The Course –Contents, Sources and Facts

WTO LAW

TECHNICAL QUESTIONSThe grading:

Closed-book examination after the course Mixture of multiple choice questions and essays

The Textbook:van den Bossche, P, The law and policy of the World

Trade Organization : text, cases and materials (2. ed., 2008).

The venue:Tuesday, 14:00 – 15:30 and Wednesday 13:00 -14:30 in

the lecture hall of the Europa-Institut (3rd floor)

GENERAL, SPECIALIZED COURSESWTO Law Int. Business Transactions

WTOGATTGATS

TRIPS

Dispute Settlement

TBT / SPS

Trade Remedies

Trade & Environment

Antidumping

SubsidiesCMAIntellectual and

in-dustrial property

•

Introduction, History Legal Order (1-74)Institution (75-167)Dispute Settlement (DS) (168 – 319)Market Access (401 – 506)Non-Discrimination (320 – 400)Trade Remedies ((507 – 613)Exceptions (615 – 739)GATS, TRIPSHarmonization (740 – 891)

PRELIMINARY TIMETABLESUBJECTS AND ASSIGNED PARTS OF THE TEXTBOOK (VAN DEN

BOSSCHE)

GENERAL LITERATUREJackson, J.H. et al., Legal problems of international economic

relations : cases, materials, and text on the national and international regulation of transnational economic relations (5th. Aufl., 2008)

Matsushita, M. et al., The world trade organization : law, practice, and policy (2nd. Aufl., 2006)

Cottier, T. et al., International trade regulation : law and policy in the WTO, the European Union, and Switzerland : cases, materials, and comments (2005)

Hilf, M./Oeter, S., WTO-Recht, Rechtsordnung des Welthandels (1. Aufl. Aufl., 2005)

Stoll, P.-T./Schorkopf, F., WTO - Welthandelsordnung und Welthandelsrecht (2002)

Guzman, A./ Pauwelyn, J., International Trade Law (2009=

INTERNET LINKSThe WTO Website

http://www.wto.org/index.htm Legal Texts

http://www.wto.org/english/docs_e/legal_e/legal_e.htm

Information on key substantive issues by the WTO http://www.wto.org/english/tratop_e/tratop_e.htm

„What is the WTO ?“http://www.wto.org/english/thewto_e/whatis_e/whatis

_e.htm

WTO in briefhttp://www.wto.org/english/thewto_e/whatis_e/inbrief

_e/inbr00_e.htm

Understanding the WTOhttp://www.wto.org/english/thewto_e/whatis_e/tif_e/ti

f_e.htm

DISPUTE SETTLEMENT LINKSDecisions

http://www.wto.org/english/tratop_e/dispu_e/dispu_e.htm

One-page summaries http://www.wto.org/english/res_e/booksp_e/dispu_su

mmary06_e.pdf

After that with every case in its web presentation Newest book edition hardcopy (http://

onlinebookshop.wto.org/shop/article_details.asp?Id_Article=721&lang=EN )

Abridged selected decisionshttp://www.law.georgetown.edu/iiel/students/material

s/reports.htmlhttp://www.worldtradelaw.net/dsc/main.htm

OTHER HELPFUL SOURCESMost valuable secondary sources

http://www.worldtradelaw.net/http://

www.tradelawguide.com/index.asp?toc=content&id=88&autologin=n

http://www.tradelawguide.com Teaching Materials in the Internet

J.H.H. Weiler, S. Cho and I. Feichtner 2007, The Law of the World Trade Organization Through the Caseshttp://www.jeanmonnetprogram.org/wto/Units/ind

ex.html

Weekly informationBridges etc (ICTSD)

http://ictsd.org/news/

RESEARCH HELPS WTO Training Package

http://www.wto.org/english/thewto_e/whatis_e/whatis_e.htm

„Researching international and foreign Law“ http://www.llrx.com/international_law.html

IIEL Research websites http://www.ll.georgetown.edu/intl/iiel/home.htm

Research guide from GATT to WTO http://www.ll.georgetown.edu/research/browse_topic.cfm?109

WHAT IS SO PARTICULAR WITH THE WTO? - 1

One of the pillars of an international economic orderMonetary: IMF and World BankTrade: WTOInvestment? No MAI. No inclusion in the WTO Law

Particularly developed legal orderMandatory and exclusive dispute settlement with two

levels (instances) of jurisprudenceBut: no lawmaking power

Zone of reduced barriers to tradeNo common market structuresBut second best: reduction of the Trade

Institutional features„Member driven“„consensus driven“

Legal order and institution common to big and small, rich and poor statesInfluence

„Green room talks“Formation of interest groups

Capacity problemsRepresentationSophistication of a legal order

Diversification of the developing world

WHAT IS SO PARTICULAR WITH THE WTO? - 2

PRELIMINARY QUESTIONS

Economic Advantage of Foreign / International Trade

Historical DevelopmentParticular features of International

Trade Law / WTO Law

ECONOMIC BASISOpening of larger markets

Economies of scaleDivision of Labor (Adam Smith!)Better supplyBetter allocation of resources

Comparative Advantage (David Riccardo)http://internationalecon.com/index.html

ADAM SMITH: LIBERAL MARKETS

„It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.

...by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this...led by an invisible hand to promote an end which was no part of his intention.“

View: Wealth of Nations, chapter IV.2

RICCARDO: COMPARATIVE ADVANTAGE

David Ricardo (1772-1823), On the principles of political economy and taxation (1817)

See:the text: (

http://socserv2.socsci.mcmaster.ca/~econ/ugcm/3ll3/ricardo/Principles.pdf)

a brief summary: (http://www.systemics.com/docs/ricardo/david.html )

Country Wine Wheat

Cost Per Unit In Man Hours

Cost Per Unit In Man Hours

England 15 30

Portugal 10 (33 % -) 15 (50 % -)

PROTECTION OF INFANT INDUSTRIESProtection of young and still weak industries

through tariffs or NTBsPractised in the US in the first half of the 19th

century as well as in EuropeNew example: AirbusProblem:

Dangers of retaliationNo urge for the protected industries to face the steering

forces of the marketDangers of perpetuation beyond needDangers of abuse

OPTIMAL TARIFF THEORYParticular position of a country on the marketRaising tariffs leads to higher import pricesHigher prices lead to less demandLess demand lowers the pricesThe country will be better off: higher income and

lower prices

BUTOnly if the country is a dominant demanderAnd if there is no potential for retaliationBecause it is an exploitative intervention

STRATEGIC TRADE POLICYTrade barriers for protection domestic enterprisesSince they can produce more they can cut cost

(economies of scale)They may be able to undercut the prices of foreign

competitors on foreign marketsBUTOnly if economies of scale are sufficiently high

(like in aircraft, car and semiconductors markets)Since the intervention is exploitative, there is a

high risk of retaliation from other states

SECURITY BASED TRADE BARRIERSCreating self-sufficiency for times of crisis or warsReducing the dependence on foreign goods,

services and commoditiesBUTCost-Benefit Analysis: higher domestic prices may

be a higher loss than the cost for stockpiling strategic goods

INCREASE IN INTERNATIONAL TRADE1948: world exports of goods 48 million USD, of

services only a minor figure2006: Goods 12 trillion USD, services 2,7 trillionsShares: North and South America decreasing,

Europe and Asia increasing

Foreign Direct Investment (FDI)1982: 59 mio USD2006: 1,3 trillion USDDeveloped countries have a higher share than DCsLLDCs: less than 1 % of incoming investment on the

global scale

TRADE AND GLOBALIZATIONFactors:

Transport and communicationFree movement of capital: investment where it is most

profitableBut also

Social problems by losses on the marketsWinners and LoosersJob losses to cheaper countries

Restraints of competitionLoss of regulatory leverage of the statesPublic services?Power of multinational companies (MNCs) vs. developing states

TRADE AND WELFAREInternational Trade is improving international

welfareBut does it also increase the welfare in all the

participating states?There are winners and loosersLoosers may be compensated by additional

demand from the winnersSo that may be a positive sum gameBut the addressees of the demand will not be the same

than the loosers in the compensated stateNecessity for a social policy in market economy?

DISTRIBUTIVE PROBLEMS A milennium goal: reducing poverty in the world by 50 % until 2015

Real poverty: people live on less than 1 $ a day There are improvements, but still almost 1 billion people are really poor

Increase of the income gap btw. the 20% richest and the 20 % poorest of the world states: 1820: 3:1 1913: 11:1 1970: 30:1 1990: 60:1 1999: 86:1

94 % of world income -> 40% of the population 6 % -> 60%

Half of them live on 2 $ a day, about a billion on less than 1 $ Even if world trade is increasing (with some stagnations in newer times), it

does not increase the wealth of the majority of people Thus: there would be a need for social policy

In the states as well as on an international level More than transfer of charitable funds

TRADE AND DEVELOPMENTWorld Bank

No trade barriersIncrease global income by 2.8 trillion USD Lift 320 million people out of poverty by 2015

From the 1.101 billion poor people in 2001DCs share is rising (20-30 %)

South-South trade amounts to more than 10 % with inceasing tendency

LLDCs (48) share has decreased (0.5 %)LDCs / LDCs – qualification?Need to protect feeble agriculture and small

business?

WHY PROTECTIONISM?If free trade is an advantage to every national

economy, why is protectionism then so attractive?Market failures (competition, information etc.)Opportunism of agents: catering for rent

seekers who are better organisedIndustrial policyInfant industry protectionSafeguardsOverriding public concerns: environment,

nature, health, culture etc.Protection of national interests: security, supply

NEED FOR STEERING OF THE MARKET BY THE STATE

Market failures require institutions. The law is one of the possible institutions.

Government (policy) failures also require legal control

Competition needs regulation because of market imperfectionsLowering prices by lowering security or

health standardsInsufficient information of the customers

MARKET FAILURESMarkets do not function as theory would like

them to doE.g.: no unlimited and totally transparent

information about prices and qualitiesDistortions of competition by private actors as

well as by state interventionSee also J.M. Keynes

POLICY FAILURES

Because of asymmetric information Rational ignorance Pressure potential of the loosers in

competition opportunism of the agents Politicians seeking re-election

CHANGE IN PUBLIC OPINIONChange in public opinion about open international

tradeEven in export-dependent states: critical majority fearing

the loss of jobs and their „export“ to other statesThe consumers do not realize their advantageMany consumers are also workers that may be threatenedParticularly NGOs are hinting at

The absence of a serious development policy in the international economy

The relative losses of shares of the poorer DCs and the LLDCs

The lack of protection for infant industries and small farmers

TOOLS OF PROTECTIONISM

Trade BarriersTariffsNon-tariff barriers (NTBs)

Distorting aid to trade or competitorsSubsidies

PaymentsTax breaks etc.

TWO-PRONGED AIM AND USE OF TARIFFS

Tariffs

Income for state budgets

Additional cost for imports

GOALSThe main conceptual focus of GATT and now the

WTO istrade liberalizationbetter allocation of economic resourcesintegration of the developing countries management of the risks of globalizationsecuring peace

CONCEPT OF THE WTO TRADE ORDER

Preserve the beneficial effect of comparative advantageby choosing a second best solution, i.e. the

tariffication of NTBs and the reduction of tariffsWithstand the lobbyism of protectionist rent seekers Reducing transaction costs

Restrain and reduce trade barriersAbolish all discrimination

between domestic and foreign goods and servicesbetween goods and services from different foreign

countriesReducing distortions of competition and policy

failuresControlling free-riding and principal-agent-

problems

MEANS TO REACH THE GOALS OF THE WTO

Preamble of the WTO Agreement

• entering into reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international trade relations

• develop an integrated, more viable and durable multilateral trading system encompassing the General Agreement on Tariffs and Trade

• the results of past trade liberalization efforts, • and all of the results of the Uruguay Round of

Multilateral Trade Negotiations

HISTORY - 1

Post-war International Economic Order Avoiding the fatal errors of the 1920s

Devaluation race Loss of the gold standard Improving the competitiveness of national goods

by devaluating the currency “Beggar-thy-neighbour“ trade policy

Protectionism race Discouraging international trade Reducing world welfare

HISTORY - 2

Bretton Woods Conference (1944): Ministers of Finance Monetary Order IMF IBRD Fixed exchange rates Mentioning trade, but leaving it to the next

conference in Havana

HISTORY – 3

Geneva (1947)/ Havana Conference (1948): Trade Order Comprehensive: trade, competition, tariffs,

NTBs ITO (Int. trade organization)GATT: Tariff Reduction Treaty –

Part IV of the ITO Charter, but also independently meaningful

Set in force earlier for 23 Member States

HISTORY - 4

By a "Protocol of Provisional Application" Speeding up the tariff reduction Without parliamentary procedure

(administrative agreement) Therefore formally no international

establishment of working bodiesBut therefore with a "grandfather clause"

And withdrawal with only 60 days notice Relation to the Havana Charter: cf. Art. XXIX GATT

HISTORY – 5

GATT remained provisional for > 45 years Protocol of provisional application was the basis of

accession for most new MS. 1951: Truman ends the unsuccessful attempt to get

approval of Congress 1955: OTC attempt unsuccessful

HISTORY - 6

GATT with ICITO (transferred from Lake Placid) remained in Geneva (av. de Lausanne)

International Gouvernemental Organization which could not be called so, although it was: Founded by states To work for common goals With common bodies

ICITO became the GATT Secretariat CONTRACTING PARTIES as plenary body

HISTORY - 7

Result of the enlarged membership after decolonization More difficulties to change the rules of GATT (Art.

XXV) 1960s: independence of DCs1965 Part IV last change of the GATT text

But still successful tariff reductions rounds From about 47 % to 3.6 % Arts. II, XXVIII bis GATT

Beginning with Kennedy Round (1960): Side agreements with varying membership

HISTORY - 8

Several Rounds for Tariff Reduction (Art. XXVIII bis GATT/XIII WTO)Reduction of bound tariffsNew commitments concerning bindingsSide agreements (Dumping, Subsidies etc.)

Rift in the structure: scattered obligation structureA la carte principleFree rider behaviour Particularly in the Tokyo Round (1973-1979)

TRADE ROUNDS (ART. XXVIII BIS GATT)

Year/Place/Name Subjects covered Countries

1947 Geneva Tariffs 23

1949 Annecy Tariffs 13

1951 Torquay Tariffs 38

1956 Geneva Tariffs 26

1960-1961 Geneva Tariffs 26

(Dillon Round)

1964-1967 Geneva Tariffs and antidumping measures 62

(Kennedy Round)

1973-1979 Geneva Tariffs, non-tariff measures, 102

(Tokyo Round) “framework” agreements

1986-1994 Geneva tariffs, non-tariff measures, 123 +

(Uruguay Round) rules, services, intellectual property,

dispute settlement, textiles, agriculture,

creation of WTO, etc

Doha – Round

URUGUAY ROUND

Major Reform by the Uruguay Round (1986-1994) WTO Single undertaking (unitary structure)Dispute settlement Tariffication in the agricultural sector Ending the "grey area agreements" (11 Safeguards

Agreement) Clarifying and intensifying the open, unclear and

incomplete rules

THE DOHA DEVELOPMENT ROUND

Seattle (1999): unfinished and tumultuousThe Doha working program (2001)

Cancun 2003: interruptionThe 2004 July program – resumption of negotiations2005 Hongkong – some achievementsThe stop-and-go in 2006 - 2008 with unclear finality?

2008: unsuccessful attempt to finalize the negotiations2009: another resumption

Major stumbling stones: agriculture and development

THE FUTURE?

Problem of further rounds Consensus rule Implementation problemCapacity problems

Scope of the legal order (competition, trade, environment, investment)

Complexity of the normsRepresentation in the WTO bodiesDispute settlement, but see the „Advisory Centre on WTO – Law “

AgricultureDeveloping countries