Lecture 3 Flashcards
What is a prohibitive tariff?
A tariff so high that it makes an import prohibitively expensive. A prohibitive tariff discourages importers from bringing goods into the country in the first place because they will be difficult to sell..
What is a non-prohibitive tariff?
Gov doesn’t add charge to price of good
Has negative effect on welfare bc it is never sufficient to offset the negative impact of the tariff on domestic consumers
What does the preamble of GATT commit members to in terms of tariff negotiations?
Reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs.
Tariff Bindings process
Once tariff negotiations have been concluded, these become tariff bindings which are set out in particular members tariff schedules that constitute an Annex in GATT.
What does Article II of GATT state?
All parties must adhere to these tariff bindings by not imposing custom duties in excess of those set forth in each country’s tariff binding schedule.
What is the exception to Article II?
Article XXVIII, which says that at scheduled triennial intervals, any members that has made previous tariff concessions can reopen these concessions with other members who have a substantial interest in the concession, with a view to modifying or withdrawing the concession.
What is the standard of the negotiations discussed in the exception to Article II?
mutually advantageous concessions not less favourable to trade than those existing between the parties prior to such reopening is maintained.
What are the five elements of domestic administration of tariffs?
- Valuation of imported goods (Article VII GATT)
- Classification
- Rules of origin
- Customs fees and administration (article VIII GATT)
- trade facilitation
Valuation of imported goods
article VII of gatt requires parties to base value of imports on actual value and not on the value of merch of national origin
What are ad valorem tariffs?
the importer pays a certain percentage of the good’s value in duty
Classification
this system attempts to reduce ambiguity and opportunism in the classification of imported goods.
Rules of Origin
- often required in order to determine the country of origin
- exceptionally complex
- not harmonized between countries
Customs, fees and administration
Article VIII restricts the imposition of fees to the approximate cost of services rendered, which must not represent an indirect protection to domestic producers or a taxation of imports for fiscal purposes
Trade facilitation
- aims to cut red tape
- speed, efficiency and transparency through trade related infrastructure
What is the theoretical rationale for MFN principle?
economic or welfare properties of the principle. Three have been identified:
- constraining bilateral opportunism in concessions favouring third parties
- constraining bilateral opportunism disadvantaging non participating third parties
- free rider problem, this weakens the negotiating position of countries and may reduce incentives for initial concessions between parties
The concept of extending ‘unconditionally’ regarding the mfn principle
The Dispute settlement body has issued various interpretations about the requirements that all privileges must be extended to all members. caselaw suggests tht conditions that discriminate on the basis of origin violate Article I
Explain the concept of like products
margarine and butter example. This issue has been contentious. Products should not be defined so broadly that a variety of third countries who have offered no quid pro quos are able to benefit. The concept must be coherently and consistently applied, as in antitrust law.
De facto discrimination
a domestic measure that is facially neutral as amongst imports from different foreign countries may nevertheless have a disparate impact on imports of like products.
mfn obligations under article XIII of GATT.
no restriction can be applied on an import/export unless the import of the like product of all third parties is similarly restricted.
What are the two major exceptions to the principle increasingly challenge its pre-eminence?
Preferential Trade Agreements (PTAs)
Less Developed Countries (LDCs)
PTAs
negotiated on a bilateral/regional basis amongst subsets of members, that by their nature treat some more favourably than others
LDCs
unilateral, non-reciprocal preferences granted to developing countries
