CLASS 1
Global risks for trade:
1. Economic risks and crises;
2. Geopolitical risks (external) and war;
3. Societal risks (internal) and social unrest;
4. Technological risks;
5. Climate and environmental risk.
For external country analysis, PESTLE (political, economical, social, technological, legal,
ecological) analysis is used.
International trade law is traditionally most focused on transactional risks, but legislation
affecting the environment of these transactions is becoming increasingly important. That
includes environmental legislation, anti-corruption law, trade embargoes (sanctions) and
labour condition regulations.
The current threat to international trade is the move back to protectionism and narrow
nationalistic views (e.g. Brexit), and the treatment of international trade as a “zero sum
game”.
The current international trading system was first signed in 1947 as General
Agreement on Tariffs and Trade (GATT). It was a legal agreement minimizing barriers to
international trade by eliminating or reducing quotas, tariffs, and subsidies while preserving
significant regulations. GATT 1947 was signed by 23 countries. In 1993, the GATT was
updated GATT 1994 to include new obligations upon its signatories. One of the most
significant changes was the creation of the World Trade Organization (WTO). The main
rule of GATT is protection through tariffs only. There has also been a gradual reduction of
tariffs on the basis of multilateral trade negotiations (called trade rounds, e.g. Geneva 1947,
Tokyo 1973-79, Doha 2001-present).
The basic principles as embodied in GATT are:
1. Multilateral trade agreements;
2. Transparency and predictability of international trade rules;
3. Mutual or reciprocal tariff reductions;
4. Non-discrimination (e.g. Most Favored Nation clause, which requires the immunity or
preferable treatment given to one country to be provided to all WTO countries, and
the National Treatment principle that prohibits discrimination between imported and
domestically produced goods with respect to internal taxation or other government
regulation);
5. The elimination of quota and non-tariff barriers.
,The purpose of GATT rules is to give WTO member states equal access to markets,
reciprocity in trade concessions, and transparent and stable trading conditions, and
ultimately to progressively liberalize world trade by gradual elimination of quota, tariff and
non-tariff barriers.
Whilst GATT was a set of rules agreed upon by nations, the WTO is an intergovernmental
organization with its own headquarters and staff, and its scope includes both traded goods
and trade within the service sector and intellectual property rights. WTO is based in Geneva,
and asides from administrating the GATT/WTO trade agreements, it also facilitates
international cooperation on trade issues, holds forums for trade negotiations (rounds) and
acts as a platform for settlement of trade disputes.
The structure and internal organisation of WTO consists of the following bodies:
1. Ministerial conference (brings together all members of the WTO, all of which are
countries or customs unions, and can take decisions on all matters under any of the
multilateral trade agreements);
2. General council (the WTO's highest-level decision-making body in Geneva, meeting
regularly to carry out the functions of the WTO; also functions as the WTO’s Dispute
Settlement Body, Trade Policy Review Body and is responsible for making
arrangements for effecting cooperation with other IGOs);
3. Council for Trade in Goods;
4. Council for Trade in Services;
5. Council for Trade-Related Aspects of Intellectual Property Rights.
Exceptions to the WTO system in GATT 1994 are:
1. Article XIX Emergency Action on Imports of Particular Products;
2. Article XX on General Exceptions (human, animal and plant health, public morals,
gold, silver, exhaustible natural resources, items with historic or artistic value);
3. Trade preferences for developing countries (preferential trade tariffs);
4. Free Trade Areas and Customs Unions.
Article XIX Emergency Action on Imports of Particular Products states that a WTO
member state may impose:
1. Temporary export prohibitions or restrictions to prevent or relieve critical shortages of
foodstuffs or other essential products;
2. Import or export restrictions related to the application of standards or regulations for
classifying, grading or marking commodities;
3. Quantitative restrictions on imports of agricultural and fisheries products to stabilize a
member state’s national agricultural markets;
4. Reasonable quantitative restrictions to safeguard a member state’s balance of
payments;
5. Quantitative restrictions to further the economic development of a developing
member state.
, A WTO member state may take action in case of facing imports where the dumping (when a
country or company exports a product at a price that is lower in the foreign importing market
than the price in the exporter's domestic market) or subsidizing of goods or manufacturers is
at stake. States facing such trade practices are allowed to impose so called counterveiling
duties - an import tax to offset artificially low prices for such imports. In order to do so, the
state must notify WTO of its action and consult with the affected exporting member state to
arrange for compensation.
Case law: Japanese Liquor Tax a.k.a. Shochu case
Japan imposed higher national taxation on imported vodka than it did on shochu, a similarly
manufactured alcoholic beverage. Canada, the EU and the US claimed that this violated
GATT Article III paragraph 2, which requires that important products be taxed the same as
like domestic products. Japan in its defence argued that vodka and shochu were not “like
products” and that its taxes on alcoholic beverages did not violate Article III paragraph 2
because the tax to price ratio was “roughly neutral”.
The questions were:
1. Are vodka and shochu “like products”? Ruling: yes.
2. Is a “roughly neutral” tax to price ratio sufficient to meet the requirements of Article III
paragraph 2? Ruling: no.
Article III paragraph 1 states that taxes should not be imposed so as “to afford protection to
domestic production”. The meaning of the phrase “like products” must be determined on a
case-to-case basis. With regard to Article III paragraph 2, the products need to share
common end-users and have essentially the same physical characteristics. Article III
paragraph 2 requires that WTO member states impose the same internal taxes on imported
products as they impose on like domestic products.
The case was handled by the Dispute and Apellate bodies of the WTO.
Case law: USA Shrimp Imports case
The USA appealed from a WTO Panel Report that held that US regulations limiting imports
of shrimp caught without so called Turtle Excluder Devices (TEDs) violated the GATT
Article XX on General Exceptions (including human, animal and plant health and
exhaustible natural resources).
The question was whether the US regulation was discriminatorily or arbitrarily applied?
Ruling:
1. The structure and logic of Article XX requires that the particular exceptions be
considered before the introductory prohibition is considered;
2. Shrimp can be exhaustible natural resources, and those species the US seeks to
protect are listed in an international treaty as being threatened with extinction;
Global risks for trade:
1. Economic risks and crises;
2. Geopolitical risks (external) and war;
3. Societal risks (internal) and social unrest;
4. Technological risks;
5. Climate and environmental risk.
For external country analysis, PESTLE (political, economical, social, technological, legal,
ecological) analysis is used.
International trade law is traditionally most focused on transactional risks, but legislation
affecting the environment of these transactions is becoming increasingly important. That
includes environmental legislation, anti-corruption law, trade embargoes (sanctions) and
labour condition regulations.
The current threat to international trade is the move back to protectionism and narrow
nationalistic views (e.g. Brexit), and the treatment of international trade as a “zero sum
game”.
The current international trading system was first signed in 1947 as General
Agreement on Tariffs and Trade (GATT). It was a legal agreement minimizing barriers to
international trade by eliminating or reducing quotas, tariffs, and subsidies while preserving
significant regulations. GATT 1947 was signed by 23 countries. In 1993, the GATT was
updated GATT 1994 to include new obligations upon its signatories. One of the most
significant changes was the creation of the World Trade Organization (WTO). The main
rule of GATT is protection through tariffs only. There has also been a gradual reduction of
tariffs on the basis of multilateral trade negotiations (called trade rounds, e.g. Geneva 1947,
Tokyo 1973-79, Doha 2001-present).
The basic principles as embodied in GATT are:
1. Multilateral trade agreements;
2. Transparency and predictability of international trade rules;
3. Mutual or reciprocal tariff reductions;
4. Non-discrimination (e.g. Most Favored Nation clause, which requires the immunity or
preferable treatment given to one country to be provided to all WTO countries, and
the National Treatment principle that prohibits discrimination between imported and
domestically produced goods with respect to internal taxation or other government
regulation);
5. The elimination of quota and non-tariff barriers.
,The purpose of GATT rules is to give WTO member states equal access to markets,
reciprocity in trade concessions, and transparent and stable trading conditions, and
ultimately to progressively liberalize world trade by gradual elimination of quota, tariff and
non-tariff barriers.
Whilst GATT was a set of rules agreed upon by nations, the WTO is an intergovernmental
organization with its own headquarters and staff, and its scope includes both traded goods
and trade within the service sector and intellectual property rights. WTO is based in Geneva,
and asides from administrating the GATT/WTO trade agreements, it also facilitates
international cooperation on trade issues, holds forums for trade negotiations (rounds) and
acts as a platform for settlement of trade disputes.
The structure and internal organisation of WTO consists of the following bodies:
1. Ministerial conference (brings together all members of the WTO, all of which are
countries or customs unions, and can take decisions on all matters under any of the
multilateral trade agreements);
2. General council (the WTO's highest-level decision-making body in Geneva, meeting
regularly to carry out the functions of the WTO; also functions as the WTO’s Dispute
Settlement Body, Trade Policy Review Body and is responsible for making
arrangements for effecting cooperation with other IGOs);
3. Council for Trade in Goods;
4. Council for Trade in Services;
5. Council for Trade-Related Aspects of Intellectual Property Rights.
Exceptions to the WTO system in GATT 1994 are:
1. Article XIX Emergency Action on Imports of Particular Products;
2. Article XX on General Exceptions (human, animal and plant health, public morals,
gold, silver, exhaustible natural resources, items with historic or artistic value);
3. Trade preferences for developing countries (preferential trade tariffs);
4. Free Trade Areas and Customs Unions.
Article XIX Emergency Action on Imports of Particular Products states that a WTO
member state may impose:
1. Temporary export prohibitions or restrictions to prevent or relieve critical shortages of
foodstuffs or other essential products;
2. Import or export restrictions related to the application of standards or regulations for
classifying, grading or marking commodities;
3. Quantitative restrictions on imports of agricultural and fisheries products to stabilize a
member state’s national agricultural markets;
4. Reasonable quantitative restrictions to safeguard a member state’s balance of
payments;
5. Quantitative restrictions to further the economic development of a developing
member state.
, A WTO member state may take action in case of facing imports where the dumping (when a
country or company exports a product at a price that is lower in the foreign importing market
than the price in the exporter's domestic market) or subsidizing of goods or manufacturers is
at stake. States facing such trade practices are allowed to impose so called counterveiling
duties - an import tax to offset artificially low prices for such imports. In order to do so, the
state must notify WTO of its action and consult with the affected exporting member state to
arrange for compensation.
Case law: Japanese Liquor Tax a.k.a. Shochu case
Japan imposed higher national taxation on imported vodka than it did on shochu, a similarly
manufactured alcoholic beverage. Canada, the EU and the US claimed that this violated
GATT Article III paragraph 2, which requires that important products be taxed the same as
like domestic products. Japan in its defence argued that vodka and shochu were not “like
products” and that its taxes on alcoholic beverages did not violate Article III paragraph 2
because the tax to price ratio was “roughly neutral”.
The questions were:
1. Are vodka and shochu “like products”? Ruling: yes.
2. Is a “roughly neutral” tax to price ratio sufficient to meet the requirements of Article III
paragraph 2? Ruling: no.
Article III paragraph 1 states that taxes should not be imposed so as “to afford protection to
domestic production”. The meaning of the phrase “like products” must be determined on a
case-to-case basis. With regard to Article III paragraph 2, the products need to share
common end-users and have essentially the same physical characteristics. Article III
paragraph 2 requires that WTO member states impose the same internal taxes on imported
products as they impose on like domestic products.
The case was handled by the Dispute and Apellate bodies of the WTO.
Case law: USA Shrimp Imports case
The USA appealed from a WTO Panel Report that held that US regulations limiting imports
of shrimp caught without so called Turtle Excluder Devices (TEDs) violated the GATT
Article XX on General Exceptions (including human, animal and plant health and
exhaustible natural resources).
The question was whether the US regulation was discriminatorily or arbitrarily applied?
Ruling:
1. The structure and logic of Article XX requires that the particular exceptions be
considered before the introductory prohibition is considered;
2. Shrimp can be exhaustible natural resources, and those species the US seeks to
protect are listed in an international treaty as being threatened with extinction;
