A SHORT COURSE IN
INTERNATIONAL TRADE LAW
Professor David A. Gantz
University of Arizona,
James E. Rogers College
of Law
Hanoi, August 2004
gantz@law.arizona.edu
Sponsored by
The U.S.-Vietnam Trade Council
Education Forum
usvtc@usvtc.org
1
I. Introduction

Teaching int’l trade law is difficult:
• Issues are complex
• Too much material to cover adequately in a 3
•
•
hour one semester course
There are constant important changes from
year to year
Case study is required for understanding of
WTO’s Appellate Body, even for civil lawyers
2
I. Introduction, cont’d.






Definition of international trade law (not
the same as int’l commercial law)
GATT/WTO History
Basic Principles – GATT/WTO
Exceptions to GATT/WTO Principles
Art. XXIV, FTAs and the VBTA
WTO Accession
3
I. Introduction, cont’d.






Doha Development Round
Rules of Origin and Customs Issues
Trade in Agricultural Products
Textiles and Clothing
Trade Remedies – Dumping, Subsides,
Safeguards
WTO Dispute Settlement
4
I. Introduction, cont'd.





Intellectual Property
Trade in Services
Standards and Phytosanitary Measures
TRIMS
Developing Countries and World Trade
5
II. GATT and the WTO



WTO, with over 146 members, became
effective in 1995
WTO replaces GATT, which governed world
trade from 1947-1994
Marrakesh Agreement Establishing the WTO
has various annexes:
•
•
•
•
•
GATT and other trade in goods agreements
General Agreement on Trade in Services
TRIPS Agreement
Dispute Settlement Understanding
Trade Policy Review Mechanism
6
GATT/WTO, cont’d.
• Plurilateral Agreements (government
contracts, civil aircraft, bovine meat, dairy
products)



All but Plurilateral Agreement are
mandatory for all WTO Members
WTO is an international organization
Voting in theory may be by 2/3 vote, but
in practice all decisions are by
consensus
7
III. Core GATT Principles



Unconditional Most Favored Nation
Treatment (Art. I)
Tariff Bindings (limit on tariff levels on
product by product basis) (Art. II)
Non-discrimination with regard to
internal taxes and rules, regulations, etc.
(Art. III)
8
III. Core Principles, cont’d.


Requirement of transparency for traderelated laws, regulations, rulings, etc.
(Art. X)
Prohibition against most quantitative
restrictions (quotas) (Art. XI)
9
IV. Exceptions



Balance of payments problems (Arts. XII,
XVIII)
Special treatment of developing nations
General exceptions (Art. XX)
• Protection of public morals
• Necessary to protect human,
•
animal or plant
life or health
Relating to trade in gold or silver
10
IV. Exceptions, cont’d.
• Compliance with customs, competition,
•
•
•
•
intellectual property and fair trade laws
Products of prison labor
Protection of national treasures of historical or
archeological value
Conservation of exhaustible natural resources
Obligations under commodity agreements
11
IV. Exceptions, cont’d.

Art. XX “chapeau” limits use of
exceptions to situations where there is
no arbitrary or unjustifiable discrimination
or disguised restriction on international
trade.
12
IV. Exceptions, cont’d.

Actions a Member “considers necessary
for the protection of its national security
interests.” (Art. XXI)
13
V. FTAs, Customs Unions and
RTAs

Exception to MFN and other GATT
obligations for FTAs and Customs
Unions (Art. XXIV), with conditions:
• Covers substantially all trade among
•
•
members
Elimination of barriers within a reasonable
payment of time
No increase in tariff or non-tariff barriers for
non-members
14
V. FTAs, cont’d.




Regional Trade Agreements (RTAs) have
proliferated – nearly 300 notified to WTO
US, Mexico, Canada, EU, now Japan
and Korea, among those concluding
RTAs
ASEAN – AFTA
NAFTA – North America
15
V. FTAs, cont’d.


VBTA is not a “free” trade agreement,
but contains some of same elements
involving not only trade, but investment,
services, transparency, business
facilitation, safeguards
VBTA requires important changes in
Vietnamese legal system, courts,
regulatory process, etc.
16
VI. WTO Accession



WTO Rules permit any Member who wishes
to negotiate bilateral agreement with
prospective members
Most favorable results of those agreements
combined in a single WTO accession
agreement
Two thirds majority vote required for new
members, but to date all accepted by
consensus
17
VI. WTO Accession


US, EU, Korea, Japan, China, Australia,
etc. realize Vietnam will be a major world
trader, and thus are seeking many
market-opening concessions
Bilateral agreements have been reached
to date only with Cuba; nearly 20 more
remain
18
VI. WTO Accession

In June, Vietnam significantly improved
its accession offer:
• Average bound tariff reduced from 22% to
•
•

18%
Greater services market-opening
Reduction in tariff rate quotas and other
exceptions
If all goes well, Vietnam could become a
WTO Member during 2005
19
VII. Doha Development Agenda


Efforts to Initiate new Round failed in
Seattle in 1999, due to concerns of
developing members and indecision in
US and EU
Doha round launched in November
1999, but progress to date has been
minimal
20
VII. Doha, cont’d.

Impasse at Cancun based on following
still unresolved issues:
• Inclusion of Singapore Issues (investment,
•
•
•
competition, transparency in government
procurement, trade facilitation)
Agricultural production and export subsidies
Agricultural market access
Extent to which developing countries will be
expected to make new commitments
21
VII. Doha, cont’d.

“Group of 20” led by Brazil, India, now
exercises considerable leadership over
many developing countries; unclear
whether G-20 will be an effective
negotiating force or simply a bar to
further progress
22
VII. Doha, cont’d.

US presidential election, changes in EU
Commission (November) and recent
accession of 25 new EU members (May)
make progress in Doha negotiations
unlikely before mid-2005
23
VIII. Rules of Origin/Customs



Eventual WTO Agreement on NonPreferential rules will likely use the tariffshift approach
In substance this is similar to U.S.
principle of “substantial transformation”
Uniformity in R/O important to facilitate
world trade
24
VIII. R/O, Customs, cont’d.

Preferential rules as in NAFTA and AFTA
may use several approaches
• Tariff shift
• Wholly produced locally
• Local content (50% - 60% in NAFTA, 40%
•
AFTA)
Specific component, e.g., color TV picture
tube
25
VIII. R/O, Customs, cont’d.


Harmonized System, used by US,
Vietnam and most other nations,
provides uniformity of classification for
more than 5,000 six digit commodity
groups
Uniformity facilitates trade and collection
of customs duties
26
IX. Agricultural Trade


Farmers are protected in every nation;
highest levels of protection are in EU,
US and Japan, but are also found in
China, Brazil, India and Mexico, among
others
GATT 1947 contained many exceptions
for agriculture, and did not effectively
regulate agricultural product trade
27
IX. Agricultural Trade, Cont’d.

Agreement on Agriculture reduces but does
not eliminate agriculture subsidies
•
•
•
•
Green box (non-distorting) subsidies aren’t
significantly restricted
Blue Box (less-trade-distorting) direct payments not
tied to production – less restricted
Amber Box (most restricting) tied to production, are
reduced
Export subsidies are significantly limited
28
IX. Agricultural Trade, Cont’d.



After expiration of “Peace Clause,”
agricultural subsidies are now restricted
under SCM Agreement
Agricultural subsidies prohibited if they
exceed Members’ commitments under AoA
Otherwise, actionable under SCM Agreement
only if adverse effects are shown.
29
X. Textiles and Clothing


For many decades, under Multi-Fiber
Agreement, developed countries have
imposed quotas on textiles and apparel
from developing nations
Under ATC, all such quotas will have
been phased out as of January 1, 2005,
although high tariffs may remain
30
X. Textiles/Clothing, cont’d.


Although ATC strongly supported by
country Members during Uruguay
Round, many are now concerned
Since China, India and a few other large
producers are no longer subject to
quotas, and are highly efficient
producers, smaller, less efficient
producers may not be able to compete.
31
X. Textiles/Clothing, cont’d.


Problem is particularly serious for small
producers in Caribbean, Central America
and Sub-Saharan Africa
Vietnam remains subject to U.S. quotas
until she becomes a member of WTO,
adversely affecting competitive position
in world textile market
32
XI. Trade Remedies Safeguards


GATT, Art. XIX contains “escape clause”
permitting reimposition of tariffs or
quotas as a result of increasing imports
causing serious injury to domestic
producers
Such language found in GATT 1947 and
most other trade agreements
33
XI. Safeguards, cont’d.


Another requirement is “unforeseen
circumstances,” unexpected surges as a
result of tariff concessions, which is
difficult to prove.
WTO Agreement on Safeguards
provides detailed procedural and
substantive requirements for initiation of
safeguard measures
34
XI. Safeguards, cont’d.


Many countries, such as US, exempt
FTA partners from global safeguards,
although WTO Appellate Body has made
this very difficult.
Developing country exports are
exempted if a country represents under
3% of total exports, or developing
countries in the aggregate, under 9%
35
XI. Safeguards, cont’d.


US – Steel Safeguards confirmed that
only increased imports throughout the
period of investigation would be
sufficient justification for safeguards.
FTA members who were major
producers– Mexico and Canada– could
not be excluded if their imports were
covered in the investigation
36
XI. Safeguards, cont’d.


Difficulties with regard to showing that
imports were cause of serious injury, FTA
issues, unforeseen circumstances,
makes a WTO legal safeguards action
by Member nations unlikely.
U.S. has special safeguards for “market
disruption” for NMEs; lower standard
37
XII. Trade Remedies - Dumping



Dumping most common of trade
remedies; over 100 WTO Members have
AD laws, as does Vietnam
Most common users are US, India, EU,
Australia and Argentina
To impose AD duty, domestic industry
needs to show dumping, and material
injury
38
XII. Dumping, cont’d.



WTO AD Agreement defines dumping as
price discrimination between foreign and
domestic markets
More logical focus on sales below
production cost, or predatory pricing, is
not used
AD laws best seen as a safety valve for
freer trade worldwide
39
XII. Dumping, cont’d.



Normal Value (NV) (usually price in home
market) compared to Export Price (EP)
If EP is lower than NV, difference is dumping
margin, with de minimis level of 2%
AD Agreement provides detailed procedural
protections and substantive rules for national
investigating authorities
40
XII. Dumping, cont’d.


Under AD Agreement and national laws,
various adjustments are to be made to
NV and EP so as to provide a “fair
comparison.”
Adjustment for freight, circumstances of
sale, differences in merchandise are
designed to result in a fair comparison at
the “ex factory” level
41
XII. Dumping, cont’d.


Non-Market economy countries, such as
Vietnam and China, are treated
differently
US, EU assume that various materials
and production costs (input data) are not
set by market forces, but through
government decisions, and are therefore
untrustworthy
42
XII. Dumping, cont’d.


Instead, Commerce (or the Commission)
uses a “surrogate,” normally a market
economy country such as India or
Bangladesh that is a significant producer of
the product, and is at a similar level of
development
In theory this seems reasonable, but the lack
of detailed public data from producers in the
surrogate country permit Commerce to make
many assumptions or adjustments that may
be adverse to NME country producers.
43
XII. Dumping, cont’d.


China, in its Accession Agreement with
the United States, accepted the concept
of NME treatment for 15 years!
US and China had recent discussions as
to how China can become a market
economy for AD purposes (like Russia)
but it likely will take many years to
change
44
XII. Dumping, cont’d.

Commerce initially determined that Vietnam
would be given NME treatment as part of
Basa/Catfish, based on:
•
•
•
•
•
•
•
Government intervention in economy
Non-convertibility of dong
Controls on foreign investment and investors
Use of government pricing committees
Discriminatory treatment of SOEs
Restrictions on private land ownership
Weak rule of law
45
XII. Dumping, cont’d.


While the surrogate approach is used for
NV, Vietnamese (and most Chinese),
exporters have been given “separate
rates” for determining EP
This is based on Commerce
determination that the exporters
determine selling prices without
government direction or interference.
46
XII. Dumping, cont’d.


In BASA/Catfish, Commerce used input
data from India and Bangladesh, and
found margins of approximately 36-64%
The US International Trade Commission
found material injury, based on the
significant increases in Vietnamese
imports over three years, and lower
prices in the U.S. market
47
XII. Dumping, cont’d.

While small producer countries are
exempt from AD injury findings if they
have imports which are less than 3%
individually or less than 7% in the
aggregate (Art. 5.8), Vietnam was
responsible for a far larger share of total
U.S. imports.
48
XII. Dumping, cont’d.


In Shrimp, Commerce found preliminary
AD margins of 12.11% to 19.60% for
most Vietnamese producers, although a
group of others received 93.13%
margins
A Bangladeshi company was used as
the surrogate for most input prices
49
XII. Dumping, cont’d.


Final AD determination could result in higher
or lower margins, after verification in Vietnam
and a hearing in Washington
If final AD margins are found, likely that
USITC will find material injury, as Vietnam
source imports (and those from five others,
China, Brazil, Ecuador, India, Thailand) are
rapidly increasing, while the U.S. domestic
producer market share is decreasing.
50
XIII. Trade Remedies –
Subsidies


US doesn’t bring countervailing duty
(CVD) actions against NMEs
US may nevertheless bring WTO actions
against Vietnam (once Vietnam is a
member) in WTO DSB against Vietnam’s
prohibited or actionable subsides under
Parts II and III of SCM Agreement
51
XIII. Subsidies


Subsidy defined (Art. 1 of SCM
Agreement) as financial contribution that
confers a benefit on recipient
Actionable or “yellow light” subsidies are
domestic subsidies that are “specific”
and cause injury, “nullification or
impairment” or serious prejudice. (Arts.
5,6)
52
XIII. Subsidies


Export (“Red Light”) subsidies are
prohibited under Art. 3 except for least
developed developing countries.
Certain subsidies (Art. 8) were from
1995-2000 specifically excluded; “Green
Light” subsidies were certain
environmental, regional and R&D
subsidies.
53
XIII. Subsidies

Developing countries, including Vietnam
once Vietnam is a member and no
longer treated as an NME, receive
certain benefits:
• Excluded if their exports are 4% or less of
•
•
import value, 9% or less in aggregate
2% de minimis level instead of 1%
Grace periods for export subsidies (now
expired)
54
XIV. WTO Dispute Settlement


WTO arguably most successful
international dispute settlement
mechanism in world history, under
WTO’s Dispute Settlement
Understanding (DSU)
309 cases filed as of March 2004, with
77 adopted panel or Appellate Body
Reports, at least 43 settled cases, most
of rest are pending or inactive
55
XIV. WTO Disputes, cont’d.


Both developed countries and
developing nations have been claimants
and respondents (66% to 33% more or
less)
Process under direction of Dispute
Settlement Body (DSB) contemplates
mandatory consultations, option of
conciliation, and then binding WTO
panel process
56
XIV. WTO Disputes, cont’d.

Prior to 1995 GATT dispute settlement was
unsatisfactory. New system makes major
improvements:
•
•
•
Strict time limits for cases, so serious delays are rare
Appellate Body (AB) reviews legal issues in interest of
consistency
Panel/AB decisions are automatically adopted in
absence of consensus not to adopt (never to date)
57
XIV. WTO Disputes, cont’d.


Panelists are chosen from Member
rosters, government or private persons
with trade expertise, not nationals of the
disputing parties
Panel accepts briefs, holds one or more
hearings, renders interim and then a final
decision, usually within about 12 months
58
XIV. WTO Disputes, cont’d.



Panel decision may be appealed on issues of
law only to AB; about 2/3 of cases go to AB
AB is standing group of seven members
chosen for four year (once renewable) terms
AB decisions are usually based on strict
textual reading of covered agreements,
following VCLT Arts. 31-32 for interpretation
59
XIV. WTO Disputes, cont’d.



AB process almost always concluded in
3 months
DSB normally adopts decision within a
month or less
Thus, total DSB process takes 16-20
months in normal circumstances
60
XIV. WTO Disputes, cont’d.

Losing Member has three choices:
• Comply with DSB decision (recommended)
• Negotiate compensation with prevailing party
• Accept retaliation (trade sanctions through
higher tariffs) from prevailing Member, as
approved by DSB
61
XIV. WTO Disputes, cont’d.

Implementation has been the rule, but
there have been exceptions resulting in
trade sanctions:
• EU – Growth Hormones
• EU – Bananas
• US – 1916 Antidumping Act
• US – Byrd Amendment
• US – Foreign Sales Corporations
62
XIV. WTO Disputes, cont’d.

Problems with DSB include:
• Difficulties for small countries to use trade
•
•
•
•
sanctions against large countries
Lack of transparency of panel/AB process
Costs of litigation before DSB
Treatment of non-member (NGO) briefs
Inability of WTO Members to effectively
supervise AB because of consensus voting
requirements
63
XV. Intellectual Property



TRIPS Agreement is comprehensive
treatment of IP issues
TRIPS initially was favored by developed
nations, who are highly competitive in
high technology exports
TRIPS opposed by developing world,
due to enforcement problems and
concerns over pharmaceutical products
64
XV. TRIPS, cont’d.

Major elements of TRIPS:
• National treatment
• Obligatory accession to IP treaties
• Minimum standards for registration of patents,
•
•
trademarks, etc.
Minimum standards for local enforcement
against piracy, including criminal penalties
Binding WTO dispute settlement
65
XV. TRIPS, cont’d.

Developing countries received special
grace periods for TRIPS implementation:
• Until 2000 for most developing countries
• Until 2005 for least developed countries
66
XV. TRIPS, cont’d.



US 301 and Special 301 remedies– used
largely against IP violations– arguably aren’t
really necessary now
US has option of seeking enforcement of
IP/TRIPS rules in DSB, and imposing
sanctions if responding Member does not
comply
For not WTO members, such as Vietnam,
Section 301 actions are a serious risk
67
XV. TRIPS, cont’d.



Section 337 mechanism– used to bar
entry of goods to US that violate a US
patent– still under use
Law requires an extensive and costly
administrative proceeding before USITC
Prevailing party can obtain exclusion
order, or cease and desist order
68
XVI. General Agreement on
Trade in Services


Objective of GATS is to apply GATT
principles for trade in goods to trade in
services
Area is of major importance to US, EU,
Japan, Canada, because they are more
competitive in services worldwide than in
manufacturing.
69
XVI. GATS, cont’d.

GATS has broad but not universal
coverage:
• MFN treatment is complete
• Transparency is required
• National treatment depends on individual
•
Member schedules
Degree of market access can be limited in
schedules, e.g., 49% ownership for foreign
banks
70
XVI. GATS, cont’d.


Financial services negotiations
completed in Dec. 1997; 104 Members
made at least some market opening
commitments, representing 95% of trade
in financial services
Commitments generally reduce
regulatory requirements, grandfather
existing operations
71
XVI. GATS, cont’d.


US GATS obligations are incorporated
by reference in VBTA
Telecommunications services
negotiations concluded in Feb. 1997; 69
governments made commitments; again,
95% of global telecommunications
market is covered.
72
XVI. GATS, cont’d.


Negotiations are continuing to achieve
“progressively higher level of
liberalization” as specified in GATS, art.
XIX:1
Significant progress awaits success of
Doha Round in other areas.
73
XVII. Standards and
Sanitary/Phytosanitary Measures


Technical Barriers to Trade (TBT)
Agreement designed to preserve
Members’ ability to implement standards,
without their unjustified use to restrict
trade
In most instances, national standards
are to be based on agreed international
standards.
74
XVII. TBT/SPS, cont’d.



Disagreements subject to WTO dispute
settlement
SPS Agreement deals with protection of
“human, animal and plant life or health
from risks” of pests, diseases, additives,
etc.
National measures must meet these
health related goals, avoid protectionism
75
XVIII. Trade-Related Investment
Measures


TRIMs Agreement is limited, compared
to bilateral investment treaties and
similar comprehensive agreements
Effectively applies only to “performance
requirements” and imposes certain
transparency requirements
76
XVIII. TRIMS, cont’d.

Examples of prohibited performance
requirements (TRIMS Annex) include:
•
•
requirements to use domestic parts and
components for local manufacturing, over
imported materials
Permitting export volumes based on the
volume of local production
77
XIX. Developing Countries and
World Trade

Special treatment under the WTO is
given to developing countries:
• Arts. XXXVI-XXXVII of GATT, “Trade and
•
•
Development”
Higher de minimis levels under AD
Agreement, SCM Agreement, Safeguards
Agreement
“Enabling Clause” permitting discrimination for
Generalized System of Preferences, AGOA,
etc.
78
XIX. Developing Countries,
cont’d.
• Doha Development Agenda may bring
“special and differential treatment” for
developing countries, if and when
negotiations are concluded.
79