Overview Flashcards
What was the core idea of the GATT?
To liberalize global trade using common rules, reciprocity, and non-discrimination.
What’s the purpose of WTO?
The WTO exists to strengthen global trade by providing binding agreements that help to restrain protectionism and retaliatory policies.
WTO Article III - Functions of the WTO
- Facilitate Trade Negotiations – Helps countries negotiate reduction of trade barriers.
- Administer Agreements – Ensures that countries follow the rules of trade agreements.
- Resolve Disputes – Provides a peaceful dispute resolution system.
- Monitor Trade Policies – Reviews members’ trade practices for transparency.
- Assist Developing Countries – Offers training and technical support.
- Promote Cooperation – Works with other organizations for economic stability.
GATT Article 3 - National Treatment
How should imported goods be treated?
What does it say about like products or directly competitive and substitutable products (DCS)?
What kind of discrimination is outlawed?
- No discrimination: Imported goods must be treated like domestic ones.
- Fair competition: Taxes and regulations apply equally.
Imported products must receive treatment no less favorable than domestic products.
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- Like products have to subjected to the identical taxation.
- Directly competitive and substitutable products should be taxed similarly provided it’s not protectionism.
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Outlawed is:
- only discrimination against imports;
- based on national origin;
- both de jure (obvious discrimination, “imported alcohol will be taxed”) and de facto (less obvious, “alcohol above 25% will be taxed” while mostly imported alcohol meets the criteria) discrimination.
Exceptions: GATT art. XX, SPS, TBT and products purchased for governmental purposes.
What does multilateral agreements GATT, GATS and TRIPS cover?
GATT - goods
GATS - services
TRIPS - intelectual property
What’s DSU?
Dispute Settlement Understanding - If a dispute arisis countries have to take part in the resolution under DSU
WTO Article 22 - Compensation and Suspension of Concessions
What happens when a country violates WTO rules and harms the other country?
Compensation: The harmed country may get trade benefits.
Suspend Concessions: The harmed country may impose restrictions against the violator.
Actions must match the harm caused and follow WTO rules.
WTO Article 23 - Strengthening Dispute Settlement
What can disrupt trade and how should countries resolve disputes?
Disruptions to trade:
a) Failure to meet obligation by one party
b) Application of another party any measure that disrupts trade
c) Any other situation impeding trade
If any of above happen a country should:
- No unilateral action: Countries can’t retaliate alone.
- Use WTO system: Disputes must go through the WTO.
Ensures fairness, consistency, and transparency.
What’s a “negative consensus” introduced by Uruguay Round?
Decisions are adopted unless all members object.
GATT Article 2 - Schedules of Concessions
What are tariff commitments under GATT?
Bound Tariffs: Maximum tariff rates agreed upon and automatically extended to all WTO Members; listed in each country’s Schedule of Concessions.
Tariffs cannot exceed the bound levels.
ODC “Other Duties or Charges”: also have to be stated in the Schedule on the time of joining WTO and cannot be changed later on.
GATT Article 11 - Elimination of Quantitative Restrictions
Are quotas allowed under GATT?
- No quotas: Prohibits limits on trade quantities.
- Exceptions: Allowed for specific cases (e.g., food shortages).
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Alternatives: Members can use duties, taxes, or charges as means of trade regulation.
Promotes free flow of goods.
GATT Article 1 - Most-Favoured-Nation (MFN) Treatment
What is Most-Favoured-Nation treatment?
What’s unconditional and conditional MFN?
What are the dangers of MFN?
- Equal treatment: Any trade benefit for one member applies to all.
- Covers tariffs, charges, and trade rules.
Promotes fairness and non-discrimination.
Covers both de jura and de facto discrimination.
_ - Unconditional: State A must extend any trade benefits it grants to state B immediately and unconditionally to state C.
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Conditional: State A extends benefits to state C only if state C reciprocates with advantages similar to those state A receives from state B.
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“Free riding”
What’s Schedule of Concessions?
A list of bound tarrifs rates for specific good created by every country in the moment of entering WTO. It’s legally binding.
Can a duty exceed a bound rate?
Yes, but only in specific circumstances allowed under GATT art. II:2:
a) a charge equivalent to an internal tax (art. III)
b) anti-dumping or counterveiling duty (art. VI)
c) fees for serviced provided during importation
d) safeguard duties (art. XIX)
GATT Article 8 - Fees and Formalities
What rules apply to import/export fees and procedures?
- Fair Fees: Charges must reflect service costs.
- No Hidden Barriers: Fees can’t restrict trade indirectly.
- Simplified Rules: Avoid unnecessary complexity in customs formalities.
How to determine the origins of a product?
- Substential transformation criterion: A significant manufacturing process occurs in a country.
- Change of tariff classification: The product’s custom category changes during processing.
- Ad valorem percentage criterion: A certain percentage of a product’s value comes from one country.
GATT Article 6 - Anti-Dumping and Subsidies
How does GATT address unfair trade practices?
- Anti-Dumping Duties: Allowed when products are sold below their normal value and harm domestic industries.
- Countervailing Duties: Permitted to offset subsidies given by other governments to their exporters.
Conditions: duties apply only if material injury to domestic industries is proven; a duty does not exceed the damage the action caused; investigations must follow WTO rules.
GATT Article 19 - Emergency Action on Imports of Particular Products (Safeguard Measures)
How can countries respond to import surges?
- Safeguard Measures: Countries can impose restrictions (e.g., higher tariffs or quotas) to protect domestic industries.
Conditions: Import surges must harm domestic industries; measures are temporary.
WTO must be informed, and affected members compensated.
GATT Article 12: Restrictions to Safeguard the Balance of Payments
When can countries restrict imports for balance of payments?
- Reason: To address financial instability or low foreign reserves.
- Measures: Temporary quotas, tariffs, or restrictions.
Conditions: Restrictions must be minimal and necessary.
Notification: WTO must be informed, and consultations held.
GATT Article XIII: Non-Discrimination in the Application of Restrictions
What does GATT require for trade restrictions?
- Non-Discrimination: Restrictions must apply equally to all WTO members.
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Transparency: Reasons for restrictions must be clear and justifiable.
Exceptions: Some cases may allow exceptions, but non-discrimination remains the rule.
What’s TRIMs Agreement (Trade Related Investments Measures)?
Bans rules tying import permissions to export performance (only importing as much as you export)
What’s the difference between duties and taxes?
Duties: Applied at importations.
Taxes: Applied after goods enter the domestic market (ex. on sale, use or distribution).
Product distinction in tariff design (by Hudec)
- Material differences
- Manufacturing methods
- Scientific distinctions
- Value brackets
- Physical attributes (shape, size, etc.)
- Quality distinctions
GATT Article 24 - Customs Unions and Free Trade Areas
What does it say about customs unions and free trade areas?
- Free Trade Areas (FTAs): Substantially all duties and other restrictive regulations are removed for nearly all trade between member countries, butonly for products originating within those countries. (They are more common)
- Customs Unions (CUs): Members eliminate substancially all duties and regulations for trade between them and all apply the same duties and regulations to trade with non-memeber countries.
Agreements must not harm trade with other members (duties and other trade restrictions applied to non-members cannot increase when forming FTA or CU).
*substantially - less than 100% but significant part
Exceptions for Developing Countries - Developing countries have more flexibility when forming customs unions or free trade areas, as long as it supports their economic development and aligns with WTO principles.
Cases before the Panel on RTAs are rare because “people who live in glass houses should not throw stones”.
The number of RTAs Are increasing.
What are GATT’s economic and non-economic exceptions?
ECONOMIC EXCEPTIONS:
1. Preferential Trade Agreements (PTAs) ;
2. Preferential treatment of developing countries;
3. Restrictions to address balance of payments problems;
4. Trade remedies
NON-ECONOMIC EXCEPTIONS:
1. Restrictions to address, for example, public morals, health, environmental
protection;
2. Restrictions to address national security’s needs
What’s Common Commercial Policy (CCP)?
EU’s trade policy, which governs how EU manages trade with non-EU countries.
GATT Article 20 - General Exceptions
What’s the purpose of this article, and what exceptions to GATT rules are allowed?
Purpose: Allows countries to adopt measures that would normally violate GATT rules if they are necessary to achieve specific legitimate objectives.
Exceptions:
a. necessary to protect public morals
b. protect human, animal or plant life or health (even outside teh country’s territory)
c. regulate gold or sliver trade
d. enforce laws consistent with GATT
e. address product of prison labor
f. safeguard national treasures
g. conserve exhaustible natural resources
h. fulfill intergovernmental commodity agreements
i. restrict exports to stabilize domestic industries
j. ensure equitable distribution during shortages
All of the above must contribute significally to the stated goal (ex. public health) and there should NOT be any less restrictive alternate measures.
GATT Article 21 - Security Exceptions
When can national security override GATT rules?
Allows countries to take actions that are necessary for their national security, even if they conflict with GATT rules.
Applies during war or crises. There is _ no obligation to share sensitive info_.
What’s the SPS Agreement?
The Agreement on Sanitary and Phytosanitary Measures
Evolved from GATT art. XX:b (to protect human, animal and plant life or health).
In this agreement the burden of proof lies on the complaining party, not the defendant.
SPS is supposed to dsicourage governments from enacting protectionist measures disguised as measures to protect public health and safety.
What’s the Precautionary Principle?
States should take cost-effective measures to prevent environmental damage, even without full scientific certainity.
It provides a temporary waiver to SPS rules when the risks cannot yet be fully assessed scientifically.
What are 3 Trade Defence Instruments?
TDIs allow all WTO Members to impose trade-restrictive measures to protect domestic industries.
Anti-dumping - response to private actions harmful to trade (like dumping) that cannot exceed dumping margin (normal value - dumped price)
Anti-subsidies / Countervailing Duties - response to government or public body actions that harm competition
Safeguards - response to internal issues in the importing country unrelated to anti-competitive behaviour
To apply those, there must be serious injury or threat thereof.
What’s the Market Economy Status?
A country with this status have prices determined by suppy-demand rather than government. Countries without MES often face higher anti-dumping duties.
Types of subsidies (Traffic-Light System)
Red-light subsidies - Prohibited
Green-light subsidies - Permitted
Orange-light subsidies - Actionable if they harm other WTO Members
Models of supply in GATS
Cross-border Supply - a company in country A provides consulatation services online to clients i country B.
Consumption Abroad - tourists travelling abroad and consuming hotel or medical services.
Commercial Presence – a foreign bank setting up a branch in another country to offer financial services locally.
Presence of Natural Persons - a professional temporarily moving to another country to provide legal or engineering services.
What are the key aspects of the TRIPS Agreement?
Harmonizes global IP laws to support trade and protect IPRs (Intellectual Property Rights).
What is the WTO’s objective regarding developing countries?
- Ensure developing countries share in international trade growth.
- Promote sustainable development and improve living standards, employment, and income in these countries.
*developing countries are identifed by the low GNI (Gross National Income)
What is the Enabling Clause and what does it allow?
Permits developed countries to grant preferential treatment to developing countries (e.g., lower tariffs).
How does the WTO treat least-developed countries (LDCs)?
- LDCs receive additional support, such as TRIPS Article 66, which encourages technology transfer from developed countries.
- LDCs also benefit from extended transitional periods and technical assistance.
