5 functions of WTO:

1. Facilitation, implementation, administration and operation of the trade subject [Art.

3.1 of Marakesh Agreement] – help in operation of annexed contracts etc.

2. [Art. 3.2] WTO is “the forum” and “a forum” for negotiation because 2 types of

negotiation: (1) those issues in the WTO text Eg. A. 20 agriculture liberalisation (2)

those issues which are new – wanted by the members Eg. Trade facilitiation, trade

and investment, regulation of counterfeit goods etc.; the members decide the new

issues and bring it to the WTO and then 2 bodies determine it thereafter (1)

ministerial conference (2) general council; is the text prepared by the ministerial

conference on the basis of a new issue brought in by some members binding on all

members? Generally not binding – ministerial declarations are the path for

negotiations to take place; however there is one case US-Clove Cigarette case in

which the Appellate body said it is binding and this is an aberration; Para. 6 of Doha

which deals with public health issues was the reason for this aberration.

3. Providing dispute settlement mechanism: WTO through DSU under Annexure 2 of

the Marakesh Agreement; they want to make the WTO Text binding in order to bring

security [rights and obligations of the members are protected by the treaty; every

member is equal] and predictability [continuity and uniformity; in terms of market

environment to know what the rules are in another country B that country A may want

to trade with; law interpretation remains the same] in terms of multilateral trading

systems; WTO is the central pillar for the security and predictability.

4. WTO is providing transparency in terms of TPRM; it is a special agreement under

Annexure 3 – Trade Policy Review Mechanism to check periodically [2 years, 4 years

and 6 years] that there is conformity with the rules; external agency is the
 TPRB[ody]; a country has to submit a report and that is reviewed by the WTO and

then they also make their own report; then they sit and discuss and ask questions.

5. To bring coherency to the multilateral trading system [A. 3.5 – no trading system can

exist isolatedly] – Bretton Woods Conference: requirement for institutionalisation of

international policy to regulate currency (IMF), reconstruction of the world (World

Bank) and coherency (IMO but this did not work) so WTO was created.

Structure of WTO:

Apex body: Ministerial conference is the highest decision making body of the WTO and it

sits every 2 years – till date 11 meetings have taken place; next one is in 2020 is Astana,

Kazakhistan [162nd member of the WTO]; single undertaking form of discussion: the agenda

must be accepted wholly or rejected wholly

1. 1996 – Singapore Ministerial Declaration: 4 developed country issues: (1) trade and

competition (2) trade and investment [trade related investment measures] (3)

transparency in govt procurement (4) trade facilitation; developing countries were

then unaware of the working of the WTO so there were no issues relevant to them;

123 countries – negotiations have been stalled on 1 and 2; 3 has progressed and 4 has

an agreement framed and implemented; in 2004 the WTO resolved that the Singapore

issues will not be discussed till the Doha issues are resolved – postponed indefinitely;

(1) there was a committee under the WTO called the Working Party for understanding

the relationship between trade and competition, with open membership; however, by

1997 this committee’s work was vehemently disagreed with by the developing

countries; developed countries proposed Trade Related Anti-Trust Measures

[TRAMS]; however this also has not been resolved due to the 2004 resolution; (2)

there is no investment treaty in the WTO as developing countries see it as interference

 and it could lead to situations like the British Raj – thus they want free investment

treaties; Calvo doctrine [Argentina] – Municipal Courts will have jurisdiction over

investment matters but this would lead to a bias of the Courts in such matters;

contrary to that is Hull formula [US] – neutral law wrt investment matters with a

neutral court such as ICSID (1964); in this matter, also the WTO set up a committee

called the Working Party for understanding the relationship between trade and

investment matters – here also the developing countries did not want to expand

TRIMS (3) Uruguay round of discussion lead to a plurilateral agreement on govt

procurement [GPA1]; thereafter there has been 2 more GPA2 and GPA3; current

GPA3 of 2014 has 47 members – India is not a member but an observer; (4) trade

facilitation agreement - further, the issue of trade facilitation was fragmented and they

entered into a treaty on this basis which is against the single undertaking form of

discussion; the agreement was entered into in 2014 (Bali discussion) coming into

force from 2018 after it was opened for signatures in 2017 (Nairobi discussion)

2. 1997 – Geneva MD: regulation of IT agreement; this treaty is informal; it came into

force due to India’s demand

3. 1999 – Seattle MD: this was a complete failure – no declarations due to NGOs

protests, farmer lobbies, consumer lobbies

4. 2001 – Doha MD: WTO tilted in favour of developing countries; the aim was to bring

reforms to the WTO keeping in mind the developing countries’ interests; they wanted

special and differential treatment in the WTO and in all agreements of the WTO; they

also brought cotton, fisheries, customs and agriculture related issues into the picture;

agricultural issues was highlighted by this – “Agriculture is a holy cow” not to be

touched i.e. all countries were protecting their agriculture vehemently; first thing was
 to reduce subsidies for agriculture in European countries in order to integrate the

agricultural issues; hence, this final issue brought the discussion to a halt

5. 2003 – Cancun MD: this was also a complete failure – no declarations due to a

deadlock between the developed and developing countries

6. 2005 – Hong Kong MD: any unit with their own external trade policy can be a

member of WTO thus HK is a member; reiteration, reaffirmation and reassurance of

Doha MD; except that LDC was given more preference by this conference

7. 2007 & 2009 – Geneva MD – no other MD in 2011, 2013 due to deadlock on Doha

issues

8. 2014 – Bali MD: (1) food security – India forced WTO to take up these matters as we

did not want agriculture to be liberalised as per the terms of developed countries (2)

trade facilitation agreement – was negotiated; the commerce minister was very happy

about it; but then after the elections, the current govt decided to not join the TFA in

2015 and other countries believed it would have severe effects on WTO; however, in

2017 we signed the TFA without reason

9. 2017 – Nairobi MD: (1) cotton (2) agriculture (3) special safeguard measures for

developing countries (4) food security and export subsidies

10. 2018 – Buenos Aires MD: (1) fisheries and subsidies (2) e-commerce (3) small

economies (4) trade and gender related issues (5) TRIPS non-violation complaints and

situational complaints

Does the WTO take care of developing countries’ interests? To a large extent, especially after

Doha MD, their interests have been considered. Before Doha, the WTO was dominated by

the developed countries [criticism]. Initially it seemed like the purpose of WTO was

recolonisation and the developed countries wanted to use the developing countries as markets.
Till 2005, WTO was dominated either by developed or developing countries. After Hong

Kong, the LDCs were given importance in light of (1) pharma patents (2) cotton.

Have the MCs led to further liberalisation of trade? No. “Further” means extension after the

Uruguay round. But agriculture and environment have not been liberalised further. However,

the IT Agreement and TFA is the only sign of further liberalisation of International Trade.

Cooperation among countries has increased manifold.

Is multilateralism still considered to be charming in light of international trade? No. Contrary

to multilateralism wherein there are no MFNs, there are 4 phases of regional trade

agreements which have taken over, post the Doha MD. In 1950, GATT failed, so we got EEC.

After the failure to complete negotiations at Doha, many mega [in terms of numbers and

subject matter]-regional TAs emerged [CPTPP]. Now, all countries are a part of RTAs [last

to join were Japan and Mongolia]. RTAs are considered to be termites for multilateralism.

RCEP is an RTA which has more than one superpower so it is likely to have internal issues.

632 RTAs; India has 40 – the first being with Sri Lanka in 1998. They are important

exceptions to the MFN principle, and are regulated by the WTO under A. 24 of the GATT

Framework.

Are RTAs trade creating or trade diverting agencies? Within these blocs the trade cooperation

is increased but between different blocs it would be trade diverting. Spaghetti bowl – RTAs.

Hawkinns – “I like all isms if they lead to trade liberalisation”

 Turkey Textile Case: India won; RTAs are important exceptions to the MFN principle

of the WTO; not violations

  Brazil – Soft drink Case: Jurisdiction between RTA and WTO for disputes is not in

conflict; WTO DSM will prevail over the RTA DSM; under A. 23 and 6.2 of DSU –

WTO has compulsory and exclusive jurisdiction over all international trade issues

 US-Guatemala Trade Case: no inherent conflict between RTAs and WTO

 Brazil-Reiterated Tyre Case: no inherent conflict between RTAs and WTO

Have new issues [not in Uruguay round of discussions] been taken up in the MCs? Attempt

has been made to include the new issues but there has not been much success.

General Council: day-to-day affairs of the WTO; each country has one vote; they have a

separate chairman; it presides over 3 council: (1) Goods Council – supervise Trade Input

Agreements (2) Services Council – negotiate service matters (3) TRIPS Council – oversee

TRIPS related items; additionally, it also works as the Trade Policy Review Body [own

chairman] and the Dispute Settlement Body [own chairman]; does not deal with controversial

matters, it is lower in hierarchy

Committees:

1. Special Committees: (1) BoP (2) Trade and Development (3) Budget, Finance and

Admin; directly supervised by MC

2. General Committes: every special agreement in the WTO has a committee; Eg:

Committee on Rules of Origin

3. Committee on Trade and Environment

4. Committee on Regional Trade Agreements

Working Parties: from time-to-time WTO establishes these special units to look into very

special work

Philosophy of the WTO:

 1. Trade contributes to the growth [real income] and employment – trade led growth is

good for the economy – it is the engine through which there is growth in the economy

and ensures employment – increase in export-imports [no trade imbalance like in

India; India therefore had to establish SEZs and Make in India – WTO has not helped

India in light of this]

2. Trade liberalisation is to be achieved through reduction of tariff and non-tariff barriers

– the role of the govt and its interference should be reduced with lesser rules and

restrictions – no tariff walls by charging less duties at the border and it will increase

the flow of goods – non-tariff barriers: no quota, no international standards imposed,

customs valuation’s mismanagement or arbitrariness in favour of few countries etc. –

these should also be reduced

3. Predictability and security of trade through binding commitments increases trade –

binding commitments are rule-based systems which are enforceable – any promises

for reduction of tariffs must be followed in order to be secure – they should also be

predictable

4. Well-defined rules relating to all matters pertaining to trade will have a positive

impact on trade – well-defined rules take into consideration every country’s votes and

it is against the power-oriented approach/system

Decision-making process in the WTO:

Importance of decision-making: (1) Role of the stakeholders must be there and given

importance to i.e. democracy, in order to ensure accountability of all members (2) it ensures

representativeness
Does WTO follow these principles of good decision-making? Yes, they are distinct from UN,

IMF etc. which take into consideration a weighted average voting – they follow the one

country-one vote – this is to give them all equality

A. 9 of the Marakesh Agreement: Source is the system of consensus in the GATT platform;

in 1985, the US wanted the postal-ballot system but the countries did not favour it right

before the Uruguay round of discussions

What is consensus? Decisions are taken unanimously [footnote to A. 9.1]; the preferred

method for decision-making is consensus. If consensus is not achieved, then the countries can

use voting [positive]. It is propagated by developed countries because they are scared of

developing countries.

Consensus is required except in cases or reverse/negative consensus [A. 2.4 of the DSU

Agreement] i.e. every country has rejected a proposition then there is negative consensus; if

even one country does not want to reject it, there is no negative consensus; used for: (1)

establishment of panel (2) adoption of panel report (3) adoption of the appellate body report

(4) authorization of sanctions i.e. retaliation, cross-retaliation, counter-measures etc. – Brazil-

Upland Cotton Case

A. 16.1 of Marakesh Agreement: US Gasoline case – decision does not refer to judgments –

dissenting opinions are not allowed; establishment of panel is a decision, but their judgments

are not decisions and these judgments must be unanimous

Voting procedures

Power of interpretation is given to the Ministerial Conference and General Council – A.

9.2
Countries can ask for a special meeting for interpretation and then there shall be voting and it

should be adopted by 3/4th majority of the members and any such interpretation shall be

binding on all WTO members; only once this has happened wrt “currency manipulation” i.e.

undervaluation of currency [Barred by A. 15 (4) of GATT 1994]

Decision to waive an obligation on a member – A. 9.3

By 3/4th majority a country can have waiver of any WTO obligations; it must be periodically

reviewed every year and reapproved 3/4th majority

Decision on accession – A. 12 (2)

To accept new members, by 2/3rd majority of WTO MC and GC is required; 41 members

have been acceeded to the WTO till date

Decision on amendments – A. 10

Must be done by 2/3rd majority of MC and GC; however the exceptions to this are: (1)

decision-making procedure (2) MFN and schedule of concessions (3) A. 2.1 of GATS – MFN

(4) A. 4 of TRIPS – MFN and IPR; these are the basic structure of the WTO so they require

unanimity in such decisions wrt amendment of these 4

Decision on budget & financial regulations –

By 2/3rd majority; no individual contributions are allowed; only govts can contribute

Accession of members – A. 12

A. 12 is based on A. 32 of GATT, 1947;

A country/state or a customs territory i.e. with its own external trade policy [HK] can be a

part of the WTO.

There is an informal document which also discusses accession of members.

2 ways to join WTO exclusively:

1. A. 12(1): Original membership – in the UN it is called high-contracting parties;

opened when the WTO was about to come into force i.e. till 1st January 1995;

obligations: (1) ready enough to accept the terms and norms of the WTO agreements

and (2) ready enough to provide concessions and commitments for goods and

services; only open to the contracting parties of the GATT; signed Morocco Protocol

which later became the Marrakesh Agreement; Punta del est Declaration: Uruguay

rounds of negotiations started with this which declared the aims of the negotiations,

and they then became the aims of the WTO

2. A. 12(2): Acceeding membership – open indefinitely; negotiations for joining takes

place at 3 levels: (1) multilateral level i.e. at WTO level by establishment of working

parties (2) bilateral i.e. with each country individual for the purpose of schedule of

concessions [an item wise specification of fixation of tariffs [bound] for the purposes

of import-export – A. 2 of GATT 1994] (3) plurilateral – in some places when

countries want extra preference – in terms of agriculture and services – agriculture has

been integrated into the WTO but half-heartedly; same obligations are original

members (1) prepare for acceptance of all rules mentioned under the Marrakesh

Agreements and all annexures (2) identify the relevant WTO provisions and the steps

required to be taken by you in the future (3) commit to bring all rules and procedures

in line with WTO guidelines; goes to the UN Depository under A. 102 with the

signatures; 41 countries joined

3 pillars of WTO Agreement on Agriculture: (1) market access – opening market for foreign

agri products on the basis of non-discrimination (2) domestic support – government subsidies
allowed only for developing countries (3) export subsidies – red-light subsidies i.e. they are

not allowed; argiculture is a holy cow i.e. not to be touched as it is too precious for

liberalisation [Doha MD]

Trade Related Technical Assistance [TRTA] Committee: informal arrangement by WTO for

providing assistance to LDCs to become WTO members wrt the working of the WTO;

sometimes even for developing countries; it helps in providing information on (1) WTO

Agreements and (2) developments in the organisation; Accession to the WTO: Procedure for

Negotiations under A. 12 – WT/ACC/1; in WTO there is a separate Accession Division to

deal with these matters

China and Russia took 15 years to enter into the WTO; China applied for GATT in 1986;

entering into GATT was very simple but it was rejected for China; China was desperate to

enter as they wanted to influence the Uruguay round of associations; even after that they were

merely allowed to observe; China finally became a half-member in 2001 till 11th December

2016 i.e. treated as subsidised country or non-market country;

Process:

1. First contact: representative of a country will meet the Director showing their interest

to join, seeking information formally to join the WTO; the contact point is the

Director of the Accession Division

2. Application for accession: “I have the honour to inform you of the wish of the

applicant to acceed to the Marrakesh Agreement establishing WTO…” and the

annexed multilateral trade agreements as per the procedure of A. 12 of the agreement;

for plurilateral, there must be separate mention of it; it is submitted to the Director-

General of the WTO

 3. Examination of application and establishment of the working party: After preliminary

examination, the GC establishes a working party; from the time of establishment of

the working party, the country becomes an observer; working party has its own

chairman with open membership but the size depends on the country’s importance in

world trade; for customs territory, the working party must see if they can maintain

their external trade policy or not

4. Trade memorandum: complete trade policy of the country including the laws

governing trade is required to be submitted to the WTO working party in order to

check whether any laws are not in consonance with the WTO policy; any

commitments should also be specified

5. Preparation of factual summary: this is prepared by the working party wrt all

developments, negotiations etc. and given to the GC

6. Negotiations: takes place at 3 levels: (1) multilateral level i.e. at WTO level by

establishment of working parties (2) bilateral i.e. with each country individual for the

purpose of schedule of concessions [an item wise specification of fixation of tariffs

[bound] for the purposes of import-export – A. 2 of GATT 1994] (3) plurilateral – in

some places when countries want extra preference – in terms of agriculture and

subsidies – agriculture has been integrated into the WTO but half-heartedly

7. Accession protocols: country mentions (1) rules (2) customs tariffs: ad valorem

[value], specific [volume] and mixed [both] (3) agricultural support and export

subsidies (4) service protocol; China-Rare Earth case and China-Raw Materials case

deal with the accession protocols

China was a non-market country i.e. more govt regulations; however since 11th December

2016 (15 years of half-membership) they are a market country

WTO Plus Countries: minimum standard; but non-discriminationally countries are allowed to

rise as far above the minimum standard as they wish

WTO Minus Countries:

 Well-known marks are accepted by TRIPS and WTO; use of “Khadi” name was not

allowed for Germany as opposed by India

 Alphonso mangos from India were banned in EU due to the appearance of flies;

Russia supported India; these claims were successful under the WTO due to sanitary

and phytosanitary measures [SPS issues]; you need scientific backing for such claims

 Bangladesh was building the Taj Mahal; UPA govt objected to it; Bangladesh said

there is no IPR; then India said try b

Fragmentation of International Law

WTO as a Treaty

Monism-Dualism

India is a dualist state.

Kelsen [Principles of International Law] is a propounder of monism which believes (1) both

domestic and international law form part of the same legal order (2) international law is

directly applicable in the country (3) in case of a conflict, international law shall prevail.

Anjilotti is a propounder of dualism which believes that (1) domestic and international law

are different branches of law (2) with different sources (3) they are both exclusive (4) they

are supreme in their own spheres (5) international law regulates the relationships between

states and domestic law regulates state and individuals or inter se individuals i.e. different

scopes (6) in case of conflict, domestic law shall prevail.

Contemporary practices: (1) a state cannnot be excused from performing domestic

obligations due to international obligations as state acts for implementation of international

standards only (2) states are duty-bound to implement international treaties in their domestic

sphere (3) domestic law of the states determine the effect of international law on domestic

law.

In light of this, WTO is a treaty law as per A. 1 of the Marrakesh Agreement. In this context,

customs barely play any role. WTO Agreement is a binding treaty for all its members as per

A. 2.1. WTO members are required to ensure that all their laws conform with the WTO

obligations as per A. 16 (4).

For India, A. 51, A. 73, A. 252 and A. 253 are used for implementation of international law.

In Kiran Niveditta v. State of Maharashtra (2010), Bombay HC said that WTO law and

municipal law are distinct and since WTO law is not the law of the land it is not applicable –

State govts cannot be asked to implement this as per A. 13 by the Central Govt. In

Commissioner of Customs v. GM Exports (2016), the Supreme Court ruled that A. 10 of the

ASCM prevails over municipal law, and in fact asked for implementation of this more

stringent law than the WTO law. In the Novartis case, A. 3 (d) of the Agreement was

discussed and then the Supreme Court held that TRIPS is not the law of the land and in case

of conflicts, Indian law will apply.

In USA, under A. 6.2 of the US Constitution: International law is the law of the land. From

the GATT 47 era, it was clear through executive notifications that GATT is not the US law.

After the WTO law came into being, the US being an important player enforced a URA Act

under which in A. 102, WTO law was stated to not be the law of the land and hence, people

cannot use it personally. This has not been challenged, but if it is, the Constitution shall

prevail. In Footwear Distributors and Retailers of America v. US, the Court held GATT and
WTO law is not the law of the land. In Hyundai Electronic Co. Ltd. v. US, the Court upheld

the same thing. The only difference between the two is that the former is pre-WTO, while the

latter is post-WTO. Therefore, although US seems to be a monist country, it is a dualist wrt

trade.

Languages and WTO – A. 16

English, French and Spanish are considered to be authentic languages. A. 33 of the VCLT

provides that if a treaty is authenticated in two or more languages then those will be

authoritative. Read: Chile-Price Land and Safeguard Measures and EC Bed Linen Case [anti-

dumping duties on import of cotton]; in both cases, the Court read text in all three languages

but considered English finally. In EC-Conditions for Granting Tariff Preferences to

Developing Countries, the Court considered French and Spanish text over English.

Notification of Laws, Rules, Regulations to WTO: Transparency

This implies all rules have to be published; they must be mandatorily notifies to WTO in

these 3 languages only; anything else is a violation; Eg: China notifies in Chinese so

American Federation Trade Commission translates it to English and publishes it for others’

convenience.

Language acts as a barrier to international trade and often language is used to distort trade.

Special and Differential Treatment to Developing Countries

UNDP marks a country as developed, developing and LDCs; World Bank also does this;

however, the demarcation is not binding. The countries themselves mark the country one of

the 3; till now, no case has challenged this so it is understood as the correct method; non-

discrimination is to not accept the special/differential treatment according to these categories

– in WTO, developing and LDCs are provided special and differential treatment – there are
special provisions in their favour, taking into account their particular needs and interests as

per the Preamble of the Marrakesh Agreement as positive efforts to ensure they secure a

share in the growth in international trade equal to the developed countries.

 Fewer and less demanding obligations

 Longer period for implementation

 Technical assistance

Aims:

 Integration of DCs and LDCs in multilateral trading suystem

 Increase in their share of total world trade

Special measures:

 Doha Declaration – gave greater importance to DCs (1) identify the special and

differential provisions that are already mandatory in nature and to consider the legal

and practical implications for the DCs and developed countries (2) examine the

additional ways in which special and dfifferential provisions can be made more

effective (3) consider incorporation of more such provisions in the WTO rules; they

adopted the Declaration on the TRIPS Agreement and public health and this popularly

is known as implementation of Para. 6 of Doha

 Part IV of GATT 1994 – this was added on recommendation by UNCTAD in 1964

and it deals with trade and development (1) MFN (2) commercial policy (3)

exceptions; A. 38 – Aim of WTO members is to reduce/eliminate barriers to

international trade on those goods which are of special interest to DCs; the principle

of non-reciprocity – for developed countries to give concessions to DCs without any

expectations; to implement all this, the enablingclause of 1979 was introduced

 through Decsion on Differental and More Favourable Treatment to DCs and it

elaborated on this part of the GATT; it also allowed DCs to deviate from the MFN

obligations for trade relations with developed countries. How has the enabling clause

been implemented? Through a generalised system of preferences.

 A. 4 of GATT – DCs will be provided access to technology on commercial basis;

access to distribution channels and information networks; liberalisation of market

access for services of export interest to DC members with a reduction of barriers and

role of govt; 4 modes of supply services under GATT (1) cross-border (2) commercial

presence (3) consumption abroad (4) movement of natural persons

 A. 18 of GATT – special measures; work in progress mechanism:

1. Proactive measures affecting imports to regulate trade imbalance

2. Protection of infant industries [recently or yet to be established]

3. Take GATT inconsistent measures to promote a particular industry

4. Measures in a balance of payments crisis

5. Subsidies and Safegaurds – Traffic-light approach for subsidies (1) green: are

allowed as they are not distorting trade (2) yellow: to products which can hamper

so if they are hampering, not allowed but if not hampering they are allowed (3)

red: not allowed; developing countries can also ask for quotas for agriculture,

which is against WTO rules; TRQ are allowed – tariff rate quota is to fix the high

tariff and the quota with a promise of elimination of both in phases; countries

have 3 kinds of duties under the WTO against unfair trade to reduce inequalities

i.e. TRADE REMEDIES (1) to impose anti-dumping duties for max. 5 years and

then it goes for sunset review – applied on a non-discrimination basis under A. 9.1

[under S. 9 of Customs Tariff Act in India or Anti-Dumping Law of WTO if there

is no law] (2) impose counter-veiling duties against unfair subsidies – applied on a

 non-discrimination basis under A. 18 of ASCM (3) impose safeguard duties as all

of a sudden due to production in one country, excessive importation has taken

place in another country which was unexpected, resulting in serious material

injury to the domestic industry for 4 years with a provision to push it out to 8

years and max. 10 years only for developing countries – India v. Japan: India was

unable to prove that it was unexpected – applied against exporters

6. Longer period for implementation of TRIPS and Agreement on Agriculture

7. Technical assistance with regard to SPS measures [direct consumption]; TBT

measures [industrial goods] – technical barriers to trade; TRIPS [does not provide

any mechanism to protect the subject matter of patent]; Customs Valuation; DSU

– under A. 27 the DSU can help developing countries; (1) it is provided by

developed countries on a bilateral basis (2) or by the WTO Secretariat; legal aid

clinic; assistance can be sought but it is binding on the country; 42% of disputes

are initiated by DCs

8. PVFB Act: Plant Varieties and Famers Breeders Act – farmers are recognised as

breeders; Seeds Act 1966 also says the same that they are breeders of seeds; seeds

are not patented in India; sui generis method of patenting applies

Basic Rules of WTO law and policy

1. Non-discrimination – 2 types:

i. MFN clause under A. 1 of GATT 1994; it is binding which means that similar

treatment will be accorded to every country in terms of tariff, privileges, preference

etc.; give to one and given to all immediately and unconditionally; it implies that

customs clearance on like producrs will be the same, irrespective of the countries;

product analysis is a determinant cause to provide trade liberalisation and for charging

other duties; MFN is origin neutral, implying that origin is immaterial and similar
 treatment will be given in all countries; if WTO countries give preferential treatment

to non-WTO countries then it is a violation of article 1; otherwise, preferential

treatment can be given under RTAs like SAFRA; dissimilar treatment shouldn’t

distort trade and it should be accorded to all. Basic exceptions to MFN: (i) General -

A. 20 of GATT 1994 (ii) Security – A. 21 of GATT 1994 (iii) Govt procurement – A.

3.8 of GATT 1994

ii. National treatment – trade liberalisation will have no value if your goods and goods of

another country are treated in a dissimilar manner; domestically manufactured goods

and foreign marker manufactured goods after customs clearance must be treated

equally (A. 3)

2. Market Access – opening up the marker on certain conditions prescribed by WTO:

i. Rules concerning customs duties – A. 2 of GATT 1994 talks of schedule of

concessions which contains all rules, formalities, item wise specifications of countries

which are submitted to the WTO Secretariat; it includes duties that will be charged

and after submission to the WTO it becomes WTO law; all goods are required to be

valued as per customs valuation agreement which will be used to value the goods

ii. Rules concerning quantitative restrictions – A. 11 of GATT 1994 prohibits these; no

quota is allowed for import-export; India- QR case – we had to remove QRs on 1500

products; 2 exceptions (1) during critical food crisis under A. 11A (2) during a

balance of payment crisis;

iii. Rules concerning NTBs – tariff has been seriously curtailed by the WTO in the world;

NTB are barriers are in the name of standards, packaging, environment etc; tariff

barriers are preferred as they can be predicted; WTO regulates NTB as per: (1)

Technical Regulations for industrial goods under TBT with 3 pillars (i) what is

Technical Regulations (ii) conformity assessment procedure (iii) risk assessment (2)
 SPS for consumption goods; customs formalities: (i) rules of origin – A. 9 of GATT

1994 and Agreement on Rules of Origin; WCO plays a significant role wrt

harmonization of these rules; US-Coll case – meat cutting case from India to US but

since reared in US it is not Indian meat (ii) pre-shipment inspection – govt appoints

private agencies of pre-shipment inspectors to check quantity, quality and prices in

foreign countries (iii) import-export regulations with the WTO Agreement: wanted to

end the licensing by (i) automatic route (ii) non-automatic route – goods causing

danger to the safety of common people (3) Govt procurement

3. Transparency and justiciability – A. 10 of GATT 1994; it will remove the security and

predictability of trade; thus treaties must be either published by notification to the WTO

Secretariat/Committee and your own rules, regulations and procedures must be published

as well i.e. external and internal transparency; further, all rules and regulations of the

WTO are binding on all the countries as per A. 2 (2) of Marrakesh Agreement, which is

ensured by the DSU; WTO is a contractual arrangement so in case of breach, the DSU

can be approached for enforceability

4. Protection against unfair trade – 2 types of unfair trade (1) dumping – A. 6 of GATT

1994 and the Anti-dumping Agreement; dumping per se is not regulated; de minimus

dumping is not regulated by the WTO; only anti-dumping is regulated; carried out by

private entities only; intention doesn’t matter, as long as there is dumping, injury and a

causal link between the two; at least 25% of the domestic industry needs to file a

complaint; only when the domestic industry is too fragmented, there can be suo moto

action by the authority; Ministry of Commerce recommends imposition of this duty, and

the Ministry of Finance collects it – bifurcation; A. 6.11 of the Agreement: public notices

will be issued; can be retrospectively applied; data collection for determination of injury

is wrt the last 3 years; process of investigation should be between 6-18 months (2)
 subsidies – A. 16 of GATT 1994 and the Annexure 7 of ASCM [indefinitely extended] –

government interference to give discounts for exports – in such matters, counterveiling

duties are allowed – if share of trade is at least 3.27 level for 3 years consecutively then

subsidies removed; the third one is often considered to be safeguards but that is not unfair

trade but rather a trade barrier – so the trade remedies/exigencies are taken here – it is

imposed on an MFN basis – for excessive imports suddenly into a country which causes

serious material injury – industry needs structural reforms in such situations to face these

situations if it arises again

5. Trade and competing interests and values – 2 parts

i. Non-economic interests and values: A. 20 of GATT – general exceptions; this is

there under TRIPS in a fragmented manner and it depends upon the particular

kind of IPR; A. 14 of GATS

ii. Competing economic interests and values: A. 19 of GATT and Agreement on

Safeguards

6. Special and differential treatment to DCs and LDCs

GATT 1947 was replaced by the WTO and WTO principles are in GATT 1994; the

institutional agreement of WTO is in Marrakesh Agreement; first agreement for trade in

goods is GATT

3 days MISSING NOTES

Advantages of diplomatic means of dispute settlement:

1. Parties have control over the dispute in terms of positive consensus; in such a situation, it

was seen under GATT that lesser disputes were resolved [also disadvantage]; they have

control over time and procedure

2. Flexibility of procedures; too much flexibility can also be bad

3. Freedom to accept or reject a proposed settlement

4. Possibility of avoiding winner or loser situations

What are the major functions of the DSM of WTO?

They are a result of codification over time:

i. A. 3.1 of DSU – A. 3 talks about general provisions by which the DSU will be

binding; 3.1 is giving the basis; A. 22 and 23 of GATT 1994 did not mention the

panel for the DSU so it was further elaborated upon in A. 3.1; tries to ensure positive

integration of DSU with all covered agreements of the WTO for all rights and

obligations

ii. A. 3.2 of DSU – DSU is the central pillar or crown jewel of the WTO; “crown jewel”

was said by Mark Moore and before him it was John H. Jackson; rights and

obligations have no value if they cannot be enforced; DSU makes all the covered

agreements binding, instead of allowing it to be soft law; if any contracting party

violates the agreements, they can be held responsible for it

iii. Providing security and predictability to the multilateral trading system

iv. Preserving the rights and obligations of the WTO members

v. Clarification of the rights and obligations through “interpretations” as per principles

of customary international law; MC and GC have the right of interpretation under A.

9.2; DSU has the duty of clarification of such but is clarification possible without

interpretation? US-Gasoline case: dealt with conflicts between PIL and WTO law –

says WTO law cannot be interpreted in clinical isolation from PIL

vi. Mutually agreed solution as the preferred solution [MAS]; at any point of time, the

parties can request a suspension of the panel and appellate body and can ask for their
 MAS to be the solution to the dispute; MAS has to be notified within 10 days time;

most preferred

vii. Prompt settlement of disputes within a precise amount of time at each stage of the

dispute; 1st stage: consultation within 60 days; 2nd stage: panel w

viii. Prohibition against unilateral measures of any sanctions/measures; WTO is

contractual in nature so in there cannot be any unilateral measure

ix. Exclusive and compulsory jurisdiction [A. 6.2 and 23 of DSU]; no jurisdiction

provision; is jurisdiction challenged in WTO? No; Mexico-Soft Drink case: WTO has

compulsory jurisdiction on all trade matters

The participants are only the members in the DSM; no individuals, secretariat etc.; amicus

curaie – Shrimp Turtle case:

DSB

DSB is nothing but the GC; the GC has its own chairman for DSB purposes; all WTO

members are members; disputes start with one party and ends with the participation of all; in

the WTO there are 3 parties: (1) complainant [can be as many in number as desired] (2)

respondent [only one] (3) third parties [any member of the WTO with substantial trade

interests and their role is there at all stages of the disputes; even if they werent a party in the

consultation they can be part of the panel; but if they werent even part of the panel stage, then

they cannot join the appellate body stage wherein third parties are called “third participants”];

cases can be clubbed;

5 powers of the DSB:

1. To establish the panels

2. To adopt the panel reports

 3. To adopt appellate body reports

4. To maintain surveillance of implementation of rulings and recommendations

5. Suspension of obligations under covered agreements

DSB meetings take place (1) as often as necessary (2) usually once a month (3) on the request

of any WTO member; they can be viewed by anybody in the world as for transparency

Decision-making in DSB is done how? A. 2.4 makes it clear that reverse/negative consensus

works

Can panel formation be blocked? Or once it is asked for must it mandatorily be established?

This is usually asked by one member only; the blocking is possible (1) if all members of

WTO agree that it should not be established (2) if for the first time in a DSB meeting, a WTO

member is asking for the panel formation, the respondent may block it but only once; why

this arrangement? (1) for further negotiation options for the respondent (2) to prevent hurried

establishment of the panel

Panel

It is a quasi-judicial body; in the Bharat Barrel case quasi-judicial bodies are defined as

bodies created by law and they can take the evidences but evidence law does not apply and

they make decisions on the basis of the principles of natural justice; they adjudicate disputes

between parties; jurisdiction over all trade matters is there for the WTO; A. 7 mentions

“terms of reference” which must be determined by the parties for deciding jurisdiction of the

dispute i.e. the parties decide the (1) facts and (2) the legality i.e. the law; it is more of an

arbitration proceeding as compared to a court; the panel does however have limited discretion

under A. 11 of DSU wrt facts and legality, otherwise it is usually understood the panel only

decides on disputes between the parties; t here is no permanent panel

Composition: (1) it is normally 3 members (2) in exceptional circumstances it can be 5 (3)

experts can be appointed on an ad-hoc basis

Panel decides via reaching consensus; the recommendations are binding in such cases; even

though there may be dissenting reasons for the recommendations, decisions must be

unanimous

Qualifications under A. 8: basically anyone who knows trade law but not from the

complainants and/or respondent

No advisory jurisdiction of the DSU; no separate declaration of the parties related to

jurisdiction is needed; A. 1.1 – (1) covered agreements (2) plurilateral agreements (3) DSU;

not just jurisdiction but also about sources of law; Annexure 1 of DSU contains the names of

the covered agreements except TPRM which is for the basic purpose of providing

transparency among a comity of nations; only with the help of DSU disputes can be initiated;

implementation of A. 22 and 23 of GATT 1994 is what DSU is; parties can refer to more

sources [Brazil case]; DSU also used CITUS for a case wrt environment; also used CBD for

interpretation; this is purposive interpretation

3 types of complaints under A. 22 of GATT 1994 which are inherent to the DSU by way of A.

3.1 of DSU: (1) violation complaint – no locus is required and it is easy to prove that

nullification of benefits has taken place (2) non-violation complaints – has been used 8 times

and has not been successful so far – difficult to prove in quantitative terms the negative

impact of another country’s trade policy as per the following [Japan-Film case] (i) the

imported products at issue are subject to and benefitting from relevant market access

concessions (ii) the competitive position of the imported products is being upset i.e. nullified

or impaired (iii) the competitive position is being upset by the application of a measure not

reasonably anticipated (3) situational complaint – not ever resorted to

What measures can be the subject matter of a dispute?

1. Action and conduct of the private parties, attributable to a WTO member

2. Measure no longer in effect or force

3. Legislations as such – as it exists

4. Legislations as applied – interpretations

5. Unwritten norms or rules of a member

6. Ongoing conduct

7. Measures by regional or local authorities

A matter must be looked into factually and legally by the Panel; if a Panel doesn’t take our

evidence, then what?

8th February NOTES

Who represents a country in a dispute?

The regulations are silent on this matter of representation; there is no pre-Uruguay rounds

discussions or case which discusses this; countries’ current practice across the globe is to

normally send govt lawyers or officials for representation; in recent times, the govts also

appoint consultants for the disputes, who are private players; Appellate Body case: EC-

Bananas III case: raised objection by US that private players cannot be allowed to represent

countries in the appellate body rulings – the appellate body allowed it due to (1) absence of

any provision prohibiting the role of private players (2) the question of who can represent is a

matter of systemic interest i.e. futuristic interest or interpretations with an important bearing

on trade policies and so countries deserve full freedom to decide on this (3) may pertain to

developing countries and since such countries don’t have govt officials or lawyers as experts,

they should not be restricted in light of such representation; Panel case: Indonesia-
Automobile case: US pleaded that Indonesia should not be allowed to use private lawyers in

the Panel proceedings – Indonesia was allowed the private players

To what extent are these decisions binding?

There are 2 types of stare decisis (1) de jure which is not there in the WTO (2) de facto which

is there in the WTO.

Constituents of the Panel Report:

1. Finding of the facts

2. Applicability of relevant provisions

3. Basic rationale behind any findings and recommendations that it makes

Usually at least 27 decisions are cited in a new decision showing the de facto stare decisis in

the WTO; India-Patents case: de facto stare decisis is accepted as the only exception

The various stages of dispute settlement:

1. Consultations: 2 types (1) A. 4 – formal (2) informal; WTO is not a dispute settlement

forum but a trade forum – hence first there is an informal consultation without WTO

involvement and only when that fails, there is formal consultation which requires

notification to the DSB and the 60 days period starts here; the parties must

mandatorily notify the DSB for third-party participation as per A. 4.11

2. Formation of the Panel: when the consultation fails to bring MAS [Mutually Agreed

Solutions A. 3.6], then either party to the dispute can ask for formation of the panel; is

consultation a pre-requisite for formation of the Panel? No – panels can be formed

without them as per A. 6.2; request for consultation must be made, even if the

consultation is not made; (1) failure of consultation (2) complainant must be asked

within 45 days (3) can be blocked only once by the respondent (4) thereafter if they
 request for establishment of the panel again there is AUTOMATIC

ESTABLISHMENT OF THE PANEL (5) no need for consent of both parties for

establishment of the Panel

3. Before the first hearing: with written submissions by both parties to the DSB

Chairman, who is the addressee

4. First hearing: both the parties and third-parties must provide whatever submissions

and clarifications as required by the Panel; Panel decides (1) decide a timeline (2)

determine the terms of reference (3) ask for clarifications

5. Rebuttals: both parties and third-parties make oral submissions with any clarifications

as wanted by the Panel

6. Role of experts: if the matter pertains to specific issues such as SPS, TBT, customs

valuations, subsidies etc., experts are appointed either as (1) individual experts or (2)

group experts; their advice is not binding – India-Quantitative Restrictions case; A.

13; only on scientific and highly technical matters being discussed;

7. First draft: only the factual matrix and arguments by the parties are prepared by the

panel given to both the parties in concern, not the third-parties; they get 2 weeks to

reply to the draft; the draft does not contain any conclusions

8. Interim Report: is given to the parties and it includes conclusions and

recommendations; the parties have 1 week time; not given to the third-parties; till date

only once the third-parties received this – EG-Tariff Preferences case due to enhanced

third-party rights

9. Review: the factual matrix, arguments, conclusions, submissions is given; 1 week

time given to parties to object one last time

10. Final report: is given first to the parties [including third parties] and after 3 weeks it is

circulated to all the members; the parties have 60 days for appeal; if no appeal is there,
 then the final report becomes binding; A. 17.4 makes it clear that only the

complainant or respondent can appeal

Time frame of the disputes:

Maximum is 456 days

1. Consultation – 60 days max.; commerce secretary sends a letter as a request for

consultation; the consultation should begin within 20 days; if there is no response in

20 days, there is a failure of consultation as there is a burden of proof on the

complainant

2. Panel formation – within 45 days from the end of 60 days; appointed by Parties as per

the Roster

3. Panel Report to the parties – within 6 months

4. Panel Report to all WTO members – 3 weeks

5. Panel Report is submitted to DSB for adoption – 60 days; if there is no appeal, then

the report is adopted

6. If appealed, the Appellate Body takes 60-90 days to adjudicate the dispute

7. Appellate Body Report goes to the DSB for the adoption – 60 days

Delay tactics:

1. Parties ask for suspension of the panel by asking for more time

2. At each stage of the submissions, they seek consultation of experts

Why do countries refer to WTO DSU more than other Courts/Tribunals?

Indication of countries’ confidence in the WTO system?

Role of Third-Parties
Legal framework: A. 4.11, A. 10 and A. 17; ensured in all the 3 stages; substantial trade

interest; if a party is not a third-party at the consultation stage, then they still may be one in

the Panel proceedings; however if they are not a part of the Panel proceedings, then they

cannot join the Appellate Body proceedings

The third party rights evolved from the source of the GATT Panel proceedings; A. 22 and 23

do not discuss their role; the first case to bring this in was in 1973 in UK-Dollar Quotas case

when the Panel accepted third party rights [without legal framework] in the GATT era

Third party rights refer to (1) participatory rights (2) right to make submissions in the first

Panel meeting (3) right to get information related to the disputes (4) right to get a copy of the

dispute in advance; exisiting third party rights

Enhanced third party rights: EC-Bananas III case – (1) entitlement to receive all information

and documents except certain business confidential matters as per the parties of the dispute

(2) presence at all meetings (3) entitlement to receive the final report at the same time as the

parties to the dispute (4) entitlement to receive interim review copy as well; this is desired by

developing countries; it is the discretion of the Panel and AB whether to allow this or not; but

the DCs want it to be in the text in itself

Under GATT there was no uniform policy on TPR:

1. The first case to bring this in was in 1973 in UK-Dollar Quotas case when the Panel

accepted third party rights [without legal framework] in the GATT era

2. The second case was EEC-Programme of Minimum Import Prices, Licenses etc. for

certain processed fruits and vegetables – in this, third parties could only raise issues

on the issues that are already raised by the main parties and cannot have claims

different from the main claims

 3. The third case was Japan-Measures on Import of Leather – in this, Australia, EC,

India, NZ and Pakistan made third party submissions – the Panel rejected their rights

without citing any reason

4. The next case is US-Customs User Fee case – in this, third party claims were

accepted

5. At the Montreal Convention in 1989, mid-term review of Uruguay negotiations, for

the first time on a GATT platform, they realised the necessity of including TPR under

DSU provisions; this was to control ambiguity and bring in uniformity

The first legal framework for this was A. 4.11:

Substantial trade interest is merely declaratory and does not require to be proved; (1) 2

members have a dispute (2) consultation (3) notified to WTO DSB – then any third party can

request the 2 parties to join the proceedings; when both parties accept this request on the

basis of substantial trade interest proved by such third party then they join; if the parties do

not accept it, then the third party has the freedom to initiate consultations against the parties

or either of them; thus, usually the request is not denied to prevent proliferation of a dispute

so the proving of the dispute does not really matter; this is to encourage compliance

The second legal framework is A. 10:

At the time of the formation of the Panel, the Chairman of the DSB asks if any country wants

to become a third party and such country declares its substantial trade interests by raising of

hands; if this, then you can make submissions at the first Panel meeting

The third legal framework is A. 17:

A. 17.4 – third parties do not have an appeal power; however if they are not a part of the

Panel proceedings, then they cannot join the Appellate Body proceedings as third participants
Who uses TPR?

1. DCs

2. LDCs

3. Newly accessed countries

4. [Rarely] developed countries

Why do they join as third-parties?

1. Problems of understanding dispute settlement mechanism

2. Training for future disputes

3. Economic reasons; no money required

4. Lack of expertise

5. Fear of losing the case/closure scrutiny in case of loss

Current practice:

1. Limited application for developed countries and wider application for DCs

2. Based on sound discretion by Panel to allow enhanced TPR

3. Only in specific circumstances enhancement is allowed

4. Only in cases of technical and highly scientific cases enhancement is permissible

5. Enhancement is not practiced in a uniform manner – Asian and African countries

suffered the most in light of this

6. Reasons are always specified when the enhancement of rights is allowed; EC-Bananas

III: first time they gave these rights and provided the reasons: (1) economic effect of

the dispute on certain TPs (2) economic benefits to TPs (3) past practices in Panel

proceedings involving the banana regimes where the TPs were given enhanced rights

[EC Bananas I & II were in the GATT era not adopted – so what is their
 jurisprudential basis? As per the US-Gasoline case, they are guidelines/’acquas’;

Lome Convention] (4) parties to the dispute were not in agreement wrt the

involvement of third parties

In EC-Tariff Preferences case, even in the interim process there ewere enhanced TPR.

But this is an aberration.

In EC-Hormones case, they allowed Canada and US to be TPs with enhanced rights

US-1916 Act case, Japan was requesting enhanced TPRs; denied as there was no

scientific basis

EC-Civil Aircraft case, Brazil asked for enhanced rights, they were not given

14th FEB NOTES

A. 9 – Clubbing of cases; the panel may club cases in a same/similar fact and law

situation around the same period of time; EC-Bananas III;

The Panel Report has facts and interpretation; the AB Report only has interpretation

Appellate Body

1. The appellate body is the second and final adjudication mechanism at the WTO

DSM.

2. It has a permanent status with 7 members who are appointed for 4 years and are

eligible for reappointment.

3. They review the legal aspects of the dispute as given by the Panel.

4. Qualifications of AB members is given under A. ; similar to Panelists.

5. Whenever a question is raised to the AB, only 3 members will look into it.
 6. Dissenting opinions are not allowed; there may be disagreement on the reasons

but you must agree with the recommendations which are binding

7. AB Reports are final only upon adoption by the DSB; why is adoption necessary?

For legal sanctity of the report and wider participation which creates a pressure on

the parties to follow through

Consultations

1. It is an integral and crucial part of adjudications in the WTO DSM; it helps to bring

MAS – Turkey-Textile case.

2. Turkey-Textile case: the exisiting text of the WTO doesn’t provide for necessary

parties to a case being asked to come into the picture; DSM cannot ask a third country

to become a part of the case

3. Purpose and objectives of consultations: High Fructose Corn Syrup case – (1)

exchange of information between the parties (2) assess the strength and weaknesses of

their respective cases (3) narrow the scope of differences (4) mutually agreed

solutions (5) provide the parties with opportunity to define and delimit the scope of

the dispute

4. Types of consulations: (1) general – A. 4 of DSU (2) special – in individual covered

agreements

5. Evaluation of consultations: it is difficult to evaluate these as they are confidential in

nature; only function of the Panel is to ascertain whether consultations were requested

or not; there is a 60 day time limit; Panels have no mandate to enquire into the

adequacy of the consultations; Panel cannot address the procedural flaws in the

consultations; merely looks at the negative aspect of the outcome and not the positive

aspect [MAS]
 6. Can expired measures be the subject matter of a dispute? Yes – Brazil-Upland Cotton

case

7. Can a Panel be established without consultations? Yes – A. 6.2

8. Form and content of consultations: (1) request for consultations shall be in writing –

A. 4.4 (2) reasons for consultations must be clear and specified (3) identification of

the measure must be mentioned (4) indication of the legal basis for the complainant

(5) A. 4.4 must be read with consultation clauses in the individual agreements (6) all

requests for consultations shall be notified to the DSB and the relevant councils

[goods, services and IPR] and committees for transparency and to allow third parties

to join (7) DSB calls on its members to send a single set of notifications in one copy

and mark which committees and councils the submissions must be sent to in order for

distribution

9. Time frame: 10, 20, 60

10. Consultations usually take place in country capitals or the Geneva headquarters; no

hindrance for it to take place elsewhere also

A. 24/11 of GATT – removal of Pakistan’s MFN status by India

Types of trade agreements:

1. Multilateral: Eg: IMF, IBRD, WTO; many countries so many subject matters

2. Bilateral investment treaties: [BIPA]; handled by ICSID [not required to be the

members – A. 25 of ICSID Convention – merely needs written consent of parties]

usually but can be there at any forum as per the parties; investment matter; it is

assumed that state law cannot be the governing law but only neutral international law;

the major issues are wrt expropriation; as a result of the conflict between Hull

Formula and Calvo Doctrine the jurisdiction must be fair and equal; UNTARD

regulates these treaties; in India the ministry of finance deals with these – we
 currently have above 80 such treaties; SEZ and local content requirements are

prohibited by TRIMs; first was between Pakistan and Germany

3. Friendship cooperation and navigation [FCN] treaties: subject matter: (1) shipping (2)

governs the rights of individuals and forms from one state living, doing business and

earning to another state; bilateral – mutual economic benefits; covers day-to-day trade

relationships; first way to enter into trade relations

International organisations for trade: UNTARD, IMF, WB [IBRD] etc.

3 components of trade policy: (1) international – WTO (2) regional – RTAs i.e. with friends

(3) domestic

India is in support of WTO aggressively and is pursuing new partners for RTAs such as

CEPA which is the deepest form of integration; domestically regulated from 1991 by

liberalisation, privatisation and globalisation; in favour of free trade policy

USA it is regulated by chaos, disorder, turmoil etc. in its trade policy; international trade

policy is regulated by pessimism at the WTO; USA is trying to prevent appointment of

Appellate Body members which will lead to chaos once the remaining 3 members retire;

Obama tried to enter into TPP which increased the GDP – however, Trump has been going

against this mechanism of Obama’s – trying to tilt everything in favour of USA wrt

interpretation of the WTO law; wrt (2) they have been coercing South Korea for trade –

redrafting of NAFTA through coercion; under S. 232 of Trade Expansion Act 1962, the US

increased tariff domestically on steel and aluminium coming from any country – violation of

WTO principles as unilateral actions are not permitted – S. 301 of Trade Act 1974, the US

imposed 25% tariff unilaterally imposed against over 1000 products from China; Buy

American Laws –
19th FEB NOTES MISSING

Advantages of MFN:

1. Promotes economic efficiency

2. Free and fair competition – every country is competing with every country; whatever

is granted to one country, it is required to be given to all; A. 1.1 – no arm twisting

3. Promotes sovereign equality

4. Minimises transactional costs i.e. rules of origin cost, shipment cost etc.

5. Protection against corruption and the ability to have special favours

6. Prevents retaliatory cycle of discrimination

Does MFN come under the idea of non-discrimination?

Problems of MFN: (1) problem of free riders Eg: Nepal; this has been eliminated due to

universalisation of WTO membership (2) use of critical mass – this is actually a problem of

special WTO issues wrt IT [software, hardware, IT enabled services] – IT Agreement 1 1997

which is not universal and it regulates software only – in Bali IT2 was suggested for software

and hardware;

Why does the WTO favour tariffication? For transparency, predictibility and security; on

some products tariffication leads to terrification – (1) related to protectionist measures on

agriculture, steel, aluminium [defence], pharmaceuticals etc. (2) related to subsidies; on these

matters, there is a division in the world between developed and developing countries

MFN is not an absolute term so it has exceptions:

1. General Exceptions: A. 20; it is in the nature of trade and social clause; there must be

provisions for the society in light of the issues arising from trade liberalisation such as

unemployment, import-morality etc.; morality, environment, labour standards, human

 rights etc. – in terms of sovgnty, this article gives freedom and policy space to govern

the country in whatever way possible best for the society; it must be implemented

through a non-discrimination manner only

2. Security Exceptions: A. 21;

3. Balance of Payment crises: A. 13; for import-export there is a necessity for foreign

exchange; all importers and exporters take money from the Central Bank [in India

based on FEMA and RBI Act]; when the govt doesn’t have money to facilitate the

ability of the traders to pay for trade then there is a problem of MFN application

4. Temporary application of QRs in a discriminatory manner: A. 11; doesn’t allow

fixation of quantity; it is meant to not be unilateral but to that there are 2 exceptions

(1) critical food shortage (2) BoP crises; this is reviewable every year

5. Waivers: A. 19.3; sanctioned non-application of MFN principle; it must be proposed

to the WTO members; it is reviewable every 1 year; maximum time is 3 years;

allowed in emergency situations; in case this is rejected, safeguard duties can be

applied due to the policy space given by the WTO for maximum of 10 years for DCs

6. Provisions on special and differential treatments: WTO Agreements

7. Preferential Trade Agreements/RTAs

22nd FEB NOTES

Why countries ban exports?

1. Conserve domestic communities that are in short supply; Eg: rice, onion in India

2. Conserve natural resources; China Rare Earth and China Raw Materials cases:

cannot put import/export bans on certain natural resources; however, the SC of

India has imposed a ban on the exportation of natural resources – this may be

challenged in the WTO

3. Combat domestic price rises/maintain domestic price contours; Eg: sugar

4. Maintain world price of commodities by suppressing supply; Brazil-Upland

Cotton case – spoke about price suppression and price depression – Brazil wasn’t

exporting cotton to US but US had cotton subsidies

5. To develop domestic processing industries; Eg: SMEs or the milk processing

industries – SMEs are not governed by WTO but there is a proposal for it in the

2018 WTO Report; not allowed

6. Voluntary export restraints – agreement between an exporting and importing

countries, where the exporting country restrains its export of a product to the

importing country at the request of the latter; widely practices in 60s and 70s by

Japan, EU and US on steel, automobiles, semi-conductors, electronic chips etc.;

currently these are prohibited under the safeguards agreement of the WTO;

recently Venezuela and Brazil have entered into these even though they are

prohibited – how or why? A. 19.3 of GATT read with Safeguards Agreements

prohibits it – VER have recently been invoked due to bilateralism and

protectionism – all countries have a right to enter into and modify treaties as per A.

2 and 41 of VCLT – however this is not allowed for the WTO under A. 16.5 of

the Marrakesh Agreement – UN Report: Fragmentation of International Law

which says WTO is a stand alone agreement; why are VERs not allowed (1)

undermining multilaterism – but not true as RTAs are allowed (2) lack of

transparency – not regulated by any committees and no notification of the

agreement (3) corruption and the ability to buy special favours (4) distortion to

international trade (5) prolonged nature of restrictions – don’t know when it will

be removed; A. 11.1 of Safeguards Agreement prohibits these

2 most important principles of WTO (1) non-discrimination (2) maket access – ensured

through Marrakesh Agreement – removal of barriers at borders – non-tariff barriers – 5

border measures imposed by countries (i) tariff – permitted (ii) quotas – QRs not permitted

unless there are exceptions (iii) subsidies – allowed depending upon its trade distortive

impact (iv) state trading enterprises – STEs have limited freedom and even the private

companys can be STEs for WTO obligations and states must notify WTO about it (v)

customs procedure – collection, Rules of Origin etc.

WTO does not allow quota but only tariffs for free trade purposes for transparency under A.

11 of GATT; does free trade lead to peace?

TRQ is only for agriculture, which is assumed to not have been taxed; allowed to also fix

quota; the TRQ can be eliminated in a phased manner;

1st and 2nd MARCH NOTES MISSING

History of MFN obligations

Almost 800 years old; the modern MFN clause started in the 1919 Treaty of Versailles;

before this there were 2 types of MFN – (1) conditional MFN first appeared in the Treaty of

Amity and Commerce in 1848 between US and France (2) unconditional MFN was started in

1860 in the Treaty of Commerce between UK and France; MFN institutions clauses also exist

in new treaties such as FAO treating other institutions also as per this principle; recently

MFN is more important due to its inclusion in BITs; it has even become a part of some

private agreements/contracts but often not allowed to boycott third parties to prevent

distortion of equality of opportunity of the parties; EC-Seal case: A. 1 is concerned

fundamentally with prohibiting discriminatory measures by requiring equality of competitive

opportunities for like imported products from all members and for that reason A. 1 does not

require a demonstration of the actual trade effects of a specific measure

1. It protects against both de jure and de facto discrimination – Canada-

Pharmaceuticals case

2. MFN obligations under WTO is on a multilateral basis and not bilateral basis as that

is conditional; trade concessions granted to few is granted to all

3. MFN applies on an automatic basis; A. 1 applies automatically i.e. all WTO nations

are under MFN status automatically; no need to have a declaration to deem a nation to

have MFN status; doctrine of automation [Eg: Pakistan is an exception under A.

24(11) of GATT 1994]

4. MFN cannot be withdrawn and if you do so then you are violating WTO law

5. It extends to services and IPR also

6. 4 step test for checking violation of MFN principle:

7. why are there lesser MFN cases as compared to National Treatment cases? NT is for

domestic industry protection whereas MFN are wrt 2 outside countries [if one country

discriminates you have options with other countries] and they deal more with de facto

discriminations

8. MFN is treaty based but NT is CIL in general so CIL will override MFN; but in WTO

there is no hierarchy between the two and they are equal and the cornerstone of the

organisation; Morocco case: how MFN obligations apply to PIL – ICJ interpreted

these obligations in terms of conditional and unconditional MFN wrt a non-trade

treaty

9. MFN is applicable to safeguards agreements as well; safeguards duties are on an

MFN basis; TRADE REMEDIES (1) to impose anti-dumping duties for max. 5 years

and then it goes for sunset review – applied on a non-discrimination basis under A.
 9.1 [under S. 9 of Customs Tariff Act in India or Anti-Dumping Law of WTO if there

is no law] applied against foreign company as per (i) dumping (ii) injury (iii) causal

relationship (2) impose counter-veiling duties against unfair subsidies in order to

offset the injury – applied on a non-discrimination basis under A. 18 of ASCM (3)

impose safeguard duties as all of a sudden due to unforeseen circumstances and

production in one country, excessive importation has taken place in another country

which was unexpected, resulting in serious material injury to the domestic industry

for 4 years with a provision to push it out to 8 years and max. 10 years only for

developing countries – India v. Japan: India was unable to prove that it was

unexpected – applied against exporters – applied in India by the DGSD

10. A. 2 deals with 4 modes of supply of services (1) cross-border (2) consumption

abroad – huge potential for India but not completely utilised due to infrastructure,

mindset, security (3) commercial presence – FDI in terms of services – India has a

cautious approach; India 100% FDI in movies, civil aviation (4) movement of natural

persons – India has a lot of people who want to go abroad – visa requirements beagn

in 1914 but if they did exist Indian population would go out only – GATS Visa is visa

on arrival

GSP Agreement: non-reciprocal arrangement provided by developed countries to developing

countries which are incentives i.e. subsidies on certain goods – in 1979, it became a trade

policy due to the enabling clause; US used this to say that the Agreement will not apply to

India because she is not a developing country anymore; this problem is also being faced by

China; now their goods are being traded on a reciprocal basis; EC-GSP case: India claimed

non-reciprocal arrangement from the EC as it was given to another country; legal framework

is Part IV, A. 36-38 + Preamble of Marrakesh Agreement + all covered agreements discuss it

indirectly
RTAs

 There is a massive rise of RTAs currently – almost 640 right now

 Significant variations in their areas of coverage – some only deal with goods, some

deal with IPR and services etc.

 Important policy instrument of all countries – there is not a single country which is

not a party to an RTAs – the two exceptions were Japan and Mongolia [2014] – but

these have also become parties to RTAs recently – therefore all 164 members are

party to RTAs

 The rise of RTAs led to a serious erosion of MFN trade; 58% of world trade takes

place through MFN and 42% under RTAs

 Conflict between multilateralism and RTAs – or as Jacob Viner said between First

Best and Second Best

 RTA is a misnomer as the definition says it means preference between countries of a

region but rather what is occurring is cross-regional TAs as the countries entering into

such agreements are not necessarily of the same region

 Mega-regionals – (1) more membership (2) larger coverage (3) dispute settlement is

different; Eg: TPP [beign negotiated], CPTPP [Enforced in end 2018], TPIP [being

negotiated], RCEP [India’s reply to CPTPP]; PTA/RTA – goods only usually;

CEPA/CECA – larger coverage of goods, services, IPR, investment, agriculture etc.

 RTAs are a stumbling block according to some and a building block according to

others; although within one RTA there is integration within one set of countries with

trade creation – but between 2 RTAs, there is trade diversion between the different

sets of countries – Jagdish Bhagwati talks about this as a spaghetti bowl as the source

of the trade is difficult to find – RTAs are termites to multilateralism; Baldwin: all

agents are good if trade increases

4 waves/stages of the rise of RTAs:

1. 1950s – led by EC; the first treaty was the Treaty of Rome; known as the ‘rush to

discrimination’ as it moved from multilateralism to RTAs

2. 1970s – around the Tokyo Round

3. Early 2000s – when it was realised that Doha Negotiations will not be successful

4. Currently – WTO is not progressing properly so mega-regionals are being established

Why do countries sign RTAs?

Historically colonial powers wanted to give preferential treatment and that’s where they arose.

Economic Reasons:

1. Trade creation and globalisation: there is a presumption they create trade and lead to

globalisation i.e. integration of economies

2. Dissatisfaction and slow process of multilateral negotiations: many countries are

dissatisfied with Doha negotiatons which are still unresolved – still not made any

decision; like-minded countries in an RTA will have faster solutions

3. Strengthening domestic trade policy: every country requires raw materials and those

are available in another country; or goods/services are required and through these

agreements you can get the benefits of domestic policy

4. Guaranteeing market access

5. Investment generation

6. [arguably] Shift in US policy: till 1985 US favoured multilateralism but after Uruguay

round, they started focusing on NAFTA as an experiment; they then realised that

RTAs are as important as multilateralism; however with the enter of Trump, they

withdrew from TPP etc., can they really be called the leading country in the
 popularisation of RTAs; they also however don’t seem in favour of multilateralism at

this point of time – no uniform policy

7. Baldwin’s Domino Theory: cycle stand syndome – if one country signs, another

country will also sign; countries are merely signing more without true implementation

Political Reasons:

1. Building alliances

2. Gaining credibility for policy reforms promoting peace

3. Increased border cooperation

4. Democracy and good governance: improve human rights etc. standards and then only

will enter into RTAs; Eg: India-Mauritius

3 types of trade agreements [commonly referred to as RTAs or PTAs] under A. 24:

Different levels of integration

1. PTA: It is an arrangement where members impose lower tariffs on goods produced

within that area with some flexibility for each member country on the extent of

reduction of tariff; it increases trade among members as exporters benefit from the

elimination of tariff in partner markers; Eg: SAPTA, India-Afghanistan PTA, India-

MERCOSUR PTA, India-Chile PTA; in WTO context, PTAs are known as Interim

Trade Agreements as they are the initial part of an agreement with few goods and

there will be further negotiations on it leading to the formation of FTAs dealing with

substantial all-trade within 10 years and if this time is extended then you must justify

it; Turkey-Textile case: substantial all-trade is when more than 90% of the trade is

covered – overwhelming trade – further, quantitatively it should not exclude any

 important sector of the economy; term “PTA” is used for all these agreements though

so these specifically are Interim Trade Agreements

2. FTA: parties agree to remove trade barriers and have have no tariff on imports from

other members or import quotas; they must cover substantial all-trade; each member

is free to maintain different MFN barriers to non-members; Eg; NAFTA, India-Sri

Lanka FTA, SAFTA, EFTA

3. Customs Union: internal and external trade policy of the unit must be uniform and the

same; your relationship with countries outside the union are maintained as per the

union; EU is heading towards a CU but it is still not – only on investment matters

there is full integration but wrt all other matters are decided by individual countries;

Eg: MERCOSUR is a CU; SACU claims to be the origin of the concept of CU from

1910 but it is actually not a CU; it is recognised under A. 24 (5) and (6)

Further, beyond the 3 recognised in the article –

4. Common Market: trade barriers are removed themselves; free movement of factors of

production such as capital and labour across national borders within the integration

are in addition to the free flow of outputs; Eg: COMESA, MERCOSUR

5. Economic Union: highest form of integration; common market + unified monetary

and economic policy including common currency; Eg: EU is arguably an economic

union due to the 3 exceptions

6. Comprehensive economic partnership/cooperation agreement [CEPA/CECA]: a type

of FTA with a broader subject area beyond just goods; it covers the entire trade area

including FDI, IPR, services etc.

Legal framework:
Turkey Textiles Case: whenever you sign an RTA the test of necessity is to follow A. 24 (5) -

(8) with substantive obligations – there are also procedural obligations to notify the

committee on RTAs

Goods: A. 24 of GATT and Services: A. 5 of GATS

1. A. 9 of Marrakesh Agreement – indirectly as it mentions customs unions

2. A. 1 of GATT – MFN

3. A. 9 of GATT: Rules of Origin (1) preferential (2) non-preferential – RTAs fall under

(1); as per A. 2.5 of Rules of Origin Agreement for harmonization it is impossible due

to these 2 types

4. A. 24 of GATT: 4 types of RTAs are allowed (1) FTA (2) Interim Trade Agreeement

– shallow trade agreements (3) Frontier traffic: It is an arrangement between 2

neighbouring countries to provide preferences near the border only or to have border

preferences for trade relations – Eg: NE informal trade – Indian trade with

Bangladesh and Myanmar but only with the bordering districts and not under any law

– it is allowed but not currently used anymore (4) Customs Union: countries having

same internal and external trade policy for substantial all trade – Eg: MERCOSUR;

substantial obligations: (1) internal trade requirement (2) external trade requirement –

no discrimination against other countries who are non-members of the such RTAs is

permitted – not to raise a barrier as purpose is trade creation; there are also procedural

obligations to notify the committee on RTAs i.e. CRTA and CTD; customs territory

can be created under A. 24 (2) of the agreement Eg: Hong Kong – one country 2

systems – own external trade and commerce policy on substantial all trade – no

important area of trade should not be excluded and at least 90% of export-import

5. Understanding on A. 24: Uruguay Round of Negotiations – purpose (1) clarifies the

purpose of RTAs is to create trade (2) clarifies requirement of proper transparency

 mechanism – when to notify and how to notify (3) the test of necessity – A. 24 (5)-(8)

requirements must be followed!!! (4) defined ‘reasonable period of time’ for the

purpose of interim trade agreements as 10 years – if they want to extend it they must

make a written explanation to the Council for Trade in Goods as to why they did not

manage to create an ITA (5) clarifies DSU extends over the examination over RTAs

6. Transparency Mechanism of WTO: created in 2006; the aim is to enhance

transparency wrt RTAs and it was created due to Para. 47 of Doha Declaration; (1)

early announcement i.e. whenever a country picks up another country to negotiate an

RTA they must notify as to when the negotiations will begin – often signed when they

are not implemented for the purposes of needs of Parliamentary approval [India

doesn’t need it as per A. 74] Eg: Canada

CRTA: created in 1996 –

 To carry out examination in terms of consistency with procedure by a working party

wrt the council of goods

 To develop the transparency mechanism – even though positive consensus, it has

transparency to inform other members of the non-compliance – can then be taken to

DSU

 To consider the system implications of such agreements on multilateral trading

systems

 Decisions made by positive consensus

 Political body

 All RTAs other than those signed between 2 developing countries or LDCs – these go

to the CTD as decided in the 1979 Declaration/Enabling Clause

  The threshold for developed countries is different from that for the developing

countries as (1) they do not have to cover substantial all-trade (2) other restrictions on

commerce that are required to be eliminated for developed countries are not required

for developing countries

7th MARCH NOTES MISSING

RTA is a stumbling block or a building block for trade?

RTAs are a stumbling block according to some and a building block according to others;

although within one RTA there is integration within one set of countries with trade creation –

but between 2 RTAs, there is trade diversion between the different sets of countries –

multilateral negotiations are difficult to conclude at the WTO level but between a few

countries it is easier to reach a solution

Trade creation

 There is further trade liberalisation wrt new generation issues – Lari Summers talks

about new generation RTAs are trade creation as they are expanding trade on issues

that have not yet been taken up at the WTO level; Baldwin: all ‘isms’ are good if

trade increases; this counters Jagdish Bhagwati’s ideas of RTAs as a spaghetti bowl as

the source of the trade is difficult to find – RTAs are termites to multilateralism; Lari

Summers calls RTAs competitive regionalism leading to trade creation

 Baldwin-Juggernaut Theory: Domino theory – one country signs an RTA then others

also sign them; the first contemporary one is NAFTA; 1998 India-Sri Lanka was the

first Indian RTA; trade creation thus

 Understanding of A. 24 of GATT 1994: purpose of RTAs is to create trade not trade

divergence
Trade divergence

7. Jagdish Bhagwati: The Dangerous Drift to PTAs – 1995; he talks about RTAs being

in violation of MFN; the number of RTAs and the way they are proliferating, the

result could be a spaghetti bowl of rules and arbitrary definitions of which product

comes from where and multiplicity of tariff depending upon the source; they create a

maze of different regulatory regimes that undermine the principles of transparency

and predictability in trade relations – in response to this book the WTO in 2006

brought in the transparency mechanism requiring all negotiations and the final RTAs

to be notified immediately to the Committee ensuring transparency – however this is a

provisional measure – in 2017 the WTO agreed to try and make it a formal and

permanent measure by 2019; CRTA [GC] deals with all RTAs and CTD [MC] deals

with RTAs between developing-developing countries – they examine if the RTAs are

in compliance with WTO obligations or not – this is review which is adjudication in

substance – only a political body like CRTA and CTD can examine the entire RTA

but a particular provision of it may be taken to the DSU – this is a systemic issue as

all members of the WTO are a part of these committees [no adjudicatory powers =

political powers]

8. Bhagwati, Krugger: RTAs show domination of smaller countries by biggers powers;

Eg: US and Canada influence over Mexico wrt NAFTA – they forced Mexico to

accept their IPR policy in order to join the NAFTA; MERCOSUR – saying if you

enter into RTA then there will be other political benefits

9. Bhagwati: indirect impact on multilateral trade negotiations; issues such as

environment etc. are not being discussed at the multilateral level due to being covered

and forced into RTAs

 10. Bhagwati, Panigrahiya: formation of trade blocs is diverting trade; it means that

RTAs create separate blocs and within the units there is coopeation but between

different blocs there is competing interests and no cooperation

11. Bhagwati: diversion of attention and energy from multilateral trade; almost the same

as 3; RTAs are termites

Trade and Gender

1. WTO: highlight the issues; Buenos Aires Conference of 2018; gender-aware trade

policies

2. UNCTARD: (1) it helps the countries assess the effect of different economic policies

on women (2) identifying gender based constraints that impair inclusive development

devising strategies to overcome them (3) mainstreaming gender-policy through the

inclusion of gender considerations in policy formulation and implementation and in

the negotiatons of trade and other agreements at the multilateral, regional and bilateral

levels (4) social causes

3. UN Arms Treaty 2014: A. 7.4 of this treaty exclusively talks about gender

implications in terms of trade and small arms

4. ILO

Minimum Support Price: when the govt buys crops etc. from farmers they definitely give

this fixed amount of money for it; Brazil and Australia filed a case against India for violating

ASCM and A. 12.1 of GATT for setting MSP for sugar – they asked for consultations; prima

facie this is not allowed - DS 579 and 580

India’s Foreign Trade Policy

Components:
 1. Multilateral: at the WTO, India is very aggressive; claims to be in favour of

globalisation as per ancient texts; even though after Independence, to protect the

industry we did not allow imports but now we have become a champion of

globalisation and free trade policy [Doha negotiations India mentioned developing

countries and gave it importance] – this protectionism has existed at the multilateral

level; India has also been blamed for the failure of MCs other than in 2017; we were a

founding member for WTO and GATT

2. Regional: CEPA/CECA etc. India signs allkinds of RTAs; Eg: SAFTA, India-

Afghanistan, India-MERCOSUR etc.; aggressive policy of signing but without

looking into its implementation

3. Domestic: decided by DG of Foreign Trade under the Ministry of Commerce; earlier

called EXIM policy; now it is called Foreign Trade Policy and they are reviewed

every year

There is no symmetry between the 3 levels; lack of proper coordination among the levels;

especially wrt IT sector; 97% of IT Trade in 1996-97 was India’s but now they have been

forced to step back as there was no stakeholder’s conference held for this; our agreement with

Thailand was signed without looking into the stakeholders’ i.e. farmers of Kerala’s interests

which led to a lot of strife in Kerala

India-EU problems wrt signing RTA: (1) pharmaceuticals – generic drugs are allowed as per

Implementation of Paragraph 6 of Doha in light of public health; compulsory licensing is also

there; WHO also allows generic drugs (2) automobiles (3) govt procurement

13th MARCH NOTES

Non-Tariff Barriers
Inventory on NTB maintains the list of these barriers but it is not a legal text of the WTO.

6 types:

1. Government participation in trade and restrictive practices tolerated by govts,

including all forms of govt aid

 Subsidies

 Tax benefits: tax holidays

 Counterveiling duties: A. 6 of GATT

 Govt procurement – 1996, 2001 and 2014 agreements – GPA3 – India is an

observer

 All facets of state trading enterprises are required to be notified

 Govt monopoly practices

2. Customs and administrative interim proceedures

 Anti-dumping duties

 Customs valuations

 Customs classification

 Consular formalities and documentations

 Rules of origin

 Import licensing

 Pre-shipment inspections

3. Technical regulations and standards

 Testing and certification arrangements

 Regulated by TBT

4. SPS

 Chemial residuary limits

 5. Quantitative restrictions

 Embargos

 Exchange controls

 Export restraints

 Measures to regulate domestic prices

 Tariff quotas

 Import restrictions – surcharges, port taxes, statistical taxes, discriminatory credit

restrictions

6. IPR standards

National Treatment

18th MARCH NOTES

Trade and Investment

No investment agreements per se at the WTO; countries are signing BITs instead; ICSID is

the proper forum for dispute resolution; India-Automobile case: trade-related investment

meaning; only required to be notified to UNCTARD; to CTD and CRTA must notify iff

investment is a part of an RTA or PTA; Calvo doctrine and Hull formula wrt dispute

resolution; any improvement over TRIMS requires consent of all members of WTO

Economists believe free trade is very important but this logic does not usually convince the

common people

Trade and Competition

Competition law – to look into the competitors and the competition; 4 features globally: (1)

anti-competitive agreements (2) abuse of dominant position (3) regulation of combinations

(4) competition advocacy or awareness; India believes the competition regime should be
local like most developing countries; other countries believe there should be global trade-

related anti-trust measures; India is not in favour of the global regulation

Discussed in Singapore MC; developing countries opposed this; but in 1999 we created a

high-powered commission even after the Seattle MC; WTO created a working party for

competition in 1996

In Doha: (1) 4 principles including transparency, non-discrimination, procedural fairness and

provisions on hardcore cartals are required to be clarified (2) the ways of handling voluntary

cooperation on competition policy among WTO members – S. 18 of Competition Act: for

enforcement of competition law, Govt. can enter into MoUs with other countries – Brazil, S.

Africa etc. (3) support for progressive reinforcement of competition institutions in developing

countries through capacity building; BUT THESE HAVE NOT TAKEN PLACE – deadlock

of Doha so municipal law is only governing it

There are 2 opinions:

1. WTO regulates competition: but this is the minority view; A. 17 of GATT –

restrictive business practices; A. 11.1 of Safeguards Agreement; A. 2 and 3 of Anti-

Dumping Agreement; A. 18 of ASCM; Pre-shipment Inspection Agreement for

private entities; no case under WTO; but under GATT the Isle Seeds case and the

Japanese Semi-Conductors case; A. 9 of TRIPS; indirect mention; TRAMS

2. WTO does not regulate competition

22nd MARCH NOTES

WTO deals with corruption as per TFA

NTB
Not defined anywhere; but there is an inventory with the forms of WTO given in it; John H

Jackson: NTB is very important for trade liberalisation [Preamble] and there is a need to

eliminate discriminatory practices in international trade – from 1967 post the Kennedy Round,

the aim was set as reducing NTBs and regulate them and this is now an objective of the WTO

– “all govt imposed or sponsored actions or ommissions that act as prohibitions or restrictions

on trade other than ordinary customs duties and other duties and charges on imports and

exports are NTBs”

 Quantitative Restrictions: A. 11 of GATT; in terms of volume and value; China-

Raw Materials case: “the term restrictions refers generally to something that has

limiting effect and use of the term quantitative suggests that restrictions within the

meaning of A. 11.1 is a measure that has limiting effect on the quantity or amount of a

product being imported or exported”; they are prohibited; types (1) prohibition or ban

either absolute or in conditional terms on importation or exportation Eg: rice ban (2)

import or export quota Eg: agriculture, textiles and clothing [ATC was subsumed in

AoA] – may be global or bilateral quota – Multi Fibre Agreement was the imposition

of global quota on cotton from 1958 onwards and then ATC was brought in to phase

out the MFA (3) import or export licensing (4) QR decision – Annexure 2 specifies

the 4th type which is [global quota, bilateral quota etc.] other quantitative restrictions

such as (i) data collection & monitoring requirements (ii) minimum price

requirements (iii) prohibiting importation of copyrighted works which are not

domestically manufacterd (iv) requiring security deposits (v) prohibiting imports not

produced in a particular manner etc.; WTO wants tariff imposition as per A. 2 of

GATT – tariff barriers are preferred to QRs for the purposes of (1) transparency and

predictability (2) QRs lead to further licensing of the system (3) for the prevention of

corruption in light of license raj; TRQ are allowed only and is only applicable to
agricultue – tariff rate quota is to fix the high tariff and the quota with a promise of

elimination of both in phases – usually for agriculture – they are not QRs as per US-

Line Pipe case – “TRQ is a quantity which can be imported at a certain duty and it

involves the application of a higher tariff rate to imported goods after a specific

quantity of the item has entered into the country at a lower prevailing rate and any

quantity above the quota is subject to a higher duty”; relevant cases for QRs: India-

QR case [India imposed QRs on 1500 items in violation of A.11 and US filed a case –

we lost] & EC-Banana III case [QRs are prohibited under A. 11]; Turkey-Textile

case: differences between QRs and tariffs or customs duties: (1) tariff is preferred and

an acceptable mode of protection and the prohibition against QRs is a reflection that

tariffs are GATT’s border protection of choice (2) tariffs are more transparent (3)

economic effect of tariff is immediately clear at the time of importation (4) tariffs are

easy to negotiate and gradual reduction of tariff is possible (5) tariff increase provides

benefits to the govt in the form of revenue while QRs provide benefits to the

importers (6) QRs lead to corruption whereas tariff is not corruption-oriented (7) QRs

impose absolute limits on imports but with tariffs there is no chance of imposition of a

ban; WTO Secretariat must be notified [no timeline] about QR impositions by the

country imposing QRs, with information of (1) general description of the QR (2) type

of restriction (3) relevant tariff line code [HS classification] (4) detailed product

description (5) justifications of the measure being in line with WTO obligations (6)

national legal basis for imposition of QRs; Japan-Semi Conductors case: mandatory

or non-mandatory measures restricting the export of some products at below cost

price is QRs; EEC-Isle Seeds case: import quota comes within the purview of QRs;

Argentina-Hides Leather case: de jure and de facto restrictions both come under

QRs; Columbia-Ports of Entry case: restrictions on 2 ports of entry limiting the

 competitive opportunities for the products at issue having a limiting effect on imports

are QRs; India-QR case and India-Automobile case: products allowed without

formal QRs at the border but subject to certain conditions which create a disincentive

to import are QRs; China-Raw Materials case: minimum export price requirement on

export of some raw materials is a QR; Brazil-Reiterated Tyres case: QRs cover

border measures and internal measures; China-Rare Earth case: export quotas are

under QRs; exceptions: (1) critical food shortage [essential products to the exporting

party] (2) import or export restrictions because of necessity test [in terms of morality,

environment etc.] (3) SPS restrictions and health related restrictions (4) Balance of

Payments crisis (5) general exceptions (6) security exceptions (7) safeguards

exceptions or escape clauses (8) waivers

 Voluntary Export Restraints: agreement between an exporting and importing

countries, where the exporting country restrains its export of a product to the

importing country at the request of the latter; widely practices in 60s and 70s by Japan,

EU and US on steel, automobiles, semi-conductors, electronic chips etc.; currently

these are prohibited under the safeguards agreement of the WTO – A. 11.1; recently

Venezuela and Brazil have entered into these even though they are prohibited – how

or why? A. 19.3 of GATT read with Safeguards Agreements prohibits it – VER have

recently been invoked due to bilateralism and protectionism – all countries have a

right to enter into and modify treaties as per A. 2 and 41 of VCLT – however this is

not allowed for the WTO under A. 16.5 of the Marrakesh Agreement – UN Report:

Fragmentation of International Law which says WTO is a stand alone agreement; why

are VERs not allowed (1) undermining multilaterism – but not true as RTAs are

allowed (2) lack of transparency – not regulated by any committees and no

notification of the agreement (3) corruption and the ability to buy special favours (4)
 distortion to international trade (5) prolonged nature of restrictions – don’t know

when it will be removed

 Customs Valuation: customs valuation agreement also exists under the WTO (1)

there are 6 methods of it which are the only allowed methods of valuation at the

border beyond which they are prohibited (i) transactional value method (ii)

transactional value of identical goods (iii) transactional value of similar goods (iv)

deductive method (v) computed method (vi) fall-back method (2) the CV must be fair

and uniform and neutral for valuation of the goods for the purpose of customs (3)

prohibition of arbitrary or fictitious customs values (4) publication of all rules made

mandatory

 Pre-shipment Inspections: practice of employing private companies to check quality,

quantity, customs classification of goods [HS classification] and the prevailing

international price of the goods; for the purposes of (1) checking commercial frauds

(2) preventing evasion of customs duties; it is an NTB regulated by WTO – still

countries are facing this barrier in terms of PSI due to (1) unnecessary delays in terms

of checking by the private companies and (2) unequal treatment of the goods based

upon origin; guidelines: (1) must be on a non-discriminatory basis (2) transparent

method of inspection (3) protection of confidential information (4) avoidance of

unreasonable delay (5) publication of all details

 Rules of Origin: A. 9 of GATT 1994 and Agreement on Rules of Origin; WCO plays

a significant role wrt harmonization of these rules; US-Coll case – meat cutting case

from India to US but since reared in US it is not Indian meat; must disclose the origin

as the time of import and export

 TBT and SPS: health of people, plants etc.

 TFA is a combination of A. 7, 8 and 20 – Bali MC; came into force in 2017; so all of

the above problems are being redressed by the above; it is a trade inputs category of

agreements

There is one view that says the law applies from the date it came into being Eg: TBT and

SPS apply from 1st Jan 1995; the second view was expressed in Large Civil Aircraft case

wherein there was a challenge to measures imposed in 1980s in violation of WTO

agreements was successful and the law was required to be changed to comply with WTO

rules; the third view is that the law applies from the date you sign upto the law of WTO

ONE WEEK MISSING – APPENDIX

GSP

Developed countries provide non-reciprocal special and differential treatment for goods

and services of developing countries and LDCs; less taxes etc. for the goods and services;

it is called generalised system of preferences because in 1979 a document known as the

Enabling Clause was issued; before that it was the developed countries’ discretion to

provide preferential treatment; but under this document and Chapter IV of GATT 1994

the legal framework for this preferential treatment was generalised; the countries

themselves determine whether a country is developing or LDCs; India deemed itself to be

a DC but its GNP has increased and so has India’s purchasing parity – therefore under S.

232 of the US Act, Trump has said they will not give India GSP anymore

Criteria to get special and differential treatment as per US Act:

1. OECD countries are not eligible for GSP

2. G-20 members are newly developed countries are not eligible for GSP

3. High-income group countries marked by the World Bank are not eligible for GSP
 4. If the country’s share in world export-import is more than 0.5% then the country

is no longer eligible for GSP

These were in the 45-page letter written by Trump which is addressed to the WTO.

Brazil has given up the GSP assistance; India’s share in world export-import is 1.5% and she

is a G-20 member – is India entitled? self-judging?

A. 21 of GATT provides security exceptions is this self-judging? A. 21(2)(b) – not self-

judging according to lastest Russia-Ukraine case; therefore security exceptions can be

challenged

SPS measures

Sanitary – animal and human health

Phytosanitary – plants

Countries take measures to prevent goods from entering the country if they endanger the life

or health of animals, humans or plants; Annex 1: any measure taken to prevent entry of

products that bring in (1) pests, diseases, disease carrying organisms (2) any risks arising

from additives, contaminants, toxins in food, beverages and foodstuffs (3) any risks arising to

plants (4) any risks arising to animals;

2 aims of the agreements: (1) to protect human or animal life and health from food-borne

risks (2) to protect human, animal or plant life and health from pests and diseases

Principles of SPS:

1. Sovereign rights to take SPS measures – every country has the right to ban goods if

they want to
 2. Obligation to take and maintain only the SPS measures necessary to protect human,

animal or plant life – risk analysis + necessity test

3. SPS is based on scientific principles – but controversial as to whose scientific

principles?

4. SPS measures should not be arbitrary and unjustifiable

5. The goal is to harmonise SPS measures internationally

SPS covers 2 problems:

1. Consumer safety from food, foodstuffs and plants

2. Unnecessary regulations in terms of safety and health

These regulations depend on the status of the countries i.e. whether it is a developed or

developing country etc.

2 types of standards for consumer safety: (1) international standards (2) domestic standards –

whose standards to apply? Domestic standards are allowed but (1) it must be based on

scientific findings (2) arising out of necessity and (3) it should not discriminate between

countries where similar situations exist wrt like products; then what happens to international

standards? Countries must be encouraged [not binding] to implement international standards

as per the SPS Agreement and international standards refer to those developed by

international standardising bodies Eg: FAO-WHO standards i.e. Codex Alimentrus

Commission standards for food; Society for Epizooties for animal products or IHO standards;

UPOB for plant health – international plant protection conservation

Is a higher level of health protection allowed by imposition of national standards? Yes, but as

per an (1) appropriate risk assessment (2) with a consistent approach

SPS Agreement is a framework agreement with a basic outline/guidelines/principles giving

freedom to countries wrt to the implementation of the agreement

SPS allows countries a legitimate way to protect its consumers, but whenever it is

discriminatory it becomes arbitrary and protection becomes protectionism

Why is SPS useful for developed and developing countries?

Developed countries interest is foremost as (1) they cant accept food imports from

developing countries if they are not of a certain quality – they have high regulation standards

(2) further consumer awareness campaigns in developed countries have people concerned

about if child labour is used in production/chemicals used/animal testing etc. (3) increase in

variety of consumer demand in developed countries ensures high quality and safety standards

(4) restrictions on market access for products in developing countries (5) allows investment

in the food and processing sectors (6) increased use of sophisticated technologies Eg: GMO

Developing countries are interested in these measures (1) to protect their agricultural sector

(2) food safety issues (3) extremely vulnerable to trade barriers in this sector (4) strategy to

deal with NTB

Basic rights and obligations under the agreements:

1. A. 2 – members rights to regulate SPS measures necessary for protection

2. Members regulatory rights are contingent on SPS Agreement i.e. the right to regulate

should be consistent with the Agreement

3. The SPS rights can only be exercised when the measures are based upon scientific

principles and are not maintained without scientific evidence

4. SPS measures should not be arbitrary or unjustifiably discriminatory

5. Application of A. 20 of GATT 1994 while implementing SPS measures

 6. Harmonisation of SPS standards [A.3] by promotion of use of international standards

7. Recognition of equal standards [A.4] i.e. mutual recognition of standards

8. Risk assessment must be carried out for SPS measures i.e. (i) evaluation to see the

likelihood of threat (ii) scientific evaluation (iii) relevant process and production

method (iv) relevant inspection (v) sampling and testing methods and (vi) other

relevant standards Eg: ecological, pesticides, environmental, quarantines etc.

Appropriate level of SPS: (1) see potential damage (2) cost of eradicating damage (3) cost-

effectiveness (4) is any alternative mechanism is available – if there is then follow that

Are provisional bans allowed on certain products? Yes, based on the precautionary principle

– EC-Biotech case: precautionary principle is not CIL – it may be a customary principle for

international environmental law but not trade law – definition of the principle in international

law is absent and hence it is not CIL; A. 5.7 of the SPS Agreement allows provisional bans,

although not having scientific basis, but on the basis of a precautionary principle while trying

to gain scientific evidence

Disguised protectionism is not allowed: test to check (1) members impose their own

appropriate levels (2) level of protection is arbitrary or unjustifiable (3) levels are leading to

discrimination – EC-Hormones case

Transparency of SPS:

1. Publication of all SPS measures is mandatory [A.7]

2. Reasonable time has been fixed for publication and implementation of the measure [A.

10 implementation]

3. Establishment of enquiry point in the importing country in order to receive all the

information about the goods entering the country

 4. Notification to the WTO secretariat and then to the SPS Committee or if any WTO

member requests it for a particular product, then they must notify such members also

5. Ntification must be there in the languages recognised by the WTO [English, French,

Spanish]

6. Control, inspection and approval procedure for SPS measures is given under A. 8: (1)

delay should not be there in granting approval (2) information must be supplied to all

relevant parties (3) confidentiality can be protected (4) fees for the measures may be

imposed on a non-discrimination basis

SPS Committee and DSU are the 2 bodies which handle any SPS related issues that may arise

A. 20 of GATT 1994 – General Exceptions

A. 20 and 21 are exceptions to GATT Principles; A. 24 is the exception to A. 1 of GATT; A.

3.8 talks about exceptions to A. 3 wrt GPA; Special and Differential Treatment, BoP, food

shortages, safeguards are some other exceptions;

Why are exceptions required?

1. Gives policy space to the governments in light of trade liberalisation

2. Checks and balances

3. Reflects political realism in light of the free trade doctrine

What are the core functions of the govt in light of trade liberalisation? – exceptions are

provided to protect these functions

1. Promotion and protection of public health

2. Consumer safety

3. Protection of environment

4. Economic development
 5. National security

A. 20 takes care of conflict beween trade liberalisation and societal values and interests; A.

21 deals with trade liberalisation and national security concerns of the countries

Nature and functions of A. 20:

1. Chapeau: refers to a hat of non-discrimination; opening sentences are a non-

discriminatory clause

2. List of 10 exceptions – they are exhaustive; singularia non sunt extendeda: exceptions

are always interpreted in a narrow manner as per the VCLT but this is not accepted by

the Panel and AB; however the VCLT is not followed by the WTO unless it is wrt A.

31, 32, 33 and 26 of the VCLT; A. 3.2 doesn't mention VCLT [because India and US

have not ratified it] – Panel and AB clarify it as per the CIL principles; but CIL

principles provide that there are exceptions to most rules

3. 2 tier test to check if it is a valid exception: (1) whether the exception falls within the

list and then (2) whether it is non-discriminatory

4. US-S. 337 Tariff Act case: (1) A. 20 provides limited and conditional exceptions

from obligations under GATT 1994 (2) it is relevant only when a measure of the

WTO member has been found to be inconsistent with other GATT provisions (3) the

exceptions as expressed in the form of a list is exhaustive in nature (4) exceptions are

in the nature of societal values

5. US-Gasoline case & US-Shrimp case: (1) A. 20 which seeks to balance the

affirmative commitments and exceptions (2) relationship between A. 1, 3 and 11 and

A. 20 must be examined in factual and legal context (3) A. 20 strikes a balance

between on the one hand trade liberalisation, market access and non-discriminatory

rules and on the other hand other societal values and interests
 6. Thailand-Cigarette case: (1) Panel may be called upon to analyse substantive

obligations and affirmative defence and to apply both in the particular measure (2)

Panel’s duty is to find and apply the line of equilibrium between substantive

obligations and exceptions

Scope of A. 20:

1. A. 20 allows under specific conditions deviations from all GATT obligations [A. 1, 3,

11]

2. The scope of application of A. 20 is very broad

Is A. 20 covering exceptions to the provisions of GATT 1994, or all the WTO Agreements or

the Accession Protocol?

1. China-Audio Visual case: Panel said A. 20 does not cover Accession Protocol but

AB said it does

2. China-Raw Materials case: keeping in mind a particular paragraph of Accession

Protocol, A. 20 does not cover the Protocol – it depends on an Article to Article basis

3. China-Rare Earth case: depends on the facts and specific paragraphs

Therefore, it is only an exception to GATT 1994.

MFN, National Treatment, DSU, SPS, TBT, A. 20