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WORLD BANK SEMINARRussian Academy of State Service

Moscow, March/April 2005

THE WTOWHO ARE YOU?

Norio KOMURO, Professor of International Economic Law, Kobe

University Law SchoolE-mail: QZY03142@nifty.com

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TABLE OF CONTENT

Introduction

I. The WTO, Where Do you Come From?

II. The WTO, What Are You Doing?

Conclusion

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INTRODUCTION The WTO

a Modern Sphinx

Perception GAPAnti-WTOismPro-WTO

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I. The WTO, Where Do you Come From?

1. Protectionism and Trade Block on the Eve of WWII

2. ITO and GATT

3. From GATT to WTO

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1.1Protectionism on the Eve of WWI

Canada’s Protectionism: High tariffs for the investment-inviting purposes; 1904 Antidumping Duty Law

French Méline Tariff of 1892

Protectionism following the Great Depression

Smoot-Hawley High Tariff and Quota

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1.2 Trade Block on the Eve of WWII

1932 Commonwealth Preferences

Grossraumwirtschaft

Greater East Asia Co-prosperity Sphere of Japan

French Block

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2. ITO and GATT

• Common Objectives: Prevention of the WWIII: Eradication of Three Factors triggering the World War

1. Free Trade vs. Protectionism

2. Non-Discrimination vs. Trade Block

3. Multilateralism vs. Isolationism

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3. From GATT to WTO1. GATT – Provisional Application Shortcomings: Lack of International

Personality; Weak Dispute Settlement; Grandfather Clause; GATT à la carte etc

2. WTO – Law Revolution Innovation: International Personality;

Scope Expansion; Dispute Settlement; Constitutionalism

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II. The WTO, What Are You Doing?

1. Bird’s Eye View2. Single Undertaking of Iceberg

Rules3. Principles and Exceptions4. Institutional Structure5. Dispute Settlement

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1. Bird’s Eye View: WTO Regime

WTO-COVERED AREA NEW AREA

Principles Goods Services IP EnvironmentCompetition Investment

Human Cloning

Vivisection

Culture

Syberterro

Non-discrimination

1. Most Favored Nation (MFN) Treatment

2. National Treatment

Free Trade Tariff & NTB

Exceptions

Market Access

Multilateralism

Dispute Settlement Understanding

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2.1 WTO Agreements: IcebergWTO Agreement (16 Articles) Tip of the Iceberg

Annex 11A Goods

1B Services1C TRIPs

Annex 2 DSU

Annex 3 TPRM

Annex 4 Plurilateral: GPA

SEAMaterial Trade Rules

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2.2 Single Undertaking :excluding the GPA

WTO Agreement

Annex 11A Goods

1B Services1C TRIPs

Annex 2 DSU

Annex 3 TPRM

Annex 4 Plurilateral: GPA

À la Carte

Single Undertaking

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2.3 WTO Agreements Plus αWTO AgreementTip of the Iceberg

Annex 11A Goods

1B Services1C TRIPs

Annex 2 DSU

Annex 3 TPRM

Annex 4 Plurilateral: GPA

WTO Accession ProtocolsChina (Russia) etc.

ITAHarmonized Rules

Of Origin?

4th Protocol: Telecom: Reference Paper

5th Protocol: Financial

Antiretroviral Decision

Case-law

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3. Principles and Exceptions

Trade in Goods

Principles

Principles Exceptions

(Flexibility)

Non-Discrimination

MFN

NT

Preferences (GSP, FTA) etc.

Government Procurement

Free-Trade Tariff Lowering

NTB Elimination

Safety Valves (AD, CVD, SG)

Multilateralism DSU Other DS

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MFN, the First Pillar of Non-Discrimination

• MFN Principle – Goods, Services, IP• Exceptions GSP Preferences Customs Union and FTA Waiver Retaliation, Counter-measures Discrimination against China GATT Art. XX and XXI GATT XXXV – WTO Art.13

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Essentials of the MFN

1. Like Products from other WTO Members

2. Import/Export, Treatment of Imports at all Stages (Customs Clearance, Procedures – Internal Transport, Sales, Use)

3. Unconditional MFN: Free-Riding

4. De jure & De facto Discrimination

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Cases on the MFN

• Spain-Unroasted Coffee Beans Colombian Mild Arabica, Unwashed Arabic

a, Robusta • Japan-SPF Lumber Tariffs Spruce Pine Fir• EC-Bananas I. II. III ACP Bananas, Latin American Bananas • Canada-Auto Pact: US Big 3 vs. J-EU

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MFN: Like Product Definition

• GATT/WTO Silence on Criteria of the Likeness

• GATT/WTO Panels made no in-depth analysis on the likeness in past cases

• Are all coffee beans like? Are all wood lumbers like? Are all bananas like? Are all cars like? Are gasoline cars and eco-cars like? Are natural and GMO beans like?

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Question on MFN

• Suppose the U.S. accorded some advantages exclusively to a good from a non-WTO Member country.

• Can a concerned WTO-Member country argue that the U.S. infringed the MFN?

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NT, the Second Pillar of Non-Discrimination

• National Treatment Principle Goods Services (Positive Commitment Regime)

IP• Exceptions Government Procurement Cinema Film Subsidies to domestic producers etc.

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NT: No less favorable treatment

• Equal, the same treatment

IP: Paris and Berne Convention

• Reverse discrimination compatible with the NT

c.f. EC Court of Justice Judgment

127/75 Bobie vs. Hauptzollamt Achen-Nord

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NT: Goods, Services, IP

1. Internal Tax (1) Discriminatory Internal Tax (2) Protective Internal Tax2. Domestic Regulation Transport, Sales, Use and Distribution Mixing Regulation etc.3. Services, IP

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NT: Internal Indirect Tax

1. Discriminatory Internal Tax

(1) Like Products

higher tax on imports

lower tax on domestic products like to the imports

(2) The Same Tax Rate

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NT: Internal Indirect Tax

2. Protective Internal Tax (1) Competing Products higher tax on imports lower tax on domestic products com

peting the imports (2) De minimis Rule Japan-Alcohol Beverage Compensation

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Cases on the NT

• EC-Anticircumvention Measures• US-Superfund• US-Reformulated Gasoline• Japan- Alcohol beverage• Canada-Periodicals• Indonesia-Cars• EC-Bananas• Canada-Auto Pact

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NT: Question 1

Suppose a WTO Member country X imposes a higher tax on mini cars (about 3.3 meters long and 1300 cc capacity) classified as ordinary cars and a lower tax on small cars (less than 3.3 meters long and less than 1300 cc capacity).

Can a WTO Member country Y exporting the mini cars argue that the country X’s indirect tax is WTO-inconsistent?

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NT: Question 2

Suppose a WTO Member country X requires a manufacturer of margarine to use a certain ratio of domestic butter.

Is this WTO-consistent?

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NT: Question 3

Suppose a WTO Member country X requires a manufacturer of margarine to use a certain ratio of butter, irrespective of whether the butter is imported or domestic.

Is this WTO-consistent in a certain situation?

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Free Trade Principle

1. Principle Tariff Barriers: Round negotiations;

Tariff peak items of the Quad Non Tariff Barriers: QR, TBT etc.2. Safety Valves SPS Trade Remedies (AD, CVD, SG) New Issues

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Free Trade and Vivisection

Question: A WTO-Member country X prohibited sales and imports of cosmetics manufactured based on animal experiments.

Is this WTO-consistent?

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Free Trade and Biodiversity

Cartagena Protocol on Biosafety based on the Biodiversity Treaty: Precautionary measures

Conflict between the WTO/SPS and the Cartagena Protocol

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Free Trade and GMO

Japan imports GMO agricultural products from the U.S. However, Japanese manufacturers are required to affix the negative marking “GMO-free”. This contrasts with the EU’s import ban of U.S.-made GMO products.

What is the Russian policy?

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Free Trade and Trade Remedies

Overview of Trade Remedies• Anti-dumping• Countervailing Measures• Safeguards: General SG;

Special SG (Agriculture Agreement); SG against China; GSP/FTA SG

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Japan’s SG on Agricultural Products

1. General SG, but not Special Agro SG

2. Japan’s Provisional SG on:

Welsh onion; Shiitake mushroom; Tatami rushes of Juncus effusus

3. SG Duty Rate = Price Undercutting

4. Problems: Lack of tariff number of Tatami rushes; Chinese Retaliation on Cars, Mobiles and Air conditioners from Japan; Solution by VER

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4. Institutional Structure

1. Institutional Innovation

2. Decision-Making

3. Budget

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WTO Organization Chart

Ministerial Conference

DSB (DisputeSettlement Body)

General CouncilTrade Policy

Review Council

CommitteesDevelopmentEnvironmentBudget etc

ServicesCouncil

TRIPsCouncil

GoodsCouncil

CommitteesAgri, TBT, ADROO, SG etc.

CommitteesFinancial etc.

Appellate Body

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New Round Organization Chart

Ministrerial Conference

General Council

Dispute Settlement

Body

Trade Policy

Review Council

TNC

7 Groups

3 Councils

TNC (Trade Negotiations Committee)

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Decision-Making in the WTO1. Decision-making of the General Council

(1) Consensus Principle

(2) Fall-back to Voting in Case of Veto-Blocking

- Simple Majority

- Three-fourths majority: interpretation; waiver

- Two-thirds majority in case of amendments

2. Decision-making of the DSB: Negative consensus

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Budget of the WTO

Budget: Contributions by WTO MembersContribution amount based on each Membe

r’s share of international trade (goods, services and IP rights)

Member’s contribution ratio in the year 2003: EC 15 Members 38.35% (Germany 8.9%, UK 5.7%, France 5.3%); US 16 %; Japan 6.4%; Canada 3.9%; China 3.2%; HK 3.2%; Taiwan 2.0%.

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4. Dispute Settlement

1. DSB’s negative consensus rule: Automatic adoption of Panel/AB reports

2. Three-stage DS: Original P/AB; Compliance P/AB; Retaliation

3. Janus-faced DS: Traditional Negotiation & Adjudication

4. WTO’s Tusk: DSU

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DS under the GATT and WTO

1. GATT Panel Cases 197 cases under the GATT Art.23 7 cases under the GATT AD Code 13 cases under the GATT CVD Code 3 cases under the GATT GPA Total: 220 cases (1948-1994)2. WTO Consultation & Panel Cases Total: 325 cases (1995-January 2005)

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Problems of the WTO DS

1. Textual Defects of the DSU Retaliation in EC-Bananas III Political compromise2. Standard of Review3. Deference to National Sovereignty4. Discretionary/Compulsory Law5. Remedies: non-retroactive remedies

in AD cases

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Conclusion

1. Pending Issues

2. Merit of the WTO Accession

The WTO Would Make Russia as a New Member Happy. Why not?

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1. Pending Issues

1. Harmonization of Non-preferential Rules of Origin

2. FTA

3. New and Cross-cutting Issues

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FTA Block: Crucial Questions

Do multiple FTAs erode the WTO non-discrimination? What is a difference between pre-WWII blocks and present FTA blocks?

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2. Merit of the WTO Accession and Russia

Recognition of Russia’s Market-Economy Country Status by the US and EC: Antidumping

Availability to WTO DS to Challenge Trade Barriers to Russia’s Goods, Services and IP Right Holders