices in an amount equivalent to the value of the tariff reduction granted to Honduran coffee. Concessions can be on a single product, by entire product categories, or across the board.
Caribbean Basin Initiative (CBI)
is the name collectively given to several laws that grant trade preferences to goods imported from the Caribbean. The most important is the Caribbean Basis Economic Recovery Act, or CBERA. These are several special programs allowing duty-free imports of textiles and other products from impoverished Haiti. These statutes give the president the authority to grant tariff reductions or duty-free status to imports from eligible countries in order to encourage trade and investment in the Caribbean.
most-favored-nation trading status
it is agreeing to accord items imported from that country the most favorable treatment or the lowest tariff rates that it gives to like products imported from other MFN trading nations. In the United States, MFN trading status is granted to a foreign country by an act of Congress. According to the WTO agreements, all countries that are members of the WTO should automatically be entitled to MFN trading status with other WTO countries (although in reality this may not be the case—Cuba is a WTO member but as of early 2017 had not received MFN trading status from the United States).
WTO Panel Report on India— Quantitative Restrictions on Imports of Agricultural Textile, & Industrial Products
the United States sought to have India remove a complex scheme of import restrictions that had existed for almost 50 years. The panel addressed the Indian licensing scheme as a prohibition on imports under Article XI and the BOP exception. - For 50 years prior to this case, India had placed complex restrictions on the import of agricultural, industrial, and consumer goods from other countries. Goods placed on the "negative list" could only be imported by special license, which was generally only granted to the "actual user," rather than to firms in the normal chain of distribution. Many goods could only be imported by state agencies. The restrictions were, in many cases, applied arbitrarily and in the discretion of Indian government officials on a caseby-case basis. As a result, it was often impossible to know at any given time what goods might be allowed into the country. Goods imported with a license were subject to confiscation or a fine of five times the value of the goods. In 1997, the United States brought this complaint at the WTO against India requesting that restrictions on thousands of products be removed. India claimed that without restrictions its foreign exchange would leave the country, upsetting its balance of payments and inhibiting its economic development. - India's quantitative restrictions and the licensing scheme violated Article XI because they were discriminatory and not "rules based," and were no longer justified to preserve its balance-of-payments. The panel's decision was upheld by the WTO Appellate Body in its report of August 1999 and later adopted by the Dispute Settlement Body. - Complex licensing restrictions like the one used by India for decades following World War II were not uncommon in developing countries. While it protected domestic producers, many of which were state-owned enterprises, it also kept their markets closed to foreign technology, innovation, capital, and the many benefits of competition. But consider how life in many developing countries has changed since the 1980s and 1990s. Most developing countries, including India, have dramatically opened their markets to foreign competition and foreign investment (although certainly not in all industry sectors). Many are no longer totally dependent on an agricultural economy. And many that once feared imports because they did not have the foreign currency to pay for them, now have vibrant export-based manufacturing industries.
