International Trade Regulation – Afilalo
Theory of Comparative and Absolute Advantage
Absolute Advantage (NOTE: 1k total workers)
A B
1k workers 1k barrels 100 barrels BEER
1k workers 100 barrels 1k barrels WINE
900 workers 900 barrels 90 barrels BEER
100 workers 10 barrels 100 barrels WINE
100 workers 100 barrels 10 barrels BEER
900 workers 90 barrels 900 barrels WINE
OPTIMAL
990 workers 990 barrels
10 workers 10 barrels
10 workers 10 barrels
990 workers 990 barrels
– promotes specialization when engaged in trade
– efficiency increases (produce more of everything with the same resources)
– lowers price for consumers
Comparative advantage – one country is better at everything
– countries should specialize in whatever they are comparatively the best and trade for those where they appear to be marginally better
Afilalo=s opinion?
– Get rid of tariffs
– Get rid of all obstacles to trade
– For what do you not want to be dependent upon others:
– Agricultural needs
– Military items
– Natural resources
SEMESTER OVERVIEW
Focus on Three Treaties:
1. GATT/WTO – General Agreement on Tariffs and Trade/World Trade Organization Agreement
– Tariffs are bad
– Each country establishes tariff bindings (won=t go higher than $x tariff) for each product
– A new round of negotiations start every few years for a new category of products
– Prohibits certain discriminatory measures, such as sales taxes and import quotas
2. never said?
3. never said?
Intellectual Property
01.21.03
I. National Treatment and GATT Article III
A. National Treatment
1. Internal Taxes
a. Tariff is a tax, but separate from other, or internal, taxes
b. Generally, a tax levied on both imported and Alike@ domestic goods, even though levied on imported goods at the point of entry, is considered an internal tax
2. ALike@ products (GATT III:2) and Adirectly competitive and substitutable products@ (GATT Interp. Note III:2):
a. Interpreted on a case-by-case basis (Japan Alcoholic Beverages Case)
b. ALike@ products need not be identical in all respects, though they ought to have essentially the same:
(1) physical characteristics
(2) tariff classification
(3) end uses
(4) consumer taste
c. Physical resemblance is not necessary
d. ALike@=narrow (shochu=vodka), v. ASubstitutable@=broad (shochu=gin, brandy, rum, whiskey, etc.)
e. ADirectly competitive@ is determined by examining:
(1) The product market – design, architecture, and revealing structure
(2) The cross-price elasticity of demand – demand for a product as prices for related products change
f. The Aaim and effect@ test – intent to protect, effectively protects (purpose of the measure as embodied within the measure itself)
(1) What is the structure of the measure?
(2) Does the measure draw a line between imports and domestics (not necessarily through words)?
(3) How is the measure worded?
B. GATT Article III Interpretation
1. Treaty Interpretation
a. Vienna Convention 3
ction or sales (general prohibition)
(2) WTO members must provide equality of competition
(3) Not limited to products subject to tariff considerations under Article II
(4) Basically, you cannot circumvent the tariff limits by imposing an internal tax
b. Article III:1 – General Principles – internal measures should not be applied blah blah blah
c. Article III:2 – Specific Obligations
(1) First Sentence – if imported products are taxed in excess of like domestic products, the tax measure is inconsistent with Article III (an application of the general principle enunciated in III:1); note important things from the first sentence:
(a) Identify imported and domestic products;
(b) ALikeness@; and
(c) AIn excess of@ (identify taxation scheme for both imports and domestics)
(2) Second Sentence – general prohibition against internal taxes and regulations that afford protection to domestic products; brings up three issues:
(a) directly competitive or substitutable products (DCSP) which are in competition with each other (go to Across-price elasticity of demand,@ or the extent to which price changes in one product affect demand for another product)
these products are not similarly taxed (greater tax
