Professional Documents
Culture Documents
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There is no domestic industry in one country. 2nd country exports
product to these and subsidises. 3rd country which also exports to the
first country gets affected. As there is no domestic industry/injury to
first country, it may not impose CD UNLESS this requirement is
waived by all contracting parties (wiaver) (Art VI(b) GATT)
Subsidies under SCM
o Article 1 – SCM
o Subsidy
Financial Contribution
Transfer/potential transfer of funds
Revenue not collected
Provision of goods and services other than general
infrastructure
Contribution to a funding mechanism
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It is a financial contribution if revenue
would have been earned ‘but for’ the
measure. This was a financial
contribution
AB – said this test is wrong – what if a country
doesn’t want to tax a particular area. Countries
may charge tax or they may not.
Look at the entitlement of the gov to tax
it
Look at other spheres in that country and
look at other countries to see whether
such transactions are taxable and
whether that has not been done.
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Serious prejudice
Injury
Nullification of benefits
o Green – allowed – no longer in use
Export Subsidy
o Article 3
Article 3.1(a) deals with export subsidies. It prohibits the maintenance
of subsidies contingent, in law or in fact [Appendixed foot note 4],
whether solely or as one of several other conditions, upon export
performance, including those illustrated in Annex I
Foot note 4 deals with the standard of de facto export contingency
which is met when the facts demonstrate that the granting of a subsidy,
without having been made legally contingent upon export
performance, is in fact tied to actual or anticipated exportation or
export earnings. It further goes on to explain that the mere fact that a
subsidy is granted to enterprises which export shall not for that reason
alone be considered to be an export subsidy within the meaning of this
provision.
o De jure and De facto Export Subsidy
De jure – law itself lays down conditions of export performance
De facto – to be configured by total configuration of facts
Canada – Autos
Law provided for maintaining the ratio of sale value of
production in Canada IS TO sale value of vehicles sold in
Canda above 75% (if ratio maintained, entities got exemption
on import duties
Question – whether contingency on export performance ? YES
Question – whether de jure or de fact? De jure
o Canada aircraft test for de fact subsidies. 3 elements
First element - , the initial inquiry must be on whether the granting
authority imposed a condition based on export performance in
providing the subsidy.
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Second element - Both of the terms used — ‘contingent … in fact’ and
‘in fact tied to’ — suggest an interpretation that requires a close
connection between the grant or maintenance of a subsidy and export
performance. This is not same as ‘expected’ (third Element)
Third Element – anticipation of exports
o EC – Large civil aircraft
3 prong test
Apply Canada aircraft to i) the design and structure of the
measure granting the subsidy; (ii) the modalities of operation
set out in such a measure; and (iii) the relevant factual
circumstances surrounding the granting of the subsidy that
provide the context for understanding the measure's design,
structure, and modalities of operation
Ratio test
The AB in EC — Large Civil Aircraft laid down the
comparison of ratio of anticipated exports and domestic sales
(before granting of the subsidy and on granting of the subsidy)
as a very relevant factor in determining de facto export
contingency. If ratio increases, there is export subsidy, else not
Agricultural Subsidies [not for purpose of exams]
o Art 3.1 – “except as provided in Agreement on Agricuulture”
o Agreement on Agriculture supersedes GATT and SCM
o AOA covers
Agricultural Export Subsidies
Domestic Support Measures
o Agricultural Export Subsidies
Whatever is mentioned in schedule of concessions is allowed.
Everything else is not
Reduction commitments under the AoA. Also given under the
Scehdule of concessions. As long as countries follow their reduction
commitments, everything is allowed.
Budgetary reduction
Volume reduction
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Article 10.3
Green box subsidy
Blue box subsidy
Peace clause
o
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Tariff Barriers
General Concept
o Tariffs are duties which are paid at the Int. Border
o Kinds - On basis of purpose
Revenue tariff – to maximise revenue
Protectionist tariffs- to protect particular industry
o Other classification-
Ad valorem – on the value
Specific duty- irrespective of value
o Other concepts
Bound tariff – as notified by countries – max number that a country can charge –
Article XXVIII
Given in the schedule of concessions – legally binding agreement. Under Art
II:7, they are part of GATT
Applied Tariff – actual rate
o Tariff Peak – charging really high tariff
o Tariff escalation – unprocessed products – low duty, processed products – high duty.
Harmful for developing countries as it incentivises countries to export unprocessed
products
o 3 things that a country must decide before charging tariffs
Tariff classification (where the product will fall)
Valuation – custom valuation agreement (art VII)
Rules of Origin – WTO/Non WTO. Preferential / non preferential
Article II GATT
o II:1(a) MFN requirement
o II:1(b) Talks about
Ordinary Custom Duty OCD -can’t be more than bound tariff(mentioned in schedule
of concessions)
Other duties and charges ODC
All tariffs other than OCD in connection with importation
All ODCs in place before April 15, 1994 can be charged or if something was
mandated by law at that time
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Can’t be increased merely by national legislation. May only be increased by
negotiation
o Exception to II:1(b) = II:2
II:2(a) Can charge internal tax consistent with II:2 (National treatment)
Anti dumping duty/countervailing duty
Fee for services rendered
India – Additional duty on imports from USA
o Distilled spirits and wines imported from USA
o Schedule of concessions = 150% ad valorem
o Excise duty, Central Sales tax, State VAT – all imposed by states in India
o Measures
Additional Duty (AD) charge equivalent to excise duty was charged by India
Extra Additional Duty (EAD) – equivalent to the other two (CST, State VAT)
India refused to give evidence of what amount is actually charged by state
o US – contentions
Custom Duty + AD + EAD is in violation of II:1(b)
o India
o Panel
ODC + OCD inherently discriminatory.
These duties have a domestic counterpart, therefore don’t fall under II:1(b)
Refused to compare rates + said (VERY INCORRECTLY) that III:2 is not a
requirement
o AB
Differentiated between OCD and ODC
ODC is wider because it is followed by ‘of any kind’
ODC and OCD are not inherently discriminatory (even though they don’t have a
domestic counterpart – even countervailing duty and anti dumping duty don’t have a
domestic counterpart)
Panel looked only at functional equivalence. Not at quantitative equivalence. This was
wrong. Amount, effect, function – all need to be looked at
All measures under II:2(a) must be consistent with II:2
Held that both were violative of II:1(b) as India count prove Quantitative equivalence
Tariff Quotas
o Article XI – General Elimination of Quantitaive restriction
No prohibitions or restrictions other than duties, taxes or other charges, whether made
effective through quotas, import or export licences or other measures, shall be
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instituted or maintained by any contracting party on the importation of any product of
the territory of any other contracting party or on the exportation or sale for export of
any product destined for the territory of any other contracting party.
Other measures
Need only be govt action – may not necessarily be mandated by statutes
2 tests
o Whether govt is providing incentive
o Whether restriction depends on govt inducement
Exceptions
o Export prohibition in case of food shortage – should be essential and
critical
o Grading of marketing restriction
For both exports and imports, if a contry wants t implement a
grading standard
These must be on the same commodity that you want to
regulate
Canada – exports of unprocessed salmons
Canada wanted to regulate processed fish. Imposed
restrictions on raw fish – not allowed
o IMPORT restriction (only) in case of agricultural/fisheries
When agricultural product is in excess and you want to restrict
it, you can then restrict animal feed