THIS EXAM HAS 06 PAGES

THIS EXAM HAS 03 QUESTIONS

NEW YORK UNIVERSITY SCHOOL OF LAW

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Final Examination --- SPRING 2018

(Term)

COVER SHEET

Course Title: International Trade Law

Course No. and Section: LAW-LW.11426.001

Professor: Joseph H. H. Weiler

Time Allowed: eight (8) hours

Materials Allowed: This exam is “open-book.” You may use any materials you like, but you MUST
NOT communicate with any living person.

Please indicate whether students are limited to a specific number of pages. Any other specific
instructions can be indicated here:

This exam is comprised of three (3) questions, and 06 pages including this cover page. You have
eight hours to complete all three questions. Please make sure to answer each question fully and
thoroughly, and make sure to stay within the required word limits.

Question 1: Max. 800 words

Question 2: Max. 800 words
Question 3: Max. 800 words

You are required to keep a copy of your exam! Please do not forget to put your Exam ID on each
page of the exam itself and not only on the cover sheet.
INTERNATIONAL TRADE LAW

This exam is comprised of three (3) questions and 06 pages, including this cover page. You have
eight hours to complete all three questions. Please make sure to answer each question fully and
thoroughly, and make sure to stay within the required word limits.

Time-limit: eight (8) hours

Permitted Materials: This exam is “open-book.” You may make use of any materials you like.
Exception: you MUST NOT communicate with any living person.

You may consult any materials you wish but it is possible to receive an A+ in this exam based
solely on the materials assigned during the class. If you do consult other materials you must
indicate such by footnote or listing such at the end of your exam.

Collaboration is strictly prohibited. You are absolutely prohibited from communicating

about this exam with any other person, through any medium throughout the exam period.

Word Limits: Please note that all questions have the same word limit (800 words) and the same
grade weight. Be sure to stay within the word limits for each question – you MUST provide the
word count for each answer you have given. You will be penalized by grade reduction if you fail
to list the word count or if you exceed the limit.

NOTE: all necessary facts are included in the problems themselves.

 The facts presented in the questions are (somewhat) fanciful, and you should consider
only the description of the facts in the problems to be authoritative.

 You should not spend any time doing additional factual research.

 If you find that some fact is unclear, or if additional facts necessary, you should make a
note of that and explain what would turn on the missing fact.

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 Question #1: International Trade in Sawmills (maximum 800 words / 33.3% of grade)

Sawmills (check out on Google images) are machine tools used, inter alia, in the furniture
industry by carpentry establishments. These complex machines can be dangerous to the operator
– one can lose a hand or finger at the blink of an eye.
Germany is world famous for its industrial prowess. Among other things, the country is a
reference in the production of furniture and timber structures, including prefabricated houses.
Professional guilds are an ancient tradition in Germany and one part of the success story. These
guilds train people as apprentices, journeymen and finally Master-workers but another
fundamental key to the German prowess is the high quality and perfectly engineered machine
tools, including Sawmills, constructed with the highest level of precision and safety.
Taiwan (like Germany, a member of the WTO) is catching up fast with a rapidly growing
furniture and timber construction industry. The country has a huge demand for sawmills, and, as
a consequence, the Taiwanese sawmill industry has established itself recently for both domestic
consumption and export. Taiwanese sawmills might not have quite the same reputation of their
German counterparts, but they are a lot cheaper!
Mutual trade in sawmills has hit a snag in both countries. The technical regulation governing
sawmills in Taiwan requires each machine to have a complex system of laser beams and
photosensors which brings the machine to a standstill as soon as the hand of the operator comes
close to the lethal revolving blade. The German longstanding regulation, by contrast, requires a
very prominent red luminous line marking around the revolving blade with clear warning signs
(adapted to the language of the country of exportation) saying “Danger! Attention!” designed to
alert the operator of the danger of any body part going beyond the red line. Consequently, no
German sawmill, unless very substantially modified, may be put into the stream of commerce in
Taiwan, and, no sawmill from Taiwan may be imported into Germany albeit with lesser
modifications.
Germany has incontrovertible empirical evidence that the rate of accidents in Germany is no
higher than in Taiwan, notwithstanding their different safety methodology. The country offers
these empirical studies as proof that, in terms of safety, their sawmills are equivalent to their
Taiwanese competitors. As a result, Germany claims that the Taiwanese technical regulation as
applied to German sawmills, is a protectionist measure that constitutes a disguised restriction to
trade and amounts to arbitrary and unjustified discrimination and should be treated accordingly.
Taiwan has a similar claim. It argues that the German safety standard is an unnecessary barrier to
trade as regards Taiwanese sawmills and its application to them has the sole aim of protecting
domestic producers.
Both countries (the EU, on behalf of Germany, and Taiwan) are contemplating legal action under
the WTO.
Imagine you are a lawyer in the relevant German Ministry. What advice would you give to your
government regarding the compatibility of the Taiwanese regulation under the WTO?
Switch hats and imagine you are working for the Taiwan Government. What would your advice
be concerning the compatibility of the German regulation?

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 Question #2: Essay Question (maximum 800 words / 33.3% of grade)

The government of Bashan, a Member of the WTO, is concerned with its underdeveloped
Southern regions. There, unemployment is high, and the average income is low. One of the
primary Southern products is vodka, produced from the abundant potatoes of the region. Potato
vodka, however, competes with cereal vodka produced in the North. Both beverages have an
identical alcoholic content – consumer preference is based on taste. (Similar to preferences
between, say, Coca Cola and Sprite, or orange juice and grapefruit juice.) About half the vodka,
of local production, consumed in Bashan comes from the north and the other half from the South.
Given the low labor costs and the efficient industry, there is, to date, relatively little importation
of alcoholic beverages from outside Bashan - currently, only 2% to 5% of the vodka on the
market is imported. In line with a well-recognized international pattern, the importation of vodka
is likely to increase as Bashan becomes more prosperous than it is today. Both grain-based vodka
and potato-based producers outside Bashan are licking their lips at the thought of this emerging
market for their products.
To give a boost to the South’s economy, Bashan’s government drastically reduced the potato
vodka tax. The goal is to favor the consumption of potato vodka over other types of spirits.
***
What systemic issues does this set of facts raise about the interaction of WTO legal disciplines
with the political economy of its members? You are not asked to comment on the litigation
problem (i.e., on whether the Bashan tax is legal or illegal) but to use this case as a platform to
identify systemic issues and analyze them.

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 Question #3: The Automobile Tax Problem (maximum 800 words / 33.3% of grade)

Prosperia, a member of the WTO, has a serious problem of income inequality. Its wealth is not
evenly distributed and is concentrated in the hands of a small upper class. The richest 1% of
Prosperians own 35% of the total wealth, while the bottom 80% own only 14%. There are
reliable estimates that, by 2021, 70% of the Prosperian wealth will belong to the rich class.
A new progressive government comes into power in Prosperia. The election manifesto contained
a promise to revise the tax code. “Soak the rich!” “Squeeze those Mercedes and Cadillac owners
and their capitalist producers till they bleed!” became some of their most effective campaign
slogans. They also promised to clear up pollution in Goldmine, the capital. They are committed
to the WTO but say that there are “…smart ways to make it work to our advantage.”
The new Prosperian government is contemplating various tax and regulation regimes for
automobiles. Prosperian plants produce mostly small and mid-range popular cars. They produce
only a few large cars and no luxury cars at all. Large and luxury cars usually are imported from
Japan, Europe, the USA, and Canada. Large and luxury cars form the bulk of American and
European exports to Prosperia in the automobile market. In the small and mid-size automobile
sector, by contrast, the USA and Europe are net importers of Prosperian cars.
A few facts about Prosperian automobile industry and market:
 Almost 80% of cars produced in Prosperia cost US$ 10,000 or less.
 The remaining 20% of the cars produced in Prosperia are in the US$10,000 to
US$15,000 price range.
 There are practically no cars, domestic or imported, in the US$15,000 to US$30,000
price range on the Prosperian market.
The new government of Prosperia is considering the following tax schemes:
1. Scheme I
 Ad valorem tax of 20% on cars up to US$10,000.
 Ad valorem tax of 60% on cars between US$10,001 and US$30,000.
 Ad valorem tax of 100% on cars 30,001 and above.

2. Scheme II
 A single rate ad valorem tax of 50% on all cars.

3. Scheme III
A tax based on engine displacement capacity:
 Cars below 1000cc displacement (sub-compacts): no tax
 Cars up to 2000 cc displacement (compacts): US$ 1000 tax
 Cars between 2000 and 3000 cc (midsize) US$ 2000 tax
 Cars between 3000 cc and 6000cc (Full size): US$ 10,000
 Cars above 6000 cc: banned as “Luxury items”, “Super Polluters” and wasteful of
non-renewable energy sources of the planet.

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American and European Automobile manufacturers are mobilizing to fight the different schemes
once a final choice among them is made and then introduced. Are these schemes consistent with
the WTO legal disciplines? Assess and evaluate each of them.