International Trade Law Analysis Essay Example

Uruguay Round, began in Punta Del Uruguay during the Ministerial Conference. After liberalizing international trade further than before, an agreement was reached resulting in GATT being transformed into a fully-fledged institution: the World Trade Organization (WTO). All GATT members must comply with WTO requirements which are part of GATT 1994.

It is necessary for state A and B to follow the same rules when it comes to their domestic issues since they are both members. The WTO operates with an executive apparatus, a legislative apparatus, and a dispute mechanism, all of which play crucial roles in making the organization functional. The executive apparatus monitors agreements, handles negotiations and implementation, while the legislative apparatus ensures the agreement is translated into domestic law. Additionally, the dispute mechanism offers protection and solutions for issues that may arise. There are five primary requirements that state A and B must uphold and assist with.

Non-discrimination in international trade involves two components: the Most Favoured Nation (MFN) rule and the National Treatment (NT) policy. While the concept of non-discrimination seems simple - to not discriminate, exclude, or treat another member state differently - equal treatment may not always be feasible. In promoting a multilateral free trade market, the GATT and WTO acknowledge that fairness must also be considered, particularly for marginalized and disadvantaged populations.

International trade law recognizes the importance of making exceptions to the non-discrimination rule. The trade law system allows for certain exceptions to the non-discrimination principle, indicating that it would not be as damaging or inconsistent with the current trade laws as it may first appear. Reciprocity is also a key factor in trade law, requiring states to treat each other

equally and limiting the effects of the MFN rule and unfair advantages. However, for reciprocity to be effective, there must be reciprocal gains, or it will not be deemed fair. If State A is experiencing domestic hardship, they may not have the desire or ability to reciprocate because continuing trade would be detrimental to their employment and economic stability. To address this concern, exceptions are provided in emergency situations by the WTO.

3. The aim is to exchange information and address any issues either amongst each other or through the GATT. 4. Another objective is to safeguard and sustain the environment. 5. Moreover, the goal is to strengthen methods for safeguarding and conserving the environment.

To determine the impact of state A's implementation of subsidies under the WTO, one must consider the definition of a subsidy. This refers to financial assistance provided by a public body or government to aid a company that would otherwise fail, causing trade distortion and unfair advantages in a free market. Subsidies can create two types of equilibriums, whereby increased production subsidies result in lower prices and increased demand subsidies tend to hike up prices. Examples of subsidies include: ...

Refers to the provision of funds through means such as grants, loans, and equity infusion, as well as the possible transfer of funds or liabilities.

The term 'financial contribution' relates to support given by a government to their domestic industries. This can include guarantees for loans, government revenue that is not collected, the provision of goods or services outside of general infrastructure, payments made to a funding mechanism, or directive to a private organization to carry out any of the aforementioned functions. The US-Tax

Treatment for 'Foreign Sales Corporations' case by the Appellate Body illustrates a 'normative benchmark' for comparative analysis of revenues raised versus potential revenues. Subsidies fall under three categories: actionable, non-actionable, and prohibited. State A has implemented various subsidies, which if deemed prohibited or actionable, can be contested through dispute resolution mechanisms or by imposing domestic countervailing duties.

Although non actionable subsidies are exempt from the mentioned provisions, if such subsidies are causing significant harm to the domestic industry of a member state, the subsidies committee may suggest modifying the program8.

The Agreement on Subsidies and Countervailing Measures (SCM) outlines actionable, prohibited, and non-actionable subsidies, which resulted in the Tokyo Round Subsidies Code. While GATT 1994 Article VI did not allow for anti-dumping and countervailing duties to be enforced administratively, the Protocol of Provisional Acceptance provided precedence to existing domestic laws at the time of GATT's signing, giving the US government the freedom to countervail without demonstrating economic justification. However, due to concerns regarding an imbalance within the international arena caused by the US's actions, restrictions had to be put in place. The Tokyo negotiations brought together GATT Articles VI, XVI, and XXIII with SCM, allowing for countervailing duties to only be pursued if subsidised products were causing harm to domestic producers.

The discrepancy between GATT and SCM is that GATT imposes 'specific' subsidies that will only be governed by the provisions of the agreement, such as a particular industry. On the other hand, the SCM agreement declares that actionable subsidies must not have any detrimental impact on the interests of other member states.

The nullification or impairment of benefits that directly or indirectly affect the domestic industry

of any signatory is considered an injury.

The subsiding member has the burden of proof in cases of serious prejudice, showing that their subsidies do not cause harm to the complaining member. If State A's subsidy is deemed actionable, they must demonstrate that it does not harm State B. If State B disagrees, the matter can be referred to the Dispute Settlement Body (DSB). Prohibited subsidies fall under SCM11, and exceptions must be made for them to be allowed. If State B suspects that State A's subsidies are prohibited, the first step is to consult relevant members and inform GATT. Evidence must be provided by State B during the consultation to support their beliefs and demonstrate how they have been impacted.

State A will undergo further consultation to clarify facts and attempt to reach resolutions. If mutual decisions cannot be reached within 30 days, the matter will be taken to the DSB. During the panel process, assistance may be required from the Permanent Group of Experts. The final decision will rest with the PGE, which cannot be modified by the panel. Should the decision be prohibition, State A will have a limited timeframe to cease all subsidies. Failure to do so may result in State B being able to take countermeasures with the support of the DSB.

Non-actionable subsidies are subsidies that comply with all provisions and do not fall under the category of specific subsidies as per Article 2. These may include research, education, and infrastructure subsidies.

While the World Trade Organization (WTO) agreement upholds principles of free trade and the Most-Favored Nation (MFN) rule, it also allows exceptions to these primary principles. This provision of exceptions can

be viewed as a beneficial factor for the flexibility of a multilateral organization. However, it is not shielded from criticisms.

One example of countervailing duties is their use to counteract subsidies and address anti-competitive practices by exporting countries that harm domestic industries. State B may implement this mechanism to balance profit loss and lessen injury to their shoe industry, possibly requiring import duties on State A. These measures must adhere to the regulations in Article VI of GATT 1994, which cover general rules on countervailing and anti-dumping duties.

The term 'Countervailing duty' pertains to a specific type of duty that is enforced in order to counter any form of subsidies or rewards given, either directly or indirectly, for the production, manufacture, or exportation of an item. Such duties come under the jurisdiction of 'anti-dumping duties', which aim at preventing discrepancies in trade prices. According to Article VI s6 of GATT 1994, products should not be subject to countervailing or anti-dumping duties unless they are exempt from taxes or duties that would normally apply if not intended for exportation. Price stabilization systems implemented for primary commodities are not classified as countervailing provided such systems do not cause distortions.

GATT 1994 Article VI Section 1 pertains to subsidies and mandates that members must inform the GATT of any subsidies that impact imports and exports, directly or indirectly. In addition, members have a responsibility to consult with any affected parties. State A ought to have already notified the GATT of changes made. It is acknowledged that providing subsidies for exports may have negative effects on importing and exporting members, cause disruption to their commercial interests, and obstruct the objectives of the

agreement.