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2. the price charged by the exporter in another
Subsidy - a financial contribution by a government country, or
or public body that that aids a market or industry to 3. a calculation based on the combination of
maintain its competitive prices. the exporter’s production costs, other
expenses and normal profit margins.
The Agreement on Trade-Related Investment And the agreement also specifies how a fair
Measures (TRIMs) are rules that are applicable to comparison can be made between the export price
the domestic regulations a country applies to and what would be a normal price.
foreign investors, often as part of an industrial
policy. TRIMs are rules that restrict preference of Countervailing Measures are measures or
domestic firms and thereby enable international response that can be undertaken whenever an
firms to operate more easily within foreign markets. investigation, by the investigating authority of the
importing country, has led to the determination that
Countervailing duties (CVDs), also known as the imported goods are benefiting from subsidies,
anti-subsidy duties, are trade import duties and that they result in an injury.
imposed under World Trade Organization (WTO)
rules to neutralize the negative effects of subsidies. Countervailing Duty - the country can launch its
They are imposed after an investigation finds that a own investigation and ultimately charge extra duty
foreign country subsidizes its exports, injuring (known as “countervailing duty”) on subsidized
domestic producers in the importing country. imports that are found to be hurting domestic
producers
Dumping only becomes prohibited when an action
is taken against dumping. Categories of Subsidies
1. Prohibited Subsidies - subsidies that
Broadly speaking, the WTO agreement require recipients to meet certain export
allows governments to act against dumping targets, or to use domestic goods instead of
where there is genuine (“material”) injury to imported goods. They are prohibited
the competing domestic industry. In order to because they are specifically designed to
do that the government has to be able to distort international trade and are therefore
show that dumping is taking place, calculate likely to hurt other countries’ trade. Two
the extent of dumping (how much lower the kinds;
export price is compared to the exporter’s a. Export Subsidies
home market price), and show that the b. Local content Subsidies
dumping is causing injury or threatening to 2. Actionable Subsidies - in this category the
do so. complaining country has to show that the
GATT (Article 6) allows countries to take subsidy has an adverse effect on its interests.
action against dumping. Otherwise the subsidy is permitted.

How to identify if a foreign country is Dumping Developing Countries exempted from Prohibited
It provides three methods to calculate a product’s Subsidies (subsidizing exports)
“normal value”. Subsidies may play an important role in developing
1. The main one is based on the price in the countries and in the transformation of centrally-
exporter’s domestic market. When this planned economies to market economies. Least-
developed countries and developing countries with form regional agreements move to genuinely free
less than $1,000 per capita GNP are exempted trade among themselves and provide adequate
from disciplines on prohibited export subsidies. compensation for any damage done to the trade
interests of other WTO members.
Emergency Import Restriction
A WTO member may restrict imports of a product Example: North American free trade agreement
temporarily (take “safeguard” actions) if its (NAFTA), ASEAN, EU, PICTA )The Pacific Island
domestic industry is injured or threatened with Countries Trade Agreement)
injury caused by a surge in imports. Here, the injury
has to be serious. Safeguard measures were always Types/Levels of Reginal Trade Agreements
available under GATT (Article 19). 1. Preferential trade area – lowers trade
barriers but do not eliminate them. This is
Kimberley Process – example of a legitimate use not allowed by WTO since the trade barriers
of quantitative restriction to regulate conflict/blood are not eliminated
diamonds. 2. Free Trade Area – trade barriers are
eliminated between two countries.
Custom Duties/Tariff - Customs Duty is a tax 3. Customs Union – member countries in this
imposed on imports and exports of goods. Custom RTA adopt common trade barriers with non-
duties on merchandise imports are called tariffs. member countries (common external tariff)
4. Common Market -customs union in which
TARIFF – A tariff is a tax on imports or exports, labor and capital markets are integrated into
while it is a way by which a State can obtain a regional market. Any restrictions on
revenues, it also means to affect competition and movement of labor and capital removed.
trade. As an example, excess tariffs imposed solely
on foreign products would give the domestic Notification Requirement Members must notify
industry for that product an advantage. all quantitative restrictions in force to the WTO.
When a Member introduces or maintains a
Tariff Concessions/Bindings – result of the quantitative restriction, it must ensure that it
negotiations to reduce tariff rates. For those is administered in a non-discriminatory
products for which such a tariff binding exists, the manner, including the provisions of Article
custom duties applied may no longer exceed the XIII of the GATT. It must also notify them
level at which they were bound. to the WTO at regular intervals and indicate,
in its opinion, what WTO provision would
Quantitative Restrictions - Specific limits on the allow it to introduce or maintain such
quantity or value of goods that can be imported. It measure.
refers to limits, or quotas on the physical amounts
of commodities that can be imported or exported. Allowed Quantity Restrictions even w/o
Notification
Regional Trading Agreements – agreement 1. Sanitary and phytosanitary (SPS) are
among groups of countries where they have agreed measures which to protect human, animal or
to reduce trade barriers among themselves. By their plant life or health from risks arising from
very nature, such arrangements favor imports from from risks arising from additives, toxins and
members of the grouping, and discriminate against contaminants in food and feed.
imports from other countries. The rules of Article 2. Technical Barriers to Trade (TBT) (Old
XXIV are designed to ensure that countries which TBT’s don’t need QR Notification but
introduction of new TBT’s require domestic over imported products are, as a
Notification) - recognizes WTO members' rule, prohibited.
right to implement measures to achieve
legitimate policy objectives, such as the Other subsidies are not prohibited but when
protection of human health and safety, or they cause adverse effects to the interests
protection of the environment as long as the of other countries, the subsidizing country
procedures are non-discriminatory and do should withdraw the subsidy or take
not create unnecessary obstacles to trade. appropriate steps to remove the adverse
3. Technical Import Licensing - Import effects. If the subsidizing country fails to do
licensing can be defined as administrative so, countermeasures commensurate with the
procedures requiring the submission of an degree and nature of the adverse effect may
application or other documentation (other be authorized.
than those required for customs purposes) to
the relevant administrative body as a prior Non-discrimination is a key concept in WTO law
condition for importation of goods. that that requires a country to grant favorable
4. Tariff Rate Quota (TRQ) – Combines treatment not just to one country but to all other
import quota and tariff to regulate imports. countries that are members of WTO. It prohibits a
TRQ’s does not restrict the quantity of country from discriminating other countries;
imported products. It does not set any limit
on the quantity or value of a product that the national treatment requires a WTO Member to
may be imported, but instead applies a treat equally foreign and domestic products, It
different, normally higher, tariff rate to that prohibits a domestic country from discriminating
specific product. foreign countries in local trade.

Dumping, i.e., to bring a product onto the market of  Non-discriminatory treatment between
another country at a price less than the normal value imported and domestic products
of that product, is condemned but not prohibited in
WTO law. Most favored nation (MFN): treating other
countries equally in trade. Under the WTO
However, when the dumping causes or agreements, countries cannot normally discriminate
threatens to cause material injury to the between their trading partners.
domestic industry of a country, WTO law
allows that country to impose anti-dumping  Non-discriminatory treatment between
duties on the dumped products in order to products of WTO members
offset the dumping. The relevant rules are
set out in Article VI of the GATT 1994 and Market access means the set of rules regarding
the Anti-Dumping Agreement. tariffs, quantitative restrictions and non-tariff
barriers agreed by members for the entry of specific
Subsidies, i.e., a financial contribution by a goods into their markets.
government or public body that confers a benefit,
are subject to a complex set of rules. Principle of Transparency
The obligation of members to publish all trade laws,
Some subsidies, such as export subsidies regulations and judicial decisions in such a manner
and subsidies contingent upon the use of that it shall inform all governments and traders so
that they can familiarize themselves with it. The
principle is important for its main goal is to ensure
effective access to foreign markets.

Principle of Justiciability
The obligation of Members to maintain or institute
judicial, arbitral or administrative tribunals for the
purpose, inter alia, of the prompt, objective and
impartial review of administrative decisions
affecting trade in goods or services is essential to
guarantee security and predictability in international
trade. They must guarantee that all the measures of
general application that affect said goods and
services are to be handled in a reasonable, objective,
and impartial manner.

Non-Tariff Barriers - restrictions on the import or


export of goods rather than tariffs. These are
agreements that deal with various bureaucratic or
legal issues that could involve hindrances to
international trade.
Non-Tariff Barriers:
 import licensing
 rules for the valuation of goods at customs
 preshipment inspection: further checks on
imports
 rules of origin: made in ... where?
 investment measures

Exceptions to the Basic Principles of the


WTO
So in this part po, we answer the fifth guide
question; which circumstances may WTO law Types/Levels of Reginal Trade Agreements
justify deviation from the basic rules of non- 5. Preferential trade area – lowers trade
discrimination and market access? and Does free barriers but do not eliminate them. This is
trade prevail over the protection of public health not allowed by WTO since the trade barriers
under WTO law? are not eliminated
6. Free Trade Area – trade barriers are
For this, since we are being asked which eliminated between two countries.
circumstances justify deviation from the basic rules 7. Customs Union – member countries in this
of the WTO, we answered po by providing the RTA adopt common trade barriers with non-
exceptions to the principles of non-discrimination member countries (common external tariff)
and market access by the WTO 8. Common Market -customs union in which
labor and capital markets are integrated into
So the first exemption to the non-discrimination a regional market. Any restrictions on
principle is the preferential treatment in favor of movement of labor and capital removed.
less developed and developing countries. The basic
rule under WTO that is being deviated is the So next we move to the exceptions to market
principle of most favored nation. The special and access. This is divided in two, the first one, the
differential provisions of WTO Agreements give competing non-economic interests and values which
special rights to developing countries which provide talks of the general exceptions under article 20 of
developed countries with the opportunity of treating GATT and non-trade issues like environmental
developing countries more favourably than other protection and health
WTO Members. and the competing economic interests and values
which involves exceptions to0 trade.
Less developed and developing countries are given
preferential treatment by: i) increasing the trade So for the first one, the competing non-economic
opportunities of developing country interests and values, members of WTO may take
Members, ii) safeguarding the interests of measures that are “necessary”, to protect public
developing country Members, iii) flexibility of health, public morals and national security provided
commitments, actions and use of policy the application of these measures does not
instruments, iv) transitional time periods, v) constitute arbitrary or unjustifiable discrimination
technical assistance, vi) special provisions for LDCs or a disguised restriction on international trade. The
exception on this part include the general
another exception included here in the non- exceptions of article 20 of GATT namely;
discriminatory principle is the regional trade  protection of public morals (XX: a);
agreements. So regional trade agreement is an  protection of human, animal or plant life or
exception to non-discrimination because it is an health (XX: b);
agreement among groups of countries where they  conservation of exhaustible natural
have agreed to reduce trade barriers among resources (XX: g);
themselves. By their very nature, such arrangements  protection of national treasures of artistic,
favor imports from the members of their grouping, historical or archaeological value (XX: f);
and discriminate against imports from other  prevention of import of goods produced by
countries. So an example of regional trade prison labour (XX: e);
agreement is ASEAN or association of south east  controlling the trade of goods in short
Asian nations, in which, we are a member. supply or subject to public intervention
 (XX: c, i and j); and 10. Actionable Subsidies - in this category the
 securing compliance with other international complaining country has to show that the
agreements that are not inconsistent with subsidy has an adverse effect on its interests.
multilateral rules Otherwise the subsidy is permitted.

another exception on this part is the security


exception. Because national security is at the core
of sovereignty, security concerns are superior to
trade concerns. As a result Members may apply
trade restrictive measures if they are necessary to 2. National Treatment - National Treatment is the
protect essential security interests, obligation of WTO members not to discriminate
between domestic and foreign goods. The goal is to
so after exceptions to non economic interests, we make sure that internal measures are not applied to
move to exceptions that affects economic interests protect domestic producers. The measures applied
and values. to foreign goods should not be in excess of those
So first here is dumping. Although dumping is applied to domestic like products.
recognized by the WTO, and is not prohibited,
Dumping only becomes prohibited when an action
is taken against dumping. the WTO agreement
allows governments to act against dumping where
there is genuine (“material”) injury to the
competing domestic industry. In order to do that the
government has to be able to show that dumping is
taking place, calculate the extent of dumping (how
much lower the export price is compared to the
exporter’s home market price), and show that the
dumping is causing injury or threatening to do so.

Subsidies on the other hand, although allowed by


the WTO, may introduce distortions in international
trade by hurting other countries’ trade through
competitive subsidies.

Categories of Subsidies
9. Prohibited Subsidies - subsidies that
require recipients to meet certain export
targets, or to use domestic goods instead of
imported goods. They are prohibited
because they are specifically designed to
distort international trade and are therefore
likely to hurt other countries’ trade. Two
kinds;
a. Export Subsidies
b. Local content Subsidies General Exceptions to key WTO law
principles.
The GATT itself contains many exceptions to XIV of the GATS, Members may take
the key principles. Some of the exceptions are measures that are “necessary”, for
general in nature such as those referring to example, to protect public health,
public morals, public health, currency provided the application of these
protection, products of prison labor, national measures does not constitute arbitrary
treasures of historic, artistic or archeological or unjustifiable discrimination or a
value, and protection of exhaustible natural disguised restriction on international
resources. There are also security exceptions trade. Article XXI of the GATT 1994 and
and regional trade exceptions. Of special Article XIV bis of the GATS allow
significance for the Philippines are the Members to take measures to protect
exceptions for developing nations. national security interests. It also allows
the taking of measures to give effect to
Exceptions to the Non-Discrimination UN mandated trade embargoes or
principle sanctions.

 Protection of Developing Countries Security Exceptions


GATT members recognized in principle Because national security is at
that the "most favoured nation" rule the core of sovereignty, security
should be relaxed to accommodate the concerns are superior to trade
needs of developing countries, and the concerns. As a result thereof,
UN Conference on Trade and Members may apply trade
Development (established in 1964) has restrictive measures if they are
sought to extend preferential treatment necessary to protect essential
to the exports of the developing security interests, as is
countries. recognised in the GATT, GATS
The WTO Agreement grants developing and TRIPS. Based on the
countries a more lenient treatment, security exception, a WTO
giving their domestic industries some Member:
protection from the rush of foreign 1. Is not required to furnish
competition. Thus, with respect to tariffs any information the
in general, preferential treatment is disclosure of which it
given to developing countries in terms of considers contrary to its
the amount of tariff reduction and the essential security
period within which the reduction is to interests 
be spread out. 2. May take any action which
is considers necessary for
Exceptions to WTO Market Access the protection of its
Apart from the basic rules and principles , essential security
WTO law also provides for a number of general interests:
exceptions to these basic rules and disciplines 1. relating to
to allow countries in certain circumstances to fissionable
take account of economic and/or noneconomic materials or the
interests and values that compete with free materials from
trade. which they are
derived 
 Competing Non-Economic Interests 2. relating to the arms
and Values traffic, or traffic in
The non-economic interests and values other goods and
include the protection of the materials for the
environment, public health, public purpose of
morals and national security. Pursuant supplying a military
to Article XX of the GATT 1994 or Article establishment
3. taken in time of war
or other emergency Anti-Dumping
in international Dumping or exporting a product
relations at less than its ·normal value· is
3. May take any action in not considered to be incompatible
pursuance of its with multilateral trade rules and is
obligations under the thus not prohibited per se by the
United Nations Charter for GATT/WTO system. However.
the maintenance of action can be taken against
international peace and dumping when it results in
security. 'material injury' to the domestic
industry of the importing country.
There have been some Once a causal link between the
invocations of security exceptions act of dumping and material
in the past, for instance in the injury to domestic industry is
case of war conflicts. In recent established. antidumping duties
times, this provision has been can be imposed by the importing
invoked by several Members in country. Anti-dumping duties are
order to justify unilateral essentially aimed at protecting
measures and countermeasures. domestic producers from unfair
Various disputes have been and predatory import
brought to the WTO related to competition. 
measures applied by Russia and
the Gulf Countries. These Subsidies
challenges are expected to shed Subsidies are provided by
light about the justiciability of governments to their domestic
such measures, in the first place, industry with a view to
and on the limits of the security safeguarding their interests and
exceptions.  also for enhancing their
competitiveness vis-a-vis foreign
 Competing Economic Interests and producers. They favour
Values production in the country granting
Economic interests that may compete them at the expense of
with trade include the protection of a production in other countries for
domestic industry from serious injury foreign or for domestic markets.
inflicted by an unexpected and sharp and in doing so introduce
surge in imports. Article XIX of the distortions in international trade.
GATT 1994 and the Agreement on So, the GATT/WTO system
Safeguards allow Members to take condemns subsidization and
safeguard measures (in the form of the imposes disciplines on the use of
imposition of customs duties above the subsidies by WTO Members. To
binding or the imposition of quotas) offset the impact of subsidies the
giving temporary protection to the WTO provides for the use of
domestic industry. Other economic countervailing duties. 
interests that may compete with trade Prohibited subsidies are those
are the safeguarding of the balance of which are contingent on export
payments and the pursuit of regional production, and subsidies which
economic integration. These exceptions are provided to the domestic
may be invoked by all countries and will industry for using domestic raw
allow these countries, if they meet materials or intermediate
certain specific conditions, to deviate products in preference to
from the basic rules and disciplines. imported goods. viz., import
substitution subsidy (Das 1998:
45-46).

Regional Trade Agreements


Regional Trade Agreements can
be defined as groupings of
countries which are formed with
the objective of reducing barriers
to trade between member
countries. These groupings or
unions may be concluded
between countries not
necessarily belonging to the
same geographical region (Pal
2004: 2). Depending upon their
level of integration, RTAs can be
broadly divided into five
categories: 
 Preferential trade
agreements in which
countries lower trade
barriers among the
members themselves; 
 free trade agreements in
which all trade barriers in
the flow of goods and
services are removed
among the members but
each member retains its
own tariff barriers with the
rest of the world: 
 Customs Union (CU) in
which there is free trade
among the members as
well as a common external
set of tariffs with the rest of
the world; 
 Common Market which is
a customs union
characterized by free
movement of labour and
capital along with the free
movement of goods and
services; and; 
 Economic Union which
has a common market as
well as harmonization of
fiscal and monetary
policies among members

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