Week 1: WTO-GATT Exam Preparation Summary
The World Trade Organization (WTO) and Its Role
The World Trade Organization (WTO) is an intergovernmental organization responsible
for:
1. Implementing, administering, and carrying out the WTO agreements and its
annexes.
2. Acting as a forum for ongoing Multilateral Trade Negotiations (MTNs).
3. Serving as a tribunal for resolving disputes.
4. Reviewing the trade policies and practices of WTO member states. Additionally,
the WTO collaborates with the International Monetary Fund (IMF) and the World
Bank to achieve greater coherence in global economic policymaking.
The General Agreement on Tariffs and Trade (GATT) and Its Main Principles
Most-Favored-Nation (MFN)
The MFN principle requires WTO members to apply their tariff rules equally to all other
members. Exceptions include measures to counter dumping and subsidization, the
creation of customs unions and free trade areas, and restrictions protecting public
health, safety, welfare, and national security.
National Treatment
The national treatment rule mandates that a country treats foreign products equally to
its domestic products once they are inside its borders. Exceptions include existing
preferences, governmental procurement for governmental purposes, subsidies to
domestic producers, and the screening of domestic cinematographic films.
Tariffs
Member states may protect their domestic industries only through the use of tariffs,
which are charges imposed on goods at the time of importation. Exceptions to this rule
include temporary export prohibitions to prevent shortages, restrictions related to
standards or regulations, and measures to safeguard balance of payments.
Transparency
WTO members must publish their trade regulations and adhere to a system of
notification and monitoring to ensure transparency in trade policies and practices.
,Direct Effect
Direct effect refers to the ability of private individuals to rely on international treaty
provisions before their national courts. In the context of GATT, certain prohibitive
provisions are directly effective, while others require implementing legislation.
Customs Unions and Free Trade Areas
• Customs Union: A group of states that have eliminated tariffs among
themselves and established a common tariff for other states.
• Free Trade Area: A group of states that have reduced or eliminated tariffs among
themselves but maintain their individual tariffs with other states.
Harmonized System
The Harmonized System is an international nomenclature for the classification of
products. It enables countries to classify traded goods uniformly, facilitating
international trade.
Escape Clause and Safeguards
The escape clause (Article XIX GATT 1994) allows a member state to impose emergency
restrictive trade measures (safeguards) if a surge in imports causes or threatens
serious injury to its domestic industry. The state must notify the WTO and negotiate
compensation with affected states.
General Exceptions
General exceptions (Article XX GATT) allow measures that:
5. Protect public morals.
6. Protect human, animal, or plant life or health.
7. Relate to the import/export of gold or silver.
8. Ensure compliance with laws not inconsistent with GATT.
9. Relate to products of prison labor.
10. Protect national treasures.
11. Conserve exhaustible natural resources.
12. Comply with intergovernmental commodity agreements.
13. Restrict exports of domestic materials during stabilization plans.
14. Are essential for acquiring products in short supply.
,Sanitary and Phytosanitary (SPS) Measures
SPS measures protect human, animal, and plant life and health. They must be based on
scientific evidence and not used as disguised restrictions on international trade.
Examples include regulations to prevent the spread of pests or diseases.
Preshipment Inspection
Preshipment inspection (PSI) involves verifying the price, quantity, quality, and other
characteristics of goods before shipment to prevent fraud and ensure compliance with
trade regulations. PSI activities must be non-discriminatory, transparent, and based on
internationally accepted standards.
Technical Barriers to Trade (TBT)
The TBT Agreement ensures that technical regulations, standards, and conformity
assessment procedures do not create unnecessary obstacles to trade. It promotes the
use of international standards and requires member states to provide information and
assistance about their regulations.
Subsidies and Countervailing Measures
The Agreement on Subsidies and Countervailing Measures regulates the use of
subsidies and authorizes countervailing duties to offset the adverse effects of
subsidies. Subsidies that cause adverse effects or injury to another member's industry
can be challenged.
Rules of Origin
Rules of origin determine the country of origin of goods, which is essential for applying
trade policies like tariffs, quotas, and anti-dumping measures. The rules must be
transparent, predictable, and not used to distort trade.
Anti-Dumping Measures
Dumping occurs when products are sold at prices below their normal value. Anti-
dumping measures can be implemented if an investigation proves material injury to a
domestic industry. Duties are imposed to offset the dumping margin, ensuring fair
competition.
By understanding these key concepts, you'll be well-prepared for questions related to
WTO-GATT in your exam.
,
