Restrictions on Export and Import - Essay Example

GATT/ WTO – RESTRICTIONS ON EXPORT AND IMPORRT –AN ANALYSIS CASE A The main goal of Generally Agreement of Tariffs and Trade (GATT) is to abolish or considerably minimise trade tariffs and other bottlenecks to international trade on the footage of mutual benefits and reciprocity. Article XI of GATT imposes a plain restriction on imposing quantitative restriction like a total ban or imposing quota restriction which is incompatible with provision of GATT /WTO which is viewed as conflicting with free flow of merchandises, the existence of relative advantage and a competent allocation of global merchandises. Article XI restricts the practice of quantitative restriction like quotas, licenses or bans on both the imported and exported merchandises. This restriction emanate from the fact that such volume-footed measures are more economically destabilising than any price based trade measures like taxes and tariffs. Article XI also prescribes small exception to this rule namely If the exporting party experiences with acute shortages of goods which are essential for exports. If restriction is felt vital for international commodities trade, fishery and agricultural products and these restrictions cannot be imposed on general environmental efforts. Article XIX authorises quotas to protect some industries from injury by rapidly increasing imports; Article XII and XVIII both provide that quotas may be levied for balance of payments purposes under scenarios explained in Article XV. Article XX authorises special tasks to apply to gold stocks , public health , substances of historic or archaeological significance; Article XXI gives recognition to paramount significance for national security of a member nation. Article XIII explains that quantitative restrictions wherever imposed should be of non-discriminatory in nature. An export or import restriction or ban which may be viewed as a detriment may be challenged as quantitative restriction which is forbidden by Article XI of GATT. However, if commerce on domestic product is also banned, then the import ban might be viewed as an internal effort enforced at the point of importation, which is allowed by Article III (4) of GATT. (Chris Wold 1996:850). Dumping means when merchandises are exported at prices which are less under the “normal value” in the country of export made. (GATT VI). In the absence of any domestic price for that product, then price of an analogous product for export to a third nation is employed. The margin of dumping is the glut of the normal price over the price at which the good is being dumped. In National Com Growers v. C.I.T1, Canadian courts were not reluctant in agreeing the levy of countervailing duties against imported subsidised agricultural products which resulted or likely to result in causing material damage to Canadian agricultural industry. (Baggaley 1998). The main aim of Article VI of GATT is to offer a relief to importing member country where imported or dumped subsidised products threaten or create substantial injury to a recognised industry or substantially hinder the constitution or formation of a domestic industry. The Uruguay Round fruitfully initiated an Antidumping Code and a Subsidies Code which gives some relief when there is dumping of products or exporting well below the cost through subsidisation. To claim a remedy under GATT VI, it is essential to make a complaint that there exists a predatory pricing, i.e. pricing a product with the aim of forcing out the competition in the market. Hence, if any domestic manufacturer wishes to invoke the provision of GATT VI, he has to demonstrate that it has been invoked to safeguard their virtual market positions. There is a general view that it would be unjustifiable to permit mighty multinational companies to market their products at unbelievable low prices at some times even at a loss , with the sole aim of penetrating the target market share by proficiently annihilating competition. Safeguard measure can be initiated to defend a domestic industry when the importing country is carrying out its responsibilities. It is an extra-ordinary action taken to protect the importer’s industry from catastrophes or from serious injury. Under GATT XIX, protective measures are the one which the member countries may resile or withdraw a previous trade incentive accorded to the happening of an “unpredictable development” and there should be a casual association between the safeguard perused and the increase in exports. (Baggaley1998). Article XI: 1 of GATT states that there should be no restrictions or prohibitions other than taxes, duties or other charges made effective through export or import licenses, quotas or through other measures for restricting importation or exportation of a product into any nation or out of any nation. It is argued that OPEC’s efforts to control the supply of oil on international market level clearly establish a quantitative restriction on the quantum of oil available on international markets. Hence, OPEC’s activities may be considered as production restrictions imposed as contained in the Article XI: 1. We can say that OPEC initiatives by and large have the same background and effects as quantitative export restrictions. A coalition of Atlantic Salmon farmers aggrieved over the increased imports of salmon from Norway which had ultimately pushed the prices down filed a petition with the both the Department of Commerce , U.S.A and with the International Trade Commission. It was alleged that Norway not only had extended subsidy to its salmon industry but also sold the farmed salmon at less than market value. It was agreed by the International Trade Commission that producers and exporters of Norwegian salmon were benefited from subsidy initiatives of Norwegian government. To prevent the dumping, the Department of Commerce levied an anti-dumping duty of 2.96% on imported salmon from Norway. Further, Commerce department also levied company-precise dumping duty extending from 15.66 to 31.80NAT percent. Due to these antidumping measures, salmon imports from Norway by U.S.A drastically reduced in 1991. After Norwegian salmon episode, Chile became the number one supplier of salmon to U.S.A. It was alleged in the year 1996 that Chile dumped the U.S.A market with low-priced salmon and thereby pushing the price down. It was ruled by International Trade Commission that there was enough clues that material damage was inflicted to producers of Salmon in U.S and antidumping duties were levied against various Chilean exporters The above Norwegian and Chilean cases are strong indicators that the U.S Salmon industry has been badly injured by unrestricted imports of Norwegian and Chilean farmed salmon. 2 Australia imposed a ban on the importation of salmon either chilled or fresh or frozen Atlantic salmon from Canada and America on quarantine footage in 1975. A complaint was registered with WTO that such ban would be infringing the SPS Agreement under Articles 2 to 5. It is to be noted that Application of the WTO Sanitary and Phytosanitary Measures (the SPS Agreement) which permits members to initiate measures like bans on exportation or importation essential for the safeguard of human being, plant and animal life health or life . However, they must not be imposed in a style that would form an arbitrary discrimination between Members where the analogous situation exist or operate as a camouflage restriction on global trade. In November 1995, U.S.A consulted with Australia with these unfair trade restrictions by invoking WTO dispute settlement mechanism whereas Canada initiated its own WTO case by including U.S.A as a third party. In 1998, WTO Appellate Body held that Australia had infringed the SPS Agreement on the following grounds.3 Australia has right to frame its own high quarantine “ no risk measure” for any merchandise but it should apply uniformly to all the forms of that merchandise. Australia had infringed the SPS Agreement since it permitted the importation of other ornamental or frozen bait fish although the peril could be regarded at least as high as that for salmon. Australia permitted conditional imports of salmon, had no internal check on the movement of salmon and had not perused a proper risk assessment of importation of salmon. On the complaint filed by Canada against Australia, WTO panel in 2000 held third time that Australian trade measures banning of imports of Canadian salmon were incoherent with Australia’s WTO duties and in response to this, Australia initiated the terms of settlement during June 2000 with Canada.4 EC-Asbestos case5, the WTO panel held that Article XI: 1 does not apply to any restriction imposed by member country for the sale of merchandise that may affect the health and can impose restriction of importation of such product. The panel was of the opinion that measures were an internal measure and did not tantamount to any quantitative measure on the importation of such merchandise. Hence Article XI: 1 could not be applied for the public health measures that imprecisely apply to imported as well as domestic goods. (Slotboom 2006:144). As the result of Uruguay Round, Dispute Settlement Mechanism was established mainly to resolve the trade disputes between member nations. Uruguay Round created two permanent dispute settlement mechanisms namely Dispute Settlement Body (DSB) and the Appellate Body (AB) which replaced earlier GATT dispute mechanism. For example, in the EC banana case6, conceding the appeal by Ecuador, the panel was reconvened on the footage that the EC’s execution was in contravention with the panel ruling and on the request of Ecuador, WTO panel forwarded its recommendations once again to EC’s to respect the provisions as regards to importation of Banana. Thailand government move to ban all tobacco importation was held incompatible under Article XI: 1 under GATT, 1947 and however, the ban was not an SPS measure within the connotation of this contribution. (Slotboom, 2006:144). In U.S.A vs. Mexico tuna case7, U.S imposed ban on import of tuna under the U.S Marine Mammal Protection Act (MMPA). Aggrieved by this, Mexico challenged the provisions of MMPA. It was held by GATT that U.S.A had infringed Article XI of GATT by pursuing quantity restrictions on imports. U.S.A in turn argued that restrictions were of internal regulations and was authorised by Article III: 4. U.S.A argument was rejected by GATT 1st and 2nd Panel on the footage that Article III ban could only be extended to ‘merchandise “and not for any “processes” by which merchandise were produced and finally viewed that Article III was irrelevant in this case. (Diane McMahon 1993) Considering the above facts, since U.K is the member of WTO , the UK government action for legislating a law for imposing a temporary restriction (lasting one year) upon the importation of red salmon can be viewed contrary to the provisions of Article XI as it was laid down in 1998 by WTO Appellate Body that Australia had infringed the SPS Agreement by imposing a ban on the importation of salmon either chilled or fresh or frozen Atlantic salmon from Canada and America on quarantine footage . On the complaint filed by Canada against Australia, WTO panel in 2000 held third time that Australian trade measures banning of imports of Canadian salmon were incoherent with Australia’s WTO duties and in response to this, Australia initiated the terms of settlement during June 2000. The identical opinion was also given in National Com Growers v. C.I.T. The main aim of Article VI of GATT is to offer a relief to importing member country where imported or dumped subsidised products threaten or create substantial injury to a recognised industry or substantially hinder the constitution or formation of a domestic industry. However, if UK government is of the opinion that there is over-production of red salmon in the UK and because of the glut of red salmon on the market, the price of salmon is so low that domestic suppliers cannot get an economic price for the salmon they produce, U.K can peruse anti-dumping measures as practiced by U.S.A against Norwegian and Chile exporters of salmon. U.K cannot restrict amount allowed to be imported is going to be controlled by a system of import licenses. It is in contravention to the provisos of Article XI. However, if the U.K Government intends by these measures to reduce the importation of red salmon to 20% of the previous year’s total of imported red salmon mainly to save it internal market or to save its from injury by rapidly increasing imports, U.K government is eligible to impose a total ban or impose of quantity restrictions on salmon to be imported only if any of the following exemption stated under Article XI that If restriction is felt vital for international commodities trade, fishery and agricultural products and these restrictions cannot be imposed on general environmental efforts. Article XIX authorises quotas to protect some industries from injury by rapidly increasing imports; Article XII and XVIII both provide that quotas may be levied for balance of payments purposes under scenarios explained in Article XV. Article XX authorises special tasks to apply to public health purposes. Article XIII explains that quantitative restrictions wherever imposed should be of non-discriminatory in nature. Except for the above, the U.K government cannot impose a complete ban or place quantity restriction of import of salmon as it is against the provision of Article XI. CASE B: Export Restriction: Article XI restricts the practice of quantitative restriction like quotas, licenses or bans on both the imported and exported merchandises. This restriction emanate from the fact that such volume-footed measures are more economically destabilising than any price based trade measures like taxes and tariffs. In Japan –Trade in Semiconductor case, European Economic Commission alleged that Japanese government instruction to its industries not to sell prices below company-specific costs for other countries other than U.S.A and government delaying tactics in issuing export license were against the provisions of Article XI: 1. It was held by GATT panel that Japan’s array of administrative initiatives comprised a tenacious practice restricting the sale for export of semi-conductors at a prices below its cost prices to markets other than U.S.A was in infringement of Article XI: 1. (Broome 2006). In 1988, Canada issued export restriction on unprocessed Herring and Salmon to be exported out of Canada. United States argued such ban was in violation of XI: 1. However, Canada justified its export ban under the following grounds; Export prohibition can be made under Article XI; 2(b) if it is find essential for grading, classification in international market. Export ban under Article XX (g) which is necessary for conservation of depletable natural resources. The GATT panel held that export ban could not be regarded as “obligatory” to the extension of standards with in the connotations of Article XI: 2(b). When the same matter was referred to U.S –Canada Free Trade Agreement panel, it was held that Canadian landing requirement infringed GATT Article XI8. Since the UK Government is a member of WTO, it cannot enact any law to restrict the export of shoe polish as it will violate free flow of goods among member countries of GATT such action will be held as an infringement of Article XI of GATT as laid down in Japan semiconductor case and Canada’s export restriction on salmon. However, U.K can levy of 50% of the manufacturing cost is imposed on all exports of shoe polish backed up by a requirement that export licenses be obtained for all exports of shoe polish only under any of the exceptions mentioned in the Article XI. Through the system of levies and export licenses, the U.K government may reduce all exports of shoe polish by 50% only under any of the following exceptions mentioned under Article XI. If the exporting party experiences with acute shortages of goods which are essential for exports. Article XII and XVIII both provide that quotas may be levied for balance of payments purposes under scenarios explained in Article XV. Article XIII explains that quantitative restrictions wherever imposed should be of non-discriminatory in nature. Hence, if U.K government wishes to invoke the provision of GATT VI, it has to demonstrate that it has been invoked to safeguard their virtual market positions. List of References Baggaley, Nicholas. (1998) Trade Liberalisation under the GATT, the NAFTA and the EU: Selected Topics. Journal of Comparative International Management Broome, Stephen A. (2006). Confliction Obligations for Oil Exporting Nations? The George Washington International Law Review Diane McMahon, (1993) GATT Tuna 2, case number 129 [online] available from [accessed 30 November 2008] Salmon: Wild vs. Farm Raised [online] available from [accessed 30 November 2008] Slatboom Marco. (2006) A Comparison of WTO and EC Law: Do Different Objects and Purposes for Treaty Interpretation?’ Cameron Table of Cases: Dispute Settlement Mechanism. [Online] available from http://www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/a1s1p1_e.htm> [accessed 30 November 2008] Read More