Lecture 4

Question 1

Scope of pta’s

Answer 1

covering goods is more common than covering trades, but this is becoming less pronounced

Question 2

Which article provides for preferential trade agreements?

Answer 2

Article XXIV. This raises the question of why the founders of GATT would have wished to accomodate arrangements which are discriminatory on their face.

Question 3

What key conditions does article XXIV establish?

Answer 3

• parties entering must notify there agreements to the WTO under Article XXIV:7
• CRTA conducts a full review and make recommendations to the General Council of the WTO on compliance of a notified PTA with the requirements of Article XXIV.

Question 4

What is an alternative avenue for review of PTAs?

Answer 4

A formal complaint to the DSB, followed by a convening panel and then a potential appealt to the appellate body

Question 5

What is the only case directly addressing the issues of PTA consistency with GATT?

Answer 5

Turkey- Textiles (1999)
- complaint by India against Turkey with respect to quantitative restrictions that Turkey had imposed on imports of textiles and clothing from India

• this case was important because is shows that the Appellate Body made clear that it considers the overall compatibility of PTAs with Article XXIV to be justifiable
• Article XXIV offers a possible defence to measures inconsistent with GATT provisions beyond the MFN principle in article I

Question 6

Which article of GATT establishes the purpose of PTAS?

Answer 6

Article XXIV:4
- facilitate trade between constituent territories and not to raise barriers to the trade of other parties with such territories.

Question 7

What are three central issues essential to understanding the welfare effects of PTA’s?

Answer 7

1. Are ptas trade creating or trade diverting?
2. Does the proliferation of PTA trade rules increase transaction costs and therefore inhibit trade?
3. how does the formation of PTAs affect the future course of international trade liberalization?

Question 8

What is the distinction between trade creation and trade diversion?

Answer 8

hinges on whether the removal of a trade barrier through formation of a customers union shifts the source of production of a good to a lower cost producer or higher cost producer, based strictly on the costs of production and abstracting from costs associated with tariffs.

Question 9

What are transaction costs, in terms of PTAs

Answer 9

each pta has a set of trade rules that ppl must comply with.
- likened to a spaghetti bowl, with each additional web adding complexity to international trade, and raising transaction costs of international trade

Question 10

Article III

Answer 10

imported products shall not be subject to internal taxes or other charges in excess of those applied to like domestic products

Question 11

Internal taxes: Japanese-Alcohol case (1996)

Answer 11

in this case, the panel and appellate body rejected the aims and effects test
- appellate body held that the concept of like product. Both bodies emphasized the like product market test.

Question 12

Canada- Split Run Periodicals (1997)

Answer 12

the appellate body overruled the Panel’s findings on like products, deciding that in the context of an 80% excise tax on advertising content, finding that foreign split run periodicals and domestic non-split periodicals are not like products.

However, the Appellate body held that they fell within the ambit of competitive or directly substitutable products

Question 13

Korea- taxes on alcoholic beverages (1998)

Answer 13

followed the other case on alcohol, adopted a market based test of likeness, and a de minimus test for similarly taxed under Article III(2)

Question 14

Chile- Taxes on Alcoholic Beverages (1999)

Answer 14

• used analogy of butter and margarine, differences in physical characteristics do not necessarily render products unlike if they serve similar functions in the utility function of consumers.

Question 15

Indonesia- Autos(1998)

Answer 15

differences in treatment for internal tax purposes of domestically produced cars and imports, car components were treated as violating Article III(2) on the grounds of substitutability by consumers among these products.

Question 16

Regulatory Measures: US- Reformated Gasoline (1996)

Answer 16

• held to violate Article III(4)
• no dispute that the products were like, but USA faced greater administrative difficulties applying the domestic measurees in question to foreign refiners was not sufficient justification for less favourable treatment

Question 17

Korea- Beef (2000)

Answer 17

Also on regulatory measures.
- formal differences in the way imports and domestic like products were treated were not in themselves sufficient to render the different treatment illegal under article III(4)

Question 18

EC- Asbestos(2000)

Answer 18

• Canada complained about EC’s ban on asbestos imports

- Appellate body found Canada’s product likeness comparison insufficient

Question 19

Regulatory Measures:Thailand- Cigarettes (2011)

Answer 19

the Appellate body held with respect to assessing no less favourable treatment, that assessment requires close scrutiny of the fundamental thrust and effect of the measure.

Question 20

What are the four critiques of the WTO case law?

Answer 20

1. literalist/formalist approach
2. aims-and effects-approach
3. economic approach
4. residual problems

Question 21

Explain the literalist/formalist critique

Answer 21

• a ‘smell’ test, comparing and contrasting physical characteristics without having some purpose in mind for the comparisons

Question 22

Aims and Effects Approach

Answer 22

emphasized the indeterminacy of an approach that focuses on the subjective intent of legislators and regulators (Japanese Alcohol) baptist bootlegger coalitions.

Question 23

Economic Approach

Answer 23

Whether the products are like or not is an empirical question involving evaluation of the cross elasticity of demand on the part of consumers
- whether measures in question have imposed greater costs on foreign producers relative to domestic producers

Question 24

Residual problems

Answer 24

• differences in production and processing methods

- human rights concerns