international trade regulation

Delivered by:Yose Rizal Damuri (Head of Department of Economics Centre

For Strategis and International Studies), ASEAN Economic Community: Maintaining Momentum, The Jakarta Post Outlook 2016

“ASEAN members need to have champions and leaders that can maintain momentum towards

integration.”

Motivation Letter Towards Global Integration

Stay Informed!

• www.kluwerlaw.com – Kluwer Law International, Journal of World Trade

• www.wto.org – World Trade Organization• www.law.harvard.edu/library/ref/ils_ref/world_trade.htm.

– Harvard Law School, WTO documents and press releases• www.ita.doc.gov – U.S. International Trade Administration• www.nafta-sec-alena.org – NAFTA secretariat• www.jus.uio.no/lm/international.economic law/itl.html –

International Trade Law Mentor• www.europa.eu.int – The European Union Online• www.lib.berkeley.edu/GSSI/eu.html - European Union

Internet Resources – University of California, Berkeley

http://www.kluwerlaw.com/

http://www.wto.org/

Covering International and Governmental Regulation of International Trade

• World trade system under the GATT• The establishment of a permanent international

institution known as WTO• Primary purpose of WTO• WTO and the agreements it has been

empowered to enforce• Strong regional trading blocks• European Union and NAFTA as two of the more

successful attempts at regional trade integration.

World Trading System

• Multilateral tradingTrading overseas

• Initial aimTo expand free trade through the reduction of tariffs worldwide

• RequirementWhen countries agree to open their markets, they are required to bind their commitments

GATT (General Agreement on Tariffs and Trade)

• A multilateral agreement regulating international trade• Purpose (according to its preamble): "substantial reduction

of tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis."

• It was negotiated during the United Nations Conference on Trade and Employment

• It was signed by 23 nations in Geneva on October 30, 1947 and took effect on January 1, 1948.

• It lasted until the signature by 123 nations in Marrakesh on April 14, 1994 of the Uruguay Round Agreements, which established the World Trade Organization (WTO) on January 1, 1995.

GATT’s Round(Nine Rounds)

Name Start Subject Covered AchievementGeneva, Switzerland

April 1947(7 months)

Tariffs Signing of GATT, 45,000 tariff concessions affecting $10 billion of trade

Annecy, France

April 1949(5 months)

Tariffs Countries exchanged some 5,000 tariff concessions

Torquay, England

September 1950 (8 months)

Tariffs Countries exchanged some 8,700 tariff concessions, cutting the 1948 tariff levels by 25%


Name Start Subject Covered AchievementGeneva II,Switzerland

January 1956(5 months)

Tariffs, admission of Japan

$2.5 billion in tariff reductions

Dillon, U.S.

September 1960(11 months)

Tariffs Tariff concessions worth $4.9 billion of world trade

Kennedy, U.S.

May 1964(37 months)

Tariffs, Anti-Dumping

concessions worth $40 billion of world trade

Tokyo, Japan

September 1973(74 months)

Tariffs, non-tariff measures, "framework" agreements

Tariff reductions worth more than $300 billion achieved


Name Start Subject Covered Achievement

Uruguay September 1986(87 months)

Tariffs, non-tariff measures, rules, services, intellectual property, dispute settlement, textiles, agriculture, creation of WTO, etc.

The round led to the creation of WTO, and extended the range of trade negotiations, leading to major reductions in tariffs (about 40%) and agricultural subsidies, an agreement to allow full access for textiles and clothing from developing countries, and an extension of intellectual property rights.


Name Start Subject Covered Achievement

Doha November 2001 Tariffs, non-tariff measures, agriculture, labor standards, environment, competition, investment, transparency, patents etc.

The round has not yet concluded. Bali Package signed on the 7th December 2013.

GATT Principles

• The most-favored-nation principleMembers of the WTO offer all other members their most favorable tariff rates.

• National treatment principleOnce a product, intellectual property right or service enters a foreign market, it must receive the same treatment given to domectically produced goods, services and intellectual property rights even though it can be treated differently at the time of importation.

• Transparency principleProhibits a country from making its import standards and requirements secretive. It also precludes a country from constantly changing import requirements without reason.

CaseGeorge E. Warren Corp. v. U.S. Environmental Protection

Agency

A rule promulgated by the Environmental Protection Agency (EPA) regulates emissions from conventional gasoline for motor vehicles and changes the way importers and foreign refiners of conventional gasoline sold in United States had been treated under the prior rule. In 1994 the EPA announced standards for setting individual baselines under which domestic refiners, foreign refiners and importers were all treated differently. Domestic refiners were each required to establish an individual baseline because the EPA determined they have adequate and reliable data with which to do so. Each importer was permitted to establish an individual baseline, but because they generally lacked the data to do so, importers we in practice assigned the statutory baseline.

Case: George E. Warren Corp. v. U.S. Environmental Protection Agency

Case highlights:•GATT’s national treatment principle requires that individuals and firms of foreign countries are given the same competitive opportunities, including market access, as are available to domestic parties (anti-discrimination)•International agreements prevail over conflicting national statutory mandates•Federal regulatory agencies may weigh different factors (such as international commitments) when rendering to a situation with international ramifications and a purely domestic one.

WTO (World Trade Organization)

• An organization for trade opening• A forum for governments to negotiate trade agreements• A place for them to settle trade disputes• Operates a system of trade rules• Essentially, the WTO is a place where member governments try to sort out

the trade problems they face with each other.

Fact File:Location: Geneva, SwitzerlandEstablished:1 January 1995Created by: Uruguay Round negotiations (1986-94) Membership: 164 countries on 29 July 2016 Budget: 197 million Swiss francs for 2014Secretariat staff: 634Head: Roberto Azevêdo (Director-General)

Source: https://www.wto.org/english/thewto_e/whatis_e/who_we_are_e.htm

Functions of WTO

• Administering WTO trade agreements• Forum for trade negotiations• Handling trade disputes• Monitoring national trade policies• Technical assistance and training for developing countries• Cooperation with other international organizations

Source: https://www.wto.org/english/thewto_e/whatis_e/who_we_do_e.htm

user1

The WTO agreements cover goods, services and intellectual property. They spell out the principles of liberalization, and the permitted exceptions. They include individual countries’ commitments to lower customs tariffs and other trade barriers, and to open and keep open services markets. They set procedures for settling disputes. These agreements are not static; they are renegotiated from time to time and new agreements can be added to the package. Many are now being negotiated under the Doha Development Agenda, launched by WTO trade ministers in Doha, Qatar, in November 2001.

user1

While the WTO is driven by its member states, it could not function without its Secretariat to coordinate the activities. The Secretariat employs over 600 staff, and its experts — lawyers, economists, statisticians and communications experts — assist WTO members on a daily basis to ensure, among other things, that negotiations progress smoothly, and that the rules of international trade are correctly applied and enforced.

user1

WTO agreements require governments to make their trade policies transparent by notifying the WTO about laws in force and measures adopted. Various WTO councils and committees seek to ensure that these requirements are being followed and that WTO agreements are being properly implemented. All WTO members must undergo periodic scrutiny of their trade policies and practices, each review containing reports by the country concerned and the WTO Secretariat.

user1

The WTO agreements cover goods, services and intellectual property. They spell out the principles of liberalization, and the permitted exceptions. They include individual countries’ commitments to lower customs tariffs and other trade barriers, and to open and keep open services markets. They set procedures for settling disputes. These agreements are not static; they are renegotiated from time to time and new agreements can be added to the package. Many are now being negotiated under the Doha Development Agenda, launched by WTO trade ministers in Doha, Qatar, in November 2001.

user1

WTO agreements contain special provision for developing countries, including longer time periods to implement agreements and commitments, measures to increase their trading opportunities, and support to help them build their trade capacity, to handle disputes and to implement technical standards. The WTO organizes hundreds of technical cooperation missions to developing countries annually. It also holds numerous courses each year in Geneva for government officials. Aid for Trade aims to help developing countries develop the skills and infrastructure needed to expand their trade.

user1

The WTO maintains regular dialogue with non-governmental organizations, parliamentarians, other international organizations, the media and the general public on various aspects of the WTO and the ongoing Doha negotiations, with the aim of enhancing cooperation and increasing awareness of WTO activities.

WTO AGREEMENTS

• Agreement on The Application of Sanitary and Phytosanitary Measures (SPS)Promoting international standards for import restrictions aimed at protecting human, animal and plant life, health.

• Customs Valuation CodeTo standardize country challenges to the valuations placed on goods being imported.

• Agreement on Preshipment InspectionPertains to an importing country’s right to preshipment inspection.

• Agreement on Import Licensing ProceduresBased upon the principle that application procedures should be mase as simple as possible. The work on developing uniform Country of Origin Rules is ongoing and should be monitored in the future.

Antidumping Procedures

The most common trade violation is the dumping of goods on foreign markets.•Dumping or price discrimination

When a foreign exporter sells goods below what it sells them in its home country of below the cost of production. The lower pricing may be the result of an illegal subsidy given to the exporter by its home country.•U.S. Tariff Act of 1930

Under it, a subsidy occurs when a foreign government authority “provide a financial contribution, any form of income or price support, makes a payment to a funding mechanism to provide a financial contribution or entrusts or directs a private entity to make a financial contribution.” U.S manufacturers can petition the Department of Commerce (DOC) to place antidumping duties on such imports.

Antidumping Procedures

• GATT’s Code on Subsidies and Countervailing DutiesIt allows such duties when the importing country can prove that the subsidy would cause injury to a domestic industry.

• Antidumping dutyIt is considered the last resort in protecting domestic industries from unfair foreign competition.

• U.S. International Trade Commission (ITC)ITC must be persuaded that dumping threatens to cause material injury to U.S. industry:

1) Sales lost to imports at “less than fair value”2) Suppression of export prices through underselling3) Lost profits4) Reduces product development abilities5) Declining sales6) Magnitude of dumping margin

Antidumping Relevant Regulation: Section 301 and Section 337 on the Tariff Act

• Section 301Provides a means to counter a broad range of unfair foreign practices, including discriminatory rules of origin, discriminatory government procurement, licensing systems, quotas, exchange controls, restrictive business practices. Discriminatory bilateral agreements, taxes that discriminate against U.S. products, and discriminatory product standards.

• Section 337Provides for relieve to be given by the International Trade Commission for “unfair methods of competition” in the important or sale of imported goods. It is commonly used to prevent the import of illegal pirated or counterfeited grey market goods.

Future of Multilateral Trade Negotiations

• Millenium RoundIt was preceded by weeks of protests and riots in Seattle, December 1999 against the WTO, included public interest, environmental, consumer and labor groups.

• Initial aim of Groups1) Labor groups protested alleged dumping for foreign

products, a lack or international labor standards and the movement of production to countries with lower standards.

2) Environmental groups have accused the WTO for not considering the environmental impacts of its decisions.

3) Consumer and public interest groups protested the WTO’s failure to give safety priority over trade.

Future of Multilateral Trade Negotiations

“To suggest a path toward barrier-free world trade that is compatible with the sustainable development, environmental protection and respect for human rights to which the international community is nominally committed but which it casts aside —or appears to— whenever they conflict with expanded commerce.”

Source: Stephen L. Kass & Jean M. McCarroll, “Having It All: Trade, Development, Environmental and Human Rights”, New York Law Journal, (May 5, 2000)

Key Terms

• Agreement on Import Licensing• Agreement on Preshipment Inspection• Agreement on the Application of Sanitary and Phytosanitary

Measures (SPS)• Agreement on Trade-Related Aspects of Intellectual Propery

Rights (TRIPS)• Binding commitments• Cease and desist order • Code on Subsidies and Countervailing Duties• Countervailing subsidy• Countervailing duties• Country of Origin Rules• Customs Valuation Code

Key Terms

• Dispute Settlement Body• Dumping• Europe Agreement• European Union (EU)• General Agreement on Tariffs and Trade (GATT)• General Agreement on Trade in Services (GATS)• Impairment• Millenium Round• Most-favored-nation principle• National treatment principle• North American Free Trade Agreement (NAFTA)• Partnership and Cooperation Agreement• Regional Goods

Key Terms

• Snapback provision• Subsidies• Substantial Provisions• Subsidies• Substantial transformation• Suspension• Tariff Act on 1930• Transparency Principle• U.S. Trade Representative (USTR)• Uruguay Round• World Trade Organization (WTO)• WTO Dispute Settlement Understanding (DSU)• WTO Panels

Main References

• Larry A. Dimatteo, The Law of International Business Transaction, 2003, USA: Thomson South Western

• Yose Rizal Damuri, ASEAN Economic Community: Maintaining Momentum, The Jakarta Post Outlook 2016

• Stephen L. Kass & Jean M. McCarroll, “Having It All: Trade, Development, Environmental and Human Rights”, New York Law Journal, (May 5, 2000)

• www.wto.org