CHAPTER 9
GATT Law and the World Trade
Organization: Basic Principles
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a part of South-Western Cengage Learning.
Introduction
• Trade barrier is any impediment to trade in
services or goods.
• Import trade barrier is any impediment, direct or
indirect, to the entrance or sale of imported
goods or services.
• What are some of the Reasons for Regulating
Imports?
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Nontariff Barriers to Trade
• Embargoes.
• Quotas.
– Auctioned quotas.
– Tariff-Rate quotas.
• Indirect nontariff barriers: Japanese large-scale
retail stores law (now repealed).
• Import Licensing Schemes.
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General Agreement on Tariffs and Trade
• Multilateral trade negotiations- reduce tariffs
and nontariff barriers (NTB).
• Nondiscrimination and unconditional MFN.
• National Treatment.
• Eliminate quotas and NTB (convert NTB to
tariffs and then reduce), transparency very
critical.
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WTO Replaced GATT in 1995
• WTO is an umbrella organization that sets rules
of international trade and dispute resolution.
• Organization of the WTO 
– Overseen by the Ministerial Conference which appoints
the Director-General.
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Structure of the WTO
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GATT/WTO Dispute-Settlement
Procedures
• Dispute mechanisms and procedures attempt to
avoid retaliation or “trade wars.”
• Have quasi-judicial process for resolving
disputes when deadlocked.
• Only a government can bring a “complaint”
against another government. See the European
Communities-Regime for the Importation,
Sale, and Distribution of Bananas case.
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GATT 1994: Major Principles
of Trade Law
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Multilateral trade negotiations.
Predictability of trade opportunities.
Non-discrimination and unconditional MFN.
National treatment.
Elimination of quotas and other non-tariff barriers
(first convert to tariffs—”tariffication”—and then
negotiate to reduce).
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Multilateral Trade Negotiations
• What was the Doha Development Agenda?
• What happened in Cancun 2003?
• Normal Trade Relations: NTR.
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Tariff Concessions, Bound Rates, and
Tariff Schedules
• Article II of GATT calls for member nations to
cooperate in lowering tariffs through
negotiations.
• Tariff concession: one country promises not to
levy a tariff at a higher level then agreed upon.
• See the GATT Report on European Economic
Community-Import Regime for Bananas.
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Nondiscrimination, MFN, and
National Treatment
• Unconditional MFN: if a member extends
privilege to another member then that
privilege automatically is extended to all
members. Now Normal Trade Relations or
NTR.
• WTO Exceptions- may deny MFN based on
national security, foreign policy, or a
government’s denial of human rights to its
citizens.
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Normalization of Trade with China
• Temporary MFN granted in 1980.
• 1989 Tiananmen Square massacre.
• 1994 Clinton delinked human rights and trade for
China’s annual renewal of MFN.
• 2000 Congress granted permanent normal trade
status to China effective on China’s admission to
WTO.
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National Treatment
• Japan Taxes on Alcoholic Beverages- 1996 WTO.
• Japan taxed vodka and other imported liquors 7
times higher than shochu (similar to vodka). This
practice challenged.
• Held: that Japan's practice violated national
treatment provisions GATT Article III. U.S. had to go
to arbitration. In 1997 Japan agreed to revise its
system.
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GATT and the Elimination of Quotas
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Article XI.
But must abide by non-discrimination.
Used for economic and political reasons.
Balance of payments exception.
Quantitative Restrictions: Balance of Payments
Exception and Developing Countries. 
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India- Quantitative Restrictions on
Imports (WTO,1999)
• The U.S. challenged India’s restriction on
imports that it claimed were necessary because
of the balance of payments exception to GATT.
The panel found that the restrictions were not
necessary and gave them a reasonable period of
time to implement the changes. This ruling was
affirmed by the WTO Appellate body.
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Conclusion
• Trade is often a political football in the United
States and other countries.
• When U.S. approved GATT agreement also
passed a bill to review WTO every 6 months.
• Fears of “multilateralism”- why is that a “dirty
word” to some?
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Conclusion
• Conflict between international and national
law.
– Law vs politics.
– What is the appropriate connection between human
rights and trade? European and Japanese model vs.
United States’ historical approach?
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Conclusion
• Should labor and environmental issues be
linked to trade?
– Furthers whose agenda?
– Is it protectionism in disguise?
– Conflict between the developing and developed
world?
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