International Business Transactions in Australia - Assignment Example

Table of Contents 1.0.Introduction 2 2.0.Legal and Procedural Considerations in Australia’s Importations 3 3.0.Trade Remedies and Restrictions of Imports 6 4.0.Australian Regulatory Approach to Exporting 8 5.0.The Appellate Body and Public Morals in the US-Gambling DS285 10 6.0.Conclusion 14 1.0. Introduction International business transaction stretches beyond conceptualization of how businesses across borders adopt regulatory and compliance measures with regard to imports and exports. Parties are currently witnessing cases where economic integration are progressing at the macro-level and the consequence of this is that there is continued establishment of regulatory and or legal environment where transactional exchanges will have to take place. What this statement suggests is that there is need for clearer mechanism of international business transaction to an extent that when there is dispute over an international business deal, there is a tribunal that determines the domestic laws to govern the underlying transaction (Wyatt 2013). However, the scope of international business transactions integrates mechanisms of regulating operations and adherence to international standards of operations so that the importations and exportations fall within acceptable code of practice. Recent studies have indicated that these statement can only be contextualized by taking a case study on a given regulatory provisions (Pauwelyn 2012). Taking a case study of countries such as Australia, this essay critically assesses the accuracy of the statement by evaluating aspects such as the legal and procedural provisions when undertaking international transactions, World Trade Organisation’s (WTO) role in conflict resolutions, roles played by GATT, TBT, Appellate Body and SPS in the regulations of non-tariff barriers with regard to trade. The first section assesses legal and procedural considerations that Australia should take into practice when decisions are made regarding importations. The second section on the other hand, relates WTO to trade remedies by examining mechanisms in which the organization as assisted when it comes to restrictions of imports. Thirdly the essay takes a case study on Australia by comparing the country’s regulatory approach exporting but within the context of GATT, SPS and TBT agreements. Lastly, the study examines the role of Appellate Body and how it dealt with public morals. 2.0. Legal and Procedural Considerations in Australia’s Importations International businesses considering importing goods into Australia need to be aware of the legal and procedural guidelines. Beginning with procedural requirements, goods imported into Australia should be cleared by DIBP.1 However, the process of clearance will depend on the nature of goods. In the process of clearance, fees are always imposed accordingly and these equally range from custom duty, clearance fees and Goods and Services Tax (GST) (Tyagi 2012). However, there are some goods that attract special restrictions thus inviting different legal and or procedural considerations. This may include goods such as industrial chemicals or household cleaning products. There have seen stricter regulations imposed on goods that fall under quarantine regulations and in such cases, importers may be forced to clear with Australian Quarantine and Inspection Service (AQIS). Contextualising this argument, there was restriction in the importation of Salmon from Canada. In 1995, Canada made a request to consult with Australia pursuant to Article XXIII:1 of the General Agreement on Tariffs and Trade 1994 ("GATT 1994"), in accordance with Article 4.4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes ("DSU")2 and pursuant to Article 11.1 of the Agreement on the Application of Sanitary and Phytosanitary Measures ("SPS Agreement")3 Still on this case, importation measures imposed by Australia fell within the provisions of a sanitary measure and in pursuant to Article 1 of the SPS Agreement that Canada was party to and by extension, Annex A.1 (a) thereto. In as much as Canada raised concerns including the argument that measures from Australia had not been developed as well as applied with regard to the SPS Agreement, it was not clear that Australia’s move violated: Article 3.1 of the SPA Agreement since the Agreement was not pegged on existing international code of regulation or recommendations pursuant to Article 3.1. Canada also argued that the measure taken by Australia was not based on proper assessment of the risks that could have been caused by Salmonid life. Generally, this was a clear case where goods could be restricted from entering Australia if such goods violate part or all of the provisions or if laid down legal frameworks and procedures are not followed. However, with regard to these provisions, the process of importations into Australia has not only seen complications with regard to laws and procedures but also contrasting concerns that have been dominating the rationale for regulation of imports. One of such concerns is the applicability on Article 2.2 of SPS. This Article contrasts a number of elements and legal procedures applied in Australia. According to Article 2.2 of SPS, members intending to import to Australia will ensure that any sanitary measures are applied only to the extent that the applications protects plant, animal or human life and that these should be based on scientific principles and guidelines. Furthermore, the application of this Article should not be without necessary scientific evidence. Relating this Article with Australian case, the country, in allowing products that may contravene Article 2.2 of SPS, has entirely relied on paragraph 7 of the Article 5 of SPS without giving consideration to Article 2.24. This level of contrast made Canada to contend that Australia over relied on paragraph 7 of the Article 5 of SPS thus failing to meet the needed fundamental requirements and obligations regarding the application of SPS measures. Secondly, contrasts sometimes arise from a country’s observation on what can amount to restriction on a given importation and Appellate Body’s view on the same product or import. When Australia for instance considers a given import the country not meeting minimum legal and procedural requirements, Appellate Body may have to be slotted in in such cases, the Body may do risk assessment to sufficiently agree or reasonably deny importation restrictions imposed. For instance, there has been need to ascertain proper relationship between legal evidence disclosed for denial and risk factors that might be brought if the legal and or procedural factors were to be ignored.5 Thirdly, contrasts may arise in the interpretation of the international Agreements. Taking a case of SPS, sometimes importers find it difficult having their goods into Australia when definition of “risk assessment” is given differently (Narlikar et al. 2012). In some cases, the definition is seen in terms of Annex A paragraph 4. However, the definition is done with regard to provisions that include those in Article 5. 3.0. Trade Remedies and Restrictions of Imports Binding tariffs and application of these tariffs equally to all trading partners is critical. Equally, most-favoured-nation treatments (MFN) are critical in the smooth importation and exportation of goods from one country to the other. Additionally, World Trade Organization agreements uphold these principles; however, they also allow derogations in some situations. However, trade remedies and restrictions of imports can be assessed in different dimensions. First, actions that nations take with regard to selling a product in an export market below what is generally seen as normal value (dumping). The second issue is subsidies as well as ‘countervailing’ measures that can be taken to offset subsidies. Thirdly, the emergency measures that can limit exports or imports temporarily. The third aspect has been designed to protect and safeguard domestic industries (Beshkar 2010). These three issues explain ways in which trade remedies play significant roles in restricting imports. However, details below expound how these roles are played and ways in which WTO agreements discipline such moves. Beginning with dumping, if a company intends to import or export a product at a price deemed lower than the price it normally charges on its own home market them this amount to dumping6. This amounts to unfair competition and to that extent, the application of WTO agreement, in particular, the application of the Agreement on Implementation of Article VI on the General Agreement on Tariffs and Trade 1994 (Anti-dumping Agreement) will come to effect in the process of disciplining such practices. The focus of this Agreement is how the government where the importation is taking place may or may not react to such cases---that is, where dumped imports have taken place, in investigation will be carried out pursuant to WTO agreements and any conduct that injure domestic producers is stopped in that country. The second issue is the subsidies and countervailing measures intended to offset subsidies. The provisions of WTO on subsidies and countervailing are very clear with regard to how parties can be disciplined when they engage in subsidies that injure.7 The provision of WTO intends to put a regulatory measure on the actions nations should take so as to counter the impacts of subsidies. Under this agreement, a country has the right to adopt WTO’s dispute agreement procedure in seeking the withdrawal of the subsidy or the effects that comes as a result. This to some extent plays an important role in restricting imports especially those which have adverse effects on the country’s goals. However, it has to be noted that countries are still allowed to launch their own investigations and finally apply a countervailing measures regarding the subsidized imports that can injure domestic producers. The third aspect is the emergency measures that can be taken to temporarily limit imports so as to safeguard domestic industries. Within the provisions of WTO, member countries have the right to apply for a short safeguard measures such as a quota or extra duty regarding imports of a given product especially when it has been ascertained that continued imports on the said product is likely to cause or threaten serious injury to the industry8. In as much as some studies still argue that safeguard measures are still available under the Article XIX of GATT, they are currently rarely used because some countries prefer to protect their industries through what can be termed as ‘grey area’ (imposed measures that put restrictions on products such as steel, cars and semiconductors). Additionally, stringent measures have been established by WTO to discipline these kinds of imports. For instance, WTO Safeguard Agreements brought new ground so as to establish a procedure and substantive rules that include but not limited to use of safeguards, time limits and prohibition of ‘grey area’ measures. Generally, these aspects have been set by WTO to discipline unwarranted imports that covers issues such as dumping and general safeguards, different investigative procedures linked to anti-dumping, countervailing and subsidies measures, and to general safeguards. 4.0. Australian Regulatory Approach to Exporting To begin with, Australia authorizes restraints on exports or business engaged in export. For instance, the Export Control Act was required to determine the extent to which the restraints on such exports affects business and exportations as well as the competiveness of Australia’s exports overseas. Therefore assessment of the extent to which Australian regulatory approach to exporting affects companies’ ability to export should be assessed with regard to the country’s Export Control Act. Indeed, Australian regulatory approach to exporting affects companies’ ability to export because companies are not set free to pursue and develop both domestic and export business. In as much as these regulatory measures protect the interest of individual citizen of Australia, they undermine volume of exports. Scholars have argued that regulations are only needed in situations where there are obvious risks to the Australian beverage and food industry (Staiger & Alan 2000). In relation to this, the cost of compliance have been found to be high and consequently affecting companies’ ability to establish a viable export market. In addition to this, the process of complying with the current orders is not creating a room where companies can benefit from the domestic market which would in turn alleviate the financial burden compliance impose. The issue can also be assessed in terms of the regulation’s effectiveness in promoting market access and specifically its value in demonstrating compliance with importing countries compliance9. Currently the regulatory approaches in Australia are not seen as a positive support for the export of Australian food thus affecting companies’ volume of exports. While it is true that these companies benefit because the industry or the company’s compliance with Australian regulatory approaches may mean automatic access in foreign markets, companies seeking to establish and develop new markets are affected since competing nations such as China or Canada be able to export flexibly and quickly---hence the decision to supply a product is relatively easy and commercial. The basics for the development of markets are also very clear in other countries thus affecting ways in which companies in Australia can export or retain foreign markets. Based on challenges that companies may face, GATT, SPS and TBT agreements further set the frame in which Australia trades outside its borders. TBT measures for instance, create administration and export/import quotas such as auctions and licensing. Additionally, the regulation has since created export limitations and bans on exports that do not meet specified laws, including food safety, quality standards and industrial standards. These measures may have adverse effects on exporting companies as logistical costs of compliance are always extreme. GATT, SPS and TBT agreements have become concerns especially to agricultural exporters as there are extreme tariff-related barriers to trade. While this is the extent to which they regulate non-tariff barriers to trade, concerns are now generated and they include whether GATT, SPS and TBT agreements can be used to unfairly discriminate against exports or establishment of unnecessary barriers to trade in food, agriculture and other related materials.10 In as much as TBT, GATT and SPS agreements clearly recognizes rights enjoyed by every country in setting their own standards, these regulations and or standards is required to be science-based and their applications should be to the extent needed for the protection of plant, human and animal health. That is, the measures cannot be used arbitrarily to discriminate against a given company’s ability to export.11 5.0. The Appellate Body and Public Morals in the US-Gambling DS285 On the one hand, public morality and free trade have continued to exist in a precarious balance. On the other, the balance is determined by the fact that the international trade was found on the doctrine of non-discrimination. The operating system was also found on the notion that states are not supposed to be forced to liberalise trade especially when in so doing would threaten their public morality. However, the question that needs to be assessed stretches beyond just the US-Gambling DS285 under the WTO dispute settlement system as there is also need to ascertain how the balance can be defined or ways in which the system can grant countries the needed autonomy so as to regulate moral grounds and at the same time, prevent countries from misusing powers for enacting protectionist measures in disguise.12 It reached a point where WTO spoke about the public morals clause concerning the 2005 in the US-Gambling case. What needs to be understood concerning the matter is the roles played by the Body with regard to public morals clause jurisprudence. According to Fontanelli (2012), the Appellate Body in the case established that the public morals exceptions ought to have been interpreted in conformity with the laid down principles or statutory obligations in the evaluation of non-discrimination. This decision plays the role of helping member countries conceptualise the extent to which non-discriminatory measures can be applied. When the Body held that the challenged measures indeed failed to conform to chapeau ought requirement the Body was playing a role of ‘fixer’ in the sense that decisions to have been based on actual discrimination. Actually, the United States failed to show that the measures were applied in a non-discriminatory manner.13 In such cases Nachmani (2013) argue that the Appellate Body may not require outright discrimination but actions that can be deemed the possibility of a discriminatory application to be enough. Report by Jackson (2013) has interpreted roles of Appellate Body differently. His argument traces before and after U.S Gambling. He argues that before U.S Gambling there was obscurity on whether the public morals clause could be given interpretation dynamically or statically. In such cases, static interpreters for instance, limited the exception to the extent or scope of the public morals as it was enshrined by the 1947 drafters. In contrast, dynamic interpreters argued that the extent could be expanded over time as there were possibilities of new issues with regard to public morality that could emerge. This is where the role of the Appellate Body comes in. The point is, in both the Shrimp/Turtle and U.S Gambling the Appellate Body is clear that Dynamic interpretation is the best option in dealing with such cases. Isabelle (2010) adds that the Body suggested that the clause ‘shall be read by a treaty interpreter with regard to the contemporary issues and concerns of the community of clause’ (p. 352). The content of public morals is likely to vary with space and time, and these variations depend upon different factors including ethical and religious values. This was the language the Appellate Body aimed at expounding. The roles of Appellate Body encompass the scope of defining public morals. Generally, there are two approaches of understanding public morals; Unilateralism and Universalism (Conconi 2014). Given the difficulty in deciding the best approach for the definition, U.S Gambling failed to provide clear strategy on the matter. However, the Body clarified that WTO members are allowed some level of scope in the definition and application of the definition term (public morals) and should not be bound by either approach.14 One possibility that could be found from the Appellate Body is a retreat to ‘originalism.’ According to a research conducted by Conconi (2014), the Body created a room to constrain the scope of the public morals exception. However, the decision to constrain the scope needs to be rejected. First, researchers have shown that moral can vary with context and time---a fact that U.S Gambling could be able to ascertain.15 Secondly, to constrain the approach is a contradiction on how WTO members had already come to exercise the clause. For instance, Uerpmann-Wittzack (2012) notes that religious mores were not stated as one of the original exceptions owing the fact that public morals exceptions have been routinely invoked so as to enact import bans on goods for religious reasons.16 One possibility of dealing with Appellate Body’s views is that countries should now accept the effects of U.S Gambling. The Body provides a different point of view of the issue; if nations are seeking to expand the understanding of the scope of public morals to integrate women’s rights, human rights, or rights or labour then can do so via textual additions to GATT Article XX (Uerpmann-Wittzack 2012). Further studies on the Appellate Body’s review have been conducted and scholars such as Delimatsis (2011) found that there is need for complete revision of the general exceptions, with an inclusion of clarification of the public morals clause so that it can reflect widely recognized international convections on labour rights and human rights. 6.0. Conclusion The essay has established a number of issues concerning international business transactions. An understanding on the legal and procedural considerations that should be taken into considerations in making a decision to import may not solely a decision of Australian company or regulatory bodies but that which complies with different statutory obligations Australia is party or member to. On the other hand, foreign governments have set regulations and standards for entry. To such extent, importers and exporters will be bound by these standards and regulations regardless of their conformance with regard to domestic standards, unless there are special agreements stemming from GATT, SPS and TBT among others. What this means is that there are different contrasting concerns that dominate the rationale for regulation of imports and exports to and from Australia and as such, it can be argued that indeed international business requires compliance with import and export controls which in most cases determine whether the trans-border transaction is even financially viable. Since Australia is signatory to the SPS and the TBT Agreements, exporting companies should not feel limited in the number of exports or trade volume should undertake instead, regulatory measures imposed are supposed to check on countries turning to food safety and secondly, quarantine restrictions as a way of protecting the country’s agricultural industries. 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