T RAINING P ROGRAMME F OR T HE G OVERNMENT O F I NDONESIA S ESSION 3: The GATT 1994: Basic Principles Jogjakarta, Indonesia 26-29 March 2019
A GENDA General overview of WTO Obligations and Exceptions I. Article I of the GATT 1994 (Most-Favoured-Nation II. treatment) Article II of the GATT 1994 (Tariffs) III. Article III of the GATT 1994 (National treatment) IV. Article XI of the GATT 1994 (Quantitative Restrictions) V. and Article 4.2 of the Agreement on Agriculture (Market Access)
G ENERAL OVERVIEW OF WTO O BLIGATIONS AND E XCEPTIONS Category Type of obligation in the GATT 1994 and specific agreements Non-discrimination Most-favoured-nation: Article I:1 and Article XIII National treatment: Article III:2 and Article III:4 Border measures Tariffs: Article II and the Understanding Customs valuation, fees and formalities: Article II:2(c) and Article VIII; Customs Valuation Agreement Internal measures Technical regulations, standards, sanitary and phytosanitary measures Restrictions Quantitative restrictions: Article XI:1 and Article 4.2 of Agriculture Agreement Subsidies General obligations: Article 1- 7 Subsidies Agreement Agricultural subsidies: Article 2-11, Agriculture Agreement Exceptions Public policy exceptions: Article XX Foreign policy exceptions: Article XXI
A RTICLE I: MFN T REATMENT Import duties State trading Quotas and TRQs Article I:1 Article XVII:1 Article XIII:2 Benefits of duty reductions STEs shall make purchases Distribution of trade and other measures must be involving imports solely in approaching shares that extended to all Members accordance with commercial Members could have immediately and considerations. obtained in the absence of unconditionally. the restrictions.
A RTICLE I: MFN T REATMENT With respect to customs duties and charges of any kind imposed on or Measures in connection with importation or exportation or imposed on the covered international transfer of payments for imports or exports, and with respect to the method of levying such duties and charges, and with respect to all rules and formalities in connection with importation and exportation, and with respect to all matters referred to in paragraphs 2 and 4 of Article III, any advantage, favour, privilege or immunity granted by any contracting party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the Advantage, territories of all other contracting parties. favour, etc. To like Accorded products of immediately other origins /unconditionally
L EGAL T EST UNDER A RTICLE I A violation of Article I:1 exists if the following elements are present: (1) The measure at issue must fall within the scope of application of Article I:1 (broad scope of measures). (2) The measure confers an "advantage, favour, privilege, or immunity" on a product originating in the territory of any country; (3) Imported products from different origins must be "like" products within the meaning of Article I:1. (4) That advantage is not extended "immediately" and "unconditionally" to "like" products originating in the territory of all Members
W HAT IS " UNCONDITIONALLY "? • Does the obligation to extend advantages “unconditionally” mean countries cannot impose any conditions? No Canada – Autos (Panel report, para. 10.23): “[W]e consider that the obligation to accord ‘unconditionally’ to third countries which are WTO Members an advantage which has been granted to any other country means that the extension of that advantage may not be made subject to conditions with respect to the situation or conduct of those countries ” “This means that an advantage granted to the product of any country must be accorded to the like product of all WTO Members without discrimination as to origin” .
N O TRADE EFFECTS ARE REQUIRED • Under Article I, just like under Articles III and XI, no evidence of an actual trade impact is required (also known as “trade effects”) . • For example, no need to show that imports have declined as a result of the measure. • Emphasis on "design, structure, and expected operation" of the measure.
D E J URE AND DE F ACTO DISCRIMINATION • The MFN obligation of Article I of the GATT covers "de jure and de facto" discrimination. • De jure: the measure provides discriminatory treatment in the text of the law itself. • De facto : although the measure is phrased in originl- neutral terms, in practice certain countries benefit while others do not.
S PAIN – U NROASTED C OFFEE (GATT) • Spain introduced a new tariff heading to separate different types of unroasted coffee: • Coffee from "mild" beans (Colombia): duty free • Coffee from "unwashed arabica" / robusta beans (Brazil): 7% • Spain argued that these were different products and, thus, no discrimination existed. • Panel found: • Both types of coffee are "like" products. • The measure violates Article I:1 because the disadvantaged producto is exported mainly by Brazil. Therefore, Spain’s tariff regime was discriminatory vis-a-vis unroasted coffee originating in Brazil.
A RTICLE II: T ARIFFS Article II:1(a) of the GATT 1994 provides: Each [Member]shall accord to the commerce of the other [Members] treatment no less favourable than that provided for in the appropriate Part of the appropriate Schedule annexed to this Agreement. Article II:1(b) of the GATT 1994 provides: The products described in Part I of the Schedule relating to any [Member], which are the products of territories of other [Members], shall, on their importation into the territory to which the Schedule relates, and subject to the terms, condition or qualifications set forth in that Schedule be exempt from ordinary customs duties in excess of those set forth and provided herein. Such products shall also be exempt from all other duties or charges of any kind imposed on or in connection with the importation in excess of those imposed on the date of this Agreement or those directly and mandatorily required to be imposed thereafter by legislation in force in the importing territory on that date.
A RTICLE II: T ARIFFS The provisions of Article II are important because they preserve the balance of tariff concessions. The Appellate Body has stated: A basic object and purpose of the GATT 1994, as reflected in Article II, is to preserve the value of tariff concessions negotiated by a Member with its trading partners, and bound in that Member's Schedule. Once a tariff concession is agreed and bound in a Member's Schedule, a reduction in its value by the imposition of duties in excess of the bound tariff rate would upset the balance of concessions among Members. Appellate Body Report , Argentina – Textiles , para. 47.
Tari ariff/Duty Type Description Example(s) Specific Based on a unit of measure 5 dollars per kilogram. such as the weight, volume, etc. of the goods. Ad valorem Percentage of the value of 7% (so the duty on a car the goods. worth US$7,000 would be US$490). Mixed Alternative between an ad 7% or 5 dollars per kilogram valorem duty and a specific whichever is less; duty. 7%, but not more than 5 dollars per kilogram. Compound An ad valorem duty to 7% + 5 dollars per kilogram. which a specific duty is added. "Technical" / other Based on specific contents, For batteries: or on duties that 0.55¢/kg on the manganese apply to related products or content; components. 48¢ each + 4.6 % on the case + 3.5 % on the battery. Based on chart produced by WTO Market Access Division
Tariff/Duty Type Description Example(s) Specific Based on a unit of measure 5 dollars per kilogram. such as the weight, volume, etc. of the goods. Ad valorem Percentage of the value of 7% (so the duty on a car the goods. worth US$7,000 would be US$490). Mixed Alternative between an ad 7% or 5 dollars per kilogram valorem duty and a specific whichever is less; duty. 7%, but not more than 5 dollars per kilogram. Compound An ad valorem duty to 7% + 5 dollars per kilogram. which a specific duty is added. "Technical" / other Based on specific contents, For batteries: or on duties that 0.55¢/kg on the manganese apply to related products or content; components. 48¢ each + 4.6 % on the case + 3.5 % on the battery. Based on chart produced by WTO Market Access Division
W HAT IS A T ARIFF -R ATE Q UOTA OR TRQ? Tariff rate quotas: There are at least two levels of tariffs 100$ 5 $ Tariff differentiation is based on volumes imported 10000 t
S CHEDULES OF C ONCESSIONS • Not all products are subject to tariff concessions. • Tariff concessions are set out in a Member's Schedule of Concessions. • Each WTO Member has a separate Schedule of Concessions (special case: the EU). • Pursuant to Article II:7 of GATT, a Member’s Schedule of Concessions is an integral part of this agreement. • Note that Article XII Member’s Schedules of Concessions in goods and services become Schedules of the GATT/GATS, respectively, according to Section II of each WTO Accession Protocol.
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