Mekelle University: School of Law

short Notes for

International trade Law

2018
1
 CHAPTER- 1
Introduction to International Trade Law
Meaning of International Trade?
 the exchange of goods or services between nations
 Involves the flow of goods and services across national frontiers
 Almost every kind of product can be found on the
international market
like food, clothes, spare parts, oil, jewellery, wine, stocks,curren
cies water and so on
 Services are also traded: tourism, banking, consulting and
transportation
 Exchange? valued them less-valued them most highly… parties & society better
off
Nations trade for the same reason that households trade-Because both side benefit
 The Benefits of Trade allow a country to specialize in the manufacture and export
of products that can be produced most efficiently in that country.
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Cont.
Rationales of international trade? why nations engage
in international trade?
A nation cannot produce the goods or provide the services in
question, or where they do not have enough
Though they have the capability of producing the goods or
supplying the services, states may import them for the
reasons that :
- Goods/services may be cheaper than those produced
domestically;
- a greater variety of goods/services may be made available
through imports;
- the imported goods/services may offer advantages other than
lower prices over domestic production – better quality or
design, higher status , technical features, etc.
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Definition….ITL…Con..
ITL- “The body of rules and norms that regulates
activities carried on outside the legal boundaries of
nations for all economies are affected.” or “is a
regulation of conduct in commerce between nations”
International trade law and public international law ?
International trade law and international
commercial law?
International trade law and international
Economic laws ?

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The Bretton Woods System?
Regulation of trade is one of the oldest forms of international law

The Great Depression (economic slump in North America, Europe, and other industrialized

areas from 1929 until about 1939; most severe economic crisis of modern times).

Reaction of national states was protectionism, esp. imposing tariffs, raising existing ones,

competitive devaluation, setting quotas and other NTB’s. Effect: great reduction of the

volume of international trade (in total by half).

Wartime devastation in Europe: US assistance was needed for reconstruction
Theory of “economic security”: fundamental causes of two WW lay in economic
discrimination and trade warfare (Cordell Hull) – ensure economic stability and political
peace. Free trade relies on free convertibility of currencies and major monetary fluctuations
can stall the free flow of trade.

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ITL cont’d
Sources of international trade law
Sources of ITL includes, but not limited to:
1. Agreement between states: treaties or conventions
2. General practices between states: trade customs and usages e.g. Lex
Mercatoria developed by practice of traders in some areas of trade
3. general recognized principles of law e.g. Good faith, pact sunt servanda,
obligation to mitigate damages
4. Previously decided cases and academic writings
5. Agreement between traders : choice of law
6. Domestic law
7.Dominant commercial organizations

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ITL
 Concerns
 Trade relations across boarders-Mkt access to trade on international
trade
 Domestic trade legislation at the inter-face of borders
 Domestic legislation having bearing on IT
 Problems in focus
 Quantitative restrictions
 Tariffs
 Non-Tariff barriers (state trading , custom procedures)
 Unfair trade practices e.g. Subsidies
 Trade related measure e.g. Intellectual Property rights, Investment
protection
 Discriminatory Practices

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Query
Free trade?
Merits and De-
merits?

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The Free Trade Debate?
 Protectionism is a view that free trade is injurious and should be restricted:
Tariff, Quota, Subsidy and other barriers
 Free Trade occurs when a government does not attempt to influence,
through tariffs, quotas, or other means,
 what citizens can buy from other countries or
 produce and sell to other countries
 The Benefits of Trade allow countries to be richer by specializing in
products they can produce most efficiently
 In long run- as people specialize and seek higher incomes, they may learn
to do their specialties better
 each country acting individually would be better off with protection, but
both would be better off if both chose free trade.

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Policy debate of free trade
Early thinking against international trade
 Merchants were considered inferior class
 Trade exposes citizens to the bad manners and corrupt barbarians:: disrupt
domestic life
 There were also supporters of trade beyond borders for mutual benefits
Pre-mercantilism
 Early views were not based on economic arguments (theories)
 Strict regulation because:
 To maintain a favorable balance of trade: aggressive export and restrictive
import
 Promote manufacturing goods at home rather than importing them
 How foreigners able to import with out export?

What are the main theories of IT?

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Theories of IT?
analyzes the basis of trade , the gains from trade, the patterns of trade.
Mercantilism (pre-16th century)
 Takes an us-versus-them view of trade
 A nation’s wealth depends on accumulated “treasure”
 Gold and silver are the currency of trade
 argued their countries should run a trade surplus
 Maximize export through subsidies
 Minimize imports through tariffs and quotas
 Mercantilists neglected to see the benefits of trade
 many thought only about advantage for their country
 Other country’s gain is our country’s loss: “zero-sum game”

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Theory Conclusion
 Flaws in assumption:
 Simple world (two countries, two products)
 no transportation costs
 no price differences in resources
 resources immobile across countries
 each country has a fixed stock of resources and no efficiency gains in
resource use from trade
 full employment
 Real world: many countries and many goods
 Transportation costs may decline with specialization
 Prices in different countries can be (are) effected by exchange rates.
 Resources can move from country to country: labor (from Eth-RSA),

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Theories of IT Cont’d
Free Trade theories
1. Absolute Advantage (Adam Smith: the Wealth of Nations, 1776)
 Mercantilism weakens country in long run; enriches only a few
 He argued a country :
 Should specialize in production of and export products for which it has
absolute advantage; import other products
 Has absolute advantage when it is more productive (most efficient) than
another country in producing a particular product
 Trade between countries is, therefore, beneficial
Example: Ghana/cocoa vs. South Korea/rice

Flaw: What if has no absolute advantage over any of its potential trading
partners with respect to any products and services?

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Theo…of IT con
2. Comparative Advantage (David Ricardo: principles of Political Economy,
1817)
 Country should specialize in the production of those goods in which it is
relatively more productive... even if it has absolute advantage in all goods
it produces
 i.e. Absolute Advantage is a special case of Comparative Advantage
 Trade is a positive-sum game : Specialization of production and free flow
of goods benefit all trading partners’ economies
 Suppose one country is more efficient than another in every thing. There
are still global gains to be made if a country specializes in products it
produces relatively more efficiently and import products for which it is
relatively inefficient than other products.
 Countries have comparative advantage in goods for which the opportunity
cost of production is relatively low i.e. those that can be produced by
giving up relatively little in production of other goods

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Theories Cont’d
 It has comparative advantage in the product or service where the ratio:
Resources required in one country .
Resources required in the other country is low
The country less efficient in everything will be poor … But it would be
even poorer if it did not trade.
Smith, Ricardo advocated free competition in any economy
 Advocates of this believe that if people were left to trade on their own, they
would naturally trade the goods in which their countries had comparative
advantage
e.g. Typing: lawyer V.s Secretary Instructor: Cooking Vs. Teaching

Flaws: Immovable resources- may not easily employed to other Different

goods use different resources in different proportions and Labor is not the
only factor it should take in to account land, capital and technology

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Theories Cont’d
3. Factors-proportions or Relative Endowment [Heckscher-Ohlin]
 Differences in factors endowment determines patterns of trade
 It was modified to include increasing opportunity cost.
 Absolute amount of factor endowments matter: produce goods and services that
use abundant resources e.g. Ethiopia- animal products
 Export goods that intensively use factor endowments, which are locally abundant
and import goods made from locally scarce factors e.g. Ethiopia coffee products
Flaws: factor endowments can be impacted by government policy –e.g. minimum
wage, investment incentives.

4. International Product Life-Cycle (Vernon-1966)

 the highly developed and industrialized economies, reflecting
their superior access to large amounts of financial capital and
highly specialized forms of human capital,would enjoy a
comparative advantage in the R&D-intensive stage of product
innovation which would focus initially on servicing a small,
domestic,custom-oriented market.
 The 2nd stage in the product cycle would see production
expanded to cater to a mass domestic market.
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Theory of free trade-Refined
 The 3rd stage would see products exported to other countries
and perhaps parent companies setting up subsidiaries in
other countries to undertake manufacture there (the
phenomenon of the Multinational Enterprise).
 A 4th stage in the product cycle would see the production
technology becoming highly standardized and adopted by
producers in other countries, particularly countries with
lower labour costs, and products perhaps then being
exported by these countries back to the USA or other
countries where the innovations had originated.
 According to this theory, quasi-rents could be earned by
domestic firms early in the product cycle, but these rents
would be dissipated as the product moved to later stages in
the cycle, and comparative advantage shifted to other
countries.
 It shows natural products are not the only factors to affect
trade, like government policy, industrial policy do so.

Query: Guess the Flaws of this theory?

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Theory of free trade-Refined

Flaws:
 in manufactured goods seems to explain reasonably well
patterns of specialization observable in many countries in the
1950s and 1960s.
 It has become less compelling over the last two decades, as an
increasing number of countries, like Japan and other NICs, have
acquired many of the same comparative advantages as the older
industrialized economies in early stages of the product cycle,
through access to large domestic and international sources of
capital that have become increasingly mobile, and through
investments of their own in the human capital required to
achieve a comparative advantage in the early stages of product
innovation and manufacture.
 Fail to explain in agricultural product trade, globalization and integration of the
economy makes this theory less valid. NIC started to have comparative advantages
even at early stages of production.

Query: Can you imagine any practical gaps that cannot be explained by these
theories? 18
New trade theories
 New trade theories:
 explain links among natural resources country advantages, government
action, and industry characteristics that enable such exchange to happen
 As output expands with specialization, an industry’s ability to realize
economies of scale increases and unit costs decrease
 Because of scale economies, world demand supports only a few firms in
such industries (e.g., commercial aircraft, automobiles)
 Countries that had an early entrant to such an industry have an
advantage:
 Fist-mover advantage
 Barrier to entry
1. Global Strategic Rivalry
 Corporations gain competitive advantage trough: intellectual property,
economies of scale and scope, experience

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New trade theories cont’d
2. National Competitive Advantage (Porter, 1990)
Determinants of national competitive advantages include:
 Factor endowments
 land, labor, capital, workforce, infrastructure
(some factors can be created...)
 Demand conditions
 large, sophisticated domestic consumer base: offers an innovation
friendly environment and a testing ground
 Related and supporting industries
 local suppliers cluster around producers and add to innovation
 Firm strategy, structure, rivalry
 competition good, national governments can create conditions which
facilitate and nurture such conditions

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Introduction to the General Agreement on Tariffs and
Trade 1947 -1994_(end of 1994,128 members)
• The GAAT Created on January 1, 1948 at Geneva,
• Despite ITO, GATT was operational because:
 It was a trade agreement rather than a trade organization
 Its legal obligations were described as ‘provisional’, viewed as impermanent
(though initially conceived as a provisional legal instrument, it endured for
almost 50 years)
 To be applied only where they where consistent with the US domestic
legislation
 IT was, therefore: a forum for trade negotiations and a mechanism for
modifying and enforcing the GATT rules.
Justifications for GAAT:
 Intention was to encourage trade between member states by regulating and
reducing barriers to trade on traded goods.
 It provided a common mechanism for resolving trade disputes
 Served as the basis for eight further rounds of ‘negotiating rounds’ to reduce
tariffs and other barriers to international trade
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The GATT and Rounds
• 1st. After World War II at the initiation of UK and USA for ITO
(International Trade Organization) : Geneva, April 1947, Signed by 23
countries: Subject matter: Tariffs: GATT birth
• 2nd . Annecy, France, in April 1949, 13 countries took part and the main
focus of the talks was more tariff reductions.
• 3rd . Torquay, England, September 1950, 38 countries took part, 8700 tariff
concessions were made: Establishment of GATT as a governing world body
on tariff and trade
• 4th. Geneva II 1955-1956, 26 countries took part for more tariff reduction,
• 5th. Dillon Round, named after former US Under Secretary of State Douglas
Dillon, held at Geneva from 1960-1962, 26 countries took part, over $4.9
billion in tariffs were reduced,
• 6th. Kennedy Round took place from 1964-1967, 62 countries took part, the
subject matters were tariffs concessions, anti-dumping.

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The GATT and Rounds
• 7th. Tokyo Round took place from 1973-1979, 102 countries took part,
Tariffs and non-tariffs measures, framework agreements.
 8. Uruguay Round from 1986-1994 (The Marrakesh – Morocco –
Declaration 1994), it was the most ambitious round, 123 countries took
part to expand the competence of the GATT to important new areas such as
services, capital, intellectual property, textiles, and agriculture; it was
headed by the Director-General Dunkel and known as Dunkel Project;
WTO was born on 1 January 1995; WTO was an improvement and
expansion of GATT;
 9th Doha Round started in November 2001, 141 countries took part on
Tariffs and non-tariffs measures, agriculture, labor standards, environment,
competition, investment, transparency, patent, information technology, etc.
Since 2011 Suspended, ‘Doha Debacle’ due to:
 Internal WTO stress
 Domestic political tensions over trade in many countries
 Conflicting views among WTO members on the basic principles
 Membership has grown too large and diverse
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GATT
 Complexities of globalization strained the effectiveness of GATT:
 GAAT has no secretariat
 Non-Tariff Barriers --not covered in GATT rules
 Agriculture had been an exception to restrictions on import quotas and export
subsidies
 Agriculture and Textiles mostly excluded from regulations
 Dispute Settlement procedures weak
 Developed Countries (DCs) wanted scope to go beyond trade in goods to
trade in services, intellectual property and investment
 Most Less Developed Countries (LDCs) did not agree to negotiations in the
Tokyo Round
 GATT was expanded by adding:
 General Agreement on Trade in Services (GATS)
 Agreement on Trade Related Aspects of Intellectual Property (TRIPS)

Then new institution that minimize the challenges, boost the success and
accommodate new changes

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WTO
 Established on 1st January 1995, as a result of the Uruguay Round
negotiations (1986-1994), by Marrakesh Agreement
Located in Geneva, Switzerland
Contracting parties= Members states (up to July 29, 2016-164)
Contracting parties = the WTO or its Ministerial conferences
 The agreement establishing the WTO commits its members to a variety of
noble objectives:
 Improved standard of living
 Full employment
 Expanded production of and trade in goods and services’
 Sustainable development and
 An enhanced share of developing countries in the world trade
 Optimal use of world resources & Sustainable development
 Share of developing and least developed countries from growth of international
trade that reflects the needs of their economic development
NB: Browse to WTO official web site

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WTO
• It is independent of the UN system-Stand alone International institution- i.e. not
UN specialized Agency
• Its a member driven organization, where each signatory has a voice
• Decision making is mostly on the basis of consensus even smaller player can
make its voice heard
• It is a rule based system where the disciplines are enforceable though an
effective dispute settlement mechanism
• It is Strives to reduce trade barriers for trade liberalization
• administers the trade agreements negotiated by its members, in particular:
 GATT- General Agreement on Trade and Tariffs- 1947
 GATS- General Agreement on trade in Services
 TRIPS- Agreement on Trade Related Intellectual Property rights
 TRIMS- Agreement on Trade relate Investment Measures

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Summery functions of WTO
 Administers the WTO Agreements and facilitates their
operation and implementation
 Provides a forum for trade negotiations among
member states on matters covered by the Agreements
and for further liberalization of trade amongst
members
 Responsible for the settlement of differences and
disputes between members
 Responsible for periodic reviews of the trade policies
of members
 Also provides technical assistance and training for
developing countries
 Cooperates with other international organizations on
subjects of mutual interest

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 Ministerial
Conference
General Council
meeting as Dispute General Council
settlement Body meeting as Trade
General Council Policy Review Body
Appellate Body
Dispute
settlement
Panels
Committees on
Trade and Council for Council for
Environment Council for Trade – Trade in
Trade and Trade in related Services
Development Goods aspects of
Sub committee on IPR
List developed
countries
Regional trade WTO Structure
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agreements
Structure of the WTO
 Ministerial Conference- The apex body for decision making (meets every
2 years). Composition:-ministerial representatives.
 General Council- performs the functions of the Conference between
meetings and has specific duties assigned to it by the WTO agreements.
Composition:- governmental representatives.
 IT also meets as the Dispute Settlement Body and the Trade Policy
Review Body.
 Councils for Trade in Goods (oversees GATT), Trade in Services (oversees
GATS) and TRIPS which report to and assist the General Council.
 Committees on special subjects, Committees functioning under the
Councils and Committees for the Plurilateral Agreements.
Membership- developed, developing, least developed countries and
economies in transition.
Decision making is by consensus (the making of a decision by general
agreement and in the absence of any voiced objection) If consensus is not
possible decisions will be taken by a simple majority vote.

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WTO
The scope of the multilateral trading system was
broadened from trade in goods (GATT) to encompass
trade in services (GATS) and trade related aspects of
intellectual property rights (TRIPS) as some called
‘Components of WTO’ which include:
 trade in goods –1994 GATT agreement –all bound
 product standards –all bound
 GATS –trade in services—not all bound
 TRIPs – all bound
 Plurilateral agreements (e.g., gov’t procurement) –some bound
 dispute resolution –all bound

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Terms worth special attention
1. protection The practice of shielding a sector of the economy from foreign
competition.
2. Tariff A tax on imports
3. Rounds series of negotiations intended to cut tariffs
4. Export subsidies Government payments made to domestic firms to
encourage exports
5. Dumping A firm’s or an industry’s sale of products on the world market at
prices below its own cost of production.
6. quota A limit on the quantity of imports e.g. issuance of permit

7.Trade deficit _ The situation when a country imports more than it exports.
8. Trade surplus _ The situation when a country exports more than it imports

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 Chapter -2
Core Principles and
Obligations Under
GATT/WTO

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Core Principles and Obligations Under GATT WTO
1. Trade Liberalization: liberal view & free market access
- limited government
- more optimistic about state cooperation
- trade is a positive sum game - reduce tariffs/ custom duties
N.B. developing countries-progressive liberalization-longer time to fulfill
their obligations
2. Non discrimination- de facto Vs. de jure
 Most Favored Nation (MFN) Art.1- GATT, Art.2 GATS, Art.4-TRIPS :
any favorable trade treatment must be given to all members
 National Treatment obligations : imports shall be at least treated as
favored as with domestic products (taxes, regulation), Art.3-GATT,
Art.17-GATS, and Art.3-TRIPS. Once the product, service or item of IP
has entered the market. NT: “not worse than the domestic firms”
Interpretation: Products must be treated equally vis-à-vis their
“content”; they may not be discriminated against because of the way in
which they were made.
3. Reciprocity: state benefiting from another state’s trade concessions should
provide roughly equal benefits in return (to prevent Free-riders).
4. Predictability - binding and enforceable commitments, restrictions on the
use of barriers to trade and 33
PP cont’d
5. Transparency: Member nations are required to
publish trade policies and regulatory frameworks.
report changes
6. Escape clause/ Safety Valves: Allows a member
state to avoid,
temporarily, its GATT 1994 obligations when there is a
surge in the
number of imports coming from other member states
aAn injured member may impose emergency, restrictive
trade measures.
b.Prerequisites:
1) It must notify the WTO of its action.
2) It must consult with the affected exporting member
state to arrange for compensation.
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Exceptions
c. If a notifying country fails to negotiate, the injured
exporting state is authorized to “retaliate.”
1) The injured state may withhold “substantially
equivalent concessions” in order to restore the
previous balance of trade between the two countries.
d. Procedures for engaging in consultations and for
withholding concessions are set out in the
Safeguards Agreement
?7. Regional Integration: GATT encourages regional
integration as a means of promoting international
trade.

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Exceptions
why Exceptions? The first is that, in order to maintain the multilateral
trade system, it is necessary to permit exceptional measures in a controlled
manner when specific criteria are met
need to consider the ability of a country to implement its obligations based
on the degree of its economical development.
 Exceptions Non-discrimination Rule:
MFN (Each country in the WTO promises that all countries will pay tariffs no
higher than the nation that pays the lowest.): exceptions:
1) General exceptions to the MFN rule.
a) Contracting states may take actions to counter dumping and subsidization.
b) Contracting states may join together to create customs unions (EU) and free
trade areas (NAFTA). GATT: Art. XXIV: 5, GATS: Art. 5
c) Contracting states may restrict imports to protect public health, safety,
welfare, and national security GATT: Art. XXI GATS: Art. XIV

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Exceptions
2) Special exceptions to the MFN rule for developing contracting states.
a) Generalized System of Preferences (GSP) allows developing countries to
export all (or nearly all) of their products into a participating developed
country on a non-reciprocal basis.
b) South-South Preferences allows developing countries exchange tariff
preferences among themselves without extending the same preferences to
developed countries.

Paused?????

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Exceptions
Case : JAPAN ‑ TAXES ON ALCOHOLIC BEVERAGES Vs USA, Canada,
EU
World Trade Organization, Dispute Settlement Panel, 1998
FACTS: Japan imposed higher taxes on imported vodka than it did on
“shochu,” a similar locally manufactured alcoholic beverage. Canada,
the EU, and the US claimed that this violated GATT Article III,
paragraph 2, which requires that imported products be taxed the
same as like domestic products. Claimants US argued that Art. III:2
should be interpreted according to an “aim-and-effect” test. Japan
also argued that vodka and shochu were not “like products” and that
its taxes on alcoholic beverages did not violate Art. III:2 because its
tax/price ratio was “roughly neutral.”
Art. III:2 requires that WTO member states impose the same internal taxes on
imported products as they impose on like domestic products. It also says
that taxes must not be applied in violation of the principles of paragraph 1.
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Exception
Art. III:1 says that taxes should not be imposed so as “to
afford protection to domestic production. The
meaning of the phrase “like products” must be
determined on a case-by-case basis. With regard to
Art. III:2, the products need to share common end-
users and have essentially the same physical
characteristics.
But could be better. E.g. in some developing countries
for absorbing FDI.
Exceptions:
a) Contracting states may maintain preferences
that existed at the time they became signatories of the
GATT.
b) Contracting states may discriminate in the
procurement of goods by government agencies.
c)Contracting states may discriminate in the payment of
subsidies to domestic producers.
d) Contracting states may discriminate in the screening
of domestically produced movies. 39
Exception
Protection through Tariffs: Contracting parties may
only protect their domestic industries through the use
of tariffs
a.Forbidden actions:
1) Use of quotas and other quantitative restrictions that
block the function of the price mechanism (Art. XI).
2) Tariffs be collected “at the time or point of importation”
(Art. II).
Purpose: To ensure that internal taxes are not
disguised as tariffs
b.Exceptions — member may impose:
1) Temporary export prohibitions or restrictions to
prevent or relieve critical shortages of foodstuffs or
other essential products.
2) Import and export restrictions related to the application
of standards or regulations for classifying, grading, or
marking commodities.
3) Quantitative restrictions on imports of agricultural
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Exception
4) Reasonable quantitative restrictions to safeguard a member
state’s balance of payments.
5) Quantitative restrictions to further the economic
development of a developing member state.
GATT -Articles XI(2) and XX
6) Protect its internal value system (public morals, national
treasures of artistic, historic or archeological value)
Preserve its tangible and intangible wealth and economic
system (e.g. to preserve exhaustible natural resources;
human, animal or plant life or health, intellectual property;
gold and silver; to ensure the marketing of commodities in
international trade)
So long as these restrictions are not:
 Unjustifiably discriminatory
 Disguised restrictions on international trade Arbitrary

Summary notes on Chapter III will be provided in due

course.!!!!
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 Chapter III
Trade Remedies

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Chapter V: Trade Remedies
General objective is to understand Trade Remedies
Specific objectives
 Safeguard Measures: Meaning and Nature
Substantive and Procedural Requirements
 Dumping: Substantive and Procedural Rules
Anti-dumping Investigation and Measures
 Subsidies: Substantive and Procedural Rules
Countervailing Measures
Subsidies and the Agreement on
Agriculture
 Critical issues of the Doha Round

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TR
Trade rem e di es are ex cep t i on s t o f ree t ra de,
w hi ch al l ow m embers to depart from the
fundamental principles of the GATT/ WTO system.

These are aimed to redress unfair foreign pricing,

government subsidies, or a sudden surge in imports
may distort the free flow of goods and adversely affect
business in a given country’s market. These provide
the domestic industries a period for adjustment to
restore normal trade. Once the normal trade is
restored, the measures should be revoked in time to
avoid overprotection.

In the absence of these opt-outs or safety valves,

governments would have been more reluctant to
assume the political risks of trade liberalization
initiatives in the first place. 44
TR
 Substantive rules for Determinations
 Existence of contingency: dumping, subsidy, or increased
imports
 Injury: degree and type of injury

 Causal link

ALL of the rules and principles set out in the relevant

WTO Agreements must be respected in each case
(are not discretionary).
Safeguard measures may be taken by a WTO member
to protect a specific domestic industry from,
sufficiently recent, sudden, sharp and significant
both quantitatively and qualitatively, increase in
imports of any product which cause or threaten to
cause serious injury.
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TR: Safeguard measures
so as to give time to domestic producers to adjust
to the new conditions.
Safeguards are not company or even country-specific.
Rather, with certain exceptions specified in the WTO
Safeguards Agreement, they apply to imports from all
countries—hence the expectation that safeguards are
to be used only in rare circumstances.
If an industry feels that a sudden increase of imports is
causing or threatening to cause serious injury, it may
file a request with its administering authority to have
a global safeguard measure temporarily put in place on
those imports.
Thus companies are advised monitor export markets
closely and to avoid rapid import surges into those
markets that are particularly distressed or depressed.
Refer: GATT Art. XIX and The Agreement on 46
TR: Anti-Dumping Measures
Dumping occurs when a producer sells a product in a
foreign market below a normal price.
..\Determination of Normal price.docx If an industry,
believes that it is being injured by unfair competition
through dumping of a foreign product imported into
its domestic market and substantiate that with
adequate evidence, it may request the imposition of
an antidumping (AD) duty/ measure by filing a
petition with its trade remedy administering
authority.
IT must establish:
 Dumping,
 Injury [material injury or threat of material injury (i.e.
Imminent and based on facts)], and
 Causation (a genuine and substantial relationship
of cause and effect between imports and injury,
based on objective examination of evidence)
Refer: Article VI of the GATT 1994 and the47
 TR: Countervailing measures against subsidy
Foreign governments subsidize industries when they
provide financial assistance to benefit either or both of
the:
 Manufacture of goods
 Exportation of goods
Forms of subsidies:
 Direct cash payments
 Credits against taxes
 Loans at terms that do not reflect market
conditions
Subsidies may be addressed if they meet conditions
set forth under the WTO Agreement on Subsidies and
Countervailing Measures (“SCM Agreement”).
Subsidies can be also addressed through domestic
countervailing duty (CVD) rules e.g. USA and other
advanced members 48
TR:
Duration of the measure. General rule: duties and
undertakings terminate five years after imposition
UNLESS
 a review covering both dumping and injury is
initiated before the deadline, AND
 there is a determination that termination of duty
would lead to continuation or recurrence of
dumping or subsidization and injury
 Measure may be continued

49
RT
Safeguards General rule: four years
 May be extended if determination that
 Measure necessary to prevent or remedy serious
injury AND
 Evidence that the industry is adjusting
 May not exceed a total of eight years
 May not reapply for same period as measure was in
place
 Safe guards’ 1 year: If duration longer than one year,
reduce impact of measure at regular intervals
(progressive liberalization)
 If duration longer than three years, mid-term review

 Withdraw or adjust pace of liberalization

50
TR
Except Special rule for developing Members
 May extend measure for additional two years
 May reapply measure after shorter period
Time-limit for investigation of safe guards is
(normally 12 months)
AD/CVM procedures
 - Right of defence
 Interested parties (including exporters and their
governments) have the right to present evidence
and arguments to the authorities
 Hearings

51
TR
 Transparency
 Parties: Right to see evidence, arguments;
authorities’ calculations and bases for determinations
 Authorities: published determinations at every stage
(initiation, preliminary determination, final
determination)
What happens if the rules are not followed?
 domestic judicial proceedings and/or

 WTO dispute settlement

E.g. See (Panel established in dispute between US and
China over alleged subsidies) available at
https://www.wto.org/english/news_e/news15_e/dsb_22ap
r15_e.htm

52
TR
 Ideally, effective trade remedy instruments are important to
respond to and restrain trade-distorting practices and the
market imperfection consequent.
 However, in practice, trade remedy instruments have been
abused to certain extent. E.g. In some cases:
 Used to minimize competition of imports to domestic
industries instead of counteracting the injurious effects of
dumped imports.
 The ambiguity of the rule of trade remedy itself leaves room for
much discretion to the investigating authorities of importing
Members.
 Stay for unreasonable long time
 the investigating authorities’ wide discretion and the different
and unfair methodologies conducted by members lead to the
initiations and subsequent measures to imported products.
 the investigating authorities reject the in formation provided
by exporters without any explanation, and rely entirely on
facts available to determine the dumping margin. As a result,
the exporters are subject to very high duty rates.
53
 Chapter IV
Technical Barriers to
Trade (TBT) and
Sanitary and
Phytosanitary Measures
54
Chapter IV: Technical Barriers to Trade: TBT
and Sanitary and Phytosanitary Measures
Non-tariff barriers to trade (NTBT)-i.e. standards-
include :
 technical regulations and standards (sometimes called
the Standards Code), and
 sanitary and phytosanitary measures, (Concerning:
food safety and animal and plant health regulations)

These are today more important barriers to trade than

customs duties or quantitative restrictions for many
products and many countries.

55
State Trading Activities
Refer to:
Article XVII of GATT 1994
The Understanding on State Trading Enterprises (Article
XVII of GATT 1994)
The Plurilateral Agreement on Government Procurement

State trader should not discriminate in the exportation or

importation of products take into account commercial
considerations in its decision making (unless import is for
immediate or ultimate governmental consumption).

State procurement should not discriminate between

suppliers.

according to Art. X:3(a) (GATT) & VI:1 of the (GATS)

Members must ensure that all measures of general
application affecting trade in goods and services are
administered in a reasonable, objective and impartial
manner.
56
standards
Refer to:
Article XX(b) of GATT 1994
The Agreement on Sanitary and Phytosanitary Measures
The Agreement on Technical Briers to Trade

Sanitary and phytosanitary measures should:

be based on scientific principles accompanied by
assessment of risk,
not arbitrary
not unjustifiably discriminate between members
not constitute disguised restrictions on international trade
or trade protection respect basic principles of good
administration, such as should not lead to undue delay,
should be reasonable.

Technical regulations and standards should:

not discriminate between …“like”…products of national
and between products of foreign origin
not result in unnecessary obstacles to international trade

57
Standards…cont’d
be necessary and based on scientific requirements,
except for temporary measures
respect international standards when these exist
relate to product performance, not to the design or
descriptive characteristics of the product
respect the code of good practice (for preparation,
adoption and application) included in the Agreement.
The actual procedures for assessment of conformity
regulations and standards should:
not discriminate
not be unnecessary obstacles to international trade
be expeditious
protect confidentiality and legitimate commercial
interests of parties
TBT: tries to ensure that regulations, standards,
testing and certification procedures do not create
unnecessary obstacles.

58
Standards…cont’d
New research of WTO experts are suggesting:
Unlike tariffs , non-tariff are appearing to have a dual
purposes: designed or administered in ways that
intentionally restrict trade even if their declared
purpose is to serve a public policy. E.g. technical
product requirement may be introduced to prevent
the importation and marketing of products considered
unsafe for consumption, but it may be targeted at
undoing some of the impact of opening up to trade on
the domestic industry.
See WTO: Staff Working Paper (Trade Policy
Substitution: Theory and Evidence from Specific
Trade Concern) ERSD-2014-18 on 29 October 2014,
p1

59
Chapter V
Agriculture

60
Chapter V: Agriculture
 WTO Agreement on Agriculture aims at providing fairer markets for
farmers and suppliers.
 The original GATT did apply to agricultural trade, but it contained
loopholes. For example, it allowed countries to use some non-tariff
measures such as import quotas, and to subsidize. Agricultural trade became
highly distorted, especially with the use of export subsidies which would
not normally have been allowed for industrial products.
 To plug loopholes, the Uruguay Round (Birth of WTO) produced the first
multilateral agreement and the first significant step towards fair competition
and less distorted agriculture sector providing fairer markets for farmers.
 The Agriculture Agreement is a set of new rules with new commitments.
The objective of the Agriculture Agreement is to reform trade in the
agriculture sector and to make policies more market-oriented.

61
Chapter V: Agriculture

The new rules and commitments apply to :

 Market access --- various trade restrictions
confronting imports
 Domestic support --- subsidies and other

programmes, including those that raise or

guarantee farm gate prices and farmers’ incomes
 Export subsidies and other methods used to make

exports artificially competitive.

The agriculture agreement does allow governments to
support their rural economies, but preferably through
policies that cause less distortion to trade.

62
Chapter V: Agriculture
 The Agriculture Agreement also allows some flexibility in the way
commitments are implemented.
 Developing countries do not have to cut their subsidies or lower their
tariffs as much as developed countries, and they are given extra time to
complete their obligations. Least- developed countries don’t have to do
this at all. Special provisions deal with the interests of countries that rely
on imports for their food subsidies, and the concerns of least-developed
economies.

Problem: Farmers are protected in every nation; highest

levels of protection are in EU, US and Japan, but are also
found in China, Brazil, India and Mexico, among others.

63
Subsidies and the Agreement on Agriculture

Governments usually give three reasons for supporting and

protecting their farmers, even if it distorts agricultural trade:
 1. to make sure that enough food is produced to meet the
country’s needs,
 2. to shield farmers from the effects of swings in world
production, and
 3. to preserve rural society.
 Agreement on Agriculture reduces but does not eliminate agriculture
subsidies
 Green box (non-distorting) subsidies aren’t significantly restricted:
can be used freely
 Blue Box (less-trade-distorting) direct payments not tied to
production – less restricted
 Amber Box (most restricting) tied to production, are reduced
 Export subsidies are significantly limited

64
Subsidies and the Agreement on Agriculture
 A form subsidy - form of financial support given by
government to farmers
 Cash (direct payment)
 Input cost finance (indirect payment)
 Tax concessions
 Any government support that affects relative prices
 Types of subsidies
 Export subsidies
 Domestic subsidies
Some of the reasons for subsidy include but not
limited to:
 Industrial development
 Creation of knowledge – research

65
Subsidies and the Agreement on Agriculture
 Attain distributional effects
 Protection of the environment
 Alleviation of poverty – consumer friendly
 Increase farm incomes
Subsidy has the following welfare effects:
 Low prices (good for consumers)
 Reduce production cost accrued to the producers
 Resources allocation
 Cost to government (tax payers)
 Negatively affect producers in other countries –
depress prices

66
Subsidies and the Agreement on Agriculture
 After expiration of “Peace Clause,” agricultural
subsidies are now restricted under SCM Agreement
 Agricultural subsidies prohibited if they exceed
Members’ commitments under the Agreement
 Otherwise, actionable under SCM Agreement only if
adverse effects are shown.

67
Chapter VI
The Trade in
Services
68
GATS
 Objective of GATS is to apply GATT principles from
trade in goods to trade in services. Hence, the GATS is
“broadly comparable” to the GATT but there are
significant differences in its approach to liberalization.
 Services cover a wide range of activities. Under the
GATS, the term “services” include any service in any
sector except services supplied in the exercise of
governmental authority (e.g. central bank services)
 The GATS applies to all measures by Members
affecting trade in services, including laws,
regulations, procedures, decisions, administrative
action etc., of Member governments.
 Area is of major importance to advanced countries such
as US, EU, Japan, Canada, because they are more
competitive in services worldwide than in
manufacturing.
69
GATS
 Trade in services under the GATS is defined, (Art.1
GATS) in terms of four modes of supply. They are :-
1) Mode one –Cross boarder supply- from the territory
of one Member into the territory of any other
Member (e.g. international telephone calls)
2) Mode Two-Consumption abroad- consumers or firms
making use of a service in another country (e.g. truism)
3) Mode three-Commercial Presence-by a service
supplier of one Member, through commercial
presence in the territory of any other Member; (e.g.
fashion models and consultants)
4) Mode four-presence of natural persons-by a service
supplier of one Member, through presence of natural
persons of a Member in the territory of any other
Member (e.g. foreign banks setting up banking
operations in a country)

70
GATS
Two main categories of obligations
I. General obligations which apply to all service sectors
of all Members.
Obligations: MFN (Art.2)
“With respect to any measure covered by this Agreement,
each Member shall accord immediately and
unconditionally to services and service suppliers of any
other Member treatment no less favorable than that it
accords to like services and service suppliers of any
other country.” Note qualifications to the MFN rule
via Art. 2 exemptions and RTAs (Art.5)
Transparency (Art.3) : The rule requires the “prompt”
publication of general measures, notification of
changes to/introduction of measures that affect sectors
covered by specific commitments to the Services
Council. Also requires the establishment of national
inquiry points.
71
GATS
II. Specific obligations which
 apply only to service sectors specified in the
Member’s “Schedule of specific commitments”
 or are to be negotiated and committed sector by sector.
 Members are not obliged to commit on the whole universe of
services sectors but applied if commitment is taken
Market Access Art. 16
“With respect to market access through the modes of
supply identified in Article 1, each Member shall
accord services and service suppliers of any other
Member treatment no less favorable than that
provided for under the terms, limitations and
conditions agreed and specified in its Schedule.”
Art. 16 contains a prohibition of a list of measures
(mostly quantitative) which Members cannot maintain
unless they specify them in their Schedules as
limitations on market access.
N.B. National Degree of market access can be limited in
schedules, e.g., 50% ownership for foreign banks
72
GATS
These measures include limitation on:
 The number of suppliers (e.g. quotas)
 The quantity of service out put (e.g. limited
broadcasting time for foreign films)
 The participation of foreign capital or restrictions on
the type of legal entity (e.g. joint venture)
National Treatment Art. 17
“In the sectors inscribed in its Schedule, and subject to
any conditions and qualifications set out therein, each
Member shall accord to services and service suppliers
of any other Member, in respect of all measures
affecting the supply of services, treatment no less
favorable than that it accords to its own like services
and service suppliers.”
E.g. The availability of tax incentives only to companies
controlled by nationals of the country in the retail
services sector.
Art. 17 covers both de jure and de facto discrimination.

73
GATS
Domestic regulations Art. 6
Article 6 addresses domestic regulations as these may act
as barriers to trade even if they are non-discriminatory.
E.g. professional qualifications, licensing procedures
and technical regulations.
Certain Art. 6 obligations apply only to service sectors in
which
commitments have been undertaken. They include:
 obligations to ensure that general measures are
administered in “a reasonable, objective and impartial
manner”.
 obligations aimed at preventing licensing and
qualification requirements and technical standards from
being unnecessary barriers to trade.
Recognition agreements regarding qualifications
should not deny other members the chance to negotiate
comparable pacts.
74
GATS
They must not be discriminatory; they must not
amount to protectionism in disguise
Commitments generally reduce regulatory
requirements,
Telecommunications services negotiations
concluded in Feb. 1997; 69 governments made
commitments; again, 95% of global
telecommunications market is covered.
Negotiations are continuing to achieve
“progressively higher level of liberalization” as
specified in GATS, art. XIX:1
Progressive liberalization is sought through
further negotiations
Uruguay Round was only the beginning; goal is
to take the liberalization process further by
increasing the level of commitments in schedules.
Progressive liberalization takes place with due 75
 GATS
 Developing countries are thus given flexibility for
opening fewer
sectors, liberalizing fewer types of transactions, and
progressively
 extending market access in line with their
development situation; they are also entitled to
receive technical assistance from the WTO
Secretariat
Special treatments for least-developed countries are
sought. Members are to establish “modalities” on how
to give special treatments to least-developed countries
during negotiations
The Exceptions (i.e. Restrictions Recognized by
the GATS)
General : The MFN (Article II) exemptions
Economic and labor market integration agreements
Measures necessary to:
 Protect public morals or maintain public order,
 Protect human, animal or plant life or health, or
 Secure compliance with laws or regulations not76
GATS
Specific
Temporary and non-discriminatory restrictions on
international payments for current transactions or
trade in committed services sectors during serious
balance-of- payments difficulties;
Measures for prudential reasons, including for the
protection of investors, depositors;
policy holders or persons to whom a fiduciary duty is
owed by a financial service
supplier, or to ensure the integrity and stability of the
financial system - the Annex on
Financial Services
Government procurement of services
Measures to ensure effective collection of direct taxes
and implementation of double taxation avoidance
agreements
Measures regarding natural persons seeking access to a 77
GATS: New concerns on services trade
New concerns on services trade
 Japan – backed by the United States, Korea, Australia and Chinese Taipei –
raised concerns about China’s “Cyber Security Act”, Japan said it could
prevent data from flowing freely and new suppliers from operating in
China, and called on China to abide by its National Treatment commitments
under the GATS. The US called on China to notify the measure to the
Council.
China said that safeguarding cyber-security to protect the interests of the
general public was a legitimate regulatory right for each member. The new
law complies with international practice and is non-discriminatory, China said.
It also stated that the draft legislation had been made available for comments
before its entry into force and said that it had been inspired by other members’
relevant practices.
 Qatar expressed concerns about recent measures by Bahrain, Saudi Arabia
and the United Arab Emirates, which limit the ability of Qatari nationals to
travel to and provide services in the Gulf, restrict the supply of services
from Qatar (in sectors including transportation, tourism, communications
and financial services) and prohibit Gulf nationals from accessing services
in Qatar. Qatar argued these measures are discriminatory, unexpected and 78
 Chapter VII
Trade-Related
Aspects of
Intellectual
Property (TRIPs)
79
TRIPS: Background
In the 1980s and 1990s, a number of the most
economically advanced industrialized nations,
including the US and some members of the EU, have
faced increasing competition in manufactured exports
from NICs in Asia and Latin America. Hence these
countries :
 gained unfair advantage due to their policy and the
issue of intellectual property rights has become a
prominent item on the trade agenda in trade
negotiations in Uruguay round final act and RTAs.
 Were Accused of affording a shorter period of patent
protection (and in some cases more narrowly defined
protection) to products such as pharmaceuticals than
do the United States and most European countries.
 Domestic imitations of these products often dominated
developing-country markets, with a resultant loss of
potential foreign sales by the original North American80
TRIPS: Background
 Have been viewed as lacking in transparency and
legal security and certainty in patent granting process
and the enforcement of patent protection.
 Were responsible for tolerance, some of them, and
lack of vigilance
in some other states as well with respect to
 The production and sale of pirate sound recordings and
videos,
 The ‘theft’ or appropriation of trademarks and symbols
(like ‘Rolex’ or ‘Pierre Cardin’) and
 Their attachment to cheap imitations that have no
relationship to the original producer’s own
manufactures.
Patent protection constitutes a form of monopoly rent to
the innovator which in turn provides incentives for
innovation. 81
TRIPS: Background

Counter arguments of Developing and NICs

 It is far from clear that all countries should be required
to maintain the same level of intellectual property
protection
 Patent protection may entail, at least, short-term
consumer welfare losses and may discourage diffusion
of technology through imitation and adaptation by
competitors, which themselves constitute valuable
economic activities.
 The advanced nations have already taken what they
need from the traditional knowledge through various
mechanisms
 It is an entry barrier

82
Main feature of the agreement
 Standards: The agreement expresses minimum
standards of protection
(I) The subject matter to be protected
(II) The rights to be conferred and permissible
exceptions
(III) The minimum period of protection
 Enforcement
(I) Provisions for domestic procedure and remedies
for the enforcement of the IPRs
(II) Includes general principle applicable to IPR
enforcement procedure apart from
administrative, civil and criminal procedure
available for enforcement of rights of the right
holder
 Dispute settlement: The agreement further provides for
the settlement of disputes over IPR among the member
states within the parameters of dispute settlement
procedure
83
Institutional arrangement
 Council for Trade Related Aspects of Intellectual
Property Rights (TRIPS)
 Dispute Settlement Body (DSB)
 Current Negotiations in special sessions (SS)
Provisions relating to developing countries
 Transitional arrangements
 Developed countries to provide
(I) Incentives for transfer of technology to Least
Developed Countries (LDCs)
(II) Technical assistance and financial support to
developing countries in preparing laws and
regulations on protection and
enforcements of IPRs

84
TRIPS
Objectives
 To reduce distortions and impediments to international trade and take
into account the need to promote competent as well as adequate
protection of IPRs
 To ensure that measures and procedures to enforce IPRs do not
themselves become barriers to legitimate trade
 To reduce tensions by reaching strengthened commitment to resolve
disputes on trade-related IP issues through multilateral procedures
 To establish a mutually supportive relationship between the World
Trade Organization (WTO) and World Intellectual Property
Organisation (WIPO)
 Sets minimum standards but freedom to determine the
appropriate method of implementing the Agreement (Art.
1.1)
 Non-discrimination features prominently in TRIPS,
similar to GATT and GATS, by following principles of:
 National Treatment (Article 3): Equal treatment for foreign and
domestic individuals and companies
85
TRIPRS
 Most Favoured Nation (Article 4): Equal treatment
for nationals of all trading partners in the WTO
TRIPS Agreement has additional important principle:
Intellectual property protection should contribute to
technical innovation and transfer of technology
Relationship between TRIPS agreement and other IP treaties
 Respects the standards and complies with the multilateral
conventions administered by WIPO( Paris and Berne conventions)
 Incorporation of explicit provision of various conventions in WIPO
into TRIPS agreement allows WTO panels to interpret them
Doha Ministerial Declaration (14/11/2001)
“implementation and interpretation of the TRIPS in a
manner supportive of public health, by promoting both
access to existing medicines and research and
development into new medicines” (par 17)

86
TRIPS
 “the TRIPS Council shall be guided by the objectives
and principles set out in Articles 7 and 8 of the TRIPS
Agreement and shall take fully into account the
development dimension” (par. 19)
 Separate Declaration on the TRIPS Agreement and
Public Health
 reconfirmed that technical cooperation and capacity
building are core elements of the development
dimension of the multilateral trading system.

2005 TRIPS Council Declaration: requests LDCs to

supply technical and financial cooperation needs in
order to implement TRIPS

87
IP
Tradition
al
Patents
knowled
ge
Utility Trade
models marks
Forms of
IP
Trade
designs
secrets

IndustriaGeograpCopyrigh
l designs hical ts
indicatio
ns 88
Rationale behind IPRs
E.g.
Patents: To stimulate innovation/encourage investment the
inventor receives an exclusive right to his invention in
exchange for disclosure of the invention in such a way that it
allows replication, the inventor receives a limited amount of
time to recoup his investment.
Copyright: Protection of creativity
Trademarks: Protection of goodwill and reputation
Importance of IPR?
 IPRs allow control over technology, signs and creations
 Original Purpose: to stimulate innovation and creativity by
compensating the creator/innovator for their intellectual
efforts
 Lately: incentive to investment / change in market players
--big multinationals
89
Reasons for controversy on IPR
IPRs
 create semi-monopolies also covering goods that
might be essential to society (e.g. pharmaceuticals
and environmentally sound technologies) /raises
prices (higher than production costs)
 limit access to textbooks, educational material,
information
 impacts on reverse engineering and imitation
 exceptions are pushed to the limit/scope is widened:
 extension of subject matter - - patentability of life /
software;
 extension of term of protection -- 70 years of
copyright protection;
 creation of new rights -- non original databases;
 over relaxation of granting of patents -- lack of
adequate description;
 inclusion of IP in trade, investment and stand alone
agreements;
 primacy of private rights of public rights
90
Acquisition and maintenance
of IP
 Member countries must create office and operate
governmental offices for the acquisition and
maintenance of IPRs
 Procedures for granting and registration of IPR must
be reasonable
 Member country's law must provide for opposition,
revocation and cancellation
 Member country may adopt measures to protect
public health and the public interest.

91
Trademark
 Trademark protects any word, name, logo or device
used to identify, distinguish or indicate the source
of goods or services
 Includes trade dress (the total image and overall
appearance of a product) and product configuration
(the shape if non functional)
 The purpose is to safeguard the integrity of
products and to prevent product confusion and
unfair competition
 The term of protection (initial registration and each
renewal of registration of a trademark shall be for a
term of no less than 7 years)

92
TRIPS: Patent
Requirements for patent protection -Patent should:
 Novel- New
 Inventive step-non-obviousness (not obvious to
someone skilled in the art)
 Industrial Applicability
 Patentable subject matter: Ideas/inventions are
patentable i.e. “Everything under the sun that is made
by man.“ as some says
Exceptions i.e. exclusions from patentability
 Discoveries are not patentable:
 Contrary to public policy and morality:
 Plant and animal varieties (in EU not in US)

93
Patent: How to obtain

Domestic patent/IP/ office: filing, obtain

priority date
International level: WIPO
Application requirements:
Description as how the invention works
Claim covering the scope of the legal
monopoly claimed by the patentee
Examination and publication
Patent duration in TRIPS-2o years
Ethiopian law is 15 years with possibility of
extension for five years…
94
TRIPs : Copyrights
 Copyright grants exclusive rights to the creator of original scientific, artistic
and literary works
 Copyright is in essential a negative right which
prevents others from making copies of the work of an
author
 ‘Fixed and Original’ is key in defining a work that qualifies for copyright
protection
 No copyright in a pure idea/news/simple
works/information itself i.e. protection is for the
expression of ideas
 Moral justification (theft is immoral) versus economic
Justification (protection brings economic welfare)
 Copyrights protects the rights of authors of literary
and artistic works for a certain time.
E.g. TRIPS-50 years
Ethiopian law -life +50 years
95
TRIPS: Industrial designs
 Protects the artistic aspect (namely, texture,
pattern, shape) of an object instead of the technical
features
 The term of protection (amount to at least 10 years)
 ‘Amount to’ allow the term to be divided into two
periods (for example two periods of five years)
 The third party is prohibited from making, selling or
importing articles bearing a design which is a copy
of the protected design, when such acts are
undertaken for commercial purposes
 Exception: optional mandate, if introduced then
such exceptions do not unreasonably conflict with
the normal exploitation of protected industrial
designs and do not unreasonably prejudice the
legitimate interests of the owner of the protected
design

96
TRIPs and Public health
Situation before TRIPS
Until early 1990s, approx. 50 developing countries
either excluded medicines from patentability or
provided shorter periods of protection or operated
conditions which restricted patent holders’ rights e.g.
Doha gave political recognition for first time that
intellectual property and trade rules had a negative
effect on access to medicines:
 we recognize the gravity of the public health problems
afflicting many developing and least-developed
countries, especially those resulting from HIV/AIDS,
tuberculosis, malaria and other epidemics” (par 1)
 leave each member free to establish its own regime
for exhaustion without challenge, subject to the MFN
and national treatment” (par 5d)
I. authorization of such use shall be considered on its individual
merits;
97
TRIPS and Public health
 we recognize that IP protection is important for the
development of new medicines. We also recognize its
effects on prices” (par 3)
 “we agree that the TRIPS does not and should not
prevent members from taking measures to protect
public health, TRIPS should be interpreted and
implemented in a manner supportive of public health
and promote access to medicines” (par 4)
 Each member has the right to grant compulsory
licenses and the freedom to determine the grounds
upon which such licenses are granted (par 5b)
NB Compulsory license: Right to use and produce the patent without
permission of the patent holder subject to certain conditions (Art. 31
TRIPS)
 each member has the right to determine what
constitutes a national emergency or other
circumstance of extreme urgency (par 5c)

98
TRIPS and Public health
I. such use may only be permitted if, prior to such use, the
proposed user has made efforts to obtain authorization from the
right holder on reasonable commercial terms and conditions
and that such efforts have not been successful within a
reasonable period of time...This requirement may be waived by a
Member in the case of a national emergency or other
circumstances of extreme urgency or in cases of public non-
commercial use.
III. the scope and duration of such use shall be limited to the purpose for
which it was authorized
IV. such use shall be non-exclusive;
V. such use shall be non-assignable
VI. any such use shall be authorized predominantly for the supply of the
domestic market of the Member authorizing such use;

99
Transition periods
 Developed countries had 1 year (1/1/1996)
 Developing countries had 4 additional years
(1/1/2000) to apply the TRIPS provisions following
date of entry into force (1/1/1995) plus 5 additional
years to comply with the TRIPS Agreement provisions
on pharmaceutical patents (1/1/2005)
 In view of special needs of LDCs, they had till 1
January 2006 to apply TRIPS with possible extension
to allow them to “create a viable technological
base”
 The Decision of the Council for TRIPS of 29 November
2005 called ‘Extension of the Transition Period Under
Article 66.1 For LDCs Members’ provides under
paragraph 1 that:
“LDCs shall not be required to apply the provisions of
the Agreement, other than Articles 3, 4 and 5, until 1
July 2013, or until such a date on which they cease to 100
The final goal is..
 rebalance innovation incentives and the public interest
 realize that IPRs will not solve all problems (neither will
Tokyo protocol)
 balance public and private rights at the international level
 promote coherence among different international
agreements and FTAs
 expand civil society participation/consultations in national,
regional and international rules setting processes on IPRs
 focus on implementation of WIPO Development Agenda,
link with WTO negotiations
 implement flexibilities, let IPRs work for you!
 build on Disclosure of Origin Momentum
 avoid adopting new IPRs before implementing existing
ones
 carry out cost-benefit analysis of GI extension and register

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 Chapter VIII
Dispute Settlement
in the WTO
102
Historical….DS
GATT 1947: was relatively weak in settling disputes:
 Very limited rules
 Central concept was “nullification and impairment” of benefits flowing from the
agreement
 Diplomatic character of dispute settlement:
No judicial arm, rather all matters were within powers of GATT Contracting
Parties
 “Evolved” practice under GATT 1947
Refre Art. XXII and XXIII

However, WTO comes with:

 More detailed procedures for the various stages of dispute- DSU that outlines
the principal operating procedures of the WTO dispute settlement system
 Appellate review of panel reports and
 surveillance of implementation by the DSB

103
DS
Dispute settlement:-
 is “a central element in providing security and predictability
to the multilateral trading system” or secures compliance
with the Agreements
 to preserve the rights and obligations of Members under the
covered agreements, and to clarify the existing provisions of
those agreements in accordance with customary rules of
interpretation of public international law
Refer: Article 3.2 of DSU
Enforcement Mechanisms: the priority is to settle disputes, not
to pass judgment.
WTO has two roles:
I. Legislative –Agreements are signed…..Art. II of Marrakesh
Ag’t
II. Adjudication- deciding trade dispute: consultation,
adjudication and implementation Art. 1.1 of DSU

104
DS Con’d
Three main stages to the WTO dispute settlement process
A. Consultations: good offices, conciliation and mediation
Members are expected to solve their disputes in a manner
that is
consistent with WTO agreement (Art. 3.7).
It gives parties the opportunity the discuss the matter and
to find
the satisfactory solution without resorting to litigation.
Parties can solve their dispute amicably at any stage of the
dispute (Art. 4.7)
Time : 60 days (Ref: Art.4, 5)
If Consultations
not successful
Request for panel establishment: “identify the specific
measures at issue and provide a brief summary of the
legal basis of the problem sufficient to present the
problem clearly”

105
DS
B. Adjudication
Panel proceedings: DSB establish panel (Art.6)
 Terms of reference (due process objective) and composition (Art. 8)
Composition:“well-qualified government and/or non-governmental
individuals”
 Panel examination : two meetings with parties & 1 meeting third parties
(Art.10& 12)
Summery of the Procedures:
o Oral hearings (usually 2), on basis of written submissions:
 factual information from any relevant source (Article 13 DSU)
 scientific or technical advice from an Expert review group

(Appendix 4 DSU)
o Descriptive part of report issued to parties
o Interim review based on draft report adopted if no Appeal 9 month
o Final report issued to parties if appealed 12 month
o Final report circulated to all Members
106
DS
Appellate Body: 7 persons with:
 authority and expertise in international trade law
 “unaffiliated with any government”
 appeals limited to “issues of law and legal interpretations”
developed by the panel, including “cross-appeals” Art. 17
 Appeal must be commenced no later than 60 days after the
Panel Report is circulated to Members; takes 60-90 days
Summery procedures:
 Notice of Appeal

 Written Submissions

 Oral Hearing

 Exchange of Views

 Circulation of the Report

107
DS Con’d
C. Implementation of the ruling:
o Member must inform reasonable time DSB of its
intentions in for implementation of the
recommendations.
 Surveillance by the DSB: Status reports on
implementation
o Negotiation of compensation (voluntary, mutually
acceptable) with in 20 days if not successful
o Authorization of retaliatory action (suspension of
concessions /obligations): temporary
measures/remedies e.g. derogate MFN
To sum up, Losing Member has three choices:
 Comply with DSB decision (recommended)
 Negotiate compensation with prevailing party
 Accept retaliation (trade sanctions through higher
tariffs) from prevailing Member, as approved by DSB
• Arbitration- for the final settlement, if compliance fails

108
Relationship of main players
Request
for
Panel
by WTO
Membe Appellate
r body(7
persons)
Dispute Settlement
Body
(General Council)
Panel (4-
5
panelists)
Ministeri
al
Conferen 109
DS
strength WTO’s Dispute Settlement Understanding (DSU):
 Both developed countries and developing nations have been
claimants and respondents.
 Process under direction of Dispute Settlement Body (DSB)
contemplates mandatory consultations, option of conciliation, and
then binding WTO panel process
 Strict time limits for cases, so serious delays are rare
 Appellate Body (AB) reviews legal issues in interest of consistency
The limitations raised include:
 Difficulties for small countries to use trade sanctions against large
countries - Blend of law and politics
 Lack of transparency of panel/AB process
 Long span of time to settle disputes and even more
 Costs of litigation before DSB
 Inability of WTO Members to effectively supervise AB because of
consensus voting requirements

110
Some cases
1. Venzuala Vs USA
 On 23 January 1995, Venezuela complained to the Dispute
Settlement Body that the United States was applying rules that
discriminated against gasoline imports, and formally requested
consultations with the United States.
 Just over a year later the dispute panel completed its final report.
 The United States appealed. The Appellate Body completed its
report, and the Dispute Settlement Body adopted the report on 20
May 1996, one year and four months after the complaint was first
lodged.
 The United States agreed with Venezuela that it would amend its
regulations within 15 months and on 26 August 1997 it reported to
the Dispute Settlement Body that a new regulation had been
signed on 19 August.
2. China Vs USA----TRIPS….USA won
3. 4. Brazil V USA cotton case….Brazil won but compromised in
2015 see http://
www.foxbusiness.com/markets/2014/10/01/us-and-brazil-resolve-d
ecade-long-trade-fight-over-cotton-subsidies.html

Recent cases: ..\Some current cases from the WTO website.pdf

111
Chapter IX
Contemporary Issues in
International Trade-
Cross Cutting Matters
112
Trade and Human Rights
Trade and Investment
Trade and Environment
Trade and regional integration/regional trade
agreements

113
Trade and Human Rights
 States have Human Rights obligations concurrent with their
commitments in the area of international trade
 164 WTO Members
 Some are parties to the IHRI
 Every WTO Member has at least ratified one of the major human

rights treaties
 some assessment of the empirical relationship between the two regimes
varies from a “veritable nightmare“ to “trade being the panacea for
fullfilling human rights“.
 The WTO framework and human and animal health
 The GATT and GATS exceptions clauses
 The Agreement on sanitary and phytosanitary measures (SPS)
 The Agreement on Technical Barriers to Trade (TBT)

114
International Trade Vs environment
Trade and Environment
Globalization Vs Environmental Regulation
Racing to the bottom Vs strict regulation framework
If its WTO commitments prevent the government from responding with
a tariff increase to prevent competitor imports, then it might instead opt
to relax a labor or an environmental standards.
Industrialization and economic growth Vs Environment
 Rules on international trade could frustrate attempts to protect
resources and the environment beyond areas of national
jurisdiction (extra-territoriality)
 Trading system could prevent nations from adopting measures to
protect their domestic environment (e.g. environmental
standards for products and services etc.)
 Trading system could obstruct efforts to compel other countries
to adopt high environmental standards
115
International Trade Vs environment
Activists: openness to trade might encourage some countries to
specialize in dirtier activities, and to export their products to others
with higher environmental standards.
Debate: some like EU and European environmental groups want new
rights to restrict trade to protect the environment where as others like
USA wants to right to ban imports unilaterally to protect the
environment.
Some Environmental provisions:
WTO rules can be waived to protect human, animal and plant health
and safety (Art. XX (b & g))
Art. 2.2 Technical Barriers to Trade (TBT) (i.e. product and
industrial standards), and
Art. 2.1. Sanitary and Phytosanitary Measures (SPS) (animal and
plant health and hygiene): explicit recognition of environmental
objectives
116
International Trade Vs environment
GATS Article XIV: policies affecting trade in services for protecting
human, animal or plant life or health are exempt from normal GATS
disciplines under certain conditions
Intellectual property: governments can refuse to issue patents that
threaten human, animal or plant life or health, or risk serious damage to
the environment (TRIPS Art 27)
Subsidies and Countervailing measures (SCM): allows subsidies, up
to 20% of firms’ costs, for adapting to new environmental laws.
Currently some argue trade agreements are, inter alia:
 disregarding the environment: race to the bottom;
promoting child labor and hazardous working conditions.
Free trade shifts jobs from high-wage-high-standard countries to low-
wage-low-standard countries.
Others trade is good if it wisely integrated with sound environment
policy e.g. importing environmental friendly technologies, innovations,
incentives for environmental Research and development, pollution can be
purified by new technologies… 117
Trade and Investment
Unilateral efforts in FDI liberalization and promotion are complemented by
efforts at 3 levels:
bilateral - e.g. BITs, FTAs
regional – e.g. COMESA
multilateral – e.g. GATS, TRIMs

International Investment Agreements have different purposes or objectives:

investment protection
Investment promotion
Investment liberalisation.

cover more or less the same issues:

 Scope and definition of foreign investment
 Admission of investment or pre-establishment NT and MFN
 Treatment of investment, i.e. national treatment, MFN
 Guarantees and compensation in respect of expropriation
 Transfer of funds and repatriation of capital and profits
 Dispute settlement, both State-State and investor-State 118
Trade and Investment
Globalization is becoming:
 Threat to sovereignty: a reduction of domestic policy influence;
 a sharpening of the conflict between industrialized and developing
nations.
Working Groups are made inactive by the WTO General Council as of
July 2004
 investment matters are excluded from the Doha Round negotiations
But, the WTO Secretariat is responding to national requests for technical
assistance in the area - for the benefit of interested WTO members and
countries seeking accession to WTO
There is increasingly high demand for trade and investment negotiations
TRIMS agreement…expansion & progressive liberalization…of trade

119
Trade and Investment
Today, every single country seeks to attract FDI, despite its impacts on
Host Countries of which some are:

Positive Impact Negative Impact

 industrial dominance
 capital information  technological dependence
 technology and
 disturbance of economic plans
management skills transfer
 cultural change
 regional and sectoral
development  interference by home
 internal competition and government of multinational
entrepreneurship corporation
 favorable effect on balance
of payments
 increased employment

120
 Chapter X
Accession Process

121
Chapter X: Accession Process
Obligations of WTO member is, inter alia, harmonize its national laws,
regulations, and administrative procedures with WTO Agreements before
accession. Hence, he acceding country must:
Made tariff-binding commitments (GATT)
progressively liberalizing the services sector as per GATS commitments.
domestic laws guarantee the minimum protection of IPRs by enacting
adequate legislation (TRIPS).
put in place appropriate institutions that will help it meet WTO
requirements for sanitary and phytosanitary measures as well as technical
standards and customs procedures
It s investment measures are, at least with TRIMS agreement etc.

Why WTO Membership? Given the trade benefits: mutual better off, there
are many benefits of WTO. 122
Chapter X: Accession Process
Of which the following are labeled as the most important:
Predictability (of trading environment and hence also attraction of
Foreign Direct Investment),
Transparency (about rules and provisions),
 Market access (allowing market entry and export diversification),
Multilateral approach to trade (allowing participation through
multilateral trade negotiations rather than bilateral agreements with trading
partners).
Initially there were two ways of acquiring WTO membership :
Original membership. Contracting parties of the GATT pre-1994

i.e. simply by accepting the terms of the WTO Agreement and the
Multilateral Trade Agreements and making concessions and commitments
for both trade in goods and services. 123
Chapter X: Accession Process
Through accession-on terms to be agreed between the acceding country
or customs territory and other WTO members (incumbent members). It
does not lay down a clear guideline as to the terms of WTO accession,
which leaves an acceding country at the mercy of the incumbent members.
The original members were not passed through the hurdles of scrutiny of
other members which was summarizes as follows:“Paradoxically for rules
based organization, the WTO has no clear rules for the “price” of
membership.
Art. XII of the Marrakesh Agreement, the legal instrument covering the
WTO accession process, merely states that new members may join the
WTO “on terms to be agreed.” This sparse guidance leaves the door wide
open to encompass both an expedited hassle-free accession process and a
drawn-out, decade-long, and burdensome accession experience.”
124
Chapter X: Accession Process
How to join the WTO: the accession process
Any state or customs territory having full autonomy in the conduct of its
trade policies may join (“accede to”) the WTO, but WTO members must
agree on the terms. Broadly speaking the application goes through four
stages:
First, It should describe itslf to the WTO: The government applying for
membership has to describe all aspects of its trade and economic policies
that have a bearing on WTO agreements. This is submitted to the WTO in a
memorandum which is examined by the working party dealing with the
country’s application. These working parties are open to all WTO members.
Second, work out on what It has to offer: When the working party has
made sufficient progress on principles and policies, parallel bilateral talks
begin between the prospective new member and individual countries for
different countries have different trading interests. 125
Chapter X: Accession Process
These talks cover tariff rates and specific market access commitments,
and other policies in goods and services. The new member’s
commitments are to apply equally to all WTO members under normal
non-discrimination rules, even though they are negotiated bilaterally. The
talks can be highly complicated. It has been said that in some cases the
negotiations are almost as large as an entire round of multilateral trade
negotiations.
Third, drafting membership terms: Once the working party has
completed its examination of the applicant’s trade regime, and the parallel
bilateral market access negotiations are complete, the working party
finalizes the terms of accession. These appear in a report, a draft
membership treaty (“protocol of accession”) and lists (“schedules”) of the
member-to-be’s commitments.

126
Chapter X: Accession Process
Finally, the decision: The final package, consisting of the report,
protocol and lists of commitments, is presented to the WTO General
Council or the Ministerial Conference. If a two-thirds majority of WTO
members vote in favour, the applicant is free to sign the protocol and to
accede to the organization. In many cases, the country’s own parliament
or legislature has to ratify the agreement before membership is
complete.
Search the WTO official website and see the Ethiopian accession so far
(since 2003) https://www.wto.org/english/thewto_e/acc_e/a1_ethiopia
LDCs exhibit:
Less competitiveness
Less economic influence

limited financial
inadequate skilled human resources

127
Chapter X: Accession Process
WTO accession for developing and LDCs countries is normally:
Costly
Complex
Unpredictable
Time taking
Dominated by individual interest of previously accessed members

N.B. 164 members and 21 observers, and

International
intergovernmental organizations granted observer status to
WTO bodies
The shortest accession negotiation was that of
Kyrgyzstan, lasting 2 years and 10 months. The longest
were that of Russia, lasting 19 years and 2 months,
Vanuatu, lasting 17 years and 1 month, and China,
lasting 15 years and 5 months.
128
Thank you
for your attention!!!

129