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WTO Import Restrictions
2. Students’ answers may vary. Some may suggest that State K may apply safeguard measures.
Safeguards are emergency actions that a WTO member state may take to protect its domestic
industries from serious injury from a sudden increase in the quantity of an imported product.
3. Students’ answers may vary. Domestic agricultural support measures and export subsidies for
agricultural products can sometimes restrict or distort trade. The Agreement on Agriculture
provides for the gradual phasing-in of member state obligations. The Agreement on Agriculture
establishes guidelines for initiating a process of reform of trade in agriculture.
To begin the process of reform, the agreement:
specifies the agricultural products it governs;
requires that nontariff barriers to agricultural imports be converted into customs tariffs;
defines permissible forms of domestic supports;
defines export subsidies;
phases in initial reductions in tariffs, impermissible domestic support measures, and export
subsidies during a six-year implementation period (developing countries are given a 10-year
period); and
progressively integrates international trade in agricultural products into the GATT system.
State V may initiate a process of reform of trade in agriculture of State D.
4. Students’ answers may vary. Students may argue that the general exceptions under Article XX
will allow State S to take measures contrary to GATT that relate to the products of prison labor.
The Panel may seek the assistance of a Permanent Group of Experts. If it concludes that there is a
prohibited subsidy, it will recommend the subsidy’s withdrawal; if it concludes that there is an
actionable subsidy, it will recommend that the subsidizing member state either remove the
subsidy’s adverse effects or withdraw the subsidy.
Sanitary and Phytosanitary Restriction Measures
5. Students’ answers may vary. Member states may protect the life and health of living things, but
they may not do so as a disguised means for restricting international trade, nor may they act
arbitrarily to unjustifiably discriminate between states where identical or similar conditions exist.
In addition, the measures taken must generally be justified by scientific evidence. Students may
argue that the Panel will rule in favor of State E.
Countervailing Duties
6. Students’ answers may vary. A WTO member state that believes that its domestic industries
have been injured by either prohibited subsidies or actionable subsidies is given four options: (1)
do nothing, (2) request consultations, (3) seek a remedy from the WTO, or (4) independently
impose countervailing duties. If a member state does not comply with a DSB-adopted report or
Appellate Body decision, the DSB will authorize (unless it agrees by consensus not to do so) a
complaining member state to adopt countervailing measures. A countervailing measure is defined
in the SCM Agreement as a duty specially levied to offset a subsidy. Students may argue that the
countervailing duty may be imposed.
©2013 Pearson Education, Inc. Publishing as Prentice Hall
Trade in Goods
7. Students’ answers may vary. A WTO member state that believes that its domestic industries
have been injured by either prohibited subsidies or actionable subsidies is given four options: (1)
do nothing, (2) request consultations, (3) seek a remedy from the WTO, or (4) independently
impose countervailing duties. If a member state does not comply with a DSB-adopted report or
Appellate Body decision, the DSB will authorize (unless it agrees by consensus not to do so) a
complaining member state to adopt countervailing measures. A countervailing measure is defined
in the SCM Agreement as a duty specially levied to offset a subsidy. Students may argue that the
Panel will mostly conclude that no unfair subsidizing exists. Therefore, State U may not impose
any countervailing duty.
Anti-dumping Duties
8. Students’ answers may vary. A product is to be considered dumped, i.e. introduced into the
commerce of another country at less than its normal value, if the export price of the product
exported from one country to another is less than the comparable price, in the ordinary course of
trade, for the like product when destined for consumption in the exporting country.
Students may argue that State G may impose anti-dumping duties on Snicker only if an
investigation determines that the dumped Snickerdoodles cause or threaten to cause material
injury to, or materially retard the establishment of, State G firms within State G.
National Product Standards
9. Students’ answers may vary. One of the major principles of the GATT is that each member
state may protect its domestic industries only through the use of tariffs. Quotas and other
quantitative restrictions that block the function of the price mechanism are forbidden by Article
XI of GATT.
Governments of the newly industrialized countries may opt for the principle of transparency. It is
the requirement that governments disclose to the public and other governments the rules,
regulations, and practices they follow in their domestic trade systems.
National Security and Public Morals
10. Students’ answers may vary. The general exceptions under Article XX will allow State A to
take measures contrary to GATT that are necessary to protect public morals. The security
exceptions set out in Article XXI will allow State O to avoid any obligations it may have under
GATT that are contrary to its essential security interests or that conflict with its duties under the
United Nations Charter for the maintenance of international peace and security.
III. Key Terms
Actionable subsidy—A subsidy that may be challenged as trade distorting if it injures the
domestic industry of another WTO member state, nullifies or impairs the benefits due another
member state, or causes or threatens to cause serious prejudice to the interests of another
member state.
Agreement on Agriculture—Establishes guidelines for initiating a process of reform to
progressively integrate international trade in agricultural products into the GATT system.
Agreement on Implementation of Article VI of GATT 1994 (Anti-dumping Code)—Allows
WTO member states to counter dumping through the application of antidumping duties.
©2013 Pearson Education, Inc. Publishing as Prentice Hall
Trade in Goods
Agreement on Implementation of Article VII of GATT 1994 (Customs Valuation Code)—
Harmonizes the methods used by WTO member states for determining the value of goods for
customs purposes.
Agreement on Import-Licensing Procedures—Requires that the import-licensing procedures
of WTO member states be neutral in their application and that they be administered in a fair
and equitable manner.
Agreement on Preshipment Inspection—Allows WTO developing member states to use
preshipment inspections, subject to certain criteria, to prevent over-and underinvoicing and
fraud.
Agreement on Rules of Origin—Establishes a three-year program aimed at bringing about an
international system of harmonized rules of origin.
Agreement on Safeguards—Establishes multilateral controls over the use of safeguards by
WTO member states.
Agreement on Subsidies and Countervailing Measures (SCM Agreement)—Classifies
subsidies as prohibited, actionable, and nonactionable; forbids the first class and allows
affected WTO member states to request consultation, to obtain a remedy from the WTO, or to
impose countervailing duties independently.
Agreement on Technical Barriers to Trade (TBT Agreement)—Establishes rules governing
the way WTO member states draft, adopt, and apply technical regulations and standards.
Agreement on Textiles and Clothing—Establishes a process for the phasing-out of existing
special arrangements governing international trade in textiles and clothing and the integration
of those products into the GATT system.
Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement)—
Defines the measures that WTO member states may take to protect the life and health of
humans, animals, and plants.
Agreement on Trade-Related Investment Measures (TRIMs Agreement)—Forbids provisions
commonly found in foreign investment laws that distort or reduce international trade,
including provisions that discriminate against foreigners and that impose quantitative
restrictions on the use of foreign products by foreign-owned local enterprises.
Australia Group—Multilateral group of states concerned with curbing the proliferation of
chemical and biological weapons.
Bound tariff rates—The highest tariff rates a WTO member state may set on imports from
another member state.
Commodity arrangements—Intergovernmental agreements regulating the production and
supply of primary commodities.
Computed value—Customs value of goods that is based on their price calculated from the
cost of manufacture, overhead, and handling.
Conformity assessment procedures—Any procedure used, directly or indirectly, to determine
that relevant requirements in technical regulations or standards are fulfilled.
Consensus—The making of a decision by general agreement and in the absence of any voiced
objection.
Countervailing measure—A duty specifically levied to offset a subsidy.
Customs union—A group of states that have reduced or eliminated tariffs among themselves
and have also established a common external tariff.
Deductive value—Customs value of imported goods that is based on the price actually paid
for similar goods by unrelated persons in the importing country at about the same time.
Derived value—Customs value of goods that is determined by using whichever of the other
methods best fit and adjusting it to the particular circumstances.
©2013 Pearson Education, Inc. Publishing as Prentice Hall
Trade in Goods
Direct effect—The principle whereby a treaty may be invoked by a private person to
challenge the actions of a state that is a party to the treaty.
Dumping—Selling exported goods at prices below their normal value.
Escape clause—Allows a WTO member state to escape temporarily from its GATT
obligations when there is a surge in the number of imports coming from other member states.
Free trade area—A group of states that have reduced or eliminated tariffs among themselves
but that maintain their own individual tariffs in dealing with other states.
General Agreement on Tariffs and Trade (GATT 1994)—Annex to the Agreement
Establishing the World Trade Organization that sets out the rules under which the member
states of that organization are committed to negotiate reductions in customs tariffs and other
impediments to international trade in goods.
General Agreement on Tariffs and Trade (GATT) 1947—Multilateral agreement that set out
the rules under which the contracting states parties were committed to negotiate reductions in
customs tariffs and other impediments to international trade in goods.
General exceptions—Situations that excuse a WTO member state from complying with its
GATT obligations in order for the state to protect certain essential public policy objectives.
Generalized System of Preferences (GSP)—A GATT scheme that allows a developing state to
obtain tariff concessions from a developed state on a nonreciprocal basis.
Harmonized System (HS)—A system of classifying goods for customs purposes established
by the Convention on Nomenclature for the Classification of Goods in Customs Tariffs.
Integrated Program for Commodities (IPC)—Proposal of developing countries that would
establish a Common Fund to underwrite the costs of maintaining a buffer stock of primary
commodities as a way to stabilize supplies.
Kennedy Round—GATT MTNs held from 1964 to 1967 that established the practice of
setting an agenda for and defining the techniques to be used during GATT negotiations.
Missile Technology Control Regime—Group of states concerned with limiting the
proliferation of missiles capable of delivering nuclear warheads.
Most-favored-nation status—When a GATT member nation sets a favorable tariff rate on a
particular type of goods imported from one GATT member, that member nation may not
assess a higher tariff on the particular type of goods being imported from any GATT nation.
National treatment—Once goods are legally imported, they must be treated the same way as
domestic goods (no additional requirements).
National treatment rule—Once imported goods are within the territory of a state, that state
must treat those goods no less favorably than it treats its own domestic goods.
Nonactionable subsidy—A subsidy that is permissible and nonchallengeable, such as
government funding to underwrite research activities, to aid disadvantaged regions, or to help
existing facilities adapt to new environmental requirements.
Nuclear Suppliers Group (NSG)—Group of nuclear supplier states concerned with limiting
the proliferation of nuclear weapons.
Primary commodities—Products obtained by extraction or harvest that require minimal
processing before being used.
Prohibited subsidy—A subsidy that is presumed to be trade distorting because it requires
export performance or is contingent upon the use of domestic instead of imported goods.
Round—A meeting of the contracting parties of GATT to participate in MTNs.
Rules of origin—Laws, regulations, and administrative procedures used by states for
determining the country of origin of goods.
©2013 Pearson Education, Inc. Publishing as Prentice Hall
Trade in Goods
Safeguard—An emergency action that a WTO member state may take in order to protect its
domestic industry from serious injury due to a sudden increase in the quantity of an imported
product.
Safeguards—Emergency trade measures imposed to protect domestic industry from a surge
of imports.
Security exceptions—Situations that excuse a WTO member state from complying with its
GATT obligations when those are in conflict with its essential security interests or its duties
under the United Nations Charter.
South-South Preferences—A GATT scheme that allows developing states to grant tariff
preferences to each other without having to grant them to developed states.
Standards—Voluntary guidelines that specify the same things that technical regulations
mandatorily specify.
Subsidy—A financial contribution made by a government or other public body that confers a
benefit on an enterprise, a group of enterprises, or an industry.
Tariffs—Governmental charges imposed on goods at the time they are imported into a state.
Technical regulations—Mandatory laws and provisions that specify the characteristics of
products; the processes and production methods for creating products; and the terminology,
symbols, packaging, marking, or labeling requirements for products, processes, or production
methods.
Tokyo Round—GATT MTNs held from 1973 to 1979 that produced six nontariff codes.
Transaction value—Customs value of imported goods that is based on the price actually paid
or payable for goods at the time they were sold for export.
Transparency—Principle that governments must make their rules, regulations, and practices
open and accessible to the public and other governments.
Transparent—Trade regulations of GATT members must be published and available to all
other GATT nations and their nationals.
Uruguay Round—GATT MTNs held from 1986 to 1994 that resulted in the establishment of
the World Trade Organization.
Waiver—The relinquishment of an obligation owed by another.
Wassenaar Arrangement—Intergovernmental arrangement and organization to coordinate
national policies so that transfers of conventional arms and dual-use goods and technologies
do not contribute to the development or enhancement of military capabilities that undermine
international and regional security and are not diverted to support such capabilities.
World Trade Organization (WTO)—Intergovernmental organization responsible for (1)
implementing, administering, and carrying out the WTO Agreement and its annexes; (2)
acting as a forum for ongoing MTNs; (3) serving as a tribunal for resolving disputes; and (4)
reviewing the trade policies and practices of WTO member states.
Zangger Committee—Exporting states parties to the Treaty on Non-Proliferation of Nuclear
Weapons that seek to harmonize their interpretations of the treaty’s export-control provision.
©2013 Pearson Education, Inc. Publishing as Prentice Hall
