Term Paper on "International Trade Case"

Term Paper 10 pages (2837 words) Sources: 15

[EXCERPT] . . . .

Trade Law

International Trade Cases

While the General Agreement on Tariffs and Trade does provide for the ability to restrict trade, and even to selectively restrict trade, for reasons of protection the health of a nation, this provision is far from absolute and can old be made in certain ways, and when specific conditions are met (Article XX). In order for Baluchistan to be successful in preventing the importation of pork and pork containing products that originated in the United States, where an outbreak of swine flu has raised serious concerns about the safety of pork/pork products, the restrictions in trade must be properly limited to block only those products with a strong likelihood of presenting a public health risk to Baluchistan. While it is fairly certain that a ban on imports of pork and pork containing products from the United States would hold up to appeal and further scrutiny, it is less clear that imports from Canada and Mexico can also be banned, and far less clear that intermediary country's products can be effectively blocked.

In the case of the United States' own pork products, there is a demonstrable risk given the outbreak of swine flu and the confirmed cases of human infection in that country. As Article XX of the GATT allows for the blocking of imports that could cause health issues so long as they are not disguised attempts at restricting international trade, Baluchistan is completely within its contractual rights in implementing this ban. The United States could argue that such a move is not "necessary" as used in Article XX, but this is likely a losing battle.

The same argument could be used by Canada and

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Mexico, of course, and could argue that it is even less necessary for Baluchistan or any other country to restrict the importing of pork and pork containing products from these countries as there are other means for controlling the safety of these country's exports in this regard without requiring an outright ban (Appellate Report on Brazil Tyre case). In order to win a judgment in its favor should Canada and/or Mexico file a complaint against the ban once implemented, Baluchistan would need to demonstrate that it could not effectively ensure that the pork or pork containing products being imported from these countries was safe and did not originate from the United States, making it truly necessary for the ban to be put in place. While it might be true that there is no effective way to tell when pork/pork products being exported from Canada and/or Mexico actually originated in the United States, the simple existence of NAFTA does not in and of itself prove that such ambiguity exists. Baluchistan would need to demonstrate that current tracking procedures an policies, which do exist, are inadequate and that therefore potentially infected meat from the United States could enter Canadian and/or Mexican products freely. If this is not the case, then the ban would not be necessary.

For Baluchistan, the question here is more a matter of fact than of law as the law has already largely been determined as it applies in this case (Appellate Report on Brazil Tyre case). If it can be demonstrated that there is a factual basis for concern that pork from the United States could unknowingly end up in products sold by Canada and Mexico due to NAFTA, then the ban could be sustained against these two countries as well. If not, it can't.

The same problem exists, only to a higher degree, when it comes to the issue of other intermediary countries. With such intermediaries that re not only outside the United States but also outside the NAFTA region, it should be far easier to determine if pork and pork containing products contain any meat or came into contact with any meat originating in the United States. Because it would be easier to determine if the meat potentially came from the United States and thus had a higher risk of causing health problems in Baluchistan, it would be more difficult to prove that such a ban was necessary. This would also require Baluchistan to demonstrate the inefficacy of tracking methods and procedures in identifying and excluding United States-originating pork for each individual country that lodged a complaint, and potentially to each and every country affected by the ban on imports.

Part B

The actions taken by Eastasia in creating favorable conditions for the production and sale of Eastasia-language materials and specifically unfavorable conditions for all import from Westasia is In direct contradiction of certain provision of both GATT and GATS. These measures are unnecessarily restrictive, quite singular and specific in their discrimination, and highly manipulative to international trade -- unabashedly and openly so, as a matter of fact -- all of which run against the letter and the spirit of GATT/GATS. It is true that the shared history and current status of Eastasia and Westasia warrant some level of protectionism on the part of the former, but such selective and highly prejudicial restrictions are not called for.

The first protectionist measure that Eastasia is taking and that should be challenged with a Panel review is the creation of a tax on materials not in the Eastasian language, which creates a clear and undeniable distinction between Eastasian products and like products in any language other than Eastasian, putting the measure in violation of Article 1 of the GATT as well as against the very spirit of the agreement as a whole. There is no necessity for this measure found under Article XX, either, and the only possible reason for the creation of this special tax would be to make it more difficult to sell materials in languages other than Eastasian, and to promote the sale of Eastasian-language materials. The need for cultural strengthening and wider Eastasian leanring might be a laudable and even a necessary goal, but these are hardly the measures by which to accomplish these ends and the measure can be challenged using Article 1 as well as several other articles of the GATT and GATS agreements.

The primary defense that Eastasia is likely to raise in this case is that its tax affects both domestic and international products equally, and that materials produced in the Eastaiasn language should not be considered "like products" with those produced in other languages. It has previously been argued that certain media features can differentiate product type, and given the cultural issues that Eastasia has faced in its history and is facing in the current era, it would not be entirely unreasonable to assert that an Eastasian book (for example) is not like a Westasian book simply based on the language and culture that produced it. This does not meet the necessity standard of Article XX, however, and could be surmounted.

The second measure recently implemented by Eastasia actually presents greater unfairness in trade and a grosser violation of GATS/GATT than the first provision. By specifically restricting trade with Westasia/Westasian-owned business to channels approved of and often created/operated by the Eastasian government, the country is not only creating a clear disparity in economic trade for no reason other than another country's identity. This disparity is again in direct violation of Article 1 of GATT as well as many other subsequent articles, including Articles VIII, XIII, and others. It leads to all imports from Westasia and all export to Westasia being treated different and separately than products coming from or going to all other countries, necessarily making the cost of business higher for Westasian companies and the profit margins lower. Though this would be counter to the agreements regardless, there is not even a clear definition of how this provision is supposed to assist Eastasia or be anything other than punitive to Westasia, which is again counter to GATT.

The state-control element of this particular measure is also cause for other concerns and grounds for other challenges of Eastasia's actions. Reviews and Panels have consistently struck down state-operated organizations that grant themselves a monopoly in the trade or distribution of certain products of a certain types or that are otherwise classified and marked for government control for reasons other than a demonstrable regulatory need (Appellate Report on China's Media Distribution). It is unfathomable that Eastasia could even attempt to justify a need to regulate business with Westasia simply because of the Westasian connection.

There are, however, some means by which Eastasia might attempt to justify its decision to limit and strictly control -- through state approved/controlled entities -- trade with Westasia and Westasian countries. An argument could be raised under Artcle XXI of GATT arguing that this protectionist measure is necessary or at least allowable given a state of "international emergency," namely the economic depression Eastasia is facing with limitless means of surmounting in the current situation. As Westasia is both geographically and historically quite close to Eastasia and has much stronger infrastructure and production capabilities, it makes sense that trying to limit and control trade with this country could… READ MORE

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Quoted Instructions for "International Trade Case" Assignment:

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Please Read ALL of the specifications thoroughly

As far as citation for the materials used as part of the course is concerned, a short hand citation is all that is required. For example, you could say, GATT panel decision on Spanish Coffee; Section 771 (10) of the Tariff Act of 1930 or 19 U.S.C.Â§ 1677 (10) etc. I do not need a full/bluebook citation. I encourage the use of parenthetical to explain why you have cited to a case, e.g., GATT panel decision on Spanish Coffee (by concentrating on the end use of coffee concluded that *****coffee is coffee***** and therefore *****like products***** within the meaning of Article I (MFN) of GATT 1994).

This is an open -book exam and you can use any materials that you want. You must provide a detailed citation for any material that you use that is not part of the course materials. For course materials which includes the text, statute book and supplementary materials and other handouts, short-hand citations are acceptable, e.g. GATT panel decision on Spanish Coffee; Section 771 (10) of the Tariff Act of 1930 or 19 U.S.C.Â§ 1677 (10) etc. I encourage the use of parenthetical to explain why you have cited to a case, e.g., GATT panel decision on Spanish Coffee (by concentrating on the end use of coffee concluded that *****coffee is coffee***** and therefore *****like products***** within the meaning of Article I (MFN) of GATT 1994).

There are three (3) questions on the final exam. The first problem is worth 75% of the final exam grade and consists of three parts (A-C). The second problem is worth 10% of the final grade and the third is worth 15% of the final grade. Please answer ALL THREE questions/problems. Read each fact-pattern carefully and outline your answers prior to writing. Organization is key.

Case:

Question No. I: (75%)

Part A. Ban on Importation of Pork

You are working for the Ministry of Trade and Industry of Baluchistan. You are worried about the swine flu epidemic and are trying to isolate your population from getting the flu by restricting imports of products from North America where there has been more than 130 individual cases in 24 states resulting in 39 deaths (although most everyone who died also suffered from depressed immunity due from pre-existing health conditions and/or advanced age).

Your Government has seen this as an *****epidemic*****. To combat that epidemic, Baluchistan government has just imposed a ban on importation of pork and pork containing products originating in North America (due to NAFTA they felt that they need to also include Mexico and Canada in the ban, although those two countries have had no cases of swine flu reported).

Although the news reports are that you cannot get the swine flu from eating cooked pork, there are a few studies that warn against handling raw pork meat that is infected and conclude that you can indeed get the swine flu if you come into contact with the infected raw meat.

The language of the ban states:

All importation of pork and pork containing products from the United States,

Mexico or Canada or originating in United States, Mexico and Canada into

Baluchistan is prohibited until further notice. Such ban is extended to intermediary countries (beyond North America) so long as those intermediary countries continue to allow pork or pork products from the NAFTA region.

Please write a memorandum to the Minister advising him of the consistency of the ban on imports of pork from North America (Canada, U.S. and Mexico) with Baluchistan*****s WTO obligations as well as the ban against intermediary countries that allow pork from the NAFTA members. Please advise and specifically address the strengths as well as the weaknesses of your position and the likelihood of success should the measure be challenged at the WTO by: (1) United States, (2) Mexico and/or Canada and/or (3) by intermediary countries.

Part B. Anti-Westasian Legislation by Neighboring Country of Eastasia 4

Eastasia and Westasia used to be part of the same country which was called Bonosovia. Bonosovia was created in 1945 and lasted till its dissolution in 2005 into Westasia and Eastasia. Throughout, Bonosovia was controlled by ethnic Westasian*****s and all official correspondence was in the Westasian language. The President of Bonosovia was always from the Westasian region of Bonosovia. In Bonosvia, the vast majority of Eastasians were poorer than their Westasian counterparts and their educational system, roads, and infrastructure were also second rate when compared to Westasia.

In 2005 a successful independence movement led by Westasian separatists led to the creation of the two countries. Westasian*****s are Christians and Eastasians are predominantly Muslim with a 10% Christian population.

Westasia is only a third of the size of Eastasia, but is economically much stronger given its advanced infrastructure and competent civil servants, and it has been the base of ALL foreign investment since the dissolution of Bonosovia. Factories are usually set up in Westasia to produce products that are then also sold into Eastasia. Eastasia is densely populated with three times the population of Westasia and with a far less educated population. Eastasia also lacks the copper and tin that is found in Westasia.

In 2010 the Eastasian Parliament passed a law prohibiting the use of Westasian language in official governmental correspondence. However, the language of the business sector continues to be Westasian and foreign books are readily found translated into Westasian but rarely in Eastasian.

As part of an attempt to cleanse their language and cultural identity from Westasian influences which seems to have continued after the dissolution of Bonosovia within the new Eastasian state, the Eastasian President has issued the following decrees:

(a) A 15% tax on all books, magazines, newspapers, and other publications sold in any language other than Eastasian. This tax is in addition to the normal value added taxes that are imposed on all books, magazines and newspapers.

(b) All products must be distributed through *****approved entities***** if they are exported to Eastasia by a Westasian company, a Westasian invested company, or through the territory of Westasia. To be an *****approved entity***** you must file an application with the Interior Ministry.

Such *****approved entities***** must be wholly owned by Eastasian nationals or be Eastasian state-controlled entity. Such *****approved entities***** will be solely responsible for sale and distribution of Westasian products and must make monthly reports to the Interior Ministry about the volume, type and categories of Westasian products that they handle. 5

You work for the Ministry of Trade of Westasia. Both Eastasia and Westasia are WTO members (acceding in 2010). Discuss how you can challenge each of the two measures discussed above. Please draft a memorandum discussing the various grounds on which EACH can be challenged before the WTO dispute settlement mechanisms. Please assess the strength and weaknesses of your arguments. You must also discuss the defenses that can be raised to justify each of those measures. Make clear any assumptions that you make.

Part C: United States*****Anti-Corruption Promotion Act

In February 2011 the United States passed a law entitled: Promotion of Anti-Corruption and Ethical Principles in International Trade and Business Act (the Act). This Act states that:

*****trade sanctions may be imposed on products from any country that is determined to have:

(a) *****systemic corruption***** (using criteria to be established by US Office of Ethics, Business and Anti-Corruption); and

(b) where the levels of corruption has not decreased in the last 3 years; and

(c) there is no regulatory/administrative structure adequately equipped to fight corruption or promote transparency as determined by the US Office of Ethics, Business and Anti-Corruption.*****

The Office of Ethics, Business and Anti-Corruption started operation on March 21, 2011. It is still drawing heavily from expertise in other departments, including the State Department. The Head of the Office has not yet been confirmed and although the Office did issue a statement in April that Guidelines will be so that countries can try to avoid trade sanctions by complying with them, such Guidelines have not yet materialized.

The Office of Ethics has however used the corruption perception index put forth by an NGO called Transparency International (TI) to investigate 20 countries as the first step towards imposing trade restrictions on them for lack of rigorous anti-corruption initiatives.

As of November 4, 2011 trade sanctions have been imposed, pursuant to the Anti-Corruption Act, on 3 countries, including Eastasia. Specifically, the sanctions against Eastasia are as follows:

a total and complete ban on importation *****of any products by Nabil Corporation into the United States or any product that is produced by any person (including

6 legal person) that is owned or controlled by Nabil Corporation*****until such time as when the Eastasian Government institutes corruption controls on the management of Nabil Corporation, effective November 4, 2011*****.

Starting in January 31,2012, the United States will extend the import ban to any corporation that is owned by or controlled by the Government of Eastasia, unless the government of Eastasia produces a credible plan before January 31, 2012 on how it plans to combat corruption in the next 3 years with draft concrete steps and proposed anti-corruption legislation.

Background info: Nabil Corporation is the largest Eastasian corporation with 51% ownership belonging to the Eastasian Government and the rest by its most successful industrialist who is one of few Eastasians with business and investment in Westasia.

You work for the Office of the United States Trade Representative (USTR) in Washington D.C. Draft a memorandum defending: (1) the US anti-corruption law on its face; (2) in its specific application against Eastasia. Also state the weaknesses of the law on its face as well as in its application against Eastasia and Nabil Corporation to the extent that it may not be consistent with WTO rules. How will the measures be challenged, i.e. under which WTO provisions? What are the chances of success by the complainants against the U.S. in light of the provisions of WTO agreements and any relevant past WTO and GATT 1947 jurisprudence?

QUESTION NO. II: [10%]

Solario is a middle size company that produces *****zenan***** a chemical that is used on leather and leather products to keep them fresh and prevent them from drying up and cracking. Recently Solario has run into competition from domestic chemical companies that are importing their leather protective chemicals that are similar in end uses to zenan from China and Russia (in both countries there is a competitive and growing chemical industry).

Solario has seen its market share (which was primarily in the northwest region of the US) shrink from 60% in 2005 to 25% in 2010. Solario has lost its market share because: (1) many of its traditional customers are buying their leather from China and Russia and such leather has already been treated with products that are similar to zenan; (2) many domestic leather manufacturers such as shoe manufacturers have disappeared because they cannot compete with leather imports or have outsourced their plants; and (3) finally leather products are less in demand as more and more synthetic leather is utilized as they are cheaper and last longer than natural leather goods.

Solario*****s market share has somewhat improved from 2008 when it had sunk to 21% of 7

the market because some in the industry that produce high end products have come to appreciate and distinguish between zenan and other zenan-like products that are produced in China and Russia. Zenan is considered to be of a higher quality than the imports.

Chemical Association of America (CAA) is a large trade association that has a lobbying office in Washington D.C. CAA members range from small and specialty chemical businesses to large manufacturers of chemicals, such as pharmaceuticals, pesticide producers, etc.

The Chairman of Solario has approached your law firm to help her fight to save the company. What are the trade remedies that are available to Solario? Should it bring the claim itself or involve others such as CAA? The Chairman of Solario wants you to advise her on ALL options. What can the company do directly (as opposed through the US Government at the WTO) to fight foreign competition and the strength and weakness of each option.

QUESTION NO. III: [15 %]

What has been the legacy of the WTO Appellate Body (not the Panels) on interpretation and application of Article XX (General Exceptions) of GATT 1994?

Rely for your answer only on the decisions we have read and discussed (and to the extent we have read and discussed them): *****U.S-Shrimp and Shrimp Products*****; *****EC-Asbestos*****; *****Brazil-Tyres*****, and *****China-Publications*****. Limit your answer to no more than three (3) pages (double spaced).

*****

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