Class 1: 2nd August, 2016

4 questions:
Why trade?
1. Is trading natural? - SPECIALISATION: important term. No scope of specialisation?
We would have not developed then. Trading is natural to the extent we have gone to
civilisation. Initial clashes between herding and farming communities. Today, trade is
natural to human beings.
2. Ancient trade? - is ancient trade different from modern trade? Big question. At basic
level, same. Human beings exchanging things. Modern day trade driven by several
other factors. This is largely a question of State or organised group of human
beings/political entities. Also question of modern day demand. Ancient trade: demand
natural to the person back then- food, clothing. Today: not for any of that. Today:
brought into existence then demand for them. Telephone for example. Modern day trade
may be kind be different from ancient trade not just in degree. How much different in
kind is it? Roman emperors wore Chinese silk. As an exotic form of clothing. They
didn’t even know Chinese. Catering to a luxury: the route. At time of early Roman
Empire. This trade route is ancient. It is the kind of trading we are doing today.
3. Is modern day different from trade as it occurred through the ages?
4. What is autarky? A self-sufficient system that doesn’t need to trade. There have been
attempts at autarky but never been fulfilled. Prominent examples: North Korea. Attempt
at autarky today. Even Nazi Germany tried to be. India never one. Brit empire tried to
be one at one point of time.
# Export and import of goods no longer a good way of looking at trade: though it’s a
dominant method of looking at trade.
Nokia phone sold in world as made in China. We are now in a world where products
are made by global value chain: step by step basis until you get to the final product.
If you are going to measure trade in terms of value addition, you will get a more realistic
picture. WTO: look at goods as made in the world, measure in terms of the country’s
contribution rather than the final product.
 International trade and economics
- Adam Smith: author of the “wealth of nations”. What did he say about
international trade? In his book, he talked about absolute advantage. Before
Smith, the principle followed was that export as much as you can, and import
nothing: mercantilism. Don’t engage in free trade with everybody but force
everybody to trade with you on your terms. Smith: it doesn’t increase wealth of
a nation to only export. He said “specialise”. Your net wealth will increase. If
you are better at producing something, then produce that thing. Wine-car
example (see from register). Greece and France: 2 commodities only: wine and
cheese. Only France can make these two commodities. What will happen then?
Adam Smith’s theory now under stress. In comes David Riccardo now.
- David Riccardo: modification of Adam Smith’s theory. Came up with the
concept of “comparative advantage”. Despite the fact that one country might
have absolute advantage over other country, they will still trade because it is
beneficial for them to specialise in things they are relatively better. If France is
better at making wine, France will still specialise in wine and Greece at cheese.
If Greece better at cheese than wine, then it will make cheese. In one hour
France makes 10 bottles of wine and 4 ounce of cheese. In 1 labour hr, 4 ounce
of cheese and 10 bottles of wine. Price of cheese double that of wine. Basic
 economic notion: price of good largely determined by the time of labour time
spent on it. Greece: 1 hour: 5 ounces of cheese and 3 bottles of wine. Now with
trade? 1.33 cost of an ounce of cheese in Greece. Cost of cheese in France: more
expensive in France. –see register-
- Heckscher-ohlin: improvement on theory of comparative advantage. Best way
to predict CA is to try and improve factors of production: land, labour, capital
and enterprise. Factors of production important.
- Stopler-samuelson: once there is trade in factors of production, then price of
factors itself starts varying. Problem in Ricardian: assumed factors of
production same.
- Import substitution industrialisation: seemingly not worked in world. When
the whole world decolonising, (1940s-60s) - hypothesis given: comparative
advantage fine, but developing world only has comparative advantage in
agriculture and since they don’t have capital, they can’t manufacture these
goods. India should export crops, wheat: agricultural products. Countries with
lots of capital: machines like cars etc. they are saying: law of CA predicts if you
trade like this both countries will get richer and richer. Then came 2 economists:
maybe all countries getting richer, but developing countries getting richer at a
slower pace since agricultural products price rises slowly as compared to other
manufactured products. Asked developing countries to seal off borders. Build
off your own capacity. Go into the world after you have built your capacity.
Industrialise while shutting out your imports. If you import from Germany, no
one will buy Indian cars. Maruti is a success story though. Policy makers in the
developing world caught on to this idea. Had some success. But world economy
didn’t corporate. Many reasons. Some say: flawed plan from beginning. Some
others: war etc. reason. ISI a success story that failed for reasons unknown. Idea
of trading on comparative advantage a firm part of international economics.
- What do the numbers show in a world where trade is largely liberalized? Two
words: growth and distribution. Many left wings: ignore growth question and
give distribution importance. Growth is also important but. Without growth
distribution will not be that good. Is absolute equal distribution better? Which
is a better situation in the world? Growth question and distribution question are
important.
- Ratio: trade to GDP ratio concept: not an indicator of anything except of how
much is the country into trading system? How much is economy participating
in trade? Trade to GDP tells us how much country participates in trade. One of
the criticisms of trade: that it benefits only developed countries. But numbers
don’t suggest that. China a developing country is the world’s largest exporter of
manufactured goods. 80% of all Asian goods are manufactured goods. Services
sector: India: 3rd largest exporter of services in the world. 4.3% a large number.
Entire 4.3% completely Indian. In terms of growth, trade has given growth.
“Middle developing countries”. What about least developed countries? WTO
three classifications. One of them LCDs. Have they grown? Some doing well.
But least developed African nations, not so well.
- Distribution? Trade increases over all welfare: welfare: overall size of economy,
more money. Doesn’t say who has more money, just nation has more money.
Lead to efficient distribution of labour.
- Unholy trinity: read.
- India borrowing money from banks across the world and industrialising and we
will repay loans once industries work. Then industries stop growing. Stop
 generating profits. Can’t repay loans. India will go bankrupt. We need someone
to give us loans and enter into negotiations with our lenders. For the nation, u
go to IMF. Says we will give u. but conditions. 1st: open up economy to free
trade: structural adjustment. Stiglitz: necessary, but enforcement procedure
horrible. The whole world started dumping goods on them, they became poorer
and poorer. Zimbabwe example. By forcing trade-liberalization in throats of
weak countries, u made them poorer. More imports happened. Distribution
always been a big problem. Easier for developed countries to export as
agriculture only in developing countries. Now the developed countries also
protesting. We are struggling with capital. Let’s tempt these MNCs to try and
start manufacturing here. Trade has the capacity of being a good thing, but can
be made a good thing. Make it a good thing by having regulations, control. We
have to deep into rules, laws and regulations and that’s why we need ITL.
- Discontents about: jobs and wages, environment, poverty and hunger, economic
shocks, livelihood of farmers, cultural identity and diversity and democracy:
tricky point. Many people think trade compromises cultural identity. Like food
for example. Indians now eat mcd fries a lot for example. That’s a loss of
cultural identity to some people. And national sovereignty. : IMF tells u do
what to do with economy. Loss of democracy? Vote of corporation more
important than yours. Liberal trade has its own problems. What we are looking
at is designing a set of rules that counter these problems.
- Economic shocks: the moment a closed economy suddenly opens, there will be
shock can lead to downfalls.
- Farmers face problems once trade open. Indigenous species get wiped out.
Finally, the interests of the big corporations which take over farm lands driving
out farmers of their lands.
- Has WTO addressed farmer’s problems yet? No. 2 questions: 1. whether
theoretically liberal trade can do something? And 2. What are the rules that
govern liberal trade?
- India bird flu epidemic. India didn’t allow US to export chicken to India.
Challenged to WTO. India lost.
- Globalisation: what is economic globalisation? Is this a new phenomenon?
Integration of national economies. Because they do, cultures also get integrated
in some sense.
- Stiglitz: on globalisation. Have we radically rethought WTO policies?
- Liberal trade: our GDP: 1.1 trillion dollars and yet we have as many as 55
billionaires.
- Income inequality: measured by how much u spend in the market. Unfair way.
Because poor spend more income than rich.
- Is liberal trade enough? Inequality.
- Question of politics: what do politicians say? Trump: extreme right. Hates trade.
Bernie: extreme left: hates it too. Trump: white Americans losing their jobs.
From both extremes, always an attack on world trade. Left: makes poor people
poorer. Right: compromises on our nationalism and until we liberalise even
more, nothing can be achieved. Extremely neo-liberal position: liberal even
more. Neo-conservative right wing: hyper-national: trump: we are losing
nationality. Cato institution on trade.
- Left: not doing enough about distribution.
- Next class: what is WTO? Its history?
Class 2: 05-08-2016
What are rare earths? Incredible use in semi-conductor, chip making tech. environmental
effects of extracting rare earth. One way to fix: to stop it. All these big American cos, and do
their mining and all in China. Purchasing significant amount of rare earth from China. Make
chip tech from it like Intel etc. located in US. China: we need to reduce the extraction, because
of environment issues. China: export either banned or controlled. Demand will go down, so
health hazards will reduce.
Suppose GATT says: u can’t put quantitative restriction, unless in some cases of public policy
exceptions. Suppose India a big exporter of rice, but one year crop bad. That year, India will
say: restriction.
In China- US example: China: health hazard so stop export. US: you are trying to take away
our factories. Who will win in the case? One imp pt.: sovereignty pt. at the end of the day, its
China’s land.
Does it (WTO) have a constraining effect on powers of countries to maintain their sovereignty?
“Discriminatory”: US: great, u want to ban then go ahead. But why aren’t u banning extraction
of rare earth for local purposes?
“Competitive world markets” “legitimate objects”
A set of arguments marshalled around public law and administration law’s good things like
Non Discrimination. All of this coming together in body of law called ITL. China lost this case.
WTO: HISTORY AND WHAT IS IT?
Came out of GATT. The world economy started exploding in ITL in 19th century. 2nd big
industrial revolution of late 19th century: Hobbes calls: age of capital. Tech expansion. World
becoming smaller because of steam ship. Significant rise in ITL. 2 things in economic scene:
1. Smith, Riccardo: imp stories about liberalising being a good thing. In response to all sorts of
economic depressions, politicians get tariff walls. They raise tariffs so much thinking domestic
industry will get protected. Increaser in trade happening. WW1 aftermath: what should we do
about tariffs? US: standing as the big industrial power. Booming economy. Trying very hard
to drive tariffs down. First gets its own down and then enters into contracts with other countries
to do the same. Record low for tariffs in 1920s. Economy starts slowing in mid 1920s.
Republicans take control in US. Forney and Mccumber: sponsor a bill that raise tariffs.
Basically: continuous fight in republicans and democrats. Republican: should increase tariffs.
Fordney Mccumber: protection to US industry. Imp: economy continues to slump. 1929:
slump: great depression. Hoover tariff signed. The two senators who are reed and willis holly:
rep senators present a law in 1930s: given presidential sanction: smut holly tariff act. Raises
American tariffs to huge high in 1930s. The aim: to protect local industry. Tariff act doesn’t
do very well for US. There is no political will to lower the tariff again.
Exceptionalism/American isolonatism. President Herbert left. Roosevelt (democrat maybe): he
appoints corell hull to a cabinet position. Hull: tariff needs to be liberalised and knows he
doesn’t have the political will to get it down. Reciprocal act replaces smoot holly. Holly
remains but the president may lower the tariffs if other country is also agreeing to lower its
tariffs. The power with president to lower the tariff a little bit: beg of liberalisation. Reciprocal
trade agreements act, 1934 doesn’t live very well. Because by 1939 WW2 begins. WW2:
realisation that trade good for world. Genince liberalisation post WW2. Hull: harriest Truman
cabinet. Chief architect of US as we know it.
2 other institutions come up: IMF and World Bank. Happened in Bretton woods. 2 agreements
reached at BW. John Maine and Keynes were there. Let’s have IMF and WB. Agreement
signed to do something about world trade. IMF originally: to control currency fluctuations.
Called IBRD initially. Agreement that we will now agree on a trade organisation.
1. Agreement on principles on world trading system: GATT: signed in 1947 by its
members one of which is India.
2. Organisation to drive these principles: Intl trade organisation.
Countries: ITO charter needed. Gets made in Havana, Cuba. ITO charter goes to US
congress which doesn’t agree with it. Concern: sovereignty. “Still born ITO” that’s
why. Countries signed by GATT. Let’s bring the GATT into effect. Provisional
protocol signed. While the monetary system fixed by the 2 organisations, the trade
system not fixed where there is a treaty called GATT. People: let’s try and work with
the GATT. Started working with the GATT to reduce tariffs. All the treaty’s rules will
be followed, but most importantly, let’s try and negotiate tariffs. Happened by bilateral
negotiations initially. GATT round launched.
What would you do where u are trying to negotiate tariffs? Figure out what the other
party wants. Bilateral negotiations on a product by product basis. Ministers getting
together. This is where the treaty comes in. the GATT makes this incredible move.
Agree on MFN basis. In other words, once a bilateral agreement reached on reduction
of tariffs, GATT: it will be multi-lateralised. This is at the beginning of the GATT round
itself. Real achievement of GATT: world over tariffs mostly on industrial goods start
reducing. GATT gained steam, people notice its success, the rounds following “Dillon”
and “Kennedy”: they become more ambitious. We won’t negotiate on product by
product basis but on an average basis. A large no. of lines of product picked, and 15%
average deduction. Negotiating on a group of products. That is achieved thru Dillon
and Kennedy. People come to Tokyo now. Removal of non-tariff barriers to trade.
Other principles written into the GATT: some principles also there. As GATT gained
steam, people realised people can violate this treaty. Disputes started coming. GATT
born without ITO. How did the disputes get resolved? Didn’t get resolved bilaterally.
Agreed on GATT panel. They would give a report on the dispute. Without a permanent
organisation, it started taking an institutional form. GATT got a secretariat. This
meeting and negotiation, starts becoming more formal. Rudimentary institutional form,
but an institutional form nonetheless. Most interesting thing about GATT disputes: the
decisions were unenforceable. Nobody had power to enforce them. Reports would
come, minister would come together, if report adopted by consensus, only then it would
be enforceable. Do u think the party which lost will say yes? Everybody had a veto.
GATT panel reports did contribute only in jurisprudential terms. Some good faith
happening at that time. World trade can be stopped in three ways: 1. China example: u
ban the export/import or u say that not more than this can be exported/imported:
quantitative restriction. Quantitative restriction: presumtply bad. The legitimate means
of controlling how much goods can come in and out is tariffs. U are bound by only that
much u agree to. Agreed liberalisation. Duty that is paid at the port/border.
TOKYO: first attempt at dealing in the international trade system. Non-tariff barriers
to trade: other things that have effect on reducing or increasing tariffs. Subsidy score.
Attempt to say that what if one country’s. Subsidising: reducing price. World trading
system: if one government does this, price is lowered then. Does by giving a subsidy a
government can control import/export of a product? Yes. Tokyo round: method of
barrier to trade. Is subsidy a barrier to trade or not? What is wrong about subsidy? Ur
problem is with absence of “free market”. Many economists: no free trade without free
market. Attempt to expand GATT rules from tariff rules to non-tariff rules. Expansion
of discipline from tariff to non-tariff rules. The next round that is launched in 1986 at
Uruguay. Tariff liberalisation starts, negotiations happening. By 1989, Italians: we
doing very well with GATT, let’s have a more permanent institutional structure to
GATT. Let’s revive ITO. Discussion about new trade organisation. Meanwhile
American and Europe, huge fight on agriculture. America sensing that everywhere else
there is this move for an organisation. EC and USA have an agreement: let’s move past
our differences, get back to Uruguay rounds. Round moves from place to place. By the
time its 1993, Clinton in power. His government says we will do it. We will call this
the world trade organisation like Canada suggested. Round by 1994 moves to
Marrakesh, Morocco. A new treaty which replaces the GATT: Marrakesh something.
On this day, this institution born: WTO. Marrakesh agreement gives us this organisation
and set of rules that will govern world trade now. Marrakesh agreement: agreement for
establishment of WTO. Set of substantive annexed to it. Contains the real rules of
international trade. Largely rules same as GATT, 1947. Gives us the world trade
organisation. Next round in Doha in 2001: no progress made in this round. Progress
slowly now because the membership of WTO huge. 180 members getting any
negotiation done, very difficult. Now it’s more of an organisation.

Today the WTO subsumes various non-tariff barriers to trade. WTO imp thing:
permanent institution. With its own office, state etc. like the UN of world trade. Big
function of its own. 2 major functions and one minor one. Dispute settlement and
negotiation: major ones. WTO dispute settlement remarkably different from GATT. If
u bought before a panel, u have to fight the case or lose. Original rule of positive
consensus turned now to negative consensus. A report can only be rejected, if everyone
agrees to reject. Dispute settlement function most imp one.
WTO like a club. U apply for membership and a long-drawn process. Firstly, a country
which wishes to become a member, and tell about yourself. Country sends a self-report.
Group appointed called accession committee. Enter into negotiation. We will give u
membership, if your tariffs are low enough. U are joining late but, u haven’t done trade
by trade rules. Go through protocol of accession. U will be bound by everything we
bound by but also some additional requirements. If u good enough, 10 years later u
become like us. This process contained inside the Marrakesh agreement: all this
organisational function.

ORGANISATIONAL STRUCTURE OF WTO:

Members in form of nations. Highest decision making body: ministerial conference.
Equivalent of SC. except SC small club. But this has representative of every country.
One vote per country. Except EU. WTO membership is a mix: sovereign states too and
customs unions too members. Let’s say EU a member of WTO. It’s a mix of country.
It’s a customs union. MC meets every two years. Reviews works over two years passes
a declaration. All authoritative decisions taken at this level. In the interim period, all
the functions of MC discharged by general council. One rep by every member of WTO.
At the level of trade diplomats. GC: meets once sort of every 2 months, also meets as a
dispute settlement body otherwise. Everybody sits together, hears it, and a committee
of experts appointed. Report accepted and it becomes final. GC: meets as the trade
policy review body. It is doing work at the level of lower level officials: different
committees on diff subjects to make new laws or enter into new negotiations.
Permanent secretariat overseeing everything.
Trade policy review: on a 5 year basis, every country gives a list of its internal trade
regulations and the body looks at it and gives review. General council: all members
present. India gives report. Everybody looks at it. People question it. India will give
explanation.
How are decisions made at WTO? Voting. Original GATT rule: consensus. WTO:
largely retains the idea of consensus. Certain things by consensus and certain things by
practice happen by consensus. Realised no. getting too big. Considered voting.
Marrakesh: a decision of accession can be made by 2/3rd agreement. Article 9 of the
WTO agreement. WTO in theory largely retains consensus rule. WTO has a DG. DG
thinks it’s his institutional responsibility that certain things happen like states
negotiating. And states not agreeing. Thinks lets divide on subject matter basis. “Green
room method of decision making”. Then brought out for a yes or no vote. This is what
happens in practice. The terms of practice actually drafted in a green room and members
only say yes or no. is this really a democratic organisation then? The way DG selected
people is problematic. Criticism: majority problem. Ruled by developed and more
developing countries.
WTO law: treaties/agreements. Agreement is what it is called. At top: Marrakesh
agreement. Major part of it about WTO itself. Organisational functional agreement
about WTO. Three important annexes within it.
- Annex 1: most important set of WTO laws. All in annex 1. Annex 1A: most
important, biggest source of WTO laws. At top: GATT, 1994. Set of new
provisions + set of authoritative interpretations (given by MC acting together)
+ all the provisions in GATT, 1947 and if we examine properly, maximum law
in GATT, 1947. Apart from that, tariff laws and NT questions. SPS agreement,
TBT, ASCM, AoA, AD, and two three other agreements. Annex 1B: GATS
(gen agreement on trade and service): one of the most imp agreements
concluded in Uruguay round. Deals with tariff and trade on goods. What about
trade on services? Like IT, medical services? TRIPS. Why trips imp? There
needs to be some IP protection for trade to flourish.
- Annex 2: understanding on dispute settlement: DSU. Set of procedural rules.
Will help us resolve annex 1 disputes. Dispute will be resolved by annex 2.
- Annex 3: trade policy review mechanism: every 5 years we will present to WTO
community.
Like a constitutional body.
WTO law not like international law. Not perceived like that. Better set of
procedures, better enforcement, all written down.
What does WTO have to do with PIL? Reading will be sent and we will have to
answer.
One group: WTO is a closed system. PIL is different from WTO. All sources
of WTO law contained within WTO agreement itself.
Other group: WTO is a part of international economic law which is itself a part
of the larger system of PIL. This view largely correct. Relationship between PIL
and WTO: DSU
Under DSU: appellate body and other body like trial court.

WTO cases always cited in short form. US-gambling: issue against US in

gambling.
Questions for tomorrow: relationship of WTO with PIL? What is the
precedential value of WTO judgments? Is there a hierarchy?
 Question: the US has a flourishing fishing industry. Eating seafood very
popular. A sea food eating culture. US has a fishing industry. Other countries
which have good coastlines too. Mexico one of them. So does Thailand etc. so
much of demand that they are exporting shrimp and crab. Imported ones are
cheaper. The US has certain moral regulations on fishing. Other countries ND.
Sometimes else, turtles get caught. It dies sometimes. Machine: turtle excluding
device. US market is going to be flooded with Mexican and Thai seafood. Lobby
formed. Schedule of concessions in WTO: list of agreements entered into parties
to reduce tariffs. US: let’s make a law, that in order to export shrimp into US, u
have to certify that this ship has been caught by turtle saving device. Then the
fishermen in Mexico and Thai realise, that the cost of our shrimps will also rise.
Drag US to WTO that they are violating their obligations.
Is the fact that WTO has no laws related to this and that US is a part of treaties
related? The WTO authority will ask that is this a source for us to rely on?
- The US shrimp industry, employs a turtle excluding device. The US puts a
regulation. Trade law: no country can protect its own industry. Axiom of trade
law. US passes a law that if u want to import u ensure that u have fished that
shrimp with that device. Thai and Malaysia: we can’t afford it. Drag US to
WTO. Look this is not WTO compliant. U are discriminating against foreign
suppliers.
- MALAYSIA AND THAI: trying to protect your industry, can’t discriminate.
- US: we have a set of legal obligations under other laws, no discrimination
because the same policy applies to domestic and foreign fishermen both. Basic
argument: this measure protected because it’s within our sovereign domain.
Conceptual framework of sovereignty: country: has the sovereign right to make
laws. If WTO says u can’t, unfairly impinging on the country’s sovereignty.
WTO law a set of exceptions: a country can still enforce exceptions, as long
as not discriminatory. This is largely the framework of WTO law. Ultimately,
a battle of sovereignty. Will always raise some questions in dispute settlement:
as to whom should the adjudicator believe?
09-08-2016
Annex 1C- TRIPS
Annex 2- dispute settlement understanding
Annex 3- trade policy review mechanism-
Annex 4- two existing plurilateral trade agreements. Only apply to a set of WTO
members. Every member has to accept. “Single undertaking”: all of WTO law
a single undertaking. At once u sign up for everything. The notion that a treaty
must be read as a whole: usually these are doctrinal devices used to make certain
interpretations. Single undertaking: u sign up at once, must be compliant with
all of it at once. All of the law applies at the same time.
Dispute settlement understanding: how do we deal with disputes generally?
# US shrimp
General council sits as a dispute settlement committee also. After appellate body
gives its judgment, comes back to GC.
In order for a GC to be rejected, every member of GC has to reject it
unanimously. DSB: entire general council. DSU: a treaty. Has set of rules.
Panel also there.
Prima facie vs detailed investigation:
 Prima facie: not a judicial body, WTO a collective of country: no surrender of
complete sovereignty: Margin of appreciation/ deference to sovereign states.
Too much precedent, so called law which will give rise to confusion.
WTO: negotiating function, adjudicatory function and trade policy review
function
Detailed: DSB: adjudicatory therefore should be detailed. Even though no
surrender of sovereignty, we have all signed up to a treaty, it will affect other
states also. States may put up a façade and we need to go past that.
China case: only country allowing rare earth excavation. Other countries had
stopped this. China: we will also reduce, we will restrict export it. Everybody
else: u don’t really want to protect environment, you would have stopped
domestic consumption also. U want factories to be set up in china which will
boost your economy. An objective standard of review required which cannot be
too subjective. Also precedents aren’t binding.
GATT 1994: skeletal treaty. Main text: incorporates provision of main GATT.
Article XXIII: nullification or impairment: 1(a), 1(b): parties can go even
without measures. Seems counter-intuitive. IMPACT. This provision: a party
may take another party to DSB provided the measure in q has the effect of either
nullifying or impairing. Original rule of tariff under GATT remained. Trade
law: every country has benefits.
If nullification or impairment: non-violation complaints: unique feature of
WTO settlements. No success on any non-violation complaints to best of sir’s
knowledge. (Look it up).
One of the criticisms of WTO settlement dispute system: largely only to
developed countries. WTO settlement body largely functional because of
independent adjudicators: say they are a fiercely independent body. The
commitment to objectivity that they take seriously. Has found US measures to
be WTO non-compliant. Third world critique: the method of adjudication
biased towards certain countries.
Third parties to dispute settlements? Will be discussed tomorrow. What is the
point of being a third party? They have the right to make submissions, can
participate, but decision not binding on them. Logic: ruling might have effect
on me. Why did I not join as a complainant but? Anticipation one reason.
Indirect reason. Political reason as to why they want to be third party. Want to
play a role in shaping the future of trade law. Also if u a complainant, costs of
litigation on u higher. Real evidence has to be presented by plaintiff. Cost-
benefit analysis done here. Why do third parties want be a part of it? It’s costly,
avoid cost and be part, get some practice at this job, and be a part of the
discourse on trade law. Two types of political reasons: dislike towards
defendants, like them enough to not stand up as a complainant.
Tom: how a panel composed, stages, timeline.
Case exercise: generalised system of preferences: one of the axioms of WTO
law, to give it some sort of legitimacy. S & DT. Bed rock principle of WTO:
don’t be discriminatory. Developing countries: can get a set of benefits from
developed countries in form of generalised system of preferences. In order to
qualify for a developed countries preference, the developing country must have
product patent pharmaceuticals. As long as product patent, tariff will be
Here country trying to impose its IPR regime?
From the PDF: one of the aspects of judicial decisions: to provide security and predictability.
without a neutral observer, law can be interpreted in various ways, in order for parties to know
exactly what law means, u need a 3rd party interpreter.
-standard of review should be subjective.
Question of precedence also:
Job of DSB: to clarify what existing provisions means.
"Cannot add to": sovereignty question. Members will be held accountable to the extent they
have ceded their sovereignty. To the extent u have signed up to the treaty: no further than that.
So that no slip against your sovereignty. How do u understand standard of review then?
Q. of jurisdiction of WTO DSB? : Compulsory: no state can unilaterally decide that other state
has violated an international law principle. You must come before the DSB. Also, no state can
say I am not going to appear. Unlike ICJ: where u have this option.
Exclusive: DSB sole power to adjudicate disputes out of WTO. Cannot drag it to any other
forum.
Contentious jurisdiction: DSB doesn’t have advisory jurisdiction. Authoritative interpretation
in WTO: possible to go to ministerial council which can take authoritative interpretations. Not
work of DSB but of MC (art 9, WTO agreement: the main top agreement)
Question: "measures”: certain measures subject to challenge before WTO bodies? US' action
in shrimp: a measure: violates provisions of WTO agreement or WTO trade agreement. Subject
to challenge. Measure: capable of giving rise to certain odd situations: US: India: min of
commerce may notify provisions which restrict entries of shrimps not by turtle devices. When
ministry notifies the regulation, it will become law. When the law is passed, u have to wait for
ministry notification. When a law is passed, can one country say this violates WTO law? Or
do they have to wait for ministry to pass notification?
Mandatory legislation v discretionary legislation. One point: discretionary legislation can itself
be challenged.
US Section 301: appellate body: we don’t have to wait for u to pass the legislation: art 3 DSU
28: predictability must be there. Otherwise all countries will be afraid to trade with u. u can be
dragged right here and right now.
The oil market of India under control of 3 companies they say: we will not export oil to
Pakistan. Pakistan: here not an enemy state. Acting against a provision of GATT: cannot
impose these kind of laws. Can India be dragged to DSB by Pakistan?
Law: cannot impose trade quotas. Quotas: naturally bad under GATT. Only legal under specific
set of circumstances.
ARISWA. Measures by private corporations: cannot be challenged under by WTO unless can
be shown that these measures are attributable to the State.
Article 8 of state responsibility.
Locus standi: what gives one country the right to approach the DSB and challenge another
country's measure?
Bilateral treaties: simple.
Multilateral: can have various situations arising out of them. Independent obligations owed to
each of the parties.
Situation 2: every country owes obligations to other countries at the same time: treaty contract:
accumulation of bilateral agreements.
WTO laws: treaty contracts.
Treaty contract: sue only if notional bilateral agreement between them violated. Actually
affecting that party. The rules of what affects u is fairly lose. Prospective effect on your trade
with the party: itself good enough. Possible effect on trade: good enough.
EC bananas: discriminatory method of export of bananas to European countries. Had some
justification. EC still doing something which a lot of WTO members thought wasn’t alright.
They are discriminating against some countries. Like Honduras, Ecuador filed a suit. US also
sued. Joined in as complainants. One of the things that EC said: u don’t even export bananas,
why are u fighting? WTO: US has a banana industry, in the future they may get affected. Good
enough for a country to have locus standi. Rules of locus standi: a little bit relaxed. But early
requirement that u at least show that you will be affected. If not, no point challenging.

Procedure: multiple complaints, koit (?) parties.

VIOLATION and NON-violation complaints: DSU on question of what triggers a WTO case
refers us back to GATT (part of WTO now) article 22 and 23.

10th August, 2016

WTO settlement dispute settlement process
1. Request for consultations: provisions: mutually agreed decision between the parties.
When one party has complaint against other, they ask for consultation. If they fail a.
period of time passes and no consensus and when they think going nowhere. A panel is
then established by DSB. The general council sits as the dispute settlement body. It
forms the panel. DSB has 165 members. Panel gives report then adopted by DSB.
Political body. Judicial body: panel. Panel usually a 3 member panel. Though a 5
member one might be there. After panel gives decision, within that period, either party
may say: we wish to appeal. Appellate body again hears the matter. Group of 7
adjudicators. Not reps of any country. It decides whether the appeal will be heard or
not. DSB doesn’t decide so. DSB a political body: works on an almost automatic basis.
DSB has to adopt appellate body’s decision as a matter of course. It can reject it only
thru a negative consensus. Then it becomes binding on the body. After judicial, the
political body: yes binding. Then parties get a reasonable period to comply with the
decision. They can otherwise request for compliance panel. DSU: dispute settlement
understanding. DSB: body with 165 members. One rep of each state. Panels: will
actually hear arguments. Ad hoc composed.

12-08-2016
What is multi-lateralised? Trade-concession. It will apply to everyone. That is called multi-
lateralising something. Bedrock of trade. MFN. Everything is multi-lateral. “Public forum
2012: is multilateralism in crisis? Way to look at WTO videos: YouTube channel.
Multilateralism in crisis. With the increasing size of WTO, what happens is that negotiations
have become more and more diff. two countries had bilateral tariff agreements. Now customs
duties on manufactured duties very low. Not willing to negotiate. Diff types of interests which
want diff things to happen. From tariff controls, we have focused WTO law on other things
which don’t focus on tariff. TRIPS agreement: weakest of WTO. We need more IP law
becoming part of trade law. We will compel all countries to reach a uniform IP regime.
Developing countries: import agricultural goods. Developed countries: want their farmers to
be successful, be prosperous, because the sector is largely big. Why would govt. of US want to
protect its farmer’s community because of votes? Farmer will be able to export from
developing countries. Want greater discipline by developed countries. Developed countries
look at big developing countries like India and say even u protect agriculture sector quite a bit.
As a part of trade regime, u need a uniform set of labour standards. Why would the EU say
everyone must have labour standards? What have labour standards got to do with trades? They
affect the cost of production. If lower wage, lower cost of production. One way of looking at
it: they are applying a good moral standard for the whole world. Ask to raise labour standards.
Ask to raise environment standards too. Negotiations come to a standstill. We have achieved
records low in terms of tariffs. We can’t agree on what to negotiate. The only thing working at
the WTO: dispute settlement system. Why does this multi-lateralism at crisis? “Worth saving,
but domestic political interests a problem”. What has happened is countries saying we not
getting anywhere here, ultimately the WTO only a treaty we bound by, but nothing in the WTO
which says we must trade with everybody. Let’s form regional trade agreements. The trick
about them is: GATT contains an exception for them. It says that u must apply MFN tariff to
everybody. But if RTA there, and tariff 0, only those parties can trade at a. say EU. Internally:
0 tariffs. No tariffs at borders. Now, u would say that by MFN standards: everything entering
France must have 0 tariff. GATT but: they can trade on their preferential standard of tariffs.
Trans specific partnership: US trading with its pacific neighbours (east Asian countries apart
from China and Australia): we will form a TPP, it will just be like WTO and more. We will
have labour standards, all sorts of protection. WTO+ protections it will be. We will trade
according to it. Everyone: they will now trade more amongst themselves now because of 0
tariffs between themselves. Trade will be diverted from this system, will go into this regional
system. T-TIP. Does this regional trade agreement cause trade diversion? Or does it cause boost
in trade? Trade diversion hypothesis v trade creation hypothesis. Spaghetti bowl crisis. When
WTO asks question is MLS in crisis, it means that is it diverging from the WTO? Asian plan
for a trade agreement coming up if it happens. Very early stages of negotiation.
BRICS doesn’t have a FTA. Counter-force as to what Europeans want to say. Is there a real
benefit of multilateral? Should we be scared in international trade system? News these days it
is. What should be done to protect multi-laterislism.
Third way of thinking of all this: unilateralism. Bad one like Donal Trump: we will become
protectionists. America first is his policy. One sort of unilateralism. Unilateralism of tariffs: u
can import into me for teach. Evidence of how it is an idea that caught up.

Brit constitution: there is a brit parliament. Right to vote people into it, and the ability to
understand what the government is going to be that is of PM requires that u must be a free
holder of land. U are then entitled to vote. Land qualifications. Who were they? Peerage ranks.
Feudal land holding system. Farmers grow and pay revenue to free holder. Free holder: owner
of farm. Huge estates. Entitled to vote these people. Brit govt.: rep of these land holders. Brit
introduced called Corn Laws. A corn producing country. This suggests: very high tariffs on
corn. 1832: brit reform act: more people will now have rights to vote provided they have free
hold lands of maybe 40 shillings. Industrial revolution: creates another class of rich people in
brit. A new rich class: bourgeoisie. Hold industrial capital. Can help factories run. Opposed to
interest in to the earlier feudal lords. Bs producing things. These guys say if brit reduces its
tariff on corn, then others will be able to trade on it. It will harm landlords. We don’t care. We
can ask other countries to reduce tariffs on manufactured goods, burge. starts fighting
landlords. Formed anti-corn law league. First example of a political group. Want these Corn
Laws to be repealed. Want Britain to go into free trade. Conservatives in power: reform has
still not voted them out. The Corn Law league starts playing this new league. They start
purchasing new free hold land, to create new voter base. By the time the new elections will
come, they think the conservatives will be voted out. PM: Richard Peel. By 1846: PM
introduces a bill: a reform for repeal of Corn Laws. Brit changes to a free trading country in 3
years. Why did unilaterally Britain repeal its corn law? Is it possible for left wing people to
lobby Modi government against its right wing agenda? It’s very tough. Then how industrial B
class apply pressure on the landlords? Explanation: conservatives vote in favour of repeal of
Corn Laws. They go away. Who becomes quiet? The anti-corn law league. The moment they
realise this goal has been met, will they continue their activism? No. who will become majority
voter in the next election? The landlords. The anti-corn law league trying to trade, doing it.
Voter base remains unchanged. Landed nature of brit constitution saved by betraying the
landed class. If u want to remain rep of landlords, make sure u shut the Corn Law league up:
Peel. This is the remarkable example of political concession made on trade front. Brit saves its
aristocratic nature by giving into the B. Marx: B will lead the first protest against aristocrats.
Then workers will take over from B. Britain put on the halt on the B democratic revolution
then and there. B: owner of industrial capital. Highest level of oppression: landlords. Owners
of vast tracks of land. Communist revolution never came. Strange halt. Interesting: leader of
anti-corn law league. Pt of story: trade historically played an impeccable role in shaping
politics.

17-08-2016
Last time: how to read tariff schedule. Studied that under GATT law, substantive provisions:
GATT 1947. Incorporated in GATT 1994 by reference. Roman numeral: GATT 1947. Arabic
numeral: 1994. No substantive law in 1994 GATT. Art 1: if one country applying tariff to 1
country, then to all. Art 2 in detail. Elements of it: 2 provisions: 2(1) (a): all contracting parties
a set of agreements we have agreed on: schedule of concessions. Product described by name
and code. The charge that will be on the product given. Party: my bound tariff on apples: 10%.
Law: cannot charge more than 10%. Treatment: no less favourable than what u have promised.
2nd point: customs duty charged cannot be in excess of 10%. Apart from customs duty, another
column for other duties and charges: otherwise can’t charge anything more.
Diff between customs duty and other charges: similar: applied for importation. No other
justification. Customs: when in nature of customs tariff. Others: terminal user free, product has
to be examined so exam fee. If u are charging something more than import: other duties and
charges. Art 2: GATT: how much can be charged? 1994: understanding. Irrespective of GATT,
to levy an ODC: it must be part of schedule. Must be transparent.
ODC: solely on the fact of importation. Charged on fact of importation, but not custom. In
nature of tariff. Applied at border. Defining impact: not linked to anything else but fact of
importation. ODC: maybe in nature of fee for services rendered, then will take defence of
article II:2. ODCs: illegal unless in SoC. If not, but fee, and are proportional, then protected
under Article II:2 which says that irrespective of above, which is nonetheless an ODC, then
that is protected. Don’t have to mention in SoC.
How are goods classified? Classified in country’s tariff schedule by reference to another
classification: harmonised system of coding and classification of goods. Products coded 6 digit
method. What do these digits denote? Laptop screens and laptops: same code. Parties free to
adopt a further two digits.
Read art 1 and 2 carefully.
Art 1 & 2: GATT. Example: India’s schedule of concession.
Product ---- BOUND DUTY-----BASE DUTY-----ODC ALREADY DECLARED---INR
9521050-----10%-----------------15%--------------Nil---------------------------------- zilch
Orange citrus
India: 12% - EU
9%- Pak
6% - Bangladesh
GATT art I- MFN clause violated
Bound themselves to a duty of 10%, but are charging 10%. Violation of article II. Cant charge
more than what is your binding duty in the schedule of concessions. – EU will say
Violation of only article 1. Not 2. – Pakistan. Not charging more than what they have bound
themselves to.
Bangladesh- article 2 violation. Can’t charge more duty ODC than promised.
If India now wants to change what it has bound to: initial negotiating right, principle supplying
interests: look it up.
A 6 digit code: first two: chap, then heading, then subheading. Big problem: citrus fruits. There
might be a fight. 951210, and 95310- citrus and fleshy fruits respectively. Fleshy fruits- 12%
bound.
TYPES OF CUSTOMS DUTY: ad valorem duties, non ad valorem duties.
EC Chicken Cuts:
Facts and two competing provisions. Remember: harmonised system: 6 digit. A country may
say for everything falling within a chap, I bind my duty at 10%. Everything between 2 nd and
3rd digit: 6%. Counties freedom to choose level of classification at which it wants to be bound.
A country can say: for certain goods, I am free to charge. So won’t be in the schedule. GATT
fine with it as long as non D and transparent.
Two different headings: two diff goods. One bound tariff, one unbound. Advantage if in bound
tariff. Thailand has taken fresh meat and put salt and sent it to Europe. Thai: I should get
advantage. Europe: not meaning of salted meat in other digits: it means salted for purpose of
preservation. Appellate body: interprets the words. Salted meat: plain meaning: meat which
has salt. So that’s the meaning. All of this valid methods of classification under article 31.
Taken in context, plain meaning shouldn’t be constrained. U cant read words into the provision.
Interpretive fights: can go either way, judges decide what they want to.
Other problem: EC land case: local area network case: 3 provisions:
8471: automatic data processing machines
8473: accessories of data processing machines
8451: electrical apparatus for line telephony or line telegraphy.
If 8473: max advantage. Lowest duty of 2%.
US sending land cables and land adaptors. To Europe. E: they are electrical apparatus. US: no,
this is components of a data processing machines, components of computers. This is our correct
tariff classification. We want 71 or 73. Certainly not 8451.
Arguments: “automatic data processing machines”. 73: accessories of data processing
machines, 51: line telephony. Late 90s case: after WTO come into being. Will help get us
context, the year.
US: can be under parts and accessories. Because 71 using all the terms which is indicating to
the terms being exported to US.
One way of looking at that: read the words. “Automatic data machine”: computers. Land:
accessory of computer. So by plain word we can come to this meaning.
Computers might not use land, but ultimately land wire a communication of it. These words
can be interpreted better to capture idea of cable.
Harmonised system: independent collection of code of goods which adapted by every country
in its schedule. Interpretive guidance to harmonised system is there. WTO: in order to interpret
one schedule, look at HS. Must look at interpretation of HS in the way HS says u must interpret:
goods must be classified under the most specific entry, rather than general; in case of conflict
must conflict in the lowest category possible: what comes later than what comes earlier should
be referred; if no solution still, then apply to test of good its closest to.
Keep specifity test in mind: 73: not described elsewhere: on EU’s side. Fine maybe an
accessory, but also described elsewhere.
Does interpretation have to pay attention to what importing country is doing to products?
This case went before panel. The panel decision on drobox. Unique moves: this dispute
between us. Can be described as an accessory of data machine, can also be instrument. Falls
under two places: but not clearly under any. None of the entries in HS and EU: uses the word
“land”. Has to be member’s schedule. Panel: this is diff. how do we resolve? 1 way: look at the
legitimate expectation of supplying state: in the past, some practice in some of the member
countries in EU to treat these products like products of automatic data machine. Use LE to
resolve crisis. VCLT: plain meaning in context read with object and purpose. If that doesn’t
help, art 32 of VCLT. EU: how did u come to this principle? Is this a part of WTO law? Panel:
not that diff. what is the purpose of WTO law? To ensure predictability in tariff dealings. So I
am using object and purpose part of art 31. Just because u cannot charge a higher tariff, against
the purpose. US argument we agree.
AB: only hears a q of law. Is LE a good way of interpretation? No. not there anywhere in WTO
law. If LE can be used of supplier, cant LE of importer be used? AB: not true, minds have to
meet in treaties. Cannot discern intention with one parties LE. Having said that, AB didn’t tell
us where it should go. This process of interpretation wrong. EU: didn’t press for a final answer.
Q of law still appealed. Torture the words till u come to answer. Can’t use LE. If u had used
LE in chicken cuts, would have come to answer much easily.
“Constructive ambiguity” two parties come to table, write a provision in which but think they
have won. U draft in a sufficiently ambiguous language so both parties think they can win. Is
it fair then that Europe didn’t get to exert its views? US could have used the same answer.
These clashes brought together. U give it to arbitrator who is presumably neutral.
Torturing of words: important part of WTO law. When preparing tests, read chapter on
interpretation in VCLT books.
ODC: art 2 para 1 (b): that y cannot charge more customs duty than what u have promised.
Also not more ODC. A lot of extra stuff. U cannot charge more customs and ODC than u
promised and declared in schedule. Most ODC nil. ODC: must have disappeared from real
world. Not true. If u import goods into India, u will pay terminal user free, in plants and foods:
exam fee. Research and analysis fee in new goods. How are these there if u declared ODC to
be nil? To protect some of the charges not declared, art II (2): three kinds of charges that can
be charged at border other than customs:
From the bottom: last one: fees commensurate to any services rendered. If the border
authorities giving u a service, for ex weighting your goods for u, helping u in any way lie
transporting goods: the fact that they are providing u these services, they can charge a fee
provided its commensurate to the service rendered.
(b): counter-veiling duties and anti-dumping duties: some goods subject to these.
(a): a charge equal to internal tax on a like product: when a pen made in India, going out of
factory: is it subject to any tax? Excise (will go away after GST). It’s a tax that it payable solely
by virtue of manufacture. Suppose in US no excise duty. If factors of production same in both
countries, pens in US cheaper. At the border: u charge with customs duty and this internal rate
of excise (like products wala example).
Marker pen-ball pen-sketch pen. Like products: really important.
Old case related to like products. GATT panel under old GATT before WTO. But adopted by
WTO as a precedent.
Spain unroasted coffee case:
Let us say: this case being decided in present day. So HS system there. At 09.01, HS says:
chapt and heading level: we are saying coffee beans, crushed coffee powder, so and so forth.
A lot of coffee based products at this code. If we were to add 6 digit to it, 09.01.10-> coffee
beans unroasted for example. 09.01.02: roasted. 03: coffee powder instant for example.
For unroasted coffee beans at 6 digit level, Spain bound its tariff to 10%. For unroasted coffee
beans, Spain will not charge more than 10%. A lot of countries importing coffee. Spain decided
to charge not a lot on coffee beans, in their interests to keep customs barrier low, so people can
drink as it doesn’t have coffee.
One day: I’m free to adopt an 8 digit classification. Spain makes these classifications:
09.01.10.01: Columbia Mild. D: 0%
09.02.10.02: other mild. : 0%
09.01.10.03: Arabica: 7%
09.01.10.04: Robusta 7%

Brazil: u have violated article 1 (MFN) and 2 (you can’t charge more than bound rate). Of
GATT. Brazil largest exporter of coffee.
Discrimination because coffee should be considered as a like product.
Is Spain in violation of art 2? One can’t charge more than what it’s promised. 10% duty at 6
digit level. It’s not doing so. No art 2 violation per se. Brazil would argue nonetheless.
Spain: HS permits me to sub-classify. After 6 I can make up 8 digit. Panel: yes u are right.
Presumtply: no violation of art 2. Brazil: what about art 1? U promised equal treatment of all
like products, u drawing artificial distinction. Spain: as long as goods classified under different
tariff headings.
Now fight: Spain: I have a right for 8 digit. Brazil: still can’t discriminate between like
products.
Can two products be like if they are classified differently for tariffs? Even one in diff 6 digit
tariff headings.
Rule: goods even though under diff tariff headings, can still be like products. Merely because
goods classified under diff tariff headings, doesn’t mean they can’t be like products. Even
though factor of diff class relevant, it’s not dispositive. Is Columbia mild diff from other mild?
Is Arabica and Robusta “like” mild coffees?
The working test: consumer substitubility. In case of Spain: whether mild coffee same as
robust?
Our case: whether Arabica same as filter coffee?
Other factors: price,
Are they substitutable? If all are there in sir’s house? For him they are substitutable. But not
every person has the feasibility to afford it. U shouldn’t be blinded by consumption pattern of
classes which are rich, but these suppliers may want to argue that I know it’s a morally good
point, but who is this consumer? What does it look like? How do u survey the market, whom
do u survey? Taste of regular consumers or sometimes who drink it?
For food products, we must pay some attention to the taste. On the substitutability question:
taste perhaps not a factor. For coffee: taste a factor.
Panel: held all the same. Even if they may vary, coffee is ultimately coffee. People who drink
it will drink any of it. Didn’t show much research to support its conclusion. Parties went with
it. Even if two things classify differently, but if they are like products, have to be charged same.
What about coffee and tea? In eco they are substitutes. Test here is but likeness. Substitution
only a factor of likeness. Juris of likeness next week.
23rd August, 2016
Test next week: whatever covered till Wednesday. Covered the idea of tariffs, how countries
bound by their schedule of concessions, any border charges, when products imported- like
products should be treated in a like manner, apart from tariffs(countries are encouraged to offer
protection to their domestic countries)- transparency to it that not there to non-tariff barriers.
The most obvious non-tariff restrictions- quantitative restrictions. India imports wheat from
US. Give quota. What is quota? Laws on non-tariff barriers start with quantitative barriers.
Unsophisticated.
Article 11, GATT: general prohibition on quantitative restrictions: under WTO law all of them
are restricted. Do not do so by imposing quotas or other forms of quantitative restrictions.
Several contours. What is the meaning of quantitative restriction?
If the prohibition in forms of duties, etc.: not quantitative. Non-fiscal measures. We start with
the presumption that all of this is bad. There shall not be import of wheat India- bad.
If u are familiar with the import-export mechanism of India- you need several number of
export-import licenses. Is Indian law automatically bad under art XI of GATT? EXIM license
needed if u want to import something for commercial use in India. Is it automatically bad? The
fact that u have to apply for license etc. automatically a form of restriction. Constitutionality-
reasonable restriction. Appropriate answer: the nature of license fairly crucial here. Early years
of GATT: doctrine: as long as licenses are automatic, they are not restrictive in the sense that
article XI says. A license which is discretionary is a quantitative restriction. If element of
subjectively then quantitative restriction. If we can understand how license can be quantitative
restriction: the effect of the regulation must be of the nature of a quantitative restriction: the
regulation must have restrictive effect on trade volume for it to be considered a quantitative
restriction.
Dumping- work of private actors within a particular country. Dumping prevented with help of
a duty called anti-dumping duty. Completely out of purview of article 11. It’s a tariff.
Restriction must be anything but a fiscal measure. If it’s a fiscal measure, it’s a quantitative
measure.
In India quantitative: facts: 3 sort of measures:
1. India has notified a set of goods- it calls restrictive items
To import them, u need EXIM license granted on merit basis in a discretionary manner.
2. Actual user requirement- u will actually use it do a certain amount of export import.
3. Canalising imports- to put into a canal- a fixed path- certain imports cannot happen
unless they go thru state-trading agency. Can’t import thru private parties.
Do all these qualify as quantitative restrictions under article XI (para 1)?
Panel: they do qualify as quantitative restriction. Panel: India doesn’t dispute these. Goes on to
do an analysis- what a QR. They have incredible urge to spell out law every time they decide.
Panels very circumspect. The law on quantitative restriction in 10 paras- starting point on laws
on QR. Clear effect in terms of restricting trade. Precedent to suggest- any import licensing
method that is not automatic is quantitative. Actual user requirement- no. of people who may
hold EXIM license limited. Amount of imports- limited. Therefore, QR. Last one- India could
have argued canalising not a QR. U have to direct thru a particular canal.
If there is a lot of water flowing thru a wide mouth tube. At least over time quantitative
restriction. That acts as a QR. An appropriate demo of how trade works? Questionable analysis.
Panel: if there is some sort of bottle neck created at the border- QR. Is that necessarily true?
Panel reports very rarely precedent. Subsequent panels can always dispute.
India marshalled an exception to... Balance of payments. A country may invoke a bop deficit
to impose restrictions- that if I don’t, my bop will go out of hand. Whether bop exception
notified or not? – Real dispute.
This case not contested on QR. It’s an excellent summary of law.
First case: India autos. To save themselves from tariffs, they break down the parts and then re-
assemble it in India.
Government –not done. India’s min of commerce- it issues a public notice. All importers will
now have to sign a MoU and this MoU will be a formal contract. Key clause- trade balancing
requirement. If u import auto parts into India and then u whatever value u add to it, u have to
balance by export.
Import quantitative restriction. Looking at import QR. Complaint: article 11, para 1 prohibits
import in terms of quantity. Clause- as long as u import, u must merely export the same
quantity. Does this MoU at any place say that u cannot import? No. it’s not a ban. Does it say
that u cannot import more than X? no. then why is it bad? Art 11 sub para not dealing with
additional burdens. Measure must have the effect of restricting. The measure must be making
effective a prohibition or restriction. The measure here: in order to import, u must export. Does
this measure make effective a prohibition or restriction? Q: is the measure in q, making
effective a prohibition or restriction? “Making effective”: important. 2 observations of
Siddant: no restriction on the face of it, but does it still have the effect of a restriction? Some
sort of curtailing of the importer’s freedom of choice. But restriction must be in terms of
quantity: the quantity gets restricted somehow. The measure must actually import a quota-
should look like a quota in effect.
A measure must either directly impose a restriction but a measure that has the effect of
restriction equally bad under art 11. De facto quantitative restriction- it in fact imposes a
restriction in quantity. The measure requires that u export in the same amount u export. More
u import, more u export. Understanding how much export they can make. They would censor
the amounts of profit they are making. This is all conjectural. It is not a QR because there is a
requirement attached to imports automatically- show the requirement attached is restricting.
Establish that the restriction attached to import- has the effect of quantitavely restricting the
import- because the importer will reduce because she wouldn’t then have to export as much.
This has an effect on quantity that is being imported. Flaw in reasoning: guessing what
importer/exporter behaviour is. Do panels look at such measures and conjecturally come to an
answer?
The question on DFQR is that whether a measure DFQR or not, depends on how the panel
approaches it. One- conjecturally doing it. Other- we need to see some evidence to see whether
or not QR effect or not. Gap in WTO law. Both these approaches seen in cases, don’t know
which one to apply in which case. Need to come up with a doctrine.
Argentina-Hides: QR is in nature of export QR not import. China-rare earth case-
restriction on the amount of rare earth to be exported from China. Is it an environment measure?
Example of export QR.
Argentinian leather- hides- v popular in world. Rely on hides being exported from Argentina.
Not enough production of hides in developed countries- tanneries pe restriction. Leather goods
producers rely on other exporting countries. Latin American countries lead in these exports.
Major producer- Argentina. Sell domestically and overseas. 1972- Argentina an export ban on
bovine hides. 1979- Export tax. Ban a tax now (fiscal measure, so article 11 nothing to do with
this).
93- Inspected by customs’ authority before exporting. Notify domestic industry. Rep of
domestic allowed to accompany customs.
Whether a case can be made under article 11 sub para 1? Someone
Hides useful to people in Argentina and outside. If a lot exported, less hides in Argentina.
Argentina initially tries to prevent export all together. Customs procedure- at time of export,
the government official examines the shipment, at time of exam- domestic rep- comes and
looks. They will certify and it will go. The rep has nothing to do with it. Official has no power
to prevent export. Is it a QR?
Delays have an export restricting effect. ADICMA- not government reps.
Panel: examine whether the measure has a QR effect or not? De facto there. But is the
restriction visible? Examine that. Approach no. 1.
Next case: Colombia Ports of Entry: facts: Colombia considers textiles, etc. to be imp
industries. Competition from Panamanian counterparts. Colombia: any imports of panama,
must enter at two ports of entry. Colombia: strengthen and improve its custom controls. 24
other ports closer. Panama: violating art 11.
Colombia: import as much as u can, but must be directed thru these 2 only. Is QR or not? Will
depend on the infrastructure of the two ports. The ease of export through these ports.
Transportation costs to these other are lesser. But can be counter-veiled by saying that others
infrastructure more developed- there will be a rising cost.
Not a blatant restriction. Accuracy not obvious. Not obvious that this line of argument will lead
us to the same argument. Question: how do u answer this q? What we figure that an absolute
accurate answer will depend on a lot of data analysis. At the first stage: may have a QR effect.
But not obvious.
How would u argue this case that Colombia brings two bits of evidence: export not reduced,
the two ports not used up to full capacity, then why u do need?
A country may at times impose QRs but have to be temporary. Art 11(2) (c).
Two agreements: TBT and sanitary. b- General principle. Explicated with these two detailed
agreements.
Para c- opium. U cannot produce more than X amount of opium, it is alright for government to
impose. An equivalent QR must be imposed. Additional set of requirement: article 13 of
general agreement. Even if u can justify QR, u must apply QR in a non-discriminatory and
lawful manner and non-arbitrary. There are certain specifics to this. Article 13: imposes an
obligation of being non-arbitrary.
Colombia ports of entry: first real answer panama: these numbers are short term numbers. The
quantities will fall if u look at these numbers. Fact: consistent that it’s a downfall. Second:
under-utilised because we have stopped exporting. Methods of argument: if panama wins this
case, by marshalling evidence that no drop in quantity, you can’t get away. Argentina: approach
exactly opposite. Because drop in amount of exports, this measure can be connected to QR.
Actual effect in Argentina. Ignore the ones in Colombia. Is the conjectural approach better?
Can u somehow extract a harmonising principle? Homework.
24th August, 2016
Not thru agency of a duty or tax
Article XIII: when a QR applied, that application must itself be valid under article 11 para 2.
In doing so u must at least comply with provisions of art 13. It must preferably in the form of
a quota (2) (a).
When applying a QR: must be similar across all countries. As long as QR, like products of all
countries must be similarly restricted. Definition of “like” products important. Make sure there
are similar restrictions whether on import or export on like products to and from all countries.
Provided that u match this requirement, even then u have to follow this rule: where preferable
allocate quotas, if not EXIM licenses. Preferred protection: always most transparent. Tariffs
more transparent than quotas, but Qs more transparent than EXIMs. Quotas, if not Qs- licenses.
When applying quotas: u must allocate the quotas so that the ratio of... Suppose country a in.
natural comparative advantage between the countries shouldn’t be changed. Quotas may be
used to reduce the amount, but can’t be used to change the proportion. Looking at average of
the last 3 years, and create an average of the ratios. Allocate quotas maintaining the ratio that
existed in the preceding year. After the quotas done, the net import to domestic production
must not vary. The aim throughout: u only impose a quota in the most transparent way possible.
Whenever a q, find out what the measure is. What is it that country that has been complained
against doing. Statutory measure or a policy decision? “Nobody can import chicken in India
unless bird flu free” for example. Any order of government, voluntary practice, and statutory
requirement- can restrict trade in some senses. India autos- sign a measure with government
that allows u to export as much as u import.
Argentina hides- customs would allow a rep of domestic country.
After identifying it, make a diff whether it’s a fiscal measure or non-fiscal. If non-fiscal- art
11, TBT, SPS. If fiscal- article 2 of the GATT. Apart from that look at article 1 and 3- broad
non-D of GATT. Various other provisions of the GATT. Test along these the compliance of
the measure. If answer no, then that’s it. Matter finished. End of the case. If answer yes,
invariably the party complained against will give u an exception. They are everywhere in WTO
law. Find whether a violation or not. Be sure of the steps. Cannot come to exception, unless u
made an analysis of other things in GATT.
Exception- where to look for it? Across the WTO they are spread- like tbt, sps, anti-dumping
agreements all have exceptions. Then there are general exceptions. To which provision does
which exception apply?
1. Where to look? To what violations do they apply? How to do the analysis?
US SHRIMP: if your waters has of the sea turtles, then your internal regulation must not be
such that harms turtles. We will only allow those people to import into US where the same
regulation has been put into place that the US has. – CRUCIAL POINT. Foreign regulation
must be domestic regulation.
Give certificate. US department of trade mandated by US law to certify that these foreign
countries are ones where regulations are the same as US’. If the country doesn’t have a
certification, then the importer can’t import in the US. 2 types of certificates: these countries
has regulations same as US regulations or that their shrimp caught in water where there is no
danger to turtles. Crucial: US department of trade must certify on a country’s basis. Even if
one fisherman in Malaysia following the rules. Article 11 restriction there. QR there. Quantity
being restricted by this measure. Non-discrimination obligation bias also. Will come in later.
US Shrimp case:
A set of measures. Is exhaustible natural resource same as endangered species? Two broad
arguments: not an exhaustible natural resource and the other set: no fauna and flora also a
resource.
Panel: read the chapeau first. Exception begins at nothing in the GATT. Article 20 two part
test:
1. See whether the measure fits into the exception at all? Check whether the measure is
okay or not?
2. Then check if okay under chapeau?
Follow steps pedantically. Start with “nothing in the GATT will undertake”…check if
legitimate objective? Is the measure related to it? Then u go to the chapeau. Para 113-123. The
AB explains: that there is a necessity that all follow the 2 part test as followed in US-Gasoline.
Take the chapeau as a proviso.
125 onwards: q1. Whether this exception applies? Is it related to conservation of an exhaustible
natural resources? First find out: what is exhaustible? Complainants: minerals, ores, fuels etc.:
are exhaustible natural resources. What was the intention of the framers? No way will that by
the ordinary meaning of the term exhaustible natural resource you be able to say turtle a natural
resource. AB can’t get to it by reading it simply.
For midterm: read class notes+ links+ cases.
Test: everything up until article 20
Non-discrimination corner stone of WTO law.

Article 3: national treatment standard of WTO law.

National treatment we will start with.
Why are MFN and national treatment so important? Once goods cross customs barrier, u treat
them in the same way that u treat domestic goods. Why is it so important but? A level playing
field between exporters and domestic producers.
If restrictions once u get inside, that’s a problem. Only barrier to trade: tariffs.
Principle on which trade system based: liberalising. Comparative advantage principle. This can
be maintained if state doesn’t interfere to disrupt CA principle. Whatever that u promised in
terms of signing up to the liberal trade system can be completely undermined if after u let goods
in, they are discriminated against. In order for trade system to run even closely on principle of
comparative advantage, make sure that goods once they get inside border, aren’t discriminated
against.
Without non-discrimination, this entire system would crumble completely. That would open
the door to a form of arbitrariness that the system won’t be able to take. All sorts of problems
can arise like conflicts for example. Power conflicts will arise.
Article III: principle of national treatment. Only paras that we need to know: III 1, 2 and 4.
These are the three paras that we will see being discussed a lot in WTO law.
Ad note: adopted during the course of the GATT years, these have been adopted as a part of
GATT itself. If the ad note says something about a certain article (whenever u see a star * then
u go down and check the relevant ad note. Its as much a part of article as any other part). These
form the actual body.
Ad note to article III para 2: we will be discussing today.
What does article III para 1 say? Principle that taxes or internal regulations should not be
applied so as to afford protection. Which means that taxes and internal regulations(that apply
after goods have come in. NON BORDER) shouldn’t be applied to protect domestic industry.
Broad principle: lays down a general principle that can be hardly broken down into legal
content. Principle exaunting the members to act in a particular way. A state must not act in a
manner so as to protect its domestic industry. These things apply after the goods have crossed
the custom lines. Once custom duty paid, once the goods have crossed the customs line,
after that event happens, internal laws must not apply in a manner to protect the domestic
industry. Once car has paid tariffs, cannot then apply ur laws in manner to protect ur industry.
Corner stone principle here. It’s a standard that is not a formal standard of treating domestic
and foreign goods equally, it says that whatever u do don’t act in a way to protect domestic
industry. Main battle against protectionism. Not insisting on equality for some sake of equality
being a good thing. If there is no equality, economic repercussion of protectionism. Article III,
para 1: lays down a general principle of national treatment. U must alleging a violation of some
other para. Can’t allege violation of article iii para 1 itself. No legal tests contained in it to help
us determine whether breach or not.
Internal taxes and charges on one hand and then laws, regulations and requirements affecting
the internal trade distribution. The word affecting linked to all the words. Read the first set of
words as indicating measures and the latter ones are the outcomes.
Fiscal non border that is internal measures and non-fiscal non border measures shouldn’t be
applied in a manner to afford protectionism.
Article III para 1: catch all provision. The word internal taxes and charges: what are they? Inter-
state transport tax? Is it one? What are set of measurers which qualify as internal taxes? One
set can be ones required to pay for transport. What are the other ones? VAT. Excise other: tax
payable on manufacture. Central sales tax. Internal tax and charges may include: sales tax,
VAT, Transport charges, even an environmental surcharge.
Any amount which is in nature of tax or charge that is payable by virtue of an internal event,
not event of importation (customs duty), is an internal tax or internal charge. What are the
possible internal events once goods enter the country? What can happen to a product?
Some sort of extra addition work can be done with it, excise in those cases. Transport can
happen. Distribution can happen. Sales also most importantly. Money payable on these
events: internal tax and charge. Any other rule not in their nature, but a rule applicable
because of these events: law, regulation and requirement: non-fiscal. If law requires
anything apart from money to be done: law and regulation and requirement. Example: some
sort of stamping required: like quality check, some certification procedure, a regulation (like
cannot sell cigarettes to kids under 18), laws that ban particular products, quantitative
restriction (import ban): can be justified under article 20: all internal laws and regulations.
Connect both of these to the remaining words: sale, distribution, transportation and use. These
measures can’t be applied to favour domestic industry. Imported goods subject to 10% and
domestic goods 5%. Clearly illegal under article III.
What about non-fiscal ones?
#US shrimp not a case under this as it is preventing an import of good. It’s a border measure.
A law that prevents so, is a violation under Article XI. Article III applies to where we have
already imported the goods.
Example: cig imported to have 90% prevention rule of cancer, whereas same doesn’t apply to
domestic ones. Illegal.
Make a diff between tax and charge. Is the measure an internal measure or border measure?
Differentiate.
Rule: in case of taxes, the money might be collected at the border, but that doesn’t
necessarily make it a customs duty.- can be an internal fiscal measure. Since its cause is an
internal event. Cause of the charge that tells us whether its an internal charge or customs duty.
If cause of charge internal event: internal charge.
Examples:
1. If goods like luxury cars imported, and at the border they have to pay 50% tariffs +
35% of the selling price of the car: further amount. With a condition that if this car is
not sold into India, and is re-exported then this entire 35% will be refunded to the
importing company. You won’t have to pay sales tax. Is this 35% an internal charge or
 customs duty? It is basically what sales tax would have been charged on it, but its
collected on the border. If u were to sell this, u wouldn’t have to pay any further
tax. Clearly this amount is linked to the internal event of selling. This is clearly an
internal tax. If measure linked to sale: internal. If distribution: internal tax,
transportation: internal. Irrespective of when it is collected.
Colombia case: only could import through the 2 ports only. Suppose, goods brought in
through another port (smuggled in through this). Also, stamps given on the 2 ports.
Goods sold in the local market thru the smuggled one. If seen that it desnt carry a stamp,
a financial penalty of 50%levied. How would u classify this measure? Is this internal
tax, an internal non-fiscal measure, is this customs duty, is this a non-fiscal measure of
border which relates to article XI?

Internal fiscal measure: article III

Internal non-fiscal measure: Article III
Border fiscal measure (customs): article II (compliance for border fiscal measure)
Border non-fiscal measure: Non fiscal measure that affects the import of a good. Check
article XI.
Throw a measure into any of these boxes.
This Colombian government rule, that if u manage to import thru a port which isn’t one
of the 2, u shall be subjected to 50% tax on sale price, where will u classify this sale
measure?
This could be a mix of border fiscal measure (part of it like a custom duty) but another
part: to allow sale of good inside country. To the extent that it is validating import:
border and why it’s called internal non-fiscal measure?
If fine levied to enforce internal regulation: still non-fiscal measure if money paid. Fine:
amount paid for breaking the law. The fine, therefore, can be a non-fiscal measure.
A penalty being levied for not carrying a stamp (internal non-fiscal measure) but
smuggling fines: border fiscal measure.
FISCAL MEASURES: taxes, VAT, transport taxes etc. the relevant para: article III
para 2. Very interesting para.
- 1 long hypo for tomorrow.
- Make case outline. What is the special doctrinal point of each case?
article 3 para 2: two sentences. the first sentence: when goods are imported then the internal
tax or charge that is levied on this good, should not be in excess of the tax paid on like domestic
products.
article 3 para 2: what sequence to be followed? Complain: country X violating this article para
2?
what steps the adjudicating body will follow?
1. whether the measure an internal tax? related question: has the product been imported? And
is the tax payable on account of an internal event? [possible events: distribution, transport etc.
big broad q: is this an internal tax?
2. what is the like domestic product ?
3. what is the identical internal tax payable?
4. is there a difference?
Go thru these 4 steps in any article 3 para 2 analysis. flag out in answer: this is the
analysis. Give these steps and proper analysis.
What is the like domestic product?
Article 3 complaints come like this:
Complaining party identifies a domestic product which is a like domestic product which is
subject to a lower tax than the one imported?
One answer by respondent: no these are not like products. Nature of argument: my internal tax
is "origin neutral". Meaning that rule of non-d that you do not discriminate on basis of origin
of products. Our law so origin neutral that if shochu came from Russia, same tax would be
levied. Japan: we charge the same for both. Our rule: origin neutral. Shochu and vodka different
products. Our law is origin neutral. If my law is origin neutral: first hurdle is to crossed. Settled
principle: the law may sound origin neutral that there is no de jure discrimination, but if there
is de facto discrimination, that will fall under article III. To see whether in fact discriminating,
see whether the two are like products or not. Whether vodka is like shochu? Question: whether
shochu and vodka are like products?
2nd question: to understand like products or not, set of tests.
Comparison of property of products, comparison of nature and quality, comparing the tariff
classification, relevant entry under harmonised system and the price of the products. There is
a test of some sort of substitutability. There is an element of substi. It’s not a controlling factor
on the likeness test. The properties of product can become fairly important. None of these tests
controlling. This must be determined on a case to case basis. The fact that they are vastly
different in terms of properties, can counter veil that they are different (?).
SUBSTITUTIBILITY----- PROPERTIES-----production processing methods.
Perfect substitutability: that they are like products- good indicator. Vice versa: they are unlike
products.
Test: laid down in Japan-Alcoholics beverages case- AB report.
AB- likeness test like an accordion. Products that are “like” are fairly squeezed accordion.
Products not identical. If the accordion doesn’t stretch too far apart- like, if not- unlike.
Q. What are distilled alcohols and the ones that are not distilled? Malt beverages- un-
distilled. Distilled- vodka, whisky and rum. We agree for example that the two aren’t
like. On the processing and production method: completely different. On properties
scale: similar or diff? Very diff. similar in the sense that they are alcoholic drinks.
Largely different in terms of properties. In terms of substitutability: where do they stand
on this scale? Substitutability not high enough to counter-veil the differences. Within
distilled alcohol, things a little complicated. Is vodka like whisky? Whisky- product of
wheat, vodka- potatoes. Processing methods- different. What about alcohol content?
Shochu- a common Japanese drink which is distilled from vegetables. Production
method not very dif from vodka, but style of distilling- very different from vodka.
Shochu- wider range of alcohol content. Vodka- high content of alcohol. Answer: from
substitutability. Critical question it becomes. Will ppl substitute vodka for shochu? See
the actual market: one way. Are people treating them as substitutable? When
substitutability itself a test, what do you look at? Just the taste? Or do u look at actual
market? Will we look at the market only of Japan? Or other countries? Market analysis:
not substitutable. Russia for example: because of the discriminatory tax that people are
 not substituting. Your results product of your own policies. Like domestic prodcuts:
vodka and shochu like products: not identical, not the same: but like. Makes the analysis
complete. What factors went into the anlysis, we discussed. What factors will play out?
Subjective.
Once established that two products like, the first sentence uses the words “not in excess
of”. Test is strict. If two products like prducts under art 3 (2), THEN any difference in
the rate: violation of article 3 para 2 first sentence. If u violate this, u are automatically
in violation of article 3 para 1. Which means that ur internal tax applied in a manner to
afford protection. What is the measure, what are like products, is it in excess of? In this
Japan case: US complainant too: u are charging shochu less than vodka. Japan: not like
products at any stage. US: u are still in violation of article 3 para 1. Japan: these are
different products, I can tax them differently. US: not as if that they have to be like for
3 para 1. Japan: it’s not a legal principle. US: article 3 para 2 second sentence but.

QUESTION:
Dominican republic- cigarettes:
Cigarettes producers: all cig producers: 2% surcharge at time of import. Applied to all
goods imported into Dominican Republic. 10% FE fee on all imports at that time along
with surcharge and customs duty. To bound and unbound items both.
If u were a country that contained many cig producers, at their behest your file a case
against DR, how will u challenge point no. 1 and 2?
Point no. 3: stamp difference. Foreign producers not allowed to stamp outside.
In order to ensure that paras 1, 2 and 3 are complied with, importers of cigs have to pay
a bond of US dollars X to the Government that nbvfcdszawill be a security for
compliance of the above paras. That they will get the three things done. If these 3
conditions are met, the bond is refunded to the importer. Basically, before the arrival,
give the bond, once shipment satisfies all the requirement, u get the refund. Based on
everything u have studied so far and US Shrimp case, how will u challenge?
As of now, the grounds are:
Is it a quantitative restriction?
Test: fee on account of importation. No internal event to which it was to be linked. Other duty
and charge therefore it is. Art II: 2. Invalid under art 2 para 1 b. fee directly proportional to
service rendered at the border. Art II: 2: defence.
06th Sept, 2016
Tariff measures that discriminate between national and imported products. When like products,
there cannot be an excess of internal tax or charge than what is payable on internal product.
Test for determining like products: first- whether internal tax, second- go on to test of likeness-
consumer taste, nature( physical and chemical properties of a product) and quality of product,
tariff classification and substitutability. These may counter-veil each other.
internal taxes or charges shall not be "applied" (similar to chapeau?) in a manner "contrary" to
principles under article 3:1.
internal taxes and non-fiscal internal laws: Art III:1.
measure of comparability needed between domestic and imported products. degree not same
in the 2nd sentence as the 1st sentence. ad note- a tax which conforms with 1st stentee, can stil
violate 2nd sentence. the test of direct competetion and subsitutability.
a tax will violate the 2nd stence: imported product and directly competitive and substitutable
product and the two aren't similarly taxed. moved from likeness to test direct competition and
subs. they are DCS products and not like products.
and if the two are not "SIMILARLY" taxed, then violation of III para 2: 2nd sentence. in excess
of substituted with not similary. violation changed to form excess to not similarly. in excess-
any difference. even if imported good- even if 1% more.
not similarly taxed- a margin here. more of a scale. range of things that can be called similat.
1st: identify what is the measure. should be an internal tax or charge. must be fiscal measure
that is linked is linked sale, distru etc.
2. is there a DCS domestic product?
3. Is the imported DCS similarly taxed or not?
4. does not automatically translate into violation, because art 3: 2- application shouldn’t be
such to afford protection. Whether dissimilar taxation is so as to afford protection to
domestic industry?
to see whether two products are DCS, test diff from that of likeness.
properties of goods a lot less important than the fact that they are competitive in the market.
consumer taste test more important. Amount of weight given to characteristics of the product
goes down. demand in market more important.
economic analysis that go into this:
if test for finding wther 2 products dcs, ultimately depends on looking at market: how do u look
at market? measure price elasticity of substitution. elasticity of substitution- continuously
measured to find out what the nature of consumer taste is.
Look at the market on which barriers have been created?
Rule: in measuring the substitutability of two products, the data should not be limited to
the real and present demand in the market, but also the latent demand. if latent demand
there, relevant to the test of DCS. When markets lack competition, ignore competition from
that market and look at another market. Need to measure latent demand. DCS- test of
measuring substitutability of products in their end dues and tastes.
Japan alcoholic beverages- 1st challenge: vodka and shochu like products. other kind of
alcohols: DCS with shochu. Said vodka and shochu like products and everything else DCS
with shochu.
Are vodka and whisky DCS?
Lamb v. meat? End dues, consumer taste and measuring therefore the demand- whether any
elasticity of demand? More economic question. Is there any latent demand? No latent demand.
Not buying beef not because its not available, but because of religion purposes. Controlled
market, not because of lack of competition, but because of factors specific to India. Cant look
at outside market.
Japan alcoholic: Panel: while shochu and whiskey not like products, can be treated as DCS.
Basically are distilled alcohol beverages. Element of substitutability involved. DCS domestic
product here shochu. Now, see if they are similarly taxed. What does it mean for them to be
dissimilarly?
Similarly: three things:
1. Where the diff in taxation is de minimis. If so, then they will be held to be similarly
taxed. They are completely ignored for the purpose of this test.
2. Dissimilarity is reasonable. Not de minist one. In such a case, imported one and DCS
not similarly taxed. So when this, third question ka answer: no: not similarly taxed.
Here, the 4th stage of analysis comes: whether it affords protection? Case: chile:
alcoholic beverages. Para 44- 76. Para 1-4 for facts. SATP. Gist: of this test: after
having seen dissimilarity, we will analyse the design, architecture and revealing
structure of the tax measure. Revealing measure: how is tax revealed in its
 application? The SATP not just one in which u look at tax in how its written, but
also how its applied. Whether this measure in its design or application, giving
protection to domestic industry as against imported products.
3. When grotesquely in excess of other, there is a violation. Eg- shochu- 5%, whiskey-
55%. Blatant violation

Chile Alcoholic beverages: internal sales tax system. Its origin netural, and is fairly logical.
Tax will be charged based on the alcohol content in the drink. Says that upto 35% alcoholic
content, sales tax- 27%. From this, every one percent change in content, 4% change in tax. At
39% and above: tax reaches its peak- 47%. And no further increase in tax. No violation of art
III on the face of it.
Whether some alcohol DCS with other, depends on consumer taste.
Question: there is a local Chilean beverage called- Pisco- form of strengthened wine. Pretty
much brandy. Fairly commonly avaiblae. Almost always below 39%. Tax always at 27%
therefore. All forms of imported alcohol like vodka, whiskey- all in excess of 39% alcohol,
47% charge to them.
Chile- vodka and whiskey not like Pisco. Different by their alcohol content. These guys- that’s
fine, but they are still DCS. On that analysis, Chile loses in trying to say that Pisco isn’t DCS
with vodka and whiskey. Countries which brought the case win. Show vodka whiskey and
Pisco- like products.
Question 3: Are they similarly taxed? Quite obviously not. Difference of 20% between them.
Questions 1-3- answered in favour of countries that brought the case.
Q4: whether dissimilar tax there to afford protection or not? Chile: not enough to show that
Pisco being charged lower. If I had to protect industry, why would I just want to protect Pisco,
we also make vodka and whiskey. All the V and W in Chile, have 47% tax.
75% domestically manufactured alcohol- Pisco. We are looking at the structure of tax law and
seeing its application. Application- 75% alcohol- 27%. And the 95% foreign- 47% taxation.
Does the application and structure look like its affording protection? Chile: of all the alcohol
that pays 47% tax, the majority is still domestic production. 25% still more than 95% of the
imported products. Are we really giving any protection then to our domestic industry? We have
a substantial amt of domestic industry which is subject to 47% tax. Give an answer to sir in
the next class- 44- 76 paras.
07th September, 2016
Measures- fiscal and non-fiscal. Fiscal- look like tax. Charge that is linked to an activity and
not penal in nature.
Another way of classifying- border and internal. Border- has an effect of reducing or increasing
the act of importation. Any measure that is linked to what happens to goods after they cross the
border. Customs duty- border fiscal measures. GATT- these are valid under our trade law
regime. Restriction- what u have promised in ur schedule of concession if u charge more than
that. Article II- if customs duty or ODC more than what has been promised. Article 1-
something charged from other trading part more than what has been charged from one.
Internal fiscal measures- internal taxes and charges. Sales tax, value added tax, can violate
GATT if applied in an uneven manner. Specifics in article III:2. And article iii:1 also important.
Argentina- non-fiscal measure. Acting at the border, only affect whether export or import can
happen.
At the border and non-fiscal- quantitative restrictions.
Tariffs and other duties and charges- fiscal measures. A fee incapable of being a QR. A QR
can’t be made effective through a tariff.
#non-fiscal internal measures: sale, distribution, transport. Internal sale, transport. Any
regulation that affects the internal sale distribution and transport of something, internal non-
fiscal measure. We will call them internal REGULATIONS. Not a tax, charge etc. tax on
transport: internal fiscal measure.
Cigarette box measure. Ban highest measure of an internal measure that affects sale. A fiscal
measure when obligation created by law is to create money. We are lloking at measures whose
compliance doesn’t involve money. Many of these technical in nature. Like bottle myst be of
certain thickness, must meet so and so standard. Some not in technical regulation. Source of
law for this Article III: 4. Internal non-fiscal measures.
Important thing: certain internal bans have the effect of acting as de facto QRs. Very oftern
there may be article III violation and article XI violation. Keep xi in mind while looking at non-
fiscal measures.
INTERNAL REGULATION. when applided to imported products they must be treated "no
less favourably" than like domestic products.
try and examine firstly, what are like products. standard of treatment- no less favourably. when
it comes to non-fiscal internal measures. like domestic products- diff from para 2. it had two
diff sets of likeness. a wide range of goods were being coovered- like and DCS both. non-fiscal
measure: limited to narrow category of likeness. AB therefore, in EC Asbestus: the AB
suggested that the term like under para 4 wider thatn term like in para 2. not wider than like +
DCS combined. not saying that under para 4 its like+ DCS. AB: under the fourth para, the term
"like domestic pridbt" essetialy a ref to the nature of competitve relationship between imported
and domestic products: if tehre is a reasonable competitive relationship between i and d
products, than they shall be like for the purpose of article 3 para 4. focus on competitive
relationship. in assessing the relationship, the latent demand for a product must be considered.

EC- Abestus: read in detail. Will also teach about article XX: b. crysotile fibres- carsogenic
fibres. Fibre gives out fibre dust which is perfectly inhalable. Which settles in lungs and causes
cancer. Were banned by france. Case defended by ec. Other thing banned- cement that
contained cryottile fibres. Couldn’t sell asbestos fibres in the French market. There were certain
health risks. Alternative to asbestos, fibres allowed were: cellulos, polyvinel asetite, glass. PCG
fibres were allowed. Cement containing any of the PCG fibres allowed. One of these three also
carried health risks but which were lower than the ones posed by asbestos. Measure: selling of
asbestos banned.
Canada: exporter of a and a cement to France. Bring this case. Ban on internal sale. Not on
import. De facto quantitative restriction. Asbestos like PVG fibres. How can u then ban one
and not the other? Violation of article III:4. France: we have a defence under article XX as to
why diff between two like products. France: these aren’t even like products. Its an original
neutral regulation. Asbestos is like asbestos itself. We have banned everything.
Panel’s analysis based on test of whether two goods like or not: ends due, physical
characteritiscs, consumer demand and tariff classification. Tc- diff, physical character- diff. all
of this ignored by panel because most of crysotile fibres used in the samee thing as pvc fibres.
Question of similarity and dissimilarity here.
Users in which completely different. By nature of analysis of like prodcuts, we look at the 4
things. France argues- consumer tastes and pref should be completely ignored. There are prof
construction companies, and other ppl. Can’t look at consumer tastes as there are different types
and some treat as ssubst and some don’t. panel: like because irrespective of eevidence, the
largest use of asbestos same as that of PVC fibres. On the max use, considerable overlap. The
AB: this method of analysis is wrong. In this, u have overstressed value of one type of
ebvidence, and sai the other doesn’t counter this particular evidence. Ab: not like products
because of one of characteristics of asbestos is that its carcegonnix. And therefore, unlike. This
method of analysis a very controversial on. Has risk of making objective of regulation as a
relevant factor in likeness test. Aims and effects test it was called. Regulatory objectives were
considered. AB shot this down.
Asbestos: one member wrote three paras: this case shouldn’t be treated as one where we are
using regulatory objective to assess like products. The mere fact that they have some overlap
end dues, doesn’t mean that they are like products.
Said that look consumer choice is also against it. ntn can have competitive relationship with
asbestos because there is nothing like asbestos. Found to be unlike products.
France took defence of article XX:b.
asbestos: link of necessity. regualtory objective of human health. france: that's fine.
necessary: absolutely essential. no less trade restrictive measure that is reasonably available.
no less trade restrictive measure that is reasonablt avaialbe. the party which gives b defence,
has to show the measyre in question, achieves regulatory objectibe. eliminating of risk of
cancer from asbestos. france: if i ban asbestos, i eliminate risk of cancer. objective is achieved
from the regulation. france is able to show that this regulation is necessary. when the party able
to proof, burden of proof shifts on complainant- to show less trade restrictive measure that is
reasonably available. canada: france could have adopted a separate measure that was less
restrictive, reasonably achievable, which achieves the same level of protection. "reasonably
available": doesnt exclude those alternatives that impose slightly higher admin difficulties.
france: controlled use ban difficult for me.
france: this less trade restrictive measure doesn't achieve the regulatory objective that i want to
achieve with this ban. i want to halt the risk of asbestos cancer. acceptable argument.
what is level of protection, does the objective get u it? is there an alternative? does it get u to
the same objective? chapeau test then.
france succeeds.
Five questions to be asked in an Article XX: b analysis:
1. what is level of protection sought?
2. does the measure achieve that level of protection? two qs that have be answered by the
party propounding the exception: like france.
3. is there a less trade restrictive alternative?
4. is that alternative reasonably available?
5. does that alternative achieve the same level of protection? burden of proof: on
complaining party.
1-5 para for facts, 84-188- EC Asbestos.
Likeness analysis. Quite obvious that asbestos and pvc not like. If they were, question of
whether one treated less favourably than other. There was one, obviously. One was banned, the
other wasn’t.
Korea Beef case
South korea: import quota system. No article XI problem, but legally imposed. Balance of
payments exception. Regulation: a retailer be able to sell only imported or domestic beef, but
not both. A new thing on imported. Korea: beef of higher quality. Regulation: harder for
retailers to buy both at the same time. 9 times as many stores, selling domestic more than
import.
Import quota utilised every year. Whether violation of article III:4.
Full analysis: measure: retailers can sale either, can’t sell both.
Physical property- same
Price elasticity and cross elasticity- ppl would still want to buy because they would want to go
for good beef. Cross elasticity- ppl would still buy domestic beef.
Competitive relationship
Other market-
Latent market- market demand will still remain the same.
Other- you would not want infected beef.
non-fiscal internal measure- require sellers of beef, to create separate markets for both.
Determine whether like products for purpose of art III: 4. End dues of imported and domestic
beef: same. Tariff classification: same, physical property: same. Consumer differences:
problem.
The fact that competitive test is the factor behind 3:4, doesn’t mean we exclude everything
else. Theoretical competitive relationship, they are like products all other sub-tests of likeness.
Products would have been like for article III: 2.
Domestic beef is like.
Is it being treated less favourably than domestic like product? The fact that u can sell only one
kind, available between domestic and imported one. Show that imported beef being subjected
to less favourable treatment.
There is a regulation in a way that imported beef may be sold and in the way domestic one
sold. Affect of regulation: increases sale of domestic beef. In reality- compels the choice in one
particular direction. Less treatment favourable a modification of the competitive conditions
between the like products to the detriment of the imported products. Which means that it
translates into less favourable treatment. De facto less favourable treatment. De facto- less
favourable treatment effect. Korea: how do u know less favourable? You argue: long run data
might change, clear modification of competitive conditions. Korea defence- we wanted the
public from being duped.
2 defenses:
XX:a defence and XX:b. will automatically fail. Answer tomorrow in class.
14th Sept, 2016
Revise article III, its cases and examples
Dominican Republic cigarettes also important.
Article I, GATT: MFN. Very imp. Lesser cases because even though old principle, nations
largely adhere to this principle. Rare that states would discriminate against foreign states inter
se. article I has a history of more than 150 years. It was a standard that was written in bilateral
treaties between Britain and France. States required to accord same benefits to every territory
that they accord to their most favoured trading partners. Heart of idea of free trade. If you don’t
discriminate vis a vis your trading partners- will lead to peace. MFN has historically been linked
to idea of peace, that’s why states have wanted MFN standard. The aim of MFN- achieve peace.
Empirical truth to this claim, there may be.
MFN principle- only one long paragraph. The way to read para 1 to treat the first words as a
group.
customs and duties, charges,...basically intends to cover all possible trade measures from tariff
measures in form of custom duties, charges related to transfer of money, methos of lvying-
mechanisms..everything in article 3 para 2 (fiscal measures) and 4 (two main paras)- everything
covered by article I. any trade measure is likely to be covered by article I. any other types of
duties and charges- everything covered by non-discrimination obligation. whatever u do as a
state to the extent that if affects goods from one territory or destined to export to one territory-
same treatment. Both on import and export basis. Can’t say that i will only export cells to china
and not to US. Till the word “any”- exhaustive list of all trade measures. any measure to the
extent that that measure confers any ADVANTAGE to ANY product- exported to
imported, required that same advantage is UNCONDITIONALLY and IMMEDIATELY
conferred on all LIKE PRODUCTS that are exported or imported.
Simply put: any measure – like tariff measure like custom. Coffee imported from say Brazil.
Brazilian coffee will get an advantage while being imported- that will pay customs duty of only
2%. Every bound customs duty in schedule, automatically an advantage: remember. I must
immediately and unconditionally give same advantage to coffee coming from any other
country. Advantage word: don’t get too held up with it. word advantage: every trade measure
confers some advantage on somebody. Safina pe 8% example. advantage kisi na kisi pe hota
hi hain. Most customs measures are advantage, any form of exemption is one.
US Shrimp example: here, article XI was used. If looked at, the claim that was made was that
this technical requirement imposes a QR. But nobody said that by imposing it, not conferred
on anyone else. The reason why people didn’t make article I case: banal.
Almost every violation can be called MFN. But that’s not what happens. US would naturally
in response to that move an article XX claim. U would end up alleging that there is violation.
In the WTO era, very few cases that deal with likeness of products under article I. Under MFN,
one would assume that likeness follows the same set of tests. The older gatt panel case was
spain unroasted coffee. Existing article I case on likeness. If a q arises, do same analysis as
article III to see whether like or not. But broad or narrow analysis, doubtful.
Difference between de jure and de facto discrimination.
27th September, 2016- 2nd midterm
Nature of likeness test under article I not very clear. Whether de facto discrimination or not?
Important. Obvious violation: trade measure itself makes it clear that a certain territory will get
an advantage and others won’t. Example: apples from Europe 6% duty, and from US 8%.
Violation of article I standard. Very, very rare. Article I requirement not just on border
measures, but also internal measures. ALL measures. If direct discrimination by naming
territories, blatant. Very rare. De facto cases more common. Canada Autos. Case of de facto
article I discrimination.
Certain products may de facto come from some places. Underhand reference to territory. Veiled
reference to territory may be there. Spain unroasted example.
Canada Autos: facts: Canada imposed a 6% tariff on import of all cars. 6% customs duty. Duty
waiver it gave: some of you (car manufacturers) shall be entitled to import duty free into
Canada. Import from wherever you want, but duty free. Mercedes bens India will import a car
made in Mercedes china/Germany whatever u want. Canada: tells some CMs in Canada,
Canada: certain companies we will let them import from free. Complex system, that there is a
base year for this calc. 1964-65- everyone manufacturing in Canada, and achieved domestic
sales- import…u will be able to import duty free today in Canada. The US basically wanted
most of its cars to go duty free into Canada. After several calculations, said that Canada
economy will benefit if they come with a list of manufacturers in 1964-65 and were able to
achieve certain ratio. Many countries challenged this as being viiolative of article I of GATT.
General motors and ford got this advantage. While honda and Toyota can import its cars from
anywhere at 6%. Unless u can show these co. products linked de facto to a territory, u wont be
able to make a case.
AB: definitely an article I violation. No Japanese car maker in 1964-65 in Canada making car.
Tricky, if Honda was also found to be making all cars in US in that year. Canada: Honda
cars from Europe are also getting the same treatment. Link of a product to a territory very
important.
MFN arguments 2 stages:
Also show that Honda cars products of a territory that aren’t getting an advantage that products
of another territory are getting.
Exception of the enabling clause: EC Tariff Preferences:
Enabling clayse: understanding adopted in 1994. Continuation of one in GATT years. As much
a part of WTO law as any other provision. Understanding says: developed countries can give
more favourable treatment to developing countries and expected to do without any reciprocity
from part of developing countries. This is an exception to Article I. apart from general
exceptions, this is one. If a developed countries gives additional favours to a developing one,
its fine. These advantages however have to be made operative through what is known as a
generalised system of preferences. Every developed country can have a GSP and give
additional duty concessions to developing countries. Cant be a bilateral one by one procedure.
GSP must be notified to WTO.

EC tariff preferences: a case brought by India against EC. Facts: EC GSP 5 preferential tariff
arrangements. Every developing country entitled to it. further set of specialised arrangements.
U are all going to get 4% but if your labour standards of certain levels that EU desires,
then additional benefit. Bangladesh: gets 4% but doesn’t get 3% advantage cuz of its labour
conditions. If you are a least developed country, certain advantage. There is a drug production
requirement. If ur pharmaceutical industry has certain standards: u shall get a lower tariff. India
challenged: all three arrangements. It pursuied drug arrangmement argument. Point: EU said
that if your enforcement standards with respect to drug trafficking such that we approve then
we will get additional benefits. Reason: countries getting advantage, India not one of them.
Pakistan one of them. This is violation of enabling clause that means that not covered by
enabling clause. EU challenges it. set of formal challenges and substantive challenged.
Formal ones: india: prima facie MFN violation because discriminating between india on one
hand and pak on one. Main violation of article I. EU: their argument bogus. Once a particular
arrangement under enabling clause, challenge must be limited to enabling clause itself.
Enabling clause is a different legal paradigm. If the structure of argument is that article I is
violated and enabling clause is the defence. How does burden of proof work? The complaining
party must prove the violation, burden of proving that defence affirmatively made on
defendant. If defendant able to show, complainant must show why defence must not be
accepted. India can show MFN violation by fact of measure itself. Burden on Europe 2ndly
will shift to show that enabling clause is applicable. EU: india must show enabling clause
violated.
It wants to say that enabling clause exception to article I and also wants to say that it can’t be
that India simply discharges its burden..strikes a middle ground by saying that in all cases
where violation of enabling clause that is alleged, not only say violation but also point out what
part to enabling clause violated. Do not need to be proved. EU will have to show GSP non- d.
Panel: disc because it discriminates between India and Pakistan on the basis that pak has some
good enforcement procedures and India doesn’t. EU: I don’t have obligation, can give pref to
whoever I want under GSP. Sharing my lunch argument. AB: what about non-discriminatory?
India: non-d means no discrimination whaatseoever
EU 2nd argument: so long as the distinction isn’t un reasonable. The word ND refers to not
make distinction where it is irrational and arbtiratry.
AB: I can accept both ur defs. My 3rd neutral def is: that the enavling clause permits developed
countries to differentiate between developing countries but doesn’t let them differentiate
between the ones that are similarly placed. Question now: are india and pak similarly placed?
EU: no they aren’t because the drug arrangements in the two countries are different. The
revelance of drug enforcement procedure to enabling clause not explored because the AB goes
on to say that developed countries may make distinction…already said. EU law is bad it says
because it pre-identifies countries that meet the drug arrangement. Whether india qualifies
under drug arrangement or not. India may come and say that I too have a good procedure. In
order to know whether similarly placed ot nor, there has to be a qualifyinf criteria. AB: yes. Its
pre-determined by EU law.
Question not explained: whether drug enforcement procedures could ever have been relevant
criteria to distinguish between countries or not?
Fails to answer that set of general criteria would work and what won’t. If it doesn’t engage
with the question of the legitimacy, then tomorrow a developed country may come and say
The jurisprudence swings very closely to the countries saying that my lunch and I will share
with whoever u want. Policy pendulum swings in favour of developed countries.
20th September, 2016
Read the panel report and AB. Panel report will help u understand how to write the answer.
Case: Dominican republic: cigarettes. 2 cases by same name. dispute: ds302. Complainant:
Honduras- this is our case.
Facts: diversity of measures. Unlike other cases we have read where only one measure
challenged.
Cigs that are getting imported to DR, subject to a set of measures:
1. charge which is called “stabilisation surcharge”
2. exchange rate surcharge
3. selective consumption tax
4. tax stamp requirement
5. bond requirement
1 and 2- taxes charged upon importation. Two surcharges that are paid at time of import. 2%
surcharge of stabilisation and the other one. Stabilisation surcharge: simple one. Customs duty
plus 2% surcharge. Exchange one: strange one. Certain percentage of exchange rate between
DR pesos and currency of country from where product imported or exported. Its like a tax.
Method of calculation: exchange rate between two countries. Justification: law asks u to pay
it. paid in addition with CD. Put up for challenge as being ODCs that DR cant charge.
Questions as to what are ODC? DR SoC- under ODCs 30% for cigs. Describes tax as 30%
consumption tax. Charged under tariff heading cigs. Honduras- these ODCs are illegal. DR- its
their in our SoC. Why illegal? First question: what article of GATT are we looking at? Article
II:1:b read with its understanding. What to think in terms of Article II argument?
Are they ODCs first of all? 2 questions: will H say that stabilisation surcharge qualifies as
ODC? Yes or no?
Is this an ODC? Yes. Charged solely on importation. Is an ODC. If Honduras had mentioned,
0% or no ODCs in its not in SoC? No. only way it can be legal, if it were in SoC and it were in
the form of fee.
Honduras in its SoC- 30% fixed.
When a particular charge noted in SoC as an ODC, do we look at the description of ODC or
only the number?
Panel: what u have written under ODC as 30% consumption tax useless. The consumption tax
u charge isn’t even an ODC. Completely incongruent. The SoC contained an entry which
wasn’t an ODC, if u negate the thing under ODC is blank. And then 2% charged then illegal
under Article II:1:b read with understanding.
Looked at what consumption tax really is.
Border fiscal measures and internal tax. Any tax related to sale, distribution, transport
etc of a good is an internal tax. Sales tax for example, VAT, luxury tax- typical examples
of internal tax. Octroy, transport tax, entry taxes into states- internal tax.
Border- customs and ODC. An ODC is a charge which is linked to the sole FACT of
importation. No other justification but for the fact that u are importing.
Same argument for exchange rate surcharge. Article 15: permits states to manintain charges on
exchange of currency if done with terms and conditions of IMF. In this case, DR argued:
exchange rate surcharge protected under Art 15. Panel: went to IMF to give opinion. IMF:
surcharge is not an ER surcharge. Linked to cost o fimported goods. We don’t have any
requirement fo this sort. Diff type of exchange rate surcharge was required by us from DR.
On the first two counts, DR loses.
Selective constimption tax: an alternative name for a luxury tax. It’s a tax that is applied to a
select number of goods. Tax payable on sale of liquor, cigs and certain other products. Tax
payable rrespective of origin. Both domestic and foreign cigs have to pay say 30% tax.
Tax stamp requirement: stamped on goods saying that stamped on goods saying that these
foods have ben taxed. Authenticates. Method of fixing it is in question here. Honduras
challenges this requirement of tax stamp. What would it argue?
Less favourable treatment: modification of conditions of competition of like products. If I
create a method in which cost of prodn goes up, then
Correct answer: the regulation only affects he importers to the affect that they have to remove
tha pack and put it again. Causes more cost for importers. 90 cents per packet diff only.
In DR cigs: Honduras did make an article XI link. Were not able to substantiate it. panel: said
its an internal measure. Not a measure that is a QR. The only two cases where we have seen de
facto QR: argentina hides and Colombia ports- the QR came from fact that ports were closed.
In this case, Honduras pressed this case, but didn’t make the argument of psychological affect.
Measure must look like a border affect. Panel: dismisses the article XI argument. If a measure
looks really internal, best to challenge it under article III claim. Psychological affect myst be
looked into. Can argue with argentina hides. Colombia entry won’t help u much.
Where would DR make the argument from? Article XX
Side note: article XX(B): ec asbestos
Article XX:d: referred to in Korea beef and also in DR cigs.
XX:d: those laws must be inconsistent. The aim is to see if measure necessary to seek
compliance with existing law. Existing law: all cig packets must contain a tax stamp. Paying
tax: is GATT consistent. This measure is a measure that is designed to ensure that tax laws of
country is complied with. No problem with underlying tax itself. DR has to show that if didn’t
employ the procedure it implied, would not have been possible to ensure tax law. Everybody
is agreed that tax law is necessary. Saying that both importers and exporters have to bear tax,
obvious that importer will have to, but domestic won’t have. But it’s necessary to ensure
compliance with tax law. No prob with legitimate objective. Honduras: u are differentiating in
the way the tax is implied. Dominican Republic: that’s inevitable. Necessity towards the goal
test. Necessary test: necessary is also not a clear word. There has to be some contribution
(Significant)- relating. Necessary- words inevitable, cant do without- is the extreme end of
necessity test. Another end- just about some contribution. Necessity test- very close to this poll.
To achieve a particular objective- there might be 5 measures- and all close to inevitably.
Doesn’t have to coincide.
Necessity measured as a balance of 3 diff factors:
1. value of the objective
2. contribution of measure to the objective
3. restrictive trade effect of the measure
This is applicable to both 20 b and d. necessity or whether a measure necessary is to be analysed
by a measure of all these 3 factors. If the objective that is sought to be achieved, gains a very
high priority- if u can show that the objective is really worth protecting, the panel will tend to
come to the conclusion that the measure is necessary.
If value of objective is high, contribution of measure only medium, then it will still be
necessary.
Not a very restricted measure, but protecting a very valued objective. Panel: conclusion: the
measure of tax stamp is necessary to achieve the objective. But 2nd layer to this test (not
chapeau). Apart from this analysis, a 4th factor: is there a reasonably available less restrictive
trade measure? Give the tax stamp to importer before he imports. Dominican Republic: these
two measures don’t achieve the same level of protection. Panel: this is not the case. The point
is that tax stamp don’t get u hundred percent smuggle proof system. Alternative: not 100%
smuggle proof, but achieves large amount of tax compliance and is less trade restrictive. On
this basis, DR’s tax stamp requirement found to be violative of article III: 4. Read the panel
report carefully. AB not very useful. It just agreed with every single finding of panel.
5th measure: bond requirement. There is a bond requirement of say 500K pesos which has to
be furnished by both domestic producers and importers of cigs. Bond: acts as a guarantee for
the fact that the domestic producer and importer will pay all the taxes they are supposed to pay.
500K peso bond. Pt no. 2: selective consumption tax. The tax paid at 30% of price of product.
The SCT collected at time of import itself. With the condition that if not sold, u get tax back.
Last point: what is the method for calculating the SCT? For domestic producers: price by
average selling price of all brands available. For imported cigs: 30% of the average selling
price of the like domestic cigs.
Internal taxes: article III: 2. it’s an internal fiscal measure- it’s a TAX. Whether a domestic
product charged a lesser tax than the like imported product?
What are the grounds of challenge Honduras will have? For SCT and Bond requirement.
Exception to MFN.
2(a): every developed country can have GSP in terms of which can give pref tarrigs to products
originating in developing countries. GSP itself must be non-discriminatory.
GSP usually contains a tariff list. The enabling clause requires that when a pref given to a
developing countries, must be given to all developing countries.
GSP must be "non-discriminatory". eithing the enabling clause, additional obligation of non-
discrimination.
04th September, 2016
Technical barriers to trade- a tech regulation is a doc that laid downs product characteristics
an compliance with it necessary. Internal regulations. Almost always. Pertain to the sale and
distruction of products- dome or fierign. To sell them, meet certain criteria. Like visible one or
produn and processing methosd. Cant sell water unless put in a seal bottle for example.
Sometimes maybe related to product. Or not. Like child labour wali factory se cant sell.
Technical regulation expressed like u cant sell unless this or peeodducts that meet only this
will be sold. They may also take the form of labels. Well u can sell X Y and Z but u must label
them. Technical regulation- labelling requirements. May sell refs which are CFC free and may
not. But label the non-CFCs as non-cfc and vice versa. TR this is. Labelling requirements
common example of TBT. Look at what the content of the label is.
Absolute ban unless u meet the requirement
Label requirements
And the ones- with which compliance not necessary. Compliance not mandatory- standards
What the law on this point is? Where is the basic obligation given? The important paras that
we must know def- articles 2.1 and 2.2. contain the core of the obligations in this agreement.
Def of a tch regulation- annex 2 to this agreement. Then go back to main articles.

2 core obligations with respect to TR

1. That the regulation must not act as a means of disc between imported and domestic
products or products of diff territories- 2.1. This is a repetition of the national treatment
obligation and MFN obligation.
2. 2.2- substantive obligation which is quite new. Not in GATT. Says that: whether or not
the regulation disc or not, one problem. Another problem: may not be disc, maybe that
the regulation is trade restrictive. All regulations in some sense are trade restrictive
though. In that sense, there is going to be a restrictive impact. Largely: they will hv
such an impact. Core of 2nd obligation: technical rs must be no more trade restrictive
than necessary to fulfil a set ot legitimate objectives. Article XX type analysis. Though
this is not exception under TBT agreement. This is the core of the obligation itself.
Adopt a regulation because u want to achieve a legitimate objective, see that it restricts
no more than is necessary to achieve that objective. Substantive problem: this is
completely unnecessary because its more trade restrictive than necessary to achieve a
legitimate objective. TBT agreement will guide us in this regard. Under tbt agreement,
2 types of challenges.
Set of recitals that lead up to the tbt very important.

Desiring however to ensure that technical regulations and standards, including packaging,
marking and labelling requirements, and procedures for assessment of conformity with
technical regulations and standards do not create unnecessary obstacles to international trade;-
this one seems to refer to article 2.2 regulation. There are restrictions which maybe necessary
which this agreement will protect. But certain unnecessary ones- should not happen.

Recognizing that no country should be prevented from taking measures necessary to

ensure the quality of its exports, or for the protection of human, animal or plant life or health,
of the environment, or for the prevention of deceptive practices, at the levels it considers
appropriate, subject to the requirement that they 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, and are otherwise in
accordance with the provisions of this Agreement;-

1. United States Cloves Cigarettes: facts: clove cigarettes- regulation which clearly says-
tobacco products if they contain flavouring additives- can’t be sold in US market. The
 measure at issue: para 78 of the report. Section 907- a cig or any of its components
including tobacco paper shall not contain an artificial additive other than menthol and
other flavours. blanket prohibiton- u cannot sell any tobacco product any of these
things. Any additive.

First question: is this a technical regulation? It’s a doc. Laying down intrinsitc
properties of a product. Talking abt product things compliance with which necessary-
TR- cuz saying that cigs that with this product characterisitic- such compliance
necessary. Reason: lot of reasons that if u have flavoured cigs- encourages young ppl
to start smoking. If that is the regulatory aim- not to stop ppl from smoking all together.
Its to discourage young ppl to taking to cigs for the first time. If that’s the regulatory
aim. Flavoured cigs like normal cigs. That this regulation only affects flavoured cigs.
It may discriminate between products which may be like, but cant attach orign to this
product. Everything imported and produced domestically. lets assume that imported
cigs- flavoured. And all domestic one- normal cigs. The two in conflict now. Clearly a
modification of competitive conditions.

2.1- exclusively legitimately regulatory discrimation- US can say this. US can succeed.
How will the challenge actually go? Indonesia- largely exporter of clove cig to US.
Clove cigs- then imported products. Indonesia- this is a bad regulation because it
modifies completive conditions between clove and other domestic cigs.

Regulation- cannot contain anything other than tobacco and menthol. Clove from
Indonesia exclusively. Menthol- internal. Indonesia- clove espeicially like menthol cigs
under 2.1. US- will say that that’s not correct. Menthol in cig added in an entirely diff
way than clove is added. Clove on the other hand, use clove powder mix with tobacco.
Consumer pattern- diff in the way they are consumed. Menthol consumed because they
like it as such and while clove are consumed only because they help remove the smell.
Menthol cigs they say are completely diff.

Look merely becase they have diff end uses, maybe the respective dominant end use is
diff. doesn’t mean there is no possibility of overlapping end use. Which is that they are
both used to mask taste of tobacco. US tried to show that no common market.

Able to come to the conclusion: that mentjol produts like to clove. – half of the 2.1
analysis done.

The TR—treats menthol more favourably than clove.

Only question- stems from a regulatory distinction ro not? What should be the
approach? Whether less favourable treatment stems from a legitimately regulatory
distinction? In order to do so, we will analyse the design, the structure and architecture
of the measure. The revealing architecture- that it protects menthol cigs which are dom
ones and not clove ones which are imported. AB- there cant be a regulatory distinction.
Distinction therefore illegitimate. Therefore, we come to the conclusion that imported
products treated less favourably than dom like products. READ THE CASE. Start from
page 34 which says background. Read the 2.1 analysis. Don’t read article XI analysis.

2. US COOL (country of origin labelling) case: a lot of reading in this. US COOL- the
food and drug admin of US feels that its consumers must be informed of the origin of
 the meat that they eat. Its consumers must be informed of the origin of the meat that
they eat. US- the meat industry very big. Farms with a lot of cattle. Meat processing a
mechanised process consuming tons of meat. This case deals largely with beef and pork.
Cattle and hogs- are common in ranches across the US, Canada and Mexico to the
South. Mexico and Canada- equally big no. of ranches. That’s not all that’s done.
Canada and Mexico- don’t slaughter and send. Transport a live pig to a ranch in US.
Global supply chain. Imp because at diff levels diff customs duty apply. If u send a
cow, less customs duty than beef. In this process, a lot of meat in the US, some grown
in the US. Top quality beef- produced entirely rganix US ranches. Cows that are grown
in Canada. Sometimes these cows give birth to calfs, which are sent to US.

US wants it people to know where animal born, raised and slaughtered. 3 stages of meat
production which says all this. Not that simple. Largely:

1. Category A- born, raised and slaughtered in the US. Came from a cow that was
born, raised and slaughtered in the US.
2. Category B- born, raised OR slaughtered in the US. Can have various combos of
the three. Born, fed in Canada. Sent to US, fed some more and slaughtered- one
combo. Cow that was born in Canada, partly raised there, broght to US, raised again
and slaughtered. Label would say – product of US, Canada
3. Category C- Imported to US for immediate slaughter. Fed category. Cow that was
born in Canada, raised and fed in Canada, but brought to US and slaughtered.
Product Canada, US.
4. Category D- Entirely imported. Even slaughtered outside.

Sometimes a packet more than one piece of meat. The first one- category B- US,
Canada. A- US. Label would say- Canada, US.

B and C- label will say Canada, US or it can say US and Canada. B or C label.

If meat was A and C- product of Canada and US.

Both cases very imp. Both these cases almost simultaneously before the WTO. The panel had
in US COOL had already delivered its report.

Labels in category A- product of US.

Label in category B- product of US, X. meaning the other countries that were involved. Or X,
US. This has a mental factor where u put the country’s name.

Category C- product of X, US. Can’t say US, X.

Category D- product of X.

^ first set of labelling requirements.

Next set: in a packet of beef, there is a steak which is cat A, one which is cat B etc. rules: if
category A+B- must contain label of category B only.

If A and C- c only.
If B+C- then can be category B.

B very dominant.

Canada and Mexico- challenge under Article 2.1 and 2.2. Formal challenge- that a
discriminates between domestic and imported products.

National treatment- if I am the person packaging meat, I need to know where it came from.
The person with US ranch- will have to know whether born in US or Canada. I have to keep
records at 4 levels- where was it cut, raised and born? I have a greater set of records. Record
keeping obligation- from packing category B meat altogether.

Mixing- every time I mix category A and b, need to have clear eye. Let me just then have
category A. then I don’t have to bother with labelling. Imported cows which are the problem
now. As a slaughterer in the US. Ultimately the driving up of costs of prodn disparate between
category A and B and C. category D not a problem at all. No record keeping requirement. Like
product- not meat but the cow. Imported like product treated differently from domestic ones in
the context of cost of prodn, this leads to a change in price and there is a change in competitive
conditions.

Now that we have to show that this discrimination not arising exclusively from a leg reg
distinction. US- it is. My aim is to tell ppl where the meat they are eating came from. If ur
meat came from three diff places, will have to maintain more records to write that. This is
airisng exclusively from a legitimate regulatory distinction. Overlap with 2.2 here. 2.2- takes
to substance of the measure. Canada- product of US and Canada. Doesn’t go into detail that
where cow born, raised and slagutreted. Yet the cost of record keeping, high on me. Substance
of the measure. High cost disproportionate to the legitimate expectation u are trying to achieve
here. Means that the discrimination not exclusively a product of a legitimate regu
discrimination. lose 2.1 argument. Some of these arguments will be repeated in 2.2

US COOL- page 99 to 130 (new section which wills tart –don’t read) then 144-155 – AB report.

How do u challenge a tech regulation on the substance of it itself?

Whether the tech regulation is such that it is no more trade restrictive?
A tech regulation may be no more be trade restrictive than necessary.
Word : “fulfil”
Three things: set of leg object, tech regulation and finally that it is no trade restrictive than
necessary.
1. What are the leg objective that a tr may seek to serve?

05th September
national sec, prevention of dec practices,. imp word that precedes these: inter alia. means that
the set of leg objectives here not an exhaustive list. a country may say that this is the ob list,
even if not captured in recital or 2.2. yet the tech regulation is fine.
set of tests to see how it works inter alia: US COOL- a ob is fine if by looking at its social
realities u can confer that its fine. legitimacy of an objective has never been put into q. has been
put into q that whether
in US COOL- when US asked what is ur leg objective, the US- consumer protection it said.
Canda and Mexico- bakwaas. thats not what is leg objective. ur only ob is trade protection. one
doesnt know how to respond to such an argument.
analysis will not go any further. panel should have stopped.
AB- is this a leg objective? yes. Art 2.2 - set of legitimate objectives not limited. there may be
others. canada- tries to make arg abt inter alia clause- everything else that can be read into the
clause if u read it ejusdem generis. AB didnt suggest that its the correct test. it said that one has
to see case to case basis whether an obkective leg or not. stopped at the pt that its a leg obj.
TR: should be able to discern what is the obj is and whether its leg.
next: whether a tech regulation fulfills a certain leg objective or not? diff to understand. XX:
necessary/related to: denote the link between measure and objective. here the linking word:
fulfill. whether a measure fulfills a leg objective or not? read US COOL to see. capture within
that every possibility. if the word is capable of meaning many things, the word captures all of
it. highly unlikely where a country has a tr and says this objective and its unsuccessful to show
how fulfilling. unless there is absolutely no link fulfill word met.
interesting thing and important: when a TR fulfills an objective how much of the objective does
it fulfill needs to be determined cuz that will effect third limb of out test. may achieve an obj
partially or completrely. the fact that the tr is capable of connecting to obj regulation in cvarious
ways, helps us establish what is level of protection the state wants? VERY IMP.
US COOL- not giving consumers all the details. so objective only somewhat fulfilled. US- I
have set up a regulation to somewhat fulfill an objective. level of protection- protecting at a
medium lebel. what is the level of protection i am according to objective becomes evident by
how much the objective fulfilled by the TR? US COOL- at a medium level, not at the highest
level. why do u need to know this? country is free to determine what its standard of protection
will be. country's sovereign right. US has argubaly demonstrated that it wishes to fulfill at a
medium level. this helps us to go into the third leg of test which is to understand the meaning
of the words "no more trade restrictive than necessary to fulfill". country decides how much it
wishes to fulfill its objective. reuirement- once it has established how much it wishes, must
then adopt a R that fulfills THAT MUCH of the objective in the least trade restrictive manner
possible. a country determines how much of objective it wishes to fulfill once this has been
determined, the country under an obligation to fulfill that objective in the least trade restrictive
manner possible. word necessary is coming into play a little bit. US wants to fulfil its objective
of informing consumers. Q is that is the TR the least restrictive method available to achieve
the same amount of fulfilment. Intuitively- answer is no. amt of info required has a serious
restrictive effect on trade. Some part of this objective being fulfilled. Is this the least trade res
possible? Answer is we cant sau. Because the test is not of proportionality. Only way to answer
this test:
Burden on complainant it falls to demonstrate that there is a less trade restrictive alternative
that is reasonably available to the respondent, which fulfils the objective to the same extent.
Canada will now have to say that this tech reg fulfils partially but I have a better idea. Why
don’t u adopt measure X? will filfill the objective in the same way. X also less restrictive.
Measure has to be reasonably available. Has to be feasible, reasonably achievable. Several
layers of things have to proven which first have to be demonstrated by Canada. Burden will
shift to US- will have to prove that the measure not reasonably achievable or that doesn’t fulfil
in the same manner and extent that its own reg was achieving.
Canada and Mex came up with 4 diff alternatives. Panel didn’t consider the evidence carefully
cuz it had decided the case on some other ground only. AB- we have to look into this, but not
enough evidence. So case closed. So Canada and mex lost on 2.2. Held: US measure not
violating 2.2 sir: had there been more evidence, outcome may have been diff.

last senteces of 2.2- process of risk assessment. if a measure adopted that no samsung co. shall
use valcom chips. we have no tolerance. risk aversers. amt of risk i averse my sovrerign
prerogative. assessment of the risk must be based on avaialble scientitific data. example: when
EC cant put asbestos in cemebt, was supported by scientific data. the scientific data should then
let u be risk averse. i cannot have come to conslusion of risk itself without any scientific data.
it suggets that among other things- TR should be harmonious accross the world. not the case
that in country A make semi-conductors X material and country B of material Y. if all countries
base their regulations on a set of intl standards then it would be easier for trade. on the one
thing that there has never been any harmonization: electric plug. the necessity for
harmonisation evident on day to day basis. even more diff for traders who will have to produce
diff goods for diff coutnries.
set of intl organizations which lay out standards of various diff products. like mobile phones,
computers- like what are safe components. these are not just mandated by internal laws, but by
intl organisations. they lay out standards on a day to day basis. TBT agreement: so long as the
countries own TR is based upon an intl standard it is to be presumed as valid. its a rebuttable
presumption. presumption under 2.2. not on q of disc but on the q of substantive validity of
regulation. what are these intl standards? several intl bodies that set them out. in TBT def of
intl organization, its membership open to all countries in the world. as long as open, they lay
out set of product standards which is reflected in law of particular country which law would be
presumed valid under 2.2 2 diff things: 1. countries encouraged to participate and 2. on other
hand, if avaialblle intl standard and u place ur regulation upon that, we will presume valid
under 2.2 Finally: the last thing TBT is interested in "conformity assessment procedure".
A Cap- FOR assessemt n as to whether a product conforms to the TR prescribed by a state.
Suppose: no mobile phone may contain valcom chip and only intel. Somebody trying to import
product in country, how will u know at time of sale that it complies with the TR? Countries
may lie: sir. Conformity assessment procedure: a recognised bdy that would have assessed for
conformity and would have indicated and verified that its actually conforming as a product.
For imported goods: does it sound like a feasible thing? We will have to start trusting label of
some body outside. The point: its possible that its possible to design a CAP which is har don
intl trade. The requirement again on CAP is simultaneous. That it shall be no more trade rest
than necessary and 2nd that CAP should aim to the greatest extent possible be mutually
accessible. If ISI has stamped a product and fone out of India, then US must respect that. U
may justify an exception. But to the greatest extent possible one must look to device a CAP
which respects the CAP of another country. TBT: CAP shouldn’t be used as a disguised rest to
trade, and to the greatest extent try and harmonise CAPs across the world.

Agreement on Sanitary (SPS agreement)

There is a similarity between TBT and SPS and its hard to classify measures between the two.
As a starting tile: in 1.5 TBT- its made clear that TBT doesn’t apply to measures to which SPS
agreement applies. What are the measures to SPS applies? Bit of challenge to understand cuz
some measures may be unclear where they fall.
US Tuna II- for TBT. US v. Mexico.

TBT can be used to make regulations those ones that protect human animal life and health. On
the objective count, there is an overlap. Method of app diff. TBT- product characterisitcs and
process methods. SPS- in the same thing, but speicifc things. Things that we eat. SPS-
significatnt relationship with agriculture. Agricultural products measures are often SPS
measures. Zone of food, health now. If one applies, the other shall not- rule.

Annex A para 1- def of san and phyto sant measures. TBT- annex of TR. Same here. Def in
annex A. a to d- 4 paras. Imp paras. Long-ish para after it. way to do it: any measure applied
to protect…till health (para a). para b- to protect human life or health. Prevent or limit other
damage. Changing of these words. These 4 opening words of a to d refer to the objectives. The
big diff between TBT and SPS – for TBT- we look first at what the content of the regulation.
Is this TR laying out largely product characterisitcs? SPS agreement- before we see what the
measure says, need to know what the objective of the measure is. Know what the objective of
measure is. Can be protect animal or plant life or health, human life or health and then some
other damage. 3 diff types. First two most common. See that these objectives are also there in
the TBT agreement. Possible that u may protect eben through TBT. But for the SPS not only
the objective important, but also the means of achieving the objective. Para a- SPS measure
looks to protect blab la bla life…by limiting the risks of…entry of “pests, diseases, disease-
causing organism or disease carrying organism. Words are a little imp.
Para b- human life or health…protecting it from additives, toxins, disease causing organisms
in food. Finally, also diseases from animals, plants pests. And prevent damage from spread of
pests. SPS- protect animal, human life and health from diseases carried by animal, plants,
toxins in food. Largely agricultural things, things we eat, things that are living: affected most
by SPS measure. Sort of complex definition. It says that an SPS measure that is looking to
protect animal, life etc…. what would be typical example of such a measure? Two diff things:
objective: to protect disease and fulfilled: to prevent entry of that disease causing thing.
Measure has to protect in its objective human health and life and..typically: the objective of an
SPS measure is to protect life but to the object to which it will apply: agricultural food.
objective: to protect human, plant and animal life.
Example: EC- approval on biotech protducts: in order to sell biotech products (what are biotech
products? GMO. Like things we eat- like brinjals. EC- there is a new regime for selling biotech
products in EC. Approval needed. Import and dome both. U need a set of approval. not
discriminatory. In some cases, absolutely banned also. The exporters get upset with this
measure. They suggest that this violates the SPS agreement. This rule that u must obtain
approval or in some cases banned, violating SPS. First q: does the SPS agreement at all apply
to this measure? We want to protect human health or life from additives, toxins, etc. what does
a GMO brinjal have? GMO- a seed that is artificially produced. What does the GMO brinjal
have?
Lesson: these words have to be broadly interpreted. If it looks like a SPS measure to u, likely
that it is an SPS measure.

EC-Hormones: they prohibit the meat that contains artificial hormones in it. discussion: SPS
measure or not and so and so forth. If meat contaisn hormones, first thing: additive is there u
can. Other party can argue: word “additive” refers to something foreign to the thing to which
it is added. But when a hormone is added? Its not foreign. U are just adding.
If the law affects foods, animals, plants because something has been added to them, or they
bear a health risk and a law affects these things so as protect hman, animl plant life. This is the
object- food, animals, plants, products. Objective- to protect human, animal, plant life and
health. Half of story. SPS measure can now take various forms. We don’t know what form this
law takes. One form can be ban. Other form- no u can sell, but take some approval. 3rd- u can
sell as long as u put a label. After a to d, the form what is the form
3 difff things while looking at SPS:
1. Set of objectives: Human life, plant lfe and animal life and their health
 2. Set of objects: SPS measure applies to plants and products, animals, and products,
diseases causing organisms, pests.
3. Measure: wide variety of measures that are possible that qualify as SPS measures.
 Last para- Sanitary or phytosanitary measures include all relevant laws, decrees,
regulations, requirements and procedures including, inter alia, end product criteria;
processes and production methods; testing, inspection, certification and approval
procedures; quarantine treatments including relevant requirements associated with the
transport of animals or plants, or with the materials necessary for their survival during
transport; provisions on relevant statistical methods, sampling procedures and methods of
risk assessment; and packaging and labelling requirements directly related to food safety.
End product criteria, PPMs, testing inspection & certicates, quarantine measures, statistical
methods for risk assessment and finally packaging and labelling.

At highest level – form of ban. End product criteria often takes this form. U cannot sell meat
to which hormones have been added. Actually in form of ban.
PPM- u cannot sell meat unless from ranch where u have killed all other chicken which have
taken bird flu.
Testing and certificate- cannot sell meat unless approved by FDA as not containing anti-biotics.
Statistical measures
Labelling requirements can also be. Say u sell packaged jam. Need a label to say best before 6
months. SPS label it is. Or other labels- which says that certified anti-biotic free. Similarly,
packaing requirements part of SPS. In roder to sell preserved coconut milk must be in a sealed
tin. Objective- protect human life from food concerned.
Quarantine example- cows that are being imported from country with mad cow disease has to
be checked first.
SPS need not be on imported products only even on domestic product. Suppose in part of India
outbreak of bird flu- in order to sell chicken from that part of India- u have to under go certain
tests. That is also an SPS measure. Just not applied to intl trade. SPS can affect intl trade in
various ways. If mad cow in England and Can says all cows from Eng quanratined since we
wanna protect health form disease causing animals. The thing with SPS agreement- its an act
of great balancing. Everybody in can will agree its good. At the same time, it can also be abused
to achieve a larfe no. of protectionist methods. Suppose only one farm in UK with mad cow.
And u apply a wuarantine measure. Maybe this a sly opportunity to apply a measure.
In order to put SPS measure in place, be cautious. Ppl might misuse it. SPS is all abt striking
balance between legitimate govt interst and to ensure that these methods are not used to protect
domestic industry. The other thing: this para which defines the measure so long that a lot of
things can fit inside it. there are endless no. of forms the measure can take. But it can also take
forms apart from this. Interesting example: I say 100 rupees as some sort of allowance since u
have a bus of selling chocken and u buy birds from various places and slaughter them and sell.
I give u 100 ruppess extra and u can import them from anywhere but not from China as atm
there is bird flu outbreak there. Question: not whether ut violates law or not, is this a SPS
measure or not? Is it intended to protect human life or health? Yes. Applying to animal,
products? Yes. Diseases causing ? yes. Is the measure listed? Not giving end product criteria
etc. basixally a restriction on ur abilitu to sell money. Its financial control. Doesn’t check the
box of enlisted measures. But itner alia words there. Measure still an SPS measure eben though
not in the enslited forms. A financial measure can also be an SPS measure. What wualifies as
SPS very broad. Tha doesn’t mean u don’t address the q. its imp to establish hat its an SPS. It
can be tricky, somewhere in between. Overlap between TBT and SPS also can there.

18th October, 2016

What is a SPS measure? A measure that is covered by sps agreement aimed at protecting plant
life or health, plant one or animal. And must look to protect from one of these things. When it
comes to disease causing organisms, an SPS measure is also one that looks to protect humans
from disease caused by animal, plants or products. Various possibilities.

1. If measure SPS, will never be TBT. Even though may look like TBT. If can classify as
sps won’t classify as tbt. Gatt- sps doesn’t automatically exclude gatt. Therefore do
analysis under sps first and gatt if possible. When u are given a measure, if the measure
looks like its designed to protect human aninals and plants- automatic view- SPS. View
should be SPS instead of TBT. Any regulation aimed at doing this, SPS measure. Form
of SPS measure can be quite similar to TBT measure. A TBT measure lays out product
criteria. Product must be made by these methods alone. SPS can also take same form.
Can say meat shouldn’t contain additional hormones. Would have been TBT except
this measure to protect humans.
The form of the measure- will look exactly as method looks. Annex A SPS on slide. All of
those TBT measure. SPS can take same form. Form might quite be the same. And what is
it looking to regulate. If to protect human, plant and animal health by regulating pests,
disease causing organisms…make sure u check both. Is it in nature of controlling pests,
diseases etc- if so go to SPS.

Article 1, 2, and 5- SPS agreement articles we have to read.

Article 1 back to top

General Provisions

1. This Agreement applies to all sanitary and phytosanitary measures which may, directly or indirectly, affect
international trade. Such measures shall be developed and applied in accordance with the provisions of this
Agreement.

2. For the purposes of this Agreement, the definitions provided in Annex A shall apply.

3. The annexes are an integral part of this Agreement.

4. Nothing in this Agreement shall affect the rights of Members under the Agreement on Technical Barriers to
Trade with respect to measures not within the scope of this Agreement.

Standard article. After u have classified measure as SPS, not end of journey. Check whether
affectin intly trade. And in a way prohibited by SPS agreement?
SPS agreement recitals- u will found that what is allowed SPS for states- all have thr right to
take SPS measures. The aim is to not take sovereign right aweay but prevent states from using
these measures..problem will arise when SPS measure used as a barrier to intl trade. With
passing time in trade, direct trade violations lesser and lesser. Trade restricitibe measures very
convoluted. Uncover that disguise. The panel or panel applellate body must look at revealing
structure. SPS measure xcellent method of causing barrier. If I say I want blight free apples.
So from no country which has blight apple. If there is one instance of blight in one country, I
stop importing from it altogether, in reality I am trying to erect a barrier for international trade.
Its very obvious that we can use very high hygiene standards..it will automatically look as
though many
Article 2 back to top
Basic Rights and Obligations

1. Members have the right to take sanitary and phytosanitary measures necessary for the protection of human,
animal or plant life or health, provided that such measures are not inconsistent with the provisions of this
Agreement.- intuitive

2. Members shall ensure that any sanitary or phytosanitary measure is applied only to the extent necessary to
protect human, animal or plant life or health, is based on scientific principles and is not maintained without
sufficient scientific evidence, except as provided for in paragraph 7 of Article 5.-

3. Members shall ensure that their sanitary and phytosanitary measures do not arbitrarily or unjustifiably
discriminate between Members where identical or similar conditions prevail, including between their own territory
and that of other Members. Sanitary and phytosanitary measures shall not be applied in a manner which would
constitute a disguised restriction on international trade.

4. Sanitary or phytosanitary measures which conform to the relevant provisions of this Agreement shall be
presumed to be in accordance with the obligations of the Members under the provisions of GATT 1994 which
relate to the use of sanitary or phytosanitary measures, in particular the provisions of Article XX(b).-

3 different things. Three guiding principles in article 2. Not our final source for law for anything. We will always
read it with article 3 and 5.

1. When u take SPS measure, u must do so because there is a risk that if u don’t do so,
there will be some danger to plant, animal and human life. Life- mein health also
included. This risk can’t be a fictitious risk of ur mind. Thinking not enough. Must be
based on scientific evidence.
2. An SPS measure should be no more trade restrictive than necessary to protect u from
that risk that u are looking to protect from.
3. In protecting form this risk, u must not discriminate between countries where same
situations prevail and between ur country and other country. Inherent MFN and national
treatment obligation.
4. This determines some relationship between SPS and GATT (SPS DOESN’T
INCLUDE APP OF GATT) if a measure consistent with SPS, presumed to be
consistent with Article XX (b). if u are consistent with SPS agreement, and if u are
inconsistent with GATT, u will be able to justify under XX(b), GATT. There is only a
presumption of consistency. If u are found to be in violation of SPS and GATT, must
bring it in conformity with both agreements. Neither agreement excludes the
applicability of other. Consistency with one, presumption with consistency of another.
With TBT and SPS, start with them before GATT.

Article 2 framed in form of rights.

Article 3- harmonisation.
3.1, 3.2 and 3.3 important.
General principle no. 1- there should be- there is no obligation, exhortitary reference- hoping
that all members base their SPS measures on standards that have been provided for by
international bodies. What is meant by “based on”? try and understand there is firstly a laege
number of intl measure tahts appky to sps. For food, important is standar and guidelines by
codex commission. Codex almentarious commission. Gives us worldwide standards for food
safety. All these levels of food safery given by codex. So suppose there a codex standard that
says meat is safe unless it contains so and so antibioitics. Reference under 3.1, to the extent
possible, members should also base their standards on these codex standards. Mirroring the
codex standards. That expectation doesn’t cast illegal obligation on members to base their SPS
measures on international standards.
3.2- when it said that members have to base on international standard, advantage they get when
they base on intl standard. Are expected to-3.1. 3.2- where conforms to intl standard shall be
presumed to be consistent. If the codex standard says that meat shouldn’t contain the following
antibiotics and india says the sae thing then this measure conforms then this measure of India
shall be presumed to be consistent with SPS and GATT. Is there a difference between basing
ur measure in 3,1 and conforming in 3.2. first para- the law says that the measure is expected
to be based on and if u conform (2nd para) protection.
Can u base but not conform? Assuming that it is possible, what is the effect then? There is no
obligation to base on international standard
3.3- extremely important. Its possible that u think that the international standard not good
enough. Doesn’t give as much protection. There is a possibility that there is a situation where
international standard is not protective enough. And I want to protect some more. If that is the
case then I may take a measure that gives me a higher lvel of protection provided there is a
scientific justification and then the rest of para badly written. Provided there is a scientific
justification AND the (or as a consewuence, or doesn’t make sense don’t read as or but and) it
ahs been done in compliance with provisions of article 5. U may take a measure that provides
a higher lebel of protection and is in conformity with article 5.
We have reached a position that members can conform and get a benefit.
3 requiremnts
1. Higher level of protection
2. Scientigfic justification
3. Put in place after conforming with requirements of article 5.
Article 5 gives method of doing a scientific justification. Sir- A member may take a SPS
measure which is not based on international standards, if the member wants a higher lebel of
protection than what is given by the international standards. In taking such a SPS measure, the
member must comply with requirements of article 5. Finally, last sentence of article 3.3- such
a measure should not be inconsistent with any other provision of SPS agreement. We can make
a couple of initial remarks about article 3. We have been able to come to a siatuons: 2 meausre:
Measure based on international standards Not based
What is the meaning of “based on”? Do not enjoy presumption of consisteny and
What is the meaning of “conformed to”? there is an evidentiary obligation on the party
What is the difference between article 3.1 taking such measure to show that it is
and 3.2? consistent with SPS agreement. You are
Most imp question- It is clear that a measure demonstrate that they are consistent by
tha conforms to international stnadards showing conformity with Article 5 of SPS
enjoys a preumsption of consistency with the agreement.
SPS and GATT. Is it possible then that an
SPS measure maybe “based on” an
itnenratinal standard, and yet doesn’t
“conform to” the international standard? If
this is possible, will such a measure enjoy a
presumption of consistency?

Is the measure based on international standard? If not based, 2 possibilities- unilateral SPS
measures that are based on scientific evidence.
3rd type- sometimes its possible that I wanna take an SPS measure, ebut scientific evidence
insufficient. Then provisional SPS measure based on precaution. The scientific evidence at this
point of time insufficient, but may becomes sufficient. Can u take a measure precautionarily?
When the scientific data insufficient can u take a measure? Precautionary principle- of envt
law which say sthat u must look to protect envt and lack of scientific evidence no exuse. This
rule doesn’t apply to SPS. Here- if u take a measure where scientific data is insuffcieint,
discouraged to take measures unless scientitic uncertainity.
Food safety- codex
Animal health and zoonoses- intl office of epizootics.

Unilateral measures based on scientific evidence- 3.3 measures- must give a higher level of
protection and must largely conform with article 5. There are a set of principels that u must
meet.
Article 5- concept of risk assessment. Point 1- read it with second para. Read the first three
articles together. First two paras- in order to take an SPS measure (taking an SPS measure
which is not based on intl standards- unilateral measre) must be based on risk assessment and
that must be based on available scientific evidence. 2 points that is. Risk assessment-
apprehending the harm that is going to be caused to plant, animal and human life. Assessing
the risk- to give us a sense of the potential adverse affect and the likelihood of entry of pest or
disease. Either to establish potential or likelihood of entry, establishement, or spread of a pest
or disease. Risk assessment- how likely is it that a pest or disease is going to come into my
territory. Pest diseases- like blight in apples, or rodents, some bacteria from mud. If we are
looking at SPS measure, the fear it is looking at entry- then likelihood- whether likely that a
pest or disease will enter. Two types of risk assessment- one is of likelihood and potential
adverse effects (to food stuffs- like injectives, additives and contaminents- lower lvel of risk
assessment here). We are getting at that there may be a risk to plant, animal and human life.
Risk assessemtn- inlu establishes whether there is a chance. Risk assessment meant to establish
that there is chance. Concept two- level of protection. This brings us to concept of lvel of
protection. How much tolerant is a country of a risk? That leads us to a set of other difficult
questions. Remember that the amount of risk is a separate question from risk tolerance.
Interesting bit of law- level of protection. 10% chance that u get cholesterol from eating lays.
U eat it only once a month. So only a little risk averse. Not entirely. A country may set its level
of protection to risk. May say I am completely risk averse. Another may say I am somewhat.
3rd might say I don’t care. SPS agreement has nothing to say about the level of aversion that a
country has. Only requires that a risk itself be based on scientific evidence. After that the level
of risk that I choose, is for me to decide. The only requirement in this contained in 5.4. this is
a general statement that doesn’t cast a legal obligation itself. Crystalised in article 5.5 and 5.6.
Recap: now dealing with SPS measure which are unilateral. Come to the conlusin:
1. Such an SPS measure must be based on a risk assessment and that risk assessment myst
establish the risk through available scientific evidence.
2. Once the risk is established by a risk assessment, the country may choose its level of
protection. Its upto the country to determine the level but in doing so it must minise
negative trade effects.
3. Negative trade effects minimised bu the following two ways:
a. It is shown that the measure doesn’t constitute an arbitrary or unjustifiable or a
disguised restriction on international trade.
b. The measure is no more trade restrictive than necessary in order to achieve the level
of protection.
There is a unilateral SPS measure- show that compliant with MFN an dnati treatment, risk
assessment and show level of protection and selectin the level no artb to international trade and
not more restrictibe than is necessary. 3 big cases are there.
Case 1: EC Hormones:
Case 2: Japan- Apples
Case 3: India-Agricultural Products…recent decision on avian influenza. Third one sir will
summarise.

EC Hormones: have to read: para 1-7,110-125,157-246.

In taking a unilateral SPS measure, must have establishment of risk through a risk assessment.
We know that that risk assessment must be based on scientific evidence. Word scientific
evidence doesn’t imply only laborities methods and statistical analysis. Takes into account
other ways of establishing probability as long as they are reasonable and objective. Objective
evidence necessary. Mostly will be based on scientific data in the traditional sense. There may
be scientific evidence of other types also. It is also necessary that a measure is based on a risk
assessment which contains scientific evidence. There is no obligation on u to conduct a risk
assessment.
EC hormones: always clash on scientific evidence.
There has to be some scientific data for risk assessment. What does it show? That there is a
risk or give percentage of risk? Or say that there is a lot of risk, medium risk etc? an absolute
quantification not necessary. Must identify what the risk is. Must be able to say that food that
contains this anti-biotics can cause cancer. Must be able to identify the adverse nature of risk
an dmust also give a sense whether likely it will happen or potential. Finally, most importantly,
the risk assessment must also be able to say that what measure will reduce the risk in what way.
Lets consider example of chips again. Packet of chips contains trans-fat capable of causing
cholesterol. There is a risk. Scientific data shows so. What measure will affect the risk in what
way we need to know. Banning these chips will continuously reduce problem of cholesterol.
Will it take care of cholesterol completely? Should be able to comment that by completely
banning chips risk goes down by 0.01% also. There can be different scientific studies also. The
existence of risk assessment is extremely important ot taking a SPS measure when no intl
standards. Once we cross this and say that this is based on scientific evidence now only have
to sgow MFM and national treatment and the other things discussed earlier.

26th October, 2016

Financial contribution word- can have various forms. Some cash forms- either give some
money to help production process or give cheap loans- at lower rates of interest. Or give loan
guarantee. All of this in cash. Kind forms- to give contribution in terms of making available a
good or service not easily available. Kind form- subsidies given in form of making available
goods or services. Some subsidies- don’t have to do anything with prodn process at all. Govt
doesn’t interfere. It offers to u what is called market price support. When govt intervenes to fix
market price, that is called market price support. All of these subsidies have an influence a
prodcer decision and enabling him to produce more. Economically can’t be shown that
subsidies bad or good for economy. Fact that I give subsidy here, means that subsidsed product
may be sent to another country cheaply. It’s impossible to fix economically the goodness or
badness of a subsidy.
What the law on subsidies says? Agreement on subsidies and countervailing subsidies. Two
possibilies of subsidies: imports into countries being driven out, or excess supply of dom
product which will be exported. Two levels of relief or remedies available to countries: one is
to complian against subsidies to WTO. Another scenario: country facing flurry of exports from
u, I can still complain to WTO and say this bad- track 1 remedy. Track 2- remedy. When I am
facing a flurry of subsidised import in my country. I have a track 2 remedy which is to erect a
wall at my border. That is, charge a tax at all subsidised import. Most countries when faced
with a surge in imports- go with track 2. Which lets them take decision by themselves. Track
1 less popular.

2 bigger concepts about subsidies:

1. Benefit: the q is whether the subsidy makes something available to the beneficiary of
the subsidy? That difference is the benefit.
Addl requirement to def of subsidy: requirement of specificity: rule of s motivated by the fact
that only specific subsidies have a real impact in distorting the market. General subsidies on
the other hand: tend to not distort the market in producing consumer decisions. We are
concerned with subsidied given to specific commodities. The requ of S says: it must be shown
in order for subsidies to be covered by the agreement: that the subsidy is granted to either a
enterprise or an industry or a grp of Es or Is. Subsidy shouldn’t be generally available.
Generally available ones: not covered by the agreement.
If the practical idea is to limit a grp of industries: still a specific subsidy. If in app of subsidy
measure found that enterpresies in a type of sector getting it, it will be found to be a specific
subsidy. Another kind: geographical specifity. Idea of encouraging industrialisation in a region:
a form of specificity. Geographical one not enough. Will lead to de facto. Example of geog
one: SEZs, badhi, etc. in order for a subsidy to be covered by a measure: financial contribution
in the form given under aticle 1a, specificity under article 2. There is a colloquial way of
designating subsidy: this method not in agreement itself. It’s a old way. Its colloquial, but
called: traffic light system for understanding subsidy. Red subsidies: presumed illegal/are
prohibited. If u give form of this one, u shall be complained against and u will bne complelled
to remove it. Yellow light: actionable subsidies: are bad only if they cause a material adverse
effect or serious prejudice to the trading interests of any other member and third: green light
ones: permitted subsidies. Actionable: can be challenged under track 1. Any country may take
a track 2 against red or yellow subsidies. Imposing a counter-valiling duties: done against
yellow or red subsidies. There are certain subsidies: which are red and which are green.
Everything in between yellow. Most subsidies in the world: ello. Red: granting of a subsidy
made contingent upon export performance or use of domestic content. Green ones: general
research and development subsidies. ASCM mein de rakhi hain. So, basically these are genrally
available: R and D ones. Govt built a big industrial park. They didn’t have to spend so much
on setting of infrastructure. Green light subisidy: computer example. no action can be taken
against it. now think of red subisdies: a subsidy contingent on export performances. Use of
govt muscle to purposely drive out stuff of other countries. If subsidy made contingent on
domestic requirement.
Actionable groups of subsidies: yellow ones that is.
Green light: article 8.

Country a, b and c- car example. india financially contributing to car A. country C wants to
bring an action against country a. only option: track 1. They will show that not a green light
subisidy, not a red light one. This is an actionable subsidy. To bring a case agiasnt it, country
c must show that actionable subsidy that the subsidy has an adverse effect on their trading.
Adverse effect a legal term and therefore needs to be defined. Adverse effect consists one of
the following
of the three things:
1. Injury to domestic industry
2. Nullification or impairment of benefits
3. Serious prejudice
Country B: it’s domestic industry is going down and seeing surge in imports. What wil it do?
2 remedies available to it. track 1 and 2 availab.e 1- go to wto and this actionalb subsidy causing
adverse effect and can ask country a to remove it. track 2- use a counter vailing duty- here at
the border if the original tariff was 20% customs, cars A. as soon as car A price gone up, people
inside the country will start buying domestic cars again. Up to injured country to choose track
1 or 2. Also possible to adopt both at the same time. There are some requirements for that.
What’s really happening: things we have to clearly understand. This is largely the scene. Track
1 especially imp to country c as it doesn’t have option of 2. 3 possibilities: 1. Injusty to domestic
industry. Country b can say that because of subsidy, my domestic industry has been injured. Pt
2: most interesting. Called nullification and impairment of concessions: particularly applicable
to country C and not B. at the time everyone entered into wto treaty, each country conferring
benefit on the other country. Country C will say: that because of wto agreement, I knew I can
send cars. But now I can’t. all that concession has ben nullified or impaired- ur subsisdy has
caused an adverse effect. 3rd: serious prejudice: some serious harm to your economy not
necessarily captured by the first two. Layers of things that have to happen.
Saudamini: it is highly possible that subisidies that appear like green light ones, can have the
same efgect. 2 things: if a green one, properly a green one: shouldn’t have any of these effects.
Empiralca data will show that nes which are R and D, tend to not affect production in a way
that that increase in pridn will have an adverse effect on someone else’s ecnomy. Can a subsidy
be disguised as green light? Common in agriculture sector. In agriculture- boxes instead of
light. Red amber and green. Box shifting- purposely classify something as good when it isn’t
good. It is possible to classify subsidies as green when they aren’t. done by a trick. Not common
in industrial sector, but common in agricultra sector.
Green light subisides not available across the board. They are called non-actionable subsidies.
Members agreed that they will be non-actionable. Small factual correction. Counter-vailing
duties: country B has an interst on imposing a counter-vailing duties. Only subsidised cars from
country A will be taken into account. It is possible that any given point of time, country B is
facing a surge from not only country a but b also. The basis of the counter-vailing duties: to try
and offset the subsidies. Counter-vailing duties themselves can turn out to be an extremely
distorting thing. In order for a counterveiling duty to be valid, it must be pointed. Doing no
more than offsetting the injury that is caused by import of a subsidised product. In order to do,
first identify the domestic industry. Require that u use some principles of like product analysis.
The term like product is of the narrowest def possible. Cars, pens, etc. the scope of this
agreement is much narrow. First identify what the domestic industry is. Establish- what injury
is caused to this domestic industry. What is the injury that is caused to the domestic industry
by virtue of subsidy? we must first:
1. Quantitivative analysis of what is the amount of benefit that the subsidiary conferred
initially on the beneficiary by the subsidy itself.
2. Nature and amount of injury caused or it is the quantittiative determination but is of..
3. Causal relationship be established between subsidised import and the injury caused.
This is an important bit of the analysis that we must take care to understand. If we look
at the agreement, there are about three articles that are really detailed and how to go
about this analysis. First thing u need to look at: article 11 procedural. Article 12:
procedural. Article 13: also procedural. Article 14: first quantitativel analysis which is
calculation of benefit. Article 15: establishment of injury and causal link. These articles
are very long, but not complex.
ARTICLE 11: will tell u a little about the policies of. Lobbying done at domestic industry.
Coutnervaliling duties are imposed, after the country imposing it, conducts an investigation to
establish that such gorunds to impose the duity exist. In order to conduct an investifation. It is
necessary as per the agreement, that the domestic group which. It is only upon considering this
application, if the brit aruthorites come to the conclusion
Two stages:
Before it gets to off investigation, the domestic authr must prima facie estblih that there is a
ground to impose. This makes the process fairly tough. A country first needs to have an
application. Before u get to investi. The authority that imposes the counter vailing.
There was a public authority in india, that gave a subsidy. that benefit caused a rise in imports
into Britain. This rise in imports caused an injury. Therefore, this benefit must be offset by a
cv duty at rate Y.
US Carbon Steel:
Article 15:
1. Injury cannot be presumed. In order to establish with help of positive evidence, what
sort of evidence u will be looking at? A sharp decline in domestic sales for example-
def an indication of injury. Drop in value of sales or significant depression in price. All
of this must be combined to show that there is an increase in imports. Say, there is a
10% import of cars from India. Even jaapn subsididing at the same time. China also
subsididing. Britian- now facing a surge in imports frm these countries. This is causing
injury to its domestic industry. In order to measure, the surge in measure, can it say that
the net import has increased? Will it have to do it nation by nation? Right answer- that
not the case. Every subsidy diff, so the amount of counter-vailing duty diff. permissible
to combine the. Provided however that individually they are above deminimist value.
U have to begin at a substantial number. If all three countries a substantial increase.
Other question: the question of the causal link.
Causal link- how do u show? CVD- is a political process in its commencement and is a
quantitative and diff economic process to complete. Despite this u will notice, that are
100s of cvd’s imposed across the world. Cvd’s- extremely popular form of remedies.
Us carvon steel- us process of investigation brought to challenge by india.