Unit -I

Introduction
International trade law includes the appropriate rules and customs for handling trade
between countries. However, it is also used in legal writings as trade between private
sectors. This branch of law is now an independent field of study as most
governments have become part of the world trade, as members of the World Trade
Organisation (WTO). Since the transaction between private sectors of different
countries is an important part of the WTO activities, this latter branch of law is now a
very important part of the academic works and is under study in many universities
across the world.

1) General Agreement on Tariffs and Trade (GATT)

General Agreement on Tariffs and Trade (GATT) was an international trade
agreement signed in 1947. 23 nations were signatories of this trade agreement.
GATT came into effect on January 1, 1948. The purpose of GATT was to liberalise
trade by reducing tariffs and reducing quotas among member countries. The
member nations had to remove all the trade discriminations. The 7 rounds of
negotiations from 1947 to 1993 reduced average tariffs on industrial goods from 40%
to 5%. The steps taken at GATT led to economic globalisation.
How Many Countries were in GATT?

By the end of the Uruguay Round of negotiations in 1994, 128 countries were part of
GATT.
Objectives:
The objectives of GATT are as follows:
To encourage full employment and large and steadily growing volume of real income
and effective demand.
To improve the world production and exchange of goods.
To ensure the full use of world resources.
To ensure a steady improvement in the living standards of people in member
countries.
To settle the disputes through consultation within the framework of GATT.
GATT Rounds:
Between 1947 and 1995 there were 8 rounds of negotiations between the
participating countries. The first 6 rounds were related to curtailing tariff rates, 7th
round included the non-tariff obstacles.

The 8th round was entirely different from the previous rounds because it included a
number of new subjects for consideration. This 8th round known as “Uruguay
Round” became most controversial. The discussions at this round only gave birth to
World Trade Organisation (WTO)

What Is the World Trade Organisation?

World Trade Organisation (WTO) is an international organisation with 164 member
countries and headquarters in Geneva, Switzerland
The primary purpose of WTO is to reduce trade barriers between nations.
The agreements negotiated and signed by the member countries are an integral part
of WTO. These agreements deal with global rules of trade between member
countries.
WTO is a negotiating forum
It is a set of rules to govern international trade.
It helps to settle trade-related disputes.
Origin of World Trade Organisation.

World Trade Organisation (WTO) was established on 1 Jan 1995. It is a successor to

General Agreement on Tariffs and Trade (GATT) which was in place since 1948.
Over the years GATT evolved through various rounds of negotiations.
The last GATT round was the Uruguay round which lasted from 1986 to 1994. This
Uruguay round of negotiations led to the creation of WTO.
The WTO was established under the Marrakesh Agreement signed in the Uruguay
round in 1994.
India is the founding member of WTO. China joined in 2001 and Russia in 2012.
As of 2017, WTO has 164 members and Afghanistan became the 164th member on
29 July 2016.
The core agreements of WTO are:
General Agreement on Tariffs and Trade (GATT)
General Agreement on Trade in services (GATS)
The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS),
Dispute settlement
Trade policy review.

Principles of the WTO agreements

The WTO establishes a framework for trade policies; it does not define or specify
outcomes. That is, it is concerned with setting the rules of "trade policy." Five
principles are of particular importance in understanding both the pre-1994 GATT and
the WTO:

Non-discrimination.
It has two major components: the most favored nation (MFN) rule and the national
treatment policy. Both are embedded in the main WTO rules on goods, services, and
intellectual property, but their precise scope and nature differ across these areas.
The MFN rule requires that a WTO member must apply the same conditions on all
trade with other WTO members, i.e., a WTO member has to grant the most favorable
conditions under which it allows trade in a certain product type to all other WTO
members."Grant someone a special favor and you have to do the same for all other
WTO members.
National treatment means that imported goods should be treated no less favorably
than domestically produced goods (at least after the foreign goods have entered the
market) and was introduced to tackle non-tariff barriers to trade (e.g. technical
standards, security standards et al. discriminating against imported goods).

Reciprocity.
It reflects both a desire to limit the scope of free-riding that may arise because of the
MFN rule and a desire to obtain better access to foreign markets. A related point is
that for a nation to negotiate, it is necessary that the gain from doing so be greater
than the gain available from unilateral liberalization; reciprocal concessions intend to
ensure that such gains will materialize.

Transparency.
The WTO members are required to publish their trade regulations, to maintain
institutions allowing for the review of administrative decisions affecting trade, to
respond to requests for information by other members, and to notify changes in trade
policies to the WTO. These internal transparency requirements are supplemented
and facilitated by periodic country-specific reports (trade policy reviews) through the
Trade Policy Review Mechanism (TPRM).[61] The WTO system tries also to improve
predictability and stability, discouraging the use of quotas and other measures used
to set limits on quantities of imports.

Safety values.
In specific circumstances, governments are able to restrict trade. The WTO's
agreements permit members to take measures to protect not only the environment
but also public health, animal health and plant health.

The WTO Dispute Resolution Mechanism

Consultation
Good Offices, Conciliation and Mediation
Panel Phase
Appellate Body Review
Remedies
Arbitration

2) Agreement on Agriculture
The Agreement on Agriculture (AoA) is a World Trade Organisation treaty that
focuses on reducing the agricultural support and subsidies given to domestic
producers by countries. It is one of the most contentious agreements within the
WTO. In this article, you can read all about the WTO Agreement on Agriculture, its
impact on India and also how developed countries have been taking advantage of
the WTO regime in their favour. This is an important topic for the UPSC exam
economy and agriculture segments.
Three pillars of Agreement on Agriculture:
Domestic Support:
- It calls for reduction in domestic subsidies that distorts free trade and fair
price.
- Under this provision, the Aggregate Measurement of Support (AMS) is to be
reduced by 20% over a period of 6 years by developed countries and 13%
over a period of 10 years by developing countries.
- Under this, Subsidies are categorised into:

Market Access:
Market access for goods in the WTO means the conditions, tariff and non-tariff
measures, agreed by members for the entry of specific goods into their markets.
Market access requires that tariffs fixed (like custom duties) by individual countries
be cut progressively to allow free trade. It also required countries to remove non-tariff
barriers and convert them to Tariff duties.
Export Subsidy:

Subsidy on inputs of agriculture, making export cheaper or other incentives for

exports such as import duty remission etc are included under export subsidies.
These can result in dumping of highly subsidised (and cheap) products in other
countries and damage the domestic agriculture sector of other countries.

AGREEMENT ON SANITARY AND PHYTOSANITARY MEASURES

• The Agreement on the Application of Sanitary and Phytosanitary Measures (the

"SPS Agreement") entered into force with the establishment of the World Trade
Organisation on 1 January 1995.
• It concerns the application of food safety and animal and plant health regulations.
INTRODUCTION

The Sanitary Phytosanitary Measures Agreement

• The Agreement on the Application of Sanitary and Phytosanitary Measures sets out
the basic rules for food safety and animal and plant health standards.
• It allows countries to set their own standards. But it also says regulations must be
based on science.
• They should be applied only to the extent necessary to protect human, animal or
plant life or health.
• And they should not arbitrarily or unjustifiably discriminate between countries where
identical or similar conditions prevail.

Key Features

• All countries maintain measures to ensure that food is safe for consumers, and to
prevent the spread of pests or diseases among animals and plants.
• These sanitary and phytosanitary measures can take many forms, such as
requiring products to come from a disease-free area, inspection of products, specific
treatment or processing of products, setting of allowable maximum levels of pesticide
residues or permitted use of only certain additives in food.
• Sanitary (human and animal health) and phytosanitary (plant health) measures
apply to domestically produced food or local animal and plant diseases, as well as to
products coming from other countries.

Protection or protectionism

• Sanitary and phytosanitary measures may result in restrictions on trade. All

governments accept the fact that some trade restrictions may be necessary to
ensure food safety and animal and plant health protection.
• However, governments are sometimes pressured to go beyond what is needed for
health protection and to use sanitary and phytosanitary restrictions to shield
domestic producers from economic competition. Such pressure is likely to increase
as other trade barriers are reduced as a result of the Uruguay Round agreements.
• A sanitary or phytosanitary restriction which is not actually required for health
reasons can be a very effective protectionist device, and because of its technical
complexity, a particularly deceptive and difficult barrier to challenge.
• The Agreement on Sanitary and Phytosanitary Measures (SPS) builds on previous
GATT rules to restrict the use of unjustified sanitary and phytosanitary measures for
the purpose of trade protection.
• The basic aim of the SPS Agreement is to maintain the sovereign right of any
government to provide the level of health protection it deems appropriate, but to
ensure that these sovereign rights are not misused for protectionist purposes and do
not result in unnecessary barriers to international trade.

Justification of measures

It requires that sanitary and phytosanitary measures be applied for no other purpose
than that of ensuring food safety and animal and plant health. In particular, the
agreement clarifies which factors should be taken into account in the assessment of
the risk involved. Measures to ensure food safety and to protect the health of
animals and plants should be based as far as possible on the analysis and
assessment of objective and accurate scientific data.

International standards

• The SPS Agreement encourages governments to establish national SPS measures

consistent with international standards, guidelines and recommendations. This
process is often referred to as "harmonization". The WTO itself does not and will not
develop such standards.
• However, most of the WTO’s member governments (132 at the date of drafting)
participate in the development of these standards in other international bodies. The
standards are developed by leading scientists in the field and governmental experts
on health protection and are subject to international scrutiny and review.
• International standards are often higher than the national requirements of many
countries, including developed countries, but the SPS Agreement explicitly permits
governments to choose not to use the international standards.

Adapting to conditions
• Due to differences in climate, existing pests or diseases, or food safety conditions,
it is not always appropriate to impose the same sanitary and phytosanitary
requirements on food, animal or plant products coming from different countries.
• Therefore, sanitary and phytosanitary measures sometimes vary, depending on the
country of origin of the food, animal or plant product concerned. This is taken into
account in the SPS Agreement.
• Governments should also recognise disease-free areas which may not correspond
to political boundaries, and appropriately adapt their requirements to products from
these areas.
• The agreement, however, checks unjustified discrimination in the use of sanitary
and phytosanitary measures, whether in favour of domestic producers or among
foreign suppliers.

Alternative measures
An acceptable level of risk can often be achieved in alternative ways. Among the
alternatives and on the assumption that they are technically and economically
feasible and provide the same level of food safety or animal and plant health
governments should select those which are not more trade restrictive than required
to meet their health objective. This helps ensure that protection is maintained while
providing the greatest quantity and variety of safe foodstuffs for consumers, the best
availability of safe inputs for producers, and healthy economic competition.

Risk Assessment

The SPS Agreement increases the transparency of sanitary and phytosanitary

measures. Countries must establish SPS measures on the basis of an appropriate
assessment of the actual risks involved, and, if requested, make known what factors
they took into consideration, the assessment procedures they used and the level of
risk they determined to be acceptable. Although many governments already use risk
assessment in their management of food safety and animal and plant health, the
SPS Agreement encourages the wider use of systematic risk assessment among all
WTO member governments and for all relevant products.

Transparency
Governments are required to notify other countries of any new or changed sanitary
and phytosanitary requirements which affect trade, and to set up offices (called
"Enquiry Points") to respond to requests for more information on new or existing
measures. They also must open to scrutiny how they apply their food safety and
animal and plant health regulations. The systematic communication of information
and exchange of experiences among the WTO’s member governments provides a
better basis for national standards. Such increased transparency also protects the
interests of consumers, as well as of trading partners, from hidden protectionism
through unnecessary technical requirements.

3) Agreement on Technical Barriers to Trade

OBJECTIVES OF THE AGREEMENT ON TECHNICAL BARRIERS TO TRADE

(a)Provide a framework and supporting mechanisms to facilitate and increase trade

in goods by eliminating and preventing unnecessary barriers to trade while taking
into account the legitimate objectives of the Parties, in accordance with Article 2.2 of
the WTO Agreement on Technical Barriers to Trade (“TBT Agreement”), and the
principle of non-discrimination, within the TBT Agreement.

(b)Ensure transparency in standards, technical regulations, and conformity

assessment procedures, and also ensure that these do not create unnecessary
obstacles to trade and are not more trade restrictive than necessary to fulfil a
legitimate objective;

(c)Enhance joint cooperation between the Parties, and between regulatory

authorities and conformity assessment bodies in the Parties, in order to resolve
specific issues related to the development and application of standards, technical
regulations and conformity assessment procedures, and establish a mechanism for
expeditious recognition of equivalence and mutual recognition and that positive
consideration is given to the requests of the exporting Party in this regard by the
importing Party, thereby facilitating the conduct of trade in goods;

(d)Improve the capacity of the Parties to identify, prevent and eliminate unnecessary
obstacles to trade between the Parties as a result of technical regulations, standards
and conformity assessment procedures applied by either Party;

(e)Increase the capacity of the Parties to ensure compliance with international

standards and with each other’s technical regulations, conformity assessment
procedures and standards; and

(f)Provide a mechanism for expeditious resolution of issues, including disputes

relating to standards, technical regulations and conformity assessment procedures.
The Technical Barriers to Trade (TBT) Agreement aims to ensure that technical
regulations, standards, and conformity assessment procedures are non-
discriminatory and do not create unnecessary obstacles to trade. At the same time, it
recognises WTO members' right to implement measures to achieve legitimate policy
objectives, such as the protection of human health and safety, or protection of the
environment. The TBT Agreement strongly encourages members to base their
measures on international standards as a means to facilitate trade. Through its
transparency provisions, it also aims to create a predictable trading environment.

The WTO Agreement on Technical Barriers to Trade (the “TBT Agreement”)

establishes rules and procedures regarding the development, adoption, and
application of voluntary product standards, mandatory technical regulations, and the
procedures (such as testing or certification) used to determine whether a particular
product meets such standards or regulations. The aim of the TBT Agreement is to
prevent the use of technical requirements as unnecessary barriers to trade.

Although the TBT Agreement applies to a broad range of industrial and agricultural
products, sanitary and phytosanitary (SPS) measures and specifications for
government procurement are covered under separate agreements. The TBT
Agreement rules help to distinguish legitimate standards and technical regulations
from protectionist measures. Standards, technical regulations, and conformity
assessment procedures are to be developed and applied on a nondiscriminatory
basis, developed and applied transparently, and should be based on relevant
international standards and guidelines, when appropriate.

Key principles
Non-discrimination

Members must ensure that technical regulations and standards do not accord
treatments less favorable to imported products compared to the ones granted to like
products of national origin or creating in any other country, as established
respectively in Art. 2.1 and Annex 3.D. This principle applies also to conformity
assessment procedures, that have to "grant access for suppliers of like products
originating in the territories of other members under conditions no less favorable than
those accorded to suppliers of like products of national origin or originating in any
other country in a comparable situation".

Avoidance of unnecessary barriers to trade

Article 2.2 obliges Members not to create unnecessary obstacles to international

trade and, on this basis, to ensure that "technical restrictions are not more trade
restrictive than necessary to fulfil a legitimate objective". The Article provides an
inclusive list of legitimate objectives including national security requirements and the
protection of animal or plant life or health.
Harmonization around international standards

When international standards exist, members shall use them as a basis for their
technical regulations, standards and conformity assessment procedures, unless their
use seems inappropriate or ineffective in certain circumstances (for example, for
climatic or technological reasons) for achieving the pursued objective. To support
this, the World Trade Organization Technical Barriers to Trade (TBT) Committee
published the "Six Principles" guiding members in the development of international
standards.

Notification requirements

The TBT Agreement also obliges States to notify each other of proposed technical
barriers to trade. To give States the opportunity to raise their concerns before the
measures come into force, members must allow reasonable time for Members to
make comments, discuss their comments and to have their comments considered.
Members must notify each other in relation to proposed TBT provisions when the
following three conditions are satisfied:

The measure must be a technical regulation or an evaluation of a conformity

assessment procedure.
There must either be no relevant international standard or, if there is, the measure
must not conform to it.
The technical regulation must have a considerable effect on international trade.

Unit -II

1. TRIMS-TRADE RELATED INVESTMENT MEASURE

• The Agreement on Trade-Related Investment Measures (TRIMS) are rules that

apply to the domestic regulations a country applies to foreign investors, often as part
of an industrial policy.
• The agreement was agreed upon by all members of the World Trade Organisation.
• The agreement was concluded in 1994 and came into force in 1995. The WTO was
not established at that time, it was its predecessor, the GATT (General Agreement
on Trade and Tariffs. The WTO came about in 1994-1995.
• Policies such as local content requirements and trade balancing rules that have
traditionally been used to both promote the interests of domestic industries and
combat restrictive business practices are now banned.
• Trade-Related Investment Measures is the name of one of the four principal legal
agreements of the WTO trade treaty.
• TRIMS are rules that restrict preference of domestic firms and thereby enable
international firms to operate more easily within foreign markets.
• The agreement on technical barriers to trade is made to ensure the technical
regulation and standards. It also ensure that no obstacle is formed during the trade.
• Along with this, it recognizes WTO member's right to implement measures to
achieve legitimate policy objectives which include the protection of human health and
safety, or protection of the environment.

Features of TRIMS
1. Abolition of restriction imposed on foreign capital.
2. Offering equal rights to the foreign investor on par with the domestic investor
3. No restrictions on any area of investment
4. No limitation or ceiling on the quantum of foreign investment.
5. Granting of permission of without restrictions to import raw material and other
components
6. No force on the foreign investors to use the total products and or materials
7. Export of the part of the final product will not be mandatory
8. Restriction on repatriation of dividend interest and royalty will be removed
9. Phased manufacturing programming will be introduced to increase the domestic
content of manufacturer

INDIA NOTIFIED TRIMS

As per the provisions of Art. 5.1 of the TRIMS Agreement India had notified three
trade related investment measures as inconsistent with the provisions of the
Agreement:
• Local content (mixing) requirements in the production of News Print
• Local content requirement in the production of Rifampicin and Penicillin G
• Dividend balancing requirement in the case of investment in 22 categories
consumer goods.

Economic Implications
• Some governments view TRIMs as a way to protect and foster domestic industry.
TRIMs are also mistakenly seen as an effective remedy for a deteriorating balance of
payments. These perceived benefits account for their frequent use in developing
countries.
• In the long run, however, TRIMs may well retard economic development and
weaken the economies of the countries that impose them by stifling the free flow of
investment.
• Local content requirements, for example, illustrate this distinction between short-
term advantage and long-term disadvantage. Local content requirements may force
a foreign affiliated producer to use locally produced parts.
• Although this requirement results in immediate sales for the domestic parts
industry, it also means that this industry is shielded from the salutary effects of
competition. In the end, this industry will fail to improve its international
competitiveness.
• Moreover, the industry using these parts is unable to procure high-quality, low-
priced parts and components from other countries, and will be less able to produce
internationally competitive finished products.
• The best the domestic industry can hope to achieve import substitution, but the
likelihood of further development is poor.
• The consumer in the host country also suffers as a result of TRIMs. The consumer
has no choice but to spend much more on a finished product than would be
necessary under a system of liberalized imports.
• Since consumers placed in such a position must pay a higher price, growth of
domestic demand will stagnate. This lack of demand also hinders the long-term
economic development of domestic industries.

2. Subsidies and Countervailing Measures Subsidies

• Subsidies and Countervailing Measures Subsidies have been provided widely
throughout the world as a tool for realizing government policies, in such forms as
grants (normal subsidies), tax exemptions, low-interest financing, investments and
export credits.
• There are six primary categories of subsidies, divided by purpose:
1) Export subsidies,
2) Subsidies contingent upon the use of domestic over imported goods,
3) Industrial promotion subsidies,
4) Structural adjustment subsidies,
5) Regional development subsidies, and
6) Research and development subsidies.
By beneficiary, there are two primary categories:
1) Subsidies that are not limited to specific businesses or industries (non-specific
subsidies), and
2) Subsidies that are limited to specific businesses and industries (specific
subsidies).

Subsidies Agreement
The Subsidies Agreement provides a definition of subsidies and classifies of three
categories of subsidies according to purpose and nature.
The Agreement defines the relationship between countervailing measures and
remedies for each type of subsidy, provides special and differential treatments for
developing country members, and provides transitional arrangements for members
in the process of transformation from a centrally planned economy to a market
economy.
Definition of Subsidies (Article 1) In the Subsidies Agreement, a subsidy shall be
deemed to exist if: “there is a financial contribution (i.e., a fiscal burden) by a
government or any public body within the territory of a Member” or “there is any form
of income or price support in the sense of Article XVI of GATT 1994,” and “a benefit
is thereby conferred.”
Actions constituting “financial contributions” include:
(a) Direct transfers of funds (for example, grants, loans and equity infusions) and
potential direct transfers of funds or liabilities (for example, government guarantees).
(b) Foregoing or non-collection of government revenue that is otherwise due (for
example, fiscal incentives such as tax credits).
(c) Government provision of goods or services (other than infrastructure) or
government purchases of goods.

(d) Government making payments to a funding mechanism or entrusting or directing

a private body to carry out one or more of the type of functions above which would
normally be vested in the government and which in practice does not differ from
practices normally followed by governments.

Categories of Subsidies

The Subsidies Agreement defines three categories of subsidies according to

specificity, purpose and nature:
1) Subsidies that are prohibited outright (“red-light subsidies”)
2) Subsidies that are not prohibited but which may be subject to countervailing
measures (“yellow-light subsidies”)
3) Subsidies that are neither prohibited nor subject to countervailing measures
(“green-light subsidies”). It also defines the relationship between countervailing
measures and remedies for each type of subsidy

(a) Red- light Subsidies:

Red-light subsidies mean prohibited subsidies. With certain exceptions, such as

preferential treatment for developing countries and transitional economies, all red-
light subsidies must be eliminated (Article 3). If a red-light subsidy is granted, it may
be subject to the remedies for red-light subsidies (Article 4). Furthermore, the
remedies for red-light subsidies may be invoked in parallel with countervailing
measures; however, with regard to the effects of a particular subsidy in the domestic
market of the importing member, only one form of relief (either a countervailing duty
or the defined remedies) shall be available.

There are two categories of red subsidies:

• Export subsidies and subsidies contingent upon the use of domestic over imported
goods. The Subsidies Agreement illustrates the following measures as export
subsidies:

Measures which provide direct subsidies contingent upon export performance.

Measures which involve a bonus on exports, such as currency retention schemes.

Measures which treat internal transport and freight charges on export shipments on
terms more favourable than for domestic shipments.

Measures which provide products or services for use in the production of exported
goods on terms or conditions more favourable than for domestic consumption.

Measures which allow the full or partial exemption, remission or deferral specifically
related to exports, of direct taxes or social welfare charges.

Measures which allow the exemption or remission, in respect of exported products,

of indirect taxes in excess of those levied in respect of like products when sold for
domestic consumption.

Measures which provided export credit guarantees or insurance programmes at

premium rates which are inadequate to cover the long-term operating costs and
losses of the programmes.

8. With some exceptions, government export credits granted at rates below those
which the government actually has to pay for the funds so employed, or the payment
by them of all or part of the costs incurred by exporters or financial institutions in
obtaining credits, in so far as they are used to secure a material advantage in the
field of export credit terms.

(b) Yellow-light Subsidies

Yellow-light subsidies are not prohibited per se but may be subject to the remedies
for yellow subsidies if they cause adverse effects, such as serious injury (“serious
prejudice”) to other countries (Article 7). Furthermore, the remedies for yellow-light
subsidies may be invoked in parallel with countervailing measures; however, with
regard to the effects of a particular subsidy in the domestic market of the importing
member, only one form of relief (either a countervailing duty or the defined remedies)
shall be available.

(c) Green-light Subsidies

Green-light subsidies are neither prohibited nor subject to countervailing measures

(Article 8). Green-light subsidies includes non-specific subsidies and those specific
subsidies that meet certain conditions found below. Specific green-light subsidies
include research and development subsidies, regional development subsidies, and
environmental conservation subsidies that have been reported to the Committee
before they take effect, reviewed by the WTO Secretariat, and approved by the
Committee.
Furthermore, specific green-light subsidies may be subject to the remedies for
greenlight subsidies (Article 9) if they cause damage which would be difficult to
repair to the domestic industry of a member.

I. Research and Development Subsidies:

Among research and development subsidies, those for industrial research must
cover no more than 75 percent of expenses; those for pre-competitive development
activities, no more than 50 percent. There are also limits on the uses to which funds
can be put within this context,

(3) what is dumping , explain anti-duming agreement?

Dumping is, in general, a situation of international price discrimination, where the
price of a product when sold in the importing country is less than the price of that
product in the market of the exporting country. Thus, in the simplest of cases, one
identifies dumping simply by comparing prices in two markets. However, the situation
is rarely, if ever, that simple, and in most cases it is necessary to undertake a series
of complex analytical steps in order to determine the appropriate price in the market
of the exporting country (known as the “normal value”) and the appropriate price in
the market of the importing country (known as the “export price”) so as to be able to
undertake an appropriate comparison.

Anti-Dumping Agreement

Anti-dumping duty is a tariff imposed on imports manufactured in foreign countries

that are priced below the fair market value of similar goods in the domestic market.
The government imposes anti-dumping duty on foreign imports when it believes that
the goods are being “dumped” – through the low pricing – in the domestic market.
Anti-dumping duty is imposed to protect local businesses and markets from unfair
competition by foreign imports.

The duty is priced in an amount that equals the difference between the normal costs
of the products in the importing country and the market value of similar goods in the
exporting country or other countries that produce similar products. The anti-dumping
duty can be anywhere from 0% up to 550% of the invoice value of the goods.

Role of the WTO in Regulating Anti-Dumping Measures

The World Trade Organization (WTO) plays a critical role in the regulation of anti-
dumping measures. As an international organization, the WTO does not regulate
firms accused of engaging in dumping activities, but it possesses the power to
regulate how governments react to dumping activities in their territories.

Some government sometimes react harshly to foreign companies engaging in

dumping activities by introducing punitive anti-dumping duties on foreign imports,
and the WTO may come in to determine if the actions are genuine, or if they go
against the WTO free-market principle.

According to the WTO Anti-Dumping Agreement, dumping is legal unless it threatens

to cause material injury in the importing country domestic market. Also, the
organization prohibits dumping when the action causes material retardation in the
domestic market.

Calculating the Anti-Dumping Duty

The WTO Anti-Dumping Agreement allows governments to act in a way that does
not discriminate between trading partners and honors the DATT 1994 principle when
calculating the duty. The GATT 1994 principle provides a number of guidelines to
govern trade between members of the WTO. It requires that imported goods not to
be subjected to internal taxes in excess of the costs imposed on domestic goods.

Also, it requires that imported goods be treated the same way as domestic goods
under domestic laws and regulations. However, it allows the government to impose a
duty on foreign imports if they exceed the bound rates and threaten to cause injury to
the domestic market.

There are several ways of determining whether an imported product has been
dumped lightly or heavily, and the amount of duty to be applied. The first method is
to calculate the anti-dumping duty based on the normal price of the product.

The second alternative is to use the price charged on the same product but in a
different country. The last alternative is to calculate the duty based on the total
product costs, expenses, and the manufacturer’s profit margins.

(3) Agreement on safeguards.

The Agreement on Safeguards (“SG Agreement”) sets forth the rules for application
of safeguard measures pursuant to Article XIX of GATT 1994. Safeguard measures
are defined as “emergency” actions with respect to increased imports of particular
products, where such imports have caused or threaten to cause serious injury to the
importing Member’s domestic industry. Such measures, which in broad terms take
the form of suspension of concessions or obligations, can consist of quantitative
import restrictions or of duty increases to higher than bound rates.

The SG Agreement was negotiated in large part because GATT Contracting Parties
increasingly had been applying a variety of so-called “grey area” measures (bilateral
voluntary export restraints, orderly marketing agreements, and similar measures) to
limit imports of certain products. These measures were not imposed pursuant to
Article XIX, and thus were not subject to multilateral discipline through the GATT,
and the legality of such measures under the GATT was doubtful. The Agreement
now clearly prohibits such measures, and has specific provisions for eliminating
those that were in place at the time the WTO Agreement entered into force.

Structure of the Agreement

The Agreement consists of 14 articles and one annex. In general terms, it has four
main components: (1) general provisions (Articles 1 and 2); (2) rules governing
Members’ application of new safeguard measures (i.e., those applied after entry into
force of WTO Agreement (Articles 3-9)); (3) rules pertaining to pre-existing measures
that were applied before the WTO’s entry into force (Articles 10 and 11); and (4)
multilateral surveillance and institutions (Articles 12-14).

General provisions
Coverage of the Agreement

Article 1 establishes that the SG Agreement is the vehicle through which measures
may be applied pursuant to Article XIX of GATT 1994. That is, any measure for
which the coverage of Article XIX (which allows suspension of GATT concessions
and obligations under the defined “emergency” circumstances) is invoked, must be
taken in accordance with the provisions of the SG Agreement.

Conditions for Application of Safeguard Measures

Article 2 sets forth the conditions (i.e., serious injury or threat thereof caused by
increased imports) under which safeguard measures may be applied. It also contains
the requirement that such measures be applied on an MFN basis.

Rules governing new safeguard measures (applied after entry into force of
WTO Agreement)
Investigative Requirements

New safeguard measures may be applied only following an investigation conducted

by competent authorities pursuant to previously published procedures. Although the
Agreement does not contain detailed procedural requirements, it does require
reasonable public notice of the investigation, and that interested parties (importers,
exporters, producers, etc.) be given the opportunity to present their views and to
respond to the views of others. Among the topics on which views are to be sought is
whether or not a safeguard measure would be in the public interest.

Factual Basis for Determination of Serious Injury or Threat Thereof

The Agreement defines “serious injury” as significant impairment in the position of a

domestic industry. “Threat of serious injury” is threat that is clearly imminent as
shown by facts, and not based on mere allegation, conjecture or remote possibility. A
“domestic industry” is defined as the producers as a whole of the like or directly
competitive products operating within the territory of a Member, or producers who
collectively account for a major proportion of the total domestic production of those
products.

Application of Measures

Safeguard measures may only be applied to the extent necessary to remedy or

prevent serious injury and to facilitate adjustment, within certain limits. If the measure
takes the form of a quantitative restriction, the level must not be below the actual
import level of the most recent three representative years, unless there is clear
justification for doing otherwise. Rules also apply as to how quota shares are to be
allocated among supplier countries, as to compensation to Members whose trade is
affected, and as to consultations with affected Members.

Unit-3 (1)General agreement on trade in services (GATS).

• The creation of the GATS was one of the landmark achievements of the Uruguay
Round, whose results entered into force in January 1995.

• The GATS was inspired by essentially the same objectives as its counterpart in
merchandise trade, the General Agreement on Tariffs and Trade (GATT): creating a
credible and reliable system of international trade rules, ensuring fair and equitable
treatment of all participants (principle of non-discrimination), stimulating economic
activity through guaranteed policy bindings; and promoting trade and development
through progressive liberalization.

• While services currently account for over 60 percent of global production and
employment, they represent no more than 20 per cent of total trade (BOP basis).
This seemingly modest share should not be underestimated, however.

• Many services, which have long been considered genuine domestic activities, have
increasingly become internationally mobile.

• This trend is likely to continue, owing to the introduction of new transmission

technologies (e.g. electronic banking, tele-health or tele-education services), the
opening up in many countries of long-entrenched monopolies (e.g. voice telephony
and postal services), and regulatory reforms in hitherto tightly regulated sectors such
as transport. Combined with changing consumer preferences, such technical and
regulatory innovations have enhanced the “tradability” of services and, thus, created
a need for multilateral disciplines.

Countries participate
All WTO Members, some 140 economies at present, are at the same time Members
of the GATS and, to varying degrees, have assumed commitments in individual
service sectors.

Services are covered

The GATS applies in principle to all service sectors, with two exceptions.
Article 1(3) of the GATS excludes “services supplied in the exercise of governmental
authority”. These are services that are supplied neither on a commercial basis nor in
competition with other suppliers. Cases in point are social security schemes and any
other public service, such as health or education that is provided at non-market
conditions.

Is it true that the GATS not only applies to cross-border flows of services, but
additional modes of supply?

• The GATS distinguishes between four modes of supplying services: cross-border

trade, consumption abroad, commercial presence, and presence of natural persons.

• Cross-border supply is defined to cover services flows from the territory of one
Member into the territory of another Member (e.g. banking or architectural services
transmitted via telecommunications or mail)

• Consumption abroad refers to situations where a service consumer (e.g. tourist or

patient) moves into another Member’s territory to obtain a service.

• Commercial presence implies that a service supplier of one Member establishes a

territorial presence, including through ownership or lease of premises, in another
Member’s territory to provide a service (e.g. domestic subsidiaries of foreign
insurance companies or hotel chains); and

• Presence of natural persons consists of persons of one Member entering the

territory of another Member to supply a service (e.g. accountants, doctors or
teachers). The Annex on Movement of Natural Persons specifies, however, that
Members remain free to operate measures regarding citizenship, residence or
access to the employment market on a permanent basis.

The basic obligations under the GATS

(a) General obligations

MFN Treatment: Under Article II of the GATS, Members are held to extend
immediately and unconditionally to services or services suppliers of all other
Members “treatment no less favourable than that accorded to like services and
services suppliers of any other country”. This amounts to a prohibition, in principle, of
preferential arrangements among groups of Members in individual sectors or of
reciprocity provisions which confine access benefits to trading partners granting
similar treatment.
Transparency: GATS Members are required, inter alia, to publish all measures of
general application and establish national enquiry points mandated to respond to
other Member’s information requests.
Other generally applicable obligations include the establishment of administrative
review and appeals procedures and disciplines on the operation of monopolies and
exclusive suppliers.

(b) Specific Commitments

Market Access: Market access is a negotiated commitment in specified sectors. It
may be made subject to various types of limitations that are enumerated in Article
XVI (2). For example, limitations may be imposed on the number of services
suppliers, service operations or employees in the sector; the value of transactions;
the legal form of the service supplier; or the participation of foreign capital.

National Treatment: A commitment to national treatment implies that the Member

concerned does not operate discriminatory measures benefiting domestic services or
service suppliers. The key requirement is not to modify, in law or in fact, the
conditions of competition in favour of the Member’s own service industry. Again, the
extension of national treatment in any particular sector may be made subject to
conditions and qualifications.

(2) Ongoing multilateral negotiations.

Multilateral trade agreements are commerce treaties among three or more nations.
The agreements reduce tariffs and make it easier for businesses to import and
export. Since they are among many countries, they are difficult to negotiate.

That same broad scope makes them more robust than other types of trade
agreements once all parties sign. Bilateral agreements are easier to negotiate but
these are only between two countries.
They don’t have as big an impact on economic growth as does a multilateral
agreement.

5 Advantages
Multilateral agreements make all signatories treat each other equally. No country can
give better trade deals to one country than it does to another. That levels the playing
field. It’s especially critical for emerging market countries. Many of them are smaller
in size, making them less competitive. The Most Favored Nation Status confers the
best trading terms a nation can get from a trading partner. Developing countries
benefit the most from this trading status.
The second benefit is that it increases trade for every participant. Their companies
enjoy low tariffs. That makes their exports cheaper.

The third benefit is it standardizes commerce regulations for all the trade partners.
Companies save legal costs since they follow the same rules for each country.

The fourth benefit is that countries can negotiate trade deals with more than one
country at a time. Trade agreements undergo a detailed approval process.

The fifth benefit applies to emerging markets. Bilateral trade agreements tend to
favor the country with the best economy. That puts the weaker nation at a
disadvantage, but making emerging markets stronger helps the developed economy
over time.

4 Disadvantages
- The biggest disadvantage of multilateral agreements is that they are complex. That
makes them difficult and time consuming to negotiate. Sometimes the length of
negotiation means it won’t take place at all.
- Second, the details of the negotiations are particular to trade and business
practices. The public often misunderstands them. As a result, they receive lots of
press, controversy, and protests.
- The third disadvantage is common to any trade agreement. Some companies and
regions of the country suffer when trade borders disappear.
- The fourth disadvantage falls on a country’s small businesses. A multilateral
agreement gives a competitive advantage to giant multi-nationals. They are already
familiar with operating in a global environment. As a result, the small firms can’t
compete. They lay off workers to cut costs. Others move their factories to countries
with a lower standard of living. If a region depended on that industry, it would
experience high unemployment rates. That makes multilateral agreements
unpopular.

Examples
Some regional trade agreements are multilateral. The largest had been the North
American Free Trade Agreement (NAFTA), which was ratified on January 1, 1994.
NAFTA quadrupled trade between the United States, Canada, and Mexico from its
1993 level to 2018.12 On July 1, 2020, the U.S.-Mexico-Canada Agreement
(USMCA) went into effect. The USMCA was a new trade agreement between the
three countries that was negotiated under President Donald Trump.
The Central American-Dominican Republic Free Trade Agreement (CAFTA-DR) was
signed on August 5, 2004. CAFTA-DR eliminated tariffs on more than 80% of U.S.
exports to six countries: Costa Rica, the Dominican Republic, Guatemala, Honduras,
Nicaragua, and El Salvador.3 The agreement increased trade from -$1.2 billion in
2005 to 8.6 billion in 2021.4
The Trans-Pacific Partnership (TPP) would have been bigger than NAFTA.
Negotiations concluded on October 4, 2015. After becoming president, Donald
Trump withdrew from the agreement. He promised to replace it with bilateral
agreements. The TPP was between the United States and 11 other countries
bordering the Pacific Ocean. It would have removed tariffs and standardized
business practices.

(3) Explain merits and demerits of FDI (foreign direct investment).

Foreign direct investment (FDI) occurs when an individual or business owns at least
10% of a foreign company. When investors own less than 10%, the International
Monetary Fund (IMF) defines it simply as part of a stock portfolio. Whereas a 10%
ownership in a company doesn’t give an individual investor a controlling interest in a
foreign company, it does allow influence over the company’s management,
operations, and overall policies.
FDI is critical for developing and emerging market countries. Companies in
developing countries need multinational funding and expertise to expand, give
structure, and guide their international sales.

Advantages of foreign direct investment:

Economic growth
The creation of jobs is the most obvious advantage of FDI, one of the most important
reasons why a nation (especially a developing one) will look to attract foreign direct
investment. FDI boosts the manufacturing and services sector which results in the
creation of jobs and helps to reduce unemployment rates in the country.

Human capital development

Human capital involved the knowledge and competence of a workforce. Skills that
employees gain through training and experience can boost the education and human
capital of a specific country. Through a ripple effect, it can train human resources in
other sectors and companies.
Technology
Targeted countries and businesses receive access to the latest financing tools,
technologies, and operational practices from all across the world. The introduction of
newer and enhanced technologies results in company’s distribution into the local
economy, resulting in enhanced efficiency and effectiveness of the industry.

Increase in exports
Many goods produced by FDI have global markets, not solely domestic
consumption. The creation of 100% export oriented units help to assist FDI investors
in boosting exports from other countries.

Exchange rate stability

The flow of FDI into a country translates into a continuous flow of foreign exchange,
helping a country’s Central Bank maintain a prosperous reserve of foreign exchange
which results in stable exchange rates.

Improved Capital Flow

Inflow of capital is particularly beneficial for countries with limited domestic
resources, as well as for nations with restricted opportunities to raise funds in global
capital markets.

Climate
The United Nations has also promoted the use of FDI around the globe to help
combat climate change

Disadvantages of foreign direct investment:

Hindrance of domestic investment

Sometimes FDI can hinder domestic investment. Because of FDI, countries’ local
companies start losing interest to invest in their domestic products.

The risk from political changes

Other countries’ political movements can be changed constantly which could hamper
the investors.

Negative exchange rates

Foreign direct investments can sometimes affect exchange rates to the advantage of
one country and the detriment of another.

Higher costs
When investors invest in foreign counties, they might notice that it is more expensive
than when goods are exported. Often times, more money is invested into machinery
and intellectual property than in wages for local employees.

Economic non-viability
Considering that foreign direct investments may be capital-intensive from the point of
view of the investor, it can sometimes be very risky or economically non-viable.

Expropriation
Constant political changes can lead to expropriation. In this case, those countries’
governments will have control over investors’ property and assets.

Poor performance
Multinationals have been criticized for poor working conditions in foreign factories.

Unit-4. (1) Settlement of dispute of international trade dispute.

The World Trade Organization (WTO) is responsible for maintaining the free flow of
trade between its member countries. WTO, in the form of Dispute Settlement
Undertaking (DSU), provides an instrument for the settling of trade disputes between
the parties. The dispute generally arises when any member country violates any
provision of WTO agreement which other member countries think unreasonable.
This dispute settlement process is the outcome of the Uruguay round (1996-1994).

Stages in settlement of trade disputes

Stage 1: Consultations (Article 4 of the DSU)

Before referring any dispute to mediation or taking any other actions, both the WTO
member countries shall affirm to resolve their disputes through consultation. If a
WTO member requests for consultation with another Member concerning measures
affecting the operations of the former member, the latter member must accept such
request within a period 10 days after the date of receipt of such request and shall
enter into consultation within 30 days.

Stage 2: Establishment of Panels (Articles 6, 8 and 11 of the DSU)

If no satisfactory solution is reached through consultation between the member
countries, the complaining member may request for the establishment of panels in
writing to the Dispute Settlement Body including a summary of the case and issues
involved. The panel is established at the second meeting of DSB at which request
appears as an agenda item of the meeting.
The function of the Panel is to aid the Dispute Settlement Body in resolving the
matter in dispute.

Stage 3: Selection of panellists (Article 8 of the DSU)

After the establishment of the panel, the next step is to select panellists. The
panellists are selected by the WTO Secretariat. The parties cannot oppose the
selection unless they state reasons satisfactory to the Secretariat. The panel shall
consist of three panellists. The parties can agree to have five panellists on board if
they consider necessary within 10 days from the establishment of the panel.

Stage 4: Procedure of Panel (Articles 10 and 12 of the DSU)

The panellists shall, within one week after the composition of the panel fix a
timetable for the panel process. After this, the panel decides a deadline for written
submission to be made by each party. Each party has to submit its submissions with
the secretariat which shall transfer each submission to the panel and submission
made by one party shall be sent to the other party as well. At the first substantive
meeting of the panel, the complaining party shall be the first to present their case
ahead of the responding party.

Stage 5: Interim report (Article 15 of the DSU)

Following the oral arguments and rebuttal that has been performed and examination
has been made, the panel shall issue a draft report to the parties. The parties have
to submit their comments in writing after receiving the draft report within the period
set by the panel.

Stage 6: Appeal (Article 17 of the DSU)

Either of the parties unsatisfied with the ruling of the panel report can appeal to the
Standing Appellate Body established by the Dispute Settlement Body. Only parties to
the dispute can appeal to a panel report and not the third parties. Third parties can
be allowed to be heard only in case such third party has notified in writing to the
Dispute Settlement Body of its substantial interest in such dispute.

Stage 7: Acceptance of report by Dispute Settlement Body (Article 30 of the DSU)

The Dispute Settlement Body has to either accept the Appellate Body report or reject
it within a maximum period of 30 days after receiving such a report. The report can
only be rejected unanimously.

(2) Nullification & impairment.

1. If any contracting party should consider that any benefit accruing to it directly
or indirectly under this Agreement is being nullified or impaired or that the
attainment of any objective of the Agreement is being impeded as the result of

a. The failure of another contracting party to carry out its obligations

under this Agreement, or
b. The application by another contracting party of any measure, whether
or not it conflicts with the provisions of this Agreement, or
c. The existence of any other situation,
The contracting party may, with a view to the satisfactory adjustment of the matter,
make written representations or proposals to the other contracting party or parties
which it considers to be concerned. Any contracting party thus approached shall give
sympathetic consideration to the representations or proposals made to it.”

The different types of complaints under Article XXIII:1 of GATT 1994

The first, and by far, the most common complaint is the so-called “violation
complaint” pursuant to Article XXIII:1(a) of GATT 1994. This complaint requires
“nullification or impairment of a benefit” as a result of the “the failure of another
[Member] to carry out its obligations” under GATT 1994. This “failure to carry out
obligations” is just a different way of referring to a legal inconsistency with, or
violation of, the GATT 1994. There also needs to be “nullification or impairment” as a
result of the alleged legal inconsistency.
The second type of complaint is the so-called “non-violation complaint” pursuant to
Article XXIII:1(b) of GATT 1994. A non-violation complaint may be used to challenge
any measure applied by another Member, even if it does not conflict with GATT
1994, provided that it results in “nullification or impairment of a benefit”. There have
been a few such complaints both under GATT 1947 and in the WTO.

The third type of complaint is the so-called “situation complaint” pursuant to Article
XXIII:1(c) of GATT 1994. Literally understood, it could cover any situation
whatsoever, as long as it results in “nullification or impairment”. However, although a
few such situation complaints have been raised under the old GATT, none of them
has ever resulted in a panel report. In the WTO, Article XXIII:1(c) of GATT 1994 has
not so far been invoked by any complainant.

Violation complaint

A violation complaint will succeed when the respondent fails to carry out its
obligations under GATT 1994 or the other covered agreements, and this results
directly or indirectly in nullification or impairment of a benefit accruing to the
complainant under these agreements. If it can be established before a Panel and the
Appellate Body that these two conditions are satisfied, the complainant will “win” the
dispute.
In practice, the first of these two conditions, the violation, plays a much more
important role than the second condition, nullification or impairment of a benefit. This
is due to the fact that nullification or impairment is “presumed” to exist whenever a
violation has been established. This presumption evolved in GATT jurisprudence1
and is today codified in Article 3.8 of the DSU. Article 3.8 is concerned only with
violation complaints (“where there is an infringement”). The presumption set out in
this article relates to nullification or impairment once it has been established that
there is a breach of an obligation. The presumption does not address the question
whether there is such a violation, and it should not be confused with this question.

(3) Enforcement and remedies.

As U.S. companies, large and small, grow their exports, it is crucial that foreign
markets remain free and open to fairly traded U.S.-produced goods.

In response to growing competition, foreign industries are more frequently seeking

relief from unfairly priced or rapidly increasing imports via trade remedy (e.g.
“antidumping” or “safeguard”) investigations conducted by the foreign government.
These involve an extensive examination of an exporter’s sales and production
records for evidence of any unfair trading and whether any such activity may have
caused injury to the investigating country’s domestic producers.
The growth in worldwide trade remedy investigations focuses on industry sectors in
which the United States has a large export presence, which means U.S. exporters
are increasingly likely to find themselves subject to a trade remedy action.

If ignored, antidumping and safeguard investigations can lead to substantial duties

being imposed on the affected U.S. exports, and the potential loss of lucrative export
markets.

Enforcement and Compliance’s Office of Policy, through its Trade Remedy

Compliance Staff (TRCS), has developed and refined a potent three-pronged
customer-oriented approach of monitoring, outreach and advocacy to address
potentially unfair application of trade remedies. Effectively using its combination of
overseas officers and U.S.-based experts, TRCS analyzes the global use of trade
remedy measures; alerts U.S. industry of pending foreign trade remedy actions;
evaluates foreign countries’ trade remedy laws, policies and practices for
consistency with World Trade Organization (WTO) rules; and maintains an extensive
network of contacts with U.S. businesses, industry associations and foreign
governments. This coordinated approach is designed to assemble as complete a
picture as possible of foreign trade remedy regimes and, where there are problems,
address these concerns with foreign governments directly, or at the WTO. This
strategy is clearly appreciated by the trading community, as evidenced by the
increasing number of U.S. companies and government partners seeking our advice
and assistance on foreign trade remedy activities.

TRCS provides a wide range of services and tools to assist U.S. companies that find
themselves subject to foreign antidumping and safeguard actions. Among these:
• A highly experienced team with extensive knowledge of trade remedy regimes
worldwide
• A robust network of contacts around the globe to monitor trade remedy
actions that affect U.S. exporters
• A comprehensive list of active foreign antidumping or safeguard actions
involving U.S. exports
• A reference library of foreign trade remedy laws and regulations issued.
• An extensive listing of online resources to monitor foreign trade remedies.

Most importantly, if you find yourself facing a foreign government’s antidumping or

safeguard investigation , don’t panic, but do act quickly. TRCS should be your first
stop – contact us at (202) 482-3415 or TRCS@[Link]. We will help you to better
understand what you will be facing, point out deadlines you won’t want to miss, and
provide support to help ensure that the foreign government conducts the
investigation fairly and according to international rules.

Unit-5