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INTERNATIONAL TRADE REGULATION • Topics for Discussion – – – – – – – General Discussion on GATT GATT Principles World Trade Organization Agreements WTO Dispute Resolution System United State’s Approach to Dispute Resolution Criticism of WTO Regional Expansion General Discussion of GATT • General Agreement on Trade and Tariff – Originated in 1947 to reduce tariffs among trading nations involving “goods” – Effective is establishing “binding amounts” among trading nations – Uruguay Round expanded into non-tariff areas such as services and intellectual property GATT PRINCIPLES • Three Basic Principles • Most Favored Nation-requires member nations to of the WTO to offer all member nations their most favorable tariff rates – Exceptions » Countries can raise barriers to the importation of goods from specific countries that are considered in violation of GATT principles-illegal subsidies and dumping of goods » Formation of Free Trade Areas that do not apply to goods from outside the regional group. GENERAL PRINCIPLES • General Principles-continued – National Treatment-once a product, service, or intellectual property right enter into a foreign market they must be given the same treatment given to domestically produced product service or intellectual property. – Transparency-prohibits a country from making its import standards and requirement secret. WTO AGREEMENT • WTO Agreements – Agreement on Technical Barriers to Tradetechnical specifications contained in documents that specifies characteristics of a product such as levels of quality, performance, safety or dimensions. Standards may include terminology, symbols, testing, packaging, marking or labeling requirements. WTO AGREEMENT • WTO Agreement continued – Agreement on the Application of Sanitary and Phytosanitary Measures-promoting international standards to import restrictions aimed at protecting human, animal and plant life and health. Promotions of international measures to protect human and animal life. • See Case on Oregon Natural Resource Council WTO AGREEMENT • WTO Agreement continued – Customs Valuation Code-attempts to standardize how countries challenge the value of a good being imported – Agreement on Pre-Shipment Inspectionpertains to a country’s right to pre-shipment inspection – Agreement on Import Licensing – Country of Origin DISPUTE RESOLUTION SYSTEM • Dispute Resolution Understanding – Time Dimensions– Urgent matters resolved in three months – Maximum use of time no more than 15 months – Dispute Resolution Structure • Mediation Body • Dispute Resolution Panel-small tribunal who hears case and makes report • Dispute Resolution Body-issues decision UNITED STATE’S APPROACH • US Approach to Dispute Resolution – US attempts to suspend tariff concession to EU • Arbitration Panel found in favor of US in terms of same sector, imported bananas treated differently and violated national treatment principles. – Antidumping Procedures • Dumping-price discrimination when foreign exporter sells goods below what it sells in home country or below the cost of production. » Lower price may constitute subsidy U.S. APPROACH • Antidumping Procedure – Manufacturer complains to Department of Commerce and requests a “countervailing duty”. • GATT Code on Subsidies and Countervailing Duties • International Trade Commission investigates whether the dumped good causes a material injury – Factors considered are lost profits, unemployment in the industry, lost sales, suppression of export prices US APPROACH • Antidumping Procedure – Section 301 of Tariff Act authorizes Office of US Trade Representative to retaliate – Deadline to complete investigation is 18 months – Countervailing Duty can be imposed – Also, setoffs can be imposed in other industries – Section 337 of Tariff Act provides relief for gray market goods CRITICISM OF WORLD TRADE ORGANIZATION • No Respect for Environmental Standards • Lack of International Labor Standards • Lack of Control of Movement of Production to Developing Economies with Lower Standards • Lack of Providing for Food Safety Priority over Trade REGIONALIZATION • North American Free Trade Agreement – Aims at Reducing Trade Barriers Among Mexico, Canada and United States • Tariff Free Area in 15 years – Goods Must Be Certified as Regional Goods – Reduce Barriers in direct and indirect investments, free flow of capital and dispute resolution system – Committee System To Constantly Review Trade Areas REGIONALIZATION • Regionalization (Global) – European Union-13 European Nations with applications for entry from other nations – MERCOSUR-Southern Common MarketArgentina, Brazil, Paraguay and Uruguay – Andean Common Market-Bolivia, Venezuela, Colombia, Ecuador and Peru – African Economic Community-51 African Natioins REGIONALIZATION • Regionalization – COMESA-Common Market for Eastern and Southern Africa – Southern African Development CommunityAngola, Botswana, Lesotho, Malawi, Mozambique, Namibia, Swaziland, Tanzania, Zambia, Zimbabwe, Mauritius and South Africa REGIONALIZATION • Regionalization – Asia Pacific Economic Cooperation Group-US, Japan, Australia, Canada, South Korea, China and Indonesia (Bogor Declaration)-to achieve free and open trade and investment – Central American Common Market-Guatemala, El Salvador, Costa Rica, Nicaragua, Honduras and Panama REGIONALIZATION • Regionalization – Gulf Cooperation Council-Saudi Arabia, Kuwait, Bahrain, Qatar, UAE and Oman – Arab League--22 members-Algeria to Yemen – Commonwealth of Independent States-former Soviet Union Nations – Association of Southeast Asian NationsIndonesia, Malaysia, Philipines, Singapore, Thailand and Brunei, Myanmar, Laos and Cambodia