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International Trade
University of Kansas School of Law
Bhala, Raj

PROFESSOR BHALA

INTERNATIONAL TRADE

SPRING 2011

Great Depression: 1930s

Smoot- Hawley Tariff Act 1930, as amended: Protectionist measures are extreme; everyone is devaluing their currency and raising tariffs

Reciprocal Trade Agreements Act: 1934; in 4-5 years there were 30 agreements that ended the Smoot- Hawley act; authorized the President to enter into agreements with other countries to lower tariffs

Atlantic Charter 1929-1945: seed for GATT, Roosevelt, and Churchill; Multilateral Negotiations

Cordell Hull, Sec of State, “peace through trade” guy

Theory: if you have a stake in the global economy via trade you won’t disrupt that by going to war.

International Trade Organization: FAILED, US did not ratify the Havana Charter.

Bretton Woods: 1944, created WB and IMF and ITO

GATT: general agreement on tariffs and trade: 30 October 1947, entered into force: 1 January 1948, just a treaty NOT an organization like the WTO later is.

GATT 1994: annexed to the Agreement Establishing the WTO and Annex 1A; an MTA

GATT becomes the Constitution for Intl Trade, create policies that ground intl trade in law

4 PILLARS OF GATT

MFN: most favored nation; art I.1 “same treatment to like products originating in any other country” (love all your neighbors equally)

Can use MFN in an FTA

Tariff Bindings : II. (keep your promises)

National Treatment: III.1/2/4 (love your neighbor like yourself)

Art III.2

FIRST SENTENCE: ‘LIKE DOMESTIC PRODUCT/ IN EXCESS OF’

SECOND SENTENCE: ‘NOT SIMILARLY TAXED’ ‘so as to afford protection’

Art III.4: “no less favorable than that accorded to like products of domestic origin”

LIKE PRODUCTS- Japan Liquor Case

Everything else is: DIRECTLY COMPETATIVE and SUBSTITUTABLE

NOT applied to Income Tax or GPA, government procurement- gov can prefer local suppliers, makes sense.

Non-Tariff Barriers: XI.1 (no quantitative restrictions at all)

Exceptions: (cracks in the 4th pillar): GATT art. XI.2

XI.2(a) can have quantitative restrictions for shortages of food or essential products

XI.2(b) TBT- can regulate w. technical rules pertaining to trade

XI.2(c)- restrictions on Farm products

-problem is that XI can turn into Protectionist measure; case by case analysis

Can NOT create an unnecessary obstacle to trade

Must fulfill a Legit objective

Can NOT be more trade restrictive than necessary

23 Contracting Parties- no soviet union

Became the constitution to world trade even though it was not intended to play that role

GATT ROUNDS

General Development of the Rounds:

Kenedy: used across the board/linear tariff cuts. Very inefficient to do it product by product, takes wayyy to long. NOW still use across the board methods

Tokyo: Swiss formula proposed by Swiss was introduced;

Everything was Pluralateral; everything was a PACKAGE DEAL

Focus on controlling NTB

Uruguay: Sept. 1986-Dec. 1993, entered into force 15 April 1994.

Developing countries want to talk about SERVICES and IP.

BUT Brazil and India said NOT talk about Services and IP (talks almost broke down)/ US said NO deal without Services and IP; and French said they would NOT talk about FARM Subsidies.; ALSO developing countries and LDCs buy into the INFANT TRADE INDUSTRY argument.

The ATC eliminated MFA quotas but actually screwed LDCs. NO quotas meant that smaller factories shut down and production moved to larger factories w

uctant, press slaughtered the US as not being ‘compassionate.’ US finally agreed to waiver after 2 years for all drugs

WTO: 1995, the organization formed from the GATT Treaty

Born out of the Uruguay Round

Governing Body:

Ministerial Conference

General Council: DSB and TRPB

Secretariat, Director General is head of Secretariat, reports to Ministerial Conference

Court: (very active, far more cases than ICJ)

Panel

Appellate Body

ASSECION:

1. working party on accession is formed at Secretariat level (helps shape terms of entry); countries are asked if they want to be on the working party group. US, EU, Japan always say yes

2. working group checks applicants current trade laws. What laws conform with current WTO, what has to be changed…

Very intense process-giving up some sovereignty, submitting sovereign legislation to the WTO for scrutiny. Bar has been raised for membership, lucky if you were an original member

2a. Second Track: bilateral agreement btwn two countries. Market access concessions that applicant makes to its counter part

Ex: US negotiates bilateral agreement to lower steel tariffs w China. US ‘multilateralizes’ reduction in tariff for all WTO members.

Free Rider issue: country with heavy negotiating power pushes applicant to make trade concessions then other countries benefit from the ‘heavy lifting’ of the ‘power’ country