CHAPTER 9
GATT LAW AND THE WORLD TRADE ORGANIZATION:
BASIC PRINCIPLES
CASES IN THIS CHAPTER
European Economic Community—Import Regime for Bananas
Japan–Taxes on Alcoholic Beverages
India—Quantitative Restrictions on Imports of Agricultural,
Textile, & Industrial Products
European Communities—Regime for the Importation,
Sale & Distribution of Bananas
TEACHING SUMMARY
International trade has grown dramatically since World War II when countries began to seek
trading partnerships with each other, realizing that such partnerships could inure to the benefit
of both. Thus, they began to craft international treaties and organizations to eliminate barriers to
trade, including tariffs, quotas, and restrictive unilateral or bilateral practices. Two of the primary
organizations and instruments in effect today are GATT and the World Trade Organization
(WTO), the latter of which the U.S. is a member. Each favors reciprocity and mutual advantage
among countries and transparency of rules. This principle is expressed in GATT through Article
I’s most favored nation and national treatment rules, which require equal tariff treatment of
member nations (and, thus, non-discrimination).
The WTO now handles many disputes between countries regarding trade barriers. Russia has
recently joined GATT and a case has been filed against it in the WTO by the U.S. on behalf of
its automakers. It might be of interest for students to see how this case progresses.
1. What action did the EEC take that violated its tariff concessions?
2. Why is it important that countries maintain their tariff commitments?
3. What is the GATT basis for their objections?
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Chapter 9: GATT Law and the World Trade Organization: Basic Principles
Answer: Article III’s National Treatment clause. The specific tariffs applied by the EEC on
imports of bananas since 1993 were clearly “less favorable” than treatment accorded to
like products from other member nations. Article II, Schedules of Concessions: Individual
tariff concessions are to be applied to all other contracting parties. Article I, General Most
Favored Nation Treatment: the EU must give the non-ACP nations who are GATT
members the same “advantage, favor, privilege or immunity granted...to any product
originating in…any other country….”
Japan–Taxes on Alcoholic Beverages
1. What is the purpose of GATT’s Article III and how is that purpose ensured?
2. Is it necessary that the complaining party show that a discriminatory tax has a negative
effect on trade? Is a remedy possible even where the discrimination has no adverse
impact on the sales volume of the imported products?
3. How does a WTO Panel determine whether two products are “like products” for
purposes of the first sentence of Article III(2) or “directly competitive or substitutable
products” that fall within the domain of the second sentence of Article III(2)?
1. Compare the system of import licensing in effect in India during that time to what you know
in the United States today. Are there any industries you can think of in the United States
that are subjected to import licensing? What industries are so highly regulated?
2. Why did the licensing scheme violate Article XI?
3. What causes a balance-of-payments problem, and why can this be a critical problem for
many developing countries?
4. Why did the panel not accept India’s balance-of-payments argument?
1. When may a member bring a complaint against another member of the WTO?
2. What was the basis for the EC’s argument in this case?
3. The EU-Latin America banana dispute did not end until 2012. What was the ultimate
conclusion to this WTO issue?
Answer: .The EU and the U.S., the later acting on behalf of the U.S.-based multinational
banana growers from Latin America, ended their wars—abandoning tariffs and retaliatory
measures.
© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Chapter 9: GATT Law and the World Trade Organization: Basic Principles
