IEL 2 MidtermReviewer - Guiyab Inte rnat iona l Eco nomi c Law IIL Legal, Eco nomic, and Pol itca l-Econo mic As pect s ofRegional Economic Integartion Week 1 Pelkmans-Balaoing Article Summar! "he rapid growth of intra-Asian trade, especially in the last couple of decades, represents both a marked shift in export orientation and an increasing integration of regional markets. In 2005, halfof total Asian exports were destined for regional consumption, and a further rise can only be expected gien the high growth rates of intraregional trade, peaking at 25! in 200" #$orld %rade &rgani'ation ($%&) 200*+. Against such a backdrop, the surge of regionalism in Asia today comes as no surprise. owhere in the world is the proliferation of regional integration arrangements #IAs+ more eident than in Asia today. A s of eptember 200*, the indiidual /ast and outh Asian countries considered in this study were inoled in 01 free trade negotiations or signed agreements. $hile political and security moties are also influential, the economic imperatie to further feed the markets appetite for more regional trade is clearly driing policy agents along the track toward free trade agreements #3%A s+. 4reious studies on the impacts of free trade agreements #3%As+ in /ast Asia hae assumed full utili'ation of preferences. %he eidence suggests that this assumption is seriously in error, with the estimated uptake particularly low in /ast Asia. In this paper, we assume a more realistic utili'ation rate in estimating impacts. $e find that actual utili'ation rates significantly diminish the benefits from preferential liberali'ation, but in a non-linear way. eciprocity is an important motiation for pursuing 3%As oer unilateral actions, although the oha ound could delier the same outcome if only it could be conclu ded. $e isol ate the impac t of reciproci ty , but find that the additional benefits also depend on utili'ation rates. 3urthermore, the potential for trade deflection combined with possible retaliatory actions could negatiely affect members and non- member s. In the abs ence of oh a, the mult il at er al i' at ion of pr ef er ences, een wi thout reciprocity, is the practical route that is most likely to delier the greatest benefits to members. 6lobal liberali'ation, while difficult to attain, would maximi'e world welfare while posing no risk in its reali'ation. Part I Article I! #eneral $ost-%a&oured-'ation "reatment 1. $ith respect to customs duties and charges of any kind imposed on or in connection with importation or exportation or imposed on the international transfer of payments for imports orexports, and with respect to the method of leying such duties and charges, and with respect to all rules and formalities in connection with importation and exportation, and with respect to all matters referred to in paragraphs 2 and " of Article III,7 any adantage, faour, priilege orimmunity granted by any contracting party to any product originating in or destined for any othercountry shall be accorded immediately and unconditionally to the like product originating in ordestined for the territories of all other contracting parties.
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International Economic Law IIL Legal, Economic, and Politcal-Economic Aspects of
Regional Economic Integartion
Week 1
Pelkmans-Balaoing Article Summar!
"he rapid growth of intra-Asian trade, especially in the last couple of decades, represents both a
marked shift in export orientation and an increasing integration of regional markets. In 2005, half
of total Asian exports were destined for regional consumption, and a further rise can only be
expected gien the high growth rates of intraregional trade, peaking at 25! in 200" #$orld
%rade &rgani'ation ($%&) 200*+. Against such a backdrop, the surge of regionalism in Asia
today comes as no surprise. owhere in the world is the proliferation of regional integration
arrangements #IAs+ more eident than in Asia today. As of eptember 200*, the indiidual /ast
and outh Asian countries considered in this study were inoled in 01 free trade negotiations
or signed agreements. $hile political and security moties are also influential, the economic
imperatie to further feed the markets appetite for more regional trade is clearly driing policy
agents along the track toward free trade agreements #3%As+.
4reious studies on the impacts of free trade agreements #3%As+ in /ast Asia hae assumed full
utili'ation of preferences. %he eidence suggests that this assumption is seriously in error, with
the estimated uptake particularly low in /ast Asia. In this paper, we assume a more realistic
utili'ation rate in estimating impacts. $e find that actual utili'ation rates significantly diminish
the benefits from preferential liberali'ation, but in a non-linear way. eciprocity is an important
motiation for pursuing 3%As oer unilateral actions, although the oha ound could delier the
same outcome if only it could be concluded. $e isolate the impact of reciprocity, but find that
the additional benefits also depend on utili'ation rates. 3urthermore, the potential for trade
deflection combined with possible retaliatory actions could negatiely affect members and non-members. In the absence of oha, the multilaterali'ation of preferences, een without
reciprocity, is the practical route that is most likely to delier the greatest benefits to members.
6lobal liberali'ation, while difficult to attain, would maximi'e world welfare while posing no
risk in its reali'ation.
Part I
Article I! #eneral $ost-%a&oured-'ation "reatment
1. $ith respect to customs duties and charges of any kind imposed on or in connection withimportation or exportation or imposed on the international transfer of payments for imports or
exports, and with respect to the method of leying such duties and charges, and with respect toall rules and formalities in connection with importation and exportation, and with respect to allmatters referred to in paragraphs 2 and " of Article III,7 any adantage, faour, priilege or immunity granted by any contracting party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties.
1. %he proisions of this Agreement shall apply to the metropolitan customs territories
of the contracting parties and to any other customs territories in respect of which this
Agreement has been accepted under Article 889I or is being applied under Article888III or pursuant to the 4rotocol of 4roisional Application. /ach such customs
territory shall, exclusiely for the purposes of the territorial application of this Agreement,
be treated as though it were a contracting party: Provided that the proisions of this
paragraph shall not be construed to create any rights or obligations as between two or more
customs territories in respect of which this Agreement has been accepted under Article
889I or is being applied under Article 888III or pursuant to the 4rotocol of 4roisional
Application by a single contracting party.
2. 3or the purposes of this Agreement a customs territory shall be understood to mean
any territory with respect to which separate tariffs or other regulations of commerce are
maintained for a substantial part of the trade of such territory with other territories.
. %he proisions of this Agreement shall not be construed to preent;
#a+ Adantages accorded by any contracting party to ad<acent countries in order tofacilitate frontier traffic:
#b+ Adantages accorded to the trade with the 3ree %erritory of %rieste by
countries contiguous to that territory, proided that such adantages are not in
conflict with the %reaties of 4eace arising out of the econd $orld $ar.
". %he contracting parties recogni'e the desirability of increasing freedom of trade by
the deelopment, through oluntary agreements, of closer integration between the
economies of the countries parties to such agreements. %hey also recogni'e that the
purpose of a customs union or of a free-trade area should be to facilitate trade between the
constituent territories and not to raise barriers to the trade of other contracting parties with
5. Accordingly, the proisions of this Agreement shall not preent, as between the
territories of contracting parties, the formation of a customs union or of a free-trade area or
the adoption of an interim agreement necessary for the formation of a customs union or of
a free-trade area: Provided that;
#a+ with respect to a customs union, or an interim agreement leading to a
formation of a customs union, the duties and other regulations of commerce imposed
at the institution of any such union or interim agreement in respect of trade with
contracting parties not parties to such union or agreement shall not on the whole be
higher or more restrictie than the general incidence of the duties and regulations of
commerce applicable in the constituent territories prior to the formation of such
union or the adoption of such interim agreement, as the case may be:
#b+ with respect to a free-trade area, or an interim agreement leading to the
formation of a freetrade area, the duties and other regulations of commerce
maintained in each of the constituent territories and applicable at the formation of
such free-trade area or the adoption of such interim agreement to the trade of
contracting parties not included in such area or not parties to such agreement shall
not be higher or more restrictie than the corresponding duties and other regulations
of commerce existing in the same constituent territories prior to the formation of the
free-trade area, or interim agreement as the case may be: and
#c+ any interim agreement referred to in subparagraphs #a+and #b+ shall include a
plan and schedule for the formation of such a customs union or of such a free-trade
area within a reasonable length of time.
*. If, in fulfilling the re=uirements of subparagraph 5 #a+, a contracting party proposes toincrease any rate of duty inconsistently with the proisions of Article II, the procedure set
forth in Article 889III shall apply. In proiding for compensatory ad<ustment, due
account shall be taken of the compensation already afforded by the reduction brought
about in the corresponding duty of the other constituents of the union.
>. #a+ Any contracting party deciding to enter into a customs union or free-trade area,
or an interim agreement leading to the formation of such a union or area, shall promptly
notify the ?&%A?%I6 4A%I/ and shall make aailable to them such information
regarding the proposed union or area as will enable them to make such reports and
recommendations to contracting parties as they may deem appropriate.
#b+ If, after haing studied the plan and schedule included in an interim agreement
referred to in paragraph 5 in consultation with the parties to that agreement and taking due
account of the information made aailable in accordance with the proisions
of subparagraph #a+, the ?&%A?%I6 4A%I/ find that such agreement is not likely
to result in the formation of a customs union or of a free-trade area within the period
contemplated by the parties to the agreement or that such period is not a reasonable one,
the ?&%A?%I6 4A%I/ shall make recommendations to the parties to the
agreement. %he parties shall not maintain or put into force, as the case may be, suchagreement if they are not prepared to modify it in accordance with these recommendations.
#c+ Any substantial change in the plan or schedule referred to in paragraph 5 #c+ shall
be communicated to the ?&%A?%I6 4A%I/, which may re=uest the contracting
parties concerned to consult with them if the change seems likely to <eopardi'e or delay
unduly the formation of the customs union or of the free-trade area.
@. 3or the purposes of this Agreement;
#a+ A customs union shall be understood to mean the substitution of a single
customs territory for two or more customs territories, so that
#i+ duties and other restrictie regulations of commerce #except, wherenecessary, those permitted under Articles 8I, 8II, 8III, 8I9, 89 and 88+ are
eliminated with respect to substantially all the trade between the constituent
territories of the union or at least with respect to substantially all the trade in
#ii+ sub<ect to the proisions of paragraph , substantially the same duties and
other regulations of commerce are applied by each of the members of the union
to the trade of territories not included in the union:
#b+ A free-trade area shall be understood to mean a group of two or more customs
territories in which the duties and other restrictie regulations of commerce #except,
where necessary, those permitted under Articles 8I, 8II, 8III, 8I9, 89 and 88+ are
eliminated on substantially all the trade between the constituent territories in
products originating in such territories.
. %he preferences referred to in paragraph 2 of Article I shall not be affected by the
formation of a customs union or of a free-trade area but may be eliminated or ad<usted bymeans of negotiations with contracting parties affected.7 %his procedure of negotiations
with affected contracting parties shall, in particular, apply to the elimination of preferences
re=uired to conform with the proisions of paragraph @ #a+#i+ and paragraph @ #b+.
10. %he ?&%A?%I6 4A%I/ may by a two-thirds ma<ority approe proposals
which do not fully comply with the re=uirements of paragraphs 5 to inclusie, proided
that such proposals lead to the formation of a customs union or a free-trade area in the
sense of this Article.
11. %aking into account the exceptional circumstances arising out of the establishment of
India and 4akistan as independent tates and recogni'ing the fact that they hae long
constituted an economic unit, the contracting parties agree that the proisions of this
Agreement shall not preent the two countries from entering into special arrangements
with respect to the trade between them, pending the establishment of their mutual trade
relations on a definitie basis.7
12. /ach contracting party shall take such reasonable measures as may be aailable to it
to ensure obserance of the proisions of this Agreement by the regional and local
goernments and authorities within its territories.
It is understood that the proisions of Article I would re=uire that, when a product
which has been imported into the territory of a member of a customs union or free-trade
area at a preferential rate of duty is re-exported to the territory of another member of such
union or area, the latter member should collect a duty e=ual to the difference between theduty already paid and any higher duty that would be payable if the product were being
imported directly into its territory.
Paragrap/ 11
Beasures adopted by India and 4akistan in order to carry out definitie trade
arrangements between them, once they hae been agreed upon, might depart from
particular proisions of this Agreement, but these measures would in general be consistent
with the ob<ecties of the Agreement.
+ nderstanding on t/e Interpretation of Article ((I) of t/e #eneral Agreement on
"ariffs and "rade 100
Cereby agree as follows;
1. ?ustoms unions, free-trade areas, and interim agreements leading to the formation of a customs union or free-trade area, to be consistent with Article 88I9, must satisfy, inter
alia, the proisions of paragraphs 5, *, > and @ of that Article.
ummary of $%&, egionalism and the $orld %rading ystem Article, 15.
An analysis of the growth in trade between participating countries in regional agreements and
their trade with other regions does not support the conclusion of an increasing regionali'ationof world trade, nor does it confirm the notion of the emergence of trading DblocsE centred in orth America, $estern /urope and the Asia-4acific region.In fact, trade with partners in thesame region and with partners in other regions hae both become increasingly important innational economies throughout the postwar period.
%he legal foundations for more open trade hae been laid by the multilateral tradingsystem - global in its coerage - with regional integration agreements sering to deepenrelations with neighbouring countries. %hus, Dthe regional and multilateral integrationinitiaties are complements rather than alternaties in the pursuit of open tradeE.
%hese are among the main conclusions of a study, Regionalism and the World Trading System, published today, by the $orld %rade &rgani'ation ecretariat, in 6enea.Coweer, commenting on the $%& rules and procedures goerning regional integrationagreements, the study says, D...it may be that goernments will consider that reforms arenecessary in order to put the mutually supportie relationship between multilateralism andregionalism on a more solid foundationE.
%he share of world merchandise trade which is intra-regional #ie. conducted within ageographic region+ has risen from "0.* per cent in 15@ to 50." per cent in 1. %hisincrease is mainly accounted for by the deelopment of $estern /urope, whose internaltrade grew from 5 to >0 per cent of its oerall trade during this period. $hile this is the
only region to exhibit a clear policy-induced increase in the relatie importance of intra-regional trade, the importance of $estern /uropeFs trade with other regions in relation toits output has largely been maintained.
Getween 1"> and the end of 1", a total of 10@ regional agreements were notified to the6A%%. In looking at the complementarity between regional integration agreements and themultilateral trading system - first the 6A%% and now the $%& - the study makes anumber of points;
- the scope for achieing tariff adantages at the regional leel is much reduced since,once the Hruguay ound commitments are fully implemented, " per cent of deeloped
countriesF imports of industrial products from partners receiing B3 #Bost-3aoured ation+ treatment will be duty-free, with an aerage of only *.* per cent on the remainder:
- with the importance of tariffs reduced, attention has shifted to the issue of non-tariff trade measures, which are seldom administered preferentially, and domestic policies #suchas production subsidies+, which cannot be administered preferentially:
- few regional agreements coer serices, agriculture and the protection of intellectual property rights whereas the $orld %rade &rgani'ation has proided an integrated systemof rights and obligations at the multilateral leel in all these areas as well as merchandisetrade in general:
- at the same time, it is recogni'ed that steps taken in certain regional integrationagreements helped lay the foundations for progress in the Hruguay ound.
%he report concludes that the co-existence of regional integration agreements and theworld trading system has been Dat least satisfactory, if not broadly positieE. Coweer, theecretariat finds some reasons for concern in the manner in which the 6A%% rules and procedures on customs unions and free-trade areas hae operated. In particular, Article
88I9 of 6A%% - now subsumed within the $%& rules - re=uires that such agreementscoer Dsubstantially all tradeE between members and that the leel of trade barriers facingthose outside be Dnot on the whole higher or more restrictieE. It is noted that among the* working parties called on to examine the conformity of customs unions and free-trade
agreements with Article 88I9, only six hae been able to reach a consensus.
%he report examines arious proposals that might arise in any attempt to improe thefunctioning of the rules and procedures on regional integration agreements: among theseare;
- allowing the working parties to reiew regional agreements before signature anddomestic approal begins, in other words while there is still scope for changing them:
- clarifying the criteria laid down in Article 88I9 and perhaps introducing new proisionsto increase the protection of third country interests: and
- improing transparency through an enhanced system of $%& sureillance of the performance and effects of regional integration agreements.
ifferential and Bore 3aorable %reatment, eciprocity and 3uller 4articipation of eeloping?ountries.
Decision of 28 November 1979 (L/4903)
3ollowing negotiations within the framework of the Bultilateral %rade egotiations, the
?&%A?%I6 4A%I/ decide as follows;
1. otwithstanding the proisions of Article I of the 6eneral Agreement, contracting parties
may accord differential and more faourable treatment to deeloping countries#1+, without
according such treatment to other contracting parties.
2. %he proisions of paragraph 1 apply to the following#2+;
a) 4referential tariff treatment accorded by deeloped contracting parties to products
originating in deeloping countries in accordance with the 6enerali'ed ystem of
4references#3+,
b) ifferential and more faourable treatment with respect to the proisions of the
6eneral Agreement concerning non-tariff measures goerned by the proisions of
instruments multilaterally negotiated under the auspices of the 6A%%:
neither shall less-deeloped contracting parties be re=uired to make, concessions that are
inconsistent with the latters deelopment, financial and trade needs.
*. Caing regard to the special economic difficulties and the particular deelopment,
financial and trade needs of the least-deeloped countries, the deeloped countries shall exercise
the utmost restraint in seeking any concessions or contributions for commitments made by themto reduce or remoe tariffs and other barriers to the trade of such countries, and the least-
deeloped countries shall not be expected to make concessions or contributions that are
inconsistent with the recognition of their particular situation and problems.
>. %he concessions and contributions made and the obligations assumed by deeloped and
less-deeloped contracting parties under the proisions of the 6eneral Agreement should
promote the basic ob<ecties of the Agreement, including those embodied in the 4reamble and in
Article 8889I. ess-deeloped contracting parties expect that their capacity to make
contributions or negotiated concessions or take other mutually agreed action under the proisions
and procedures of the 6eneral Agreement would improe with the progressie deelopment of their economies and improement in their trade situation and they would accordingly expect to
participate more fully in the framework of rights and obligations under the 6eneral Agreement.
@. 4articular account shall be taken of the serious difficulty of the least-deeloped countries
in making concessions and contributions in iew of their special economic situation and their
deelopment, financial and trade needs.
. %he contracting parties will collaborate in arrangements for reiew of the operation of
these proisions, bearing in mind the need for indiidual and <oint efforts by contracting parties
to meet the deelopment needs of deeloping countries and the ob<ecties of the 6eneral
Agreement.
4o/a 4eclaration Summar
%he oember 2001 declaration of the 3ourth Binisterial ?onference in oha, Jatar, proidesthe mandate for negotiations on a range of sub<ects, and other work including issues concerningthe implementation of the present agreements.
%he negotiations take place in the %rade egotiations ?ommittee and its subsidiaries. &ther work under the work programme takes place in other $%& councils and committees.
%his is an unofficial explanation of what the declaration mandates.
"/e work programme
%he 21 sub<ects listed in the oha eclaration #and the paragraphs that refer to them+.Bost of these inole negotiations: other work includes actions under DimplementationE,
DImplementationE is short-hand for problems raised particularly by deeloping countriesabout the implementation of the current $%& Agreements, i.e. the agreements arisingfrom the Hruguay ound negotiations.
In oha this important =uestion was handled in two ways. 3irst, ministers agreed to adoptaround 50 decisions clarifying the obligations of deeloping country member goernments with respect to issues including agriculture, subsidies, textiles and clothing,technical barriers to trade, trade-related inestment measures and rules of origin.
Agreement on these points re=uired hard bargaining between negotiators oer the course
of nearly three years.
Bany other implementation issues of concern to deeloping countries hae not beensettled, howeer. 3or these issues, Binisters agreed in oha on a future work programmefor addressing these matters.
In paragraph 12 of the Binisterial eclaration, ministers underscored that they had taken adecision on the 50 or so measures in a separate ministerial document #the1" oember 2001 decision on DImplementation-elated Issues and ?oncernsE+ and pointed out that Dnegotiations on outstanding implementation issues shall be an integral part of the $ork 4rogrammeE in the coming years.
%he ministers established a two-track approach. %hose issues for which there was anagreed negotiating mandate in the declaration would be dealt with under the terms of thatmandate.
%hose implementation issues where there is no mandate to negotiate, would be the takenup as Da matter of priorityE by releant $%& councils and committees. %hese bodies areto report on their progress to the %rade egotiations ?ommittee by the end of 2002 for Dappropriate actionE.
2. K 4roduct at issue; %extiles and clothing from India.
. HBBAL &3 M/L 4A/NAG 3II6 K 6A%% Arts. 8I #prohibition on
=uantitatie restrictions+ and 8III #non-discriminatory administration of =uantitatie
restrictions+; %he 4anel found that the =uantitatie restrictions at issue were inconsistentwith Arts. 8I and 8III. #%urkey did not deny this.+ K A%? Art. 2." #prohibition on new
restrictions+; %he 4anel found that %urkeyFs measures were new restrictions, that did not
exist at the time of the entry into force of the A%?, and, thus, were prohibited by Art. 2.".
K 6A%% Art. 88I9 #regional trade agreements+; %he Appellate Gody agreed with the
4anelFs ultimate conclusion that %urkeyFs measures were not <ustified under Art. 88I9
because there were alternaties aailable to %urkey that would hae met the re=uirements
of Art. 88I9;@#a+, which were necessary to form the customs union, other than the
adoption of the =uantitatie restrictions. %he Appellate Gody, therefore, modified the
4anelFs legal reasoning and concluded that to determine whether a measure found
inconsistent with certain other 6A%% proisions can be <ustified under Art. 88I9, a panelshould examine two conditions; #i+ whether a Dcustoms unionE, as defined in Art. 88I9;@
exists #compatibility of a customs union with the proisions of Art. 88I9+: and #ii+
whether the formation of a customs union would be preented without the inconsistent
measure #i.e. whether the measure is necessary for the formation of a customs union+.
#%he 4anel had assumed the existence of the customs union and moed on to examine the
necessity of the measure.+
". . &%C/ IH/
K Gurden of proof #6A%% Art. 88I9+; %he Appellate Gody agreed with the 4anel that
Art. 88I9 may be considered as a DdefenceE or DexceptionE to a iolation. %he 4anelalso held that the burden of proof under Art. 88I9 was on the party inoking it. K
Information from non-party Bember #H Art. 1.2+; espite the fact that the /uropean
?ommunities was not a party or a third party to the dispute, the 4anel asked the /uropean
?ommunities, pursuant to Art. 1.2, for releant factual and legal information so as to to
hae Dthe fullest possible understanding of this caseE. %he /uropean ?ommunities
proided answers to the 4anelFs =uestions.
4ifference Between +ustoms nion and %ree "rade Area
1. $ith respect to any measure coered by this Agreement, each Bember shall accord
immediately and unconditionally to serices and serice suppliers of any other Bember
treatment no less faourable than that it accords to like serices and serice suppliers of any
other country.
2. A Bember may maintain a measure inconsistent with paragraph 1 proided that such a
measure is listed in, and meets the conditions of, the Annex on Article II /xemptions.
. %he proisions of this Agreement shall not be so construed as to preent any Bember fromconferring or according adantages to ad<acent countries in order to facilitate exchanges limited
to contiguous frontier 'ones of serices that are both locally produced and consumed.
#A"S Article )
&rtic!e ,: -conomic Inte#ration
1. %his Agreement shall not preent any of its Bembers from being a party to or entering into
an agreement liberali'ing trade in serices between or among the parties to such an agreement, proided that such an agreement;
#a+ has substantial sectoral coerage#1+, and
#b+ proides for the absence or elimination of substantially all discrimination, in the
sense of Article 89II, between or among the parties, in the sectors coered under
subparagraph #a+, through;
#i+ elimination of existing discriminatory measures, andNor
#ii+ prohibition of new or more discriminatory measures,
either at the entry into force of that agreement or on the basis of a reasonable time-
frame, except for measures permitted under Articles 8I, 8II, 8I9 and 8I9 bis.
2. In ealuating whether the conditions under paragraph 1#b+ are met, consideration may be
gien to the relationship of the agreement to a wider process of economic integration or trade
liberali'ation among the countries concerned.
. #a+ $here deeloping countries are parties to an agreement of the type referred to in
paragraph 1, flexibility shall be proided for regarding the conditions set out in paragraph 1,
particularly with reference to subparagraph #b+ thereof, in accordance with the leel of
deelopment of the countries concerned, both oerall and in indiidual sectors and subsectors.
#b+ otwithstanding paragraph *, in the case of an agreement of the type referred to in
paragraph 1 inoling only deeloping countries, more faourable treatment may be
granted to <uridical persons owned or controlled by natural persons of the parties to such
an agreement.
". Any agreement referred to in paragraph 1 shall be designed to facilitate trade between the
parties to the agreement and shall not in respect of any Bember outside the agreement raise the
oerall leel of barriers to trade in serices within the respectie sectors or subsectors compared
to the leel applicable prior to such an agreement.
5. If, in the conclusion, enlargement or any significant modification of any agreement under
paragraph 1, a Bember intends to withdraw or modify a specific commitment inconsistently with
the terms and conditions set out in its chedule, it shall proide at least 0 days adance notice
of such modification or withdrawal and the procedure set forth in paragraphs 2, and " of
Article 88I shall apply.
*. A serice supplier of any other Bember that is a <uridical person constituted under the
laws of a party to an agreement referred to in paragraph 1 shall be entitled to treatment granted
under such agreement, proided that it engages in substantie business operations in the territory
of the parties to such agreement.
>. #a+ Bembers which are parties to any agreement referred to in paragraph 1 shall
promptly notify any such agreement and any enlargement or any significant modification of that
agreement to the ?ouncil for %rade in erices. %hey shall also make aailable to the ?ouncil
such releant information as may be re=uested by it. %he ?ouncil may establish a working partyto examine such an agreement or enlargement or modification of that agreement and to report to
the ?ouncil on its consistency with this Article.
#b+ Bembers which are parties to any agreement referred to in paragraph 1 which is
implemented on the basis of a time-frame shall report periodically to the ?ouncil for %rade
in erices on its implementation. %he ?ouncil may establish a working party to examine
%his Agreement shall not preent any of its Bembers from being a party to an agreement
establishing full integration#2+ of the labour markets between or among the parties to such an
agreement, proided that such an agreement;
#a+ exempts citi'ens of parties to the agreement from re=uirements concerning
residency and work permits:
#b+ is notified to the ?ouncil for %rade in erices.
+anada O +ertain $easures Affecting t/e Automoti&e Industr
?omplaint by Papan.
&n Puly 1@, Papan re=uested consultations with ?anada in respect of measures being taken by ?anada in the automotie industry. Papan contended that under ?anadian legislationimplementing an automotie products agreement #Auto 4act+ between the H and ?anada, only alimited number of motor ehicle manufacturers are eligible to import ehicles into ?anada dutyfree and to distribute the motor ehicles in ?anada at the wholesale and retail distribution leels.Papan further contended that this duty-free treatment is contingent on two re=uirements;
i. a ?anadian alue-added #?9A+ content re=uirement that applies to both goods andserices: and
ii. a manufacturing and sales re=uirement. Papan alleges that these measures are inconsistentwith Articles I;1, III;" and 88I9 of 6A%% 1", Article 2 of the %IBs Agreement,Article of the ?B Agreement, and Articles II, 9I and 89II of 6A%.
&n 1> August 1@, the /? re=uested consultations with ?anada in respect of the same measuresraised by Papan in $%N1 and cites the same proisions alleged to be in iolation, except for Article 88I9 of 6A%% 1", which was cited by Papan but is not cited by the /?.
&n 12 oember 1@, Papan re=uested the establishment of a panel in respect of $%N1. At
its meeting on 25 oember 1@, the G deferred the establishment of a panel.
Panel and Appellate Bod proceedings
3urther to re=uests to establish a panel by Papan and the /?, at its meeting on 1 3ebruary 1,the G established a single panel, pursuant to Article .1 of the H, to examine thecomplaints $%N1 and $%N1"2. India, Morea, and the H resered their third-partyrights. &n 15 Barch 1, the /? and Papan re=uested the irector-6eneral to determine thecomposition of the 4anel. &n 25 Barch 1, the 4anel was composed. %he report of the panelwas circulated to Bembers on 11 3ebruary 2000. %he panel found that;
•
the conditions under which ?anada granted its import duty exemption were inconsistentwith Article I of 6A%% 1" and not <ustified under Article 88I9 of 6A%% 1".
• the application of the ?9A re=uirements to be inconsistent with Article III;" of 6A%%
1".
• the import duty exemption constitutes a prohibited export subsidy in iolation of Article
.1#a+ of the ?B Agreement.
• the manner in which ?anada conditioned access to the import duty exemption is
inconsistent with Article II of 6A% and could not <ustified under Article 9 of 6A%.
• the application of the ?9A re=uirements constitutes a iolation of Article 89II of the
6A%.
&n 2 Barch 2000, ?anada notified its intention to appeal certain issues of law and legalinterpretations deeloped by the panel. %he Appellate Gody report was circulated to Bembers on1 Bay 2000. %he Appellate Gody;
• eersed the panels conclusion that Article .1#b+ of the ubsidies Agreement did not
• ?onsidered that the panel had failed to examine whether the measure at issue affected
trade in serices as re=uired under Article I;1 of the 6A%.
• eersed the panels conclusion that the import duty exemption was inconsistent with the
re=uirements of Article II;1 of the 6A% as well as the panels findings leading to thatconclusion.
%he G adopted the Appellate Gody report and the 4anel report, as modified by the AppellateGody report, on 1 Pune 2000.
Implementation of adopted reports
4ursuant to Article 21. of the H, ?anada informed the G on 1 Puly 2000 that it would
comply with the recommendations of the G. &ne of the recommendations made by the Gwas that ?anada withdraw within 0 days the export subsidy found to be inconsistent withArticle .1#a+ of the ubsidies Agreement. &n " August 2000, Papan and the /uropean?ommunities re=uested, pursuant to Article 21.#c+ of the H, that the reasonable period of time be determined by arbitration. %he arbitrator determined that the Dreasonable period of timeEwas @ months from the date of adoption of the Appellate Gody and 4anel eports, as modified bythe Appellate Gody eport. %he Dreasonable period of timeE was thus to expire on 1 3ebruary2001.
At the G meeting of 12 Barch 2001, ?anada stated that, as of 1@ 3ebruary 2001, it hadcomplied with the Gs recommendations.
Week %our
+ommentaries
Menneth am, egional /conomic Agreements and the 6A%%; the egacy of a Bisconception
A9stract!
%he last do'en years hae seen a proliferation of customs unions and free-trade areas of
unforeseen proportions. uch regional arrangements, far from being halfway houses on the road
to nondiscriminatory and freer trade, may be in direct conflict with those goals. %he 6eneral
Agreement on %ariffs and %rade has been charged with the duty to regulate the formation of customs unions and free-trade areas in order to reconcile that conflict. %he two principal
conclusions of this discussion are that 6A%% has failed to discharge that responsibility and that
its failure may be traced to a fundamental misconception of the nature and conse=uences of the
conflict between regional arrangements and nondiscriminatory freer trade.
9. ?&?HI& $e hae reiewed article 88I9 from three general points of reference. 3irst,
we hae examined the meaning of the article as presently drafted and hae found it ambiguous at
best. econd, we hae attempted to assess the soundness of the standards announced in the light
of the underlying conflict between the most-faored-nation principle of article I and the
discrimination inherent in customs unions and free-trade areas. Cere the conclusion has been that
article 88I9 makes ery little sense and that =uite different standards should be adopted. %hird,
we hae reiewed the experience of the ?ontracting 4arties in applying article 88I9.11 In
attempting to reach general conclusions concerning article 88I9, it would be appropriate todetermine what generali'ations may be made concerning this historic record. &n first impression
the historical record is a sorry one indeed. ot a single customs union or free-trade area
agreement which has been submitted to the ?ontracting 4arties has conformed fully to the
re=uirements of article 88I9.
Let the ?ontracting 4arties hae felt compelled to grant waiers of one kind or another for eery
one of the proposed agreements. It cannot necessarily be concluded, howeer, that article 88I9
has been of no conse=uence whateer. %he desire to aoid unnecessary friction with other
contracting parties may hae been a marginal influence on the structure of new customs unions
and free-trade areas. It is impossible, of course, to know what form those regional groupings
would hae taken in the absence of article 88I9. &nly in the case of the atin American 3ree
%rade Association do we hae concrete eidence aailable. ince most of the early planning was
done under the auspices of the Hnited ations /conomic ?ommission for atin America, we
hae aailable a public record which suggests that a desire to comply with article 88I9, or at
least to come respectably close to complying, was widely held among those who attended the
planning sessions. 12 It may be that, but for article 88I9, a preferential trading arrangement
with partial reduction of internal tariffs would hae been chosen in preference to a freetrade area
with complete elimination of internal tariffs.
/en assuming that article 88I9 has had a significant influence on the structure of recent
customs unions and free-trade areas, it does not necessarily follow that that influence has beenuniformly beneficent. If, for example, as appears to this writer, the oerseas territories proisions
of the %reaty of ome and the atin American 3ree %rade Association as a whole will hae, on
balance, unfaorable production effects, it may well be that the re=uirement of article 88I9 that
internal restrictions on substantially all trade among member countries be eliminated has had an
unfortunate influence. 4artial reduction of internal barriers might well hae been preferable to
complete elimination from the iewpoint of the world as a whole for the reasons examined
aboe.1
%he foregoing analysis suggests that, howeer feeble article 88I9 may hae been as a <uridical
rule in outlawing nonconforming regional economic agreements, the errors in policy underlying
the articleFs formulation hae had unfortunate conse=uences for the world as a whole. Juite asidefrom any influence on structural planning, article 88I9, by proing in practice to be a barrier to
summary 6A%% approal, has forced the members of some nascent regional groupings to discuss
their plans at length within the 6A%% framework and to report yearly on the implementation of
such plans. %hese consultations hae not only been an important dispute settlement mechanism
but also, by making aailable detailed information concerning the successes and difficulties of
would, of course, be no obligation to reach any particular agreement. 4erhaps reision of article
88I9 is impossible at this time, particularly in iew of the large number of contracting parties
which are members of existing customs unions or free-trade areas and which therefore hae a
ested interest in the legal status =uo. In that eent, some progress might be made within the
context of the existing formulation of article 88I9 by a reinterpretation of its proisions by the
$orking 4arties assigned to reiew new regional arrangements.
%he ery ambiguity of article 88I9 proides an opportunity if primary emphasis can be placed
on the statement in paragraph " that Qthe purpose of a customs union or of a free-trade area
should be to facilitate trade between the constituent territories and not to raise barriers to the
trade of other contracting parties.QF15 It has been the burden of the analysis undertaken here that
a regional arrangement with negatie production and consumption effects tends Qto raise barriers
to the trade of other contracting partiesQ whether or not it meets the tests laid down in the
remaining paragraphs of article 88I9 while a regional arrangement with positie production and
consumption effects facilitates intermember trade without raising such barriers. Garring reision,
the best approach may thus be a creatie reinterpretation of article 88I9.
:and9ook of International Economic Law +/apter on International "rade! Regionalism
;oel P "rac/tman
egional integration agreements #IAs+, like other forms of international economic
institutionali'ation or law, are generally aimed at economic integration; the reduction of barriers
to moement of economic factors across borders. Coweer, there can be other aims; the original/uropean /conomic ?ommunity and /uropean ?oal and teel ?ommunity were famously
motiated by a desire to make war between 6ermany and 3rance impossible. Bonetary union in
the /uropean Hnion has been critici'ed by financial economists, but may play a broader role in
political or social aspects of integration. egionalism is an accelerating phenomenon, as shown
in the table below, although in 1*, Menneth am was able to say that the last do'en years had
Rseen a proliferation of customs unions and free-trade areas of unforeseen proportions.
%he great ma<ority of these IAs are free trade areas #3%As+, rather than customs unions #?Hs+.
A 3%A proides 'ero tariffs among its members, but each member maintains its own tariff
schedule for application to the products of other states, whereas a ?H is a free trade area with a
common external tariff. Among the best known regional IAs are the /uropean ?ommunities#/?+,1 the orth American 3ree %rade Agreement #A3%A+, the outhern ?ommon Barket
#B/?&H+, the Association of outheast Asian ations 3ree %rade Area #A3%A+ and the
200" ?entral American 3ree %rade Area #?A3%A+. egionalism presents many faces to the
international economic law system. egional integration creates international economic law
subsystems.2 %hese subsystems are rather dierse in structure and scope. %hese subsystems hae
a complex economic relationship with the multilateral system, represented by the $%&; they
may both undermine and support multilateral economic integration. egionalism, as applied to
third countries, is broadly inconsistent with the principle of most faored nation trade; the
principle of non-discrimination among trading partners. %his is because it applies a different
tariff on goods depending on their origin. %herefore, is-S-is the global setting #as opposed to
internally+, regionalism will often be inconsistent with the operation of comparatie adantage,
since it applies tariffs to goods sourced outside the IA, but not to goods sourced within theIA. &n the other hand, regional arrangements generally reduce internal barriers to trade and
therefore are consistent with comparatie adantage internally. %he comparison between internal
trade creation, and diersion of external trade, initially analy'ed by Pacob 9iner, has been a
central, but disputed, part of the analysis of the static welfare effects of regionalism. egional
arrangements may also hae dynamic effects by inducing economic restructuring that paes the
way for deeper multilateral integration, or sering as comparatie laboratories to deelop
institutional tools for deeper multilateral integration. 3urthermore, regionalism may implicate
any or all of the Rfour freedoms; trade in goods, trade in serices, free moement of inestment
and free moement of labor. egional subsystems also hae a complex legal relationship with
the multilateral system. egionalism is regulated under $%& law. %he relationship betweenregional agreements and $%& law is important both in the application of the law of the regional
agreements and in the application of the law of the $%&.
a. %raditional ?ategoriesince its founding in 15>, the /? has been the leading example and the gold standard. of regionalism. ot only has it established in large measure the .four freedoms., but it has alsodeeloped a high leel of policy coordination, international relations coordination, andredistribution. 3urthermore, the /? has deeloped a complex federal legal system, coering a broad spectrum of sub<ect areas and dealing in a highly sophisticated way with issues of legalrelations between the IA goernance and the member states. %here are many examples of
circumstances in which other regional and multilateral integration bodies hae learned lessonsfrom, or emulated, the /?. &f course, customs unions can be precursors of states, as in theformation of 6ermany andItaly.
Galassa #1*2+ deeloped a system of categori'ing regional integration." $e begin with a 3%A,in which tariffs and =uotas are abolished for imports from within the area, but each member maintains its own external trade barriers. %he next step is to a ?H, which in addition toestablishing a 3%A, establishes a common external tariff. A common market includes additionalremoal of barriers to moement of factors of production, and may include further coordinationof external commercial policy. An economic union includes some degree of harmoni'ation of economic policy. %otal economic integration includes unification of monetary, fiscal, social and
counter-cyclical policies, plus a supranational authority that can bind member states.
%hus, the /? may be understood as an example of a common market with some features of totaleconomic integration, while A3%A is essentially a 3%A with a few additional features. %heseadditional features include coerage of inestment, intellectual property and serices. Coweer,as the multilateral system since 1" has included intellectual property and serices, theadditionality offered by A3%A is largely in the area of the intra-regional 'ero tariff treatment, plus inestment. Bore recent 3%As hae proided greater additionality, with more intense
coerage of intellectual property and serices than may be found in the multilateral system; so-called .$%& plus..
+onclusion!
$hile in 1">, Article 88I9 may not hae been ery important, and while at that time, the riseof 3%As could not be anticipated, Article 88I9 has taken on great importance. &ne of the most
important =uestions in international economic policy today is the relationship between regional
integration and multilateral integration. 3or better or worse, Article 88I9 #and its cognates in
serices and elsewhere+ proides the framework for articulation of this relationship. Article
88I9 of 6A%% presents a facially compelling case to seek to align international trade law with
the dictates of welfare economics. It would be useful to redesign or reinterpret Article 88I9 so
as to increase global welfare; permitting only those IAs that result in an increase in global
welfare. Coweer, there are two potential obstacles. 3irst, it is not clear that the goal of
goernments is to increase global welfare. econd, it is not clear that an Article 88I9 rule
oriented more directly to global welfare would be possible or administrable. Article 88I9 is notwell deeloped, and contains many uncertainties, perhaps reflecting in part the ambialence in
statesT attitudes towards IAs. %his ambialence, for example, makes it difficult to know how
Article 88I9 will deal with safeguards and with certain 4 or %G% measures in IAs. Let,
IAs may sere as laboratories of institutional deelopment, assisting our understanding of the
potential institutional solutions to international economic integration problems. %he =uestion of
whether IAs may indeed sere as building blocks toward greater integration is still open.
/6I&A %A/ A6//B/% 9. %C/ $%&; A 4&4&A 3& /3&B &3
A%I?/ 88I9 %& ?&H%/ %CI I%I%H%I&A %C/A% ?&I G. 4I?M/
Issue! %As, A%I?/ 88I9 A %C/ $%& %As include all arrangements between states
concerning their trade relations. ometimes %As are called 3ree %rade Agreements #Q3%AsQ+,
4referential %rade Agreements, or, in some circumstances, ?ustoms Hnions.1 %hese agreements
may be bilateral, trilateral, or multilateral. %heir sectoral and substantie coerage may be
significant, minimal, or illusory.12 3or purposes of this Article, the term Q%AQ includes all
regional trade arrangements except customs unions, for customs unions are significantly
different. Coweer, much of the criti=ue of %As presented in this Article could also apply to
customs unions.1 %he term Q%AQ will also be used interchangeably with the term Q3%AQ in this
examination of the benefits and harms of %As in their relationship with the $%&. .1. %he
Genefits of %As %he multilateral trade system has witnessed phenomenal growth in the number,coerage, and scope of %As.1" $hile it has been asserted that the present QfeerQ of actiity in
deeloping regional arrangements is due to globali'ation,15 there hae been other periods of
regionalism before this present burst of actiity,1* albeit none so frenetic as the period since the
birth of the $%&.F >
%here are many reasons for this growth, though in the early period of the multilateral trade
system-the post-war years-much of the growth in %As was related to continuing colonial
associations.F @ Additionally, in those post-war years, %A formation was encouraged as another
mechanism to help increase security in /urope.1 6eopolitics aside, howeer, there has been no
shortage of reasons, historically and in modem times, for countries to enter into %As.
Hnderstanding those reasons allows a greater understanding of the feasibility of any proposal to
regulate %As so as to reduce their negatie impact. uch a proposal, like the one offered in this
Article, must be able to achiee its regulatory goal, yet not detract from the many positiereasons for utili'ing %As. Cence the importance of first identifying the reasons that states enter
into %As and why the system allows %As to exist. tates enter into %As for a whole host of
reasons, including furthering economic, security, and foreign policy goals. %he conentional
wisdom is that states enter into %As to secure economic or welfare gains from exclusie access
to the other %A statesF markets. 20 tates may also <oin %As to ensure continued access to a
market already coered by an %A. 3or example, the purpose of ?anadaFs inolement in the
orth American 3ree %rade Agreement #QA3%AQ+ was, in part, to ensure it retained the access
to the H.. market that it had obtained from a preious %A - the ?anada-H.. 3%A
#Q?H3%AQ+.21 imilarly, when all other countries are perceied to be entering into such
arrangements, a country will not want to be left behind.22 %his is called Qdominoregionalism.Q2 In this way, inolement in %As ensures that a state is not Qtaken adantage ofQ
through multilateralism.2" All these reasons speak to the underlying idea that a state will seek to
establish positie preferences from other countries for the stateFs industries and interests -
sometimes non-economic interests.
In addition to proiding indiidual states with economic and welfare benefits, %As also proide
benefits for indiidual states and the global economy through their interaction with the
multilateral system and trade policy as a whole.2* As an initial matter, regionalism may sere as
an inducement for the deelopment of multilateralism. 2> %he Hnited tatesF response to
/uropean regionalism was initially to push eer harder for multilateral trade deelopment-with
some success. %hat policy led to some of the more important rounds of the 6eneral Agreementon %ariffs and %rade #Q6A%%Q+ - the illon, Mennedy, and %okyo ounds.2@ %he threat of
regionalism, and the trade diersion that goes with it, may thus encourage the conclusion and
acceptance of multilateral agreements.2 egional arrangements can also increase the bargaining
power of an %AFs constituent members within multilateral arrangements.0 Additionally, with
the recent increase in regionalism due to globali'ation, combined with the opening of economies
in the post-tariff era, economic actors suddenly hae become aware of on-%ariff Garriers
#Q%GsQ+ and the need to deal with them.
Accordingly, many consider that it is the non-economic benefits that sere as the primary
rationale for %As.@ In particular, foreign policy and national security continue to be significant
reasons for entering into %As. Indeed, as mentioned aboe, trade agreements hae played a
role in the Biddle /ast peace process."0 %As can also be employed to realign external
relations, as in the cases of %urkey with /urope, and Bexico with orth America."1 %As may
also sere as a foreign policy reward for allies. 3or example, entering into an %A with an
economic power can sere to reward countries and conince them to adopt more market oriented
domestic policies."2 %As may een be thought to assist in domestic political affairs."
+<'+LSI<' $hile there is no shortage of factors to blame for the slow deelopment of the
$%&, this Article has suggested one additional factor; the institutional conflict between %As
and the $%&. %his Article offers a 4roposal to respond to this institutional threat. %he 4roposal
suggests substantie harmoni'ation and institutional centrali'ation of %As with the $%&.
?ertainly the likelihood of the adoption of a formal amendment, this one in particular, to the
$%& is unlikely, especially one that would re=uire states to act selflessly. onetheless, this4roposal and the reasoning behind it may sere to remind $%& members of their obligations to
the $%&, and that the $%& is not immortal. %he 4roposal and the issues raised in this Article
should sere as a wake-up call to $%& members. %he Hnited tates, /urope, ?anada, Gra'il,
?hina, Papan, Australia, and the other big players should take a stand as parties with the largest
global trade and the ones most likely to suffer from the harms caused to the $%& by these %As.
Additionally, as some of the most significant users of %As, they should also take responsibility
for their role in this problem and seek to rectify the damage and aert the potential disaster their
%AFs may produce. &f course, there is another route to resole this battle between %As and the
$%&. %hat route would be through the $%& taking into account the reasons for the growth and
strength of these %As; simply put, its failure to gie its members what they want. Hnfortunately,the desires of its members are far from uniform and are often mutually exclusie. Groadly
speaking, for the deeloping world, those demands include reform of agriculture policies,
intellectual property protections that take into account the realities of deeloping countriesF
needs, and so on. Gut then, and also broadly speaking, the demands of the deeloped world
include a faster pace of liberali'ation, reduction of %Gs, expansion into new and related areas
such as competition law, and so on. Although progress on these issues is almost as unrealistic as
the 4roposal itself, perhaps the 4roposal, when compared to the alternaties, is the least harmful
way to resole the issue, and as such may not appear so unrealistic after all.
Week %i&e
SA'I"AR= A'4 P:="<SA'I"AR= $EASRES!
I%&H?%I&
Hnderstanding the $%& Agreement on anitary and 4hytosanitary Beasures
Bay 1@
%he Agreement on t/e Application of Sanitar and P/tosanitar $easures #the Q4AgreementQ+ entered into force with the establishment of the $orld %rade &rgani'ation on 1Panuary 15. It concerns the application of food safety and animal and plant health regulations.
%his introduction discusses the text of the 4 Agreement as it appears in the 3inal Act of theHruguay ound of Bultilateral %rade egotiations, signed in Barrakesh on 15 April 1". %hisagreement and others contained in the 3inal Act, along with the 6eneral Agreement on %ariffsand %rade as amended #6A%% 1"+, are part of the treaty which established the $orld %rade
&rgani'ation #$%&+. %he $%& superseded the 6A%% as the umbrella organi'ation for international trade.
%he $%& ecretariat has prepared this text to assist public understanding of the 4 Agreement.It is not intended to proide legal interpretation of the agreement.
I'"R<4+"I<' "/e Sanitar and P/tosanitar $easures Agreement
Problem: How do you ensure that your country’s consumers are being supplied with food that is
safe to eat !safe! by the standards you consider appropriate" #nd at the same time$ how can
you ensure that strict health and safety regulations are not being used as an e%cuse for protecting domestic producers"
The Agreement on the Application of Sanitary and Phytosanitary Measures sets out the basicrules for food safety and animal and plant health standards&
't allows countries to set their own standards& (ut it also says regulations must be based on
science& They should be applied only to the e%tent necessary to protect human$ animal or plant life or health& #nd they should not arbitrarily or unustifiably discriminate between countries
where identical or similar conditions prevail&
*ember countries are encouraged to use international standards$ guidelines and
recommendations where they e%ist& However$ members may use measures which result in higher standards if there is scientific ustification& They can also set higher standards based on
appropriate assessment of ris+s so long as the approach is consistent$ not arbitrary&
The agreement still allows countries to use different standards and different methods of
inspecting products&
>e %eatures
All countries maintain measures to ensure that food is saf e for consumers, and to preent thespread of pests or diseases among animals and plants. %hese sanitary and phytosanitary measurescan take many forms, such as re=uiring products to come from a disease-free area, inspection of products, specific treatment or processing of products, setting of allowable maximum leels of pesticide residues or permitted use of only certain addities in food. anitary #human and animalhealth+ and phytosanitary #plant health+ measures apply to domestically produced food or localanimal and plant diseases, as well as to products coming from other countries.
Protection or protectionism"
anitary and phytosanitary measures, by their ery nature, may result in restrictions on trade. Allgoernments accept the fact that some trade restrictions may be necessary to ensure food safety
and animal and plant health protection. Coweer, goernments are sometimes pressured to go beyond what is needed for health protection and to use sanitary and phytosanitary restrictions toshield domestic producers from economic competition. uch pressure is likely to increase asother trade barriers are reduced as a result of the Hruguay ound agreements. A sanitary or phytosanitary restriction which is not actually re=uired for health reasons can be a ery effectie
protectionist deice, and because of its technical complexity, a particularly deceptie anddifficult barrier to challenge.
%he Agreement on anitary and 4hytosanitary Beasures #4+ builds on preious 6A%% rules torestrict the use of un<ustified sanitary and phytosanitary measures for the purpose of trade protection. %he basic aim of the 4 Agreement is to maintain the soereign right of anygoernment to proide the leel of health protection it deems appropriate, but to ensure that thesesoereign rights are not misused for protectionist purposes and do not result in unnecessary barriers to international trade.
,ustification of measures
%he 4 Agreement, while permitting goernments to maintain appropriate sanitary and phytosanitary protection, reduces possible arbitrariness of decisions and encourages consistentdecision-making. It re=uires that sanitary and phytosanitary measures be applied for no other purpose than that of ensuring food safety and animal and plant health. In particular, theagreement clarifies which factors should be taken into account in the assessment of the risk inoled. Beasures to ensure food safety and to protect the health of animals and plants should be based as far as possible on the analysis and assessment of ob<ectie and accurate scientificdata.
'nternational standards
%he 4 Agreement encourages goernments to establish national 4 measures consistent withinternational standards, guidelines and recommendations. %his process is often referred to asQharmoni'ationQ. %he $%& itself does not and will not deelop such standards. Coweer, mostof the $%&s member goernments #12 at the date of drafting+ participate in the deelopmentof these standards in other international bodies. %he standards are deeloped by leading scientistsin the field and goernmental experts on health protection and are sub<ect to internationalscrutiny and reiew.
International standards are often higher than the national re=uirements of many countries,including deeloped countries, but the 4 Agreement explicitly permits goernments to choose
not to use the international standards. Coweer, if the national re=uirement results in a greater restriction of trade, a country may be asked to proide scientific <ustification, demonstrating thatthe releant international standard would not result in the leel of health protection the countryconsidered appropriate.
ue to differences in climate, existing pests or diseases, or food safety conditions, it is notalways appropriate to impose the same sanitary and phytosanitary re=uirements on food, animalor plant products coming from different countries. %herefore, sanitary and phytosanitarymeasures sometimes ary, depending on the country of origin of the food, animal or plant product concerned. %his is taken into account in the 4 Agreement. 6oernments should also
recogni'e disease-free areas which may not correspond to political boundaries, and appropriatelyadapt their re=uirements to products from these areas. %he agreement, howeer, checksun<ustified discrimination in the use of sanitary and phytosanitary measures, whether in faour of domestic producers or among foreign suppliers.
#lternative measures
An acceptable leel of risk can often be achieed in alternatie ways. Among the alternaties O and on the assumption that they are technically and economically feasible and proide the sameleel of food safety or animal and plant health O goernments should select those which are notmore trade restrictie than re=uired to meet their health ob<ectie. 3urthermore, if another
country can show that the measures it applies proide the same leel of health protection, theseshould be accepted as e=uialent. %his helps ensure that protection is maintained while proidingthe greatest =uantity and ariety of safe foodstuffs for consumers, the best aailability of safeinputs for producers, and healthy economic competition.
Ris+ #ssessment
%he 4 Agreement increases the transparency of sanitary and phytosanitary measures.?ountries must establish 4 measures on the basis of an appropriate assessment of the actualrisks inoled, and, if re=uested, make known what factors they took into consideration, theassessment procedures they used and the leel of risk they determined to be acceptable. Although
many goernments already use risk assessment in their management of food safety and animaland plant health, the 4 Agreement encourages the wider use of systematic risk assessmentamong all $%& member goernments and for all releant products.
Transparency
6oernments are re=uired to notify other countries of any new or changed sanitary and phytosanitary re=uirements which affect trade, and to set up offices #called Q/n=uiry 4ointsQ+ torespond to re=uests for more information on new or existing measures. %hey also must open toscrutiny how they apply their food safety and animal and plant health regulations. %he systematiccommunication of information and exchange of experiences among the $%&s member
goernments proides a better basis for national standards. uch increased transparency also protects the interests of consumers, as well as of trading partners, from hidden protectionismthrough unnecessary technical re=uirements.
A special ?ommittee has been established within the $%& as a forum for the exchange of information among member goernments on all aspects related to the implementation of the 4Agreement. %he 4 ?ommittee reiews compliance with the agreement, discusses matters with potential trade impacts, and maintains close co-operation with the appropriate technical
organi'ations. In a trade dispute regarding a sanitary or phytosanitary measure, the normal $%&dispute settlement procedures are used, and adice from appropriate scientific experts can besought.
?ES"I<'S A'4 A'SWERS Gack to top
What are sanitary and phytosanitary measures? Does the SPS Agreement cover countries’
measures to protect the environment? Consumer interests? Animal welfare?
3or the purposes of the 4 Agreement, sanitary and phytosanitary measures are defined as anymeasures applied;
•
to protect human or animal life from risks arising from addities, contaminants, toxins or disease-causing organisms in their food:
• to protect human life from plant- or animal-carried diseases:
• to protect animal or plant life from pests, diseases, or disease-causing organisms:
• to preent or limit other damage to a country from the entry, establishment or spread of
pests.
%hese include sanitary and phytosanitary measures taken to protect the health of fish and wild
fauna, as well as of forests and wild flora.
Beasures for enironmental protection #other than as defined aboe+, to protect consumer interests, or for the welfare of animals are not coered by the 4 Agreement. %hese concerns,howeer, are addressed by other $%& agreements #i.e., the %G% Agreement or Article 88 of 6A%% 1"+.
Weren’t a nation’s food safety and animal and plant health regulations previously covered by
A!! rules?
Les, since 1"@ national food safety, animal and plant health measures which affect trade were
sub<ect to 6A%% rules. Article I of the 6A%% #see note 1+, the most-faoured nation clause,re=uired non-discriminatory treatment of imported products from different foreign suppliers, andArticle III re=uired that such products be treated no less faourably than domestically producedgoods with respect to any laws or re=uirements affecting their sale. %hese rules applied, for instance, to pesticide residue and food additie limits, as well as to restrictions for animal or plant health purposes.
%he 6A%% rules also contained an exception #Article 88;b+ which permitted countries to takemeasures Qnecessary to protect human, animal or plant life or health,Q as long as these did notun<ustifiably discriminate between countries where the same conditions preailed, nor were adisguised restriction to trade. In other words, where necessary, for purposes of protecting human,animal or plant health, goernments could impose more stringent re=uirements on imported
products than they re=uired of domestic goods.
In the %okyo ound of multilateral trade negotiations #1>"->+ an Agreement on "ec/nical
Barriers to "rade was negotiated #the 1> %G% Agreement or Qtandards ?odeQ+ #see note 2+.Although this agreement was not deeloped primarily for the purpose of regulating sanitary and phytosanitary measures, it coered technical re=uirements resulting from food safety and animaland plant health measures, including pesticide residue limits, inspection re=uirements andlabelling. 6oernments which were members of the 1> %G% Agreement agreed to use releantinternational standards #such as those for food safety deeloped by the ?odex+ except when theyconsidered that these standards would not ade=uately protect health. %hey also agreed to notifyother goernments, through the 6A%% ecretariat, of any technical regulations which were not
based on international standards. %he 1> %G% Agreement included proisions for settling tradedisputes arising from the use of food safety and other technical restrictions.
What is new in the SPS Agreement?
Gecause sanitary and phytosanitary measures can so effectiely restrict trade, 6A%% member goernments were concerned about the need for clear rules regarding their use. %he Hruguayound ob<ectie to reduce other possible barriers to trade increased fears that sanitary and phytosanitary measures might be used for protectionist purposes.
%he 4 Agreement was intended to close this potential loophole. It sets clearer, more detailed
rights and obligations for food safety and animal and plant health measures which affect trade.?ountries are permitted to impose only those re=uirements needed to protect health which are based on scientific principles. A goernment can challenge another countrys food safety or animal and plant health re=uirements on the grounds that they are not <ustified by scientificeidence. %he procedures and decisions used by a country in assessing the risk to food safety or animal or plant health must be made aailable to other countries upon re=uest. 6oernmentshae to be consistent in their decisions on what is safe food, and in responses to animal and planthealth concerns.
"ow do you #now if a measure is SPS or !$!? Does it ma#e any difference?
%he scope of the two agreements is different. %he 4 Agreement coers all measures whose purpose is to protect;
• human or animal health from food-borne risks:
• human health from animal- or plant-carried diseases:
%he %G% #%echnical Garriers to %rade+ Agreement coers all technical regulations, oluntarystandards and the procedures to ensure that these are met, except when these are sanitary or phytosanitary measures as defined by the 4 Agreement. It is thus the type of measure which
determines whether it is coered by the %G% Agreement, but the purpose of the measure which isreleant in determining whether a measure is sub<ect to the 4 Agreement.
%G% measures could coer any sub<ect, from car safety to energy-saing deices, to the shape of food cartons. %o gie some examples pertaining to human health, %G% measures could include pharmaceutical restrictions, or the labelling of cigarettes. Bost measures related to humandisease control are under the %G% Agreement, unless they concern diseases which are carried by plants or animals #such as rabies+. In terms of food, labelling re=uirements, nutrition claims andconcerns, =uality and packaging regulations are generally not considered to be sanitary or phytosanitary measures and hence are normally sub<ect to the %G% Agreement.
&n the other hand, by definition, regulations which address microbiological contamination of food, or set allowable leels of pesticide or eterinary drug residues, or identify permitted foodaddities, fall under the 4 Agreement. ome packaging and labelling re=uirements, if directlyrelated to the safety of the food, are also sub<ect to the 4 Agreement.
%he two agreements hae some common elements, including basic obligations for non-discrimination and similar re=uirements for the adance notification of proposed measures andthe creation of information offices #Q/n=uiry 4ointsQ+. Coweer, many of the substantie rulesare different. 3or example, both agreements encourage the use of international standards.Coweer, under the 4 Agreement the only <ustification for not using such standards for foodsafety and animalNplant health protection are scientific arguments resulting from an assessment
of the potential health risks. In contrast, under the %G% Agreement goernments may decide thatinternational standards are not appropriate for other reasons, including fundamentaltechnological problems or geographical factors.
Also, sanitary and phytosanitary measures may be imposed only to the extent necessary to protect human, animal or plant health, on the basis of scientific information. 6oernments may,howeer, introduce %G% regulations when necessary to meet a number of ob<ecties, such asnational security or the preention of deceptie practices. Gecause the obligations thatgoernments hae accepted are different under the two agreements, it is important to knowwhether a measure is a sanitary or phytosanitary measure, or a measure sub<ect to the %G%Agreement.
"ow do governments and the interested public #now who is doing what?
%he transparency proisions of the 4 Agreement are designed to ensure that measures taken to protect human, animal and plant health are made known to the interested public and to trading partners. %he agreement re=uires goernments to promptly publish all sanitary and phytosanitaryregulations, and, upon re=uest from another goernment, to proide an explanation of the reasonsfor any particular food safety or animal or plant health re=uirement.
All $%& Bember goernments must maintain an /n=uiry 4oint, an office designated to receieand respond to any re=uests for information regarding that countrys sanitary and phytosanitarymeasures. uch re=uests may be for copies of new or existing regulations, information onreleant agreements between two countries, or information about risk assessment decisions. %headdresses of the /n=uiry 4oints can be consulted here.
$heneer a goernment is proposing a new regulation #or modifying an existing one+ whichdiffers from an international standard and may affect trade, they must notify the $%&ecretariat, who then circulates the notification to other $%& Bember goernments #oer >00such notifications were circulated during the first three years of implementation of the 4Agreement+. %he notifications are also aailable to the interested public and can beconsulted here. Alternatiely, notifications can be re=uested from the /n=uiry 4oint of thecountry which is proposing the measure.
6oernments are re=uired to submit the notification in adance of the implementation of a proposed new regulation, so as to proide trading partners an opportunity to comment. %he 4
?ommittee has deeloped recommendations on how the comments must be dealt with.
In cases of emergency, goernments may act without delay, but must immediately notify other Bembers, through the $%& ecretariat, and also still consider any comments submitted by other $%& Bember goernments.
Does the SPS Agreement restrict a government’s ability to establish food safety and plant and
animal health laws? Will food safety or animal and plant health levels be determined by the
W!% or some other international institution?
%he 4 Agreement explicitly recogni'es the right of goernments to take measures to protect
human, animal and plant health, as long as these are based on science, are necessary for the protection of health, and do not un<ustifiably discriminate among foreign sources of supply.ikewise, goernments will continue to determine the food safety leels and animal and planthealth protection in their countries. either the $%& nor any other international body will dothis.
%he 4 Agreement does, howeer, encourage goernments to Qharmoni'eQ or base their national measures on the international standards, guidelines and recommendations deeloped by$%& member goernments in other international organi'ations. %hese organi'ations include, for food safety, the <oint 3A&N$C& ?odex Alimentarius ?ommission: for animal health, the &fficeInternational des /pi'ooties: and for plant health, the 3A& International 4lant 4rotection
?onention. $%& member goernments hae long participated in the work of theseorgani'ations O including work on risk assessment and the scientific determination of the effectson human health of pesticides, contaminants or addities in food: or the effects of pests anddiseases on animal and plant health. %he work of these technical organi'ations is sub<ect tointernational scrutiny and reiew.
&ne problem is that international standards are often so stringent that many countries haedifficulties implementing them nationally. Gut the encouragement to use international standards
does not mean that these constitute a floor on national standards, nor a ceiling. ationalstandards do not iolate the 4 Agreement simply because they differ from international norms.In fact, the 4 Agreement explicitly permits goernments to impose more stringentre=uirements than the international standards. Coweer, goernments which do not base their national re=uirements on international standards may be re=uired to <ustify their higher standard
if this difference gies rise to a trade dispute. uch <ustification must be based on an analysis of scientific eidence and the risks inoled.
What does harmoni&ation with international food safety standards mean? Will this result in a
lowering of health protection' i(e(' downward harmoni&ation?
Carmoni'ation with international food safety standards means basing national re=uirements onthe standards deeloped by the 3A&N$C& Point ?odex Alimentarius ?ommission # see note +.?odex standards are not Qlowest common denominatorQ standards. %hey are based on the inputof leading scientists in the field and national experts on food safety. %hese are the samegoernment experts who are responsible for the deelopment of national food safety standards.
3or example, the recommendations for pesticide residues and food addities are deeloped for ?odex by international groups of scientists who use conseratie, safety-oriented assumptionsand who operate without political interference. In many cases, the standards deeloped by ?odexare higher than those of indiidual countries, including countries such as the Hnited tates. Asnoted in the reply to the preious =uestion, goernments may nonetheless choose to use higher standards than the international ones, if the international standards do not meet their health protection needs.
Can governments ta#e ade)uate precautions in setting food safety and animal and plant
health re)uirements? What about when there may not be sufficient scientific evidence for a
definitive decision on safety' or in emergency situations? Can unsafe products be banned?
%hree different types of precautions are proided for in the 4 Agreement. 3irst, the process of risk assessment and determination of acceptable leels of risk implies the routine use of safetymargins to ensure ade=uate precautions are taken to protect health. econd, as each countrydetermines its own leel of acceptable risk, it can respond to national concerns regarding whatare necessary health precautions. %hird, the 4 Agreement clearly permits the precautionarytaking of measures when a goernment considers that sufficient scientific eidence does not existto permit a final decision on the safety of a product or process. %his also permits immediatemeasures to be taken in emergency situations.
%here are many examples of bans on the production, sale and import of products based onscientific eidence that they pose an unacceptable risk to human, animal or plant health. %he 4Agreement does not affect a goernments ability to ban products under these conditions.
Can food safety and animal and plant health re)uirements be set by local or regional
governments? Can there be differences in re)uirements within a country?
It is accepted in the 4 Agreement that food safety and animal and plant health regulations donot necessarily hae to be set by the highest goernmental authority and that they may not be the
same throughout a country. $here such regulations affect international trade, howeer, theyshould meet the same re=uirements as if they were established by the national goernment. %henational goernment remains responsible for implementation of the 4 Agreement, and shouldsupport its obserance by other leels of goernment. 6oernments should use the serice of non-goernmental institutions only if these comply with the 4 Agreement.
Does the SPS Agreement re)uire countries to give priority to trade over food safety' or animal
and plant health?
o, the 4 Agreement allows countries to gie food safety, animal and plant health priorityoer trade, proided there is a demonstrable scientific basis for their food safety and healthre=uirement. /ach country has the right to determine what leel of food safety and animal and plant health it considers appropriate, based on an assessment of the risks inoled.
&nce a country has decided on its acceptable leel of risk, there are often a number of alternatiemeasures which may be used to achiee this protection #such as treatment, =uarantine or
increased inspection+. In choosing among such alternaties, the 4 Agreement re=uires that agoernment use those measures which are no more trade restrictie than re=uired to achiee itshealth protection ob<ecties, if these measures are technically and economically feasible. 3or example, although a ban on imports could be one way to reduce the risk of entry of an exotic pest, if re=uiring treatment of the products could also reduce the risk to the leel consideredacceptable by the goernment, this would normally be a less trade restrictie re=uirement.
Can national food safety and animal and plant health legislation be challenged by other
countries? Can private entities bring trade disputes to the W!%? "ow are disputes settled in
the W!%?
ince the 6A%% began in 1"@, it has been possible for a goernment to challenge another countrys food safety and plant and animal health laws as artificial barriers to trade. %he 1>%G% Agreement also had procedures for challenging another signatorys technical regulations,including food safety standards and animal and plant health re=uirements. %he 4 Agreementmakes more explicit not only the basis for food safety and animal and plant health re=uirementsthat affect trade but also the basis for challenges to those re=uirements. $hile a nations ability toestablish legislation is not restricted, a specific food safety or animal or plant health re=uirementcan be challenged by another country on the grounds that there is not sufficient scientificeidence supporting the need for the trade restriction. %he 4 Agreement proides greater certainty for regulators and traders alike, enabling them to aoid potential conflicts.
%he $%& is an inter-goernmental organi'ation and only goernments, not priate entities or non-goernmental organi'ations, can submit trade disputes to the $%&s dispute settlement procedures. on-goernmental entities can, of course, make trade problems known to their goernment and encourage the goernment to seek redress, if appropriate, through the $%&.
Gy accepting the $%& Agreement, goernments hae agreed to be bound by the rules in all of the multilateral trade agreements attached to it, including the 4 Agreement. In the case of atrade dispute, the $%&s dispute settlement procedures #click here for an introduction, click here
for details+ encourage the goernments inoled to find a mutually acceptable bilateral solutionthrough formal consultations. If the goernments cannot resole their dispute, they can choose tofollow any of seeral means of dispute settlement, including good offices, conciliation,mediation and arbitration. Alternatiely, a goernment can re=uest that an impartial panel of trade experts be established to hear all sides of the dispute and to make recommendations.
In a dispute on 4 measures, the panel can seek scientific adice, including by conening atechnical experts group. If the panel concludes that a country is iolating its obligations under any $%& agreement, it will normally recommend that the country bring its measure intoconformity with its obligations. %his could, for example, inole procedural changes in the way ameasure is applied, modification or elimination of the measure altogether, or simply eliminationof discriminatory elements.
%he panel submits its recommendations for consideration by the $%& ispute ettlement Gody#G+, where all $%& Bember countries are represented. Hnless the G decides by consensusnot to adopt the panels report, or unless one of the parties appeals the decision, the defending
party is obliged to implement the panels recommendations and to report on how it has complied.Appeals are limited to issues of law and legal interpretations by the panel.
Although only one panel was asked to consider sanitary or phytosanitary trade disputes duringthe "> years of the former 6A%% dispute settlement procedures, during the first three years of the4 Agreement ten complaints were formally lodged with reference to the new obligations. %hisis not surprising as the agreement clarifies, for the first time, the basis for challenging sanitary or phytosanitary measures which restrict trade and may not be scientifically <ustified. %hechallenges hae concerned issues as aried as inspection and =uarantine procedures, animaldiseases, Quse-byQ dates, the use of eterinary drugs in animal rearing, and disinfectiontreatments for beerages. ispute settlement panels hae been re=uested to examine four of the
complaints: the other complaints hae been or are likely to be settled following the obligatory process of bilateral consultations.
Who was responsible for developing the SPS Agreement? Did developing countries participate
in the negotiation of the SPS Agreement?
%he decision to start the Hruguay ound trade negotiations was made after years of publicdebate, including debate in national goernments. %he decision to negotiate an agreement on theapplication of sanitary and phytosanitary measures was made in 1@* when the ound waslaunched. %he 4 negotiations were open to all of the 12" goernments which participated inthe Hruguay ound. Bany goernments were represented by their food safety or animal and plant health protection officials. %he negotiators also drew on the expertise of technicalinternational organi'ations such as the 3A&, the ?odex and the &I/.
eeloping countries participated in all aspects of the Hruguay ound negotiations to anunprecedented extent. In the negotiations on sanitary and phytosanitary measures, deelopingcountries were actie participants, often represented by their national food safety or animal and plant health experts. Goth before and during the Hruguay ound negotiations, the 6A%%ecretariat assisted deeloping countries to establish effectie negotiating positions. %he 4
Agreement calls for assistance to deeloping countries to enable them to strengthen their foodsafety and animal and plant health protection systems. 3A& and other international organi'ationsalready operate programmes for deeloping countries in these areas.
Was there public participation in the *ruguay +ound negotiations? Were private sector
interests or consumer interests e,cluded?
6A%% was an intergoernmental organi'ation and it was goernments which participated in6A%% trade negotiations: neither priate business nor non-goernmental organi'ations participated directly. Gut as the scope of the Hruguay ound was unprecedented, so was the public debate. Bany goernments consulted with both their public and priate sectors on ariousaspects of the negotiations, including the 4 Agreement. ome goernments established formalchannels for public consultation and debate while others did so on a more ad hoc basis. %he6A%% ecretariat also had considerable contact with international non-goernmentalorgani'ations as well as with the public and priate sectors of many countries inoled in thenegotiations. %he final Hruguay ound results were sub<ect to national ratification and
implementation processes in most 6A%% member countries.
%he $%& is, likewise, an intergoernmental organi'ation. 4riate business and non-goernmental organi'ations do not directly participate in its work, but can influence the work of the $%& through their contacts with their own goernments. In addition, the $%& ecretariatregularly has contacts with many non-goernmental organi'ations.
What is the SPS Committee and who is on it? What does it do?
%he 4 Agreement established a ?ommittee on anitary and 4hytosanitary Beasures #the Q4?ommitteeQ+ to proide a forum for consultations about food safety or animal and plant health
measures which affect trade, and to ensure the implementation of the 4 Agreement. %he 4?ommittee, like other $%& committees, is open to all $%& Bember countries. 6oernmentswhich hae an obserer status in the higher leel $%& bodies #such as the ?ouncil for %rade in6oods+ are also eligible to be obserers in the 4 ?ommittee. %he ?ommittee has agreed toinite representaties of seeral international intergoernmental organi'ations as obserers,including ?odex, &I/, I44?, $C&, H?%A and theInternational tandards &rgani'ation#I&+. 6oernments may send whicheer officials they beliee appropriate to participate in themeetings of the 4 ?ommittee, and many send their food safety authorities or eterinary or plant health officials.
%he 4 ?ommittee usually holds three regular meetings each year. It also holds occasional <oint
meetings with the %G% ?ommittee on notification and transparency procedures. Informal or special meetings may be scheduled as needed.
uring its first year, the 4 ?ommittee deeloped recommended procedures and a standardi'edformat for goernments to use for the re=uired adance notification of new regulations. &er >00notifications of sanitary and phytosanitary measures were submitted and circulated by the end of 1>. %he ?ommittee considered information proided by goernments regarding their nationalregulatory procedures, their use of risk assessment in the deelopment of sanitary and
phytosanitary measures and their disease-status, notably with respect to foot-and-mouth diseaseand fruit-fly. In addition, a considerable number of trade issues were discussed by the 4?ommittee, in particular with regard to boine spongiform encephalopathy #G/+. As re=uired by the 4 Agreement, the 4 ?ommittee deeloped a proisional procedure to monitor the useof international standards. %he 4 ?ommittee is continuing to work on guidelines to ensure
consistency in risk management decisions, in order to reduce possible arbitrariness in the actionstaken by goernments. In 1@, the 4 ?ommittee will reiew the operation of the 4Agreement.
Who benefits from the implementation of the SPS Agreement? -s the agreement in the interest
of developing countries?
+onsumers in all countries benefit. %he 4 Agreement helps ensure, and in many casesenhances, the safety of their food as it encourages the systematic use of scientific information inthis regard, thus reducing the scope for arbitrary and un<ustified decisions. Bore information willincreasingly become aailable to consumers as a result of greater transparency in goernmental
procedures and on the basis for their food safety, animal and plant health decisions. %heelimination of unnecessary trade barriers allows consumers to benefit from a greater choice of safe foods and from healthy international competition among producers.
pecific sanitary and phytosanitary re=uirements are most fre=uently applied on a bilateral basis between trading countries. 4e&eloping countries benefit from the 4 Agreement as it proidesan international framework for sanitary and phytosanitary arrangements among countries,irrespectie of their political and economic str ength or technological capacity. $ithout such anagreement, deeloping countries could be at a disadantage when challenging un<ustified traderestrictions. 3urthermore, under the 4 Agreement, goernments must accept imported productsthat meet their safety re=uirements, whether these products are the result of simpler, less
sophisticated methods or the most modern technology. Increased technical assistance to helpdeeloping countries in the area of food safety and animal and plant health, whether bilateral or through international organi'ations, is also an element of the 4 Agreement.
E.porters of agricultural products in all countries benefit from the elimination of un<ustified barriers to their products. %he 4 Agreement reduces uncertainty about the conditions for selling to a specific market. /fforts to produce safe food for another market should not bethwarted by regulations imposed for protectionist purposes under the guise of health measures.
Importers of food and other agricultural products also benefit from the greater certaintyregarding border measures. %he basis for sanitary and phytosanitary measures which restricttrade are made clearer by the 4 Agreement, as well as the basis for challenging re=uirementswhich may be un<ustified. %his also benefits the many processors and commercial users of imported food, animal or plant products.
What difficulties do developing countries face in implementing the SPS Agreement? Will they
receive any assistance in this regard? Are there special provisions for developing countries?
Although a number of deeloping countries hae excellent food safety and eterinary and planthealth serices, others do not. 3or these, the re=uirements of the 4 Agreement present achallenge to improe the health situation of their people, liestock and crops which may bedifficult for some to meet. Gecause of this difficulty, the 4 Agreement delayed allre=uirements, other than those dealing with transparency #notification and the establishment of
/n=uiry 4oints+, until 1> for deeloping countries, and until 2000 for the least deelopedcountries. %his means that these countries are not re=uired to proide a scientific <ustification for their sanitary or phytosanitary re=uirements before that time. ?ountries which need longer time periods, for example for the improement of their eterinary serices or for the implementationof specific obligations of the agreement, can re=uest the 4 ?ommittee to grant them further delays.
Bany deeloping countries hae already adopted international standards #including those of ?odex, &I/ and the I44?+ as the basis for their national re=uirements, thus aoiding the need todeote their scarce resources to duplicate work already done by international experts. %he 4Agreement encourages them to participate as actiely as possible in these organi'ations, in order
to contribute to and ensure the deelopment of further international standards which address their needs.
&ne proision of the 4 Agreement is the commitment by members to facilitate the proisionof technical assistance to deeloping countries, either through the releant internationalorgani'ations or bilaterally. 3A&, &I/ and $C& hae considerable programmes to assistdeeloping countries with regard to food safety, animal and plant health concerns. A number of countries also hae extensie bilateral programmes with other $%& Bembers in these areas. %he$%& ecretariat has undertaken a programme of regional seminars to proide deelopingcountries #and those of ?entral and /astern /urope+ with detailed information regarding their rights and obligations stemming from this agreement. %hese seminars are proided in
cooperation with the ?odex, &I/ and I44?, to ensure that goernments are fully aware of therole these organi'ations can play in assisting countries to meet their re=uirements and fully en<oythe benefits resulting from the 4 Agreement. %he seminars are open to participation byinterested priate business associations and consumer organi'ations. %he $%& ecretariat also proides technical assistance through national workshops and to goernments through their representaties in 6enea.
"E+:'I+AL BARRIERS "< "RA4E! %/?CI?A /84AA%I&
%echnical Information on %echnical barriers to trade
"/e pro9lem
W/ an Agreement@ back to top
:ig/ num9er of tec/nical regulations and standards
In recent years, the number of technical regulations and standards adopted by countries has
grown significantly. Increased regulatory policy can be seen as the result of higher standards of
%he proisions of the 6A%% 1"> contained only a general reference to technical regulations and
standards in Articles III, 8I and 88. A 6A%% working group, set up to ealuate the impact of
non-tariff barriers in international trade, concluded that technical barriers were the largest
category of non-tariff measures faced by exporters. After years of negotiations at the end of the
%okyo ound in 1>, 2 6A%% ?ontracting 4arties signed the plurilateral Agreement on
%echnical Garriers to %rade #%G%+. %he tandards ?ode, as the Agreement was called, laid down
the rules for preparation, adoption and application of technical regulations, standards and
conformity assessment procedures. %he new $%& Agreement on %echnical Garriers to %rade, or
%G% Agreement, has strengthened and clarified the proisions of the %okyo ound tandards
?ode. %he %G% Agreement, negotiated during the Hruguay ound is an integral part of the $%&
Agreement. Gefore examining the Agreement in detail, it is necessary to define the meaning of
Dtechnical regulationsE, DstandardsE and Dconformity assessment proceduresE.
4efinitions back to top
"ec/nical regulations and standards in t/e "B" Agreement
%echnical regulations and standards set out specific characteristics of a product O such as its
si'e, shape, design, functions and performance, or the way it is labelled or packaged before it is
put on sale. In certain cases, the way a product is produced can affect these characteristics, and itmay then proe more appropriate to draft technical regulations and standards in terms of a
productFs process and production methods rather than its characteristics per se. %he %G%
Agreement makes allowance for both approaches in the way it defines technical regulations and
standards #Annex 1+.
4ifference 9etween a tec/nical regulation and a standard
imilarly, in order to be marketable in the Hnited Mingdom, 3rench or 6erman motor ehicles
need to be ad<usted to right-hand drie. %he costs of designing, manufacturing, and deliering the
same product in arious configurations may be high.
+onsumersC 9enefits
%echnical harmoni'ation may increase consumer welfare. $ithin a harmoni'ed regulatory
enironment, competition ensures that consumers hae a wide and economically attractie
choice of products. %his presupposes, howeer, that harmoni'ed standards do not go beyond
fulfilling their legitimate regulatory ob<ectie, i.e. that they do not stifle innoation or otherwise
discourage producers from introducing new products or product ariants.
:armoniation 627 back to top
Introduction
3or many years, technical experts hae worked towards the international harmoni'ation of standards. An important role in these efforts is played by the International tandardi'ation
&rgani'ation #I&+, the International /lectrotechnical ?ommission #I/?+ and the International
%elecommunication Hnion #I%H+. %heir actiities hae had ma<or impact on trade, especially in
industrial products. 3or example, I& has deeloped more than ,*00 international standards
coering almost all technical fields.
:armoniation and t/e "B" Agreement
%he Agreement encourages Bembers to use existing international standards for their national
regulations, or for parts of them, unless Dtheir use would be ineffectie or inappropriateE to fulfil
a gien policy ob<ectie. %his may be the case, for example, Dbecause of fundamental climaticand geographical factors or fundamental technological problemsE #Article 2."+. As explained
preiously, technical regulations in accordance with releant international standards are
rebuttably presumed Dnot to create an unnecessary obstacle to international tradeE. imilar
proisions apply to conformity assessment procedures; international guides or recommendations
issued by international standardi'ing bodies, or the releant parts of them, are to be used for
national procedures for conformity assessment unless they are Dinappropriate for the Bembers
concerned for, inter alia, such reasons as national security re=uirements, preention of deceptie
practices, protection of human health or safety, animal or plant life or health, or protection of the
enironment: fundamental climatic or other geographical factors: fundamental technological or
infrastructural problemsE #Article 5."+.
Participation in international standardiing 9odies
$idespread participation in international standardi'ing bodies can ensure that international
standards reflect country-specific production and trade interests. %he %G% Agreement encourages
Bembers to participate, within the limits of their resources, in the work of international bodies
for the preparation of standards #Article 2.*+ and guides or recommendations for conformity
assessment procedures #Article 5.5+.
Special and differential treatment
Implementing and enforcing international standards may re=uire technical and financial
resources beyond the capabilities of deeloping countries. %he %G% Agreement eases the impact
of certain proisions whose full application would not be compatible with deeloping country
BembersF deelopment, financial and trade needs. Boreoer, in iew of their particular
technological and socio-economic conditions, deeloping country Bembers may adopt technical
regulations, standards or test methods aimed at presering indigenous technologies and
production methods and processes compatible with their deelopment needs #Article 12."+.
3inally, deeloping country Bembers may re=uest international standardi'ing bodies to examine
the possibility of, and if practicable, prepare international standards for products of special trade
interest to them.
EDui&alence back to top
W/at is eDui&alence@
%he process leading to the preparation of an international standard can be lengthy and costly.
eaching consensus on technical details can take seeral years. %he time gap between the
adoption of an international standard and its implementation by national regulators can also be
significant. 3or these reasons, negotiators introduced in the %G% Agreement a complementary
approach to technical harmoni'ation, known as e=uialence. %echnical barriers to international
trade could be eliminated if Bembers accept that technical regulations different from their own
fulfil the same policy ob<ecties een if through different means. %his approach, based on the
/uropean ?ommunityFs 1@5Dnew approachE to standardi'ation, is contained in Article 2.> of
the %G% Agreement.
:ow does eDui&alence work@
et us assume that country A, wishing to protect its enironment from high auto emission leels,
re=uires that cars be e=uipped with a catalytic conerter. In country G, the same ob<ectie is
achieed through the use of diesel engines in motor ehicles. ince enironmental concerns are
identical in the two countries O to reduce the leels of pollutants in the air O A and G can agree
that their technical regulations are essentially e=uialent. %hus, if car manufacturers in country Awant to export to G, they will not be obliged to satisfy country GFs re=uirement to fit diesel
engines, and ice ersa. %his will eliminate the costs of ad<usting production facilities to fulfil
international standards or guides of recommendations: and #2+ if the technical regulation or
conformity assessment procedure may hae a significant effect on the trade of other Bembers
#Articles 2. and 5.*+. raft regulations should be notified to the $%& ecretariat, if possible
sixty days prior to their formal adoption so as to allow time for other Bembers to make
comments. egulations can also be notified ex-post wheneer urgent problems of safety, health,
enironment protection arise #Articles 2.10 and 5.>+. ocal 6oernments at the leel directly below central goernment are re=uired to notify technical regulations and conformity assessment
procedures which hae not been preiously notified by their central goernment authorities
#Article .2 and >.2+.
Statements on t/e implementation and administration of t/e Agreement
/ach $%& Bember must, promptly after the Agreement enters into force for it, notify Bembers
of the measures in existence or taken to ensure the implementation and administration of the
Agreement and of any subse=uent changes to them #Article 15.2+. %his written statement has toinclude, inter alia, all releant laws, regulations, administratie orders, etc., to ensure that the
proisions of the Agreement are applied: the names of the publications where draft and final
technical regulations, standards and conformity assessment procedures are published: the
expected length of time for the presentation of written comments on technical regulations,
standards or conformity assessment procedures: and the name and address of the en=uiry points
established under Article 10.
Bilateral or plurilateral agreements
Hnder Article 10.>, a Bember who has reached an agreement with any other country or countries
on issues related to technical regulations, standards or conformity assessment procedures which
may hae a significant effect on trade must notify other Bembers through the $%& ecretariat
of the products to be coered by the agreement, and proide a brief description of the agreement.
+ode of good practice
%he ?ode of 6ood 4ractice for the 4reparation, Adoption and Application of tandards lays
down disciplines in respect of central goernment, local goernment, non-goernmental and
regional standardi'ing bodies deeloping oluntary standards. %he ?ode is open for acceptance by any of these standardi'ing bodies. ?entral goernment standardi'ing bodies must accept and
comply with the proisions of the ?ode. A standardi'ing body wishing to adhere to, or withdraw
from, the ?ode has to notify its acceptance of, or withdrawal from, the ?ode using the
appropriate notification format #paragraph ? of the ?ode+. tandardi'ing bodies which hae
accepted the ?ode must notify at least twice a year the existence of their work programme, and
where details of this programme can be obtained #paragraph P+. otifications hae to be sent
Bembers of the %G% Agreement are responsible for the acceptance and compliance with the
?ode of 6ood 4ractice by their central goernment standardi'ing bodies. 3urthermore, they are
re=uired to take such reasonable measures as may be aailable to them to ensure also that local
goernment and non-goernmental standardi'ing bodies within their territories, and regionalstandardi'ing bodies of which they are members, accept and comply with the ?ode.
"ec/nical assistance
W/o /as t/e rig/t to tec/nical assistance@
Any Bember, and especially deeloping country Bembers, can re=uest technical assistance from
other Bembers or from the $%& ecretariat, on terms and conditions to be agreed by the
Bembers concerned #Article 11+. e=uests for technical assistance receied from least-
deeloped Bembers hae priority.
W/at tpe of assistance@
%he coerage of technical assistance ranges from the preparation of technical regulations and the
establishment of national standardi'ing bodies to the participation in international standardi'ing
bodies and the steps to be taken by deeloping country Bembers to gain access to regional
international conformity assessment systems. %echnical assistance can help firms in deeloping
country Bembers to manufacture products in accordance with the technical re=uirements
existing in an importing country, thus ensuring that the products are accepted on the importing
BemberFs market.
W"< SecretariatCs tec/nical assistance acti&ities
%he $%& ecretariatFs assistance to deeloping and least-deeloping countries on %G% matters
often takes the form of regional or sub-regional seminars. ecently, technical assistance
"oward <pen Recognition@ Standardiation and Regional Integration nder Article ((I)
of #A""
A9stract
%his paper proides a legal analysis of the significance of standards, technical regulations and
4 proisions #collectiely, D%G%4E proisions+ in regional trade agreements #D%AsE+ in
relation to the multilateral trading system. It first examines the ways in which %A regulation of national %G%4 measures may contribute to or detract from liberali'ation goals. It then
describes how 6A%% Article 88I9 and the Hnderstanding on the Interpretation of Article 88I9
#the DHnderstandingE+, as presently understood, regulate %A regulation of national %G%4
measures. Gased on its analysis, this paper makes the following recommendations; 1. Interpret
Article 88I9;5 of 6A%% to proide an exception from obligations contained in the %G%
Agreement and 4 Agreement, principally the B3 obligation, in accordance with the %urkey-
%extiles necessity test. %his aoids imposing an inappropriate barrier to formation of %As. 2.
Interpret Dother restrictie regulations of commerceE and Dother regulations of commerceE in
Articles 88I9;5 and @ to include only discriminatory and unnecessary %G% or 4 measures.
%his aoids re=uirements to eliminate or harmoni'e non-protectionist %G% or 4 measures. It
aoids imposing an inappropriate barrier to formation of %As. . Interpret Article I;1 of 6A%%
and the B3 proisions of the %G% Agreement and 4 Agreement to clarify authori'ation for
only DopenE mutual recognition agreements, similar to the permission contained in Article 9II of 6A%. %his ensures that recognition arrangements will not proide an aenue of discrimination
or other defection from $%& multilateral free trade principles. %oday, it is not clear that any
mutual recognition agreements are authori'ed.
%his paper proides a legal analysis of the significance of standards, technical regulations and
4 proisions #collectiely, D%G%4E proisions+ in regional trade agreements #D%AsE+ in
relation to the multilateral trading system. It first examines the ways in which %A regulation of
national %G%4 measures may contribute to or detract from liberali'ation goals. It then
describes how 6A%% Article 88I9 and the Hnderstanding on the Interpretation of Article 88I9
#the DHnderstandingE+,2 as presently understood, regulate %A regulation of national %G%4
measures. %his paper concludes by suggesting how Article 88I9 and the Hnderstanding might
be reinterpreted or reised to conform more closely with the normatie goal, expressed in Article
88I9;", of balancing regional integration goals with multilateral liberali'ation goals. %his paper
finds that most of the Dfortress %AE types of concerns, as they relate to %G%4 measures, are
addressed if not precluded by $%& law as presently understood, and that the remaining potential
Dfortress %AE concerns relating to %G%4 measures are of uncertain significance. Coweer,
policymakers continue to express concern.
+onclusion
%he re=uirements of Article 88I9 of 6A%% and the Hnderstanding with respect to %A
regulation of national %G%4 measures are somewhat unclear, in large measure due to theimprecision of the definitions of Dother restrictie regulations of commerceE in Article 88I9;@,
and Dother regulations of commerceE in Article 88I9;5 and @. %his paper suggests that the $%&
law be read to re=uire %As internally to impose a rule of national treatment-type
nondiscrimination and necessity. Coweer, it must be recogni'ed that the $%& system already
proides this anti-protectionism discipline, and so this re=uirement has little traction. &n the
other hand, Article 88I9;@ does not appear to re=uire harmoni'ation or mutual recognition
arrangements. %o the extent that %As engage in harmoni'ation, their harmoni'ed %G%4
measures must conform to the re=uirements of $%& law, namely the 6A%%, the %G% Agreement
and the 4 Agreement. %he regulation of %A rules of mutual recognition, under the B3
obligation of Article I;1 of 6A%%, and under Article 88I9, is unclear, and rules of mutualrecognition may present some opportunities for %A protectionism. It would be useful to clarify
the meaning of Dother restrictie regulations of commerceE in Article 88I9;@, and Dother
regulations of commerceE in Article 88I9;5 and @ in order to clarify what Article 88I9 re=uires
and what it prohibits. %he core =uestion raised by this paper has to do with the treatment of
recognition arrangements. hould %As be permitted to maintain exclusie recognition
arrangements, effectiely discriminating against similarly-situated third states and DlikeE third
state productsV &r should they be re=uired, as under Article 9II of the 6A%, to practice what
might be termed Dopen recognitionEV &pen recognition would establish %A conditions for
recognition, but permit third states to meet those conditions. %his paper has suggested that,
although the legal re=uirements are not clear, open recognition may be re=uired under Article I;1
and 88I9 of 6A%%. It might be useful to clarify these re=uirements. In order to ensure that %A
%G%4 measures do not unnecessarily inhibit trade with outside parties, and in order to ensurethat $%& re=uirements for B3 and Article 88I9 re=uirements do not unnecessarily inhibit
regional integration, the following three initiaties are recommended; 1. Interpret Article 88I9;5
to proide an exception from obligations contained in the %G% Agreement and 4 Agreement,
principally the B3 obligation, in accordance with the %urkey-%extiles necessity test. %his
aoids imposing an inappropriate barrier to formation of %As.
2. Interpret Dother restrictie regulations of commerceE and Dother regulations of commerceE in
Articles 88I9;5 and @ to include only discriminatory and unnecessary %G% or 4 measures.
%his aoids re=uirements to eliminate or harmoni'e nonprotectionist %G% or 4 measures. It
aoids imposing an inappropriate barrier to formation of %As. . Interpret Article I;1 of 6A%%
and the B3 proisions of the %G% Agreement and 4 Agreement to clarify authori'ation for
only DopenE mutual recognition agreements, similar to the permission contained in Article 9II of
6A%. %oday, it is not clear that any mutual recognition agreements are authori'ed. %his ensures
that recognition arrangements will not proide an aenue of discrimination or other defection
from $%& multilateral free trade principles. %hese initiaties could be effected by the dispute
settlement process, or by action of the member states of the $%&. %hese initiaties would assist
in ensuring that %A %G%4 integration contributes to global welfare, and that $%& rules do
not inappropriately inhibit the formation of %As. Coweer, this papers analysis does not
purport to answer the =uestion of building blocks or stumbling blocks in connection with
regional integration in the %G%4 field. %his paper has also not addressed the dynamic time
path issue; whether %A integration of %G%4 issues will help to achiee greater welfarethrough institutional growth. &ne problem with this =uestion is that it is not clear that either %A
or multilateral standardi'ation would increase welfare in any particular circumstance. $hile
Mindleberger suggests that world standards are a public good,@* ykes,@> tephan@@ and others
point out that harmoni'ation may diminish welfare through suppression of efficient ariation and
regulatory competition. In a sense, both perspecties are correct, but depend on the particular
type of product, and the preferences of indiiduals and states.
- actions taken against dumping #selling at an unfairly low price+
- subsidies and special DcounterailingE duties to offset the subsidies
- emergency measures to limit imports temporarily, designed to DsafeguardE domestic
industries.
Anti-dumping actions
If a company exports a product at a price lower than the price it normally charges
on its own home market, it is said to be DdumpingE the product. Is this unfair
competitionV &pinions differ, but many goernments take action against dumping
in order to defend their domestic industries. %he $%& agreement does not pass
<udgement. Its focus is on how goernments can or cannot react to dumping O it
disciplines anti-dumping actions, and it is often called the DAnti-umping
AgreementE. #%his focus only on the reaction to dumping contrasts with the
approach of the ubsidies and ?ounterailing Beasures Agreement.+
%he legal definitions are more precise, but broadly speaking the $%& agreement
allows goernments to act against dumping where there is genuine #DmaterialE+
in<ury to the competing domestic industry. In order to do that the goernment has
to be able to show that dumping is taking place, calculate the extent of dumping
#how much lower the export price is compared to the exporters home market
price+, and show that the dumping is causing in<ury or threatening to do so.
6A%% #Article *+ allows countries to take action against dumping. %he Anti-
umping Agreement clarifies and expands Article *, and the two operate together.
%hey allow countries to act in a way that would normally break the 6A%% principles of binding a tariff and not discriminating between trading partners O
typically anti-dumping action means charging extra import duty on the particular
product from the particular exporting country in order to bring its price closer to
the Dnormal alueE or to remoe the in<ury to domestic industry in the importing
country.
%here are many different ways of calculating whether a particular product is being
dumped heaily or only lightly. %he agreement narrows down the range of
possible options. It proides three methods to calculate a products Dnormal
alueE. %he main one is based on the price in the exporters domestic market.
$hen this cannot be used, two alternaties are aailable O the price charged bythe exporter in another country, or a calculation based on the combination of the
exporters production costs, other expenses and normal profit margins. And the
agreement also specifies how a fair comparison can be made between the export
price and what would be a normal price.
?alculating the extent of dumping on a product is not enough. Anti-dumping
measures can only be applied if the dumping is hurting the industry in the
importing country. %herefore, a detailed inestigation has to be conducted
according to specified rules first. %he inestigation must ealuate all releant
economic factors that hae a bearing on the state of the industry in =uestion. If the
inestigation shows dumping is taking place and domestic industry is being hurt,
the exporting company can undertake to raise its price to an agreed leel in order
to aoid anti-dumping import duty.
etailed procedures are set out on how anti-dumping cases are to be initiated,
how the inestigations are to be conducted, and the conditions for ensuring that
all interested parties are gien an opportunity to present eidence. Anti-dumping
measures must expire fie years after the date of imposition, unless an
inestigation shows that ending the measure would lead to in<ury.
Anti-dumping inestigations are to end immediately in cases where the authorities
determine that the margin of dumping is insignificantly small #defined as less than
2! of the export price of the product+. &ther conditions are also set. 3or example,the inestigations also hae to end if the olume of dumped imports is negligible
#i.e. if the olume from one country is less than ! of total imports of that
product O although inestigations can proceed if seeral countries, each
supplying less than ! of the im ports, together account for >! or more of total
imports+.
%he agreement says member countries must inform the ?ommittee on Anti-
umping 4ractices about all preliminary and final anti-dumping actions, promptly
and in detail. %hey must also report on all inestigations twice a year. $hen
differences arise, members are encouraged to consult each other. %hey can also
use the $%&s dispute settlement procedure.
ubsidies and counterailing measures back to top
%his agreement does two things; it disciplines the use of subsidies, and it
regulates the actions countries can take to counter the effects of subsidies. It says
a country can use the $%&s dispute settlement procedure to seek the withdrawal
of the subsidy or the remoal of its aderse effects. &r the country can launch its
own inestigation and ultimately charge extra duty #known as Dcounterailing
dutyE+ on subsidi'ed imports that are found to be hurting domestic producers.
%he agreement contains a definition of subsidy. It also introduces the concept of a DspecificE subsidy O i.e. a subsidy aailable only to an enterprise, industry,
group of enterprises, or group of industries in the country #or state, etc+ that gies
the subsidy. %he disciplines set out in the agreement only apply to specific
subsidies. %hey can be domestic or export subsidies.
%he agreement defines two categories of subsidies; prohibited and actionable. It
originally contained a third category; non-actionable subsidies. %his category
existed for fie years, ending on 1 ecember 1, and was not extended. %he
agreement applies to agricultural goods as well as industrial products, except
when the subsidies are exempt under the Agriculture Agreements Dpeace
clauseE, due to expire at the end of 200.
4rohibited subsidies; subsidies that re=uire recipients to meet certain export
targets, or to use domestic goods instead of imported goods. %hey are prohibited
because they are specifically designed to distort international trade, and are
therefore likely to hurt other countries trade. %hey can be challenged in the
$%& dispute settlement procedure where they are handled under an accelerated
timetable. If the dispute settlement procedure confirms that the subsidy is
prohibited, it must be withdrawn immediately. &therwise, the complaining
country can take counter measures. If domestic producers are hurt by imports of
subsidi'ed products, counterailing duty can be imposed.
Actionable subsidies; in this category the complaining country has to show thatthe subsidy has an aderse effect on its interests. &therwise the subsidy is
permitted. %he agreement defines three types of damage they can cause. &ne
countrys subsidies can hurt a domestic industry in an importing country. %hey
can hurt rial exporters from another country when the two compete in third
markets. And domestic subsidies in one country can hurt exporters trying to
compete in the subsidi'ing countrys domestic market. If the ispute ettlement
Gody rules that the subsidy does hae an aderse effect, the subsidy must be
withdrawn or its aderse effect must be remoed. Again, if domestic producers
are hurt by imports of subsidi'ed products, counterailing duty can be imposed.
ome of the disciplines are similar to those of the Anti-umping Agreement.
?ounterailing duty #the parallel of anti-dumping duty+ can only be charged after
the importing country has conducted a detailed inestigation similar to that
re=uired for anti-dumping action. %here are detailed rules for deciding whether a
product is being subsidi'ed #not always an easy calculation+, criteria for
determining whether imports of subsidi'ed products are hurting #Dcausing in<ury
toE+ domestic industry, procedures for initiating and conducting inestigations,
and rules on the implementation and duration #normally fie years+ of
counterailing measures. %he subsidi'ed exporter can also agree to raise its
export prices as an alternatie to its exports being charged counterailing duty.
ubsidies may play an important role in deeloping countries and in the
transformation of centrally-planned economies to market economies. east-
deeloped countries and deeloping countries with less than W1,000 per capita
64 are exempted from disciplines on prohibited export subsidies. &ther
deeloping countries are gien until 200 to get rid of their export subsidies.
east-deeloped countries must eliminate import-substitution subsidies #i.e.
subsidies designed to help domestic production and aoid importing+ by 200 O
for other deeloping countries the deadline was 2000. eeloping countries also
receie preferential treatment if their exports are sub<ect to counterailing duty
inestigations. 3or transition economies, prohibited subsidies had to be phased
out by 2002.
X more on subsidies and counterailing measures
X ee also oha Agenda negotiations
afeguards; emergency protection from imports back to top
A $%& member may restrict imports of a product temporarily #take DsafeguardE
actions+ if its domestic industry is in<ured or threatened with in<ury caused by a
surge in imports. Cere, the in<ury has to be serious. afeguard measures were
always aailable under 6A%% #Article 1+. Coweer, they were infre=uentlyused, some goernments preferring to protect their domestic industries through
Dgrey areaE measures O using bilateral negotiations outside 6A%%s auspices,
they persuaded exporting countries to restrain exports DoluntarilyE or to agree to
other means of sharing markets. Agreements of this kind were reached for a wide
range of products; automobiles, steel, and semiconductors, for example.
%he $%& agreement broke new ground. It prohibits Dgrey-areaE measures, and it
sets time limits #a Dsunset clauseE+ on all safeguard actions. %he agreement says
members must not seek, take or maintain any oluntary export restraints, orderly
marketing arrangements or any other similar measures on the export or the
import side. %he bilateral measures that were not modified to conform with theagreement were phased out at the end of 1@. ?ountries were allowed to keep
one of these measures an extra year #until the end of 1+, but only the
/uropean Hnion O for restrictions on imports of cars from Papan O made use of
this proision.
An import DsurgeE <ustifying safeguard action can be a real increase in imports
#an absolute increase+: or it can be an increase in the imports share of a shrinking
market, een if the import =uantity has not increased #relatie increase+.
Industries or companies may re=uest safeguard action by their goernment. %he
$%& agreement sets out re=uirements for safeguard inestigations by nationalauthorities. %he emphasis is on transparency and on following established rules
and practices O aoiding arbitrary methods. %he authorities conducting
inestigations hae to announce publicly when hearings are to take place and
proide other appropriate means for interested parties to present eidence. %he
eidence must include arguments on whether a measure is in the public interest.
%he agreement sets out criteria for assessing whether Dserious in<uryE is being
caused or threatened, and the factors which must be considered in determining
the impact of imports on the domestic industry. $hen imposed, a safeguard
measure should be applied only to the extent necessary to preent or remedy
serious in<ury and to help the industry concerned to ad<ust. $here =uantitatie
restrictions #=uotas+ are imposed, they normally should not reduce the =uantities
of imports below the annual aerage for the last three representatie years for
which statistics are aailable, unless clear <ustification is gien that a different
leel is necessary to preent or remedy serious in<ury.
In principle, safeguard measures cannot be targeted at imports from a particular
country. Coweer, the agreement does describe how =uotas can be allocated
among supplying countries, including in the exceptional circumstance where
imports from certain countries hae increased disproportionately =uickly. A
safeguard measure should not last more than four years, although this can be
extended up to eight years, sub<ect to a determination by competent national
authorities that the measure is needed and that there is eidence the industry isad<usting. Beasures imposed for more than a year must be progressiely
liberali'ed.
$hen a country restricts imports in order to safeguard its domestic producers, in
principle it must gie something in return. %he agreement says the exporting
country #or exporting countries+ can seek compensation through consultations. If
no agreement is reached the exporting country can retaliate by taking e=uialent
action O for instance, it can raise tariffs on exports from the country that is
enforcing the safeguard measure. In some circumstances, the exporting country
has to wait for three years after the safeguard measure was introduced before it
can retaliate in this way O i.e. if the measure conforms with the proisions of theagreement and if it is taken as a result of an increase in the =uantity of imports
from the exporting country.
%o some extent deeloping countries exports are shielded from safeguard
actions. An importing country can only apply a safeguard measure to a product
from a deeloping country if the deeloping country is supplying more than !
of the imports of that product, or if deeloping country members with less than
! import share collectiely account for more than ! of total imports of the
product concerned.
%he $%&s afeguards ?ommittee oersees the operation of the agreement andis responsible for the sureillance of members commitments. 6oernments hae
to report each phase of a safeguard inestigation and related decision-making,
o far $%& <urisprudence has not resoled the pu''le of how $%& Bembers that are part also
of a regional trade agreement #such as A3%A or B/?&H+ should conduct safeguard
inestigations and apply eentual safeguards in line with $%& rules. ?an or must they exclude
regional imports from the in<ury determinationV ?an or must they apply the eentual safeguard
only to third parties, or are they under an obligation rather to apply all safeguards on a non-
discriminatory basisV %hose are the =uestions examined in this paper. %he paper refocuses some
of the attention to 6A%% Article 8I8 and critici'es the Appellate Godys re=uirement of
parallelism as well as its <urisprudence under 6A%% Article 88I9. It also offers an alternatie
way forward and ends with a list of options for $%& safeguards by members of customs unions
or free trade areas.
$hat are the safeguard options, under $%& rules, for a $%& Bember that is part also of a preferential
trade arrangementV 3or example, when the Hnited tates decides to impose import restrictions on steel to
safeguard the H steel industry from serious in<ury, can it e%clude Bexican and ?anadian steelV &r rather, must it exclude these A3%A imports to ensure the ery =ualification of A3%A as a Zfree trade
areaV &r conersely, is the Hnited tates prohibited from faoring its A3%A partners gien the blunt
statement in the $%& Agreement on afeguards that Z(s)afeguard measures shall be applied to a product
being imported irrespective of its sourceV1
%hose are the =uestions that this paper tries to answer. %hey were raised in all fie Appellate Gody
proceedings under the Agreement on afeguards so far 2, but each time skillfully #though not always
conincingly+ aoided in the final Appellate Gody ruling.
%he analysis begins with a reminder of why the $%& permits safeguards in the first place, focusing on
6A%% Article 8I8, Zunforeseen deelopments and the existence of prior 6A%% concessions #ection I+.
I next examine Articles 2, " and 5 of the Agreement on afeguards and the re=uirements and limits theyimpose on the origin of imports to be #1+ examined in a safeguards inestigation #ection II+ and #2+ made
sub<ect to any eentual safeguard measure #ection III+. ection I9 sets out and critici'es the in case law
deeloped re=uirement of Zparallelism between the imports inestigated, on the one hand, and the
1 &rtic!e 22 of te &#reement on afe#*ar$s em%asis a$$e$
2 +ese ve cases are: (1) &%%e!!ate o$5 6e%ort Argentina – Safeguard Measures on
Imports of Footwear +/D121/&/6 a$o%te$ 12 an*ar5 2000 (&r#entina oot;ear
(-<) )= (2) &%%e!!ate o$5 6e%ort Korea – Denitive Safeguard Measure on Imports of
&%%e!!ate o$5 6e%ort United States – Denitive Safeguard Measures on Imports of !eat"#uten from t!e $uropean Communities +/D1??/&/6 a$o%te$ 19 an*ar5 2001 (@A
eat !*tenB)= (4) &%%e!!ate o$5 6e%ort United States – Safeguard Measures on Imports
of Fres!% C!i##ed or Fro&en 'am( Meat from )ew *ea#and and Austra#ia +/D177/&/6
imports eentually made sub<ect to the safeguard, on the other. 3inally, ection 9 analyses how 6A%%
Article 88I9 on regional trade agreements affects the possibility for $%& Bembers to impose
safeguards. In conclusion, I summari'e the different safeguard options aailable to $%& Bembers that
are part also of a preferential trade arrangement.
Importantly, this paper is limited to safeguard measures permitted under WT- rules. Bany regional trade
agreements include their own safeguard mechanism limited to intra-regional trade only and focused =uite
often on safeguard measures during a transitional period." Additional safeguard options under such intra-
regional mechanisms are not coered in this paper. onetheless, their consistency with $%& rules is
addressed in ection I9.A.
+onclusion
$hat are the safeguard options for a $%& Bember that is part also of a preferential tradearrangementV %he different pieces of this rather complex pu''le analy'ed aboe can now be puttogether in the following eight points;
1.Gased on re=uirements in 6A%% Article 8I8 itself -- in particular Zthe effect of the obligationsincurred under .#TT re=uirement and possibly also that of / unforeseen deelopments -- $%&Bembers part also of a regional arrangement must e%clude imports from within the region as a basis for $%& safeguards if such imports are coered also by the preferential trade deal andmade sub<ect there to liberali'ation commitments e=ual to or exceeding 6A%% concessions. %hisshould normally lead to less $%& safeguards #since, as a conse=uence of regional free trade,regional imports may hae increased most and may cause most in<ury, excluding those regionalimports may make it more difficult to meet $%& re=uirements+. At the same time, safeguardmechanisms under regional deals may still permit regional safeguards #see below point 5+.
2. %he Agreement on afeguards, in contrast, is silent on the source of imports that must beta+en into account in a safeguards inury determination. All imports can be considered, but onecan also e%clude regional imports #as adocated under point 1+ or take account only of importsfrom one source. ?rucially, howeer, een if only third-party imports are considered in thedetermination itself, the in<urious effects of other imports #in casu, regional imports+ must still beealuated so as not to attribute them to third-party imports. Boreoer, if only third-party importsare considered in the in<ury determination, they alone must meet the causal link re=uirement withserious in<ury or threat thereof #that is, it must be demonstrated that third-party imports Zplayed a
3 In tis &rtic!e I *se te terms %referentia! tra$e arran#ementsE re#iona! tra$e
a#reementsE an$ re#iona! $ea!sE intercan#eab!5 +ese terms as te5 are *se$ere cover bot c*stoms *nions an$ free tra$e areas as $ene$ in &++ &rtic!e
FFI,:8
4 ee for eGam%!e &rtic!e 801 of N&+& (i!atera! &ctionsE) an$ &rtic!e 29 of te
-*ro%e &#reement estab!isin# an association bet;een te -*ro%ean <omm*nities
an$ teir member tates of te one %art an$ te <Hec 6e%*b!ic of te oter %art
part in, or contributed to, bringing about serious in<ury so that there is a causal DconnectionE or DnexusE 5+.
.In principle, the eventual safeguard measure itself must be applied to all imports, on a non-discriminatory basis #pursuant to Article 2.2 of the Agreement on afeguards, sub<ect, of course,
to 6A%% Article 88I9 discussed in point @ below+. At the same time, if the in<ury determinationconsidered only third-party imports, the ensuing safeguard measure itself can only offset thein<ury caused by third party imports #not in<ury caused by regional imports+.
". %he Appellate Godys re0uirement of parallelism [ that is, e=uialence between theimports considered in the in<ury determination and those made sub<ect to the safeguard measure [ is an unnecessary complication to deal with a problem better resoled under either 6A%%Article 8I8 itself #and the obligation there to exclude regional imports in certain circumstances+or Article 2.2 of the Agreement on afeguards in combination with 6A%% Article 88I9.4arallelism has not aoided, let alone resoled, the problem of selectie safeguards and therelationship between the Agreement on afeguards and Article 88I9. 4arallelism may lead to
absurd situations and complicates the problem more than it resoles it. %he re=uirement of parallelism should be abandoned. 5. 6A%% Article 88I9 does not prohibit safeguards on trade within a regional trade
arrangement . In particular, Article 88I9;@ permits some internal restrictions #including intra-regional safeguards+ as long as Zsubstantially all the trade is liberali'ed.
*. In addition, 6A%% Article 88I9 may operate as a ustification not only for iolations of 6A%% Article 8I8 but also of the Agreement on afeguards.
>. /xamining the conditions for <ustification under 6A%% Article 88I9, the current
#ppellate (ody re0uirements expressed in its report on Tur+ey 1 Te%tiles #the measure must be #i+Zintroduced upon the formation and #ii+ Znecessary for the formation, of a customs union or freetrade area in line with Article 88I9+ would not permit safeguards that exclude regional imports.uch exclusion is neither #i+ Zintroduced upon the formation of the regional arrangement: nor #ii+Znecessary for such formation.
@. Coweer, the #ppellate (ody re0uirements for #rticle 22'3 ustification are supported
by neither the te%t nor the spirit of #rticle 22'3 . %hey ought to be oerturned. In particular, there=uirement that exclusion of regional imports must be Znecessary for the formation of aregional arrangement in line with Article 88I9, ought to be replaced with the re=uirement thatsuch exclusion is Zpart of the formation of a regional arrangement in line with Article 88I9. &nthat basis, excluding regional imports from a safeguard measure can be <ustified under Article88I9 #the =uota on Indian textiles in the Tur+ey 1 Te%tiles dispute cannot : nor can the iolationof parallelism or 6A%% Article 8I8 in the eent an in<ury determination takes account of all
imports, but the safeguard measure e%cludes regional imports+. An Appellate Gody finding thatArticle 88I9 can, indeed, <ustify safeguards that e%clude regional imports would keep regionaltrade free from $%& safeguards and proide an important incentie for $%& members to signregional trade deals especially with members that are heay users of safeguards. At the same
C &%%e!!ate o$5 re%ort on US – !eat "#uten above n 2 at %ara ?7
time, a close eye should be kept on possible trade diersion so as to ensure that the exclusion of regional imports from $%& safeguards does not run counter the ob<ectie in 6A%% Article88I9;".* 3inally, it should be recalled that the absence of WT- safeguards on regional tradedoes not preclude the imposition of regional safeguards under a safeguard mechanism proidedfor in the regional deal itself.
%he aboe conclusions lead to the following options for $%& Bembers>, part also of a customsunion #?H+ or free trade area #3%A+, wanting to impose a $%& @ safeguard #6+. ote that inmost cases only &ption 2 will be aailable #since the product in =uestion is most likely to becoered also under the ?HN3%A+ and that between &ption 2.a and &ption 2.b, the most obiouschoice will be &ption 2.a, that is, to exclude regional imports from the actual safeguard #sinceregional imports will be excluded also from the in<ury determination and hence be better tackledunder a regional safeguard mechanism, if such mechanism exists+;
? ee above n Error! Bookmark not defned.
7 +e tab!e sets o*t te o%tions for a +" 'ember itse#f to im%ose a safe#*ar$
6emember o;ever tat %*rs*ant to footnote 1 of te &#reement on afe#*ar$s
a customs union can a!so im%ose a safe#*ar$ eiter as a ;o!e or on bea!f of one
or more of its member states ee above teGt at n Error! Bookmark not
defned. an$
Error! Bookmark not defned.
8 6emember o;ever tat even if &++ &rt FIF eGc!*$es re#iona! im%orts as a
basis for a safe#*ar$ under "A,, s*c re#iona! im%orts ma5 sti!! co*nt to;ar$s an
intrare#iona! safe#*ar$ under t!e CU-F,A (as !on# as te re#iona! safe#*ar$
mecanism res%ects te ri#ts of oter +" 'embers an$ is in !ine ;it &rtic!e 11
of te &#reement on afe#*ar$s see above n 4 an$ Error! Bookmark not
#during the safeguard inestigation+SA%E#AR4 $EASRE
#as eentually applied+
#&ption 1+
etermination based on
ALL I$P<R"S
#&ption 1.a+ALL I$P<R"S
are sub<ect to the safeguard
7 If the inestigated product is coered also by the?HN3%A, there is a iolation of 6A%% Art. 8I8#regional imports must then be excluded+ #if not socoered, consistent with Art. 8I8+
7 %he iolation of Art. 8I8 cannot be <ustifiedunder Art. 88I9
7 ?onsistent with parallelism re=uirement7 ?onsistent with 6 Article 2.2 #non-discrimination+7 Intra-regional safeguards are not per se
prohibited by 6A%% Art. 88I9
#&ption 1.b+RE#I<'AL I$P<R"S E(+L4E4
7 9iolation of parallelism re=uirement,not <ustified under Art. 88I97 9iolation of 6 Article 2.2 but <ustifiedunder Art. 88I9 #though iolation of parallelism and Art. 8I8 remain+
#&ption 2+RE#I<'AL I$P<R"S
E(+L4E4
#&ption 2.a+RE#I<'AL I$P<R"S E(+L4E4
7 If the inestigated product is coered also by the?HN3%A, then regional imports must be excludedunder Art. 8I8
7 Agreement on afeguards #Arts. 2.1 and "+ doesnot prohibit exclusion of regional imports
?onsistent with parallelism re=uirement 9iolation of 6 Article 2.2 #non-discrimination+ but <ustified under Art. 88I9
#&ption 2.b+ALL I$P<R"S
sub<ect to the safeguard
9 +e o%tion of a%%!5in# a +" safe#*ar$ on!5 to re#iona! im%orts is not inc!*$e$ in
tis tab!e &s note$ above in n Error! Bookmark not defned. s*c safe#*ar$
;o*!$ r*n co*nter to &rtic!e 22 of te &#reement on afe#*ar$s an$ not be
7 9iolation of parallelism re=uirement but <ustified under Article 2.27 ?onsistent with 6 Article 2.2 #non-discrimination+7 Intra-regional safeguards are not per se
prohibited by 6A%% Art. 88I97 4otentially in iolation of rules in the?HN3%A itself #prohibiting regionalsafeguards, albeit under certainconditions+
Week Se&en
Anti-4umping Actions, Su9sidies, and +ounter&ailing $easures # see previous sections+
Agreement on implementation of Article )I of t/e #eneral Agreement on "ariffs and
"rade 100
#%he Anti-dumping Agreement+
%he Agreement on Implementation of Article 9I of the 6eneral Agreement on %ariffs and%rade 1" #the DA AgreementE+ goerns the application of anti-dumping measures byBembers of the $%&. Anti-dumping measures are unilateral remedies which may beapplied by a Bember after an inestigation and determination by that Bember, inaccordance with the proisions of the A Agreement, that an imported product isDdumpedE and that the dumped imports are causing material in<ury to a domestic industry producing the like product.
%he A Agreement sets forth certain substantie re=uirements that must be fulfilled inorder to impose an anti-dumping measure, as well as detailed procedural re=uirements
regarding the conduct of anti-dumping inestigations and the imposition and maintenancein place of anti-dumping measures. A failure to respect either the substantie or proceduralre=uirements can be taken to dispute settlement and may be the basis for inalidation of the measure. Hnlike the Agreement on ubsidies and ?ounterailing Beasures, the AAgreement does not establish any disciplines on dumping itself, primarily becausedumping is a pricing practice engaged in by business enterprises, and thus not within thedirect reach of multilateral disciplines.
Su9stanti&e rules
Article 1 of the A Agreement establishes the 9asic principle that a Bember may not
impose an anti-dumping measure unless it determines, pursuant to an inestigationconducted in conformity with the proisions of the A Agreement, that there are dumped
imports, material inur to a domestic industr, and a causal link between the dumpedimports and the in<ury.
Article 2 contains substantie rules for the determination of dumping. umping iscalculated on the basis of a Dfair comparisonE between normal &alue #the price of theimported product in the Dordinary course of tradeE in the country of origin or export+and e.port price #the price of the product in the country of import+. Article 2 contains
detailed proisions goerning the calculation of normal alue and export price, andelements of the fair comparison that must be made.
4etermination of inury
Article of the A Agreement contains rules regarding the determination of material
inur caused by dumped imports. Baterial in<ury is defined as material in<ury itself,threat of material in<ury, or material retardation of the establishment of a domesticindustry. %he 9asic reDuirement for determinations of in<ury, is that there be an ob<ectieexamination, based on positie eidence of the &olume and price effects of dumped
imports andt/e conseDuent impact of dumped imports on t/e domestic industr.Article contains specific rules regarding factors to be considered in makingdeterminations of material in<ury, while specifying that no one or seeral of the factorswhich must be considered is determinatie. Article .5 re=uires, in establishing the causal
link between dumped imports and material in<ury, known factors other than dumpedimports which may be causing in<ury must be examined, and that in<ury caused by thesefactors must not be attributed to dumped imports.
A significant new proision, Article ., establishes the conditions in which acumulati&e
e&aluation of the effects of dumped imports from more than one country may beundertaken. Hnder the rules, authorities must determine that the margin of dumping from
each country is not de minimis, that the olume of imports from each country is notnegligible, and that a cumulatie assessment is appropriate in light of the conditions of competition among the imports and between the imports and the domestic like product.
4efinition of industry
Article " of the A Agreement sets forth a definition of the domestic industr to beconsidered for purposes of assessing in<ury and causation. %he domestic industry isdefined as producers of a Dlike productE, which term is defined in Article 2.* as a productthat is identical to, or in the absence of such a product, one that has characteristics closelyresembling those of, the imported dumped product under consideration. Article " contains
special rules for defining a DregionalE domestic industry in exceptional circumstanceswhere production and consumption in the importing country are geographically isolated,and for the ealuation of in<ury and assessment of duties in such cases. Article " alsoestablishes that domestic producers may be excluded from consideration as part of thedomestic industry if they are DrelatedE #defined as a situation of legal or effectie control+to exporters or importers of the dumped product.
A principal ob<ectie of the procedural re=uirements of the A Agreement is to ensuretransparency of proceedings, a full opportunity for parties to defend their interests, andade=uate explanations by inestigating authorities of their determinations. %he extensieand detailed procedural re=uirements relating to in&estigations focus on the sufficiency of petitions #through minimum information and DstandingE re=uirements+ to ensure thatmeritless inestigations are not initiated, on the establishment of time periods for thecompletion of inestigations, and on the proision of access to information to allinterested parties, along with reasonable opportunities to present their iews andarguments. Additional procedural re=uirements relate to the offering, acceptance, andadministration of price undertakings by exporters in lieu of the imposition of anti-dumping measures.
%he A Agreement re=uires inestigating authorities to gie pu9lic notice of and e.plain their determinations at arious stages of the inestigatie process insubstantial detail. It also establishes rules for the timing of the imposition of anti-dumpingduties, the duration of such duties, and obliges Bembers to periodically re&iew thecontinuing need for anti-dumping duties and price undertakings. %here are detailed proisions guiding the imposition and collection of duties under arious duty assessmentsystems, intended to ensure that anti-dumping duties in excess of the margin of dumpingare not collected, and that indiidual exporters are not sub<ected to anti-dumping duties inexcess of their indiidual margin of dumping. Article 1 of the A Agreement re=uiresBembers to proide for udicial re&iew of final determinations in anti-dumping
inestigations and reiews. &ther proisions establish that Bembers may, at their discretion, take anti-dumping actions on behalf of and at the re=uest of a third country, andrecognise that Dspecial regardE must be gien by deeloped country Bembers to thesituation of de&eloping countr $em9ers when considering the application of anti-dumping duties.
Specific Pro&isions
'nitiation and conduct of investigations
Article 5 establishes the re=uirements for the initiation of inestigations. %he AAgreement specifies that inestigations should generally be initiated based on a writtenre=uest submitted Dby or on behalf ofE a domestic industry. %his DstandingE re=uirement issupported by numeric limits for determining whether there is sufficient support bydomestic producers to conclude that the re=uest is made by or on behalf of the domesticindustry, and thereby warrants initiation. %he A Agreement establishes re=uirements for eidence of dumping, in<ury, and causality, as well as other information regarding the product, industry, importers, exporters, and other matters, in written applications for anti-
dumping relief, and specifies that, in special circumstances when authorities initiatewithout a written application from a domestic industry, they shall proceed only if theyhae sufficient eidence of dumping, in<ury, and causality. In order to ensure that meritlessinestigations are not continued, potentially disrupting legitimate trade, Article 5.@
proides for immediate termination of inestigations in the eent the olume of imports isnegligible or the margin of dumping is de minimis, and establishes numeric thresholds for these determinations. In order to minimi'e the trade disruptie effect of inestigations,Article 5.10 specifies that inestigations shall be completed within one year, and in nocase more than 1@ months, after initiation.
Article * sets forth detailed rules on the process of in&estigation, including the collectionof eidence and the use of sampling techni=ues. It re=uires authorities to guarantee theconfidentiality of sensitie information and erify the information on whichdeterminations are based. In addition, to ensure the transparency of proceedings,authorities are re=uired to disclose the information on which determinations are to be
based to interested parties and proide them with ade=uate opportunity to comment, andestablishes the rights of parties to participate in the inestigation, including the right tomeet with parties with aderse interests, for instance in a public hearing.
'mposition of provisional measures
Article > relates to the imposition of pro&isional measures. Article > includes there=uirement that authorities make a preliminary affirmatie determination of dumping,in<ury, and causality before applying proisional measures, and the re=uirement that no proisional measures may be applied sooner than *0 days after initiation of an
inestigation.
Price underta+ings
Article @ establishes the principle that undertakings to reise prices or cease exports atdumped prices may be entered into to settle an inestigation, but only after a preliminaryaffirmatie determination of dumping, in<ury, and causality has been made. It alsoestablishes that undertakings are oluntary on the part of both exporters and inestigatingauthorities. In addition, an exporter may re=uest that the inestigation be continued after an undertaking has been accepted, and if a final determination of no dumping, no in<ury,
or no causality results, the undertaking shall automatically lapse.
'mposition and collection of duties
Article establishes the general principle that imposition of anti-dumping duties isoptional, een if all the re=uirements for imposition hae been met, and establishes thedesirability of application a Dlesser dutE rule. Hnder a lesser duty rule, authorities
impose duties at a leel lower than the margin of dumping but ade=uate to remoe in<ury.Article . establishes that anti-dumping duties may not exceed the dumping margincalculated during the inestigation. In order to ensure that anti-dumping duties in excessof the margin of dumping are not collected, Article . re=uires procedures for
determination of the actual amount of duty owed, or refund of excess duties paid,depending on the duty assessment system of a Bember, normally within 12 months of are=uest, and in no case more than 1@ months. Article ." establishes rules for calculatingthe amount of duties to be imposed on exporters not indiidually examined during theinestigation. Article .5 proides for expedited reiews to calculate indiidual margins of dumping for exporters or producers newly entering the market of the importing Bember.
Article 10 establishes the general principle that both proisional and final anti-dumpingduties may be applied only as of the date on which the determinations of dumping, in<ury,and causality hae been made. Coweer, recogni'ing that in<ury may hae occurredduring the period of inestigation, or that exporters may hae taken actions to aoid the
imposition of an anti-dumping duty, Article 10 contains rules for the retroacti&eimposition of dumping duties in specified circumstances. If the imposition of anti-dumping duties is based on a finding of material in<ury, as opposed to threat of materialin<ury or material retardation of the establishment of a domestic industry, anti-dumpingduties may be collected as of the date proisional measures were imposed. If proisionalduties were collected in an amount greater than the amount of the final duty, or if theimposition of duties is based on a finding of threat of material in<ury or materialretardation, a refund of proisional duties is re=uired. Article 10.* proides for retroactieapplication of final duties to a date not more than 0 days prior to the application of proisional measures in certain exceptional circumstances inoling a history of dumping,massie dumped imports, and potential undermining of the remedial effects of the final
duty.
4uration$ termination$ and review of anti5dumping measures
Article 11 establishes rules for the duration of anti-dumping duties, and re=uirements for periodic reiew of the continuing need, if any, for the imposition of anti-dumping dutiesor price undertakings. %hese re=uirements respond to the concern raised by the practice of some countries of leaing anti-dumping duties in place indefinitely. %he DsunsetEre=uirement establishes that dumping duties shall normally terminate no later than fieyears after first being applied, unless a reiew inestigation prior to that date establishes
that expiry of the duty would be likely to lead to continuation or recurrence of dumpingand in<ury. %his fie year DsunsetE proision also applies to price undertakings. %he AAgreement re=uires authorities to reiew the need for the continued imposition of a dutyupon re=uest of an interested party.
Article 12 sets forth detailed re=uirements for pu9lic notice by inestigating authorities of the initiation of inestigations, preliminary and final determinations, and undertakings.%he public notice must disclose non-confidential information concerning the parties, the product, the margins of dumping, the facts reealed during the inestigation, and the
reasons for the determinations made by the authorities, including the reasons for acceptingand re<ecting releant arguments or claims made by exporters or importers. %hese publicnotice re=uirements are intended to increase the transparency of determinations, with thehope that this will increase the extent to which determinations are based on fact and solidreasoning.
"/e committee and dispute settlement
Article 1* establishes the ?ommittee on Anti-dumping 4ractices, and sets forth
re=uirements for Bembers to notif wit/out dela all preliminar and final actionstaken in anti-dumping inestigations, and notif semi-annuall all actions taken duringthe releant reporting period.
Article 1> establishes that the ispute ettlement Hnderstanding is applicable to disputesunder the A Agreement. Coweer, Article 1>.* establishes a special standard of
re&iew to be applied by panels in examining disputes in anti-dumping cases with regard both to matters of fact and =uestions of interpretation of the Agreement. %his standardgies a degree of deference to the factual decisions and legal interpretations of nationalauthorities, and is intended to preent dispute settlement panels from making decisions based purely on their own iews. A Binisterial ecision, which is not part of the A
Agreement, regarding this proision establishes that its operation will be reiewed after three years with a iew to consideration whether it is capa ble of general application.
%inal pro&isions
Article 1@. establishes the effectie date of the A Agreement, proiding that it isapplicable to inestigations and reiews of existing measures initiated pursuant toapplications made on or after the entry into force of the A Agreement. Article 1@."re=uires Bembers to bring their laws into conformity with the A Agreement by the dateof entry into force of the A Agreement. Hnder Article [email protected], Bembers are re=uired
to notif t/eir anti-dumping laws and regulations to the ?ommittee.
Annex I to the A Agreement establishes procedures for Don-the-spotE inestigations,which are generally undertaken in the territory of an exporting Bember to erifyinformation proided by foreign producers or exporters. Annex II to the A Agreementsets forth proisions on the use of Dbest information aailableE in inestigations,specifying the conditions under which inestigating authorities may rely on informationfrom a source other than the person concerned.
%he Binisterial ecision on Anti-+ircum&ention, which is not part of the AAgreement, noted that the negotiators had been unable to agree on a specific text dealingwith the problem of anti-circumention, recogni'ed the desirability of applying uniformrules in this area as soon as possible, and referred the matter to the ?ommittee for
resolution. %he ?ommittee has established an Informal #roup on Anti-+ircum&ention,which is open to participation by all Bembers, to carry out the task assigned by theBinisters.
Antidumping and +ounter&ailing 4uties in Regional "rade Agreements! +anadaS %"A, 'A%"A
and Beond #il9ert R Win/am :eat/er A #rant
%he use of antidumping #A+ and counterailing duties #?9s+ to preent or remedy unfair trade
practices has been an important issue during recent multilateral and regional trade negotiations. It is a
particularly difficult issue because parties differ on the role unfair trade remedies should play in trade
policy. &ne approach is to iew these measures as an attempt to remedy or offset unfair trade practices by
foreign goernments or exporters. Alternatiely, exporters may iew these measures as politically
motiated contingency protection, or as Qmeasures of Fstand-by protectionF or techni=ues of administered
trade.QF Hnfair trade remedies are proided on the initiatie of specific industries on the basis of a
complicated body of trade regulation. %he system is discrete and highly legalistic, and is an alternatie to
a more general approach to trade policy based on multilateral tariff reductions or codes of conduct.
Gecause parties differ on the role unfair trade remedies should play in trade policy, these remedies hae
been applied uneenly among the ?ontracting 4arties #?4s+ to the 6eneral Agreement on %ariffs and
%rade #6A%%+. 2 %he result is an Quneen playing fieldQ among trading partners, and it has become
eident that more standardi'ed rules and procedures goerning the application of these remedies are
re=uired. A considerable step in the direction of greater standardi'ation has been achieed in the
Antidumping and ubsidies ?odes negotiated in the Hruguay ound. /lsewhere, other measures hae been considered in regional agreements to achiee the desired security of access to a trading partnerFs
market in order to foster economic growth in a competitie enironment. %he application of A and
?9s by the Hnited tates was one of the ma<or ?anadian grieances that surfaced during the negotiation
of the ?anada-H.. 3ree %rade Agreement #3%A+.
Initially, ?anada tried unsuccessfully to gain a blanket exemption from H.. trade remedy laws. As an
alternatie, ?anada placed considerable emphasis on negotiating a dispute settlement mechanism into the
3%A that would reduce ?anadaFs exposure to the use of A and ?9s by the Hnited tates. %he dispute
settlement mechanism ultimately incorporated into ?hapter 1 of the 3%A proides for <udicial-like
reiew of A and ?9 actions by binational panels. 5 Bore specifically, it proides exporters and
importers the option of taking a disputed A or ?9 action to a binational panel with binding powers in
lieu of seeking <udicial reiew by a domestic court.* Gecause indiiduals from both the Hnited tates and
?anada sit on the panels, it is generally assumed that binational panels promote greater consistency and
ob<ectiity in A and ?9 practices. Although the panels are not authori'ed to create substantie law, the
reiew mechanism helps to ensure that each nation is applying its own laws fairly and consistently.
eterminations of dumping and subsidi'ation can be different in each country, but will be upheld as long
as the administratie agency made its determination in accordance with domestic law.> &wing to these
arious characteristics, ?hapter 1 has been one of the most uni=ue dispute settlement mechanisms
&ne of the primary ob<ecties of the 6A%% is to promote secure access to foreign markets so that
businesses will feel confident that they can export their products to other countries without encountering
any unfair or unforeseen impediments in competing for a portion of the consumer market. umping and
unrestricted subsidi'ation hae long been recogni'ed as serious obstacles to this ob<ectie. umping is
generally understood as the sale of goods on a foreign market at a price which is less than that at whichthe product is sold on the sellerFs domestic market. A subsidy is the granting of a non-commercial benefit,
usually by the goernment, at any stage of a goodFs manufacture, production or export. A general concern
about the harmful effects of dumping and subsidi'ation resulted in their inclusion in the 6A%%
negotiations in 1">. %hese negotiations concluded with the insertion of a remedy under Article 9I of the
final Agreement, which allows ?4s to the 6A%% to take unilateral action to offset the effects of dumping
or subsidies on their domestic industries through the use of A and ?9s. 10 6A%% Article 9I allows
the application of an A duty against an imported good where it is being dumped on the foreign market
and is causing or threatening to cause Qmaterial in<ury to an established industry . . . or materially retards
the establishment of a domestic industry.Q1 A ?9 may be applied to an imported good to offset the
effects of a foreign subsidy where the subsidy causes, or threatens to cause, in<ury to the domestic
industry or the potential deelopment of such industry. 12 %he 6A%% proisions for A and ?9srepresented minimal commitment to any real control oer these practices.
+<'+LSI<'
%he similarities in how ?anada and Bexico approached A and ?9s in a regional trade
agreement may proide clues as to how this issue might play out in a broader context, such as
a hemispheric or multilateral trade agreement. 3irst, both ?anada and Bexico recogni'ed that
resort to unfair trade remedies by the larger trade partner - the Hnited tates - could threaten
security of access to the H.. market, and therefore undercut the alue of a trade agreement.
econd, both ?anada and Bexico sought an exception from H.. unfair trade legislation, and
failed. %hird, both ?anada and Bexico tried to negotiate a broader understanding oer the use
of A and ?9s, but also failed.
3inally, both countries settled on a binding dispute settlement mechanism, built around an
internationali'ed form of <udicial reiew of domestic agency actions, as a surrogate for a
more permanent solution to the problem of A and ?9s between close trading partners.
If other hemispheric nations were to accede to A3%A or negotiate a new hemispheric trade
agreement, it is likely that a ?hapter 1-like mechanism would appeal to them for the same
reason it appealed to ?anada or Bexico. %rade remedy actions like A and ?9s arguably
amount to increased protectionism, and they are on the increase in international trade. It is in
the interest of most nations to hae A and ?9 actions conform to high standards of due
process, een more so if the substance of these actions may hae a harmful impact on
international trade relations. 6ien the widespread use of A and ?9s, in particular by theHnited tates, and the difficulties in establishing standardi'ed substantie rules in this area, it
seems probable that other countries will consider negotiating a ?hapter 1-like mechanism.
%he ?anada-H.. 3%A negotiation demonstrated that it is easier to adopt a ?hapter 1
mechanism for A and ?9s where legal systems are similar, while the A3%A negotiation
illustrated how accommodation can be made where systems are different.
Any attempt by hemispheric nations to accede to A3%A would raise some of the same
issues faced in the A3%A ?hapter 1 negotiation, such as the role of amparo #which has
retards the establishment of a domestic industry producing like product #see ection 01#a+, %??, as
amended by A @>52+
ote; #1+ %he imposing authority for the anti-dumping duty is the %I ecretary in the case of non-
agricultural product, commodity, or article or the A ecretary in the case of agricultural product,
commodity or article. #2+ /en when all the re=uirements for the imposition hae been fulfilled, the
decision on whether or not to impose a definitie anti-dumping duty remains the prerogatie of the %ariff ?ommission #+ In the determination of whether to impose the antidumping duty, the %ariff ?ommission
may consider among others, the effect of imposing an anti-dumping duty on the welfare of the consumers
andNor the general public, and other related local industries #"+ %he amount of anti-dumping duty that may
be imposed is the difference between the export price and the normal alue of such product, commodity,
or article. ead ection 02, %??
J; $hat is a counterailing dutyV
It is a special duty imposed on the importation of a product, commodity or article of commerce into the
4hilippines when the same is granted directly or indirectly by the goernment in the country of origin or
exportation any kind or form of specific subsidy upon the production, manufacture or exportation of such
product, commodity or article, and the importation of such subsidi'ed product, commodity or article hascaused or threatens to cause material in<ury to a domestic industry or has materially retarded the growth
or preents the establishment of a domestic industry as determined by the %ariff ?ommission. #see
ection 02, %??, as amended by A @>51+
ote; #1+ %he counterailing duty shall be in addition to any ordinary duties, taxes, and charges imposed
by law on such imported product or article #2+ %he counterailing duty is e=uialent to the bounty #cash
award paid to an exporter+, subsidy #fiscal incenties, not in the form of cash award, to encourage
manufacturers or exporters+ or subention #any assistance other than bounty or subsidy+. #+ %he
imposing authority for the counterailing duties is the %I ecretary in the case of non-agricultural
product, commodity, or article or the A ecretary in the case of agricultural product, commodity or
article. ead ection 0, %?? J; $hat is a marking dutyV A marking duty are the additional customs
duties imposed on foreign articles #or its containers if the article itself cannot be marked+ not marked in
any official language in the 4hilippines in a conspicuous place as legibly, indelibly and permanently in
such manner as to indicate to an ultimate purchaser in the 4hilippines the name of the country of origin.
#ee ection 0, %??+
J; $hat are the exceptions to marking of articlesV
1. %he article is incapable of being marked
2. %he article cannot be marked prior to importation to the 4hilippines without in<ury
. %he article cannot be marked prior to importation to the 4hilippines except at an expense economically
prohibitie of its importation
". %he marking of the container of such article will reasonably indicate the origin of such article
5. %he article is of a crude substance
*. uch article is for the use of the importer and not intended for sale in its imported or other form
>. uch article is to be processed in the 4hilippines by the importer or for his own account and not for the