International Trade and WTO Prof. Sohn, Taewoo

* GATT 1994 ? GATT 1947? The WTO replaced GATT as an international organization, but the General Agreement still exists as the WTO’s umbrella treaty for trade in goods, updated as a result of the Uruguay Round negotiations. Trade lawyers distinguish between GATT 1994, the updated parts of GATT, and GATT 1947, the original agreement which is still the heart of GATT 1994. For most of us, it’s enough to refer simply to “GATT”.  

2. GATT/WTO The First Pillar: MFN Treatment and GATT Article 1 1. The General Agreement on Tariffs and Trade: History and Provisions 2. GATT/WTO The First Pillar: MFN Treatment and GATT Article 1 GATT Article 1: Part I Article I: General Most-Favoured-Nation Treatment 1.       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. 2.       The provisions of paragraph 1 of this Article shall not require the elimination of any preferences in respect of import duties or charges which do not exceed the levels provided for in paragraph 4 of this Article and which fall within the following descriptions: (a)      Preferences in force exclusively between two or more of the territories listed in Annex A, subject to the conditions set forth therein; (b)      Preferences in force exclusively between two or more territories which on July 1, 1939, were connected by common sovereignty or relations of protection or suzerainty and which are listed in Annexes B, C and D, subject to the conditions set forth therein;   (c)      Preferences in force exclusively between the United States of America and the Republic of Cuba;   (d)      Preferences in force exclusively between neighbouring countries listed in Annexes E and F. 1. 수입 또는 수출에 대하여 또는 수입 또는 수출과 관련하여 부과되거나 수입 또는 수출에 대한 지급의 국제적 이전에 대하여 부과되는 관세 및 모든 종류의 과징금에 관하여, 동 관세 및 과징금의 부과방법에 관하여, 수입 또는 수출과 관련된 모든 규칙 및 절차에 관하여, 그리고 제3조제2항 및 제4항에 언급된 모든 사항에 관하여 체약당사자가 타국을 원산지로 하거나 행선지로 하는 상품에 대하여 부여하는 제반 편의, 호의, 특권 또는 면제는 다른 모든 체약당사자의 영토를 원산지로 하거나 행선지로 하는 동종 상품에 대하여 즉시 그리고 무조건적으로 부여되어야 한다.

2. GATT/WTO The First Pillar: MFN Treatment and GATT Article I 3.       The provisions of paragraph 1 shall not apply to preferences between the countries formerly a part of the Ottoman Empire and detached from it on July 24, 1923, provided such preferences are approved under paragraph 5(1), of Article XXV which shall be applied in this respect in the light of paragraph 1 of Article XXIX. 4.       The margin of preference* on any product in respect of which a preference is permitted under paragraph 2 of this Article but is not specifically set forth as a maximum margin of preference in the appropriate Schedule annexed to this Agreement shall not exceed: (a)      in respect of duties or charges on any product described in such Schedule, the difference between the most-favoured-nation and preferential rates provided for therein; if no preferential rate is provided for, the preferential rate shall for the purposes of this paragraph be taken to be that in force on April 10, 1947, and, if no most-favoured-nation rate is provided for, the margin shall not exceed the difference between the most-favoured-nation and preferential rates existing on April 10, 1947;   (b)      in respect of duties or charges on any product not described in the appropriate Schedule, the difference between the most-favoured-nation and preferential rates existing on April 10, 1947. In the case of the contracting parties named in Annex G, the date of April 10, 1947, referred to in subparagraph (a) and (b) of this paragraph shall be replaced by the respective dates set forth in that Annex. This outlines the concept of Most-Favoured-Nation (MFN) treatment and states that trade concessions granted to one Member are applied immediately and without conditions to all other Members.

2. GATT/WTO The First Pillar: MFN Treatment and GATT Article 1 (2) In international economic relations and international politics, most favoured nation (MFN) is a status or level of treatment accorded by one state to another in international trade. The term means the country which is the recipient of this treatment must, nominally, receive equal trade advantages as the "most favored nation" by the country granting such treatment. (Trade advantages include low tariffs or high import quotas.) In effect, a country that has been accorded MFN status may not be treated less advantageously than any other country with MFN status by the promising country. There is a debate in legal circles whether MFN clauses in BIT's include only substantive rules or also procedural protections. The members of the World Trade Organization (WTO) agree to accord MFN status to each other. Exceptions allow for preferential treatment of developing countries, regional free trade areas and customs unions. Together with the principle of national treatment, MFN is one of the cornerstones of WTO trade law. Most favoured nation relationships extend reciprocal bilateral relationships following both GATT and WTO norms of reciprocity and non-discrimination. In bilateral reciprocal relationships a particular privilege granted by one party only extends to other parties who reciprocate that privilege, while in a multilateral reciprocal relationship the same privilege would be extended to the group that negotiated a particular privilege. The non-discriminatory component of the GATT/WTO applies a reciprocally negotiated privilege to all members of the GATT/WTO without respect to their status in negotiating the privilege.

2. GATT/WTO The First Pillar: MFN Treatment and GATT Article 1 (3) Q 1: The United States admits squash from North Korea at a 2 percent tariff. The tariff on squash from Canada is 5 percent. Must the United States lower its tariff on Canadian squash, and if so, why? A1: The United States must give Canada the most-favored rate. The reason is GATT Article I:1. Observe that the language of Article I:1 does not mandate that the extension be to a Member, but rather to any country. (4) Q 2: The United States decides to lower its duty on imports of yellow squash to 10 percent. For squash of all other colors, the United States maintains its pre-existing 25 percent rate. However, in practice, only North Korea and Libya produce yellow squash, thus only they benefit from the lower rate. Has the United States violated the rights of Canada and, if so, what can Canada do about it? If not, is Canada entirely without legal recourse? What about American defenses? Suppose Laos starts exporting squash to the United States that is not yellow in color, and the United States slaps that squash with a 25 percent duty. Assume Laos is not a WTO Member and has no BIT with the United States. Would Laos have any claim here?

2. GATT/WTO The First Pillar: MFN Treatment and GATT Article 1 (4) A 2: There are two possible claims Canada can make. First, the 25 percent tariff is de facto discriminatory one, and discrimination of either a de facto or de jure form under GATT Article I:1 is impermissible. The 25 percent tariff impacts Canadian squash exporters based on the color of their squash. Second, Canada can claim violation nullification and impairment under GATT XXIII. Even if there is no violation of Article I:1, Canada is not able to receive the benefit of the 10 percent rate that it could reasonably expect. The key American defense would be squash of different colors are not like products. Laos would have no claims, because it is not a WTO Member and has no BIT with the United States.

Article XXIII: Nullification or Impairment 1.     If any contracting party should consider that any benefit accruing to it directly or indirectly under this Agreement is being nullified or impaired or that the attainment of any objective of the Agreement is being impeded as the result of  (a)     the failure of another contracting party to carry out its obligations under this Agreement, or  (b)     the application by another contracting party of any measure, whether or not it conflicts with the provisions of this Agreement, or  (c)     the existence of any other situation,  the contracting party may, with a view to the satisfactory adjustment of the matter, make written representations or proposals to the other contracting party or parties which it considers to be concerned. Any contracting party thus approached shall give sympathetic consideration to the representations or proposals made to it.  2.     If no satisfactory adjustment is effected between the contracting parties concerned within a reasonable time, or if the difficulty is of the type described in paragraph 1 (c) of this Article, the matter may be referred to the CONTRACTING PARTIES. The CONTRACTING PARTIES shall promptly investigate any matter so referred to them and shall make appropriate recommendations to the contracting parties which they consider to be concerned, or give a ruling on the matter, as appropriate. The CONTRACTING PARTIES may consult with contracting parties, with the Economic and Social Council of the United Nations and with any appropriate intergovernmental organization in cases where they consider such consultation necessary. If the CONTRACTING PARTIES consider that the circumstances are serious enough to justify such action, they may authorize a contracting party or parties to suspend the application to any other contracting party or parties of such concessions or other obligations under this Agreement as they determine to be appropriate in the circumstances. If the application to any contracting party of any concession or other obligation is in fact suspended, that contracting party shall then be free, not later than sixty days after such action is taken, to give written notice to the Executive Secretary(1) to the Contracting Parties of its intention to withdraw from this Agreement and such withdrawal shall take effect upon the sixtieth day following the day on which such notice is received by him. 제23조 무효화 또는 침해 1. 체약당사자가 다음의 결과로 이 협정 하에서 직접적 또는 간접적으로 자신에게 발생되는 이익이 무효화되거나 침해되고 있거나 이 협정의 목적 달성이 방해되고 있다고 인정하는 경우 (a) 다른 체약당사자의 이 협정 하의 자신의 의무의 불이행 또는 (b) 이 협정 규정과의 저촉 여부를 불문하고 다른 체약당사자에 의한 조치의 적용 또는 (c) 그밖의 상황의 존재 동 체약당사자는 동 문제의 만족스러운 조정을 목적으로 관련이 있다고 동 체약당사자가 간주하는 다른 체약당사자 또는 체약당사자들에게 서면으로 의견을 제시하거나 제의를 할 수 있다. 이렇게 의견을 제시받거나 제의를 받은 체약당사자는 자신에게 행하여진 동 의견 또는 제의에 대하여 호의적인 고려를 한다. 2. 합리적인 시간 내에 당해 체약당사자간에 어떠한 만족스러운 조정도 이루어지지 아니하는 경우 또는 그 어려움이 이 조 제1항(c)에 기재된 형태인 경우 동 문제는 체약당사자단에 회부될 수 있다. 체약당사자단은 자신에게 회부된 문제를 신속히 조사하고, 경우에 따라, 체약당사자단이 관련이 있다고 인정하는 체약당사자에게 적절한 권고를 하거나 동 문제에 관하여 판정을 한다. 체약당사자단은 협의가 필요하다고 인정하는 경우 체약당사자, 국제연합 경제사회이사회 및 적절한 정부간기구와 협의할 수 있다. 체약당사자단은 상황이 그러한 조치를 정당화할 만큼 충분히 심각하다고 간주하는 경우 체약당사자단이 동 상황하에서 적절하다고 결정하는, 이 협정 하의 양허 또는 그밖의 의무의 다른 체약당사자 또는 체약당사자들에 대한 적용을 체약당사자 또는 체약당사자들이 정지하는 것을 승인할 수 있다. 체약당사자에 대한 양허 또는 그밖의 의무의 적용이 실제로 정지된 경우 동 체약당사자는 이러한 조치가 취하여진 후 60일 이내에 이 협정에서 탈퇴할 의사를 체약당사자단의 사무국장) 체약당사자단은 1965년 3월 23일의 결정으로 GATT 사무국 수장의 명칭을 갽1 사무국장(Executive Secretary)"에서 괽1 사무총장(Director- General)"으로 변경함. 에게 서면으로 통보할 자유가 있으며 이러한 탈퇴는 동 통보가 사무국장에 의하여 접수된 다음날로부터 60일째 되는 날 발효한다.   2019-07-04 국제거래법

3. GATT/WTO The Second Pillar: Bindings and GATT Article II Article II: Schedules of Concessions 1.       (a)      Each contracting party shall accord to the commerce of the other contracting parties treatment no less favourable than that provided for in the appropriate Part of the appropriate Schedule annexed to this Agreement. (b)      The products described in Part I of the Schedule relating to any contracting party, which are the products of territories of other contracting parties, shall, on their importation into the territory to which the Schedule relates, and subject to the terms, conditions or qualifications set forth in that Schedule, be exempt from ordinary customs duties in excess of those set forth and provided therein. Such products shall also be exempt from all other duties or charges of any kind imposed on or in connection with the importation in excess of those imposed on the date of this Agreement or those directly and mandatorily required to be imposed thereafter by legislation in force in the importing territory on that date. (c)      The products described in Part II of the Schedule relating to any contracting party which are the products of territories entitled under Article I to receive preferential treatment upon importation into the territory to which the Schedule relates shall, on their importation into such territory, and subject to the terms, conditions or qualifications set forth in that Schedule, be exempt from ordinary customs duties in excess of those set forth and provided for in Part II of that Schedule. Such products shall also be exempt from all other duties or charges of any kind imposed on or in connection with importation in excess of those imposed on the date of this Agreement or those directly or mandatorily required to be imposed thereafter by legislation in force in the importing territory on that date. Nothing in this Article shall prevent any contracting party from maintaining its requirements existing on the date of this Agreement as to the eligibility of goods for entry at preferential rates of duty. 제2조 양허표 1. (a) 각 체약당사자는 다른 체약당사자의 상거래에 대하여 이 협정에 부속된 해당 양허표의 해당 부에 제시된 대우보다 불리하지 아니한 대우를 부여한다. (b) 어떤 체약당사자에 관한 양허표 제1부에 기재된 상품으로서, 다른 체약당사자 영토의 상품이 동 양허표에 관련된 영토로 수입되는 경우, 동 양허표에 명시된 조건 또는 제한에 따라 동 양허표에 명시되고 제시된 관세를 초과하는 통상적인 관세로부터 면제된다. 이러한 상품은 이 협정일자에 부과되고 있거나 이 협정일자에 수입영토에서 유효한 법령에 의하여 이후 부과되도록 직접적이고 의무적으로 요구되는 한도를 초과하여 수입에 대하여 또는 수입과 관련하여 부과되는 모든 그밖의 관세 및 모든 종류의 과징금으로부터 또한 면제된다. (c) 어떤 체약당사자에 관한 양허표 제2부에 기재된 상품으로서, 동 양허표에 관련된 영토로 수입될 때 제1조에 의하여 특혜대우를 받을 권리가 부여된 영토의 상품이 당해 영토로 수입되는 경우, 동 양허표에 명시된 조건 또는 제한에 따르되 동 양허표 제2부에 명시된 관세를 초과하는 통상적인 관세로부터 면제된다. 이러한 상품은 또한 이 협정일자에 부과되고 있거나 이 협정일자에 수입영토에서 유효한 법령에 의하여 이후 부과되도록 직접적 또는 의무적으로 요구되는 한도를 초과하여 수입에 대하여 또는 수입과 관련하여 부과되는 모든 그밖의 관세 및 모든 종류의 과징금으로부터 또한 면제된다. 이 조의 어떠한 규정도 체약당사자가 특혜관세율에 의한 수입을 위한 재화의 적격성에 관하여 이 협정일자에 존재하는 요건을 유지하는 것을 방해하지 아니한다.

3. GATT/WTO The Second Pillar: Bindings and GATT Article II Article II: Schedules of Concessions 2.       Nothing in this Article shall prevent any contracting party from imposing at any time on the importation of any product: (a)      a charge equivalent to an internal tax imposed consistently with the provisions of paragraph 2 of Article III* in respect of the like domestic product or in respect of an article from which the imported product has been manufactured or produced in whole or in part; (b)      any anti-dumping or countervailing duty applied consistently with the provisions of Article VI;* (c)      fees or other charges commensurate with the cost of services rendered. 3.       No contracting party shall alter its method of determining dutiable value or of converting currencies so as to impair the value of any of the concessions provided for in the appropriate Schedule annexed to this Agreement. 4.       If any contracting party establishes, maintains or authorizes, formally or in effect, a monopoly of the importation of any product described in the appropriate Schedule annexed to this Agreement, such monopoly shall not, except as provided for in that Schedule or as otherwise agreed between the parties which initially negotiated the concession, operate so as to afford protection on the average in excess of the amount of protection provided for in that Schedule. The provisions of this paragraph shall not limit the use by contracting parties of any form of assistance to domestic producers permitted by other provisions of this Agreement.* 2. 이 조의 어떠한 규정도 체약당사자가 상품의 수입에 대하여 언제든지 다음을 부과하는 것을 방해하지 아니한다. (a) 동종의 국내상품에 대하여 또는 당해 수입상품의 제조 또는 생산에 전부 또는 일부 기여한 물품에 대하여 제3조제2항의 규정에 합치되게 부과하는 내국세에 상당하는 과징금 (b) 제6조의 규정에 합치되게 적용되는 반덤핑 또는 상계 관세 (c) 제공된 용역의 비용에 상응하는 수수료 및 그밖의 과징금 3. 어떠한 체약당사자도 이 협정에 부속된 해당 양허표에 제시된 양허의 가치를 침해하도록 관세평가가격의 결정방법 또는 통화환산방법을 변경하여서는 아니된다. 4. 체약당사자가 이 협정에 부속된 해당 양허표에 기재된 상품의 수입에 대한 독점을 공식적으로 또는 사실상 설정, 유지 또는 승인하는 경우, 이러한 독점은 동 양허표에 제시되어 있거나 당해 양허를 최초로 협상한 당사자간에 달리 합의된 경우를 제외하고는, 평균하여 동 양허표에 제시된 보호의 정도를 초과하여 보호를 부여하도록 운영되어서는 아니된다. 이 항의 규정은 체약당사자가 이 협정의 다른 규정에 의하여 허용되는, 국내생산자에 대한 제반 형태의 지원을 사용하는 것을 제한하지 아니한다.

3. GATT/WTO The Second Pillar: Bindings and GATT Article II Article II: Schedules of Concessions 5.       If any contracting party considers that a product is not receiving from another contracting party the treatment which the first contracting party believes to have been contemplated by a concession provided for in the appropriate Schedule annexed to this Agreement, it shall bring the matter directly to the attention of the other contracting party. If the latter agrees that the treatment contemplated was that claimed by the first contracting party, but declares that such treatment cannot be accorded because a court or other proper authority has ruled to the effect that the product involved cannot be classified under the tariff laws of such contracting party so as to permit the treatment contemplated in this Agreement, the two contracting parties, together with any other contracting parties substantially interested, shall enter promptly into further negotiations with a view to a compensatory adjustment of the matter. 5. 체약당사자는 어떤 상품이 이 협정에 부속된 해당 양허표에 제시된 양허에 의하여 의도되었다고 믿는 대우를 다른 체약당사자로부터 받지 못하고 있다고 간주하는 경우 동 문제에 대하여 직접 상대체약당사자의 주의를 환기한다. 상대체약당사자가 상정된 대우가 주의를 환기한 체약당사자가 주장한 대우라는 점에는 동의하나 법원 또는 그 밖의 관계당국이 당해 상품은 동 체약당사자의 관세법상 이 협정에서 의도된 대우가 허용되도록 분류될 수 없다는 취지로 판정하였기 때문에 동 대우를 부여할 수 없다고 선언하는 경우, 이들 두 체약당사자는 실질적인 이해관계가 있는 다른 체약당사자와 함께 동 문제의 보상조정을 목적으로 추가협상을 신속히 개시한다.

3. GATT/WTO The Second Pillar: Bindings and GATT Article II Article II: Schedules of Concessions 6.       (a)      The specific duties and charges included in the Schedules relating to contracting parties members of the International Monetary Fund, and margins of preference in specific duties and charges maintained by such contracting parties, are expressed in the appropriate currency at the par value accepted or provisionally recognized by the Fund at the date of this Agreement. Accordingly, in case this par value is reduced consistently with the Articles of Agreement of the International Monetary Fund by more than twenty per centum, such specific duties and charges and margins of preference may be adjusted to take account of such reduction; provided that the CONTRACTING PARTIES (i.e., the contracting parties acting jointly as provided for in Article XXV) concur that such adjustments will not impair the value of the concessions provided for in the appropriate Schedule or elsewhere in this Agreement, due account being taken of all factors which may influence the need for, or urgency of, such adjustments. (b)      Similar provisions shall apply to any contracting party not a member of the Fund, as from the date on which such contracting party becomes a member of the Fund or enters into a special exchange agreement in pursuance of Article XV. 7.       The Schedules annexed to this Agreement are hereby made an integral part of Part I of this Agreement. 6. (a) 국제통화기금의 회원국인 체약당사자에 관한 양허표에 포함된 종량 관세 및 과징금과 동 체약당사자가 유지하는 종량 관세 및 과징금에 관한 특혜의 폭은 이 협정일자에 동 기금이 수락하였거나 또는 잠정적으로 인정한 평가(平價)에 따라 해당 통화로 표시된다. 따라서 동 평가(平價)가 국제통화기금협정에 합치되게 20%를 초과하여 인하될 경우, 이러한 종량 관세 및 과징금과 특혜의 폭은 동 인하를 고려하여 조정될 수 있다. 단, 체약당사자단(즉, 제25조에 제시된 바대로 공동으로 행동하는 체약당사자들)이 이러한 조정의 필요성 또는 긴급성에 영향을 줄 수 있는 모든 요인을 적절히 고려하여 이러한 조정이 해당 양허표 또는 이 협정의 다른 부분에서 제시된 양허의 가치를 침해하지 아니할 것이라는 데 동의하여야 한다. (b) 동 기금의 회원국이 아닌 체약당사자에게는 동 체약당사자가 동 기금의 회원국이 되는 일자 또는 제15조에 따라 특별환협약을 체결하는 일자로부터 유사한 규정이 적용된다. 7. 이 협정에 부속된 양허표는 이로써 이 협정 제1부의 불가분의 일부가 된다. All trade concessions made by Members must be stated and incorporated into the legal agreement – ‘bound’ rates. No other Member may be treated less favourably than any ‘bound’ rate.

3. GATT/WTO The Second Pillar: Bindings and GATT Article II (2) GOODS SCHEDULES Members’ commitments WTO negotiations produce general rules that apply to all Members, and specific commitments made by individual Member governments. The specific commitments are listed in documents called “schedules of concessions”, which reflect specific tariff concessions and other commitments that they have given in the context of trade negotiations, such as the Uruguay Round. For trade in goods in general, these usually consist of maximum tariff levels which are often referred to as “bound tariffs” or “bindings” (GATT Article II). In the case of agricultural products, these concessions and commitments also relate to tariff rate quotas, limits on export subsidies, and some kinds of domestic support. All WTO Members have a schedule of concessions which is either annexed to the Marrakesh Protocol to the GATT 1994 or to a Protocol of Accession. The content of the schedules change over time to take account of different modifications, such as GATT Article XXVIII negotiations or rectification procedures. This is the reason why determining a Member's concession for a specific tariff line could involve, in some cases, examining several different legal instruments.

3. GATT/WTO The Second Pillar: Bindings and GATT Article II (3) Q1: Before the Kennedy Round, the United States tariff on many types of watches exceeded 50 percent whereas the common external tariff (CET) of the European Economic Community (EEC) on such items was below 15 percent. Suppose a 50 percent tariff cut is agreed to in a negotiating round. As a result, the American duty becomes 25 percent and the EEC duty becomes 7.5 percent. Does the significant pre-existing tariff disparity render the tariff reduction unsatisfactory? Should tariff harmonization accompany tariff reduction? Consider the position of Swiss watch producers. Are they adversely affected by non-linear reductions owing to the initially high American tariffs? Note the problem of tariff disparities was debated hotly between the United States and EEC during the Kennedy Round, but no resolution was reached. A1: Yes. That is, the tariff reduction is unsatisfactory without accompanying tariff harmonization. The United States duty is still almost 4 times the EEC duty. Consider, for example, the repercussion of a 50 percent American tariff reduction and a 25 percent EEC reduction. The result would be duties of 25 percent (half of 50 percent) and 11.25 percent (15 percent minus one-quarter of 15 percent), respectively. Now, the United States tariff is double, not 4 times, the EEC rate. Therefore, a step toward tariff harmonization, as well as tariff reduction, has occurred.

3. GATT/WTO The Second Pillar: Bindings and GATT Article II (4) Q2:In 2006, several European Union (EU) states suggested a “Green Tax” to encourage countries to battle global warming. In particular, France, Italy, Spain, and the Nordic countries suggested a tax on imports from countries that did not ratify the Kyoto Protocol. EU Trade Commissioner Peter Mandelson disagreed, saying a Green Tax would be problematical under WTO rules. He suggested a zero tariff accord among WTO Members on products designed to deal with climate change, such as Chinese wind power generators, European green technology, Indian energy-saving water heaters, and other clean power generation or renewable energy items. What problems might a Green Tax raise, and does the Commissioners’ suggestion resolve them? A2: A Green Tax could present a problem of both the MFN and tariff binding rules under GATT Articles I:1 and II:1(b), respectively. There is no WTO obligation to join the Kyoto Protocol. A Green Tax would be a remedy with no correlative right or obligation. Moreover, some WTO Members have ratified it, but have not implemented any targets for greenhouse gas emissions because of their status under the Protocol as a developing country. China is an example. Other countries, like the United States, have not joined the Protocol, but individual states — such as California — adhere to strict emission standards. Thus, it is not clear what WTO Members would be subject to the Green Tax — a possible concern under GATT Article X transparency rules. Commissioner Mandelson’s proposal for a zero-tariff accord resembles the WTO Information Technology Agreement (ITA). Done properly, it would present no GATT law difficulties.

The Kyoto Protocol is a protocol to the United Nations Framework Convention on Climate Change (UNFCCC or FCCC), aimed at fighting global warming. The UNFCCC is an international environmental treaty with the goal of achieving the "stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system." The Protocol was initially adopted on 11 December 1997 in Kyoto, Japan, and entered into force on 16 February 2005. As of September 2011, 191 states have signed and ratified the protocol. The only remaining signatory not to have ratified the protocol is the United States. Other states yet to ratify Kyoto include Afghanistan, Andorra and South Sudan, after Somalia ratified the protocol on 26 July 2010. Under the Protocol, 37 countries ("Annex I countries") commit themselves to a reduction of four greenhouse gases (GHG) (carbon dioxide, methane, nitrous oxide, sulphur hexafluoride) and two groups of gases (hydrofluorocarbons and perfluorocarbons) produced by them, and all member countries give general commitments. Annex I countries agreed to reduce their collective greenhouse gas emissions by 5.2% from the 1990 level. Emission limits do not include emissions by international aviation and shipping, but are in addition to the industrial gases, chlorofluorocarbons, or CFCs, which are dealt with under the 1987 Montreal Protocol on Substances that Deplete the Ozone Layer.

Transparency and GATT Article X (1) Why Transparency Matters non-transparency of rules is a non-tariff barrier to free, fair competition in two respects: First - some players are disadvantaged relative to players that understand the rules. Second - potential players - ones seeking entry into the game - are disadvantaged relative to players that understand the rules. Transparency merely demands that every current or prospective player have the chance to learn the rules . . . . . . NOT that all of them have a voice in shaping the rules (2) GATT Article X:1 …requires prompt publication in such a manner as to allow governments and traders to become acquainted with the law GATT Article X:2 ….calls for enforcement of laws only after they have been officially published GATT Article X:3 …speaks of the uniform, impartial, and reasonable administration of laws, the use of independent adjudicatory tribunals 2019-07-04 국제거래법

Transparency and GATT Article X 제10조 무역규정의 공표 및 시행 1. 체약당사자가 시행하고 있는 법률·규정·사법판결 및 일반적으로 적용되는 행정결정으로서 관세목적을 위한 상품의 분류 또는 평가, 관세, 조세 또는 그밖의 과징금의 율, 수입 또는 수출, 또는 이를 위한 지급이전에 대한 요건, 제한 또는 금지에 관한 것이거나 상품의 판매, 유통, 운송, 보험, 창고보관, 검사, 전시, 가공, 혼합 또는 그밖의 사용에 영향을 주는 것은 각 정부 및 무역업자가 알 수 있도록 하는 방식으로 신속히 공표되어야 한다. 체약당사자 정부 또는 정부기관과 다른 체약당사자 정부 또는 정부기관간에 유효한, 국제무역정책에 영향을 주는 협정 또한 공표되어야 한다. 이 항의 규정은 체약당사자가 법률의 시행을 방해하거나 달리 공익에 반하거나 공사를 불문한 특정기업의 정당한 상업적 이익을 저해할 수 있는 비밀정보를 공개하도록 요구하는 것은 아니다. 2. 체약당사자가 취하는 일반적으로 적용되는 어떠한 조치도, 확립되고 일관된 관행 하에서 수입에 부과되는 관세 또는 그밖의 과징금의 율을 증가시키는 것이거나 수입 또는 수입을 위한 지급이전에 대하여 새롭거나 더 부담이 되는 요건, 제한 또는 금지를 부과하는 것은 동 조치가 공식적으로 공표되기 이전에 시행되어서는 아니된다. 3. (a) 각 체약당사자는 이 조 제1항에 기재된 종류의 자신의 모든 법률, 규정, 판결 및 결정을 일관되고 공평하며 합리적인 방식으로 시행한다. (b) 각 체약당사자는 특히 관세와 관련된 행정적 조치의 신속한 검토 및 시정의 목적을 위하여 사법, 중재 또는 행정 재판소 또는 절차를 유지하거나 실행가능한 한 조속히 설치한다. 동 재판소 또는 절차는 행정적 시행을 담당하는 기관으로부터 독립되어야 하며, 그 판결은 상소가 수입자에 의하여 제기되도록 정하여진 기간 내에 상위관할권의 법원 또는 재판소에 상소가 제기되는 경우가 아니면 동 기관에 의하여 이행되고 또한 동 기관의 행위를 규율한다. 단, 동 기관의 중앙행정관청은 그 판결이 확립된 법원칙이나 실제사실과 일치하지 아니한다고 믿을만한 충분한 이유가 있는 경우 다른 심의과정에서 동 문제에 관한 검토를 받기 위한 조치를 취할 수 있다. (c) 이 항 (b)호의 규정은 이 협정일자에 체약당사자의 영토에서 유효한 절차로서, 행정적 시행을 담당하는 기관으로부터 충분히 또는 정식으로 독립되어 있지 아니하다 하더라도 행정조치의 객관적이고 공평한 검토를 제시하는 절차의 철폐 또는 대체를 요구하는 것은 아니다. 동 절차를 채용하는 체약당사자는, 요청이 있을 경우, 동 절차가 이 호의 요건에 합치하는지 여부를 체약당사자단이 결정할 수 있도록 동 절차에 관한 충분한 정보를 체약당사자단에 제공한다. 2019-07-04 국제거래법

4. GATT/WTO The Third Pillar: National Treatment and GATT Article III Article III: National Treatment on Internal Taxation and Regulation 1.       The contracting parties recognize that internal taxes and other internal charges, and laws, regulations and requirements affecting the internal sale, offering for sale, purchase, transportation, distribution or use of products, and internal quantitative regulations requiring the mixture, processing or use of products in specified amounts or proportions, should not be applied to imported or domestic products so as to afford protection to domestic production.* 2.       The products of the territory of any contracting party imported into the territory of any other contracting party shall not be subject, directly or indirectly, to internal taxes or other internal charges of any kind in excess of those applied, directly or indirectly, to like domestic products. Moreover, no contracting party shall otherwise apply internal taxes or other internal charges to imported or domestic products in a manner contrary to the principles set forth in paragraph 1.*

4. GATT/WTO The Third Pillar: National Treatment and GATT Article III Article III: National Treatment on Internal Taxation and Regulation 3.       With respect to any existing internal tax which is inconsistent with the provisions of paragraph 2, but which is specifically authorized under a trade agreement, in force on April 10, 1947, in which the import duty on the taxed product is bound against increase, the contracting party imposing the tax shall be free to postpone the application of the provisions of paragraph 2 to such tax until such time as it can obtain release from the obligations of such trade agreement in order to permit the increase of such duty to the extent necessary to compensate for the elimination of the protective element of the tax. 4.       The products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use. The provisions of this paragraph shall not prevent the application of differential internal transportation charges which are based exclusively on the economic operation of the means of transport and not on the nationality of the product.

4. GATT/WTO The Third Pillar: National Treatment and GATT Article III Article III: National Treatment on Internal Taxation and Regulation 5.       No contracting party shall establish or maintain any internal quantitative regulation relating to the mixture, processing or use of products in specified amounts or proportions which requires, directly or indirectly, that any specified amount or proportion of any product which is the subject of the regulation must be supplied from domestic sources. Moreover, no contracting party shall otherwise apply internal quantitative regulations in a manner contrary to the principles set forth in paragraph 1.* 6.       The provisions of paragraph 5 shall not apply to any internal quantitative regulation in force in the territory of any contracting party on July 1, 1939, April 10, 1947, or March 24, 1948, at the option of that contracting party; Provided that any such regulation which is contrary to the provisions of paragraph 5 shall not be modified to the detriment of imports and shall be treated as a customs duty for the purpose of negotiation. 7.       No internal quantitative regulation relating to the mixture, processing or use of products in specified amounts or proportions shall be applied in such a manner as to allocate any such amount or proportion among external sources of supply.

4. GATT/WTO The Third Pillar: National Treatment and GATT Article III 8.       (a)      The provisions of this Article shall not apply to laws, regulations or requirements governing the procurement by governmental agencies of products purchased for governmental purposes and not with a view to commercial resale or with a view to use in the production of goods for commercial sale. (b)      The provisions of this Article shall not prevent the payment of subsidies exclusively to domestic producers, including payments to domestic producers derived from the proceeds of internal taxes or charges applied consistently with the provisions of this Article and subsidies effected through governmental purchases of domestic products. 9.       The contracting parties recognize that internal maximum price control measures, even though conforming to the other provisions of this Article, can have effects prejudicial to the interests of contracting parties supplying imported products. Accordingly, contracting parties applying such measures shall take account of the interests of exporting contracting parties with a view to avoiding to the fullest practicable extent such prejudicial effects. 10.     The provisions of this Article shall not prevent any contracting party from establishing or maintaining internal quantitative regulations relating to exposed cinematograph films and meeting the requirements of Article IV. Members may not use internal measures to discriminate between domestic goods and those imported from Members; that is to say that imports from Members are accorded National Treatment.

4. GATT/WTO The Third Pillar: National Treatment and GATT Article III (2) The Background of Rules: National Treatment Principle National treatment (GATT Article III) stands alongside MFN treatment as one of the central principles of the WTO Agreement. Under the national treatment rule, Members must not accord discriminatory appropriate treatment between imports and like domestic products (with the exception of the imposition of tariffs, which is a border measure). The GATS and the TRIPS Agreement have similar provisions. This rule prevents countries from taking discriminatory measures on imports on the one hand, and to prevent countries from offsetting the effects of tariffs through non-tariff measures. An example of the latter could be where Member A reduces the import tariff on product X from ten percent to five percent, only to impose a five percent domestic consumption tax only on imported product X, effectively offsetting the five percentage point tariff cut. The purpose of the national treatment rule is to eliminate “hidden” domestic barriers to trade by WTO Members through according imported products treatment no less favourable than that accorded to products of national origin. The adherence to this principle is important to maintain the balance of rights and obligations, and is essential for the maintenance of the multilateral trading system.

4. GATT/WTO The Third Pillar: National Treatment and GATT Article III Legal Framework (i) GATT Article III GATT Article III requires that WTO Members provide national treatment to all other Members. Article III:1 stipulates the general principle that Members must not apply internal taxes or other internal charges, laws, regulations and requirements affecting imported or domestic products so as to afford protection to domestic production. In relation to internal taxes or other internal charges, Article III:2 stipulates that WTO Members shall not apply standards higher than those imposed on domestic products between imported goods and “like” domestic goods, or between imported goods and “a directly competitive or substitutable product.” With regard to internal regulations and laws, Article III:4 provides that Members shall accord imported products treatment no less favourable than that accorded to “like products” of national origin. In determining the similarity of “like products,” GATT panel reports have relied on a number of criteria including tariff classifications, the product’s end uses in a given market, consumer tastes and habits, and the product’s properties, nature and quality. The same idea can be found in reports by WTO panels and the Appellate Body. (ii) Exceptions to GATT Article III (National Treatment Rule) Although national treatment is a basic principle under the GATT, the GATT provides for certain exceptions as follows. (a) Government Procurement

4. GATT/WTO The Third Pillar: National Treatment and GATT Article III Legal Framework (ii) Exceptions to GATT Article III (National Treatment Rule) (a) Government Procurement GATT Article III:8(a) permits governments to purchase domestic products preferentially, making government procurement one of the exceptions to the national treatment rule. This exception is permitted because WTO Members recognize the role of government procurement in national policy. For example, there may be a security need to develop and purchase products domestically, or government procurement may, as is often the case, be used as a policy tool to promote smaller business, local industry or advanced technologies. While the GATT made government procurement an exception to the national treatment rule, the Agreement on Government Procurement resulting from the Uruguay Round mandates signatories to offer national treatment in their government procurement. However, WTO Members are under no obligation to join the Agreement on Government Procurement. In fact, it has mostly been developed countries that have joined the Agreement. Therefore, in the context of government procurement, the national treatment rule applies only between those who have acceded to the Agreement on Government Procurement, and for others, the traditional exception is still in force. (b) Domestic Subsidies GATT Article III:8(b) allows for the payment of subsidies exclusively to domestic producers as an exception to the national treatment rule, under the condition that it is not in violation of other provisions in Article III and the Agreement on Subsidies and Countervailing Measures. The reason for this exception is that subsidies are recognized to be an effective policy tool, and is recognized to be basically within the latitude of domestic policy authorities. However, because subsidies may have a negative effect on trade, the Agreement on Subsidies and Countervailing Measures imposes strict disciplines on the use of subsidies. (c) GATT Article XVIII:C

4. GATT/WTO The Third Pillar: National Treatment and GATT Article III Legal Framework (ii) Exceptions to GATT Article III (National Treatment Rule) (c) GATT Article XVIII:C Members in the early stages of development can raise their standard of living by promoting the establishment of infant industries, but this may require government support and the goal may not be realistically attainable with measures that conform to the GATT. In such cases, countries can use the provisions of GATT Article XVIII:C to notify WTO Members and initiate consultations. After consultations are completed and under certain restrictions, these countries are then allowed to take measures that are inconsistent with GATT provisions excluding Articles I, II and XIII. Unlike the trade restrictions for balance of payment reasons in GATT Article XVIII:B, the Article XVIII:C procedure allows both border measures and violations of the national treatment obligations in order to promote domestic infant industries. In the case concerning Malaysia ’s import permit system of petrochemical products, Malaysia resorted to GATT Article XVIII:C as a reason to enforce import restrictions on polyethylene. Although Singapore filed a WTO case against this Malaysian practice, Singapore then withdrew its complaints and therefore neither a panel nor the Appellant Body had an opportunity to rule on the case.3 3 Malaysia – Prohibition of Imports of Polyethylene and Polypropylene (WT/DS1). This complaint had the distinction of being the first dispute under the new WTO dispute settlement system. 17 (d) Other Exceptions to National Treatment

4. GATT/WTO The Third Pillar: National Treatment and GATT Article III Legal Framework (ii) Exceptions to GATT Article III (National Treatment Rule) (d) Other Exceptions to National Treatment Exceptions peculiar to national treatment include the exception on screen quotas of cinematographic films under Article III:10 and Article IV. The provisions of GATT Article XX on general exceptions, Article XXI on security exceptions, and WTO Article IX on waivers also apply to the national treatment rule. For further detail, see the relevant sections of Chapter 1 (MFN Principle). (iii) National Treatment Rules Outside of GATT Article III With the entry into force of the WTO Agreement, the idea of national treatment has been extended, although in a limited fashion, to agreements on goods, services and intellectual property. Among the agreements on goods, for instance, Article 5.1.1 of the TBT Agreement also addresses national treatment. GATS Article XVII provides national treatment for services and service providers and Article 3 of the TRIPS Agreement provides national treatment for the protection of intellectual property rights. The plurilateral Agreement on Government Procurement also contains a national treatment clause. (See the relevant chapters for more information on Trade in Services, Intellectual Property Rights, and Government Procurement.)

4. GATT/WTO The Third Pillar: National Treatment and GATT Article III (4) Economic Implications There is a tendency for importing countries to attempt to use discriminatory application of domestic taxes and regulations to protect national production, often as the result of protectionist pressures from domestic producers. This distorts the conditions of competition between domestic and imported goods and leads to a reduction in economic welfare. The national treatment rule does not in principle permit these sorts of policies designed to protect domestic products. GATT Article II does permit the use of tariffs as a means of protecting domestic industry, but this is because tariffs have high degrees of transparency and predictability since they are published and committed to in tariff schedules. On the other hand, domestic taxes and regulations are “hidden barriers to trade” that lack both transparency and predictability, which means that they can have a large trade-distortive impact. The existence of GATT Article III generally impedes the adoption of policies and measures aimed at domestic protection, and thus promotes trade liberalization. In addition, regarding tariff concessions, GATT Article II recognizes tariffs as tools for domestic industrial protection, and having done so, sets a course for the achievement of liberalization through gradual reductions. Even if tariff reductions were made as a result of trade negotiations, if domestic taxes and regulations were to be applied in a discriminatory fashion to protect domestic industry simultaneously, then effective internal trade barriers would remain. The national treatment rule prohibits countries from using domestic taxes and regulations to offset the value of tariff concessions and is, therefore, a significant tool in promoting trade liberalization. 2. PROBLEMS OF TRADE POLICIES AND MEASURES IN INDIVIDUAL COUNTRIES National treatment provisions, as well as the MFN clause, are often invoked in WTO disputes. However, an argument on national treatment is rarely made on its own; instead, the national treatment principle is usually invoked in conjunction with other provisions regarding 18 MFN, quantitative restrictions, TRIMs, and standards and conformity assessment .

4. GATT/WTO The Third Pillar: National Treatment and GATT Article III Ch. 2 The World Trade Organization (WTO) 1. The General Agreement on Tariffs and Trade: History and Provisions 4. GATT/WTO The Third Pillar: National Treatment and GATT Article III (5) Q: Report of the Appellate Body, Korea-Taxes on Alcoholic Bererages (WT/DS75/AB/R, WT/DS84/AB/R) Q: Suppose that under its Liquor Tax Law, Korea imposes an ad valorem tax on imported distilled alcoholic beverages (e.g., brandy, cognac, gin, liqueurs, rum, tequila, vodka, and whiskey) in a dissimilar manner from the way it taxes a domestic alcoholic beverage, soju (a traditional Korean drink). Specifi cally, the tax burden is lower on soju than on the imports. Assume a WTO panel sides with the complainants, the EU and United States. Korea decides to appeal, and the key issue on appeal was whether the Korean liquor tax was consistent with the second sentence of GATT Article III:2. Suppose Korea points out that at some level, all products can be said to be competitive. It states that if an unqualifi ed minimum threshold were enough to render products “directly competitive or substitutable products,” then Article III:2 would become an “unbridled instrument of tax harmonization and deregulation.” Accordingly, on appeal the question boils down to whether imported products are “directly” competitive or substitutable with the domestic product under consideration. The panel answered “yes,” i.e., the panel found that imported alcoholic beverages and soju were like or directly competitive. But, argues Korea, in doing so the panel committed four grave errors.

4. GATT/WTO The Third Pillar: National Treatment and GATT Article III Ch. 2 The World Trade Organization (WTO) 1. The General Agreement on Tariffs and Trade: History and Provisions 4. GATT/WTO The Third Pillar: National Treatment and GATT Article III (5) Q: Report of the Appellate Body, Korea-Taxes on Alcoholic Bererages (WT/DS75/AB/R, WT/DS84/AB/R) Q: (1) The panel based its conclusion in part on the potential for competition between these products in the near future, not on an extant competitive relations. The panel speculated about what consumers might do, and did not focus on what they actually do. (2) The panel examined the “nature” of competition, thereby adding a “vague and subjective criterion” to the determination of whether products are directly competitive or substitutable. (3) The panel also checked evidence from other markets (e.g., Japan), thereby assuming without foundation that the Korean market was becoming like the other markets. (4) By grouping products in a Procrustean manner, the panel improperly defined the comparison to be made. For example, the panel grouped distilled soju and diluted soju together, and then compared them with all imported distilled spirits, which the panel had wrongly lumped together. Yet, not all of the constituents of each grouping were alike. Certain beverages that the panel had put in the same group for comparative purposes were not physically identical, were produced in different ways by different manufacturers using different materials, had different tastes, were used differently, and were marketed and sold in different ways through distinct distribution channels at very different prices subject to different tax rates. Consequently, the panel “ ‘trivialized’ actual consumer perceptions which are at the heart of the ‘directly competitive or substitutable standard.” What the panel should have done is juxtapose each individual imported drink with each domestic drink, i.e., engage in a product-by-product comparison. You are counsel to the EU or United States. How do you rebut Korea’s arguments? How do you anticipate the Appellate Body will rule?

4. GATT/WTO The Third Pillar: National Treatment and GATT Article III Ch. 2 The World Trade Organization (WTO) 1. The General Agreement on Tariffs and Trade: History and Provisions 4. GATT/WTO The Third Pillar: National Treatment and GATT Article III (5) Q: Report of the Appellate Body, Korea-Taxes on Alcoholic Bererages (WT/DS75/AB/R, WT/DS84/AB/R) A: As the citation in the Question indicates, a real case on point exists, and the arguments raised by Korea in that case are precisely those recounted in the Question. Moreover, the facts of Korea — Alcoholic Beverages are strikingly similar to those in Japan — Alcoholic Beverages. In the actual Korea — Alcoholic Beverages case, a WTO panel ruled soju was directly competitive or substitutable with these imported products. It said Korea violated GATT Article III:2, because the tax differential was more than de minimis, and was applied so as to afford protection to domestic production. The key issue on appeal was whether the Korean liquor tax was consistent with the second sentence of GATT Article III:2. The Appellate Body upheld all of the panel’s fi ndings, and in so doing put into action its like product analysis from Japan — Alcoholic Beverages. On appeal, the complainants, the European Communities (EC) and United States, disputed Korea’s points. The EC pointed out Korea wrongly assumed the phrase “directly competitive or substitutable” had to be interpreted strictly. In fact, the phrase is designed to connote a broad notion that would include potential competition and evidence from other markets. To be sure, said the EC, the panel had found an existing, direct competition relationship between soju and imported spirits. Still, the panel was right to examine potential competition, which is an important factor that the drafters of GATT did not exclude from consideration because they did not limit Article III:2 or Ad Article III with the word “actual.” Indeed, the EC argued potential competition is competition. As to the grouping of products, the EC challenged Korea to show that its suggested product-by-product algorithm would lead to a different legal conclusion. The implication was that grouping products was a reasonable and convenient methodology for analytical purposes only with no effect on the outcome.