CHAPTER 10
Laws Governing Access to
Foreign Markets
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a part of South-Western Cengage Learning.
The General Principle of
Least Restrictive Trade
• WTO mandates a balancing test.
• Thailand: Restrictions on Importation of
Cigarettes 1990.
– The U.S. challenged Thailand's restrictions on imports
of cigarettes. Thailand defended them on the basis that
they were necessary to protect Thai peoples’ health
from the additives in imported cigarettes.
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The General Principle of
Least Restrictive Trade
• The WTO panel found the licensing system
violated GATT and were more restrictive than
necessary. Thailand was encouraged to bring its
requirements in line with GATT.
• Why were they only recommended?
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Technical Barriers to Trade
• Technical regulation is a MANDATORY
law/regulation affecting a product’s
characteristics.
• Standard is a VOLUNTARY guideline
established by a private or administrative
body.
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Protection of Public Health,
Safety, or Welfare
• Testing, Inspections, and Certifications for
Compliance with Product Safety, Quality, and
Technical Standards and Regulations Sale.
– Different countries have different philosophies and take
different approaches. In U.S., regulations are set by
federal agencies (USDA, FCC, Dept of Commerce,
etc.)
• Why are standards and technical regulations
barriers to trade?
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EU Standards and
Technical Regulations
• EU efforts to reduce technical barriers to trade is
critical because of the multi-national brands and
consolidation of the euro.
• The EU is attempting to increase its
standardization through the “CE Mark”. Once the
CE mark is received, the product can be sold
throughout Europe without impediment.
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Japanese Standards and
Technical Regulations
• U.S. – Japan have long history of disputes.
• Product standards in Japan are usually based on
design characteristics. U.S, in contrast, has
standards of performance.
• What happens when Japanese regulations lack
“transparency”?
• What does the “JIS” mark signify?
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Chinese Standards and
Technical Regulations
• China is still socialist/communist and has a very
bureaucratic regulatory framework.
• Laws are administered by AQSIQ.
– Product Quality.
– Standardization.
– Food Hygiene.
• Standardization Administrative of China 2001.
– Coordinate development of standards.
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WTO Agreement on TBT
• 1994—Technical Barriers to Trade (TBT)
Agreement.
• Harmonization, Equivalence, and Mutual
Recognition.
– Conformity of Assessments.
– Main Provisions of TBT apply to all products,
agricultural, industrial, and consumer goods.
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European Communities:Measures
Affecting Asbestos 2001
• The WTO found French retsrictions on asbestos
a valid technical regulation.
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International Organization
for Standardization (ISO)
• International standardization makes design and
building and products cheaper and trade easier.
• ISO 9000- certification makes selling in Europe
much easier.
• ISO 14000- environmental standards.
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Import Licensing Procedures
• Article XI permits a country to use licensing in a
nondiscriminatory, MFN, and transparent fashion to
regulate some imports.
– Example: a country may want to only allow importation of health
products made from sterilized materials.
• GATT requires “transparency” (published materials
available to all countries).
• WTO Agreement on Import Licensing Procedures.
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Government Procurement
• GATT allows exception to national treatment
allowing government to favor domestic supplier.
• But the new Agreement on Government
Procurement (2006) applies only to those
countries that signed and applies to goods and
services worth 205,000 SDR’s (US $205,000)
and construction contracts over 5 million SDR’s
(US $7 million).
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Agencies Excluded from the
Procurement Rules
• Department of Defense.
• Department of Energy.
• States that have specific exclusions e.g. N.Y.
subway cars.
• Must be Transparency in Procurement
Procedures.
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General Agreement on
Trade in Services (GATS)
• Includes professional services (e.g., law,
accounting, architecture, engineering, etc), health
care, insurance, travel, and many others. In 2006
over 80% of U.S. GDP was in services.
• Similar to GATT rules.
• First attempt to open up services is very helpful to
U.S.
• Overseen by Council for Trade in Services.
• Agreement on financial services and
telecommunications are separate.
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Trade in Services: GATS
• Recognition of Licensing and Professional
Qualifications.
• The WTO Agreement on Trade in Financial
Services.
– Signed by over 100 nations.
– Promotes efficiency and reduces cost.
– Provides consumers with greater choice.
• WTO Agreement on Basic Telecommunications.
– Open telcom markets to foreign competitors.
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Trade in Agriculture (1994)
• Agreement will increase export opportunities.
• Reduce government subsidies that distort market
competition.
– Cut domestic programs that support higher prices.
– Cut subsidies of exports of farm products.
– Convert quotas and non-tariff barriers.
• U.S.-Brazil Dispute Over Cotton Subsidies (2007).
WTO panel agreed that U.S. was not in compliance.
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Sanitary Measures
• Agreement on Application of Sanitary and
Phytosanitary Measures (SPS Agreement): a
country has the right to protect human, animal
and plant life but may not be used to justify
otherwise discriminatory conduct. 
• Codex Alimentarius: International standards for
the protection of plants animals and foodstuffs.
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EC Measures Concerning Meat and
Meat Products (hormones)
• WTO Panel held that The EC’s ban on the sale
of beef containing residues of growth hormones
violates the Application of Sanitary and
Phytosanitary Measures. The Panel decision
was upheld by the WTO Appellate Body in 1998.
• What action has taken place since then?
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Trade in Textiles and Clothing
• 1974 Multifiber agreement: contained quota
limits by country and product.
• 1994 GATT agreement on Textiles ends Quota
system over 10 year period.
• 2005 textiles will be covered by GATT’s regular
rules on safeguards and unfair trade.
• WTO Textile monitoring body.
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Trade in Textiles and Clothing
• What about illegal transshipment?
• Countries try to avoid quotas by shipping to a 3rd
country, relabeling the goods as origination from
the 3rd country, and reshipping.
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TRIMS
• Uruguay Round of talks.
• Does not set broad rules.
• Prohibits laws which condition a company’s right
to import foreign goods on the volume of goods
exported.
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TRIPS
• WTO countries agree to abide by intellectual
property conventions.
• Domestic and foreign IPR (intellectual property
rights) treated the same.
• Enforcement strengthened.
• Members are bringing their laws into
compliance with TRIPS.
• 2000, WTO Dispute Settlement process.
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Information Technology Agreement
• Signed by 70 nations.
• Called for elimination of all tariffs on computers,
telecommunications, software, scientific
instruments, etc. by 2005.
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Trade Sanctions and Section 301:
Threat of Retaliation
• Section 301 Trade Act 1974.
• Basic 301: USTR retaliate against foreign country. It is
discretionary and may be imposed when USTR finds
unreasonable discrimination that burdens or restricts
U.S trade.
– Procedures: filing a petition by company or USTR. Investigation
commences and decision within 18 months.
– Sanctions are imposed to end illegal foreign practice.
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U.S. Trade and Development Act of 2000:
The Carousel Law
• The TDA amends section 301 by requiring
USTR to periodically review list of products
subject to retaliatory action and revise them 120
days after inception, and every 180 days
thereafter.
• EU and some American importers object to the
law.
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Special 301
• Used by USTR against countries that fail to
protect American intellectual property.
• Each year USTR identifies countries.
– Worst offenders are tagged “priority foreign countries”
which requires a Section 301 investigation.
– USTR also maintains a “watch list.”
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Telecommunications 301
• Telecommunication 301: identify foreign barriers
to telecommunications firms and requires
mandatory retaliation
• Case: Access to Japanese markets for U.S.
cellular phones.
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Super 301
• Super 301: USTR identifies priority trade
practices which pose barriers to U.S. trade.
• Priority countries with pervasive pattern of
discrimination triggers investigation.
• If no action, then retaliation.
• Law has since lapsed and is not in effect.
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Issues
• What should the connection be between human
rights or environmental issues and trade law and
policy?
• First, what is a human rights violation? Can you
agree?
• Second, what is the appropriate national,
regional, international action? Is unilateral action
ever appropriate? Military action?
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