International Trade Law Notes PDF

lOMoARcPSD|43963026 International trade law appunti di lezione International And European Trade Law (Università degli Studi di Siena) Scan to open on Studocu Studocu is not sponsored or en...

lOMoARcPSD|43963026 International trade law appunti di lezione International And European Trade Law (Università degli Studi di Siena) Scan to open on Studocu Studocu is not sponsored or endorsed by any college or university Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 INTERNATIONAL AND EUROPEAN TRADE LAW 4/03/21 International legal order à has interns. Legal persons are different from domestic ones à has its own sources à intern responsibility different from domestic judicial system Public international law à applies to States and sometimes to individuals (criminal law) and regulates relationships between states in international treaty State law à applies to private national persons à applies to persons with relationship with the State (he/she is located/work there) Private international law (conflict of laws) à regulates issues with foreign citizens that have problems with State private law. To solve them it is like for trade law, you have to find the type of law that fits better Public ≠ Private The topic of this course is public law Legal persons à international law has legal persons STATES: o independent structure (juridical system and organs) “nobody over me” o Must exercise effective powers (they must be recognized and be able to enforce them) INTERNATIONAL ORGANIZATION, must have the same characteristics as states a) EU b) WTO Recognized 70 years ago (Bernadette case) INDIVIDUALS/GROUPS OF INDIVIDUALS = international, criminal law (torture, genocide,..) If I commit a crime, I respond on my own Sources of Law (those made by states) 1) Customary law= binding for all states “erga omnes” a. No written norms (just a few). They must be: i. Diuturnitas (consuetudine)= repetition of a conduct ii. Opinion juris = assumption that is an obligation Example: free sea from 12 miles from the cost of a state 2) Treaties = convention, pact, government a. Can be written or oral ( written preferable) b. Binding only for the parties (bilateral/multilateral) c. Procedure= entry into force-valificationà domestic act that makes the treaty entry into force for the party Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 3) Acts= deriving from the treaty a. Binding if the treaty says so: i. UN Security Council Resolutions ii. EU regulations, directives, decisions Regulations= binding for states and their nations directly applicable, binding in its entirety ( it says who and what must be done) Directives= only binding for States, they can decide how to achieve results Decisions= binding on those to whom it is addressed and directly applicable International law international organizations States= we need it to enforce in domestic legal systems Dualism between international and domestic law Incorporation= - directly-norm referring to international law (i.e. article 10 Italian constitution on Customary Law) - indirectly-adaptation of specific domestic acts for specific international investments Hierarchy= which law prevails? It depends on the situation Consequences at international level Domestic level International responsibility Subjective element à who? Affects international legal persons= State, organs (WTO, EU) Private persons à depends if they on behalf of a “de facto” state (EFFECTIVE CONTROL DOCTRINE: duty to prevent illicit conducts, duty to repress illicit conducts) Objective element à wrongful act= breach of an international law/norm No reason of preclusion if: - consent - force measure - necessity - self-defense= subsequent reaction consequences= - REPARATION: restitution (re-establish) Compensation Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 - UNILATERAL ACTS (adopted just by one state): reprisal (self-defense) Countermeasure (unilateral sanction) 5/03/21 International law is the result of the will of states. INTERN. DESPUTE SETTLMENT = states are judged on: - Voluntary basis (states can deny the jurisdiction of an intern. Judge that they don’t accept) - Binding or non-binding means à usually they are not binding, if a State doesn’t like the solution they can decline it - Bilateral disputesà the disputes affect 2 states, one against the other. They are not effective to solve all the problems - Diplomatic or judicial meansà diplomatic= means in which states are free to choose the most appropriate solution Voluntary basis - Broad freedom of states (ICJ) à to use its jurisdiction states must accept its power, otherwise the court cannot exercise its power - Compulsory means, but freedom to choose fora (UNCLOS= United Nations Convention on the Law of the Sea) There is a double choice: states may choose at the beginning the means they want, but they are obliged to choose it - Compulsory means (ECJ, WTO) Bilateral disputes A dispute between two states There are some cases in which a bilateral solution is not enough, for example the case of climate change because you cannot assert precisely who is the victim. Non-compliance procedures applies in those cases in which a bilateral dispute is not possible, when the state victim is not possible to identify. (used for the first time at the Montreal Protocol to the 1985 Vienna Convention on the Protection of the Ozone Layer) It’s a sort of a collective activity to help a state that cannot comply with the standards of the convention to achieve them. Diplomatic means vs judicial means (both used to solve bilateral dispute) Diplomatic means: they do not use laws, they try to balance the different interests among states. So, they try to find a solution through: - Consultation - Mediation à there is the participation of a third party, usually a powerful authority in the community Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 - Conciliationà it’s up to the parties to choose the conciliator, usually performed by a group of people appointed by the parties. They do NOT base the settlement on legal principle N.B. all these instruments do not lead to a binding decision, so the parties are free to deny the results of the consultation, unless they sign a treaty, at that point the settelment is binding. Judicial means: Really rare - Arbitration à free to choose the law to apply and the judges, BUT at the moment that a final decision has been taken it’s binding - International adjudication à we mean all the international tribunal, courts,.. that have been permanently established (WTO, ECJ). The fact that they are permanent organs do not mean that they have the power to judge states, in fact states can deny the decisions of these organs. But when they achieve the FINAL decision, this one is binding. FROM THE EEC TO THE EU EUROPEAN COMMUNITIES 1951à ECSC = European Community on Coal and Steal. The treaty established in this community provided a deadline, it could last for 50 years in fact in 2001 it disappeared. The most important moment that strengthen the collaboration between these 6 countries was the establishment of two further communities: 1957à EEC= European Economic Community 1957à EURATOM= European Atomic Energy Community 1965à MERGER TREATY= these European communities should have single organs, so they worked all together towards the European unification 1966à LUXEMBOURG ACCORD= every time that an issue discussed in the community was a vital issue for a single state all decisions should be made in unanimity. The problem is that you cannot take many decisions 1986à SINGLE EUROPEAN ACT= reorganized the former Luxembourg accord and majority vote was introduced The main changes were implemented by the ECJ 1992à MAASTRICHT TREATY= reorganized the European community treaty and lead to 2 further treaty the EC treaty and the European Union. We heard for the first time the political concept of European union citizenship THREE PILLARS OF THE EU 1) The EC pillarà internal market, so removal of the barriers to freedom of movement, people, services and money 2) The common and security policy pillar à political relations with third states 3) The justice and cooperation in criminal matters pillar. a. Cooperation in the fields of terrorism and drug trafficking b. Cooperation between domestic judicial bodies 1997 AMSTERDAM TREATY à it reorders all the other treaties 2000 NICE TREATY à EU Charter of Fundamental Rights 2007 LISBON TREATYà established the current conditions of the EU Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 - EU Treaty - Treaty on the Functioning of the European Union (TFEU) it includes all the norms that were in the European community treaty It gave birth to TWO INTERNATIONAL ORGANIZATION - EU - EURATOM ARTICLE 13 EU TREATY - European Parliament, elected by people - European Council, it’s the organ which decides the political goals and decide according to unanimity. - Council of the European Union (the Council) they are considered for the state they represent - European commission à it’s an organ of individuals, but they do not represent their country of nationality, but they represent European union - European Court of Justice - European Central Bank - Court of Auditors à the organ that supervises the lawful activity of inflows and outflows. And it has also the competence to asses the approprietness of choice EU INSTUTIONS INTERGOVERNAMENTAL ORGANS à they are made of representatives of the states that act in interest of each state INTERNATIONAL ORGANS à in which each member of these organs act in the interest of the European union EU OTHER ORGANS - High representative of the European union for the foreign affairs and security policy - European ombudsman à can just submit reports - Committee of regions à made of people that are choosen and sent by states and represents the different regions of European unions EU SOURCES OF LAW - EU Treaties - General Principles of Law - International Agreements à means the agreement that the EU signs with the other states - Acts deriving from the EU Treaties o Regulations – binding o Directives o Decisions LEGISLATIVE PROCEDURES - Ordinary procedure – Codecision o Council and Parliament à the council brings the voice of states and the parliament the voice of EU people. The act cannot be adopted if one of these organs do not agree Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 - Special Procedure – when required by the treaty o Unanimity without parliament o Qualified majority, non-binding opinion of the Parliament DUALISM BETWEEN EU AND STATE LAW - SUPREMACY o Costa v. Enel Case o Simmenthal Case o Solange I and II Case - DIRECT EFFECT o Van Gend & Loos o Horizontal and Vertical Effect What is prevalent? EU law or Italian Law? It depends from the point of view. - Initially they thought that Italian law should have prevailed over ECC law - Then the EU assessed that they should set aside law that do not comply with the Italian one, but this is impossible in Italy, because it can only be abrogated by the intervention of the Parliament. European Law should prevail over Italian law. Italian judges must apply EU laws always. If there is an Italian statute that is in conflict with European law must set aside. However, this Italian statute remain in force, because the only way to abrogate the statue is to adopt a new statute on behalf of the Parliament or to declare it unconstitutional. S1/S2/… are states Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 11/03/21 FUNCTIONING OF THE EUROPEAN UNION LEGAL SYSTEM European Court of Justice is the organ that has the main task of ascertain the way European law is applied throughout the EU. LEGAL ACTIONS: Were already established in the EEC - Infringement procedure à is the procedure according to which the ECJ may ascertain whether or not a European MS has violated or not EU Law. EU Commission can bring an action before the court, but the Commission must and can also investigate on the conduct of the MS. At that point the Commission, upon discretion, can decide whether or not bring the case before the ECJ. Another possibility is that another MS bring an issue against another MS. This is the only legal action that can be brought against a member state. For example, is not possible for a private person to bring an action. - Review of legalityà is the procedure of the legality with which European legal acts should be ascertained. Legal acts are subjected to a review of legality by EU Organs, States and private persons. Obviously, the power of private person is very limited, in fact they can bring an action against an act if it affects directly the person, so, it must be possible to identify the specific person (it means they must know the exact name, Plaumann example). - Failure to act à this is the opposite case with respect to review of legality. It is when an organ of the EU should have acted but it didn’t. The failure to act is the action that claim that an organ of the EU did not what it should have done. It can be brought by EU Organs, States or private persons. - EU Extracontractual Liability à when the EU performs an act that breaches the right of a State or a private person, in that case the private person can bring an action for extracontractual liability. The breach of law must be a really serious one and comply with the responsibilities and competences of the EU. - Preliminary Ruling à it means that a private person that has a dispute of domestic law can rise a breach of EU law and then the domestic judge can then decide to bring this action to the ECJ. This domestic judge is the “final instance judge” (corte di cassazione). Then the ECJ will ask to the question raised by the final instance judge in a very general way. They can just interpret it or ascertain the legitimacy of the EU act. This is the most powerful instrument in the hand of the ECJ. ATTRIBUTION OF COMPETENCES Since the EU is an international organization, the competences are based on: - The principle of attribution= the EU has only the competences that the MSs recognize to it. The EU can adopt acts only on the matter of its competence. Its competences are divided into: Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 Exclusive competences Shared Competences= shared with EU MSs. It can adopt these acts Only if MSs do not act. shared Competences can happen only For the Principle of Subsidiarity + Support, Coordination or Supplement Competences = adopt optatory acts, which means invite states to adopt specific principles. FUNCTIONING OF THE WTO From GATT to WTO 1947 à General Agreement on Tariffs and Trade (GATT) 1945 US initiative, at the end of WW2 wanted to establish an instrument to regulate international trade 1947 Protocol of Provisional Application 1947-1961 à Five Rounds on Reduction of Tariffs, international conferences that lasted for a certain period of time. The first round had the purpose to abolish tariffs 1964-1967à Kennedy Round on Non-Tariff Barriers, non-tariff barriers are for example quantitative restrictions. 1973-1979 à Tokyo Round on Non-Tariffs Barriers and Dispute Settlement 1986-1994 à Uruguay Round WTO WTO Agreement Multilateral Agreements à GATT 1994, GATS (trading services) Plurilateral Agreements WTO FUNCTIONS - Facilitating the implementation of the WTO agreement - Providing a forum for negotiations. WTO it is a permanent structure so a forum to negotiate further obligations is needed. - Administering dispute settlement - Administering the Trade Policy Review Mechanism, it’s particularly important because it takes place in a permanent manner. It must ascertain if the state breaches the obligations because it wants to take advantage with it or because it cannot because it has internal problems. In this case they must provide the state a solution (usually happens for developing states) - Cooperating with the IMF and the WORLD BANK (achieving greater coherence in global economic policy making). Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 WTO MEMBERSHIP 164 members o States and Non-States (EU) o EU art IX(1) WTO Agreement Accession o WTO Members examine Applicant’s Report o Bilateral negotiations between single WTO Members and the applicant o Drafting of a Protocol of Accession. It’s a document in which you find all obligations and rights affecting all specific member states o Final decision of the WTO Members, the existing members decide to accept the new members If a member wants to leave WTO, it can by means of article IX (3) WTO ORGANS § Ministerial Conference (Decision-making Power) = it’s the conference of all WTO members at a very high level and this is the organ that takes decisions. It’s not permanent § General Council = implements the WTO obligations. It’s made of representatives of States § Trade Policy Review Body General Council § Dispute Settlement Body § Specialized Councils, they are made of representatives of states and they supervise specific fields like trade and services (GATS) and intellectual property rights (TRIPS). They analyze technical issues rather than technical ones § WTO Secretariat and Director General = both they perform a secretarial and technical support with members, developing countries, third countries and media WTO FUNCTIONING - Intergovernmental character o Consensus, it’s like unanimity but more flexible. There must be the general agreement of all the members o Ministerial conferences for negotiations - Supranational character o Trade policy review o Technical assistance to developing countries Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 18/03/21 Il 25 non c’è lezione!!!!! Il 26 spiega i seminar WTO SUBSTANTIVE RULES We now analyze to content of the WTO’s decisions. Among the various agreement the most important one is the 1994 GATT. The WTO agreements do not obligate the countries to do something, but they are mainly aimed at facilitating international trade. What facilitate international trade is the abolition of the barrier which prevent international trade. The rules used on this purpose are very general. The most important principle used are: PRINCIPLE OF NON-DISCRIMINATION à prohibition of differential treatment among the products of different states part of the WTO. This is done to prevent that all good are commercialized in the same manner. There are two manners: - State A favors State B, without giving the same advantage to state C. this is the case that WTO wants to prevent (Most Favored Nation Principle MFN). It is included in the first article of GATT. This art. Only applies to measures that are adopted by state and may affect the import and export. There are also other types of measures that affect imports and exports and are rules and formalities. Art. 1 requires that the State who is ensuring and guaranteeing an advantage to a state, does it also for other states immediately and unconditionally. - Discrimination can happen also within one legal system and can affect the trade operators of the state and also of another state. The main victims are private. (National Treatment Principle NT). a state is obliged to treat foreign operator in the same way it treats its operators. A private company cannot invoke WTO norms against a state which is treating this private operator. What are the domestic rules that may breach the obligation of Most Favored Nations? We must define some terms first: (FAQ!!!) - Measures - Advantage - Like products - Immediately and unconditionally accorded MEASURES What are the measures that are relevant in order to ascertain whether a state has violated or not the Most Favored Nation Principle. Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 The WTO obligations apply according to the traditional norms of breach, so when there is a claim of a state against another (with State we intend any public organ like regions, municipalities, etc.) these measures must be state measures so they must derive from a public authority. TYPES OF MEASURES measures - Custom duty Border - Charge à all the payments and extra payments that are asked with respect to a foreign product - Method of levying à the method in which duties or tariffs must be paid measures Internal - Rules and formalities Border measures are the rules applied when an object cross the boarders of a State. Internal measures are when the foreign good is within the borders of a state. It’s necessary that the effect of the measure has a discriminatory effect - De Facto Discrimination (FAQ) à in this case law is apparently neutral and it’s seems like is not going to affect the state, but in the end it does. It’s a different treatment of foreign products which exclude from the market some state. It happens when a domestic norm is applicable to all state, but it excludes one. For instance, it could be the case of a state which decides to establish a lower duty with respect to a product, for example, chocolate produced with mountain milk and chocolate produced with normal milk. Apparently, there’s not a discrimination, but if a country does not have mountains, it is subjected to a discrimination because it cannot have lower duties. - De Jure à a discrimination done by law - No Subsidies to Domestic Production à the most favorite nation principle cannot be applied with regard to the subsidies recognized to domestic production. If there is the recognition of a special treatment with respect to the product of a third state, it cannot be subject to the principle of MNP. - Modification of competitive opportunities à a measure is considered in breach of most favored nation principle if it modifies the competitive opportunities of other states. ADVANTAGE An advantage means a privilege, a better treatment with respect to another, but it also means an immunity, because it may come as a negation, for example, to not be subject to a certain tax. The advantage may occur in different form, the appellate body defined it as any treatment that ensure more favorable competitive opportunities for a product with respect to another. Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 There must be a balance in advantages. What is important is also the fact that some state affirms that they damaged another state because they claim that this one had other advantages but is not possible to use this kind of justification. LIKE PRODUCTS (FAQ) The concept of like products is different with respect to different fields. We now analyze it with respect to trade in goods. - Similar characteristics à like external characteristics, we must ascertain how similar must be two products to be considered like products? - Extent of similarity - There are criteria for assessing similarity: o Physical characteristics o End-use à the final purpose or use o Tariff regimes à to which a product is subject. There are some products that are classified with the tariff they are subjected. - Consumers’ tastes (competitive relationship)à are also relevant - No presumption of likeness à you cannot assume, without ascertaining in concrete, that two products are like products This ascertainment must be performed on a case by case, it cannot be done in general. IMMEDIATELY AND UNCONDITIONALLY These are the manner of how state should implement the non-differentiate treatment between two products. - Immediatelyà means instantly, it’s not possible to wait. - Unconditionally à no conditions are allowed; a state cannot put reservations. - Not necessary to ascertain: o Actual negative effects on trade à. You’re obliged to treat products in the same way. o Discriminatory intent à even if it wasn’t on purpose it can still be considered a breach of most favored nation - Potential advantagesà it includes the potential positive situations that may derive from an advantage EXCEPTIONS ENABLING CLAUSE 1979 à Decision on Differential and More Favorable Treatment, Reciprocity, and Fuller Participation of Developing Countries. This long name now has been substituted with “enabling clause”. It is the exception that allows developing countries or better to say the products of the developing countries to be treated in a preferential manner. This treatment occurs notwithstanding the existance of art.1 of the GATT. - This norm affirms the intent to breach art.1 of the GATT and Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 - ensure better tariff for developing states. - Aimed at promoting trade, in particular within developing countries, not to raise barriers - No impediment to the Reduction of Tariffs, because it should not go against the principle of MFN. - Possibility of Modification - Procedural conditions à in order to control these measures, the WTO agreement added the obligation to provide a notification to the WTO that they are adopting such measures. - Additional Preferential Treatments in favor of some Developing Countries – legitimate if available for all Developing Countries in a similar situation It’s a way to protect developing countries, without worsening the position of the other states. MFN AND TRADE IN SERVICES Art. II (1) GATS (General Agreement on Trade in Services) “With respect to any measure covered by this Agreement, each Member shall accord immediately and unconditionally to services and service suppliers of any other Member treatment no less favorable than that it accords to like services and service suppliers of any other country” MEASURES A measure is an act of a state, which can be: - Any law, regulation, more practical activities like procedure or administrative action - State Measures including Local Authorities - Professional Associations’ Regulations if regulations are recognized by the State - Affecting trade in services: purchase, payment, use, services relating to goods - No supplied in the exercise of the governmental authority, these services are not considered measures because their goal is not to provide a competitive advantage to the state. Usually, they are public services, but not all of them for example public transport. 19/03/21 SERVICES AND SERVICE SUPPLIERS Definition of trade in services à this definition is not provided by the GATT. Generally, we can say that is any activity that is not the selling of goods. A possible definition can be the one of forms of supplying: 1. Cross-border supply à the service supplier moves to a third country in order to provide a service 2. Consumption abroad à the customer goes towards the service (for example if you get a medical treatment in another state) 3. Commercial presence à for example a lawyer that establishes a secondary office in another country Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 4. Presence of a Natural Person à a company that sends an employee to a third country in order to provide a service To these four categories it has been added another one which is the one in which nobody moves, neither the customer nor the service. This is the case of telecommunication services. EXEMPTIONS There are some types of services that may be excluded from the most favor nations and provisions of WTO and they were established before the entry into force of GATS. So, before the 1994 agreement, member states were allowed to adopt some exemptions in order to avoid that some measures they adopted in regard with trading services were covered by the GATS and by the MFN principle. All these exemptions are listed in an Annex which is part of the GATS agreement. - They have a temporary nature - Managed by the council on trade in services à is a specialized council that has very specific competences, but it doesn’t have a strong power, they just supervise. - Activities performed between adjacent countries à for instance US and Canada and in this case the MFN principle can be disapplied LIKE SERVICES AND LIKE SERVICE SUPPLIERS The lack of definition of services is reflected also in the definition of like services. In order to ascertain like services, we need: - To perform a case-by-case analysis à due to their difference with goods, which are easier to compare. - Art. 2 of the GATS gives an overall definition of like services and suppliers à we should also compare the person performing that activity, not just the activity. - Criteria for assessing likeness à they may resemble the one to compare goods, but they have different characteristics. - Presumption of likeness when the measure is based exclusively on the origin. Presumption is a mental reasoning in order to ascertain the likeness of two services just because they belong to the same state. This kind of presumption cannot be done with respect to goods. CRITERIA FOR ASSESSING LIKENESS - Characteristics à the differences between two services that are similar are more with respect to two similar goods. The characteristics that we must take into account are also the one of the suppliers. - Consumers’ preferences à they might be really different - Tariff classification à the most objective criteria. If two services belong at the same tariff category in the WTO system, they can be considered like services. Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 NO LESS FAVORABLE TREATMENT When two services are considered like service, they are treated the same, as it is written in art.2 of the GATS. A country must immediately and unconditionally comply with a no less favorable treatment. The no less favorable treatment is a wide concept due to the fact that services are more difficult to define, so even the state behavior that may affect services vary and all of them must be taken into account. What is important to ensure that a service is no less favorable in comparison to a like service? - The treatment must comply with the same condition of competition between services of different countries à modification of the conditions of competition, if there’s a modification of the conditions of competition that measure is in breach of the GATS - De jure and De facto discrimination in order to demonstrate that two like services are treated in a different manner, it is not necessary to demonstrate that the manner provided for the different treatment is unlawful. There’s no need to demonstrate: - Illegitimate purpose Not possible to use it as a discrimination - Discriminatory intent reasoning, because they do not produce effects § Treatment defined out of exemptionsà if there’s a differentiate treatment you must accept it § Regulatory aspects are excluded à states are free to establish some regulatory aspects EXCEPTIONS (FAQ) Exceptions are new limits that may be established by the GATS or following the enter into force of the GATS. For example, a new exception was introduced in 2011 (Geneva Decision). This decision is called the LDC Services Waiver (LDC= least developed countries). It allows a special treatment for least developed countries; these regulations are excluded from the GATS. it’s not possible to establish permanent measures, they are just temporary. A further exception to the principle of the MFN is provided in art. VII of the GATS and concern recognition. - Recognition of certificates of education or experience à states are free to prefer a state with respect to another - Agreements or autonoms decision - Affording access to the treatment if requirements are met - Prohibition of discrimination Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 NATIONAL TREATMENT PRINCIPLE (NT) This principle is aimed at protecting foreign products from the protectionism approach of some states. We will analyze this principle with respect to both goods and services. This principle is envisaged in Art. III (1) of the GATT, in a very general manner: “the contracting parties recognize that internal taxes and other internal charges, and laws, regulations and requirements affecting the internal sale, offering for sale, purchase, transportation, distribution or use of products in specified amounts or proportions, should not be applied to imported or domestic products so as to afford protection to domestic product” Art.3 is really general, from paragraph 1 we can find some main features of how the WTO and the GATT wants to prevent the discrimination between domestic and foreign products There are two fields: Taxation or regulation of all Internal measuresà measures adopted by a products (including those state, or measures that affect a product when it covered by concessions) crosses the boarder of a state (par.3) The national treatment principle only applies to state measures that apply in the territory of a state, not on the boarders. All foreign products are covered by Art.3 par.1 No protection of domestic production INTENRAL TAXATION Art. III (2) of the GATT: (FAQ) “The products of the territory of any contracting party imported into the territory of any other contracting party shall not be subject, directly or indirectly, to internal taxes or other internal charges of any kind in excess of those applied, directly or indirectly, to like domestic products. Moreover, no contracting party shall otherwise apply internal taxes or other internal charges to imported or domestic products in a manner contrary to the principles set forth in paragraph 1” We should into account the two different parts of this paragraph, that is divided into two sentences: - In the first sentence we deal with the issue of internal taxation of like products. Like products may not be subject to taxes that are in excess with respect do domestic products. There are three main features to identify whether or not a discrimination has occurred, and these features are: o Internal taxes or charges o Like products Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 o In excess of à the taxation of foreign product cannot be in excess with respect to the taxation of domestic product - When two products are not like products, the second sentence of par.II applies. The products are still subject to the rule of non-protectionism approach. INTERNAL TAX OR CHARGE The concept of taxation is defined as any form of tax which may affect the good and not the producer or supplier. For instance, income taxes are not covered. These payments may affect the procedure in which a payment must be performed, because the procedure may have a different impact with foreign or domestic producers. Tax and charges must be paid because the good is in the territory and they must be paid within the territory - Charges/Taxation à all the payment required for the commercialization of a product within the territory. - Direct or Indirect taxation àdirect taxation means that they affect the final product. Conversely, indirect taxation concerns the raw materials of which the good is made. (Art. III covers both) - Types of payments à the concept of charges does not cover all type of payments. For instance, art. III does not cover customs’ duty because it does not affect the good when is within the territory. LIKE PRODUCTS According to art. III par(2) first sentence, this definition is narrow. Two products may be considered like products only when they are perfectly substitutable àtwo products that may exercise the main function both in the views of states and consumers. CRITERIA: - Properties (including price) - End-useà some products that may seem similar have two completely different use - Consumers’ tastesà the preferences of consumers are very important to qualify and ascertain two products as like products - Tariff classification à if two products are in the same tariff category, they may be considered like products TAXED IN EXCESS Art. III(2) first sentence, we find the definition of taxes in excess. When two products are considered like products, they cannot be taxed in a way that foreign products are taxed in excess with respect to foreign product. But when the excess is relevant? - Any amountà there is not a specific amount in excess that makes a tax in breach of NT. The differentiation must be unlawful and unjustified to be in breach with NT - Methods of applicationà if the application of a tax provide that taxes must be paid in a specific office in the territory of the state that is applying the taxes, for a foreign producer this is a heavier burden with respect to a domestic producer Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 - De jure or De facto differentiationà de jure: discriminations that result from the norm, de facto: discrimination that arises from the application of a norm - Detrimental effectà it’s unnecessary, if the differentiate transaction does not provoke any damage to the trade of the foreign product, the correct application of the NT prohibits to apply taxation that is in excess - No balance with other taxes à it’s not possible for a state to establish a tax that is higher than the tax of the domestic product and then to provide some advantages for the foreign product in order to compensate the former excessive tax. Like products must be treated almost in the same manner. INTERNAL TAXATION OF COMPETITIVE PRODUCTS Art. III par.2 GATT Second Sentence “…moreover, no contracting party shall otherwise apply internal taxes or other internal charges to imported or domestic products in a manner contrary to the principles set forth in paragraph 1” NOTE Ad Art.III(2) “A tax (is) consistent with the second sentence only in cases where competition was involved between the taxed product and a directly competitive or substitable product which was not similarly taxed.” When two products are not like products, they are regulated by the second sentence of Art.III par.2. there is no definition of the products included in sentence two and this is quite important, because not all products can be included in this definition. These products, however, must have a sort of similarity and this degree of similarity is defined in the note to Art. III(2). The characteristics are: - Same internal taxes or charges - Competitive products - Dissimilar taxation - Contrary to the principles of par. 1 (no protection of domestic production) DIRECTLY COMPETITIVE OR SUBSTITUTABLE PRODUCTS In order to ascertain when the second sentence of par.2 must be applied, we must define the concept of directly competitive or substitutable products. Here, the concept of substitution is not perfect and it’s quite broad. These products can be both competitive and substitutes à while like products are also substitutable products, not all substitutable products are like products. As for the competition of two products, we must take into account any degree of competition. There are several criteria to take into account, but we should analyze case-by-case before assessing if they are really concretely or potentially competitive products. The criteria are: - Competitive relationship - Channels of distribution - Characteristics Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 - End-use - Consumers’ tastes - Tariff classification - Internal regulations DISSIMILAR TAXATION In order to apply the second sentence of art.3 par.2 of the GATT, it is necessary that two competitive products are treated in a different manner or, more exactly, they should not be similarly taxed. How is possible to ascertain this similarity? In this case, we should ensure an almost equal treatment, not an absolute equal treatment because the products are not perfectly substitutable. In order to ascertain if two products are treated in a dissimilar manner, is necessary to: - Determined on a case-by-case basisàany situation may require ascertaining whether the competitive relation is damaged by the intervention of the state - De Jure and De Facto differentiation - Less strict than “in excess of”à difference with the first sentence of art.3 par.2 PROHIBITION OF THE PROTECTION OF DOMESTIC PRODUCTION The measures applying taxes with respect to foreign products cannot be in contrast with principle set forth in par.1 Art.3, which recognizes the principle of NT. It is possible that a measure that apparently is not discriminatory, could favor domestic production with respect to foreign one. This measure may be considered in breach of sentence two of Art.3 par.2 and so in breach of the principle of NT. It’s not relevant to look at the intent of states, what is relevant is the effect that is produced. States are not obliged to guarantee the same treatment to foreign products, but they have at least to ensure that this treatment is consistent with the principles envisaged in Art.3 par.2 - Structure of domestic measures - Application of domestic measures - No detrimental effect required - No protectionist intent required INTERNAL REGULATIONS Internal regulations are defined in Art.3 par.4 of GATT. Paragraph four affirms that foreign products must be treated not less favorably than like domestic products. The concept we have to define are: - Regulations - Like products - No less favorable treatment Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 REGULATIONS First of all, it is necessary to define regulations, which are the domestic measure that may be affected by paragraph 4 art.3 of the GATT: § State Measuresà measures of central and local authorities. These measures may be very different and concern: - Minimum price - Advertising - Distribution channel - Requirements § Private voluntary requirementsà rules used by private association. In this case, the possibility to consider these private measures as relevant for par.4 of art.3 of the GATT, is necessary that the state has approved these measures and the requirements that these measures provide for. § Tax measuresà they may affect sales of foreign products in two different manners, as regulatory measures or as normal tax measures. So, it can breach both par.2 and 4 of Art.3. it is possible to have a double breach of this norm. § Relevance of the regulatory intent à these measures are aimed at regulating the sales. If there’s a regulatory intent, it’s not considered a breach. LIKE PRODUCTS Even in these norms we have the definition of like products, but it’s a broader definition than in par.2. it has to include also products which are substantiable but not completely Competitive relationship Presumption of likeness is allowed. A domestic measure cannot discriminate two products just on the basis of the state of origin Criteria o Characteristics o End use o Consumers’ tastes o Tariff classification NO LESS FAVORABLE TREATMENT - Equal treatment is not necessary nor sufficient because you need to ensure the same competitive conditions that grant the same opportunities of domestic and foreign products. For this reason, it’s not enough for a state to justify its behavior by affirming that is applying the same provision, because the application of the same norm does not always result with the same effect. - What is necessary is the concrete or potential detrimental effect - It’s important also the genuine link between the measure and the effect, if this effect is limiting the competitive effect between foreign and domestic product, this measure can never be considered consistent with par.4 art.3 Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 DEROGATIONS TO THE NATIONAL TREATMENT PRINCIPLE Art.III is an article that ensure competitive opportunities of foreign products with respect to domestic product. It’s not a severe obligation which requires the equal treatment between domestic and foreign products. But there are situations in which the principle of NT is not applied, these are called derogations. - Derogations are provided for in art. III (8) into two separated subparagraphs: Paragraph 8(a): GOVERNAMENT Pragraph 8(b): SUBSIDIES PROCUREMENT “The provisions of this article shall not prevent the “The provisions of this article shall not apply to payment of subsidies exclusively to domestic laws, regulations or requirements governing the producers, including payments to domestic procurement by governmental agencies of producers derived from the proceeds of internal products purchased for governmental purposes taxes or charges applied consistently with the and not with a view of commercial release or provisions of this article and subsidies affected with a view to use in the production of goods for through governmental purchases of domestic the commercial use” products.” GOVERNMENT PROCUREMENT It’s the acquisition of a product for governmental purposes by a governmental agency and with the exclusion to resell this good for commercial purposes. The essential requirements that we have to look to envisage government procurement are: - Acquisition à more than acquisition we should look at the process to obtain product, which must be aimed at satisfying a public interest - Governmental agency à performs the public interest - Competitive relationship à the products object of the government procurement is the one that have a competitive relationship with foreign products - The action taken by the state must have a governmental purpose à the acquisition of product directly by the government can be justified by governmental reasons, for example the purchase of weapons - It’s important that the state does not resell these products for commercial purposes or use them as raw materials to produce other goods. Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 SUBSIDIES (art. III(8)(b)) Subsidies are only the financial contribution by a government to a private producer which confer benefit (definition found in the “subsidies countervail measure agreement”) Governmental subsides may consist in only two forms: - Payment of an amount of public money à money deriving from the government goes directly to domestic producers - Governmental purchase of domestic products à purchase by the government of the domestic products No exemption from taxes APPLICATION OF NT PRINCIPLE TO TRADE IN SERVICES The main concepts that allow national treatment principle to services are: - Explicit commitment - Measures - Like services and service suppliers - No less favorable treatment EXPLICIT COMMITMENT - Services schedule à per each state there’s a schedule in which all the sectors in which the application of the national treatment is allowed are included. It’s a sort of international treaty so it must be ordered and applied as an international treaty - Contextual interpretation in domestic and international legal orders à it’s a principle that says that a treaty must be interpreted according with the other international obligations that a state has. MEASURES - Any law, regulation, procedure, administrative action - State measures including local authorities - Excluding measures concerning governmental services - Professional associations’ regulations if regulations are recognized by the state - Substantive and procedural obligations LIKE SERVICES AND SERVICE SUPPLIERS - Service + suppliers à we must take into account also suppliers to define a service - Competitive relationship à two like services have a competitive relationship - Differences with respect to goods - Criteria as analytical tools These criteria are used to assess some o Characteristics clarification about the classification of o Consumers’ taste services, but they are not enough to o Tariff classification decide if a service is like another Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 - Presumption of likeness o Difference based on origin o Attentive ascertainment of origin NO LESS FAVORABLE TREATMENT It’s provided for into two norms: - Art. XVII par. 2 and 3 o Formally identical or formally different treatment à it’s possible that a state adopt two different measures to regulate the treatment of domestic and foreign services or it’s possible that the treatment result in a different activity. But in the end what it is important is the substance, in other words, that they are not treated differently o Modification of the conditions of competition (par.3) à if two services are qualified as like services and their competitive relationship is modified by a domestic measure, that measure should be considered in breach of art. XVIII par.1 - De jure and de facto discrimination - There are some domestic measures that are excluded from the assessment of the treatment of a foreign service: o Regulatory aspects à states are free to establish obligations, like penalties or prohibitions o Inherent disadvantages (Footnote 10 to art. XVII GATS) SEMINARS 1. Antidumping in the WTO Use the information of the lectures 2. Security exception in the GATT 3. WTO and circular economy 4. EU and circular economy 5. International trade and the protection of the environment 6. WTO and the protection of human rights 7. COVID-19 and international trade 8. EU external relations Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 1/04/21 TARIFF BARRIERS DEFINITION AND PURPOSES Tariff barriers have always been considered an impediment since the GATT agreements. Tariffs are financial charge on imported or exported products due to their importation or exportation. - Border charge à applied when a good is crossing the boarder of a foreign country - Purposes: o Financial incomes for government o Protection of domestic production TYPES OF DUTIES ON IMPORT Tariffs depend on cost of duties and can be quantified in different manner: - Ad valorem à based on the value of the good, so the price. It considered the most transparent way. Ad-valorem duties are more transparent and take into account the problem of inflation - Non ad valorem à since they are not based on the price, but on different criteria: o Specific, based on weight, length or an element that can be measured in a precise manner o Compound, takes into account both ad valorem and non-ad valorem quantification of the duty o Mixed, it’s a way to establish tariff where the importing state establishes a minimum and a maximum o Technical, they are quantified according to the technical composition of the product Types of states that are subjected to tariffs - Most favored nation duties à WTO member states are subjected to tariff under the principle of the MFN - Preferential duties à it’s the case of developing states, which apply to them better treatment - No-WTO duties à these duties are not compulsory for those who are not WTO members. These duties cannot be applied to WTO states NATIONAL CUSTOMS TARIFF It’s the document according to which all the obligations to which a state is subjected are patent (?) to all states. This document includes a list of products and the customs tariff applied by each state. This distinction is performed by the “Harmonized Description and Commodity” and the Harmonized System (HS). IMPOSITION To ascertain whether or not a tariff is lawful Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 - Classification of goods à performed according to the 1983 “International Convention on the Harmonized Commodity Description and Coding System” (HS Convention). This convention refers to an international organization which is the World Customs Organization different from the WTO, which originally was called “Custom Cooperation Council” and was established in 1952. It’s the framework in which WTO assess the classification of goods according to the HS Convention - Valuation of customs duties à adopted within the WTO and it is an implemented agreement of a rule that already existed in the GATT in art. VII. The Customs Valuation Agreement of 1994 define some methods to establish the quality of the good: o Transaction Value à the valuation of a custom duty must be done according to its transaction value. It’s an ad valorem method used in the GATT system. It’s the preferential manner, but if it’s not possible to have the transaction value we can use the alternative methods addressed in Art. 7 in a sequential manner: 1. Similar goods 2. Deductive method à applied when there are not similar goods. We must look at the importer, the private person who is importing the good. The good will be classified according to the types of good that the importer usually commercializes. 3. Computed Value Method à we look at the manufacturer (producer) to see in which category of duties is included the good 4. Fallback method à we look at the legislation of the importing state. We’ll look at the way in which trade is made and regulated in the state of import and the duty will be calculated according to the practice of the state. DEFINITION OF THE ORIGIN OF GOODS à the origin of the good is regulated by the 1994 Agreement on Rules of Origin which is a WTO agreement. There is a distinction between two categories of duties: a. Non preferential duties – MFN Principle (all the states of WTO) b. Preferential Duties – Annex II (developing countries) - Criteria: o Value added à it’s that activity that makes a product a valuable product o Change in tariff classification à it’s the case in which a component or process that is added to a product transform the product in a different one and it puts it in a different tariff classification. (example of orange and juice) o Qualifying processes à among all the phases at which the production of a good is subject, there’s one that is more important than the others and will qualify the product. In this case, the origin of the good will be the one in which the relevant phase takes place. For instance, a jewel has its origin where it is composed, not where the material of which is made comes from. OTHER DUTIES AND CHARGES - Art. II(1)(b) GATT o Defined case by case o Non in excess of lawful duties - Understanding on Art. II(1)(b) GATT o Provided for in the Schedule, which is the good schedule o No beyond the level established in the Schedule Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 EXEMPTIONS There are some cases in which states are free to not adopt financial charges Art. 2 II(2) GATT - Internal taxes (including border tax adjustment à is a situation in which a state must apply taxes to a foreign product in order to balance and to ensure the fair competition between domestic and foreign product). - Anti-dumping à charges adopted to fight dumping = is a practice that states adopt, but it’s unlawful, in order to have huge exportation. They establish higher price on their domestic territory in order to allow producers to adopt lower prices when they sell abroad. - Cost of services à payment of some services that the importing state pays for some products EXPORT DUTIES - MFN Principle Art. I GATT à I can establish duties but they must be applicable to all WTO members - Art. II(1) GATT commitment to reduce export duties - Accession Protocols o China (2001) They wanted measures to establish duties on raw materials o Russia (2011) and so have a special treatment In the view of EU export duties for China and Russia were not lawful. They must be applied only to developing countries. EU Flexibility for Developing Countries TARIFF CONCESSIONS AND BINDINGS Concessions à are those privileges that a state provides allowing the import of products without the payment of duties or with the payment of a small duty. Bindings à are the maximum limit that prohibit a state to establish higher custom duties. - Purpose of reduction Art. XXXVIII bis GATT - Rules according to which custom duties may remain effective:(FAQ) o Reciprocity à if I grant concessions, concessions must be granted to me o MFN à I must ensure concessions and bindings to all WTO members o No reciprocity for developing states à because they are subject to a special treatment The rules for the concessions are regulated in art. XXXVI(8) GATT NEGOTIATIONS At the beginning of the functioning of the GATT in 1947 these regulations took place by means of: - Product by product basis (bilateral negotiations) - Multilateral negotiations which took the name of rounds. The formula approach was the common rule which correspond to the allowed concessions or bindings: o Linear approach (during the Kennedy Round) à the same percentage of tariff was applied to all goods. It didn’t take into account the peculiarities of different states. Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 o Non-linear approach (during Tokyo Round in 1970s) à products were divided in categories and for each category, concessions and bindings were formulated. o Uruguay Round Formula (1990s) à it’s available only for agricultural products: average basis + minimum reduction. States must ensure a minimum reduction (15%) and there should be an average basis of custom (36%). o Swiss Formula à 2007 Non-Agricultural market access. It allowed to reduce the higher custom duty affecting non-agricultural product, but it’s still not possible to have a common rule for custom duties affecting non-agricultural products. SCHEDULE OF CONCESSIONS (goods schedule) - MFN Concessions - Preferential Concessions - Concessions on Non-Tariff Measures - Special Commitments on Domestic Support and Export Subsidies Art. II(1)(a) GATT à treatment no less favorable than the one provided in the schedule Art. II(1)(b) GATT à MFN Concessions, exempted from ordinary duties in excess with respect to those established in the Schedule. It means that ordinary duties can be applied to WTO members as long as these duties remain in the maximum level of custom applicable according to the schedule. MODIFICATION Modification are in Art. XXVIII(1) GATT - Initial negotiating rights (INR) à these states are the beneficiary - Principal supplying interest à they are WTO members and produce the same type of goods to which a tariff applies but they are not the original beneficiary - Substantial interest à added in 1994 with a note ad art. XXVIII. They can have an impact on the modification of concessions. Highilights the state that are allowed to participate to that negotiation These three categories are very specific in order to exclude all those WTO members who do not have any interest in the negotiations. If the negotiation fails state can decide to withdraw from the concessions art. XXVIII(3) GATT 8/04/21 NON-TARIFF BARRIERS All those barriers applied to good or service which is in the territory of the foreign country and it’s subject to the laws of the foreign country. They are not allowed in general, but only exceptionally. Art. XI (1) GATT “No prohibitions or restrictions other than duties, taxes, or other charges, whether made effective through quotas, import or export licenses or other measures, shall be instituted or maintained by any contracting party on the importation of any product of the territory of any other contracting party or on the exportation or sale for export of any product destined for the territory of any other contracting party.” Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 QUANTITATIVE RESTRICTIONS Those measures aimed at limiting the access of a good in the territory of a state. - TYPES o Ban à a specific product cannot enter a foreign country, it’s absolute o Quotas àonly a certain amount of good can be imported, it’s limited o Licensing à without an import license or an export license is not possible to import/export the good in another country These restrictions are less transparent than custom duties because it’s difficult to ascertain whether or not these measures are lawful. Moreover, custom duties do not prevent the entrance of a good in a country, they just raise the price of the good. Conversely, quantitative restrictions and non-tariff barriers goods cannot at all enter the market of a country. If a state wants to establish a quantitative restriction, it must notify the WTO secretariat. - MEASURES to establish a quantitative restriction o Laws o Administrative actions o De facto restrictions à they can be provided in measures that are equally applicable to domestic and foreign product, but they produce a restrictive effect on the import/export of domestic product addressed to foreign country. These measures are not applicable when a good is crossing the border, but they may also apply in the territory and so be proper internal measures. - RESTRAINING EFFECT To assess whether a measure is establishing a quantitative restriction, it’s necessary to look at the effects of this measure. If this measure has restraining effects, a limiting effect, that measure is a quantitative restriction and so unlawful. - EXCEPTION (provided in Art. XI (2)(a) GATT): In case there are shortages of food stuff or other products essential to the country, the state can reduce the quantity of these products that should be exported. WTO attempted to decrease and eliminate quantitative restrictions have been successful in, at least, two fields of trade: - The agricultural field 1994 agreement on agriculture o “tariffication” (FAQ) à WTO attempted to transform all the existing quantitative restrictions into tariffs. So, they transformed the benefits that state could have from quantitative restriction to benefits from custom duties which are more regulated and transparent. o Tariff quotas à they are tariffs that apply differently with respect to the amount of goods and it’s the instrument used to implement tariffication. - The textiles and clothing field 1994 agreement on textiles and clothing à it was very successful because in ten years (2004) all quantitative restrictions concerning textiles were abolished and substituted by tariffs. Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 - VOLUNTARY EXPORT RESTRAINTS It’s a self-imposed quantitative restriction on exports that a state accepts to bear. The export state accepts to limit the exporting of its products This happens when the importing state is more powerful than the exporting state and it was considered unlawful. o Established in bilateral treaties o Prohibited in the agreement on safeguards by 1999. It was approved in 1994, but states had 5 years to voluntary cancel their self-imposed quantitative restrictions. - FUNDAMENTAL RULES Since the WTO does not provide very precise obligations and prohibitions and for this reason some quantitative restrictions still exist. So, the WTO has established some fundamental rules according to which state must apply quantitative restriction or measures providing quantitative restrictions. 1. Non-discrimination art. XIII (1) GATT à we must ensure the same replication of quantitative restrictions to all state and not make preferences. 2. Distribution of trade Art. XIII (2) à states must allocate the shares of quotas in a reasonable manner. The interest import countries are the states which have a substantial interest in selling goods to foreign countries so they must allocate quotas. 3. Import-licensing procedures à the adoption of these licenses must be regulated 4. Differentiated treatment of developing countries art. XVIII GATT à developing countries that are members of WTO are treated more favorably Import-licensing procedures Agreement on import licensing procedures makes distinction between two types of licenses: - Automatic licenses à those licenses that are immediately granted to application, there’s no need an assessment from a public body of the state, it’s just a formality to control the market of a country, but those it does not constitute an obstacle to international trade - Non-Automatic Licenses à are those licenses that are granted only after the evaluation of a public body. Usually, they are restrictive, because the public body can decide whether granting or not the license. OTHER FORMS OF NON-TARIFF BARRIERS - LACK OF TRANSPARENCY ART. X GATT Foreign producers must know the rules that are applied in the states in which you want to sell. If this information is not provided there’s a lack of transparency. Rules must be: - Public - There must be a specific information called notification - You can guarantee the right to apply against the deny of a license in enquiry points - Review, judicial or administrative. A trade operator has the right to complain against measures that constitutes an obstacle to trade - ARBITRARY APPLICATION OF MEASURES ART. X (3) GATT If the measure establishes right for all foreign producers, but if applied just to certain states this arbitrary application is considered unlawful. Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 - CUSTOMS FORMALITIES ART. VIII (2) GATT These are domestic laws that establish how custom must be applied. How you ask to pay the duty can produce an obstacle. According to the 2013 Agreement on Trade Facilitation, where several measures were provided to facilitate trade. For instance, with regard to some disadvantaged states is possible to provide some technical assistance. - GOVERNMENT PROCUREMENT A state may exclude foreign products, not in a discriminatory manner, from the import when the state buys such products for governmental purposes not for resell. 2014 plurilateral agreement on government procurement à it’s binding only for those states who accepted to be bound to this agreement NON-TARIFF BARRIERS TO TRADE IN SERVICES - No tariff barriers à tariff barriers are NON applicable to services - Regulation of non-tariff barriers that may be applied to services QUANTITATIVE RESTRICTIONS Quantitative restrictions affecting services can be regulated. There’s not a complete equal treatment between foreign and domestic services. Quantitative restrictions are not definetly forbidden by WTO. - TYPES OF QUANTITATIVE RESTRICTIONS ART. XVI (2) GATS o Number of suppliers à it’s possible that a state accepts just a limited number of foreign suppliers o Transaction value à there’s a limit of transaction o Number of operations à limit in the number operations, it affects mainly financial institutes o Number of employees o Amount of foreign capital invested These hypotheses are the ones that are prohibited and it’s an exhaustive list, it’s not possible to add further hypotheses. These are the only ones that are considered unlawful. - DOMESTIC MEASURES They may have different aspects. For example, they can be adopted by central organs or local authorities, nevertheless they are considered domestic measures. o Discriminatory à limit foreign services o and non-discriminatory measures à they can be applied to both domestic and foreign country - fundamental rule art. XVI (1) GATS à a state must accord to services and service suppliers a treatment that is no less favorable than the treatment that is provided for in the schedule for that state. In this schedule there are all the obligations that a state has adopted - OBLIGATIONS Negotiations of commitments Art. XIX GATS o 2001 guidelines for negotiations Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 o Exclusion of least developed countries - SERVICE SCHEDULES that are divided into two parts o Horizontal commitments à a rule that is applicable to all trade in services, in general o Sector commitments à some states may accept one sector other states others. The turism sector is particularly developed - MODIFICATION OF COMMITMENTS o Notification to the council on trade in services à must be addressed to the council of trade and services o Compensatory adjustment o Arbitration o MFN principle à I cannot discriminate among the WTO member states OTHER NON-TARIFF BARRIERS - LACK OF TRANSPARENCY ART. III GATS o Publication o Notification o Enquiry points o Review - ARBITRARY APPLICATION OF MEASURES ART. VI GATS - LICENSING REQUIREMENTS ART. VI (5) GATS In order to supply services a state may grant a license - RECOGNITION OF DIPLOMAS à a state may discriminate with respect to titles, but it must be based on objective characteristics not on the nationality. The MFN must be applied. - GOVERNMENT PROCUREMENT ART. XIII GATS Plurilateral government procurement agreement applicable. It’s performed by means of domestic service suppliers - MONOPOLIES AND EXCLUSIVE SERVICE SUPPLIERS MFN principle must apply also in this case - RESTRICTION ON INTERNATIONAL PAYMENTS It’s not possible to put restrictions to international payments so restrictions on payments are prohibited in Art. XI GATS. Nevertheless, there is still a possible limitation to movement of money between two states and this is the case of Exchange Controls, which is allowed for serious difficulties affecting balance of payments. Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 REGULATORY MEASURES à Aimed at regulating some specific issue - Technical barriers to trade (TBT) Both these issues are regulated by instruments of - Sanitary and Phyto-sanitary (SPS) WTO through two specific agreements These two fields have characteristics in common. One for example, it’s that they both deal with specific issues especially SPS, which concerns human and animal protection. Moreover, these two agreements attempt to regulate other fields, apart from trade, they want to balance the interests between trade and other fields. That’s why we find the harmonization of domestic legislation, to have on one hand, the protection of international trade and on the other the protection of interest of the country. TBT AGREEMENT à Technical Barriers to Trade Agreement This agreement was established in 1994 and entered into force in 1995. This agreement regulates the way WTO member states should deal with the issue of technical barriers. There’s a TBT Committee, which is an organ subordinated with respect to a specialized council. It’s made by a representative of each member state and it takes decisions on the base of consensus. Its main functions are: - Consultation à a sort of forum for consultation of states. - Review à this organ can review the behavior of states in particular the adoption of domestic legislation concerning technical barriers. - Decisions àsince the decisions are taken on consensus, so almost unanimity, these conditions should be considered as an addition to the TBT agreement. So, they are binding and considered a sort of treaty obligation. For this reason, they must be implemented by the organs of the WTO. There is also a Dispute Settlement Body under which there is the organ of the Technical Expert Group. A group of experts, which provide very impartial information used to resolve the dispute affecting technical barriers. TBT REGULATORY MEASURES There’s a distinction between three categories described in Annex 1 of the TBT Agreement (FAQ): - Technical regulations Annex 1.1 - Standards Annex 1.2 - Conformity Assessment Procedures Annex 1.3 TECHNICAL REGULATION It’s a law, usually a domestic law, and it establishes what the characteristics of a product are, those characteristics that help to define the product. Products must comply with these characteristics otherwise they cannot be sold in the market of that state. These characteristics are binding. Identify the product Laying down characteristics Mandatory characteristics Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 Technical regulations may affect also Process and production method (PPM) à it concerns the way a product is produced. The only relevant production process for the technical regulations is those PPM that are useful to classify the characteristics of a product. Another relevant issue for TBT is Labelling à it’s the way in which a product is described in the label. When the label is important to classify the type of product, then the label could be considered a measure to analyze on the basis on the TBT obligation. In all these situations what is relevant is the classification of the product STANDARDS - Voluntary requirements à not mandatory - Guidelines by a recognized body à in order to define a measure a “standard” it must be issued by a recognized body of the state - Differentiation with respect to technical regulations (FAQ) àa measure is a technical regulation if it’s binding or is a standard if it’s only voluntary. It’s not possible to be in both fields. CONFORMITY ASSESSMENT PROCEDURES They are all those procedures established within a state in order to ascertain whether or not a product should be commercialized, for instance: - Doing sampling, testing, inspections à all those procedures may affect the trade of a specific product, but it does not mean that they may describe the characteristics of a product. - Alternative with respect to technical regulations à The main difference between technical regulations and conformity assessment procedure is that the former assesses the characteristics of a product, while the latter establishes whether is commercial or not. ENTITIES - Governmental (central and local) à WTO states in which TBT is applicable, but also the local government of states in which TBT are also applicable - Non-governmental entities à first of all, they must be recognized bodies and have some power within the states. They may be association of the private sector. They are not directly responsible in front of WTO organs and TBT obligations. They must comply with TBT obligations and their duty is indirective, not deriving directly from the WTO. RELATIONSHIP WITH OTHER WTO AGREEMENTS - Government procurement agreement à a state may adopt restrictions for governmental purposes. Since it’s a plurilateral agreement, it does not bind all the WTO states but only does that takes part in it. - SPS Agreement (Art. 1.5 TBT) à they concern a very specific subject, since it’s more specialistic it must prevail over TBT. - GATT 1994 à it also regulates non-tariff barriers, but at the same time it can cover technical barriers, but the TBT is more specific than the GATT, so for this reason the TBT must prevail over the GATT. It’s expressed in a note to Annex A of WTO agreement, which specifies that special agreement, including TBT, must prevail over the GATT. Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 9/04/21 MFN AND NT PRINCIPLES IN TBT SUBSTANTIVE OBLIGATIONS ART. 2.1 TBT AGREEMENT “Members shall ensure that in respect of technical regulations, products imported from the territory of any Member shall be accorded treatment no less favorable than that accorded to like products of national origin and to like products originating in any other country” - Standards Annex 3.D - Conformity assessment procedures art. 5.11 We have to define the term “like products”, in this case must be interpreted in a very general manner, because it means products that are in competition. According to TBT a like product cannot: - Adopt a less favorable treatment à it’s not sufficient to adopt an equal treatment. What is important to look at the impact on international trade, so the measures that in this case may provoke a negative impact on foreign products even if apparently, they are not discriminatory à de facto discrimination and de jure (expressed) discrimination - These measures are impartial (even-handedness) with respect to the treatment of domestic and foreign products and proportionally measures with respect to the aim they want to achieve. ART. 2.2 TBT “members shall ensure that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade. For this purpose, technical regulations shall not be more trade-restrictive than necessary to fulfil a legitimate objective, taking account of the risks non-fulfilment would create.” The second obligation established in the TBT agreement is the obligation to not establish unnecessary obstacles. - It’s applied to standards and conformity assessment procedures - Unnecessary obstacles - Non-more restrictive than necessary LEGITIMATE OBJECTIVES à to ascertain the lawful of the measure and to apply Art. 2.2 TBT. Types: o Protection of national security o Protection of human, animal and plant health o Protection of the environment - Ascertained by an impartial body - Contribution to the fulfillment à it must achieve an objective - Degree of fulfillment achieved à if it achieved an objective but with scares results, in that case it means that the measure is not mainly aimed at achieving that legitimate objective. Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 What is important is that the measure demonstrate that is concretely aimed and effective for the achievement of an objective. ASSESSMENT OF THE RISK How can we perform a risk assessment? o Scientific information o Technology o End use of the product à This mainly concerns food products and the way you use agricultural products. For example, if you use vinegar for food you have to check if it’s healthy otherwise if you use if for coloring clothes you are not obliged to check it. NOT MORE TRADE-RESTRICTIVE THAN NECESSARY Implies that restrictions are allowed what it is not allowed is an excess in the restrictions with respect to the necessity. So, necessity is the criteria to judge if a measure is lawful or unlawful à Relational analysis between risk and restriction Comparative analysis with other measures à you have to choose the solution that is less restrictive with respect to international trade ART. 2.4 TBT “where technical regulations are required and relevant international standards exist or their competition is imminent, Members shall use them, or the relevant part of them, as a basis for their technical regulations excepts when such international standards or relevant parts would be an ineffective or inappropriate means for the fulfillment of the legitimate objectives pursued, for instance because of fundamental climatic or geographical factors or fundamental technological problems.” OBLIGATIONS TO BASE REGULATIONS ON INTERNATIONAL STANDARDS International standards exist in order to make domestic legislation of different countries more similar among them. These standards must derive from international organization. - Purpose of harmonization - Applicable to standards and assessment procedures - We must define the concept of international standard à usually defined by private associations - We must define the concept of “base” à it’s necessary to comply with these standards - Legitimate the objective pursued TO SUM UP: TBT provides also for other substantive obligations such as: - Mutual recognition of states’ regulations Art. 2.7 TBT - Product requirements fixed according to performance art. 2.8 TBT à this criterion facilitate international trade - Transparency art. 2.9 TBT à states must make public technical measures, except for urgent problems in which states can use some instruments without publication. Measures must enter into force after notification in reasonable interval of time. It is applicable to standards and assessment procedures. In order to make it more effective the WTO system has also established the TBT information management system à very important to avoid restriction to trade and it Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 concerns the obligation for states to send to the WTO secretariat. It’s a sort of database that collects all the legislation or technical measures adopted by the WTO members, in order to make the others states and operators aware of the measures adopted in that state. It’s a way to maintain a preventive control on states DIFFERENTIAL AND MORE FAVOURED TREATMENT - EXCEPTIONS ART.12 TBT o Developing countries à they have a more favorable treatment. o Time-limited o Non-Compliance with international standards o Non-stringent Duties for developed states - TECHNICAL ASSISTANCE ART. 11 TBT According to this norm developed states have the obligation of helping and supporting developing states to achieve some results: o Adopt their own technical regulations (providing instruments or examples) o Compliance with other states’ regulations o Participation in Fora establishing international standards It does not provide very strict obligations. SANITARY AND PHYTO-SANITARY AGREEMENT (SPS) It regulates very technical issues which could create obstacles to international trade, by means of domestic measures, in particular concerning all those measures aimed at safeguarding the health of human, animals and plants. For this reason, in 1994 the SPS was adopted and entered into force in 1995 together with the TBT. - SPS COMMITTEE à it’s an organ specialized in the issue related to the agreement and it has 3 main functions o Forum for consultation of WTO parties à they discuss about problems related to SPS issues o Supporting international standards à to have international standards that are common to a large part of states are important to ensure that the domestic measures concerning SPS are not an impediment to international trade o Review of the implementation of the agreement à WTO members states must present a report to the committee - DISPUTE SETTLEMENT o Advisory technical expert group à it’s a specific group made of experts which provide impartial information concerning very technical issues - RELATION WITH OTHER WTO AGREEMENTS o Art. 1.5 TBT provides for the priority of the SPS agreement over the TBT. Due to the fact that SPS is more specific than TBT. o Presumption of consistency of GATT with SPS à the measures of the SPS are more specific with respect to the one regulated by the GATT. If a domestic measure is consistent with the SPS agreement, then it’s presumed to be persistent with the GATT. Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 - ENTITIES ART. 13 SPS They are divided into two categories: o Governmental (central and local) o Non-governmental à there’s no direct interference or action of the WTO with respect to non-governmental entities. The way in which SPS is binding for these non-governmental entities depend on the intervention of the state ART. 1.1 SPS “this agreement applies to all sanitary and phytosanitary measures which may, directly or indirectly, affect international trade” PURPOSES OF THE MEASURES ANNEX A.1 it’s important to classify these measures according to their purposes 1. Protection of health from food-borne risks 2. Protection of health from risks due to pests and diseases 3. Prevention of other damages from the spread of pests or diseases MEASURES Measures, unlike the TBT agreement, are not defined in a precise manner - Types - Territorial application à these measures must be obligations that foreign producers face when they enter the territory of the state - Affecting international trade à they are only applicable to transboundary trade activities - In force à states accepted the idea to extend the application of the SPS agreement to measures that were adopted before the agreement but were still in force with the domestic legal order of the state. SPS BASIC PRINCIPLES - Right of states to adopt measures to protect health Art. 2.1 SPS à it recognizes the right of states to adopt measures aimed at safeguarding sanitary and Phyto-sanitary issues, but the only measure to be adopted are the one which protect human and hearth health. The recognition of this right is important - Only measures necessary to protect health Art. 2.2 SPS The most important thing is to assess the necessity with: a. Scientific evidence b. Risk assessment à in order to ascertain the relationship between a restrictive character of a measure and the risk for human health. If there is a real risk in that case the measure is legitimated otherwise will be considered in breach of SPS agreement. It’s a really general concept. - These measures must be non-arbitrary and unjustifiable discrimination (à it means that is not possible to justify the discrimination) (Art. 2.3 SPS) o Subject to the MFN and NT principles o Similar conditions à what is relevant is the similarity between the risks that two products may produce Downloaded by Alessandro Liverotti ([email protected])  lOMoARcPSD|43963026 - AIM OF HARMONIZATION ART. 3 SPS The attempt of WTO to establish common rules with respect to a very technical issue such as the SPS issues. In order to achieve the aim of harmonizing domestic legislation states may choose three different methods: 1. Measured based on international standards Art. 3.1à states may adopt legislation that implements standards and principles affirmed by international entities, but they are free to enforce these principles as they prefer. 2. Measures complying with international standards Art. 3.2 à states must adopt legislations that reproduces principles recognized by international organs 3. Measures establishing higher level of protection Art. 3.3 à in this case, the state decides to have higher protection with respect to the international standards. RISK ASSESSMENT RISK ANALYSIS ART. 5 SPS States are obliged to take a risk analysis if they want to adopt a SPS measure. A risk analysis is performed taking into account two issues: RISK ASSESSMENT RISK MANAGEMENT Whether and to what extent a risk The way in which a state may contro