1 Laws Governing Access to Foreign Markets Chapter 10 © 2002 West/Thomson Learning.

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Laws Governing Access to Foreign MarketsLaws Governing Access to Foreign Markets

Chapter 10

© 2002 West/Thomson Learning

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GATT: Least Restrictive Trade Principle

WTO members must make valid restrictions no more restrictive than necessary to achieve goals

Laws and regulations for internal purposes must also be least restrictive as possible Health and consumer safety

standards must not unduly burden trade or single out foreign goods or service providers

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Thailand Restrictions on Importation of Cigarettes (GATT 1990)

Thailand Restrictions on Importation of Cigarettes (GATT 1990) Facts: Thailand restricts import of

cigarettes – require license Only license granted was to Thai state

Tobacco Monopoly Thailand – restrictions to control

additives – public health problem Issue: Do restrictions violate GATT Art.

XI? Decision: Yes, restrictions violate GATT

Art. XI:1 Reasons: Restrictions not justified under

Art. XX(b) – measures allowed only if no alternative consistent with GATT or less restrictive exist Could use nondiscriminatory regulation

to require disclosure of additives, ban harmful additives

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Separate Agreements under the 1994 GATT Agreement

Separate Agreements under the 1994 GATT Agreement

Technical barriers to trade (regulations and product standards)

Import Licensing Procedures Government procurement of goods Trade in services Trade in agricultural products Trade in textiles and apparel Trade related investment measures

(TRIMS) Trade related intellectual property

(TRIPS)

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International StandardsInternational Standards CE Mark – Conformite Europeane International Organization for

Standardization: promulgates internationally-accepted standards

ISO 9000: assurance of product quality through design and manufacture ISO certification makes selling in

Europe much easier Required under EU law for

medical devices and construction equipment

ISO 14000: standards for environmentally safe products

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GATT 1994 Agreement on Technical Barriers to Trade

GATT 1994 Agreement on Technical Barriers to Trade

Requires that member states’ standards must be applied in non-discriminatory manner

Standards must not create unnecessary obstacles to trade

Members are to use international standards whenever possible

Transparency: members should publish proposed standards for comment and publish final standard to allow reasonable time to adapt

Principle of Least-Restrictive Trade

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EC – Measures Affecting Asbestos (WTO Appellate Body Report 2001)

Facts: France imposes virtual ban on importation of chrysotile to France

Canada complains that fibers can be used in ways without risk

Canada requested WTO dispute settlement France claims Art. XX(b) – protect public health

Issue: are restrictions valid technical regulation under GATT?

Decision: Yes – not discriminatory Reasons: Technical regulations lay down product

characteristics Measure here prescribes certain

characteristics for all products Panel decision as to risk based on scientific

evidence – protects life or health within meaning of Art. XX(b)

WTO members have right to determine level of protection chosen

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Import Licensing Procedures

GATT art. XI allows for import licensing if used in non-discriminatory and transparent manner

Textile quotas (expired Jan. 1, 2005) Transparency:

Procedures not unduly complicated, rules published and openly available to all interested parties

Applications should be handled within 60 days GATT Agt.on Import Licensing Procedures (1994):

non-discriminatory and simple procedures Members must notify WTO Import Licensing

Comm. if products will be subject to new licensing requirements

If use licensing to administer quotas, must publish amount of quota already used

Trade Facilitation: efforts to simplify and standardize regulations and procedures for movement of goods across borders

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Government ProcurementGovernment Procurement GATT Art. III allows exception to national

treatment allowing government to favor domestic supplier

GATT 1994 Agreement on Government Procurement requires fair, open and non-discriminatory procurement practices- 2006 revisions applies only to those signatories, and applies to goods and services worth

130,000 SDR or more and construction contracts over 5 million SDR

Agt provides for bilateral agreements btwn. Signatories as to how AGP will apply to them May have differing rules for different

countries involved Allow signatories to exempt certain

agencies

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AGP Procurement Rules

Procuring agency must treat products from all signatories equally – no less favorable than domestic products

Prohibits offsets – requirements to use local labor or to purchase from local suppliers

Transparency: give adequate notice to potential bidders and disclose all material information to submit bid

Procedure to challenge bids award and to settle disputes

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US AGP ExclusionsUS AGP Exclusions

Dept. of Defense: military equipment or relating to national security

Dept. of Agriculture: food support programs and food for distribution

Dept. of Energy & FAA States may have specific

exclusions: N.Y. : subway cars S.D. : beef purchases

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Trade in ServicesTrade in Services

Not included in GATT until 1994 Uruguay Round

U.S. has trade balance in services: 76.6% of GDP from services

GATT General Agt. On Trade in Services overseen by Council for Trade in Services

Telecommunications and transportation excluded

Separate agreements on financial services and telecommunications

Methods of providing services: Cross-border supply Consumption abroad Commercial presence Presence of natural persons

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General Agreement on Trade in Services

(GATS) Transparency No local participation requirement MFN Nondiscrimination No restriction on transfer of money Members can license professionals

– must be objective, no discrimination on citizenship

Members can set specific exceptions: U.S. excluded transportation Japan excluded repair services and

couriers

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GATS Agreement on Trade in Financial

Services Open domestic markets to foreign

competition: Banking Securities Insurance

Promote efficiency, reduce costs,provide greater choice of providers

Unintended consequence: consolidation as domestic firms acquired by foreign firms

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GATS Agreement on Basic Telecommunications Signatories bound to open

domestic telecommunications markets to foreign competition Apply MFN and nondiscrimination

principles Covers most services: voice,

data, facsimile, mobile data, paging, etc.

Includes local and long distance services

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Trade in Agriculture

Agriculture most heavily protected sector EU: Common Ag Policy US: Farm Bill Japan: Japanese Staple Food Control

Law Powerful domestic political force

Concern for independence in food supply

Subsidies and Price Supports common Increases domestic prices Distort production patterns Results in surpluses

2000: Doha Round focuses on agriculture – no real progress yet

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GATT 1994 Agreement on Agriculture

GATT 1994 Agreement on Agriculture

Agreement effective 1995 Attempts to bring fair trade and

competition to ag sector Reduce government subsidies that

distort market competition Cut domestic programs that support

higher prices Cut subsidies of exports of farm

products Convert quotas and nontariff barriers

Agreement on Application of Sanitary and Phytosanitary Measures (SPS): allows members to protect human ,

animal and plant life – based on scientific evidence

Must be no more restrictive than necessary

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EC Measures Concerning Meat and Meat Hormones (WTO 1997)

Facts: EU ban on beef with any residue of growth hormones

Protect public health and restore confidence in meat industry

US and other complained ban violated SPS US imposed retaliatory duties of EU imports EU requested WTO panel

Issue: Is ban more restrictive than necessary? Decision: EU ban violates GATT and SPS Reasons: Art. 3.1 – must base sanitary measures

on international standards Codex standards allow residues EU standards not based on international

standards Member standards must be only to extent

necessary

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Trade in TextilesTrade in Textiles

Textiles “import sensitive” sector Labor intensive Developing countries can be major

competitors 1974 Multifiber agreement: system

of bilateral quotas by country and by product

US: huge trade deficit in textiles Committee for Implementation of

Textile Agreements conducts textile negotiations

NAFTA: no quotas on Canadian or Mexican textiles

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Effective 1995: phase out quota system over 10 year period Subject to GATT by Jan. 1, 2005 MFN and nondiscrimination principles Reduce tariffs over 10 years Temporary quotas as safeguards to

avoid serious injury to domestic industry

WTO Textile Monitoring Body created to oversee compliance

Disputes resolved through WTO Problems in Textile trade:

Illegal transshipment Re-labeling the goods as to origin US – right to limit Chinese imports until

2008

1994 GATT Agt on Textiles and Clothing

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GATT 1994 Agt on Trade Related Investment

Measures

GATT 1994 Agt on Trade Related Investment

Measures TRIMS Does not set broad rules Prohibits laws or regulations

that condition a company’s right to import foreign goods on the volume of goods exported

Prohibits conditioning receipt of foreign investment on company’s foreign exchange revenues

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GATT 1994 Agt on Trade Related Aspects of IP

Rights

GATT 1994 Agt on Trade Related Aspects of IP

Rights TRIPS WTO countries agree to abide by intellectual

property conventions No discrimination: domestic and foreign IP

rights treated the same Prohibits conditions attached to patents, etc. Transparency as to rules and regulations Members to strengthen enforcement Members must bring domestic laws into

compliance with TRIPS WTO Dispute Settlement process

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US Trade Sanctions: S. 301

US Trade Sanctions: S. 301 Section 301 Trade Act 1974, as amended

US can retaliate against countries violating GATT or maintaining unfair or discriminatory practices or policies

Four different provisions: Basic S. 301 Special 301 Telecommunications 301 Super 301

Initiated by petition by company or by USTR Investigation and /or hearing USTR to negotiate with offending

country If claim GATT violation, invoke WTO

process if no resolution in 150 days

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Basic S. 301Basic S. 301 USTR has discretion to retaliate when country

has unreasonable or discriminatory practices (even if no violation of trade agts.)

USTR has discretion to retaliate when country denies labor rights

USTR must retaliate when: Country denies US rights under trade agts. Country’s policies unjustifiable, deny US legal

rights and burden or restrict US commerce If violation of GATT, presume burden to US

commerce Waive retaliation if:

WTO panel upholds country’s actions Country agrees to eliminate policy USTR believes negotiated settlement imminent USTR believes retaliation would have more

adverse impact than benefit on US economy

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Other S. 301 Actions Super 301: most controversial – lapsed in

2007 USTR to identify priority trade

practices posing greatest barriers to US trade

Identify priority countries showing pervasive discrimination against US firms

Retaliation required if country does not remove barriers

Special 301: action against countries failing to protect IP rights Designate worst offenders “priority

foreign countries” – place on priority list or priority watch list

USTR to investigate – 6 months to decide to invoke sanctions

Telecommunications 301: mandatory retaliation against countries blocking access to telecom market

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Trade Sanctions under S. 301

US has wide range of sanctions available: generally assess additional duties

Carousel Law: Trade and Development Act of 2000 USTR to review products subject to

retaliatory duties after 120 days Then periodic rotation (every 180 days)

of products subject to duties to “spread the pain”

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U.S. Sections 301-310 of Trade Act of 1974 (WTO Panel

1999)

Facts: EU complaint that Ss. 301-310 violate GATT dispute settlement process EU claims that strict time limits under

US law don’t allow sufficient time for WTO process to work

Issue: Does US law violate GATT? Decision: US law valid as long as allows

US to follow WTO settlement rules Reasons: US legislation not inconsistent

with WTO if it permits action consistent with WTO US law provides discretion to comply

with WTO rules and procedures in each case