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

2. 2 GATT: Least Restrictive Trade Principle WTO members must make valid restrictions no more restrictive than necessary to achieve goals Laws and regulations for internal purposes must also be least restrictive as possible Health and consumer safety standards must not unduly burden trade or single out foreign goods or service providers

3. 3 Thailand Restrictions on Importation of Cigarettes (GATT 1990) Facts: Thailand restricts import of cigarettes – require license Only license granted was to Thai state Tobacco Monopoly Thailand – restrictions to control additives – public health problem Issue: Do restrictions violate GATT Art. XI? Decision: Yes, restrictions violate GATT Art. XI:1 Reasons: Restrictions not justified under Art. XX(b) – measures allowed only if no alternative consistent with GATT or less restrictive exist Could use nondiscriminatory regulation to require disclosure of additives, ban harmful additives

4. 4 Separate Agreements under the 1994 GATT Agreement Technical barriers to trade (regulations and product standards) Import Licensing Procedures Government procurement of goods Trade in services Trade in agricultural products Trade in textiles and apparel Trade related investment measures (TRIMS) Trade related intellectual property (TRIPS)

5. 5 International Standards CE Mark – Conformite Europeane International Organization for Standardization: promulgates internationally-accepted standards ISO 9000: assurance of product quality through design and manufacture ISO certification makes selling in Europe much easier Required under EU law for medical devices and construction equipment ISO 14000: standards for environmentally safe products

6. 6 GATT 1994 Agreement on Technical Barriers to Trade Requires that member states’ standards must be applied in non-discriminatory manner Standards must not create unnecessary obstacles to trade Members are to use international standards whenever possible Transparency: members should publish proposed standards for comment and publish final standard to allow reasonable time to adapt Principle of Least-Restrictive Trade

7. 7 EC – Measures Affecting Asbestos (WTO Appellate Body Report 2001) Facts: France imposes virtual ban on importation of chrysotile to France Canada complains that fibers can be used in ways without risk Canada requested WTO dispute settlement France claims Art. XX(b) – protect public health Issue: are restrictions valid technical regulation under GATT? Decision: Yes – not discriminatory Reasons: Technical regulations lay down product characteristics Measure here prescribes certain characteristics for all products Panel decision as to risk based on scientific evidence – protects life or health within meaning of Art. XX(b) WTO members have right to determine level of protection chosen

8. 8 Import Licensing Procedures GATT art. XI allows for import licensing if used in non- discriminatory and transparent manner Textile quotas (expired Jan. 1, 2005) Transparency: Procedures not unduly complicated, rules published and openly available to all interested parties Applications should be handled within 60 days GATT Agt.on Import Licensing Procedures (1994): non- discriminatory and simple procedures Members must notify WTO Import Licensing Comm. if products will be subject to new licensing requirements If use licensing to administer quotas, must publish amount of quota already used Trade Facilitation: efforts to simplify and standardize regulations and procedures for movement of goods across borders

9. 9 Government Procurement GATT Art. III allows exception to national treatment allowing government to favor domestic supplier GATT 1994 Agreement on Government Procurement requires fair, open and non- discriminatory procurement practices- 2006 revisions applies only to those signatories, and applies to goods and services worth 130,000 SDR or more and construction contracts over 5 million SDR Agt provides for bilateral agreements btwn. Signatories as to how AGP will apply to them May have differing rules for different countries involved Allow signatories to exempt certain agencies

10. 10 AGP Procurement Rules Procuring agency must treat products from all signatories equally – no less favorable than domestic products Prohibits offsets – requirements to use local labor or to purchase from local suppliers Transparency: give adequate notice to potential bidders and disclose all material information to submit bid Procedure to challenge bids award and to settle disputes

11. 11 US AGP Exclusions Dept. of Defense: military equipment or relating to national security Dept. of Agriculture: food support programs and food for distribution Dept. of Energy & FAA States may have specific exclusions: N.Y. : subway cars S.D. : beef purchases

12. 12 Trade in Services Not included in GATT until 1994 Uruguay Round U.S. has trade balance in services: 76.6% of GDP from services GATT General Agt. On Trade in Services overseen by Council for Trade in Services Telecommunications and transportation excluded Separate agreements on financial services and telecommunications Methods of providing services: Cross-border supply Consumption abroad Commercial presence Presence of natural persons

13. 13 General Agreement on Trade in Services (GATS) Transparency No local participation requirement MFN Nondiscrimination No restriction on transfer of money Members can license professionals – must be objective, no discrimination on citizenship Members can set specific exceptions: U.S. excluded transportation Japan excluded repair services and couriers

14. 14 GATS Agreement on Trade in Financial Services Open domestic markets to foreign competition: Banking Securities Insurance Promote efficiency, reduce costs,provide greater choice of providers Unintended consequence: consolidation as domestic firms acquired by foreign firms

15. 15 GATS Agreement on Basic Telecommunications Signatories bound to open domestic telecommunications markets to foreign competition Apply MFN and nondiscrimination principles Covers most services: voice, data, facsimile, mobile data, paging, etc. Includes local and long distance services

16. 16 Trade in Agriculture Agriculture most heavily protected sector EU: Common Ag Policy US: Farm Bill Japan: Japanese Staple Food Control Law Powerful domestic political force Concern for independence in food supply Subsidies and Price Supports common Increases domestic prices Distort production patterns Results in surpluses 2000: Doha Round focuses on agriculture – no real progress yet

17. 17 GATT 1994 Agreement on Agriculture Agreement effective 1995 Attempts to bring fair trade and competition to ag sector Reduce government subsidies that distort market competition Cut domestic programs that support higher prices Cut subsidies of exports of farm products Convert quotas and nontariff barriers Agreement on Application of Sanitary and Phytosanitary Measures (SPS): allows members to protect human, animal and plant life – based on scientific evidence Must be no more restrictive than necessary

18. 18 EC Measures Concerning Meat and Meat Hormones (WTO 1997) Facts: EU ban on beef with any residue of growth hormones Protect public health and restore confidence in meat industry US and other complained ban violated SPS US imposed retaliatory duties of EU imports EU requested WTO panel Issue: Is ban more restrictive than necessary? Decision: EU ban violates GATT and SPS Reasons: Art. 3.1 – must base sanitary measures on international standards Codex standards allow residues EU standards not based on international standards Member standards must be only to extent necessary

19. 19 Trade in Textiles Textiles “import sensitive” sector Labor intensive Developing countries can be major competitors 1974 Multifiber agreement: system of bilateral quotas by country and by product US: huge trade deficit in textiles Committee for Implementation of Textile Agreements conducts textile negotiations NAFTA: no quotas on Canadian or Mexican textiles

20. 20 Effective 1995: phase out quota system over 10 year period Subject to GATT by Jan. 1, 2005 MFN and nondiscrimination principles Reduce tariffs over 10 years Temporary quotas as safeguards to avoid serious injury to domestic industry WTO Textile Monitoring Body created to oversee compliance Disputes resolved through WTO Problems in Textile trade: Illegal transshipment Re-labeling the goods as to origin US – right to limit Chinese imports until 2008 1994 GATT Agt on Textiles and Clothing

21. 21 GATT 1994 Agt on Trade Related Investment Measures TRIMS Does not set broad rules Prohibits laws or regulations that condition a company’s right to import foreign goods on the volume of goods exported Prohibits conditioning receipt of foreign investment on company’s foreign exchange revenues

22. 22 GATT 1994 Agt on Trade Related Aspects of IP Rights TRIPS WTO countries agree to abide by intellectual property conventions No discrimination: domestic and foreign IP rights treated the same Prohibits conditions attached to patents, etc. Transparency as to rules and regulations Members to strengthen enforcement Members must bring domestic laws into compliance with TRIPS WTO Dispute Settlement process

23. 23 US Trade Sanctions: S. 301 Section 301 Trade Act 1974, as amended US can retaliate against countries violating GATT or maintaining unfair or discriminatory practices or policies Four different provisions: Basic S. 301 Special 301 Telecommunications 301 Super 301 Initiated by petition by company or by USTR Investigation and /or hearing USTR to negotiate with offending country If claim GATT violation, invoke WTO process if no resolution in 150 days

24. 24 Basic S. 301 USTR has discretion to retaliate when country has unreasonable or discriminatory practices (even if no violation of trade agts.) USTR has discretion to retaliate when country denies labor rights USTR must retaliate when: Country denies US rights under trade agts. Country’s policies unjustifiable, deny US legal rights and burden or restrict US commerce If violation of GATT, presume burden to US commerce Waive retaliation if: WTO panel upholds country’s actions Country agrees to eliminate policy USTR believes negotiated settlement imminent USTR believes retaliation would have more adverse impact than benefit on US economy

25. 25 Other S. 301 Actions Super 301: most controversial – lapsed in 2007 USTR to identify priority trade practices posing greatest barriers to US trade Identify priority countries showing pervasive discrimination against US firms Retaliation required if country does not remove barriers Special 301: action against countries failing to protect IP rights Designate worst offenders “priority foreign countries” – place on priority list or priority watch list USTR to investigate – 6 months to decide to invoke sanctions Telecommunications 301: mandatory retaliation against countries blocking access to telecom market

26. 26 Trade Sanctions under S. 301 US has wide range of sanctions available: generally assess additional duties Carousel Law: Trade and Development Act of 2000 USTR to review products subject to retaliatory duties after 120 days Then periodic rotation (every 180 days) of products subject to duties to “spread the pain”

27. 27 U.S. Sections 301-310 of Trade Act of 1974 (WTO Panel 1999) Facts: EU complaint that Ss. 301-310 violate GATT dispute settlement process EU claims that strict time limits under US law don’t allow sufficient time for WTO process to work Issue: Does US law violate GATT? Decision: US law valid as long as allows US to follow WTO settlement rules Reasons: US legislation not inconsistent with WTO if it permits action consistent with WTO US law provides discretion to comply with WTO rules and procedures in each case