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Dernière sauvegarde : lundi 25 janvier 2010

International economic law 2009 - 2010


Section 1 Very Ancient International Economic Treaties


Section 2 (More) Recent International institutions


Section 3 Modern Institutions


Paragraphe 1st Laws of economics & IEL (c) Pascal Lamy

The scene happens before the Barcelona Graduate School of Economics.

“ (…)

Let me share a small secret with you. Our economists were largely inspired by your
work on the relationship between trade and growth in preparing our 2008 World Trade
Report on “Trade in a Globalizing World”. The Report looks into the role of trade in an
interconnected world and the challenges facing governments to ensure it results in greater
prosperity for its citizens. You may want to check the number of quotes of your faculty in this
now famous publication!

It will come as no surprise to you, therefore, that I shall focus my remarks this
evening on international trade, its economic underpinning and its political realities. Two
sides of the same coin.

I have recently read that the financial crisis and the economic downturn have
become such central preoccupations of policymakers and the public at large that there is no
room to worry about trade any more. This kind of compartmentalization, I think, reflects a
narrow view — one that disregards the inseparability of all aspects of international economic

We already see how financial difficulties are squeezing trade opportunities as trade
financing dries up in respect of far too many potential trade transactions. We can also see the
lay-offs of thousands of workers in factories in China as demand in developed countries

Managing these linkages effectively and devising multi-faceted solutions is at the

centre of today’s policy challenges, truly testing the capacity of governments to cooperate
effectively with one another, as we saw at this weekend's leaders summit in Washington.
And it is therefore no surprise that in addition to a stimulus package, and laying the
foundations for better global financial governance, leaders also sent a powerful message on
trade and the importance of rapidly concluding the WTO Doha Round

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{Some explanation about the WTO Doha Round} 1.

› Gains from trade: old and new theories

The case for open trade has a long and rich intellectual history. David Ricardo's
intuition that the gains from international trade are rooted in the law of comparative
advantage2 has provided the backbone for 200 years of trade theory and practice.

Traditional theories taught us that countries — like people — gain from trade
because they are different, and that it is relative rather than absolute differences in
production costs that make trade profitable. This last insight provides the vital intellectual
underpinning for the argument that all countries can gain from trade — you only have to be
more competitive in relative, and not absolute, terms across production activities to gain
from trade. Understanding this reality has been indispensable to the efforts of many over the
last six decades and more to build a more open and inclusive multilateral trading system.

David Ricardo linked the comparative advantage of countries to technological

differences. Later theorists, such as Heckscher and Ohlin, emphasized differences in factor
endowments — such as labour, land and capital — as the driving force of comparative
advantage and gains from trade. These differences in emphasis embody no contradiction.
They merely emphasize the rich opportunities offered by diversity.

Notwithstanding the robustness and continued relevance of traditional

propositions that explain the advantages of trade, theory has continued to move on, and we
have seen important innovations in quite recent times. For instance, from around the 1980s
onwards trade analysts focused on exchanges of products within the same industries. Intra-
industry trade is largely explained by economies of scale and associated market
imperfections, and it accounts for a big part of increased prosperity and enriched choice,
especially in high-income countries. I might also add that Paul Krugman’s contribution to
this thinking, often referred to as the new trade theory, was part of what earned him this
year’s Nobel Prize.

Even more recently, new data sets with information on production and trade
revealed considerable differences among firms, challenging the standard assumption that we
could treat producers as identical and think in terms of ‘the representative firm’. The
theoretical formulations resulting from these new insights demonstrate that opening up
to trade does not just offer new opportunities to specialize productively. It also raises
the average level of productivity of domestic industries. These insights have been dubbed

The Doha Development Round or Doha Development Agenda (DDA) is the current trade-negotiation round
of the World Trade Organization (WTO), which commenced in November 2001. Its objective is to lower trade
barriers around the world, which allows countries to increase trade globally. As of 2008, talks have stalled over a
divide on major issues, such as agriculture, industrial tariffs and non-tariff barriers, services, and trade remedies.
The most significant differences are between developed nations led by the European Union (EU), the United States
(USA), and Japan and the major developing countries led and represented mainly by India, Brazil, China, and South
Africa. There is also considerable contention against and between the EU and the U.S. over their maintenance of
agricultural subsidies—seen to operate effectively as trade barriers.
The Doha Round began with a ministerial-level meeting in Doha, Qatar in 2001. Subsequent ministerial meetings
took place in Cancun, Mexico (2003), and Hong Kong (2005). Related negotiations took place in Geneva,
Switzerland (2004, 2006, 2008); Paris, France (2005); and Potsdam, Germany (2007).
The most recent round of negotiations, July 23-29 2008, broke down after failing to reach a compromise on
agricultural import rules. After the breakdown, major negotiations were not expected to resume until 2009.
Nevertheless, intense negotiations, mostly between the USA, China, and India, were held in the end of 2008 in order
to agree on negotiation modalities. However, these negotiations did not result in any progress.
Ricardo argued that there is mutual benefit from trade (or exchange) even if one party (e.g. resource-rich country,
highly-skilled artisan) is more productive in every possible area than its trading counterpart (e.g. resource-poor
country, unskilled laborer), as long as each concentrates on the activities where it has a relative productivity

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the “new new” trade theories — surely evidence that economists' ability to give names to
their theories does not match their intellectual achievements!

Another challenge to traditional trade theories has arisen on account of the

international fragmentation of production processes resulting from the break-up of supply
chains — a phenomenon that has accelerated in recent times. Off-shoring, or trade in tasks,
whether in goods or in services, is in reality a new application of the traditional comparative
advantages. It has been made possible by a powerful combination of new technology in
information, communication and transport, and increasingly open trade policies.

This rapid journey through the history of trade theory is a useful reminder of the
diverse sources of gains from trade, including increased efficiency, the realization of
economies of scale, greater product variety and higher productivity.

But trade theory, just like trade, is not much use as an end in itself. Theory is useful
if it informs policy and trade is useful if it enhances the human condition. And on both
these counts, realism and intellectual honesty require that we consider the costs and the
politics associated with trade. If the beginning and end of the story was that trade was
unconditionally beneficial to all and that the more we had of it the better, then governments
would surely embrace it unilaterally and without question. And there would certainly be no
need for the WTO Agreement to manage international trade relations!

› The costs and politics of trade

➊ As far back as Ricardo, we have understood that trade creates winners and
losers. It affects the distribution of income within societies. For example, traditional
theories predict that when industrialized countries import labour-intensive goods from
emerging economies that are abundant in low-skill workers, the result is lower demand and
therefore lower wages for low-skill workers in the industrialized world.

More generally, Paul Samuelson reminded us in an important article written in

2004 — using a standard Ricardian framework — that productivity growth in one country
can undermine the export success of another country, thus reducing income in the
latter. This argument, and certain variants of it, have spurred renewed interest in the
evolution of inequalities in industrialized countries and the role of trade in this evolution.

While the recent literature appears to have converged to the view that other forces — most
prominently technological change — have been rather important in changing income
distribution, there is no doubt that trade can contribute to rising wage inequality. This does
not, however, offer an argument for protection, or for turning our backs on openness.
Rather, it makes a powerful case for attending to the social tensions arising from inequality,
be this through public provision of basic services, better education and training
opportunities or fiscal reform.

A second source of costs is the inevitable structural adjustment associated with

trade opening. Some sectors, firms or individuals gain from trade, while others have to
adjust into alternative activities, if they can, in the face of new competitive realities.
Moreover, trade — especially that associated with off-shoring — can increase uncertainty. This
has no doubt further raised concerns about the virtues of globalization in general and trade
in particular.

On the other hand, countries that miss out on international production

opportunities risk being marginalized from globalization. Firms' decisions to offshore
{outsource, delocalize} are strongly influenced by the quality of the institutional framework,
the costs of setting up a business and the quality of infrastructure. Not addressing these
issues is likely to limit the participation of low-income countries in production networks
despite their advantage in terms of factor prices. Being left out is surely much worse than
trying to manage change and localized losses against a background of generalized gains.

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It is clear that the politics of trade have to be properly managed if societal gains are
to be realized. Anthony Downs, in his theory of democracy, shows that political competition
will lead politicians to propose and enact the policy preferred by the voter with median
policy preferences. The application of this theory to trade policy suggests that increasing
inequality will be associated with an increase in opposition to trade and, ultimately, with
more restrictive trade policies. Greater inequality will lead to increased calls for

➋ A second political issue concerns a ‘collective action’ problem. The gains from
trade opening tend to be distributed widely within societies and individual gains from trade
opening may be relatively small. But the losses from trade reform tend to hit relatively small
groups, and are often heavily concentrated. The losers from greater trade opening have a
higher incentive to lobby against trade reforms than the winners. This may slow down
or reverse the process, even though overall gains exceed overall losses.

➌ A third issue relates to uncertainty. Voters tend to prefer the status quo — that is,
they will vote against trade reform — as they may not know in advance whether they will be
among the winners or losers from reform. The fragmentation of production implied by off-
shoring intensifies uncertainty and public reticence to embrace change that is beneficial

My final point touches upon domestic policies in an economically integrating

world. Today the economy is more and more global, but politics is still local. This
discrepancy may lead national governments to choose domestic-oriented policies, which
reduce the likelihood of further economic integration at a global level. But globalization
is moving international interdependence to a level never seen before. And this process
creates new and stronger forms of policy considerations that cross national borders, be it in
the area of social choice, environmental standards, financial market regulation, or elsewhere.
There is, therefore, a need for more and better global rules. But there is also need for
domestic policies, which are coherent and complementary to the global ones.

As I mentioned during my recent visit to Berkeley University, I am convinced that

restoring the confidence of Americans in trade requires ensuring that the right health
and pension systems are in place through domestic tax and spending policies. Equally,
boosting domestic consumption in China, which today is limited by its high saving
rate, will also necessitate greater spending in social policies in areas such as health or

› Conclusions

The policy challenge I have outlined this evening is that of balancing the significant
economic — not to mention socio-political — advantages of international engagement
through trade with social justice and a perceived sense of legitimacy. This is not a new
challenge, it is just a more intense and pressing one.

After 60 years of multilateral trade cooperation in a dramatically changing world,

the case for an open trading system is as strong as ever. But as technology improves and
intensifies global interdependence, national policymakers and the global community are
confronted with an increasingly pressing need to demonstrate imagination, leadership and a
willingness to face up to new demands.

For national policymakers in the industrialized world, disregard for rising public
concern about some aspects of globalization would threaten to undermine the legitimacy of
governments and imperil social support, as would neglect of the gains from trade. The
answer to this tension lies in a balance between open markets and complementary domestic
policies, along with international initiatives that manage the risks arising from globalization.

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As for the global community, integrated economic markets need good legal and
political institutions. Without these institutions, markets lack the basic regulatory framework
to function properly. Our changing global realities, punctuated dramatically by the
current economic crisis, call for a re-think of many aspects of international governance.

{ Since 94, theory of comparative advantages has grown up. There is a conviction
that international trade is normally for the benefit of everyone. It’s demonstrated that the
gain for society from trade outweighs the losses of competition. The conviction is the value
created by international trade through specialization and exchange in open markets is far
over the losses of competition. That’s why barriers are progressively deleted. This doctrine
has been announced by Adam Smith “it’s the maxim to every master of household never to
attempt to make at home what will cost him more than to buy. The shoemaker should not
have created his clothes but has to recruit a tailor”.

The doctrine of comparative advantages has been retold by D. Ricardo, who

demonstrated that even a state, in which the production of two different products is cheaper
than the production of the same products in an order state, can have interests in focalizing
the production to one only product in which he’s specialized, and to import the other one.
Wine and clothes. In Portugal, production of a gallon of wine cost 20 units, when the
production of a yard of clothes cost 90. Compare to England, the production of a gallon of
wine cost 120, when a yard of clothes cost 100. Portugal has an interest not to losing time to
product clothes. That theory suggests that each country should devote its capacities to
products in which he has the strongest advantage. He forgets currencies, public policies.
Moreover, the major part of international exchanges is between developed states. Ricardo’s
theory doesn’t take care of development state lacks. }

Pascal LAMY says Ricardo has been the base of international trades during 200
years. If Ricardo’s theory works in Europe, it’s not so true in Africa. If a lot of value has
been created, competition too, illustrating the cruelty of the system.

Paragraphe 2nd The 3 pillars of International economic law in 44-48

Bretton Woods 44’. Its aim: rebuild the post ww2 economy. The World Bank and
the international monetary fund have been so created.

La charte de la Havane, projet de convention mettant en place un pilier commercial

au coté des piliers financiers et monétaires, n’a jamais été ratifiée car la superpuissance
qu’était les Us ne la souhaitait pas.

Only a temporary agreement on tariffs and trades has been signed in 47. Theses
institutions were put in force in order to preserve peace. Ahah. It was one the Bretton Woods
goals. The World Bank was devoted to financing the rebuilding of destroyed, at least
drained, economies, to avoid them to turn into communism. The IMF was supposed to
guarantee that the states should not use their currencies in a belligerent way. It was also
supposed to promote international exchanges between countries. GATT became an informal
institution as time past. Now, IMF has more a political aim than its economic one

Paragraphe 3rd The new international economic order in 70’s

The main idea of this new order is that trade should at least support development.
in fact, the international order was completely fragmented, and this fragmentation could not

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permit a global policy. On the one hand, trade was based on reciprocity, and on non-
discrimination. On the other hand, the food problems were hold by FAO. Cf. 55’s and 64’s
conferences of Bandung and Cairo. After these victories on trade aspects of the international
economics (cf. avantages tarifaires), the future non-aligned movement pasts a new step,
trying to set up a new international economic order. The idea of a new international
economic order has been clearly in 1973 by a now declared non-aligned movement in
Algiers. It’s first and mainly about sovereignty. Every state has the right to nationalize any
activity without international law. African states, like Libya, aimed oil activities. In fact it was
just a political proclamation. The new international economic order can be seen as a

Le nouvel ordre économique international, utopie, a été une revendication des PED
et ensuite des non-alignés, qui a fini par recevoir un écho devant l’ONU. Elle visait
principalement la possibilité de nationalisation d’activités sans préemption du Droit
international. De nombreux conflits ont apparu, avec par exemple des affaires devant les
tribunaux arbitraux. Les contours de ce nouvel ordre, d’abord flous, ont fini par être rejetés
peu à peu. Au début des années 80, ce n’était plus qu’une trace dans l’histoire.

Paragraphe 4th Privatization of financial laws

Evolution of what happens today. States and institutions require money. At least
at the beginning, states had an obligation to maintain a certain rate between their currencies
and the gold { étalon-or: gold standard }. To maintain this one, states had to intervene on the
currencies markets. The Federal Reserve has the power to create dollars, under the federal
government authority. { ⋲OR›$›autres } Unless the action of the Federal Reserve, you have to
buy dollars. If the demand for dollars against euro increase, the dollar price increase. France
had to intervene to reestablish the balance to protect euro. France had to offer dollars against
the dollar increase. The IMF has for object to inject money to assure some stability. The
problem is its reserve is not unlimited.

The private banks became more powerful the IMF to lend international
currencies, dollars of course. Private banks became more influent. In fact, English and
American private banks considered banking regulation were too strict. In example, during
the 50’s, English banks couldn’t keep currencies in reserve. American banks started to
outsource their activities in Europe. Private banks end up by kept petrodollars from
petromonarchies and nowadays petroeuros.

Private interests overcome public ones on currencies exchanges. IMF seems to be

impotent, as us’ administration on the dollar. That’s why it’s so difficult to regulate, to
reformate international financing activities. A lack of regulation engenders instability. As the
water finds its path, financial activities will avoid regulation. All the more so those public
administrations are now dependent of private financial activities.

Paragraphe 5th Nowadays

The WTO – World Trade Organization, created in 1995, is a kind of revolution
because it is the first of global institutions to have a juridical level. After the WW2, after
the 60’s, a regional trade organizations’ boom appears. WTO has to be viewed as a result of
the multiplication of groups. G7 has been the first in place as quasi institution to manage

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international and economic relations. Its instauration dates back to the 70’s. Chiefs of State or
government met to act. At least in theory. For a long time, it was sufficient to rely on the G7
to resolve economic problems of the Earth. The G7 has decided for example to organize
manage/annulment of poor countries debt. G7 has been extended in parallel to G20 to
increase its radiance, and so the value of its reforms.

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PARTIE I • Institutions and rules of international rules

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Chapitre I The WTO (World Trade Organization)

Section 1 The GATT (General Agreement of tariffs and trade)

Harry Dexter White and John Maynard Keynes at the Bretton Woods Conference –
Both economists had been strong advocates of a liberal international trade environment, and
recommended the establishment of three institutions: the IMF (fiscal and monetary issues),
the World Bank (financial and structural issues), and the ITO (international economic

Negotiations started in 1946-47. Countries of the Bretton Woods system negotiated

reductions of tariffs, trade. In 1947, an agreement, supposed to be administrated by the
ITO – International Trade Organization, still in limbos. In 1948, another agreement – the
Havana Charta – tried to institute this one. Senate refused. The plan called for the ITO to take
control over GATT, once the ITO was finalized. Owing to the United States failing to
implement the ITO, GATT was the only organization left. On 1 January, 1948 the agreement
was signed by 23 countries. Contracting parties decided to negotiate more and more tariffs
lowering. (⋲)

The 1982 Ministerial Declaration identified problems including structural

deficiencies, spillover impacts of certain countries’ policies on world trade GATT could not
manage. To address these issues, the eighth GATT round (known as the Uruguay
Round3) was launched in September 1986, in Punta del Este, Uruguay. It was the biggest
negotiating mandate on trade ever agreed: the talks were going to extend the trading system
into several new areas, notably trade in services and intellectual property, and to reform
trade in the sensitive sectors of agriculture and textiles; all the original GATT articles were
up for review.

The round was supposed to end in December 1990, but the US and EU
disagreed on how to reform agricultural trade and decided to extend the talks. Finally, In
November 1992, the US and EU settled most of their differences in a deal known informally
as “the Blair House accord”, and on April 15, 1994, the deal was signed by ministers from
most of the 123 participating governments at a meeting in Marrakesh, Morocco.

Section 2 The WTO

Paragraphe 1st The Agreement Establishing the World Trade Organization


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The agreement established in 1994, the World Trade Organization, which
came into being upon its entry into force on January 1, 1995, replaced the GATT
system. It is widely regarded as the most profound institutional reform of the world trading
system since the GATT's establishment.

Services, capital, intellectual property, textiles, and essentially agriculture were

specific topics of this agreement.


Paragraphe 2nd Membership and Accession

The WTO has 153 members, representing more than 97% of total world trade and
30 observers, most seeking membership. The WTO is governed by a ministerial conference,
meeting every two years; a general council, which implements the conference's policy
decisions and is responsible for day-to-day administration; and a director-general, who is
appointed by the ministerial conference. The WTO's headquarters is at the Centre William
RAPPARD, Geneva, Switzerland.

En cadeau…

WTO founder members (1 January 1995)

WTO subsequent members

A country wishing to accede to the WTO submits an application to the General

Council, and has to describe all aspects of its trade and economic policies that have a bearing
on WTO agreements. The application is submitted to the WTO in a memorandum, which is
examined by a working party open to all interested WTO Members.

After all necessary background information has been acquired, the working party
focuses on issues of discrepancy between the WTO rules and the applicant's international
and domestic trade policies and laws. The working party determines the terms and
conditions of entry into the WTO for the applicant nation, and may consider transitional
periods to allow countries some leeway in complying with the WTO rules.

The final phase of accession involves bilateral negotiations between the applicant
nation and other working party members regarding the concessions and commitments on
tariff levels and market access for goods and services. The new member's commitments are

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to apply equally to all WTO members under normal non-discrimination rules, even though
they are negotiated bilaterally.

When the bilateral talks conclude, the working party sends to the general council
or ministerial conference an accession package, which includes a summary of all the working
party meetings, the Protocol of Accession (a draft membership treaty), and lists ("schedules")
of the member-to-be's commitments. Once the general council or ministerial conference
approves of the terms of accession, the applicant's parliament must ratify the Protocol of
Accession before it can become a member.

Paragraphe 3rd WTO objectives

 The World Trade Organization deals with regulation of trade between
participating countries; it provides a framework for negotiating and
formalizing trade agreements, and a dispute resolution process aimed at
enforcing participants' adherence to WTO agreements, which are signed
by representatives of member governments and ratified by their parliaments.

-- Dolphin / Tuna cases & Shrimp / Turtle Case --

In the two dolphin Tuna cases, US amended the act to provide the importation of
tuna from other countries. It would be conditioned by a positive statement by us official4,
saying tuna has been fished under the respect5 of the same obligation that us fishermen.

Because Mexico and some other countries didn’t respect these obligations, us
declared an embargo on these countries. These countries revolt. Us justified the embargo
under the 20’ article, saying a state can adopt a measure to protect natural resources. Us
position were declared wrong. If they really want to protect dolphins, they should try to
protect a multilateral agreement in this matter. They prefer to adopt unilateral sanctions
against countries. And that’s against GATT. EU and Nederland have renewed the tuna
dolphin case. As in the first case, article 20 doesn’t permit the US to adopt unilateral
measures like these.

In a shrimp - turtle case6, US invented a new kind of fishnet, to permit turtles to

escape. US compensate their fishermen, and declared an embargo against countries (Sri
Lanka, India, and Malaysia who didn’t use these new fishnets. The question has been put to
the appellate body in the WTO, which declared like the precedent affair.

The WTO try to shift the debate on a political level towards environment. Opening
up trades and combating climate effects can have a positive impact of green house gazes,
including transfer of clean technologies. Rising incomes with trade opening can also have
social dynamics, particularly on developed economies.


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Paragraphe 4th Functions of WTO
Among the various functions of the WTO, these are regarded by analysts as the
most important:

 It oversees the implementation, administration and operation of the

covered agreements.

 It provides a forum for negotiations and for settling disputes.

 Additionally, it is the WTO's duty to review and propagate the national

trade policies, and to ensure the coherence and transparency of trade
policies through surveillance in global economic policy-making. Another
priority of the WTO is the assistance of developing, least-developed and
low-income countries in transition to adjust to WTO rules and disciplines
through technical cooperation and training.

 The WTO is also a center of economic research and analysis: regular

assessments of the global trade picture in its annual publications and
research reports on specific topics are produced by the organization. Finally,
the WTO cooperates closely with the two other components of the Bretton
Woods system, the IMF and the World Bank.


WTO Deal with the existent rules and so Implement WTO agreements. This is one
of its major functions. It involves a lot of bodies in WTO. In 1995, a committee has been
established, to deal to any question related to the market access. It has to supervise the
implementation of concessions by members on tariffs. It has also to oversee the application
of procedures for modifications or withdraw on tariffs concessions. Every agreement must be

WTO is also a Forum for trade negotiations. The Doha round has been launch in
2001. It was supposed to be concluded in 2005. It is still not up. The Doha round could be
concluded with a new Doha round.

WTO settled disputes.

WTO monitors trade policies. There is a trade policy mechanism. The Kennedy
round, strengthened by the Marrakech Uruguay Round made up this policy. It implies a
review system, a control system. Every 2 years for EU, USA, Japan and Canada members. For
the 60 other largest trading nations, reviews take place every 4 years. Other members have
been reviewed every 6 years. This review has to reveal the transparency mechanism of WTO.
It is not supposed to give arguments, to be a source of disputes, but to put some pressure on
countries. Each country write a report, explaining what’s relevant in WTO’s matters, and a
second report is release by the WTO Administration. The trade policy review body is the
general assembly of the WTO members to discuss trade policy reviews of members. They
take account of these reports and discuss it. EU was one of the last one. The next one:
Maldives’ Islands, followed by RSA, NIGER…

Cooperation with other organizations.

The article 7 of the WTO agreement explains that function. In fact, that’s derived
from a mandate released in 1993. The mandate has been implemented in the Doha final
version. Art 5 : WTO cooperates with IMF, doesn’t have to with UN. There are some
observers members, like OECD. Each body of the WTO has a list of accepted observers,
depending on the topic. The WTO can also have relationship with NGO. Art. 5 suggests it.
NGO can participate in or organize discussion sessions around a specific topic.

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Paragraphe 5th Institutional structure

 Ministerial Conferences

 Minister-level representatives of all Members

 Decision-making powers on all matters

 Meet once every two years:

Geneva, nov. 2009

Hong Kong, 2005

Cancún, 2003

Doha, 2001

Seattle, 1999

Geneva, 1998

Singapore, 1996

A · General Council
 Ambassador-level diplomats and normally meets once every two months

 Day-to-day management of the WTO

 The General Council convenes as appropriate to discharge the responsibilities

of the Dispute Settlement Body (the “DSB”) and the Trade Policy Review
Body (the “TPRB”) respectively;

 The General Council, the DSB, and the TPRB are in fact the same body
although they each have their own chairperson and rules of procedure.

B · Specialized Councils, Committees and Working Groups

➊ The Council for Trade in Goods; the Council for Trade in Services; and the
Council for TRIPS. All WTO Members are represented. They oversee the functioning of the
multilateral agreements in Annex 1A, 1B or 1C respectively. They assist the General Council
and the Ministerial Conference to adopt authoritative interpretations of the multilateral trade
agreements. They “instruct” the procedure for the adoption of waivers and the amendment

➋ Apart from three specialized Councils, there is a number of committees and

working groups to assist the Ministerial Conference and the General Council in carrying
out their functions.

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The WTO Agreement provides for three such committees: the Committee on Trade
and Development, the Committee on Balance-of-Payments Restrictions and the Committee
on Budget, Finance and Administration.

C · Quasi-judicial and Other Non-political Bodies

 Dispute Settlement Body

 Dispute Settlement panels

 Appellate Body

D · WTO Secretariat
-- Seems highly neglected (!) --

Paragraphe 6th Decision-Making

A · Normal Procedure
 Consensus, or Majority (one country, one vote)

B · Special Procedures
 Interpretation: ¾ majority

 Wavers: consensus or ¾ majority

 Accession: 2/3 majority

 Amendments: consensus or 2/3 majority

Paragraphe 7th Budget

⋲ CHF 189,257,600 7


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Chapitre II Basic Rules of WTO Law

Section 1 Non-Discrimination
It has two major components: the most favoured 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.

Paragraphe 1st The MFN (Most Favoured Nations) Treatment

A · The Principle

With respect to customs duties and charges of any kind imposed on or in

connection with importation or exportation or imposed on the 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 territories of all other
contracting parties

B · The importance of the principle:

“The MFN principle embodied in Article I:1 is a “cornerstone of the GATT” and “one
of the pillars of the WTO trading system”, EC — Tariff Preferences, para. 101

C · Functions of the principle (Art. I-1 GATT)

A “carrot”, An incentive for multilateralism:

“The prohibition of discrimination in Article I:1 also serves as an incentive for

concessions, negotiated reciprocally, to be extended to all other Members on an MFN basis »
Canada Autos, para. 84 (WT/DS139/AB/R, WT/DS142/AB/R)

D · Precisions (Art. I GATT)

➊ The beneficiary of the advantage which must be extended: any country,
notwithstanding the fact that it’s a member, or not, of the WTO.

➋ The beneficiary of the MFN-T is not a country, but “like products”; art. 1 GATT:

The second one is the real beneficiary. Fact is there is no definition of liked
products. Liked products are supposed to be established case by case. A common point is

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the competitiveness. Functional likeness seems to be one other. Substitutability too. Taking
account of raw materials.

“Any advantage, favour, privilege or immunity granted by any Member 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 territories of all other

➌ Definition of “like product”?

“We agree with the practice under the GATT 1947 of determining whether
imported and domestic products are “like” on a case-by-case basis” (Japan — Alcoholic
Beverages II, p. 19-20, DSR 1996:I, p. 97 at 112-113 (WT/DS8/AB/R, WT/DS10/AB/R,

“There can be no one precise and absolute definition of what is “like”. The concept
of “likeness” is a relative one that evokes the image of an accordion. The accordion of
“likeness” stretches and squeezes in different places as different provisions of the WTO
Agreement are applied. The width of the accordion in any one of those places must be
determined by the particular provision in which the term “like” is encountered as well as
by the context and the circumstances that prevail in any given case to which that
provision may apply. … (N. Japan — Alcoholic Beverages II, p. 21, DSR 1996:I, p. 97 at
114 (WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R))

“Uniform classification in tariff nomenclatures based on the Harmonized System

(the “HS”) was recognized in GATT 1947 practice as providing a useful basis for confirming
“likeness” in products”(Japan — Alcoholic Beverages II, p. 22, DSR 1996:I, p. 97 at 114-115
(WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R))

 The obligation not to discriminate aims to trade and domestic instruments.

➍ The Unconditionally Extension of the Advantage

The fourth aims the extension of advantages. And it’s unconditional, except social
ones, custom duties, non-unconditional advantages.

Does the term requests from the members to impose no conditions at all in the first
place, when they grand an advantage?

A number of cases retain this interpretation, outlawing any conditions imposed by

the importing WTO members. There is a second string of cases, which do not take such an
absolute approach.

➎ The beneficiary of the advantage do not have to grant an advantage in

exchange De facto as well as De jure discriminations are concerned

“(…) We observe that Article I:1 does not cover only “in law”, or de jure,
discrimination. As several GATT panel reports confirmed, Article I:1 covers also “in fact”, or de
facto, discrimination. Like the Panel, we cannot accept Canada’s argument that Article I:1
does not apply to measures which, on their face, are “origin-neutral”. (M.2.1.2 Canada —
Autos, para. 78 (WT/DS139/AB/R, WT/DS142/AB/R))

There is no need to demonstrate trade effect or intent to discriminate for a

complaint arguing that a member has violated the MFN provision.

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Paragraphe 2nd The national treatment (art. III §2)

National treatment is depicted in the GATT art. 3. §2 says that products of a
territory of any contracting party imported into the territory of any other contracting
party shall not be subject neither directly or indirectly to internal taxes or other
internal charges of any kind in excess of those applied directly or indirectly to liked
domestic products. §4 slightly differs.

National treatment obligation requires a WTO member to treat liked foreign

domestic, service and service suppliers’ products. The art. 3 try to avoid protectionism. The
only protectionism accepted measures are flowing of custom duties. All the others are
supposed to be prohibited, excepting exceptions… the very objective of the GATT aims free
trade, so lowers rates. Exceptions remain negotiable under the WTO and the appellate body.

GATT Art. 3 §2 specifically concerns taxation, when §4 points internal regulation.

Taxation excess appeared to be forbidden. And WTO cannot pretend to compensate excesses
between disadvantages and advantages. The §4 aims a no-less-favoring treatment. It covers
every law, every regulation, on foreign products, that can be fill up by discrimination.

Section 2 Market Access

There are many ways, for a State, to protect its internal market. The object of
WTO Law is to lower, and sometimes prohibit, these protections.

Market access for goods in the WTO means the conditions, tariff and non-tariff
measures, agreed by members for the entry of specific goods imported from abroad into
their markets

Market access for services means all the regulations, which are conditional on the
delivery of these services in the internal market.

Paragraphe 1st Custom duties

A · Custom duties are not prohibited as such…
Under WTO law, the imposition of custom duties on trade in goods is not
prohibited. Paradoxically, custom duties are considered as the most acceptable instrument
of protection of internal market. It is generally allowed by the GATT 1994.

B · But there is a commitment to negotiate custom duties: Article XXVIII bis

This article of the GATT 1994 calls upon the WTO Members to negotiate the
reduction to tariffs.

The contracting parties recognize that customs duties often constitute serious
obstacles to trade; thus negotiations on a reciprocal and mutually advantageous basis,
directed to the substantial reduction of the general level of tariffs and other charges on
imports and exports and in particular to the reduction of such high tariffs as discourage the

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importation even of minimum quantities, and conducted with due regard to the objectives
of this Agreement and the varying needs of individual contracting parties, are of great
importance to the expansion of international trade. The contracting parties may therefore
sponsor such negotiations from time to time.

C · Method and principles of negotiation

1 · Method
Tariff negotiations are normally conducted on a bilateral basis.

(A) accepts a reduction of its tariffs, in exchange of an advantage granted by (B).

But any reduction benefits to all WTO Members. As a consequence, the Members should try
to act on a multilateral approach, at least including important Members.

Dixit Article XXVIII bis, “The contracting parties recognize that in general the
success of multilateral negotiations would depend on the participation of all contracting
parties which conduct a substantial proportion of their external trade with one another”.
2 · Principles
The principle of reciprocity and mutual advantages is central to trade
negotiations. No one should be injured, considered as loosing anything at the end of
the negotiations.

But there is no definition of reciprocity in the WTO law. It is for each

government to assess the economic benefits and advantages of proposed concessions.

 According to art. Article XXXVI, 8. « The developed contracting parties do not

expect reciprocity for commitments made by them in trade negotiations to
reduce or remove tariffs and other barriers to the trade of less-developed
contracting parties ».

 Dixit Annex 1, ad Article XXXVI : « It is understood that the phrase “do not
expect reciprocity” means, in accordance with the objectives set forth in this
Article, that the less-developed contracting parties should not be expected, in
the course of trade negotiations, to make contributions which are
inconsistent with their individual development, financial and trade needs,
taking into consideration past trade developments. »

D · Consequence of the negotiations: the tariffs concessions

 The tariffs concessions are the results of the negotiations.

They are set out in each Member’s « Schedule of concessions on goods ». These
tariffs are published. There is a permanent transparency in this regard. It is possible for
Member to modify or withdraw tariff concessions only after negotiation under specific
conditions (renegotiation). The Member seeking modification or withdrawal of concessions is
expected to give compensatory concessions on other products.

 General result of the negotiations

Under the GATT 1947, these negotiations have taken place in the context of
eight successive rounds (Geneva, Annecy, Torquay, Geneva, Dillon, Kennedy, Tokyo,
Uruguay). These negotiations have been successful: the rates passed from an average

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duty on industrial product of around 40% ad valorem, to less than 4%. Many products
have 0% duty.

The new challenges concerns particularly protected markets:

agriculture and services.

Paragraphe 2nd Quantitative restrictions

A · Notion and regime of custom duties
So-called Measures prohibit or restrict the quantity of a product that may be
imported or exported. These measures are generally called « quotas », import or export

Quantitative restrictions (“QRs”) on trade in goods are, as a general rule,

forbidden. Unless one of many exceptions applies, WTO Members are not allowed to ban
the importation or exportation of goods or to subject them to quotas.

 Following Article XI on General Elimination of Quantitative Restrictions, “No

prohibitions or restrictions other than duties, taxes or other charges, whether
made effective through quotas, import or export licences or other measures,
shall be instituted or maintained by any contracting party on the importation
of any product of the territory of any other contracting party or on the
exportation or sale for export of any product destined for the territory of any
other contracting party “.

B · Exceptions
Quantitative restrictions may be temporarily applied to prevent or relieve
critical shortages of foodstuffs or other essential products to the exporting contracting

Quotas can be decided for example for balance of payment reasons, in

emergency safeguard action, or for the protection of public health and national

Quotas have been authorized for certain products (textile, until 2005)

When quantitative restrictions are applied under certain exceptions, they

should be applied on a non-discriminatory basis

 Article XIII: Non-discriminatory Administration of Quantitative Restrictions:

“No prohibition or restriction shall be applied by any contracting party on the
importation of any product of the territory of any other contracting party or
on the exportation of any product destined for the territory of any other
contracting party, unless the importation of the like product of all third
countries or the exportation of the like product to all third countries is
similarly prohibited or restricted”.

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1 · Precision on Tariff Quotas
A tariff quota is not a quota. . It is a quantity, which can be imported at a certain
duty (for example, 1000 products at 10%, while any other above this quantity will be taxed at


These tariff quotas are not considered as prohibited quotas,

because they are not quantitative restrictions, since they do not prohibit importations.

2 · Precision on QR’s
They are prohibited not only as regards importation, but also as regards

 It was not so clear until 1994 Marrakech agreements.

The WTO agreement prohibits “grey-area” measures.

 It says that members must not seek, take or maintain any voluntary export
restraints, orderly marketing arrangements or any other similar measures on
the export or the import side. The bilateral measures that were not modified
to conform with the agreement were phased out at the end of 1998.
Countries were allowed to keep one of these measures an extra year (until
the end of 1999), but only the European Union — for restrictions on imports
of cars from Japan — made use of this provision.

Paragraphe 3rd Other Duties and Financial Charges (Art. II 1-A-b / Art. II 2-c / Art. VIII A-a)
 Art. II A (b) of the GATT stipulates that regarding to products on which
there is a tariff concession, no other duties and financial charges may be
imposed in excess of those imposed in 1948 or at the moment of accession of
the Member concerned.

 Art. II 2 (c) states that new fees or charges can be created, but only if they are
« commensurate with the cost of services rendered.

 Art. VIII A (a) states that these fees and charges must be limited to the
approximate cost of services rendered.

Paragraphe 4th Non tariff barriers

They include custom procedures, technical regulations, sanitary and phytosanitary
measures, etc. The general rule is that these measures are prohibited if they amount to
protectionist measures. A number of very known measures are dealt with by specific

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Section 3 Exceptions

Paragraphe 1st For the benefit of developing countries

 Part IV of the GATT 1994, added in 1965, provides special and differential rules
for developing country Members.

 Art. XXXVI sets out the principle and objectives of the GATT 1994 in
contributing to the development of developing country Members. This article
incorporates the principle of non-reciprocity in trade negotiations
between developed and developing country Member.

The non-reciprocity principle conducted to the adoption of the 1979 Decision on

Differential and More Favourable Treatment, known as the Enabling Clause.

This Decision allows developed country Members to depart from the MFN-T in their
trade relations with developing countries and to grant to these countries « differential and
more favourable treatment » « without according such treatment to other Members ».

Developed countries Members have granted these treatments under the

Generalized System of Preferences, first adopted as a policy by UNCTAD in 1968.

Paragraphe 2nd Art. XX of the GATT and XIV of GATS

This provision acknowledges that Members are entitled to adopt and implement
legitimate governmental policies which may conflict with trade liberalization, if their
aim is to protect legitimate societal values and special interests such as human, animal
and plant life of health, exhaustible natural resources, national treasures of artistic, historic or
archaeological value and public morals.

A · Article XX: General Exceptions

It starts with a Chapeau. “Subject to the requirement that such measures are not
applied in a manner which would constitute a means of arbitrary or unjustifiable
discrimination between countries where the same conditions prevail, or a disguised
restriction on international trade, nothing in this Agreement shall be construed to prevent
the adoption or enforcement by any contracting party of measures” :

 Necessary to protect public morals;

 Necessary to protect human, animal or plant life or health;

 Relating to the importations or exportations of gold or silver;

 Necessary to secure compliance with laws or regulations which are not

inconsistent with the provisions of this Agreement, including those
relating to customs enforcement, the enforcement of monopolies operated

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under paragraph 4 of Article II and Article XVII, the protection of patents,
trade marks and copyrights, and the prevention of deceptive practices;

 Relating to the products of prison labour;

 Imposed for the protection of national treasures of artistic, historic or

archaeological value;

 Relating to the conservation of exhaustible natural resources if such measures

are made effective in conjunction with restrictions on domestic production or
consumption (…).

B · Method for implementing this provision

To determine whether a national contested measure constitutes a valid exception
under article XX, the following questions must be answered:

 Does the contested measure come under one of the specific exceptions?

 Does the measure at issue satisfy the requirement of the chapeau of Art. XX?

C · Art. XX (b) › Protect human, animal or plant life or health

This is the exception concerning the measures necessary to protect human, animal
or plant life or health. A Member invoking this provision to justify a measure, which is
contested must establish that the policy concerned falls is covered by the exception, and that
the measures for which the exception is being invoked are necessary to fulfil the policy

The Necessity requirement is the one, which is difficult to establish. It must be

demonstrated that there are no alternative measures, less inconsistent with the GATT that
could reasonably have been adopted to achieve the objective.

In the United States-Tuna Dolphin Case, the Panel considered that the United States
measure, even if Article XX (b) were interpreted to permit extrajurisdictionnal protection of
life and health, would not meet the requirement of necessity set out in that provision.

D · Art. XX (g) › Conservation of exhaustible natural resources if such measures are made effective
in conjunction with restrictions on domestic production or consumption
This exception concerns measures « relating to the conservation of exhaustible
natural resources if such measure are made effective in conjunction with restrictions on
domestic production or consumption ».

The implementation of this provision supposes a positive answer to 2 questions:

 Whether the measure effectively relates to conservation of exhaustible

natural resources;

 Whether the measure is made effective in conjunction with restrictions on

domestic production or consumption.

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In the US-Shrimp Case, it has been held that the US measure was on the scope of
article XX (g), but that it was not covered under the « chapeau » of article XX.

The objective of the chapeau of Art. XX is not so much the measure itself, rather the
manner in which that measure is applied. Its purpose and object are to prevent abuse of
the exceptions of article XX that would result in defeating and frustrating the objectives of
GATT 1994

In this regard, it forbids arbitrary or unjustifiable discrimination, and

disguised restriction on international trade.

E · GATS Article XIV: General Exceptions

Chapeau: Subject to the requirement that such measures are not applied in a
manner which would constitute a means of arbitrary or unjustifiable discrimination between
countries where like conditions prevail, or a disguised restriction on trade in services, nothing
in this Agreement shall be construed to prevent the adoption or enforcement by any
Member of measures:

 Necessary to protect public morals or to maintain public order;

 Necessary to protect human, animal or plant life or health;

 Necessary to secure compliance with laws or regulations which are not

inconsistent with the provisions of this Agreement including those relating to:

➊ The prevention of deceptive and fraudulent practices or to deal

with the effects of a default on services contracts;

➋ The protection of the privacy of individuals in relation to the

processing and dissemination of personal data and the protection of
confidentiality of individual records and accounts;

➌ Safety; (…)

Paragraphe 3rd Security Exceptions (GATT, Art. XXI / GATS, Art. XIV bis)
The security exceptions allow members to take measures, which depart from GATT
disciplines to achieve security objectives.

There is, first, the national security exception. It empowers Members with the
right to refuse the disclosure of information based on security grounds, but also to take
any action such as unilateral embargoes, as regards fissionable materials, relating to
traffic in weapons, or in time of war or other emergency in international relations.

There is also the exception relating to the actions under the UN Charter for the
maintenance of peace and security.

Measures affecting economic relations, like economic sanctions, can be taken by

members if these measures are required by the security council acting under article XXV of
the Charter, and under Article VII of this Chapter

It has been the case in the 1980’s when sanctions have been taken again South

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Same principles apply under the GATS).

Paragraphe 4e Safeguard Measures (GATT, Art. XIX)8

A · Notion: Emergency actions on imports of particular products
An increase in imports is the normal effect of trade liberalization, but it has
generally been recognized in trade treaty practice that there are certain circumstances in
which import liberalization may become difficult to sustain. Prior to the GATT 1947, bilateral
trade agreements generally provided for safeguard measures, in order to face situations
where the contracting parties, confronted with an impossible dilemma, risk to
repudiate their international commitments.

The GATT 1947 contained a special provision on “emergency action”, in Article

XIX. As a safeguard measure is always dangerous, because it can be the abusively referred to,
article XIX prescribed precisely the conditions under which safeguard measures may be

 This Art. XIX states:

§1. (a) If, as a result of unforeseen developments and of the effect of the
obligations incurred by a contracting party under this Agreement, including tariff
concessions, any product is being imported into the territory of that contracting party in
such increased quantities and under such conditions as to cause or threaten serious injury to
domestic producers in that territory of like or directly competitive products, the contracting
party shall be free, in respect of such product, and to the extent and for such time as may be
necessary to prevent or remedy such injury, to suspend the obligation in whole or in
part or to withdraw or modify the concession. The conditions to adopt safeguard
measures are very numerous, and difficult to meet.

§2 of the same article states that other WTO Member can request for
compensation from the State adopting the measures, if the safeguard measure cause them a

In effect, even in the context of a safeguard measure, Members must maintain a

substantially equivalent level of concessions and other obligations with respect to
affected exporting Members.

To attain this objective, the importing Member may first negotiate trade
compensation with the affected Members for the adverse effects of the measure.

If no agreement is achieved within 30 days, the affected exporting Members

individually may suspend substantially equivalent concessions and other obligations vis-à-vis
the Member imposing the safeguard measure.

B · The practice under the GATT

Some 150 safeguard measures were officially notified to the Contracting Parties to
the GATT 1947.


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However, Contracting parties also tried to rely on measures other than
safeguard measures to protect their markets from serious injuries.

“Grey area” measures (Voluntary Export Restraints (VERs), Voluntary Restraint

Arrangements (VRAs) and Orderly Marketing Arrangements (OMAs)).

It was easier for Contracting Parties than to face the request for compensation from
the rest of the contracting parties, and could be “targeted”, contrary to safeguard measures
(principle of non discrimination).

C · The Agreement on Safeguard

Article XIX of GATT 1947 was carried forward into GATT 1994. As a result of the
Uruguay Round, further safeguard rules were written in the Agreement on Safeguards, which
forms an integral part of the WTO Agreement.

Precisions are given concerning the interpretation that should be given to the
conditions enunciated by article XIX.

The agreement describes how quotas can be allocated among supplying countries,
including in the exceptional circumstance where imports from certain countries have
increased disproportionately quickly.

D · Safeguard Measures can be tariff measures-like

Safeguard Measures can be tariff measures9.

Does it means Quotas ? 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 setting a different, lower, level.

The maximum duration of any safeguard measure is 4 years, but can be

extended to 8.

Under critical circumstances, defined as circumstances where delay would cause

damage that would be difficult to repair, provisional measures may be imposed, on the
basis of a preliminary determination that there is clear evidence that increased imports have
caused or threaten to cause serious injury. Such measures should be in the form of
refundable tariff increases, and may be kept in place for a maximum of 200 days. The period
of application of any provisional measure must be included in the total period of application
of a safeguard measure.

Paragraphe 5th Regional Integration

Under WTO Law, groups of WTO members are authorized to achieve closer
integration of their economies. The term « regional integration » aims to capture these
preferential schemes that deviate from the obligation not to discriminate by establishing

› The Safeguards Mess: A Critique of WTO Jurisprudence, Alan O. Sykes, Stanford Law School, June 2003, U
Chicago Law & Economics, Olin Working Paper No. 187

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Not all the schemes are « regional » in the sense of geographical proximity,
but « cross regional ».

It is better to speak of « preferential trade agreements ».

The WTO law distinguishes 3 kinds of preferential trade agreements: free

trade agreements, custom unions, and economic integrations.

A · The different sorts of Preferential Trade Agreement

1 · Free trade area
A free trade area is a designated group of countries that have agreed to
eliminate tariffs, quotas and preferences on most (if not all) goods and services traded
between them.

Dixit Art. XXIV, 8, b: « A free-trade area shall be understood to mean a group of two
or more customs territories in which the duties and other restrictive regulations of commerce
(except, where necessary, those permitted under Articles XI, XII, XIII, XIV, XV and XX) are
eliminated on substantially all the trade between the constituent territories in products
originating in such territories ».

For example, North American Free Trade Agreement (NAFTA), African Free Trade
Zone (AFTZ), Central European Free Trade Agreement (CEFTA), or the Southern Common
Market (MERCOSUR), and maybe too the Association of Southeast Asian Nations (ASEAN)
Free Trade Area (AFTA).

2 · Custom Union
A customs union, unlike a free trade area, requires its members to
adopt a common external tariff of customs duties. The objective is to enable goods
(NOT LABOUR OR CAPITAL) to move freely throughout the union.

 Dixit Art. XXIV, 8, b: « A customs union shall be understood to mean the

substitution of a single customs territory for two or more customs territories,
so that:

 Duties and other restrictive regulations of commerce (except, where necessary,

those permitted under Articles XI, XII, XIII, XIV, XV and XX) are eliminated with
respect to substantially all the trade between the constituent territories of the
union or at least with respect to substantially all the trade in products originating
in such territories, and,

 Subject to the provisions of paragraph 9, substantially the same duties and other
regulations of commerce are applied by each of the members of the union to the
trade of territories not included in the union »

3 · Economic Integration
An economic integration is an agreement liberalizing trade in services between or
among the parties to such an agreement.

Normally, an economic integration is a supplementary development of a free trade

area, or of a customs union, so that, in the THOUVENIN’s view, you will never find an
economic integration, which is not already a preferential trade agreement.

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E.g. EU.

B · Are Preferential Trade Agreements coherent with WTO law? (Art. XXIV)
« Regional » agreements are considered to be beneficial to the development
of international trade.

 Dixit Art. XXIV: « The contracting parties recognize the desirability of

increasing freedom of trade by the development, through voluntary
agreements, of closer integration between the economies of the countries
parties to such agreements. They also recognize that the purpose of a
customs union or of a free-trade area should be to facilitate trade between
the constituent territories and not to raise barriers to the trade of other
contracting parties with such territories ».

C · Conditions (Art. XXIV §5)

The conditions are contained in art. XXIV §5 of the GATT.

The first condition is that the area cannot be less advantageous for non-members of
the area than was the situation before.

Therefore, the duties and other regulations of commerce imposed on non-

members at the formation of the Preference Trade Area or at the entry into force of an interim
agreement leading to this area should not be higher or more restrictive than those existing
until then.

For a FTA, customs duties imposed by each member must not increase or be more
restrictive. For a CU, the duties cannot on the whole be higher or more restrictive.

 Consequences on any enlargement of the EU.

Enlargement of the EU involves the extension of the customs union.

As a consequence, the new EU member has to align its external customs tariffs to the existing
common external tariff of the EU. Then, some of its tariffs could increase. It would also have a
consequence on the tariffs quotas of this new member.

There is no contestation if the overall balance is for the benefit of the other states
(tariffs are substantially lowered). But in the reverse situation, the Union has to offer
compensations to other states, in negotiations with a view to achieve a mutually satisfactory
compensatory adjustment. The negotiating process is the same than the normal procedure
for tariff renegotiation.

The second one is that an interim agreement must include a plan and a schedule
for the formation of a custom union of a free trade within a reasonable length of time, which
should not exceed 10 years except in exceptional circumstances.

The third condition is that the agreement must be notified to the WTO for review.
The committee on regional trade agreement has to determine their compatibility with the
WTO agreements.

The examination by the committee is conducted on the basis of information provided by the
parties to the PTA, through written replies to written questions posed by WTO members or
through oral replies to questions posed at CRTA meetings. Once the factual examination is
concluded, the Secretariat drafts the examination report. Thereafter, consultations are
conducted and once the report is agreed by the CRTA, it is submitted to the relevant superior
body for adoption.

No examination report has been finalized since 1995…

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The review is defective

Interpreting the wording of art. XXIV of the GATT and V of GATS has proved highly

In the Doha declaration, members agreed to negotiate a solution, giving due regard to the
role that these agreement (x)

The “regional” explosion

From 1948 until 1994, GATT has received 124 notification of PTA relating to trade in goods,
and since the creation of the WTO in 1995, almost 300 additional arrangements covering
trade in goods or services have been notified.

Between January 2004 and February 2005, 43 PTAs have been notified to the WTO. Between
October and June, 10 new regional trade agreements have been notified.

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Section 4 Protection Against Unfair Trade

WTO law does not have general rules on unfair trade practices.

It has been unsuccessful in developing new competition law rules. But it has some
rules that relate to specific forms of unfair trade. Those rules concern dumping and subsidies.

Paragraphe 1st Subsidies and Countervailing Duties10

One of the most common means at the disposal of national administrations
wishing to intervene on the functioning of the economy by way of an industrial policy is to
grant subsidies to such or such undertaking or industry.

Generally speaking, subsidies are a financial contribution by a government or

public body that confers a benefit to an economic competitor.

The objective pursued can be manifold: modernization of an industry (for example,

the car industry has been subsidized for the launching of electric cars; aeronautic is
commonly subsidized); responding to social situation (subsidies to agriculture; regional
subsidies); etc.

Normally, it is the responsibility of each State to decide if, and to what extent, it
wishes to grant subsidies

A · Subsidies may be legitimate but may have adverse effects

Art. VI of the GATT recognizes that subsidies may be a legitimate instrument
of public policy.

But subsidies might also have adverse effects on trading interests of other WTO

Generally, subsidies allow to lower the prices of the products subsidized. In this
context, subsidies can undermine market access commitments by importing nations. If an
administration grants subsidies to its national undertakings, the products sold by these
undertakings on the national market will have a competitive and abnormal advantage
against imported products. Secondly, subsidies can divert customers from one exporting
nation to another. If A subsidizes the products it exports, when B does not, then the
consumers from C will prefer to buy products imported from A.

In the same way, if A grants subsidies to its exporting undertakings, the consumers
from B will prefer to buy imported products from A than to by national products that are not


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B · National laws
States have adopted for a long time laws combating the effects of subsidies granted
by foreign States to foreign undertakings. The United States, for example, has adopted a Law
at the end of the XIXth century.

These laws generally provide for the imposition of a countervailing duty,

which is a supplementary duty on the subsidized product when it crosses the borders. The
aim of this countervailing duty is to neutralize the effect of the subsidy.

These laws have as their effect to increase the tariff paid for the importation of the
subsidized product, compared to the normal tariff. This if of course a “protection”, but
this is acceptable, as long as the duty is calculated in good faith.

C · WTO Law
1 · Overview
Current WTO law is contained in the agreement on subsidies and countervailing
measures adopted in Marrakech. This agreement is far more precise than what was in force
until then.

This agreement accepts that WTO Members protect themselves against subsidies,
but under certain conditions. It provides for two forms of relief:

 A multilateral approach, whereby a Member can request the

establishment of a panel to adjudicate on whether a particular subsidy or
program is WTO consistent or not; a country can use the WTO’s dispute
settlement procedures to seek the withdrawal of the subsidy or the removal
of its adverse effects.

 A unilateral approach whereby a WTO Member can impose countervailing

duties, provided that it has respected the relevant conditions laid down in the
agreement. The country can launch its own investigation and unilaterally
charge extra duty (known as “countervailing duty”) on subsidized imports
that are found to be hurting domestic producers.

2 · Definition
There must be a common definition of subsidies. Then the agreement contains
such a definition.

Dixit Art. 1 of the SCM11 Agreement (1994):

 1.1 For the purpose of this Agreement, a subsidy shall be deemed to exist if:

 (a)(1) There is a financial contribution by a government or any public body

within the territory of a Member (referred to in this Agreement as
“government”), i.e. where:


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 ➊ A government practice involves a direct transfer of funds (e.g. grants, loans,
and equity infusion), potential direct transfers of funds or liabilities (e.g. loan

 ➋ Government revenue that is otherwise due is foregone or not collected

(e.g. fiscal incentives such as tax credits) ;

 ➌ A government provides goods or services other than general infrastructure,

or purchases goods;

 ➍ A government makes payments to a funding mechanism, or entrusts or

directs a private body to carry out one or more of the type of functions illustrated
in (➊) to (➌) above which would normally be vested in the government and the
practice, in no real sense, differs from practices normally followed by
governments; or (a)(2) There is any form of income or price support in the sense
of Article XVI of GATT 1994; and (b) a benefit is thereby conferred”.

The definition contains three basic elements: (➊) a financial contribution, (➋) by a
government or any public body within the territory of a Member, (➌) which confers a
benefit. All three of these elements must be satisfied in order for a subsidy to exist.

➀ Contribution

US — Softwood Lumber IV, para. 52 and footnote 35 (WT/DS257/AB/R):

 “An evaluation of the existence of a financial contribution involves

consideration of the nature of the transaction through which something of
economic value is transferred by a government. A wide range of transactions
falls within the meaning of “financial contribution” in Article 1.1(a)(1). (…)
contribution having financial value can also be made in kind through
governments providing goods or services, or through government

 This range of government measures capable of providing subsidies is

broadened still further by the concept of “income or price support” in
paragraph (2) of Article 1.1(a).”

➁ Benefit

The disciplines set out in the agreement only apply to subsidies granting a
“benefit”. Canada — Aircraft, para. 157 (WT/DS70/AB/R)

 “The word “benefit”, as used in Article 1.1(b), implies some kind of

comparison. This must be so, for there can be no “benefit” to the recipient
unless the “financial contribution” makes the recipient “better off” than it
would otherwise have been, absent that contribution. In our view, the
marketplace provides an appropriate basis for comparison in determining
whether a “benefit” has been “conferred”, because the trade-distorting
potential of a “financial contribution” can be identified by determining
whether the recipient has received a “financial contribution” on terms more
favourable than those available to the recipient in the market”.

➂ Specific enterprise / industry / group

 2.1 In order to determine whether a subsidy, as defined in paragraph 1 of

Article 1, is specific to an enterprise or industry or group of enterprises or

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industries (referred to in this Agreement as “certain enterprises”) within the
jurisdiction of the granting authority, the following principles shall apply:

 (a) Where the granting authority, or the legislation pursuant to which the
granting authority operates, explicitly limits access to a subsidy to certain
enterprises, such subsidy shall be specific.

 (b) Where the granting authority, or the legislation pursuant to which the
granting authority operates, establishes objective criteria or conditions
governing the eligibility for, and the amount of, a subsidy, specificity shall not
exist, provided that the eligibility is automatic and that such criteria and
conditions are strictly adhered to. The criteria or conditions must be clearly
spelled out in law, regulation, or other official document, so as to be capable
of verification.”

 (c) If, notwithstanding any appearance of non-specificity resulting from the

application of the principles laid down in subparagraphs (a) and (b), there
are reasons to believe that the subsidy may in fact be specific, other factors
may be considered. Such factors are: use of a subsidy programme by a
limited number of certain enterprises, predominant use by certain
enterprises, the granting of disproportionately large amounts of subsidy to
certain enterprises, and the manner in which discretion has been exercised by
the granting authority in the decision to grant a subsidy. In applying this
subparagraph, account shall be taken of the extent of diversification of
economic activities within the jurisdiction of the granting authority, as well as
of the length of time during which the subsidy programme has been in

In this regard, in particular, information on the frequency with which applications

for a subsidy are refused or approved and the reasons for such decisions shall be considered.

 2.2 A subsidy, which is limited to certain enterprises located within a

designated geographical region within the jurisdiction of the granting
authority, shall be specific. It is understood that the setting or change of
generally applicable tax rates by all levels of government entitled to do so
shall not be deemed to be a specific subsidy for the purposes of this

WT/DS257/AB/R (USA vs. CANADA) (2004) about conifers

WT/DS70/AB/R (BRAZIL vs. CANADA) (2000) about civilian aircrafts

3 · Categories of subsidies
There can be “domestic” or “export” subsidies.

The agreement defines two categories of subsidies: prohibited (red box) and
actionable (orange box). It originally contained a third category: non-actionable
subsidies (green box). This category existed for five years, ending on 31 December 1999,

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and was not extended. The agreement applies to agricultural goods as well as
industrial products.

{Ce qui n’est une fois encore que le rappel craignos d’un article, ici le SCM}.

i) Prohibited subsidies

The prohibited subsidies are the one that require recipients to meet certain export targets, or to
use domestic goods instead of imported goods.

(a) Subsidies contingent, in law or in fact, whether solely or as one of several other conditions, upon
export performance, including those illustrated in Annex I;

(b) Subsidies contingent, whether solely or as one of several other conditions, upon the use of domestic
over imported goods.

They are prohibited “per se” because they are specifically designed to distort international trade, and are
therefore likely to hurt other countries’ trade.

They can be challenged in the WTO dispute settlement procedure where they are handled under an
accelerated timetable. If the dispute settlement procedure confirms that the subsidy is prohibited, it must be
withdrawn immediately. Otherwise, the complaining country can take counter measures. If domestic producers are
hurt by imports of subsidized products, countervailing duty can be imposed. There is no “compensation” for the
Members adversely affected by the subsidy.

ii) Actionable subsidies

In this category the complaining country has to show that the subsidy has an adverse effect on its
interests. Otherwise the subsidy is permitted. If the Dispute Settlement Body rules that the subsidy does have an
adverse effect, the subsidy must be withdrawn or its adverse effect must be removed. Again, if domestic producers
are hurt by imports of subsidized products, countervailing duty can be imposed.

 Dixit 5 SCM, “No Member should cause, through the use of any subsidy referred to in
paragraphs 1 and 2 of Article 1, adverse effects to the interests of other Members, i.e.:

(a) Injury to the domestic industry of another Member;

(b) Nullification or impairment of benefits accruing directly or indirectly to other Members under
GATT 1994 in particular the benefits of concessions bound under Article II of GATT 1994;
(c) Serious prejudice to the interests of another Member.

 Ar. 16 SCM: Definition of Domestic Industry

“16.1 : For the purposes of this Agreement, the term “domestic industry” shall, except as
provided in paragraph 2, be interpreted as referring to the domestic producers as a whole of the
like products or to those of them whose collective output of the products constitutes a major
proportion of the total domestic production of those products, except that when producers are
related to the exporters or importers or are themselves importers of the allegedly subsidized
product or a like product from other countries, the term “domestic industry” may be interpreted
as referring to the rest of the producers.”

 Art. 6 SCM: Serious Prejudice

Serious prejudice in the sense of paragraph (c) of Article 5 shall be deemed to exist in the case of:

(a) The total ad valorem subsidization of a product exceeding 5 per cent;

(b) Subsidies to cover operating losses sustained by an industry;
(c) Subsidies to cover operating losses sustained by an enterprise, other than one-time measures
which are non-recurrent and cannot be repeated for that enterprise and which are given merely
to provide time for the development of long-term solutions and to avoid acute social problems;
(d) Direct forgiveness of debt, i.e. forgiveness of government-held debt, and grants to cover debt

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4 · Countervailing Measures
The SCM Agreement sets forth certain substantive and procedural requirements
that must be fulfilled by any State planning to impose a countervailing measure.

A failure to respect either the substantive or procedural requirements can be taken

to dispute settlement and may be the basis for invalidation of the measure.

 Concerning the substantive rules, a Member can impose a

countervailing measure only if it determines that there are

i) subsidized imports,

ii) injury to a domestic industry, and

Iii) a causal link between the subsidized imports and the injury.

The SCM Agreement gives explanations on the notion of injury to a domestic


 Concerning the procedural rules, they are regarding the initiation and
conduct of countervailing investigations, the imposition of preliminary
and final measures, the use of undertakings, and the duration of

The principles are that the investigations must be conducted in a transparent and
“contradictory manner, and that investigating authorities adequately explain the bases for
their determinations.

The Agreement requires that Members create an independent tribunal to review

the consistency of determinations of the investigating authority with domestic law

 Dixit Art. 11 SCM: Initiation and Subsequent Investigation

“11.1 Except as provided in paragraph 6, an investigation to determine the

existence, degree and effect of any alleged subsidy shall be initiated upon a
written application by or on behalf of the domestic industry.”

Paragraphe 2nd Dumping and Anti Dumping12

A · Notion
If a company exports a product at a price lower than the price it normally charges
on its own home market, it is said to be “dumping” the product. Is this unfair competition?
The WTO agreement does not pass judgement. Its focus is on how governments can or
cannot react to dumping — it disciplines anti-dumping actions, and it is often called the
“Anti-dumping Agreement”.

At first sight, dumping is a good news for the consumers of the export market: they
can buy the product “dumped” at a lower price.


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But a company normally decides to “dump” in order to exclude its competitors
from a targeted market. These competitors will not be able to compete with the prices
“dumped”. At the end of the process, when the competitors will be eliminated, the normal
conduct of the “dumper” will of course to increase its selling prices.

Difference with SCM: Dumping is an action by a company, which sells its products
at a price under the price it charges on its own home market. In the context of subsidies, it is
the government or a government agency that acts.

WTO is an organization of countries and their governments. The WTO does not
deal with companies and cannot regulate companies’ actions such as dumping.
Therefore the Anti-Dumping Agreement only concerns the actions governments may
take against dumping.

B · National laws
A dumping that does not cause any injury to the domestic producers is normally
the object of no prohibition. But if such dumping injures the domestic producers in the
importing country will be conducted to impose anti-dumping duties to offset the effects of
the dumping.

National anti-dumping legislation dates back to the beginning of the 20th century.
In the US, the “old” law was promising jail for the dumpers.

C · The GATT
The GATT 1947 contained a special article on dumping and antidumping action.
Article VI of the GATT condemns dumping that causes injury, but it does not prohibit it.

Rather, Article VI authorizes, under certain conditions, the importing Member

to take measures to offset injurious dumping.

 GATT Art. VI-1 “The contracting parties recognize that dumping, by which
products of one country are introduced into the commerce of another
country at less than the normal value of the products, is to be condemned if
it causes or threatens material injury to an established industry in the territory
of a contracting party or Rather, Article VI authorizes, under certain
conditions, the importing Member to take measures to offset injurious

 GATT Art. VI-1 “The contracting parties recognize that dumping, by which
products of one country are introduced into the commerce of another
country at less than the normal value of the products, is to be condemned if
it causes or threatens material injury to an established industry in the territory
of a contracting party or materially retards the establishment of a domestic

Since 1947, anti-dumping has received elaborate attention in the GATT/WTO on

several occasions:

A Group of Experts established in 1960 agreed on certain common interpretations

of ambiguous terms of Article VI. An Anti-Dumping Code was negotiated during the 1967
Kennedy Round (signed by 17 parties). The Code was revised during the Tokyo Round (25
signatories). During the Uruguay Round, changes were proposed to the 1979 Code. Article VI
was carried forward into GATT 1994. A new agreement, the Agreement on Implementation

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of Article VI [ADA], was concluded in 1994 as a result of the Uruguay Round. Article VI and
the ADA apply together.

D · The ADA: The Anti-dumping Agreement

 It gives a definition of the dumping margin, which is the difference between
the normal price and the export price;

 It also gives a definition of the « injury », without which no action against

dumping can be engaged;

 It explains the requirements that have to be respected by States in their

procedures against dumping;

 Lastly, it explains the WTO procedures that can be engaged by a States when
the requirements have not been respected.

1 · Determination of the Dumping margin (difference between the normal value and the export price)
In the current law, dumping of services is not covered. Indeed, the General
Agreement on Trade in Services, negotiated during the Uruguay Round, does not contain
provisions with respect to dumping or anti-dumping measures.

Neither Article VI (nor the ADA) cover exchange rate dumping, social dumping,
environmental dumping or freight dumping.

The major difficulty with the implementation of the dumping regulation is to draw
a comparison permitting to demonstrate the existence of a dumping. The WTO law gives the
relevant guidelines.

There are different situations.

 Standard situation : domestic sales (Art. 2.1/2.3)

Within time, Representative like product › export price › comparable price (+

excluded products outside the normal course of trade).

 No domestic sales at stake (Art. 2.2)

In such a case, the dumping margin shall be determined by comparison with a

comparable price of the like product when exported to an appropriate third country,
provided that the price is representative, or with the cost of production in the country of
origin plus a reasonable amount of administrative, selling and general costs and for profits.

 More than two countries involved (Art. 2.5)

If the authorities find a pattern of export prices which differ significantly among
different purchasers, regions or time periods, and if an explanation is provided as to why
such differences cannot be taken into account appropriately by the use of one of the two
principal methods; In such a case, there can happen that some comparisons reveal a
dumping, while others do not, or even show a negative dumping.

The negative dumping occurs because the export price is actually higher than the
normal value. If the negative dumping for certain sales can be used to offset the positive
dumping amount of the other sales, no dumping will be found to exist.

However, it has been the practice of some WTO Members not to allow such offset
and to attribute a zero value to negatively dumped transactions. This is known as the
practice of zeroing.

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Use of this method implies that if just one transaction is dumped, dumping will be
found. The method therefore facilitates dumping findings.

This method is contested since 1994.

Some WTO Members applied a new type of zeroing: inter-model zeroing. If, for
example, model A was dumped while model B was not dumped, the Members would not
allow the negative dumping of model B to offset the positive dumping of model A.

“we are also of the view that a comparison between export price and normal value
that does not take fully into account the prices of all comparable export transactions – such
as the practice of “zeroing” at issue in this dispute – is not a “fair comparison” between
export price and normal value, as required by Article 2.4 and by Article 2.4.2.;

Appellate Body Report, EC – Bed Linen (2001).

 Is Zeroing acceptable under EU Law ?

3 methods, first and second symmetrical method, and asymmetrical method.

1. comparison of a weighted average normal value with a weighted average of

prices of all export transactions to the Community’ (‘the first symmetrical method’ W-T).

2. comparison of individual normal values and individual export prices to the

Community on a transaction-to-transaction basis’ (‘the second symmetrical method’ T-T)

3. A normal value established on a weighted average basis may be compared to

prices of all individual export transactions to the Community, if there is a pattern of export
prices which differs significantly among different purchasers, regions or periods, and if the
methods specified in the first sentence of this paragraph would not reflect the full degree of
dumping being practised’ (‘the asymmetrical method’).

Dixit CFI, 24 October 2006 , T-274/02:

“As regards, finally, the WTO Appellate Body’s reference at the end of paragraph 55
of the Bed linen report to the unfairness of a comparison that does not take into account all
comparable export transactions, the Court considers that this reference, despite its apparent
generality, cannot, in the light of the abovementioned considerations, be interpreted as
meaning that zeroing is wrong in every context.

It follows from the foregoing that, contrary to what the applicants claim, the Bed
linen report concerns only the model-zeroing technique in the context of the first
symmetrical method and cannot be considered to deal with this mechanism also when it is
used in the context of the asymmetrical method.

Therefore, even if, as the WTO Appellate Body found, it might indeed be contrary
to Article 2.4.2 of the 1994 Anti-dumping Code and unfair to employ the model-zeroing
technique in the context of the first symmetrical method, and especially in the absence of a
difference in the export price pattern, it is not contrary to that provision or to Article 2(11) of
the basic regulation, or unfair within the meaning of Article 2(10) of that regulation, to
employ the zeroing technique in the context of the asymmetrical method, where the two
conditions for applying that method are met. »

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ECJ, 27 September 2007, C-351/04, Ikea Wholesale Ltd

» In its report of 30 October 2000, a dispute-resolution panel of the DSB (‘the

Panel’) found that the European Communities had acted in a manner incompatible with their
obligations under Articles 2.4.2, 3.4 and 15 of the Anti-Dumping Agreement, as regards the
method used in the investigations which led to the adoption of Regulation No 2398/97.

The Community appealed against a number of the Panel’s findings. The WTO
Appellate Body (‘the Appellate Body’), in its report of 1 March 2001, confirmed that the
practice of ‘zeroing’ applied by the Community was incompatible with Article 2.4.2 of the
Anti-Dumping Agreement and that the Community had acted in a manner incompatible
with Article 2.2.2(ii) of the Anti-Dumping Agreement in calculating the amounts
corresponding to administrative, selling and general costs and profits in the anti-dumping
investigation. In the light of those findings, the Appellate Body recommended that the DSB
request the Community to take the measures necessary to ensure the conformity of
Regulation No 2398/97 with its obligations under the Anti-Dumping Agreement.

On 12 March 2001, the DSB adopted the Appellate Body’s report and the report of
the Panel, as amended by the former’s report. …

 In US – Zeroing (Japan)13 (2007), the Appellate Body reversed the original

panel’s finding that the maintenance of zeroing procedures in: T-to-T
comparisons in original investigations; periodic reviews; and new shipper
reviews was not WTO-inconsistent.

It considered that the United States acts inconsistently with Articles 2.4 and
2.4.2 of the AD Agreement by maintaining zeroing procedures when
calculating margins of dumping on the basis of transaction-to-transaction
comparisons in original investigations.

Concerning the weighted average-to-transaction (W-T) comparison, it said

that the transaction side must represent the “pattern of export prices which
differ significantly among different purchasers, regions or time periods”.
Zeroing is not possible in this context …

2 · Determination of the Injury

a · Material injury (Art. 3.4 / Art. 3.5 ADA)
The determination of material injury must be based on positive evidence and
involve an objective examination of the volume of the dumped imports, their effect on the
domestic prices in the importing Member market and their consequent impact on the
domestic industry.

A recommendation of the WTO Committee on Anti-Dumping Practices provides

that injury should preferably be analysed over a period of at least three years. This period is
often called the injury investigation period.

There must be an evaluation of all the factors which can be the cause of the
injury, and which are not the attributable to the dumped product.


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 Article 3.4 requires that the examination of the impact of the dumped
imports on the domestic industry shall include an evaluation of all relevant
economic factors and indices having a bearing on the state of the industry
producing the like product in the importing country and then mentions 15
specific factors.

“Actual and potential decline in sales, profits, output, market share,

productivity, return on investments, or utilization of capacity; factors
affecting domestic prices; the magnitude of the margin of dumping; actual
and potential negative effects on cash flow, inventories, employment, wages,
growth, ability to raise capital or investments”.

 The authorities must also examine any other known factors, according to
article 3.5 ADA:

Art. 3.5 proposes a series of factors: the volume and prices of imports not sold
at dumping prices, contraction in demand or changes in the patterns of
consumption trade restrictive practices of and competition between the
foreign and domestic producers, developments in technology and the export
performance and productivity of the domestic industry.

 But it is not compulsory for the authority to check these factors, as it is

concerning the factors listed at art. 3.4.

“The text of Article 3.5 refers to “known” factors other than the dumped
imports which at the same time are injuring the domestic industry but does
not make clear how factors are “known” or are to become “known” to the
investigating authorities. We consider that other “known” factors would
include those causal factors that are clearly raised before the investigating
authorities by interested parties in the course of an AD investigation. We are
of the view that there is no express requirement in Article 3.5 that
investigating authorities seek out and examine in each case on their own
initiative the effects of all possible factors other than imports that may be
causing injury to the domestic industry under investigation”.

b · Threat of injury (Art. 3.7 ADA)

That means confirmed threat.

It may occur that a domestic industry alleges that it is not yet suffering material
injury, but is threatened with material injury, which will develop into material injury unless
anti-dumping measures are taken.

However, because such statements are easy to make, and because any
investigation based on threat of material injury will necessarily be speculative because it
involves analysis of events that have not yet happened, Article 3.7 offers special provisions for
a threat case.

Thus, a determination of threat must be based on facts and not merely on

allegation, conjecture or remote possibility. The change in circumstances, which would
create a situation in which the dumping would cause injury, must be clearly foreseen and

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 In making a threat determination, the importing Member authorities should
consider, inter alia, four special factors.
(➀) A significant rate of increase of dumped imports into the domestic market
indicating the likelihood of substantially increased importation;
(➁) Sufficiently freely disposable, or an imminent, substantial increase in,
capacity of the exporter indicating the likelihood of substantially increased
dumped exports to the importing Member’s market, taking into account the
availability of other export markets to absorb any additional exports;
(➂) Whether imports are entering at prices that will have a significant
depressing or suppressing effect on domestic prices, and would likely
increase demand for further imports; and
(➂) Inventories of the product being investigated.
The Mexico – Corn Syrup Panel concluded that a threat analysis must also
include evaluation of the Article 3.4 factors.

3 · National procedures
a · Initiation (Art. 5 +)
An anti-dumping case normally starts with the official submission of a written
complaint by the domestic industry to the importing Member authorities that injurious
dumping is taking place.

 Art. 5 ADA: “an investigation to determine the existence, degree and effect of
any alleged dumping shall be initiated upon a written application by or on
behalf of the domestic industry”.
It must “include evidence of (a) dumping, (b) injury within the meaning of
Article VI of GATT 1994 as interpreted by this Agreement and (c) a causal link
between the dumped imports and the alleged injury. Simple assertion,
unsubstantiated by relevant evidence, cannot be considered sufficient to
meet the requirements of this paragraph” (art. 5.2, ADA).
Article 5.3 imposes the obligation on the importing Member authorities to
examine, before initiation, the accuracy and the adequacy of the evidence in
the application.
The importing Member authorities must determine before initiation that the
application has been made by, or on behalf of, the domestic industry.
The failure to properly determine standing before initiation of the
proceedings renders it illegal.
“An application is made by, or on behalf of, the domestic industry of the
importing Member if it is supported by those domestic producers whose
collective output constitutes more than 50 per cent of the total production of
the like product produced by that portion of the domestic industry
expressing either support for or opposition to the application. However, no
investigation shall be initiated when domestic producers expressly
supporting the application account for less than 25 per cent of total
production of the like product produced by the domestic industry. These
tests are often called the 50 per cent and the 25 per cent test and the
following example may explain their operation” (art. 5.4 ADA).

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b · Due process rights (Art. 6 / Art. 12)

Articles 6 and 12 ADA contain various due process rights of interested parties.

Article 12 obliges importing Member authorities to publish public notices of

initiation, and of preliminary and final determinations, with increasing degrees of
specificity, as the investigation progresses. In addition, they must publish detailed
explanations of their determinations.

Due process rights in Article 6 include the opportunity to present evidence in

writing, the right of access to the file, the right to have a hearing and to meet opposing
parties, the right to be timely informed of the essential facts under consideration which form
the basis for the decision whether to apply definitive measures, and the right to obtain,
subject to exceptions, an individual dumping margin.

c · Provisional Measures
Can a State protect itself immediately when the proceedings are engaged?

Provisional measures may be applied only if the normal proceedings have

been correctly followed; a preliminary affirmative determination has been made of
dumping and consequent injury to a domestic industry; and the authorities concerned judge
such measures necessary to prevent injury being caused during the investigation.

Provisional measures may take the form of a provisional duty or, preferably, a
security - by cash deposit or bond - equal to the amount of the anti-dumping duty
provisionally estimated .

Provisional measures shall not be applied sooner than 60 days from the date of
initiation of the investigation.

The application of provisional measures shall be limited to as short a period as

possible, not exceeding four months or, on decision of the authorities concerned, upon
request by exporters representing a significant percentage of the trade involved, to a period
not exceeding six months.

d · Price Undertakings
Can an enterprise recognize its fault and stop the proceedings?

Proceedings may be suspended or terminated without the imposition of

provisional measures or anti-dumping duties upon receipt of satisfactory voluntary
undertakings from any exporter to revise its prices or to cease exports to the area in
question at dumped prices so that the authorities are satisfied that the injurious effect of the
dumping is eliminated.

BUT. Anti-dumping measures cannot be preventive measures without determination.

They cannot be used to ply.

Price undertakings shall not be sought or accepted from exporters unless the
authorities of the importing Member have made a preliminary affirmative determination
of dumping and injury caused by such dumping.

The authorities of the importing Member may suggest Price undertakings, but
no exporter shall be forced to enter into such undertakings.

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If an undertaking is accepted, the investigation of dumping and injury shall
nevertheless be completed if the exporter so desires or the authorities so decide.

e · Anti-dumping duties: retrospective (US) and prospective duties (EC)

It is possible for the importing Party to adopt, or not, anti-dumping duties.
The amount of the anti-dumping duty shall not exceed the margin of dumping. The
anti dumping duties are fixed for the future importations.

Article 9.3 introduces the distinction between retrospective and prospective duty
collection systems and requires prompt refunds of over-payments in both cases.

Under the retrospective system, used mainly by the United States, the original
investigation ends with an estimate of future liability; however, the actual amount of
anti-dumping duties to be paid will be established in the course of annual reviews,
covering the preceding one-year period.

Under the prospective system, used by the EC and most other countries, on the
other hand, the findings made during the original investigation form the basis for the future
collection of anti-dumping duties, normally for the five years following the publication of
the final determination.

The retrospective system is more precise than the prospective system. On the
other hand, it is costly and time-consuming for all parties, including the importing
Member authorities.

f · Retroactivity of anti-dumping duties? (Art. 10)

That concerns consequences of a final determination of injury, about levy of
potential provisional measures; and that dovetails with the fact anti-dumping duty is
higher/lower than the provisional duty paid, so the difference has to be taken into

{Et allez, rebelote…}

 Dixit Art. 10 ADA:

10.2: Where a final determination of injury (but not for a threat there or a
material retardation of the establishment of an industry) is made or, in the
case of a final determination of a threat of injury, where the effect of the
dumped imports would, in the absence of the provisional measures, have led
to a determination of injury, anti-dumping duties may be levied
retroactively for the period for which provisional measures, if any, have
been applied.

10.3: If the definitive anti-dumping duty is higher than the provisional duty
paid or payable, or the amount estimated for the purpose of the security, the
difference shall not be collected. If the definitive duty is lower than the
provisional duty paid or payable, or the amount estimated for the purpose of
the security, the difference shall be reimbursed or the duty recalculated, as
the case may be”.

Where a final determination is negative, any cash deposit made during the
period of the application of provisional measures shall be refunded and any
bonds released in an expeditious manner.

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g · Duration
 Art. 11.1 ADA: “An anti-dumping duty shall remain in force only as long as
and to the extent necessary to counteract dumping which is causing

 Art. 11.3 ADA: “any definitive anti-dumping duty shall be terminated on a

date not later than five years from its imposition (or from the date of the
most recent review under paragraph 2 if that review has covered both
dumping and injury, or under this paragraph), unless the authorities
determine, in a review initiated before that date on their own initiative or
upon a duly substantiated request made by or on behalf of the domestic
industry within a reasonable period of time prior to that date, that the expiry
of the duty would be likely to lead to continuation or recurrence of dumping
and injury”.

h · Interpretation of this provision by the ECJ

Dixit CFI, 24 September 2008, Case T-45/06, §§104 – 110

“The aim of Article 11.3 of the WTO Anti-Dumping Agreement … is to provide for
the automatic lapse of the duties concerned five years after their imposition unless a review is
initiated. As was rightly pointed out by the Commission in its pleadings, in Article 11.3 of the
WTO Anti-Dumping Agreement …, the clause which provides for the possibility of
maintaining existing duties in force following the initiation of an expiry review of
anti-dumping and countervailing measures was introduced during the negotiations for the
Uruguay round in order to compensate for the introduction of the ‘sunset clause’ triggering
the automatic expiry of anti-dumping and countervailing measures five years after their

In that context and regarding to the aim of Article 11.3 of the WTO Anti-Dumping
Agreement (…), it is necessary for the review to be initiated, at the latest, before the
automatic expiry of the anti-dumping and countervailing measures (…). It is apparent from
the foregoing that a review ,which is initiated before midnight on the last day of the normal
period for the application of measures must be regarded as being in conformity with Article
11.3 of the WTO Anti-Dumping Agreement and Article 21.3 of the WTO Anti-Subsidy

{Moi je dis, su-per.}

i · Judicial Review (Art. 13 ADA)

“Each Member, whose national legislation contains provisions on anti-dumping
measures shall maintain judicial, arbitral or administrative tribunals or procedures for
the purpose, inter alia, of the prompt review of administrative actions relating to final
determinations and reviews of determinations within the meaning of Article 11. Such
tribunals or procedures shall be independent of the authorities responsible for the
determination or review in question”.

It must be noted that this provision does not state the scope of review (facts?

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j · Implementation by the EC: The European commission manages proceedings
The provisions governing the application of anti-dumping measures by the
European Community are set out in Council Regulation (EC) No 384/96 of 22 December 1995
on protection against dumped imports from countries not members of the European
Community (OJ 1995 L 56, p. 1) (‘the basic regulation’). It has been amended many times.

An anti-dumping investigation can be initiated in response to a complaint lodged

by European manufacturers affected by dumped imports or at the request of an EU country.

The European Commission is in charge of the proceedings.

k · Implementation by the EC: Direct application of ADA in European Legal Order?

CFI, 8 July 2008, Case T-221/05

« The applicant claims that the institutions concerned infringed Article 2.4 of the
1994 Anti-dumping Code …

It must be recalled at the outset that, according to settled case-law, having regard
to their nature and structure, the WTO Agreements are not in principle among the rules
in the light of which the Community Courts are to review the legality of measures adopted
by the Community institutions (Case C-76/00 P Petrotub and Republica v Council [2003] ECR
I-79, paragraph 53; Case C-93/02 P Biret International v Council [2003] ECR I-10497,
paragraph 52; and Ikea Wholesale, paragraph 29).

It is only where the Community intended to implement a particular obligation

assumed in the context of the WTO, or where the Community measure refers expressly to
the precise provisions of the WTO Agreements, that it is for the Community Courts to review
the legality of the Community measure in question in the light of the WTO rules (Case C-
149/96 Portugal v Council [1999] ECR I-8395, paragraph 49; Petrotub and Republica v
Council, paragraph 54; Biret International v Council, paragraph 53; and Ikea Wholesale,
paragraph 30).

In the present case, the Community adopted the basic regulation in order to meet
its international obligations arising from the 1994 Anti-dumping Code (Petrotuband
Republica v Council, paragraph 56). Furthermore, by means of Article 2(10) of the basic
regulation, it intended to implement the particular obligations laid down by Article 2.4 of
that code. To that extent, it is for the Court to review the legality of the contested regulation
in the light of that latter provision (see, to that effect, Petrotub and Republica v Council,
paragraph 56).

Thus, in order to assess the validity of the contested regulation, it is necessary to

examine the interpretation by the institutions concerned of Article 2(10)(g) of the basic
regulation in the light of Article 2.4 of the 1994 Anti-dumping Code.”

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Section 5 Developing Countries in the WTO System

Paragraphe 1st Recognition of the Interests and Needs of Developing Countries

In the Preamble of the WTO Agreement, WTO Members explicitly recognize the
need for positive efforts designed to ensure that developing countries, and especially the
least developed countries, are integrated into the multilateral trading system and
secure a share in the growth in international trade commensurate with the needs of their
economic development.

 Dixit Part IV of the GATT, called “Trade and Development”: “There is a wide
gap between standards of living in less-developed countries and in other
countries »; « the CONTRACTING PARTIES may enable less-developed
contracting parties to use special measures to promote their trade and
development »; « The developed contracting parties do not expect reciprocity
for commitments made by them in trade negotiations to reduce or remove
tariffs and other barriers to the trade of less-developed contracting parties”;
“etc..” {Loll.}

Paragraphe 2nd Special and Differential Treatment for Developing Country Members
WTO law provides for many special provisions in favour of developing and
least-developed countries, taking into account their particular needs and interests. In
general, these provisions provide, in many areas, for fewer or less demanding
obligations, longer periods for implementation and technical assistance.

One can note provisions aimed at increasing trade opportunities; provisions

allowing flexibility for developing countries in the use of measures in support of their
economic development; provisions allowing longer periods for implementation; provisions
limiting the possibility to take action against products originating in developing country
Members; and provisions concerning technical assistance.

Developed country Members are allowed to grant preferential tariff treatment

to developing country Members. Most developed country Members have done so under
the Generalized System of Preferences (the “GSP”), first adopted as a policy by
UNCTAD in 1968.

A high percentage of the exports of developing countries is covered by GSP

schemes and thus benefits from preferential tariff treatment. The Enabling Clause also
provides for differential and more favourable treatment with respect to non-tariff measures
and allows developing country Members to enter into regional or global arrangements
amongst themselves for the mutual reduction or elimination of tariffs and, under certain
conditions, non-tariff barriers to trade.

Article IV of the GATS, which is entitled “Increasing Participation of Developing

Countries”, calls for the negotiation of specific commitments to facilitate the increasing
participation of developing country Members in world trade in services. Article IV refers to
specific commitments relating to access to technology on a commercial basis; access to

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distribution channels and information networks; and, more generally, the liberalization of
market access for services of export interest to developing country Members.

Chapitre III Specific Rules of WTO Law

Section 1 The Agreement on Agriculture

Paragraphe 1st Introduction

A · The Specificity of Agriculture
Agriculture has always been a « special » topic in the context of international trade.
It suffices to see the difficulties of the European policy in this regard, and the very important
political sensibility of any question related to it.

There are many reasons for that. The first of these reasons is probably the feeling
that there is a need to guarantee, over time, stable food supplies in a world of potential
famines. From that, it is not without merit to think that agricultural products are not
products « like the others ». Another reason has been the importance of the farms in the
economic activities of countries, and the difficulty in maintaining farm incomes and
populations. It is considered sometimes that the protection of the national farmers is

 This “specificity” of agriculture has been the subject matter of a debate

in the WTO very recently: “UN Rapporteur and WTO head debated the
impact of trade on hunger. Does agricultural trade liberalization hamper
governments’ ability to ensure their poor have food? Olivier De SCHUTTER,
UN Special Rapporteur on the Right to Food argued that it does”.

 M. De SCHUTTER’s case

The UN rapporteur’s focus was on the dangers of trade, taking care that
countries are not too dependent on exporting a limited number of
products, and ensuring government have the freedom to choose their
policies without “these being dictated by the international trade

Overall, M. De SCHUTTER described trade as a destabilizing force that

creates vulnerability for countries and communities that are too dependent.
International trade and WTO agreements bind countries’ hands, preventing
them from dealing with the problem or forcing them to rely on the “wager”
that trade will be good for them.

 M. LAMY’s response

The real obstacles to the right to food are: property ownership systems,
storage facilities, transport and distribution infrastructure, lack of credit,
shortage of water, etc, Mr Lamy said. “When I am in the field, in Burundi,

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Cambodia or India, the farmer and NGOs dealing with poverty in these
countries do not raise the issue of international trade,” he said. “They ask me
all these other questions.”

M. LAMY’s main concern with trade was not dependency but distortions
caused by very high import barriers and “absolutely massive” subsidies. The
WTO’s roles are both to liberalize and to regulate, through 600 pages of
agreed rules, and the two roles should not be confused, he said.
He said the present negotiations will lead to the steepest cuts on the highest
tariffs and “a very large reduction of around 80% in subsidies in countries of
the North” — the US, Europe and Japan.

“Agriculture can be subsidized under certain conditions, there can be higher

tariffs under certain conditions, so the idea that the WTO is going to place
agriculture on the same level as socks, which I believe is one of your fears, is
not true and will not be true for a long time to come,” he said.

B · The original GATT Law

The original GATT did apply to agricultural trade, but it contained loopholes.

In accordance with the prohibition of quantitative restrictions, there is an

agricultural exception under Article XI-2 of the GATT. Thus, export restrictions can be used to
prevent or relieve critical shortages of foodstuffs or other products essential to the
exporting countries; import and export restrictions can be used to bring about “the
application of standards or regulations for the classification, grading, or marketing of
commodities in international trade”; and import restrictions can be applied on any
agricultural or fishery product imported in any form necessary to the enforcement of
governmental measures that operate to:

 Restrict the production or marketing of the like domestic product or of a

domestic product that is a close substitute;

 Remove a temporary surplus of a like domestic product by making the

surplus available to groups of domestic consumers free or at reduced

 Restrict the quantities produced of any animal product that is directly

dependent wholly or mainly on the imported product.

But the US wanted more liberty as regards their agricultural policy. In 1951, the US
Congress stated that “no trade agreement could be applied in a manner inconsistent
with” Section 22 of the US Agricultural Adjustment Act. In 1955, the US insisted upon and
received a waiver, under the threat that it might otherwise be forced to leave the GATT. This
“temporary” waiver was in force for almost 40 years.

It authorized the U.S. to implement a domestic law, which gave the

administration discretion to impose fees or quantitative limitations on any agricultural
commodity or product, and was used to restrict imports of sugar, peanuts and dairy
products until the Uruguay Round.

The waiver was an exception to exceptions. Whereas Article XI permitted all

contracting parties to take trade restrictive actions so long as there were policies in place
that “restrict” the production or marketing of the domestic product, this waiver allowed
the US to apply import restrictions without regard to such rules. This waiver, which thus
discriminated against countries other than the US, has been a major source of continuing
resentment by others and was used as an argument that the US was not serious about trade

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The special treatment for agriculture under the GATT rules formed the basis for the
development, in the 1960s, of the common agricultural policy by the EC.

Concerning the subsidies, the original GATT had only a section that required the
contracting parties to report “any subsidy, including any form of income or price support,
which operates directly or indirectly to increase exports of any product from, or to reduce
imports of any product into its territory, to other parties”. Thus, there was originally no
prohibition on subsidies, domestic or export. This became what is now Article XVI , extended
in 1955.

Article XVI-3 says export subsidies shall not be applied in a manner resulting
in having more than an equitable share of world export trade in the aimed product.

 “Contracting parties should seek to avoid the use of export subsidies on the
export of primary products. If, however, a contracting party grants directly or
indirectly any form of subsidy which operates to increase the export of the
primary product from its territory, such subsidy shall not be applied in a
manner which results in that contracting party having more than an
equitable share of world export trade in that product, account being taken of
the shares of the contracting parties in such trade in the product during a
previous representative period, and any such special factors which may have
affected or may be affecting such trade in the product”.

 Article XVI-4 prohibits export subsides for other, non-primary products, that
means for products that are not agricultural products.

The exemption of agriculture, along with fishery and forestry products, can be
traced to the influence of the US farm lobby. The US position on the export subsidy issue
changed only when it became clear in the 1960s, after the establishment of the EC’s
common agricultural policy in 1962, so that the provisions would be used to the
detriment of the US agricultural sector.

C · The WTO agreement on agricultural products

In the Uruguay Round, a coalition of countries, the CAIRNS group, pushed for a
worldwide liberalization of agricultural trade. The EC, on its part, moved towards a possible
rationalization of its agricultural policy, which made possible a new move in international
trade on agricultural products.

The Agreement on Agriculture finally accepted during the Uruguay Round

seeks to reduce restrictions on trade in agricultural products by introducing disciplines
to increase market access (dismantle quantitative restrictions), reduce domestic
support measures or reduce subsidized exports.

Paragraphe 2nd Market access

Before the Uruguay Round (UR), quotas and other non-tariff measures
restricted some agricultural imports. After the UR, and first of all, these have been replaced
by tariffs that provide more-or-less equivalent levels of protection, via an obligation of
price settings provisioned by the Agreement on Agricultural products.

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Setting of prices is the process of conversion of all non-tariff market protection
measures into the tariff equivalent. The tariff equivalent to a non-tariff barrier is the difference
between the average domestic price and the average world market price: if the previous
policy meant domestic prices were 75% higher than world prices, then the new tariff could
be around 75%.

 BUT it was foreseen that the high tariff levels resulting from the price setting
process could turn out to be more protective than the previous situation.

This was likely to immediately disrupt existing trade. WTO Members were therefore
obliged to ensure that a certain amount of domestic consumption would continue to be
supplied by imports. All WTO Members agreed to open up their markets to imports for at
least 3 per cent of the domestic consumption in 1995, and for 5 per cent by 2000.

The maintenance of existing trade levels was ensured by means of current access
quotas. In addition, minimum access commitments were created to allow new import
opportunities for products previously covered by a nontariff barrier. Both of these
commitments were administered through the establishment of “tariff-rate quotas”

WTO Members also agreed in the Uruguay Round that once the tariffs were fixed,
they would agree to reduce these tariffs over time, i.e., over six to ten years starting on the
date of the coming into effect of the Marrakesh Agreement in 1995. This is the second step of
the process.

The tariff reductions were fixed at the time of the conclusion of the Uruguay Round
and are also set out in each WTO Member’s Country Schedule.

 Developed country Members agreed to reduce, over a six-year period

beginning in 1995, their tariffs on agricultural products by 36 per cent
on average, with a minimum cut of 15 per cent for any product.

 For developing countries, the cuts are 24 and 10 per cent respectively,
to be implemented over ten years.

Least-developed countries members were required to bind all agricultural tariffs,

but not to undertake tariff reductions.

Of course, there is a safeguard. For products whose non-tariff restrictions have

been converted to tariffs, governments are allowed to take special emergency actions
(“special safeguards”) in order to prevent swiftly falling prices or surges in imports from
hurting their farmers. But the agreement specifies when and how those emergency actions
can be introduced (for example, they cannot be used on imports within a tariff-quota).

Paragraphe 3rd Agricultural Subsidies

One of the main features of the Agreement on Agriculture (AOA) is to allow
WTO Members to use subsidies in derogation from the SCM Agreement.

But at the same time the Agreement seeks to ensure that agricultural trade is not
distorted through the use of subsidies.

The key objective of the Agreement on Agriculture is also to discipline and

reduce all subsidies, while at the same time leaving scope for governments to design
effective agricultural policies.

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Agricultural support measures are classified as belonging to two major groups,
about which two sets of measures are provisioned:

 Export subsidies

 Domestic support and general support;

A · Export subsidies
The Agriculture Agreement prohibits export subsidies on agricultural products
unless the subsidies are specified in a member’s lists of commitments. Where they are listed,
the agreement requires WTO members to cut both the amount of money they spend on
export subsidies and the quantities of exports that receive subsidies. Taking averages for
1986-90 as the base level, developed countries agreed to cut the value of export subsidies by
36% over the six years starting in 1995 (24% over 10 years for developing countries).
Developed countries also agreed to reduce the quantities of subsidized exports by 21% over
the six years (14% over 10 years for developing countries). Least-developed countries do not
need to make any cuts.

During the six-year implementation period, developing countries are allowed

under certain conditions to use subsidies to reduce the costs of marketing and transporting

B · Domestic support
The main complaint about policies, which support domestic prices or production is
that they encourage over-production. This squeezes out imports or leads to export subsidies
to lower the prices on world markets. But not all subsidies must be condemned: some have
no effect.

The Agriculture Agreement distinguishes between supporting programmes

that stimulate production directly, and supporting those considered to have no direct

Domestic policies that do have a direct effect on production and trade have to be
cut back. WTO members calculated how much support of this kind they were providing per
year for the agricultural sector (using calculations known as “total aggregate measurement
of support” or “Total AMS”) in the base years of 1986-88. Developed countries agreed to
reduce these figures by 20% over six years starting in 1995. Developing countries agreed to
make 13% cuts over 10 years. Least-developed countries do not need to make any cuts.

Subsidies that do not have an impact on trade are for example certain direct
payments to farmers where the farmers are required to limit production, certain government
assistance programmes to encourage agricultural and rural development in developing
countries, and other support on a small scale (“de minimis”) when compared with the total
value of the product or products supported (5% or less in the case of developed countries
and 10% or less for developing countries).

C · Conclusion
The Agreement on Agriculture is an initial attempt at reforming agricultural
trade. WTO Members agreed that negotiations on agricultural trade reform would
continue and set a date for the recommencement of those negotiations.

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The negotiations began in 2000 and have now been incorporated into the
Doha Development Round of negotiations.

Section 2 The Agreement on Textiles and Clothing

Paragraphe 1st Introduction STA / LTA / MMA

Like agriculture, Textile has also generally been difficult to liberalize in international
trade for many reasons linked to social situation in importing countries. It suffices to see the
number of shops selling clothes in the street to understand the importance of textiles in the
economy of many countries. Since 1961, international trade in textiles and clothing had
been virtually excluded from the normal rules and disciplines of the GATT. It was governed
by a system of discriminatory restrictions, which deviated from some of the basic principles
of the GATT.

The system was first incorporated in a so-called Short-Term Cotton Arrangement

(“STA”), next followed by a Long-Term Arrangement (“LTA”) and, later by the Multi-fiber
Arrangement (“MFA”).

 STA provides that (i) countries already restricting cotton textile imports would
increase the access; (ii) to avoid market disruption in non-restricting
countries, the low cost countries would agree to control exports; and (iii) an
importing country may unilaterally impose restrictions if the exporting
country does not. STA also provides for the establishment of a Cotton Textiles
Committee charged with the task of negotiating a long-term arrangement.

 Nineteen countries accept the STA.

 The Long-term Arrangement Regarding International Trade in Textiles (LTA)

was signed for a period of five years, beginning from 1 October 1962. It
provided for quantitative restraint actions against particular products from
particular sources on the basis of market disruption or threat thereof. The
restraint action could be unilateral or by bilateral agreement.

 Under the LTA, extensive use was made of bilaterally agreed restraints, as well
as unilateral safeguard actions.

 In the 1960s, man-made fibre (MMF) products gained in importance.

Between 1962-68, imports of these products in the US increase ten-fold. This
was accompanied by a strong showing of wool products.

Since both STA and LTA had dealt with only cotton textile products, this
development generated pressure for expanding the coverage to include wool and man-
made fiber products. US launched campaign to secure an agreement covering MMF and
wool products as well. It eventually leads to the conclusion of Multi-fiber Arrangement
(MFA) to go into effect from 1 January 1974. Modeled on the LTA, it expanded the product

From 1974 until the end of the Uruguay Round, the textile and clothes sector
was governed not by the GATT but by the Multi-fiber arrangement.

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This was a framework for bilateral agreements or unilateral actions that established
quotas limiting imports into countries whose domestic industries were facing serious
damage from rapidly increasing imports.

The quotas were the most visible feature. They conflicted with GATT’s general
preference for customs tariffs instead of measures that restrict quantities. They were also
exceptions to the GATT principle of treating all trading partners equally because they
specified how much the importing country was going to accept from individual exporting

Since 1995, the WTO’s Agreement on textiles and clothes took over from the Multi-
fiber Arrangement. By 1 January 2005, the sector was fully integrated into normal GATT rules.
In particular, the quotas came to an end, and importing countries are no longer able to
discriminate between exporters. The Agreement on Textiles and Clothing no longer
exists: it’s the only WTO agreement that applies to textiles and clothes.

Section 3 The TRIPS14

This is the Agreement on Trade-Related Aspects of Intellectual Property Rights
(“TRIPS Agreement”), adopted in Marrakech in 1995.

Paragraphe 1st Position of the problem

In modern trade, primary products are not the principal products that are trade. It
is manufactured and branded products. Ideas and knowledge behind the material products
are an important part of the value of the products. Most of the value of new medicines and
other high technology products remains in the amount of invention, innovation, research,
design and testing involved. Films, music recordings, books, computer software and on-line
services are bought and sold because of the information and creativity they contain, not
usually because of the plastic, metal or paper used to make them. (…) These are “intellectual
property rights”.

Intellectual property rights can certainly reveal themselves as a barrier to a certain

kind of trade. Clearly, in a country where the intellectual property rights are protected, it will
be forbidden to import copies of branded products. But this kind of restriction is accepted
as legitimate. On the other side, someone can also consider that a country, which does not
protect intellectual property rights of foreign persons, generates an injury to other States.

The aim of international law as regards Intellectual property rights is precisely

to force every WTO member to protect intellectual property rights.

The fact is that the extent of protection and enforcement of these rights varies
widely around the world; and as intellectual property became more important in trade, these
differences became a source of tension in international economic relations. This is why an
agreement on this question has been adopted in Marrakech.


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The agreement aims at narrowing the gaps in the way these rights are protected
around the world, and to bring them under common international rules. It establishes
minimum levels of protection that each government has to give to the intellectual

Paragraphe 2nd General Principles

Part I of the TRIPS Agreement incorporates certain general principles, including
national and most favoured nation (MFN) treatment.

 According to the national treatment principle, a Member should treat

foreign nationals in a manner equivalent to local nationals for the
purpose of obtaining and enforcing rights in intellectual property rights, as
well as in defending against allegations of abuse.

 Pursuant to the MFN principle, a Member should treat nationals of

different Members in the same manner, and should not grant special
privileges to nationals of particular Members.

Both the national and MFN principles are subject to certain limitations and
exceptions. The TRIPS Agreement has an additional principle:

 Intellectual property protection should contribute to “the promotion of

technological innovation and to the transfer and dissemination of
technology, to the mutual advantage of producers and users of technological
knowledge and in a manner conducive to social and economic welfare, and
to a balance of rights and obligations”.

Paragraphe 3rd Substantive rules

The second part of the TRIPS agreement looks at different kinds of intellectual
property rights and how to protect them. The purpose is to ensure that adequate
standards of protection exist in all member countries. The starting point is the obligations of
the main international agreements of the Word Property Organization that already existed
before the WTO was created:

 The Paris Convention for the Protection of Industrial Property (patents,

industrial designs, etc)

 The Berne Convention for the Protection fo Literary and Artistic Works

Some areas are not covered by these conventions and in some cases, the standards
of protection prescribed by these conventions were thought inadequate. So the TRIPS
agreement adds a significant number of new or higher standards. This method is unique:
the TRIPS Agreement is the only one to dictate substantive rules to WTO Members.

1 · Geographical indication
A place name is sometimes used to identify a product: “Champagne”,
“Scotch”,“Roquefort” cheese. Wine and spirits makers are particularly concerned about the

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use of place-names to identify products, and the TRIPS Agreement contains special
provisions for these products.

Using the place name when the product was made elsewhere or when it does
not have the usual characteristics can mislead consumers, and it can lead to unfair
competition. The TRIPS Agreement says countries have to prevent this misuse of place

For wines and spirits, the agreement provides higher levels of protection, i.e. even
where there is no danger of the public being misled.

Some exceptions are allowed, for example if the name is already protected as a
trademark or if it has become a generic term. For example, “cheddar” now refers to a
particular type of cheese not necessarily made in Cheddar, in the UK. But any country
wanting to make an exception for these reasons must be willing to negotiate with the
country, which wants to protect the geographical indication in question.

The agreement provides for further negotiations in the WTO to establish a

multilateral system of notification and registration of geographical indications for
wines. These are now part of the Doha Development Agenda and they include spirits. Also
debated in the WTO is whether to negotiate extending this higher level of protection beyond
wines and spirits.

B · The « moral » question

Can the rules related to intellectual property rights permit someone to definitely
refuse to grant authorization to exploit his inventions, even when these inventions are
needed to deal with a health problem?

In the public health sector, patent protection may restrict access to medicines
among a large segment of the population by preventing competition from generic
medicines, and it may be antithetical to a wide public interest to permit such a situation to

 Art. 21 of the Agreement is related to compulsory licensing. It says that:

“Members may determine conditions on the licensing and assignment of
trademarks, it being understood that the compulsory licensing of trademarks
shall not be permitted and that the owner of a registered trademark shall
have the right to assign the trademark with or without the transfer of the
business to which the trademark belongs”.
 Art. 31 defines exceptions, and permits compulsory licensing under certain

Compulsory licensing is when a government allows someone else than the

owner to produce the patented product or process without the consent of the patent

There are flexibilities on patent protection included in the WTO’s agreement on

intellectual property.


 Each licence should be considered on its own merits (Article 31(a));

 There should be prior negotiations for a reasonable commercial licence

with the patent holder, except in the case of national emergency,
extreme urgency, or public non-commercial use (Article 31(b));

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 The patent holder is entitled to adequate remuneration in the circumstances
of the case (Article 31(h)):

 The licence should be granted predominantly for the supply of the local
market (Article 31(f))

 The licence should be non-exclusive (Article 31(d));

 And there should be opportunity for review by independent authority of the

grant of the licence and the terms of remuneration (Articles 31(i) & (j)).

Some members and public interest groups queried whether the flexibility written
into the TRIPS Agreement was sufficient to ensure that it supports public health, especially in
promoting affordable access to existing medicines while also promoting research and
development into new ones.

 There has been a change with the Doha Round. What changes is the
provision that says that compulsory licences must be granted mainly to
supply the domestic market (paragraph (f) of Article 31). The 2001 Doha
Ministerial Conference decided that this should be changed so that
countries unable to manufacture the pharmaceuticals could obtain
cheaper copies elsewhere if necessary.

 The legal means of making the change was agreed on 30 August 2003,
when the General Council decided to waive the provision, allowing generic
copies made under compulsory licences to be exported to countries that lack
production capacity, provided certain conditions and procedures are

Paragraphe 4th Enforcement

There is a general obligation of Members to provide coercion mechanisms. It
requires that enforcement procedures “are available under their law so as to permit
effective action against any act of infringement of intellectual property rights (IPRs)
covered by this Agreement, including expeditious remedies to prevent infringements and
remedies which constitute a deterrent to further infringements”.

Members are obligated to ensure that enforcement procedures are “fair and
equitable”, and “not unnecessarily complicated or costly, or entail unreasonable time limits
or unwarranted delays”. There is additional provision on written decisions, opportunities to
present evidence, and obligation to provide judicial review for administrative decision, etc

 But Article 41:5 establishes two important principles. First, Members are not
required to establish separate judicial systems for the enforcement of IPRs, as
distinct from general law enforcement. Second, there is no “obligation with
respect to the distribution of resources as between enforcement of
intellectual property rights and the enforcement of law generally”.

 The TRIPS Agreement establishes basic principles for the conduct of civil
proceedings, in the legal orders of the WTO member States, to enforce IPRs.
It obligates Members law to have provision for the ordering of “prompt and
effective provisional measures” to prevent entry of infringing goods into
channels of commerce and preserve evidence.

 The TRIPS Agreement obligates Members to provide criminal penalties for

trademark counterfeiting and copyright piracy on a commercial scale,

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allowing for the possibility of imprisonment and/or fines “sufficient to
provide a deterrent, consistently with the level of penalties applied for crimes
of corresponding gravity”.

Section 4 The GATS

The services sector is the largest and fastest-growing sector of the world

The initiative for including services in the Uruguay Round came from OECD

When it came into effect in 1995, the General Agreement on Trade in Services (the
“GATS”), negotiated and concluded as a result of the Uruguay Round of multilateral trade
negotiations, was the first multilateral agreement covering this important and growing area
of services trade.

The GATS consists of two main parts: The “General Framework” with its annexes,
on the one hand, and participating countries’ individual “Schedules of Commitment”, on the
other hand.

The General Framework of GATS is composed of a preamble and 28 Articles,

followed by eight annexes, eight ministerial declarations and decisions, and one
“understanding” on financial services. Most of the annexes contain specific provisions
applying to certain sectors, whereas the declarations and decisions address general
institutional issues, such as the setting up of working parties, work programmes, mandates

The individual country schedules of commitment, plus a consolidated European

Union schedule, are grouped in an “Appendix” to the Framework. Several countries have
also submitted lists of MFN exemptions together with their schedule.

Paragraphe 1st Scope of the agreement

Article I, paragraph 1: “The Agreement applies to measures by Members affecting
trade in services.”

1 · Defined services
“Services” are defined in paragraph 3 b) of Article I as including any service in any
sector. All sectors are covered, including possible future services, but there are some sectors
where not all major players have made specific commitments, such as audiovisual services.

The GATT Secretariat has issued a services sectored classification list, which gives an
indication of what is generally considered as an existing service.

 Business services, including professional services

 Communication Services, including telecommunication and audiovisual
 Construction and related engineering services
 Distribution services
 Educational services
 Environmental services

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 Financial services, including insurance and banking services
 Health related and social services
 Tourism and travel related services
 Recreational, cultural and sporting services
 Transport services, including maritime, waterways, air and road transport

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2 · Excluded services
A category of services is excluded from the range of the GATS: services supplied in
the exercise of government authority. This exception is, however, limited: where a
Government acts on a commercial basis and/or as competitor with other suppliers, its
activities are treated like those of any private supplier. This also includes State-owned
commercial enterprises, which are covered by GATS general obligations such as MFN, as well
as by specific commitments on market access and national treatment.

Furthermore, services purchased by governmental agencies for governmental, non-

commercial purposes (government procurement) are not covered by the principal provisions
of the GATS, i.e. MFN, market access and national treatment. However, one of the plurilateral
agreements which are an optional part of the Uruguay Round package is specifically devoted
to government procurement.

3 · Trade in Services (4 motion)

There are four different ways in which services can be traded internationally.
They are all covered by the agreement, and this is the first time.

 Mode 1: describes what is often called the “cross-border” mode of supply.

Only the service crosses the border, with neither the consumer moving nor
the supplier establishing himself abroad. The service may be supplied, for
instance, through telecommunications or mail, or through transmission of a
computer diskette. Another example is a transfer of funds from a bank in one
country to a financial institution or a customer in another country.

 Mode 2, only the consumer (or his property, such as in ship repair) crosses
the border to consume the service abroad. This can apply to almost any
service, but is especially relevant in the tourism sector.

 Mode 3, the supplier crosses the border to establish a “commercial

presence” abroad, through which he intends to provide a commercial
service. Commercial presence is defined in Article XXVIII (d) as “any type of
business or professional establishment, including through: ➀ The
constitution, acquisition or maintenance of a juridical person. ➁ The creation
or maintenance of a branch or representative office”. The concept of
“commercial presence” retained appears, in fact, to be equivalent to the
concept of establishment.

 Mode 4, the supplier crosses the border to provide a service abroad

through the presence of natural persons. This mode of delivery is a rather
sensitive issue, because it interferes with countries’ sovereign rights to control
entry of individuals into their territory. At the same time, its inclusion was of
great importance particularly for developing countries. An Annex on
Movement of natural persons clarifies that the natural persons referred to
may either themselves be service suppliers, for instance self-employed, or be
employees of a foreign service supplier. The Annex also reserves countries’
rights to regulate immigration and access to the employment market, and
expressly recognises that visa requirements may be applied in a
discriminatory manner.

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4 · Measure by a Member
 Article XXVIII (a) on Definitions is the starting point for clarifying the meaning
of a “measure”.

It stipulates that a measure by a Member may take the form of a law,

regulation, rule, procedure, decision, administrative action or any other form. This
concerns of course only laws, regulations etc. which are in force.

 In accordance with Article I, all measures by sub-national entities are covered

by the GATS.

Members must take all reasonable measures available to ensure observance of

their general obligations (such as MFN) or specific commitments (such as National
Treatment) by sub-national entities. A Member may of course inscribe limitations with
respect to sub-national measures in its schedule of commitments.

 Paragraph 22.9 of the Understanding on the Settlement of Disputes makes it

clear that violations of obligations regarding sub-national measures are
subject to dispute settlement. If a Member’s central government shows that
it has exhausted all reasonable measures available and still is unable to ensure
observance by its sub-national entities, it will not be considered as violating
its obligations under the agreement. Nevertheless, it must then offer
compensation in the form of a new concession. If it does not offer satisfactory
compensation, the Member offended by a sub-national measure may be
authorised to suspend application of a commitment to the offending

Paragraphe 2nd General Framework

(Obligations and principles applying from the outset to all Members)
1 · The MFN Clause
a · Principle
The Most-Favoured-Nation (MFN) clause in Article II of the GATS forbids any
discrimination between foreign services and service suppliers originating in different GATS
Members. MFN is applicable to all measures affecting trade in services, as defined in Article I,
in all sectors irrespective of whether specific commitments (we will explain that later) are
undertaken or not, in any form such measures might take.

b · Exceptions (Economic integration & co / preferential treatment / recognition)

The first set of exceptions concerns Economic Integrations, General and security
exception, etc, that we have already seen.

There are two more exceptions.

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➀ The first one relates to the preferential treatment for trade in frontier areas.

 According to article II, par. 3, the provisions of the GATS Agreement shall not
be so construed as to prevent any Member from conferring or according
advantages to adjacent countries in order to facilitate exchanges limited to
contiguous frontier zones of services that are both locally produced and

➁ The second exception concerns recognition.

 Art.VII of the GATS allows Members to recognize selectively the education or

experience obtained, requirements met, or licenses or certifications granted
in a particular country, but not in the others.

Such recognition may provide the basis for selectively granting authorization,
licensing or certification of services suppliers, to service suppliers from these countries, but
not to service suppliers from other countries. In accordance with Article VII, Members may
recognize, for instance, a foreign law degree as equivalent, and therefore sufficient for
obtaining the authorization to practice, and they may discriminate between other Members
in pronouncing such recognition.

Paragraphs 2 to 5 of Article VII erect safeguards against abuses of the right to

selective recognition. Paragraphs 3 and 6 state that a country should base its recognition
policy on objective criteria and not discriminate between countries in applying these criteria.
Selective recognition should not be a means of arbitrary discrimination, but based on
effective differences between foreign countries as regards standards for qualifications.

Paragraph 2 introduces a right for third countries, where mutual recognition

agreements or unilateral recognition exist, to try and demonstrate that their education,
licensing requirements should be recognized as equivalent to those of the parties to a
mutual recognition agreement or the beneficiaries of unilateral recognition.

➂ Besides these exceptions to the MFN, one must add another more general
exception, which is provisioned at article II, paragraph 2, considered as future exceptional
measures to MFN

 « A Member may maintain a measure inconsistent with paragraph 1 provided

that such a measure is listed in, and meets the conditions of, the Annex on
Article II Exemptions”. This provision has allowed Members to lodge
exemptions to the MFN principle once, before the entry into force of the
agreement. The list was not necessarily limited to existing measures, but
could include future measures constituting exemptions to MFN, as long as
they were clear. MFN exemptions may cover existing or planned reciprocity
requirements, which are considered exceptions to MFN.

If a country want to introduce discriminatory measures after the entry into force,
and if they have not been envisaged in its MFN exemption list, they can only be admitted
under the heavy procedure set out in Article IX of the WTO Agreement: Approval by a
three-fourths majority of the Members of the WTO Ministerial Conference.

Why such an important exception to the MFN principle?

If a member has already granted access to its market to another, on the basis of
reciprocity, before the entry into force of the GATS, it would not be fair to extend this
commitment to the all other Members, with a retroactive mechanism, and without any
negotiation or reciprocity for the benefit of the said member. In this case, the options were,
for the member concerned, to withdraw from its preceding commitments, or to keep with it

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but without extending them as a consequence of the MFN clause. This is the latter solution
that has been retained.

EC exemptions examples:

 Audiovisual services – Distribution of audiovisual works

 Production and distribution of cinematographic works and television


 Road transport – passenger and freight

 Sales and marketing of air transport services

Internal waterways transport (Measures based upon existing or future

agreements on access to inland waterways (incl. agreements following the Rhine-
Main-Danube link), which reserve traffic rights for operators based in the
countries concerned and meeting nationality criteria regarding ownership)

 Press Agency Services …

MFN exemptions were to be reviewed after five years. “In principle”, they
should not be maintained for more than ten years. However, the addition of the words “in
principle” has been seen by many as eliminating most of the value of the ten year limitation.
Indeed, many countries have indicated in their lists that the duration of a given MFN
exemption was “indefinite”.

2 · Transparency
Transparency is considered, together with MFN, as a major accomplishment of the
GATS applicable to all. It is usually referred to as an obligation, which applies from the
outset, regardless of specific commitments. This is only partly true.

The only “transparency” requirement applicable from the outset is the obligation
to publish “all measures of general application” relevant to the GATS. But publication can
be anywhere or by any means, nationally, regionally or just locally. In particular, there is no
obligation for a Member to notify these measures to the GATS or to make them
otherwise known internationally. Excepting specific commitments inscribed in a
schedule by a Member. An effective notification requirement exists only for measures
concerning sectors or sub-sectors for which a Member has inscribed specific commitments in
its schedule.

3 · Progressive Liberalization
Members are free to decide in which sector they want to continue to liberalize
and to what extent.

Nevertheless, article XIX requires each Member to attach a schedule of specific

commitments to the agreement; a Member must thus make a commitment in at least one
sector or subsector.

In accordance with Article XIX, Members are also obliged at least to come and sit at
the negotiation table in successive rounds of negotiation, with the purpose of achieving
progressively a higher level of liberalization.

“An overall balance of rights and obligations” is sought between participants.

Further liberalization is based on mutual exchanges of concessions.

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4 · General exceptions (general and security exceptions) – no emergency safeguards
The agreement contains exceptions, which apply to general obligations as well as
to obligations resulting from specific commitments. They are divided in general exceptions
and security exceptions. They are very comparable to the exceptions we have already
presented. It should be noted that the GATS does not contain rules on emergency

Paragraphe 3rd Obligations applying only where specific commitments have been undertaken
All other GATS obligations depend on the specific commitments each Member
has been willing to enter into. For these commitments to generate full liberalisation of
trade in services requires, beyond MFN and transparency, the presence of three elements is

 Market access (Article XVI)

 National treatment (Article XVII)

 Domestic regulations which are not unnecessarily burdensome (Article VI)

 These elements are completed by certain rules concerning capital

movements and payments and transfers necessarily related to trade in

Obligations in respect of these elements do not exist per se, but only where a
Member has chosen explicitly to make commitments in a specific services sector, and,
for market access and national treatment, subject to the conditions inscribed in its

Members have the free choice through which mode of delivery they want to grant
market access and national treatment; they can make commitments only on one Mode and
may thereby effectively be encouraged to impose on foreign suppliers a particular mode of

A Member having decided to make commitments on market access in a given

sector for one or more modes of supply therefore needs to inscribe in its schedule under the
market access column any quantitative limitations classified according to:

 Mode of supply

 Nature of limitation

The first four types of quantitative restrictions, listed in sub-paragraphs (a) to (d) all
take the form of an economic needs test, or can be expressed in absolute numbers. It is
recalled that they can, but do not have to, discriminate against foreigners. They concern:

 limitations on the number of service suppliers

 limitations on the total value of transactions or assets

 limitations on the total number of service operations or quantity of services


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 Limitations on the total number of natural persons

The last two types of market access limitations listed refer more specifically to
foreign direct investment and establishment

National treatment (Article XVII) implies the absence of all discriminatory

measures that may modify the conditions of competition to the detriment of foreign
services or service suppliers. Again, limitations may be listed to provide cover for
inconsistent measures, such as discriminatory subsidies and tax measures, residency
requirements, etc. It is for the individual Member to ensure that all potentially relevant
measures are listed; Article XVII does not contain a typology comparable to Article XVI.
(Examples of frequently scheduled national treatment restrictions are given in Attachment 1
to document S/L/92.) The national treatment obligation applies regardless of whether or not
foreign services and suppliers are treated in a formally identical way to their national
counterpart. What matters is that they are granted equal opportunities to compete.

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Chapitre IV Dispute settlement

Section 1 In the GATT

-- x --

Section 2 In the WTO

In most of cases, methods are not compulsory. In some cases, states have duty
to negotiate. But they keep most of their liberty. It is exceptional ICJ has a compulsory
jurisdiction. An illustration is its number of cases, around 3 per year. (⋲)

The dispute settlement is the central pillar of the multilateral trading system
put in place by the WTO. Referring to article 3.2 of the DSU (Dispute Settlement
Understanding), the dispute settlement system of the WTO is a central element in providing
security and predictability to the multilateral trading system. However, the objective it
pursues is not necessarily to pass judgment. The priority is to settle disputes, through
consultations – that means negotiation – when possible. The DSU expresses a clear
preference for solutions mutually acceptable to the parties reached through negotiations,
rather than solutions resulting from adjudication.

Article 3.7 states “before bringing a case, a Member shall exercise its judgment as to
whether action under these procedures would be fruitful. The aim of the dispute settlement
mechanism is to secure a positive solution to a dispute. A solution mutually acceptable to
the parties to a dispute and consistent with the covered agreements is clearly to be

An example concerns the subsidies granted by UE states to airbus. These ones

could contested, and it’s true since 2004. Before 2004, both parties agreed to find a
mutual solution. This one was no longer acceptable to them from 2004. The last one
agreement dates back to 1992.

Un accord avait ainsi été trouvé, permettant à l’UE de financer son aviation civile,
jusqu’à un certain montant. Les Usa reconnaissaient expressément ce Droit, incompatible
pourtant avec l’OMC. En échange de quoi les européens reconnaissaient aux Usa le droit de
financer leur aviation mil… éventuellement civile, avec des limites. Bon au final, l’UE se faisait
entuber, mais ça évitait une guerre commerciale.

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Paragraphe 1st Jurisdiction

1 · Material Jurisdiction
The WTO dispute settlement system has jurisdiction over any dispute between
WTO Members arising under what the “covered agreements”. The covered agreements are
the WTO agreements listed in appendix 1 to the DSU, including the WTO agreement,
the GATT 1994, and all other multilateral agreements on trade in goods, the GATS, the
TRIPS agreement and the DSU.

Multilateral Trade agreements are covered agreements subject to the adoption of a

decision by the parties to these agreements setting out the terms for the application of the
DSU (Appendix 1 of the DSU). Of the two multilateral agreements currently in force, on the
agreement on government procurement is a covered agreement. Some of the covered
agreements provide for a few special and additional rules and procedures “designed to deal
with the particularities of dispute settlement relating to obligations arising under a specific
covered agreement”. These special of additional rules and procedures prevail over the DSU
rules and procedures to the extent that there is a “difference”.

2 · Compulsory Jurisdiction
Art. 23 of the DSU reveals that when Members seek the redress of a violation of
obligations or other nullification or impairment of benefits under the covered agreements or
an impediment to the attainment of any objective of the covered agreements, they shall have
recourse to, and abide by, the rules and procedures of this understanding”.

In such cases, members shall (a) not make a determination to the effect that a
violation has occurred, that benefits have been nullified or impaired or that the attainment of
any objective of the covered agreements has been impeded, except through recourse to
dispute settlement in accordance with the rules and procedures of this understanding, and
shall make any such determination consistent with the findings contained in the panel or
Appellate Body report adopted by the DSB – Dispute Settlement Body – or an arbitration
award rendered under this understanding.

The WTO is supposed to be independent from UN. WTO has to work in a coherent
manner with IMF. WTO is a expert-like in commercial trade when UN is political. The
problem arises if WTO recognize ECHR (⋲), which is not possible for now.

This means that the jurisdiction of the DSU is compulsory. A complaining Member
is obliged to bring any dispute arising under the covered agreements to the WTO
dispute settlement system, and not to its own municipal judicial system, and not to any
other international jurisdiction.

This means also that unlike in other international dispute settlement systems, there
is no need for the parties to a dispute arising under the covered agreements to accept
in a separate declaration or separate agreement the jurisdiction of the WTO dispute
settlement system or adjudicate that dispute.

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3 · Personal jurisdiction
Access to the WTO dispute settlement system is limited to Members of the

Following the US-Shrimp case, “it may be well stress at the outset that access to the
dispute settlement process of the WTO is limited to Members of the WTO. This access is not
available, under the WTO agreement and the covered agreements as they currently exist, to
individuals or international organizations, whether governmental or non-governmental.
Only Members may become parties to a dispute of which a panel may seized (x).

4 · Causes of action (violation complaints, non-violation complaints & situation complaints)

Each covered agreement contains one or more consultation and dispute settlement
provisions. These provisions set out when a member can recourse to the WTO dispute
settlement system. For the 94’ GATT, the relevant provisions are articles XXII and XXIII.

 Article XXIII-1 of the 94’ GATT (x)

Unlike other international dispute settlement systems, the WTO system provides for
three types of complaints:

 Violation complaints,

 Non-violation complaints

 Situation complaints

In fact, there can be complaint when there has been a “nullification or impairment
of a benefit or the impeding of the realization of an objective”. And this can be the result of
“application by another Member of any measure, whether or not it conflicts with the
provisions “ of a covered agreement, as said in the DSU.

In the case of a non-violation complaint or situation complaint, the

complainant must demonstrate that there is nullification or impairment of a benefit or
that the achievement of an objective is impeded because of a measure adopted by
another member.


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