International Trade Summary

Contents

Part 1: The Law of International Trade and the Multilateral Trading System

Introduction to World Trade Law

Economics of Trade Law

Part 2: History, Institutional Aspects, and the Relationship between International Law and Domestic Law

History of the WTO

Structure and Purpose of the WTO [74]

Structure of the WTO

World Trade Law and International Law

Article 31 of the Vienna Convention

World Trade Law and Domestic Law

Direct effect [124]

Part 3: Dispute Settlement in the WTO

Dispute Settlement in the GATT

The DSU Process

EC-Bananas

Timing/sequencing issue

Alternatives to Dispute Settlement

Interaction of the DSU Rules with other WTO Agreements

Procedural and Systemic Issues [182]

Violation Complaint:

Non-violation complaint:

What type of measures can be challenged?

Burden of proof [191]

Standing [191]

Third parties [194]

Transparency [195]

Amicus Curiae [198]

Treaty interpretation [202]

Precedential effect [204]

Standard of review [206]

Standard or Review to be applied to actions of domestic actors [208]

Judicial economy [216]

Multilateralism v Unilateralism [221]

Criticism and Appraisal of the DSU Process [226]

Traditional GATT Obligations

Border Measures: Tariffs and Quotas

Introduction

Tariff

GATT rules on Bound Tariffs: Article II [241]

Customs Valuation: GATT Article VII

Customs classification [244]

Non-violation Nullification or Impairment Remedy [251]

Valuation of Goods by Domestic Authorities [255]

Classification of Goods by Domestic Authorities [258]

Quotas

Tariff Quotas [267]

Export Quotas/Tariffs [268]

Non-Discrimination: MFN and National Treatment

Non-Discrimination

National Treatment: Domestic Taxes and Regulations

Art III:2 Tax Measures [281]

Art III:4 Regulatory Measures [299]

Conclusions and general observations [319]

Most Favored Nation Principle [322]

Like Products

Non-discrimination

Unconditional MFN

GATT Exceptions

Bilateral/Regional Trade Agreements

The Development of Regionalism through PTAs?

GATT Article XXIV and GATS Article V

Obligation to notify the CRTA

External Trade Requirement

Internal Trade Requirement [361]

PTAS and Dispute Settlement

Article XX General Exceptions

General Interpretive issues

‘Necessary’ versus ‘relating to’

Major Listed Exceptions

XX(a): Public Morals

XX(b): Human, Animal or Plant Life or Health

XX(d): Compliance Measures

XX(g): Conservation of Exhaustible Natural Resources

The Chapeau!

US-Gasoline

US-Shrimp [414]

Remedies for Fair and Unfair Trade- Subsidies and Countervailing Measures

Identification of subsidies that are subject to the SCM agreement

Definition of Subsidy

Specificity

Regulation of specific subsidies under the SCM agreement

Prohibited subsidies

Application of the Export Contingency Standard for ‘In Fact’ Subsidies

Art 3.1(a) & Annex 1 [439]

Domestic Content Subsidies

Actionable Subsidies

Non-actionable subsidies

Dispute Settlement and Remedies

Special Rules for Certain Countries [450]

Agriculture Agreement

GATT

TRIMS Agreement

Countervailing Measures

Canada-US Lumber dispute [454]

Dumping and Anti-Dumping Measures

Anti-dumping: A basic overview

Anti-Dumping Investigations

Initiation

Is there dumping? [472]

Comparing the Export Price and Normal Value: Calculating the Dumping Margin!

Zeroing [476]

Domestic Dumping Determination (By Canadian Agency dealing with Sorel Footwear) [483]

Injury

Was there an injury in that Canada Sorel waterproof boots case? [498]

Causation [same as for subsidies]

Safeguards

Procedural Requirements

Conditions to be satisfied in order to apply safeguard measures

Increased Imports

Unforeseen Developments

Serious Injury or Threat Thereof

Causation and Non-attribution

Standard of Review

Application of safeguard measures

The Extent of Safeguard Measures

Parallelism

Measures in the form of Quantitative Restrictions

Excluding Developing Country Members

Duration of Safeguard Measures

Provisional Safeguard Measures

Maintaining an equivalent level of concessions

SPS and TBT Agreements

SPS Agreement

Basic Rights and Obligations: Article 2

Harmonisation: Article 3

Equivalence: Article 4

Assessment of Risk and Determination of the Appropriate Level of SPS Protection: Article 5

Article 5.5: Discrimination or Disguised Restriction on Trade

Article 5.6: No more trade-restrictive than necessary

Transparency: Article 7

TBT Agreement

Article 2: Preparation, Adoption and Application of Technical Regulations by Central Government Bodies

US-Clove Cigarettes

U.S. Country of Origin Labeling (COOL)

US-Tuna II

GATS-Trades in Service

Scope of the GATS

What Services are Covered?

How are Services Traded?

Relationship between GATT and GATS

General Obligations and Disciplines

Most Favoured Nation Treatment

Transparency

Domestic Regulation: Article VI

Exceptions

TRIMS: Trade-Related Investment Measures

TRIMS Agreement

Dispute Settlement

International Investment Regulation outside the WTO Context

Bilateral Investment Treaties (BITs) and Investment Provisions of Free Trade Agreements

Metalclad Corporation v Mexico [651]

Multiateral Agreement on Investment

De Gossis Reading

Investor Nationality

Definition of Investment

MFN and National Treatment

Fair and Equitable Treatment and Full Protection and Security

Free Transfer of Capital

Expropriation

Performance Requirements

Contracts and Obligations Observance

Dispute Resolution

Foreign Investment Review in Canada- Slides

Part 1: The Law of International Trade and the Multilateral Trading System

Introduction to World Trade Law

  • We are looking at the legal instruments that regulate trade flows.
  • These can be based on both international agreements and domestic law. The WTO Agreement is the principal agreement, but regional trade agreements (NAFTA, EU, MERCOSUR, ASEAN) also play an important role.
  • Global trade has increased in recent years because of (1) technological advances, (2) the reduction in trade barriers, and (3) globalization.
  • As it stands, large economies tend to dominate trade (they have more goods to sell), but developing countries must also rely on trade for growth and are active participants.
  • Trade is seen as a good thing because it is argued that it promotes poverty reduction, democracy, and peace.
  • Free trade is generally more beneficial than protectionism despite being less popular, but there is debate.
  • However, the current free trade regime is not perfect for developing countries (patent laws, agricultural subsidies, and high tariffs on manufactured products), but the book’s general conclusion is that trade is good.
  • We must also note that not all trade agreements are the same. There are varying levels of integration between agreements.
  • Entire GATT/WTO system is premised on the idea that trade liberalization is good for everyone.

Economics of Trade Law

  • Adam Smith talked about absolute advantage, but Ricardo perfected with comparative advantage.
  • Comparative advantage is the notion that every country has an advantage at producing something (whether they are absolutely better or relatively better).
  • Free trade therefore allows wealth maximization because everyone is getting the best deal.
  • But this is complicated when there are multiple countries and multiple goods. In reality the theory doesn’t play out. (For instance the political reasons to bail out GM even if one argues that Japan has a comparative advantage in auto production.)
  • There are incentives to barriers (invisible revenue increases, developing new industries, industries with spillover effects)
  • Still free trade is still the best policy despite imperfections.
  • Moreover, the principle of comparative advantage is based on the notion of shallow integration. However, today integration is deeper and effects not only production outputs, but impacts efficiency in terms of intellectual property and governance and regulation.

Part 2: History, Institutional Aspects, and the Relationship between International Law and Domestic Law

History of the WTO

  • The WTO is a member-driven organization, it serves the interests of governments in the way that governments see fit (it does not govern)
  • US took the lead in the aftermath of WWII to create an international trade institution (proposed the ITO)
  • The ITO proposal was drafted at the same time as the GATT (an international agreement to reduce tariffs). However, the ITO failed (too ambitious), the GATT succeeded (restricted to tariffs).
  • There were problems however as the GATT was designed to be implemented with the ITO, therefore some provisions were left incomplete. (GATT is not an institution)
  • GATT was subsequently renegotiated throughout various “Rounds” each focusing on different roles for GATT and trying to take the agreement further (the Uruguay Round finally created the WTO)
  • WTO negotiations were long and turbulent, but were a necessary response to the incoherence, legal uncertainty and political weakness of the GATT.

Structure and Purpose of the WTO [74]

  • 3 purposes
  • Negotiation forum
  • Provides a set of rules
  • Helps settle disputes among Members
  • Governed by the following principles
  • Non-discrimination (MFN and National treatment)
  • Freer trade through reductions in trade barriers
  • Predictability through binding trade commitments (transparency)
  • Fair and undistorted competition (Art XX chapeau)
  • Special treatment for developing countries
  • Ultimate goals include increasing living standards, attaining full employment, growth of real income and effective demand and an expansion of the production of and trade in goods and services
  • Achieved in accordance with sustainable development and through increasing integration of developing countries
  • Achieved through the reduction of trade barriers and the elimination of discrimination in international trade relations
  • Specific agreements pursue particular principles
  • TRIPS sets out substantive IP protection rules
  • GATS provide for service market access rules that go beyond non-discrimination
  • SPS requires that measures be based on ‘scientific principles’
  • TBT requires that Members ensure that technical regulations are not prepared with the effect of creating unnecessary obstacles to international trade
  • SPS, TBT, TRIPS promote harmonisation and mutual recognition of laws
  • The scope of the WTO (Article II of the WTO Agreement) is to provide a common institutional framework for the conduct of trade relations between members in matters relating to the agreements
  • The function of the WTO (Article III of the WTO Agreement)
  • (1) facilitate the implementation, administration, operation, and further objectives of the Agreement and Plurilateral Trade Agreements;
  • (2) provide a forum for negotiations among members for matters dealing with the agreements and for further negotiations among members;
  • (3) administer the Dispute Settlement Understanding (DSU);
  • (4) administer the Trade Policy Review Mechanism (TPRM) and;
  • (5) cooperate with the IMF and the World Bank to achieve greater coherence in global economic policy making [82]

Structure of the WTO

  • The substantive agreements (GATT, GATS, TBT, DSU, etc.) are contained in the annexes of the WTO Agreement [83].
  • The Ministerial Conference is all the Members brought together to make decisions.
  • The General Council is under the Ministerial Conference and is composed of Member representatives. They carry out the function of the Ministerial Conference between Conferences (usually monthly). The General Council also directs the activities of the three sub-councils [85].
  • The Secretariat does the administrative work.
  • The WTO adopts a consensus approach to decision-making (allowing Members to keep control).
  • This usually means that Agreements get watered down.
  • It was easier in the GATT years when there were fewer countries (they were all developed too)
  • The Ministerial Conference and the General Council have the exclusive authority to adopt interpretations of the WTO Agreements (Article XI:2 WTO Agreement).
  • The interpretations are binding, but this has never been used [94].
  • The Ministerial Conference can also allow waivers to WTO obligations (Article IX:3), it was later agreed that it should voted on instead.
  • Waivers are super exceptional [95].
  • Obtaining amendments is difficult. You need consensus at the Ministerial conference or it waits for 90 days. Then it is put to a vote at the Ministerial Conference that needs a 2/3 majority. Then it is put to the Members who need to pass it with a 2/3 majority.
  • If it affects rights and obligations, only those who voted for it are affected.
  • States negotiate to join the WTO and it is a long process. It is easy to withdraw.

World Trade Law and International Law

  • World trade law and international law are largely considered to be separate spheres, but the WTO is an international treaty, and this is part of the larger body of international law
  • There is debate over the role of international law in WTO law
  • For those who see a substantial role [104]:
  • WTO law looks like international law in the sense that the creators are the subjects, there is cooperation and equality, and it is derived from state agreement.
  • Treaties are born into a system of international law; there is no hierarchy.
  • The applicable law before a WTO panel depends on: (1) the claims presented; (2) the defences invoked; (3) the scope of the relevant rules; (4) conflict rules. WTO dispute settlement does not exist in a legal vacuum and they can look to and apply international law.
  • The WTO dispute settlement covers more than the WTO agreements (slave trade example where the DSU would have to apply peremptory norms).
  • The WTO rules belong to the rules of international law and thus international law is a part of that law.
  • This argument is countered [112]:
  • There is no normative basis why international human rights law trumps international trade law. Moreover, the WTO Agreements were negotiated based on political balancing of international interests.
  • There is a choice-of-law problem in the international horizontal legal order. But you cannot impose order where none exists.
  • There is a distinction between law that applies to state conduct and law that applies to WTO dispute settlement.
  • WTO panels have refused to apply other treaties because they were not intended to be a part of dispute settlement.
  • There could also be impacts on third party rights
  • Bringing in other law would upset the balance achieved through WTO negotiation Rounds.

Article 31 of the Vienna Convention

  • There is a common point. International law is mentioned in Article 3.2 of the DSU and in Article 31 of the Vienna Convention. But the disagreement lies in what should come in beyond that.
  • There are three ways that international law can be applied by the DSB: (1) through interpretation; (2) as evidence; (3) as law.
  • In EC-Biotech the AB left some flexibility to use other international law if it was informative and the claimant was not relying on them [120].
  • Pursuant to Article 31(1) of the Vienna Convention, the terms of a treaty must be interpreted in accordance with the “ordinary meaning” to be given to these terms in their context and in the light of its object and purpose.
  • In addition to dictionaries, other relevant rules of international law may in some cases aid a treaty interpreter in establishing the ordinary meaning of treaty terms in the specific context in which they are used. Such rules would not be considred because they are legal rules, buth rather because they may provide evidence of the ordinary meaning.

World Trade Law and Domestic Law

  • The application of international law within countries depends on the country
  • The role of domestic law varied depending on what kind of international law it is (treaty, decision, custom, jus cogens), and how the country treats international law.

Direct effect [124]

  • A private person in a state may base a claim in, and be grated relief from, the domestic of that state against another private person or the state on the basis of the state’s obligations under international treaty
  • Private actors directly derive rights and assume obligations under a self-executing treaty
  • Direct effect only exits under constitutions that follow the monist doctrine, as opposed to a dualist system
  • Direct effect is seen by some as a weapon against protectionism and raising the right to trade to that of a human right.
  • Direct effect would also increase reliability and certainty, enhance economic integration, and would benefit smaller countries who depend on rule of law.
  • However, direct effect would cause domestic imbalance and could threaten democracy
  • Direct effect is not necessary to ensure that governments follow international law
  • Moreover, the fact that most states do not have direct effect puts those that do in a disadvantaged position.
  • The middle ground is that states enforce DSB decisions domestically (this is based on equality and looks like minimal direct effect)
  • USA and direct effect [129]
  • There is no direct effect
  • No provision of the WTO agreements will have effect within the US if it is inconsistent with any US law
  • No WTO provision can operate to change prior or subsequent US law
  • No private or other persons, other than the US, has standing within a US court to invoke a WTO agreement to challenge actions of the federal government or its agencies
  • Only states can make claims.
  • However, there is indirect effect in the USA
  • WTO law can be used to interpret US law based on the Charming Betsycase.
  • An Act ought never to be construed to violate the law of nations if any other possible construction remains
  • But Chevronsays that the courts must defer to Congress is Congress is clear.
  • The EU and direct effect [139]
  • EU law gets predominance over national law
  • Not for GATT because it was considered to be a tool for negotiation and imprecise
  • WTO law can neither be invoked by individuals nor by EU Member States to challenge the lawfulness of EU measures
  • Van Parys case
  • WTO agreements cannot be relied upon before EU courts except where the EU intended to implement a particular WTO obligation
  • The recommendations of a DSB ruling are not mandatory
  • Chiquita case
  • Exception to general rule applies only where the lawfulness of an EU measure which “specifically transposes prescriptions arising from the WTO agreements into Community law
  • General obligations of a DSB ruling does not fit exception, must be specific
  • FIAMM case
  • Rejects direct effect because the courts of EU’s most important trading partners did not allow WTO law to be invoked, there would be an unequal application of WTO rules
  • Canada and direct effect:
  • No direct effect
  • There is a dualist system
  • An implementing legislation must be passed to give effect to treaties in the domestic