Non-Tariff Barriers: Survey

Professor Thomas Cottier

Summer Course 2010
Day 2, Session 3

Quantitative Restrictions and

VERs

The Ban of Quantitative

Restrictions
Article XI:1 of the GATT states:
“No prohibition or restriction other than duties,
taxes or other charges, whether made effective
through quotas, import or export licenses or
other measures, shall be 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.”
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 Principles
• GATT rules applicable to all trade and not only
to bound tariff lines
• Transformation of all QRs to Tariffs
(Tariffication, tariff equivalents in Agriculture)
in Uruguay Round
• Phasing out of QRs in textiles by 2005
• Tariff Quotas and QRs under special exemptions
(esp. Articles XIII, XX GATT)

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Exceptions to Article XI:1 (I)

• Food security and shortages of essential goods
(Art. XI:2, relation to Agreement on Agriculture?)
• Balance-of-Payment difficulties to protect limited
supply of foreign exchange (Art XII, XVIII:B)
– Historical context after World War II, rigid
controls of foreign exchange and fixed
exchange rates.
– In Korea – Beef, a GATT panel found that
Korea was not allowed to rely on this exception
because of its improvements in BOP.
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Exceptions to Article XI:1 (II)

• Art. XIX, Agreement on Safeguards, possibility to impose
quotas as result of an injury determination and subject to a
phasing out process
• Special Safeguards in Agreement on Textiles and Clothing
(phased out in 2005), Protocols of Accession (in particular
China)
• NOT under Agreement on Agriculture (Special Safeguard
Art. 5: additional duties), but safeguards and BOP
• Waivers (Art. IX:3 and 4 WTO Agreement)

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2
 BoP QRs (Art. XII, XVIII:B)
• India - Quantitative Restrictions on Imports
of Agriculture, Textile and Industrial
Products (AB-1999-3). ITR p. 165; 467/8
• Relation of DSU to BOP Committee
(Jurisdiction)
• Interpretation of para. 11 Article XVIII.B
• Impact of IMF Assessment (para. 121 ss)

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Administration of Quotas
• Quotas are operated for tariffs and for QRs
(if exceptionally allowed)
• What are the main problems?
– Scarcity and distributive justice among
suppliers, MFN tensions
– Corruption in licensing
– Rent seeking

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Principles of Administration
– Article XIII of the GATT 1994 regulates the
administration of tariff and QR quotas on a
non-discriminatory basis (para 1, 5) and:
“In applying import restrictions to any product,
contracting parties shall aim at a distribution of
trade in such product approaching as closely as
possible the shares which the various
contracting parties might be expected to obtain
in the absence of such restrictions…” (para.2)
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 Methods of Allocation
• Traditional patterns of quota allocation
• first-come-first served
• lottery
• sale and/or auctioning
• Does Agreement on Import Licensing
Procedures regulate methods of allocation
(cf. Article 3 lit. j, k, l): what are minimal
requirements?
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Voluntary Export Restraints (VERs)

• A VER, VRA or OMA is an arrangement

between an exporting and importing
country to limit the volume of exports
from one country to the other.
• Why are VER’s “gray area” measures?
WTO consistency or not?
• Agreement on Safeguards, Article 11

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Types of VER’s
• A VER might be :
– A non government measure (private agreement,
OMA, orderly marketing agreement) and/or,
– A government measure (government-to-
government measure)
• Explicit or tacit arrangements (i.e. Japanese
restraints on automobiles – formally a
unilateral Japanese statement)

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 Practical Benefits of using VER’s
• Why are VERs attractive?
– Informal arrangements (avoidance of national
implementing processes in order to restrict
trade)
– No determination of injury in the importing
country
– No restriction on a MFN basis (discriminatory)
– It confers more control over import restrictions
to the exporting country (they decide how much
to export below the maximum)
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Technical and Sanitary Barriers

Main Barriers today

• Legitimate goals (e.g. pharmaceuticals)
• Regulatory divergence (countries operate
their own rules and specifications) (e.g.
electrical appliances)
• Low tariffs compensated for by technical
and phyto-sanitary standard for purposes of
protecting domestic industries

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 Technical Barriers to Trade
(TBT)
• Product and process requirements
(standards) for purposes of standardization
or safety of products
• TBT Agreements obliges to use
international standards where available and
to avoid excessive standards
(proportionality, Art. 2)
• Rules on assessing conformity and
transparency requirements (Art. 5)
•
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Sanitary and phytosanitary Trade

Barriers
• Product or process requirements for
purposes of human, animal and plant health,
including environment
• Obligation to use international standards in
SPS Agreement
• Right to use more stringent domestic
standards, subject to extensive testing and
consistency requirements. or recourse to
precaution (examples: EC-Hormones, EC-
GMOs)
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Main legal issues

• Relationship of international standards and
domestic standards (Art. 3)
• Burden of proof for scientific evidence
(Art.5)
• The concepts of Risk Assessment and Risk
Management (Annex A:4)
• Relationship to other Agreements
(Cartagena Protocol)
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 IPRs and Competition Issues

IPR Protection and Enforcement

• Lack of protection and enforcement of IPRs
amounts to non-tariff barrier
• Excessive protection of IPRs equally
amounts to non-tariff barrier
• TRIPs Agreement
• Example of border measures

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Losadan and Abacavir

• December 4, 2008 - 500 kilos of losartan potassium (an active
pharmaceutical ingredient used in the production of medicines for
arterial hypertension) was detained en route from India to Brazil upon
request of right holder.
• On 12 November of 2008 the Dutch customs authorities stopped a
shipment of 49 kilo of the AIDS medication abacavir (300mg tablets)
produced by Aurobindo, shipped from Hyderabad, India by KLM
Cargo destined for Nigeria with as the recipient the US Embassy in
Abuja. The order was placed on behalf of UNITAID by the Clinton
Foundation and carried out by the procurement agent Missionpharma.
• The product concerned is abacavir used in second-line treatment of
HIV/AIDS. The shipment would have provided treatment for 166
patients for three months with an estimated value of 11.000 USD.
• The drugs are patented in Netherlands – no patent protection in
India.Brazil and Nigeria, respectively and Brazil.
• 14 similar documented cases of detaining generic drugs consignments
by the Dutch authorities in 2008.
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 Legal Ground for EU Customs Action
• Council Regulation No 1383/2003 (EC Regulation on
Custom Action)
– allows border authorities to detain goods in transit for inspection if
they are suspected of infringing an intellectual property rights
(Article 9).
– national law of the country which detained the goods is to apply
when deciding whether IP rights have been infringed (Article 10).
• ECJ decisions on goods in transit:
Polo/Lauren; Rioglass; Rolex; Commission vs France; Montex; Class
International

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TRIPs Perspective

• Article 51 requires that a certain suspension

procedure is available in relation to
counterfeited trademarks and copyright pirated
goods.

• FN 13 to Article 51– no obligation and

consequently no prohibition to apply customs
action on goods in transit.

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DOHA Declaration on the TRIPs and

Public Health
– Para 4: [TRIPs] Agreement “can and should be interpreted
and implemented in a manner supportive of WTO
Members’ right to protect public health and (…) to promote
access to medicines for all”.
– Para 6: permits a Member without manufacturing capacity
to import medicines from other Members under a
compulsory cross-licensing arrangement (paragraph 6
system)
– Failure to apply and construe EU law in accordance with
the Declaration

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 Anti-trust and Competition
• WTO disciplines may be undermined by private
cartels and abuse of dominant positions
• Lack of disciplines in WTO law except for
Telecom (Reference paper) and state supported
VERs
• Left to domestic jurisdiction (Art. 41 TRIPs)
• Need for multilateral disciplines in WTO or mere
coordination (Competition Network)?

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Thank you for your attention!

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