8th February 2024

India- Pakistan on MFN

MFN is not a misnomer for India and Pakistan owing to article 24. Article 1.1 applies to India
and Pakistan as well. MFN is required to be accorded on a reciprocal basis.
India had accorded MFN status to Pakistan in 1996. Pakistan has not accorded it yet. In 2012,
revision was done and India threatened to withdraw it and initially India had withdrawn it. Both
the countries have violated article1 but article 24 mandates India and Pakistan to enter into an
agreement which will not be termed RTA. This special treaty confers the way of doing trade.
Subsequently, in 1948, Pakistan had initiated a case against since India was according tariff
concessions to all the countries except Pakistan. Then, the GATT chairman had held that it was a
violation of article 1.1. Article 24 (11) says that both the countries will enter into some kind of
treaty. Both the countries entered into an informal arrangement in which the Positive List
Approach was identified. It means a list is provided of products in which the countries will be
doing trade.
During independence, trade with India amounted to 56% of the total trade of the country. Post
the 1965 war and 1971 war, the list shrank. Post the Shimla Agreement, trade had resumed by
positive list. The countries thought, instead of positive list, they should develop negative list.
But this was not implemented.

Two Approaches:
: Positive List Approach
: Negative List Approach

Four Pronged test, as identified in EC Seal Products AB 2014:

Whether the measure at issue is the major covered by article 1.1?
Whether the measure grants any advantage, privileges or immunities?
Whether the products are like products?
Whether the advantage at issue is accorded immediately or unconditionally irrespective of your
origin/destination?

US Large Civil Aircraft

US Boeing Case
In both these cases, there are similar facts. US alleged that these companies were getting
concessions in European union. EC alleged that the same was happening in US. Both won one
 case each.

Second Argument- Whether the measure grants any advantage, privileges or immunities?
1. Canada Automobiles Case
The wordings of article 1.1 refer not to some advantages granted with respect to the
subjects that fall within the defined scope of article 1.1 but to any advantage. Not to some
products but to any product and not the like products from some other members but to the
like products originating in or destined for all other members. This case has been used to
clarify the meaning of advantage under article 1.1 This advantage is origin neutral.

2. Columbia Ports of Entry Case

Submission of import declaration and payment of customs duty in advance is an example

of advantage within the meaning of article 1.1

3. US - Tuna 2 Case
Access to dolphin safe label constituted an advantage on the US market for tune products
by virtue of labels.

4. EC Banana Thirds Case

Article 1.1 does not permit balancing less advantaged treatment with more advantageous
treatment.

Third- Whether the measure is for like products?

Like products has not been defined. Article 2.6 of Anti-Dumping agreement defines like
products in terms of dumping.

1. EC Asbestos Case, 1998 AB

Three questions are required to be answered to understand like products?
: Which characteristics or qualities are important in assessing likeness.
: To what extent a degree must products share qualities or characteristics in order to be
considered as like products.
: From whose perspective likeness should be judged?

This is the only case in which the environment and world trade related regulations were
discussed.
This case had cautioned for why dictionary meaning should not be taken into consideration while
defining like products. This is because
- The definition of like product as provided in the dictions does not indicate which characteristic
 are importance to assess the likeness of the product.
- Dictionary definition provides no guidance in determining the degree or extent to which
products must share qualities or characteristics in order to be like products.
- The dictionary meaning of like does not indicate from whose perspective likeness should be
determined.

2. Japan Alcoholic Beverages Case 1996 DS 2

Like products is nothing but a accordion. This is because it depends on the context like
products are being used. Like product differentiation should be based on a context. Similar
products are to be treated similarly. Different products may be treated differently. If the
definition of like products is too broad, it would threaten legitimate national regularity
interests and raises questions about loss of national sovereignty. Too narrow a definition
would lead to shrinking of obligations beyond what is appropriate and allow nations to
construct protectionist measures defeating trade liberalization efforts.
The definition should be based on the weighing and balancing approach. The definition has
not been provided by the drafters because it is contextual and elastic.
"the accordion of likeness stretched and squeezes in different places as different provisions
of WTO apply. The width of an accordion in any of those places must be determined by the
particular provision in which the term like is encountered as well as the context and the
circumstances that prevail in any given case to which that provision may be applied."

Critics
: But the accordion definition under Japan Beverages Case is too vague.

9th February 2024

*Indian Diplomatic on 13th MC:

There some non-negotiables on trade, and we are not going to discuss these.

- Environment
- Gender : As per the government, it should be having more role. It was discussed in 2017, 2019
and 2022 ministerial conference. The only treaty in which trade and its impact on gender has
been mentioned is UN Arms Treaty.
- SMES
All along, Indian government is making sure that SMES should be developed. Eg: Vocal for
Local, Make In India, etc. But when it comes to international discussion, India took a step back.
Double standards.
- Labour
ILO provides labour standards. Currently, we have 43 labour regulations.
Indian government is not agreeing for environmental goods proposal.

As per article 1.1, measure, advantage or privilege mean the same.

Article 1 read with article 24 states that, preference should be sincere and sensible.

Definition of Like Products:

1. Canada Aircraft Case
The dictionary meaning of like product leaves many interpretative questions open and thus
cannot be considered reliable.

2. EC Seal Case 2014 AB

Article 1.1 and 3.4, notwithstanding their textual differences, both of these provisions are
concerned with prohibiting discriminatory measures and ensuring equality of opportunity
between products that are in competitive relationship.

All these case are based on traditional understanding. The following two cases modified the
approach in case of like products:

3. US Poultry (China)
4. Argentina - Financial Services

In both these case, it was held that if discrimination has been done, then there is no need to
analyze like products. If the discrimination has been done, there is no need to determine the
likeness of these products. Discrimination cannot be analyzed in abstract. There should be
products competing with each other. However, this understanding has been criticized since it
cannot be assumed, in the presence of discrimination, that the products are like products.

Like products has been used in

- Article 1.1
- Article 3.2
- Article 4
- Article 11
- Article 13
- Etc.

Fourt Test - Advantage accorded immediately and unconditionally?

1. EC Seal Products 2014 AB
Immediately means without delay, at once.
At the time country enters into WTO, it has to be provided immediately and
unconditional. "Article 1.1 is concerned fundamentally with protecting expectations of
equal, competitive opportunities for the imported products from all WTO members. It does
not follow that article 1.1 prohibits a member from attaching any conditions to the
granting of any advantage within the meaning of article 1.1. Instead it prohibits those
conditions that have a detrimental impact on the competitive opportunities for like
products from any member.
 Whether in MFN injury is required to be proved?
No, injuries are presumed whenever there is violation of WTO.

MFN Application on Services

- MFN is applicable in terms of services. The term services has not been defined, but it
excludes all the government services.
- In service trade, if the services are allowed in the schedule, then only MFN will be allowed.
MFN applies only on bound services only.
- There are 12 categories of services which is further sub divided into 161 sub categories.
- In services, countries are free to determine their own schedule. In terms of services, there is
UN Central Product Classification. The UN regulates classification of services.
- If a country wants to restrict supply of services, then it can put some conditions.

Modes of Service
There are four modes of supply of service;
: Cross Border Supply of Services
It means that the service provider and recipient remain in their countries and service is provided
through telecommunications.
: Consumption Abroad
The service recipient moves into the service providers country. E.g.: medical purpose, tourism,
etc.
: Commercial Presence
The service provider comes to the country of service recipient. E.g.: Hotel chains, insurance
services, etc. It is regulating FDI in terms of services. India has a huge potential in tourism. Inn
Delhi only, there are 1600 monuments.
: Movement of Natural Persons

Advantages of opening services

- Competition
- Employment increase
- Legal education improve

MFN Application of IPRs

 Article 2 of Safeguards Agreement, if a serious material injury has taken place, then the country
can impose safeguard duty on MFN basis. A complete ban can be imposed in case of serious
material injury. Article 19 read with article 2.2 of safeguards agreement covers the same. Serious
material injury is required to be taken place.

12th February 2024

National Treatment
Introduction

- Fair and equal treatment is given to goods. MFN is the basis on which multilateral trade in
conducted among all WTO members. Conditions should not disturb equal opportunity.
- MFN is a treaty based obligation. It has been provided under Article 4 of Draft Articles on
MFN Clauses. "The most favored nation clause is a treaty provision whereby a state
undertakes an obligation towards another state to accord MFN in an agreed sphere of

relations.
- Agreed sphere of relations has been provided because article 1 states that general MFN
related to all spheres agreed by the members.
- Tariff barriers are regulated by the WTO. Non- tariff measures may or may not be
regulated by the WTO.

*Non Bound Tariff: Tariff not declared. Countries are doing trade and the tariff has not been
applied. MFN applies on this too.

*LCR?
India Automobile Judgement
Solar Panel Development Case
These cases held that LCR is violation of article 1(MFN) and article 2 of TRIMS.

Article 11 of DSU states that panel is required to objectively assess claims. Panel and appellate
body are required to follow standard of review. They are required to analyze local courts as well.
Article 17.6 of Anti-dumping agreement and article 11 of DSU allows to review local court
appeal and interpretation of anything which is disturbing the equality of opportunity
This has been held in India Patens Case (Legislations) and US 1916 Act Case (Judgement)
As per Delhi High Court judgment, all the companies operating in India have article 14
protection?
But this protection is not available for foreign companies owing to article 19.

What are subsidies?

• A financial contribution given by govt, public body, private bodies (entrusted by govt)
• It is an advantage or benefit to recipients
• Specific to an enterprise or region
• It is causing serious prejudice to trade.

Which of the following would amount to a violation of national treatment?

- If tax is not taken from certain state (tax holiday), whether this will be considered financial
contribution?
Yes, because you are not paying to the govt.

- Corporate governance can be an example of subsidy?

- ISRO confers certain benefits to 5 companies so that these companies can indulge into
research related to agricultural products?
- Subsidies
Yes
13th February 2024
Included Above.

14th February 2024

Trade encourages and incentives prosperity and peace but it is not a guarantee of peace.
Parties to multilateral and bilateral treaty don’t go on war with each other mostly. Wherever
there are two McDonalds, countries don’t go on war. Kuch bhi? Kuch bhi?

*Farmer's Protest Issues

Article 3(8)B: Subsidies are out of the preview of the national treatment.
Whether agreement on agriculture can be read with ASCM?
Since both are lex specialis and both have to be harmoniously construed.
Brazil Upland Cotton Case: AOA and ASCM can be read together.

AOA talks about three things:

: Market Access - Opening market for foreign exports and imports.
: Domestic Support - Article 3.2; If the subsidies granted to agriculture is causing distortions and
serious prejudice to international trade, such domestic support is actionable. These are an
example of per se prohibition, prohibited the moment they are given. Subsidies fall under this
and are not permitted and this is why the government is reluctant in giving subsidies.
: Export Subsidies: Subsidies granted for the promotion of the foreign products are not
permitted.

DS 579. 580, 581

India - Measures Concerning Sugar and Sugarcane
DS 579 challenged by Brazil
DS 580 challenged by Australia
DS 581 challenged by Canada
These cases were introduced in 2019. As per this, MSP in terms of agriculture in India is a
violation. India made the submission that the government does not buy the agricultural products
but the companies buy. India for granting subsidies comes under article 27.2B of ASCM
Agreement. This exempts India from granting any subsidies. But this article was there only for a
few years- 8 years.

India has largely benefited from WTO obligations. Demand to withdraw from WTO will not be
entertained.

Legal Provisions for National Treatment

Article 3'94
Article 2.1 of TBT
Article 2.3 of SPS Agreement
Article 17 of GATTS
Article 3 of TRIPs

Purpose of Extending MFN to National Treatment:

This is an extension of MFN obligations in terms of ensuring nondiscrimination obligations. If at
the customs border, the goods, services and IPRs are not getting discriminated, and they are
discriminated inside the border, it would be a halfhearted attempt of fulfilling obligations under
article 1 and article 2.

Meaning:
National treatment means that a foreign person, product or a right that is a goods, service or
service provider and investor and IPR and IPR holder or a juridical or physical person owning
an IPR must be treated by a regulatory state like their domestic/ national equivalent.

Difference:
The difference between MFN and National Treatment is that MFN regulates only border
measures while the national treatment regulates internal measures (state measures applied after a
complete importation).

Article 3:

Purpose
Article 3 has two purpose:
: It prohibits discrimination against imported products.
: It prohibits members from treating imported products less favorable than their domestic
products once the imported products have cleared through customs and entered domestic
markets.
: It prohibits protectionism in such a way that the domestic industry is benefitted.

Japan Alcoholic Beverages Case: The broad and fundamental purpose of NT is to avoid
protectionism in the application of internal tax and regulatory measures.
to ensure that internal measures not to be applied to imported or domestic products so as to
afford protection to the domestic production, for the above two things art III obliges members of
the WTO- to provide equality of competitive conditions for imported products in relation to
domestic products,

Japan Alcoholic Beverages Case: Article 3 regulates de jure and de facto taxation.
Korea Beef Case: Same

Korea Alcoholic Beverages Case: Purpose of art III is

to avoid protectionism requiring equality of competitive conditions.
protecting expectations of equal competitive relationship be foreign and domestically produced
products.

EC Asbestos Case:
Purpose of art III is
To prevent members from applying internal taxes and regulations in a manner which affects the
competitive relationships in the market place between the domestic imported products involved
so as to afford protection to domestic production,

EC Seal Products Case:

Art III is concerned fundamentally with prohibiting discriminatory measures by requiring
equality of competitive opportunities for imported products and like domestic products and for
that reason art III does not require demonstration of the actual trade effects of the specific
measures, last line indicates that the injury need not to be proved

Article 3.1
1. The contracting parties recognize that internal taxes and other internal charges, and laws,
regulations and requirements affecting the internal sale, offering for sale, purchase,
transportation, distribution or use of products, and internal quantitative regulations requiring
the mixture, processing or use of products in specified amounts or proportions, should not be
applied to imported or domestic products so as to afford protection to domestic production.

It is an introductory clause, chapeau.

The products of the territory of any contracting party imported into the territory of any other
contracting party shall not be subject, directly or indirectly, to internal taxes or other internal
charges of any kind in excess of those applied, directly or indirectly, to like domestic products.
Moreover, no contracting party shall otherwise apply internal taxes or other internal charges to
imported or domestic products in a manner contrary to the principles set forth in paragraph 1.*

Article 3.2 first sentence talks about internal taxation which includes GST, sales tax, excise duty,
VAT, etc.
Article 3.2, second sentence: income tax does not come under the preview of internal tax for the
purposes of trade.
15th February 2024
Protection has a positivist connotation but protectionism has a negative one
Protectionism means protecting domestic industries from foreign competition. It is done in two
manners:
: Internal Taxation ( Article 3.2 - first & second sentence)
: Regulation (Article 3.4)

Taxation and regulation are siblings in law, shaping consumption, having the power to change
the behavior of enterprise and company. These measures should not benefit the domestic
industries as per article 3.
The definition of like products is a narrow one. There should not be any discrimination based on
like products. This is apparent in Article 3.2 first sentence. If a broader definition is considered,
it would make the first sentence redundant.

Aims & Effect Test is followed.

It was approved by US Malt Beverages Case and US Taxes on Automobiles Case. This test
however was rejected in Japan Alcohol Beverages Case.
The article was discussed and added in the Uruguay Rounds.
Coverage:
- Internal Taxes
- Charges
- Laws, Regulations affecting sale, transportation and usage of the products.
- Internal quantitative measures

Three Prong Test to under article 3.2

- Whether the measure is an internal tax or other internal charges on products
- Whether the Imported products and domestic products are like products
- Whether the imported products are taxed in excess of the domestic products

Canada Periodicals Case 1997: This case talks about 2 test:

- whether domestic and imported products are like prod
- whether the imported products are taxed in excess of –

This was further clarified by China Automobile Parts- 2009 AB- talks about whether that
measure is internal or not is a threshold question- if measure is not internal trade measure- the
first measure is that- internal tax- or any other charges of any other kind- first is VAT, GST,
excise duty, sales tax but not the income tax, and IT is direct tax and outside the purview of art
III

Indirect taxation ref to tax imposed on raw materials used in the products used in the stages of
various products, whether border tax adjustments will be regulated by first sentence

Whether sec deposits can be considered as internal tax?

Tax administration and tax collection measures, whether such measures fall under art III 2 first
sentence
16th February 2024
No class
19th February 2024

Case- Russia Ukraine case

Country had invoked national security for the very first time

1. Another example morality- not a single case till 2005- US Gambling case- country invoked
morality

2. Countries were accepting that trade liberalization is helping their economy, that is why they
don’t invoke nationalism or protectionist measure.

Why do Countries put Export ban?

Why countries are invoking morality, nationalism, national security? Do they have a relation, are
they corollary to each other? How can it be reconciled?

Journal over trade- very good journal- available online and at library

Article 20- threshold is very high only one case- EC Asbestos- only this case is successful, so
practically it is unthinkable.

20(g)- exhaustion of natural

resources 20(e)- necessity
China raw material case- even if it requires to be conserved, however it wasn’t allowed.
To check prices within the country the country puts export ban.
Article 19,20,21 are conditional exceptions, they aren’t unfettered conditions
8 grounds:
1. To conserve domestic industries which are in short supply:

2. Conserve natural resource

3. Combat domestic price, or maintain domestic price controls.,

4. To maintain world crisis of a community by withholding the supplies

5. To develop the domestic processing industries

6. Impose voluntary export restrain (VER) at the behest of importing country

7. Limit the military or economic capability of a company

8. Sanction a country, or induce is to change its policies

if critical food shortage, then they can put quantitative restrictions under article 11 of GATT94-
 no QR cannot be there so to put prohibition on imports or exports, unless it is permitted under
WTO in specific agreements, for e.g.- TBT, SPS

On what grounds the special and differential treatment are to be protected?

Non-reciprocal- enabling clause 1979- special and differential treatment provision for DCs and
LDCs- this talks about the obligation being non-reciprocal

IR perspective- five things, arguments on S&D Treatment:

1. It is an acquired political right

2. DCs should enjoy privileged access to the market of the trading partners particularly the
Developed countries

3. DCs should have right to restrict imports to a greater degree than the Developed Countries.

4. DCs should be allowed additional freedom to subsidize exports

5. DCs should be allowed flexibility in respect of application of certain WTO rules or to

postpone the applications of those rules

Two scholars Alexander Keck and Patrick Low made arguments for DCs and LDCs.

AIM: 1. Integration in the multilateral trading system

2. Increase their due share in international trade participation.

Source- preamble of Marrakesh agreement.

Characteristics:
1. Special provision aims at increasing the trade opportunity of DCs with other countries

2. Special provision under which WTO members should safeguard the interest of DCs

3. Flexibility of commitments of action and use of policy documents

4. Transitional time period

5. Technical assistance

6. Special Provisions relating to LDCs.

 I. On dispute the Special and Differential provisions are:

a. Article 3(12) of DSU:

Decision on 5th April 1966, (BISD145 18)

a. DG of WTO can work as mediator, conciliator for LCDs and DCs.

b. Fund and legal aid for DCs and LDCs

I. On dumping:

If the goods are dumped in developed world, it is expected that:

a. Imposition of lesser duty rule: anti-duty margin should be less than the difference of price
by domestic country and the other country. Since it is coming from developing countries
less duty should be imposed.

b. Price undertaking- in writing you have to declare that you are not going to do it further, so
the DCs are asked to specify the price, price revision is required to be made. It is only
desirous and not compulsory, so this is a loophole. Para 7.2 of Doha declaration makes it
mandatory on part of WTO members.

I. TRIPs- under article 63

India QR case- India lost

EC bed linen case- India was arguing that it was Mandatory on part of US to have lesser duty
rule, India lost, subsequently India also removed it from Customs Tariff act.

Part IV of GATT, Doha declaration, enabling clause- Differential and more favourable treatment
Reciprocity and fuller Participation of DCs 1979. These are read together and known as Special

and Differential provisions.

20th February 2024

Grey Areas
1. Voluntary Export Restraints
- These are also called voluntary export agreements. It is defined as an agreement between
exporting and importing country whereby the exporting country restraints its exports of the
product to the importing country at the request of the latter. It is a reciprocal arrangement.
- This was very popular in 1960s.
- Subject matter includes steel, automobiles, aluminum, etc. The main players are EU, US and
Japan.
- Criticism:
: These are considered as grey measures because of lack of transparency. Article 10 of GATT'94
is violated.
: Secondly, it undermines the concept of multilateralism.
: Thirdly, it distorts the flow of trade.
: Fourthly, it prolongs restrictiveness for a long period of time, by promoting bilateralism.
- Article 11 of Agreement on Safeguards prohibits such kind of arrangement that promotes any
kind of export restriction. In recent times, VER are on rise especially on aluminum, steel and
computer chips.

2. Special & Differential Treatment

In terms of obligations on the countries, there is no difference. But special exceptions have been
created for the developing and least developed countries.
Substantive provision:
- Article 18 of GATT'94
It is popularly known as infant industry clause. It is a privilege accorded to developing and
least developed countries. It permits these countries to raise tariffs and protect their infant
industries. These countries can withdraw/ modify tariff concessions with the aim to
promote establishment of a particular industry on the ground of raising living standards
(which is recognized in Marrakesh Agreement) for the people. Article 2 of GATT'94
obligates every country to provide fixed tariff to every product exported/imported. Article
28 of GATT'94 allows a country to modify schedule of concessions after negotiation with
all the countries. In the case of developing and developed country, they can modify it
unilaterally.
Article 18 states that even though the developing countries do not meet the low
development criteria, they are still allowed to use the infant industries clause for some time.
There is an assumption that there will be improvement in the living standards eventually.

*Article 18 elaborates on the process of modification//withdrawal of schedule.

: Notify to GATT
: Negotiate with affected parties
: Agree on Compulsory adjustment agreement
If this does not take place, the matter is referred to the Council.

- EC Tariff Preferences Case:

 Article 27 of ASCM agreement states that if a country has a GNP of more than 1000, they
will be regarded as developed country. This article is only there for the purposes of subsidy
elimination.

- The second privilege under this clause is that the developing countries may impose quotas
for balance of payment reasons that is mentioned in article 12. Quotas are the numerical

fixation/ quantitative restrictions of allowing goods or services. These are to be eliminated

in a phased manner.
- The developing countries may be permitted to provide governmental assistance to infant
industries. This means subsidies.

- Part IV of GATT named as Trade and Development. It got added in GATT'47 in 1965 on
the recommendation of Herbler Report 1958. It provides concessions to developing
countries. It is recognized as best endeavor clause. The developed countries should take
measures for the developing countries growth. Article 36 to 38 are obligations but these are
mere principles and not obligatory.

Both of these substantial provisions were there in GATT'47.

- Preamble of Marrakesh Agreement.

It stated that developing countries should take steps to increase involvement of developing
countries.

- Doha Ministerial Conference

It ensures:
: WTO is required to identify those special and differential provisions that are already
mandatory in nature and consider the legal and practical implications for developed and
developing countries.
: To examine the additional ways in which special and differential provisions can be made
more effective.
: To consider incorporating special and differential provisions in the WTO rules
: It adopted specific paragraphs in the form of declaration for public health requirement
and concerns of developing countries.

- Bali Ministerial Conference

It had established a monitoring mechanism to check the implementation of special and
differential treatment obligations.
 - Enabling Clause
It was also incorporated in GATT'47. It was incorporated in 1979 and serves as an
exception to MFN. It states that developed countries are required to give preference to
developing countries on non-reciprocal basis.
EC Tariff Preferences Case recognized the enabling clause. Under this clause, many
countries have started the GSP programme which allows the developed countries to give
extra trade concessions to developing countries. It was conferred for 20 years but it
subsequently got expired. The US put forward three prolonged approach :
: WTO members with more than 12375 Per capita GNI as per WB Data is not required to
be provided GSP.
: WTO members that account for no less than 0.5% of global trade share
: If a country becomes OECD member or a member of EU, G20, etc. then they will not be
considered developing country. E.g.: Trump administration declared Brazil, India China,
Vietnam, etc. do not fulfill the criterion.
India on the other hand argues that GSP can only be withdrawn only on certain specific
products. Their share in the international trade is variable and therefore a period of 5 years
should be considered.

- TPRM Report submission

Developing - 4 years
LDC - 6 YEARS

- Article 24
Article 24 states that if two developing countries enter into regional trade agreement, they
will be subject to less stringent rules.

Incomplete Efforts
: Transfer of technology is not happening.
: Provisions like article 8 and 63 of TRIPs are not adhered to. These talk about transfer of
technology to developing countries.
: Para 6 of Doha has been accepted by the WTO keeping in mind the public health
concerns of the developing world. There are some rampant diseases like AIDS, Cancer, etc.
This paragraph talks about compulsory licensing and access to medicine even when IP is
violated. But even though this is there, it is not implemented because there is huge pressure
on the government.
: Another example is Aid for Trade was initiated in 2005 between WTO, UNCTAD, OECD
and UN.
 : Again, the pressure from the developed world to developing countries hampers its
implementation.
: None of the least developed countries have initiated a dispute in WTO. 42% if disputes
are initiated by India, Indonesia, Chile, Argentina, Thailand, Brazil, etc. These are newly
developing and gradually turning towards developed. These are newly enriched countries.
Scholars argue that there is a need to universalize the DSU so that the developing and least
developing countries participate in the dispute resolution. This is also known as third party
participation.
21st February 2024
3. Article 20
Article 20 is an exception of article 1 and 3.
Article 20 has two parts:
: Article 20 B and G is termed as environmental charter of the WTO.
- CITES defines exhaustible natural resources. It can be used for the purposes of Article
20G. This was laid down in the US Shrimps Case.
- In Stockholm Declaration of 1972, Gandhi said that at the cost of poor people, developed
countries have got prosperity. Developing countries therefore always favor
environmental protection.
- The term environment has not been used because developed countries always wanted to
have stringent regulations on environment. These countries formed the Committee on
Trade & Environment. Environment is present in the preamble of Marrakesh. This
committee predominantly formed by the developed countries, was formed to the regulate
environment. The developing countries stance was there is no need of a separate committee
since we already have UNEP, and different protocols, etc.
- Precautionary Principle: It is the customary principle of international environmental law.
- Environmental Legal Committee Case: Protecting environment as precautionary measure
is a customary principle of the international law and thus protection measures need to be
taken even in the absence of a statutory provision.
- EC Biotech Case DS 291: Citing precautionary principle, environmental measures cannot
be justified. This is because it has not been defined and there is no uniformity in defining.

*India in DSU
22 as Complainant
24as respondent
 160+ third party

22nd February 2024

Tests under Article 3(2)

Test 1:

Whether the following will be considered for the purpose of internal charge or tax?

i. Financial Penalty Provisions

US Tobacco 1994:
Financial penalty provisions imposed for the imported products will not be considered as internal
tax but considered as financial regulations.

ii. Security Deposit

These will not come under the preview of internal tax. They will come under the preview of
article 3(4)

iii. Border Tax Measures

Definition: These mean any fiscal measures which put into effect in whole or in part, the
destination principle which enables exported products to be relieved of some or all of the tax
charged in the exporting company in respect of
similar domestic products sold to consumers on the home market and which enable imported
products sold to consumers to be charged with some or all the taxes charged in the importing
company with respect to similar domestic products.
Covered under Article 3(2)

iv. Tax administration and tax collection charges

These come under the preview of article 3(2) - first sentence
Argentina- Hides and Leather Case: Tax administration and tax charges can be considered under
the example of internal tax for the purposes of article 3(2) first sentence.
Test 2: Whether the domestic and imported products are like products?
Liked products need to be interpreted narrowly. Article 3(2) second sentence involves
competitive products and keeping a broader view might defeat the purpose of the provisions.

Japan Alcoholic Beverages Case

Likeness will be construed in case to case basis. Three criteria to define liked products
: Natural Quality
: End use of the product
: Consumers tests and habits
: Custom Classification and Tariff Classification (EC Asbestos Case)
These principles were developed in the Border Tax Adjustment 1970s where the likeness test
originated.
These four criteria are not mutually exclusive. A product can be present in more than one
criteria.
In this case sochu and vodka were found to be like products.

Canada Periodicals 1997 AB

The likeness has been understood in the context of hypothetical determination of like products.
Example: if there is no import and domestic industry, hypothetical determination will be
understood for likeness.

Korea Alcoholic Beverages Case

Soju and vodka not considered

Mexico Soft Drink Case

Soft drinks sweetened with sugar or high fructose sugar and soft drink sweetened with cane
sugar was considered to be like products.

Philippines Distilled Spirits Case

Distilled Spirits of various types made from designated raw material and distilled spirits of
various types made from raw material and grapes, etc. were recognized as like products.

Aims & Effect test

US Malt Beverages Case 1987
Aims and effect test for the purpose of determining likeness developed in this case.

US Taxes on Automobiles
Reiterated aims and effect test.

Japan Alcoholic Beverages Case was the first case in this regard after the establishment of
WTO. This case rejected the aims and effects test. This was because of the following:
: In the second sentence of article 3(2) - the phrase used is not similar to the one use in first
sentence - "so as to afford protection". So, this test will only be applied for determination under
article 3(1).
: In the WTO Case, violation has to be proved by the complainant and the respondent is
required to prove the aims and effect test. Since it would shift the burden on the other party, it
will not be used for the purpose of 3 (2) second sentence.
: There can be various aims and effects for a particular legislation and it would be difficult
to determine which one to consider.
: If this test is applied, then article 20 (a- j) will become redundant.

These objections were also reiterated in Indonesia Automobile 1998 and Columbia Ports of
Entry Case 2009. This test was rejected in Clove Cigarettes Case as well.

Test 3: Taxes in Excess of

Internal taxes of imported products should not be in excess of taxes on domestic products.
Whether De Minimus Test is applied or
Japan Alcoholic Beverages Case
De minimus test is not applicable.

This was reiterated in Argentina Hides and Leathers Case and Thailand Cigarettes Case

Article 3.2 Sentence 2:

Internal Taxation on Directly Competitive and Subs
Test as per Japan Alcoholic Beverages Case
: The imported and domestic products are directly competitive or DCSP?
: Directly competitive or substitutable products are not similarly taxed.
: Dissimilar taxation of such products applies so as to afford protection to domestic production.

Other case like Mexico Soft Drinks Case, Philippines Distilled Spirits Case, Korea Alcoholic
Case, etc.
Four test:
: Whether the measure at issue is an internal tax other charges or products?

Korea Alcoholic Beverages Case: Like products are a subject of DCSP. All like products are
 included in DCSP. Not all DSCP are like products. The category of DCSP is broader and like
products should be considered narrowly. The words directly suggest a degree of competitive
relationship between the domestic and imported products. For understanding DCSP, the panel
must not only consider the current and potential demand but also latent demand.

Japan Alcoholic Beverages Case: It talks about cross price elasticity of demand in the relevant
market is considered to be a means of establishing whether the products are DCSP.

23rd February 2024

Reforms Needed
Some countries believe that the DSU is not fulfilling current requirements. Firstly, because it has
a binding nature which violates sovereignty principle. Secondly, there exists excessive power
with the Panel and Appellate Body. The entire mechanism has started working like a domestic
court. In essence, practically, the reason is that US is losing a lot of cases.

The developed countries are unable to protect the domestic industries and failing to provide the
employment opportunities to their citizens. DSU is the central to bring security and
predictability in the multilateral trading system. Discrimination to protection is becoming more
practical. So, the developed countries want to modify and weaken this system.

Soto Text, consisting of 43 pages indicates the points of reforms:

: Third Party Rights

Third parties are parties that show interest in the dispute. In the EC Banana Third Case, the
term enhanced third party rights was used. The developing countries are asking that enhanced
third party rights should be there in the legal texts. When the developed countries ask for the
enhanced third party rights, they are allowed but the same does not follow for the developing
countries. If the existence of third party rights is mentioned in the legal text, the developing
countries will not be deprived of it.

: Panel Composition
Panel and appellate body are the judicial mechanisms available to the countries. The panelists
should not be there from the disputing parties. But, this does not apply for third parties. The
panelists are mostly from Canada, EU, New Zealand, etc. Their training is such that there is
biasness towards developing and least developing countries. Some countries propose that there
must be some roaster which is there but implementation is not there. Along with this, there must
be some guidelines to decide the case. Panel composition must be there on well- defined
guidelines in the legal text.
: Remand
Only in some cases, the appellate body had sent the matter back to the panel, which is generally
not done. It is a rule based system. EC Banana Third is one case where remand had taken place.

: Mutually Agreed Solution

As per article 3, it is considered to be the most preferred manner of settling dispute. There is no
time frame for mutually agreed solution to get notified. It is too informal. There would be
dominance due to power dynamics.
India's stance is that it would make the process very cumbersome and there will be serious
compliance issue.

: Strictly Confidential Information/ Business Confidential Information

It is done in dumping disputes, IPRs, services, etc. The parties (exporter) need to show good
cause for why the information is to be kept confidential. There is a huge chance that the
investigation might not take place in such a case.
The countries are demanding that mechanism employed by the panel and appellate body to
identify confidential information should be mentioned in the DSU Text.

: Sequencing
The countries are demanding that there must be clear cut rules on the sequence of the issues and
how they will be treated. Judicial Economy applies mostly in investment disputes. There are no
per se rules or treaty for investment. Only two article of GATT'94 on which TRIMs applies-
article 3 and article 11 of GATT'94. It regulated only two areas- no discrimination between
foreign investor and domestic investor and there cannot be any quantitative restriction in terms of
goods and services. The question of judicial economy will come when the parties either violate
article 3 or 11 of GATT'94 or they violate article 3 of TRIMs. The illustrative list of TRIMs talks
about the definition of local content requirement and export performance requirement which are
prohibited. Article 3 and article 11 are not para materia to TRIMs. The panel and appellate body
in India Automobile, Indonesia Automobiles, EC Banana, Canada Automobile. The panel has the
discretion to take any of the decision. The countries therefore demand that sequencing issue must
be clarified for better.

: Retaliation
Retaliation means increasing tariff in response to the other countries measure affecting your
domestic case. In the Brazil Upland Cotton Case, the issue of cross retaliation was raised. The
countries are demanding that post as well as cross retaliation should be allowed.

: Transparency and Amicus Curae participation

 India is against NGO participation because NGOs are overarching, influential and dominating.
The countries demand that NGOs should have an active role in WTO functioning. Currently,
NGOs have a limited role. Second, parallel proceedings are taking place for NGOs. Thirdly, a
country to country dispute does not require the involvement of the public. Therefore some
countries ask that NGOs should have more than active role. But they do not have a very
effective rile in WTO functioning.

: Developing Countries Interest

Decision on 5th April 1966 for special provisions for developing countries is required to be
expanded asnd modified for the developing countries.

: Flexibility and Members Control

The developing countries have serious objection on membership control. It brings back WTO to
positive consensus rule. But it would amount to dilution of the dispute resolution system.
Security and predictability will be seriously weakened.

India along with 15 countries had made a submission to Soto for amending article 10 and 17.
Only Australia is not in favor of third party rights since the DSU will be crowded with thrid
parties that don’t have much interest in the case. In EC case, Australia was a third party and
yet had made the arguments against the third party rights.

26th February 2024 Need structuring

ARTICLE III:4 OF GATT 1994

Requirements for violations:
1. Whether the measure at issue is a law/regulation or any measure covered by Art. III.4?
Ex: minimum price requirement to domestic produced beer, requirements that imported beers
and wine be sold only through the state wholesalers and other middlemen, ban on foreign
cigarettes advertisements, any trade related investment measures, regulations resulting in higher
railway transportation cost for imported products, VAT related administrative requirements
imposed on resellers of imported cigarettes, regulations requiring all imported newspapers and
periodicals be distinguished through one particular distribution channel.
2. Whether the domestic products and imported products are like products? Same as the
 previous categories.
3. Whether the imported products are accorded less favorable treatment than the
domestically manufactured products? US-Gasoline case and Korea-Beef case 1991: talk about
the treatment no less favorable. It means according conditions of competition no less favorable to
the imported products than to the like domestic products to be considered less favorable
modifications of competition in the relevant market to the detriment of imported products.

Regulations resulting in higher railway transportation cost for imported products

VAT related administrative requirements imposed on resellers of imported cigarettes
Regulations regarding all imported newspapers and periodicals be distributed through only one
particular base channel

Treatment no less favorable:

US Gasoline Case 1996
Korea Beef Case 2001
In both these cases, the meaning of treatment no less favorable was discussed. It means
according conditions of competition no less favorable to the imported products than to the like
domestic products to be considered less favorable modifications of competition in the relevant
market to the detriment of imported products.

DCSP
Criteria for DCSP under article 3(2) as identified in Philippines Distilled Spirits Case
- Competitive relationship between the products at issue
- Products channels of distribution
- Physical Characteristics
- Their end use and marketing
- Tariff Classification
- Internal Regulations

Exceptions to the MFN status

1. Cultural Exceptions
It is regulated by article 4 of GATT'94. Because of trade liberalization, many countries felt
threatened that their culture was getting diminished. This is why this exception was developed by
the WTO. Broadcaster, music related things can have restrictions. Prime Time TV may be
restricted for the domestic movies only. LCR is permitted in such cases.

2. Critical Food Shortage

 It is provided under article 11

3. Balance of Payment Restrictions

If enough foreign exchange is not there, national treatment can be allowed to deviate

4. Economic Development
Article 18 along with Part
IV.

5. Economic Exceptions

6. General /Societal Exceptions

7. National and International Security Exceptions

8. Regional Trade Exceptions

9. Special and differential treatment

10. TRIPs Exceptions

11. GATT's Exceptions

12. Govt. Procurement Exceptions

What is the nature of these exceptions?

Exceptions under article 20 are conditional in nature- general exceptions
Cultural exceptions are permanent.
Conditional:
: General
: Security
: Regional Trade Exceptions

Temporary Measures
: Economic Exceptions
Safeguard duty, first for four years.
Bangladesh example; will be developing so product patenting
Compulsory licensing- article 31; balancing country's interest along with the core values of
multilateralism. In the case of national emergency only, the state can take away the right of the
patentee.
Local emergency can also be used for compulsory licensing. Trademark is an exception to this
rule.

Regional Trade Exceptions

Article 21
First Best Approach: Multilateral trade
Second Best Approach
Article 41 allows countries to modify that does not recognize customary principle of
international law
Article 24 ad Article 5 of GATTs.

WTO+ Measures
Eg: Govt. Procurement, Investment
These are not covered by the WTO, but regional trade agreements do cover them.
TRIPs+ Measures
WTO Report uses the term Preferential Trade Agreements', RTA, FTA, etc. are in the nature of
preferential trade agreements. PTA as such means shallow integration agreement permitted to the
countries only for 15 years. On maturity of these 15 years, the countries convert to FTAs and the
PTAs lapse. Coverage of FTA is substantial all trade. PTA is restricted to a narrow coverage
including only a few products. Economic Union is considered to be the deepest integration
including goods, services, iprs, labour movements, currency, etc.

Article 20
It has two parts:
-Chapeau: This means nondiscrimination obligations.
-A to J: These exceptions are exhaustive in nature.

If any exceptions under article 20 is invoked by a country, the panel would adjudge two
requirements: what is the practice of the particular country - what is the manner of the practice-
in order to understand the consistency.
These were identified in Brazil Retreated Tyres, AB 2007.
The first case in this regard is US Gasoline Case which states that the analysis on article 20 is
twofold- provisional justification by regional characterization of the measure The measure must
come under one or another of the paragraphs from A to J under article 20. The measure must also
satisfy the requirements imposed by the opening clauses of article 20. The measure must be
applied on non-discriminatory basis.
27th February 2024 Mid Sem

28th February 2024

Trade Remedies
Remedies mean dispute settlement. Trade remedies are given when a country practices unfair
trade mechanism in three particular areas:
- Dumping done by company/enterprise
A company employing predatory prices in other country. The importing country creates a
mechanism for investigation. Anti-dumping duties are employed to offset/ compensate the
domestic industries. Whenever a product is subject to anti-dumping duty implies that the
goods of the company have been caught in dumping. The investigation is done by Director
General of Trade Remedies (Ministry of Commerce). They then recommend the imposition
of anti-dumping duty. The Ministry of Finance imposes anti-dumping duty. The exporter
pays the anti-dumping duty. The anti-dumping duty = customs duty + extra duty.
The law that governs dumping is Agreement on Implementation of Article 6 of
GATT'94. In India, Customs Tariff Act, 1975 read with Customs Rules.

- Subsidies provided by the country which result into certain benefits. After taking this
benefit, if the product is manufactured and exported to another country which in turn
causes injury. The country in response imposes countervailing duties. This is regulated by
Agreement on Subsidies & Countervailing Measures.

- Safeguards Agreement: Due to overproduction in one country, excessive exportation takes

place which injured the domestic market of another country. In such a case, safeguard
duties are paid. This is known as economic emergency.

Dispute Resolution in such cases - they are required to hear both the parties. Every country is
required to have a judicial mechanism over the investigation mechanism. In India, it is
CESTAT - Customs Exercise Tribunal.

Article 6.5 of GATT'94 states that both the duties cannot be simultaneously imposed.
US Anti-Dumping and Countervailing Duties Case
This is an exception of article 6.5. It states that double remedies are not permitted. In certain
circumstances, in the name of double counting, both can be imposed.

NME means Non Market Economy. It is a centralized economy where the government control is
more. In case dumping is taking place from non-market economies, double market compensation
can be imposed.

Bipin Chandra case and case- Exclusion of Judicial review cannot be done, so the HC
and SC can hear it.
Can double remedies be imposed?

Article 6.5 of GATT94- No product of the territory of any contracting party imported into the
territory of any other contracting party shall be subject to both anti-dumping and countervailing
duties to compensate for the same situation of dumping or export subsidization.

US anti-dumping and counter vailing case- exception of article 6.5, double remedies are not
permitted, but in certain cases like double counting, it can be imposed. so, this case is an
exception.

NME- non-market economies- centralized economy where the govt’s control is more, when
goods are dumped from their countries then we can have double remedies. so this is 2nd
exception.
first country to impose- Canada

we become signatory in Tokyo rounds 1975, that is why have the act from 1975, it got
implemented . so we were one of the few countries to impose anti-dumping law at that
stage. Sri-Lanka doesn’t have anti-dumping law, such measures are mandatory, a dispute
can be initiated.
why is competition law not a part of this?
we need to check the enterprises, otherwise consumers won’t be protected, but it in turn protects
the companies, so anti-dumping law is like competition law but the only catch is it regulates on a
cross-border basis.
Article 5 of anti-dumping agreement-
Initiation: two ways it can be initiated:
i. Written application: it will start with the written application from the domestic
industry- 5.1
Except as provided for in paragraph 6, an investigation to determine the existence, degree, and
effect of any alleged dumping shall be initiated upon a written application by or on behalf of the
domestic industry
Standing requirement:
 a. 50% test: 50% of domestic industries have to apply to DGTR, this participation has to be
a quantitative aspect.
b. 25% test: in no circumstance an investigation will start if it is less than 25% support.

ii. Suo moto: 5.6: if the domestic country is so fragmented that the investigation is not
possible.

If, in special circumstances, the authorities concerned decide to initiate an investigation without
having received a written application by or on behalf of a domestic industry for the initiation of
such investigation, they shall proceed only if they have sufficient evidence of dumping, injury
and a causal link, as described in paragraph 2, to justify the initiation of an investigation.

Role of investigating wing: 5.3

It will examine whatever data submitted by the 50% industries is “adequate, accurate and
sufficient” to start the investigation, if not then 5.8
three conditions to constitute dumping:
i. Dumping has taken place
ii. injury has taken place/threat to a material injury
iii. causal relationship between dumping and injury.

De minimis dumping- where dumping has taken place but it is negligible.

a. 2% test- if the dumping is only of 2%, then it is negligible enough and no dispute will
start.
b. 3% test

c. 7% test-

Documents- performa document- data which is needed for application is prescribed under 5.2.
there are two products for anti-dumping:
a. subject product
b. like products- define in article 2.6 of anti-dumping agreement

29th February 2024

Anti-Dumping Measures:
- Raising the final definite anti-dumping duty
It is equivalent to dumping margin (Normal Value in Country of Export - Export Price in
the country of Import). The difference between both these prices is known as dumping
margin. In case dumping is taking place, investigation takes place. It is determined by
 DGTR. Normal value is higher than the export price. Equivalent to the margin, dumping
duties are imposed. Article 9.2 states that this should be appropriate amount. Lesser duty
rule is if the designated authority thinks that imposition of less duty is sufficient for the
purposes of providing compensation. Final definitive duty is the duty found after the
investigation is complete.

- Provisional duties
The investigation period is determined by three rules - either 6 months, 1 year (most
countries) , not beyond 18 months.

- Price Undertakings

Whether retrospective duty can be imposed?

Article 10 states that it can be done for a period of

Last three years data will be taken under investigation for the purposes of determining the
injury. Anti- dumping duty is imposed for 'as long as the act continues' as per article 11.1
Kinds of Review:
- Sunset Review
Once it is imposed, it continues to be there for 5 years. Post this, there will be sunset
review. Then re-investigation is done followed by the analysis. The difference between
both these investigations in approach is that in the initial investigation, retrospective
analysis is done. In review investigation, prospective analysis is done. SSR review must be
completed within 1 year. The SSR process starts 6 months before the 5 years.

- Mid Term Review

Mid-term review or changed circumstances review which takes place after 1 year of the
duty imposed on application to the DGTR.

- New Shippers Review

All rate duty means a duty calculated after dumping margin given to all the countries
exporting goods to my country. On the basis of average, a fixed duty is imposed on the
exporters to comply with. If a company has not exported yet, doesn’t want to pay, they can
apply for new shippers review. The burden of proof lies on the exporting company. Arm's
length transactions will be used to determine the same.

- Price Undertaking Review

It means that the undertaking by the exporter to cease the act of dumping and to revise the
 price to the extent of dumping margin. It is done as per article 8. The offer for price
undertaking is from the investigating agency unilaterally.
The nature of dumping duty is punitive.
Article 3 mentions 3 kinds of injuries
- Present Material Injury
- Future Injury/ Threat to Injury
Apprehension of injury. Here, too anti -dumping duty can be imposed as a precautionary
measure.
- Material Retardation

Article 6 talks about the due process clause. Applications can be counter acted. If foreign
exporters view is not heard, then there is an appeal in every country. Eg: CESTAT in India.
Then judicial mechanism of the said country can be invoked. If the foreign country thinks
that the domestic system is inefficient, then they can initiate a dispute in the WTO.

1959 ICJ Judgement - Exhaustion of local remedies is a customary principle of law. This is
defeated in the case of WTO.

If data is not there in public domain, as per article 5.2, domestic industries need to submit
data regionally available. Those data which are generally available to the DGTR is required
to be used in such cases.

US I916 Act Case

WTO has the power to review the decisions of the domestic investigation body like DGTR.

1st March 2024

Purpose:
- To protect the domestic industry from injury.
- Fair trade principles establishment.
- Offset from injury to the domestic industry.
In real sense of the term, there is no compensation because the duty goes to the government.
- To increase the prices of imported products so that the conditions of competition are established.

Also, to create a level playing field so that the domestic product and imported product are sold at
a competitive field.

It is used as a strategic weapon targeting few countries. It is not universally applied. It works like
a protectionist measure. There are certain products and industries which are politically very
sensitive. When exports take place on such products, then only anti-dumping duty is imposed.
E.g.: Electricity, Telecommunication, etc.

Certain scholars argue that there is no need to have anti-dumping agreement because it promotes
competition. The duty indirectly benefits the domestic injury, instead of directly benefiting it.

Kinds of Dumping covered:

- Predatory Dumping
It means selling the goods below the cost of production in another market. Mens Rea is not
required. Not required to prove the injury.

- Cyclical Dumping/Overcapacity Dumping

Sometimes the industry produces goods excessively which are then sold in another market
 for cheaper price. It means selling at lower prices in another market due to overcapacity
and downturn in demand.

- Market Expansionary Dumping

When the company tries to expand its horizon inn another market by introducing one's
product at lower price and below the cost of production.

- State Traded Dumping

It means dumping through PSUs.

Things not covered:

- Exchange Rate Dumping

It means that dumping done in order to pay the transaction in basket of currencies.
Currency Manipulation -----
Article 15.4 gives power to IMF for weighted average voting

- Social Dumping
It means sending people to another country and making sure that the goods are produced at
a cheaper price. ADA covers only goods dumping, not services dumping.

- Environmental Dumping

- Freight Rate Dumping

Whatever is the cost of transportation, if it is artificially low by the state, it is not regulated
under ADA.

Three Conditions of Anti-Dumping as per Article 1:

1. WTO members may apply anti-dumping measures only when the conditions set out in
article VI ofGATT'94 are met. This is because it has two fold purpose: the meaning of anti-
dumping & anti-dumping duty along with its purpose.

2. Anti-dumping duty may be imposed in pursuant to investigation in accordance with the

provisions of anti-dumping agreement. The substantive obligations of anti-dumping are laid
out in article 6 of GATT'94 and Article 2, 3 and 4 of Anti-Dumping Agreement.
Article 2: Dumping
Article 3: Injury
Article 4: Domestic Industry
 3. Application of article 6 of GATT'94 is governed by anti-dumping agreement where a
member takes action under its anti-dumping laws.

Anti-dumping duty is not benefitting the domestic industry. eg: a country imposed the duty and
the country made sure that whatever duty is collected goes back to the industry, depending upon
the injury to domestic industry. Whether this is valid law? whatever action is allowed against
anti-dumping must satisfy the requirements of ADA.

Byrd Amendt Case

Whether these are exclusive?

Article 18.4 states that anti-dumping agreement

18.4 + 18.1 + 1 of anti-dumping agreement provides that it is a framework agreement and only

min. standards are required to be adhered to, rest the country is at liberty on how to implement.
All laws, regulations etc. shall be in conformity with the anti-dumping agreement. It is not
exhaustive.

The procedure prescribed under the agreement need to be followed.

Dumping is the differentiation between normal value and export price. Dumping is to enter into
another market for subsequent profits. Anti-dumping duty is imposed against the exporter which
will be higher than custom duty, this will be like a punishment duty.
fair manner= cost of production + administrative cost+ profits that you are expecting.
Domestically also it is not permitted. this will be treated as use of dominant positive and it is
permitted under sec 4 of competition act.
Anti-dumping agreement of WTO does not cover services, IPRs. Social dumping – you export
the labour and then they produce the goods in another countries at cheaper price. But this is not
permitted.

4th March 2024

Period of Investigation
- It means that period when investigation takes place for the imposition of dumping for the
collection of data.
- No clear provision.
- 1 year, should not go beyond 18 months
 - Last 3 years data taken into consideration.
- If a country extends it beyond 18 months, it would be a violation of WTO anti-dumping
agreement.

Step 1: Investigation
How to initiate this investigations?
The following are the requirements:
: Written Application
There must be a complaint in the form of written application by the domestic industry suffering
injury because of dumping. This application will be there on perfroma document in the case of
India. Article 5.6 talks about suo moto application in special circumstances. In cases where the
domestic industry is so fragmented that the standing requirement cannot be met. Annexure 2
states that it is the DGTR's responsibilty to collect data that is generally available.

: Documentary Requirement
Article 5.2 provides the list of the documents required to be submitted to the DGTR. Data can be
resubmitted as well as supplemented.

: Notification to Exporting Country

Article 5.5 provides that once the application has been released, then it is required to be assessed
on the touchstone of accuracy, adequacy and sufficiency post which notification is to be send to
the exporting country. This notification is required since the exporting government is cautioned.

: Prima Facie Case

If these things are satisfied, the prima facie investigation starts. Before initiation the DGTR is
required to verify whether the application is having standing requirement. (50% - 25% test). It is
purely quantitative test. Only the data is supplied, not the analysis.

: Public Notice

It is mentioned in article 12. It is given to the public and the government of the exporting
country. The two requirements are: about the product and the country from where it is brought.
It has to be in widely circulated newspapers

: DGTR Guidelines
The guidelines by the DGTR have been set and the same have to be adhered to.
The further steps have been discussed under article 6.
Step 2: Due Process
The second step in the process is due process. The data is required to be collected from the
exporters. Article 6 talks about due process requirements.
The investigation submitted, copy submitted to the other party as well.
Step 3: Treatment of confidential information
Step 4: Principles of Facts available
Even after giving full opportunity, if certain facts are not submitted, the DGTR can use facts
available for the purposes of the investigation.

Step 5: Verification of information submitted by the parties.

Article 6.11 talks about interested parties. The data is required to be notified to the interested
party. These are vital for the purpose of investigation. The list provided under article 6.11 is not
exhaustive. The list includes businesses, third states, downstream market associations etc.

Article 6.11.1
A questionnaire is sent to them and they are required to submit it within 30 days. All interested
parties must be given notice for collecting evidence. For collecting evidence, the questionnaire is
sent. This information will be used to establish whether the dumping has taken place, whether
there was injury and whether there was a cause- effect relationship. This deadline can be
extended provided due consideration is given.

Article 6.1.2

Article 5.8
Confidential Information: If the exporters in good cause show, that there is a reason not to
submit certain data, those data will be considered confidential information. It is however, not
saved in absolute terms. If the confidential information is marked so, it would be very difficult
for the other party to make submissions. So, the interested parties are required to submit the
summary of confidential information for the appreciation of the information.
Confidential information is marked so by the domestic investigative agency (Case: Gautemala
Cement 2 ) or the interested party. However, there is no agreement

The duty is charged as per the de minimus rule. It is done as per "2+3+7". This is mentioned in
article 5.8. As per this article, where the injury is negligible, the investigation is required to be
terminated.

Dumping margin could be:

- Individual Dumping Margin
 Whosoever has dumped, the difference between normal value and price would be the anti-
dumping duty.

- All Examination Rate

It means that all known exporters who had participated in the investigation are very high,
then an all examination rate is applied.

- All Rate Dumping Margin

It is applicable in case a large number of exporters are there and most of them had not
participated in the investigation.
New Shippers Review applicable.

Preliminary Determination/ Provisional Duty Determination

- Initiation of investigation under article 5 and 6
- Preliminary Affirmation of Determination of Dumping and Injury under article
- Such measures as necessary for prevention of injury to the domestic industry.

Dumping occurs if a company sells at a lower price in an export market than in its domestic
market.

Calculation
Comparison between export price and benchmark price. Normal value of the product used which
means comparable price at which the goods under complaint are sold in the ordinary course of
trade in the domestic market of the exporting country.

Ordinary course of trade means the goods are sold from a neutral seller to a neutral buyer or
where the goods are sold at arsm length transaction.
Two options available: Representative price in the third country and constructed normal value.

Export price is that price at which the goods have been exported. In this regard the prices are
generally available in CIF value. The prices must be available at X party level where the goods
collected by the biyer will also be taken into consideration.

Normally, trading agencies determine export price first since it is easily available. For the same
commercial invoice, bill of lading, letters of credit, packing list, etc. will be seen. Duty drawback
scheme will also be seen if the country maintains the same.

Export price can be constructed in three circumstances:

- Barter
- Export price unavailable
- importer had paid high invoiced price.

Constructed Export Price will be calculated as per the country.

Basis:
Cost of Production
Transactional Costs: Reasonable Amount of Administrative Selling and General Costs
Reasonable Amount of Profits.

Methods of Comparison
: Weighted Average to Weighted Average
: Transaction to Transaction

Zeroing is a methodology employed by the govt, in which transaction with negative dumping
margin are not allowed to offset those with positive margins as a result when aggregating
transaction, the use of zeroing causes the weighted average dumping margin to be higher than it
would otherwise be without zeroing.

US - Vietnam Zeroing Case :US-Vietnam case- US refused to make a submission and said we
will compensate and not stop dumping, the AB said that no submission is also a submission.

5th March 2024

If the designated authority prepares non confidential summary of confidential information
and keeps it in non-confidential file, whether it is a violation of the anti-dumping
agreement?
Confidential information is required to be kept as per the ADP. He has to show good cause to
prove that the information is confidential in nature. If the designated authority agrees, then the
respondents are required to prepare the summary of confidential information. This summary can
be kept in the non-confidential file. Full opportunity is given to all the parties to access these in
order to prepare their rebuttal.

If a designated authority gives the exporter 45 days to respond to the questionnaire and the
domestic producer 30 days. Is this allowed under the ADP?
Article 9 states that nondiscrimination principle is required to be followed. The exporters may be
given an extension if they ask for it as per article 6.1.1.

If a WTO member adopts legislation mandating prison terms for exporters found to have
injuriously dumped, can this legislation be challenged in the WTO?
 Article 18.1 read with article 1 states that the countries are at a liberty to form their legislation
but the basic standard is to be maintained since ADP is a framework agreement. This law can be
challenged since having criminal sanctions are not permitted for the offence is civil in nature.

Can anti-dumping duty be imposed retrospectively?

It can be imposed as per article 10. The last three years data is taken into consideration.

When the imposition of duty is determined, whether the dumping margin will be used for the
impostition of duty or lesser duty can be used?
Lesser duty rule can be applied and less duty can be imposed. Imposition of lesser duty is an
option as per the EC Fasteners and EC Bed Linen Case.
Initially India had the lesser duty rule but it was removed subsequently in 2019.

Whether constructive remedy is allowed?

Article 15 permits developed countries to explore the constructive remedies. It has been
reiterated in EC Fasteners Case. Doha Round identified two constructive remedies when
dumping is taking place from developed country to developing country in article7 which are-
lesser duty and price undertakings.

Whether a country can pass a legislation to qualify trade unions as interested parties?
Article 6.11 provides a list in terms of interested party. It is not an exhaustive list and so trade
unions, consumer associations, business associations, etc. can be considered interested party.

How is injury determined?

There are three aspects needed for imposition of anti dumping duty. There are three types of
injury as per article 1:
- Material Injury
- Threat to Material Injury
- Material Retardation of the establishment of domestic injury.

Injury is determined either on price effect or volume effect.

- Eminence relating to volume of the dumped imports (Volume Effect)
- Eminence of the effect of dumped imports on prices (Price Effect)
- Eminence demonstrating the effect of dumped imports on the conditions of the domestic industry
 producting alike products
- Eminence indicating whether there is a causal relationship between the dumped imports and
injury to the domestic industry.

Article 3.7 mentions 15 specific factor for the purposes of injury determination which are as
follows:
- Actual and Potential Decline in sales
- Actual and potential decline in profits
- Actual and potential decline in output
- Actual and potential decline in market share
- Actual and potential decline in productivity
- Actual and potential decline in return on investment
- In capacity utilization
- Magnitude of margin of dumping
- Negative effects on cash flow
- Negative effects on inventories
- Negative effects on employment
- Negative effects on wages
- Negative effects on growth
- Negative effects on ability to raise capital
- Negative effects on investment.

What constitutes domestic industry?

It means producers of liked products. Two products are used for determination:
- Subject Product (the product dumped)
- Liked Product (the product on which the effect is seen)
Article 2.6 defines like products.
Criteria for determination of likeness:
- Physical characteristics of merchandise
- Degree of interchangeability of the products
- Raw materials used in manufacturing
- Manufacturing methods and technologies used in the production of merchandise
- The functions and the end use of the products
- Industry specification
- Pricing
 - Quality
- Tariff Classification
- Channels of Distribution
- Marketing of Mercantiles
- Presence of common manufcaturing facilities.
- Customer and Producers Perceptions of the products
- Commercial brand and commercial prestige.

Non Injurious Price: It is the level of price which the industry is expected to have charged under
the normal circumstances during the period defined.

Facts Available: It means those information which are available but those have not been
submitted to the designated authority. These are pertinent for the purpose of investigation.

Price undertaking is given depending on the general policy. Why the exporters prefer price

undertaking than paying anti-dumping duty?

Two conditions for price undertaking: to cease the act of dumping and to revise the prices

6th March 2024

How are prices constructed when the exporting country is a non-market economy?
In case the exporting country is a non-market economy, the normal value of the price will be
constructed by the designated authority on the basis of surveyed method. Article 2.7 of ADP
refers to the non-market economy but without definition.

Definition of Non Market Economy

Article 15 of Schedule of Concessions of China, deals with China' non market economy.
The term non market economy has been defined by UNCTAD as a national economy in which
the government seeks to determine economic policy largely through a mechanism of central
planning largely in contrast to the market economy which depends heavily on the market forces
to allocate market resources.

WTO in 1955 tried to define non market economy in one of its reports, which have a non-
binding nature.
The World Bank has defined non market economy in one of its report as comprising of
centralized planning and the economy dependent on the govt.
US in Section 771 (18) of Tariffs Act defines non market economy and this is similar to the
UNCTAD definition.
In the context of India, there is a rebuttable presumption for the countries exporting to India.
Thus, Chinese goods coming to India are subject to double remedies. India, US, EU, etc. treat
China as a non-market economy.

Subsidies

Two types of subsidies:

i. prohibited- export subsidies, LCR they are prohibited per se.
ii. actionable subsidies
book talks about one more- non-actionable subsidy- which means R&D, Green technology etc.
Sir doesn’t include this because it got expired few years back.
law governing – agreement on subsidies and countervailing measures (ASCM)
countervailing- of a country provides subsidies, the importing country has the power to impose
CVD (countervailing duty) to offset the domestic industry from the injury.
first country to pass legislation for subsidies- US in 1890.
Does not having subsidies mean promoting privatisation?
Can subsidies be provided on a transnational level for example, providing subsidy to a
PSU?
They are not included in subsidies. Article 1 of the ASCM defines subsidies. Article 1.1a uses
the term 'within the territory of a member'. However, there are four ECJ judgements that state
that transnational subsidies are also included within the ambit of subsidies.

The first instance of regulation of subsidies is 1890 in USA. The country was facing problems of
subsidized sugar. Till 1979, USA was the only country having a countervailing law.

Purpose for providing subsidies:

- Subsidies as a means to influence market access
- Subsidies as a means to remedy market failures or pursue other policy objectives.

Types of Subsidies:
- Prohibited
- Actionable

Traffic Light Approach of Subsidies

Red:
: Export Subsidies (EPR) and LCR
: This means that these are prohibited.

Yellow:
: Actionable Subsidies
: Depending on the distortions caused to the international trade, these are allowed or prohibited.
If the price is getting influenced, they are not allowed.

Green:
There were certain subsidies considered to be non-actionable subsidies. The 'peace clause' got
expired in 2005.

Currently, only red and yellow light services are considered for the legal framework of subsidies.

Legal Framework:
Two set of agreements that regulate subsidies in WTO:
- ASCM
- Agreement on Agriculture
Work in progress;
Talks about market access, domestic support (actionable) and export subsidies (prohibited)]
If the country is facing problems in agriculture- critical food shortage, then it would be an
exception. In terms of agriculture, all products have still not been integrated with the world
economy.
TRQ permits the countries to fix their tariff quota on agriculture on the promise to timely
reduce. This is known as tariffication of agricultural products.
This process is forcing the developing countries to integrate their agriculture with the world
economy.
It is a special law and states that ASCM will not be applicable on AOA. But in the case
of Brazil Upland Cotton DS- 267, it was held that definition of subsidies for AOA will be
used.

The subsidies agreement has been signed to check market access and to make sure that policy
objectives are getting fulfilled.
Certain scholars state that subsidies should be regulated as non-violation complaint.

Historical Background
Article 16 and 6 of GATT'47 regulated subsidies but this was a very mild arrangement.
Notification and discussion on granting subsidies was allowed to serve transparency
requirement. This was considered a very soft approach towards subsidies regulation. Tokyo
Rounds Subsidy Code officially named as Agreement on Implementation of Article 6, a16 and
23 of GATT'47 was a failure because very few countries signed it. It was allowing treaty
shopping.
The current subsidies agreement is binding on all the members since it is positively integrated
with the Marrakesh Agreement.

Objective of Subsidies Agreement:

: DS Countervailing Duties on Certain Carbon Steel from Germany DS 213 2002, the US has
alleged that in the absence of the preamble, there will not be any objective. Article 32 of VCLT
talks about contextual interpretation. In absence of the preamble, contextual meaning of the
treaty is understood. The purpose is to increase and improve GATT disciplines relating to both
subsidies and counter vailing measures. The purpose is to establish a multilateral framework on
the premise that some forms of governmental intervention distort or have the potential to distort
international trade. So, the aim is to regulate governmental intervention.

Definition of Subsidies:
1.1 (a) (1) there is a financial contribution by a government or any public body within the
territory of a Member (referred to in this Agreement as "government"), i.e. where:
Subsidies are considered to be financial contribution and benefit analysis. These two are to be
independently analyzed. It must be a financial contribution, leading to a benefit. The third
requirement is specificity.

(i) a government practice involves a direct transfer of funds (e.g. grants, loans, and equity
infusion), potential direct transfers of funds or liabilities (e.g. loan guarantees);
The financial contribution is given by the government or by a public body or a private body
entrusted by the government. Financial contribution may come in the form of direct transfer of
funds, grants, loans, equity infusions, etc. Potential direct transfer of funds like loan guarantees
will come under the preview of financial contribution.

(ii) government revenue that is otherwise due is foregone or not collected (e.g. fiscal incentives
such as tax credits)1 ;

It is not necessary that the government actively takes a step, the analysis will be whether the
benefit has been incurred.

(iii) a government provides goods or services other than general infrastructure, or purchases
 goods;
Government revenue which is otherwise foregone or not collected. Fiscal incentives such as tax
credits also come under the preview of financial contribution.

(iv) a government makes payments to a funding mechanism, or entrusts or directs a private

body to carry out one or more of the type of functions illustrated in (i) to (iii) above which
would normally be vested in the government and the practice, in no real sense, differs from
practices normally followed by governments

Or

(a) 2. there is any form of income or price support in the sense of Article XVI of GATT 1994;

And

(b) a benefit is thereby conferred.

The term public body has been defined in US Countervailing Duties and Anti-Dumping Case.
There are two tests:
- Instrumentality
- Functionality

7th March 2024

Subsidies are not a matter of right, rather they are conferred. In case there is no cost for the
government, and the benefit has been conferred on the recipient, then it would be considered
subsidy.

Three requirements:
- Financial Contribution
- Benefit Conferred
- Govt. Agency/ Public Body/ Pvt Body interest by govt.
- Specificity

Direct Transfer of Funds

Funds
These are public assets.
Japan DRAMS Case clarified that as per article 1.1a.1 that financial contribution comprises
money, financial resources and financial claims as well. Example: debt forgiveness, extension of
loan maturity, interest weight reductions, debt to equity swaps. All these put the borrower in
improved condition and are thus regarded as financial contribution.

Large Aircraft Civil Case : US won

Boeing Case : EU won
The facts of these cases are similar. In both these cases the respondents pleaded that because of
the subsidies granted, their sale to India got reduced. The Indian stance was .

Boeing and NASA were having an arrangement under which Boeing was providing
equipment, facilities and employees while NASA was providing scientific, technical
information, discoveries and data. Whether this would be considered a direct transfer of
funds?
The Appellate Body said that the arrangement is similar to a joint venture and would be
considered subsidies. Even if no fund is getting transferred, the arrangement is such that it
amounts to financial contribution as per article 1.1A.

Transfer:
India Steel Case: Transfer signifies a conveyance of something form one person or entity to
another. Direct which indicates something occurring immediately without any intermediaries or
without anybody's interference. The phase direct transfer of funds therefore suggests that what is
at issue is the manner or method by which the funds are conveyed.

Government Revenue
But for Test: This doctrine was developed in US FSC Case. According to this, the government
revenue being foregone because of the actions of the government.

Whether the development of infrastructure would be considered subsidy?

It would not be considered as it would amount to general infrastructure.
The benefit should reach the market.
Public Body
Government has been defined in US Anti-Dumping and Countervailing Duties Case wherein it
was said that government means continuous exercise of authority over subjects, authoritative
direction or regulation or control.

Control Test: Any entity established by the government, and under the control of the
government.
Instrumentality Test: How was the entity formed?

Functionality: functions of the body considered.

Before the US Anti-Dumping & Countervailing Measures Case , the appellate body was
considering the instrumentality case, after the case- functionality test.

Specificity
The subsidies must be specific in nature, like:
: Industry Specific
: Enterprise specific
: Region specific

Currency Manipulation does not come under the preview of specificity and it is difficult to
regulate the same. It is not done by the company and so does not come under the dumping. It is
not specific and thus cannot be subjected to countervailing duties as well.

ASCM Regulates:
- Subsidies
- Countervailing Duties

Government includes local, federal and regional govt. as well.

8th March 2024

Whether WTO should govern industrial policy?

Prohibited subsidies are of two types:

1. Export subsidies

2. LCR- any reservation eg; 10% of total purchase of a foreign company estb in India must be
from domestic producer and 10% of local employees or worker must be there. This is
prohibitive of ASCM.

As per article 3 these two are prohibited. Because it is making sure that your goods are getting
better comparative advantage. It economic term it is undue increase in your share of international
trade. Conditions of competition is getting vitiated. These two are per se prohibited. SEZ is also
violative of ASCM.

SEZ act 2005. This talks about whatever entity got estb in SEZ will be given preferential
treatment and for all practical purpose this SEZ will be foreign land. India law won’t operate on
it and any goods coming from SEZ will be considered export. If they export to foreign country
and earn foreign exchange then govt existence would continue. This is violative of art 3 of
ASCM.

Case: Maruti Udayog case (Haryana case)- only local people will be provided jobs. SC has
allowed this legislation. But this is in violation of art 2 of TRIPs and ASCM.

India Solar Panel case: india govt was reserving certain procurement for domestic producer.
Jawharlal nehru legislation. US filed the case. We lost the case.

Local content requirement in context of cultural things or cinematographic movie. This

exception is provided under art 4 of GATT 1994. India has been found providing local content
requirement in terms of solar panle development.

India has lost the case but world bank said that we are going to provide support for the
development of solar panel. Can this be allowed, whether other int institution can go against

this? the answer has not been provided.

US was and continue to dump solar panel equipment in India. Why India has not initiated a
dispute against US? India is trying to develop hydroelectric power project and it we will impose
anti-dumping duty on those solar panel then the budget of our project will increase.

Actionable subsidies- article 5

Subsidies which are not export subsidies are considered to be actionable subsidies. Three
requirements are there:

1. Injury to domestic industry- adverse effect or distorting international trade

2. Nullification or impairment of benefits: it is assumed that by opening the market to foreign

producer based on fixed tariff will benefit the exporter. Art XXII of GATT 1994 uses this
term. For dispute settlement this is one of the factor that is required to be pleaded.

3. Serious prejudice to the interest of other member.

Art 6 of GATT talk in terms of subsidies provided to services. But ASCM applies only to goods.

Non-actionable or green subsidies

This is not related to environment at all. It lapsed after 5 years. This is popularly known as peace
clause. Even if your action are violative of WTO, it would not be considered violation for
sometimes. Provided in article XXXI of ASCM. Developing country want to revive these non-
actionable subsidies.

Eg: research and development, regional development, environmental protection, infrastructural

subsidies. Infrastructural subsidies was included under art 31 but earlier we talked about services
other than infrastructural subsidies. So now it is not clear whether infrastructural subsidies can be
covered under the purview of financial contribution.

Remedies available:

• Imposition of counter veiling duty. Part 5 of ASCM.

We know that for dispute settlement DSU is there. Most of the agreement says this. secondly,
some additional provision are there in covered agreement. Covered agreement will prevail
because of the principle of lex specialis. It is seen based on the subject matter.

ASCM- For subsidies, consultation is for 30 days. Art 4 of DSU- consultation period is 60 days.
So consultation period will be 30 days only. Secondly, Amicus curiae – there submission is
discretionary. In ASCM, there is PGE (permanent group of experts under article 4.5 of ASCM)
and their recommendations are binding.

How to impose counter-veiling duty?

1. Investigation is done by DGTR. DGTR works under Customs Tariff act.

2. Investigation as per ASCM.

3. Evidence required and evidencde will be collected based on sampling method. As long as
effect of subsidy continues.

What are the new issues pertaining to subsidies? Cotton subsidy issue, fishery subsidy issue,
currency manipulation. Negotiation is taking place for the first two. An agreement has been
signed for fisheries but India has not signed it.

India is very poor in terms of notification to WTO in terms of WTO program. A committee is

there in WTO that looks at day to day working of subsidy.

Whether india is considered to be a developed country? Annex 7 of ASCM says that if the
country share is 3.5 in terms of overall international trade and exceeding 1000 dollars …. then
that country is required to remove all export restrictions. Because this country is no longer a
developing country. India name in there in annex 7. India is pleading that we are on extension or
exemptions. But panel is now saying that those extensions were not infinite.

11th March 2024

Dispute Resolution Mechanism
Legal Framework
 - Article XXII, XXIII, GATT'94.
- DSU
- Covered Agreement of the WTO

When special provisions are in conflict with DSU, special provisions will prevail.

Article 3.1 Purpose: Continuity with change. It is an improvement from the previous system of
dispute resolution. The improvements include:
- Consensus is not required for the purpose of dispute resolution
One country is sufficient enough to initiate a dispute.
- Independent review mechanism has been created in the form of appellate body.
- Introduction of time precise manner of settling dispute.
- Prohibition of unilateral measures
Economic sanctions are only permitted when the panel or appellate body specifies.

In terms of jurisprudence, GATT'47 was based on power oriented manner of settling disputes.
On the other hand, DSU mechanism is based on the power oriented along with rule oriented
mechanism. Examples of power oriented include consultation, good offices, mediation and
conciliation in the present system. This is why John H. Jackson calls it the crown jewel of the
WTO.
Crown Jewel because:
- International law and obligations have no meaning when they are not imposed. They would
be considered positive morality or ninth point of jurisprudence.
- The rights and obligations of the members are fulfilled based on rules based on equality
- The rules and regulations pertaining to dispute resolution are codified and agreed by the
members themselves.

Can DSU be regarded as 'world court'?

In lose sense of the term, it can be considered world court. The parties are the most important. In
pure sense of the term, it cannot be considered a court since the differences are getting resolved
by the consensus of other members.

Does DSU work on Arbitration basis?

Whatever the mechanism is used for the purpose of establishing arbitral tribunal, that is working
on the DSU system. The applicable law, the factual matrix, the parties, etc. will be decided by
the partiers. Arbitral method of resolving dispute has been adopted. This is also why some
scholars consider it power oriented method of resolving disputes/
Dispute
Complaints are of three kinds:

: Violation Complaint- Whenever a WTO member violates an obligation, dispute can be initiated
against them. If violation is done, there is presumption of nullification and impairment of the
benefits of the other members. In proving violation, there is no need to prove injury because
there would be nullification and impairment of the benefits of other members. Injury are of three
kinds-
: Non Violation Complaint- In such a case, nullification and impairment is required to be proved.
Till now, non-violation complaint has been a subject matter in only 9 disputes and it has never
succeeded. Japan - Hill Case 1998 the court held that the country bringing dispute needs to
prove injury.
: Situational Complaint- It has not been defined. Not a single dispute has surfaced to WTO
regarding this.

Locus Standi Requirement

It means the claim, interest of the party in the claim. Locus standi is required in NVC and SC. In
case of violation complaints, locus standi is not required because of the presumption of
nullification and impairment.

A dispute is a disagreement on a point of law or a fact, a conflict of legal views or of an interest

between two persons or two countries. In order to establish the existence of a dispute, it must be
shown that the claim of one party must be positively shown.
In case of WTO members, specific disagreement concerning a matter of fact, law or policy in
which claim or assertion of one party is met with refusal, counter claim or denial by another
party.

Parties to the dispute

: Complainant
: Respondent
: Third Parties/Participants

Purpose:
- To create a framework for dispute settlement procedure
- To encourage compliance of GATT WTO obligations.
It mentions GATT, because all the main principles of WTO lie in GATT.
- To supply a mechanism for compliance and review (monitoring/surveillance) of panel and
appellate body judgements. The countries are asked whether they have complied with
 judgement or not in the WTO meet.

Methods:
- Negotiation (Art. IV)
- Consultation (Article IV)
- Good Offices (Article V)
- Mediation
- Conciliation
- Panel
- Appellate Body (Art. XVII)
- Arbitration (Article XXV)

The basic principles of dispute settlement system are mentioned in article III.

Jurisdiction
As per article 23 which talks about strengthening the multilateral system, the members shall
recourse to or abide by the procedures established by DSU.
It establishes a compulsory jurisdiction over disputes between the countries. Only the member
countries can access the DSU.

Jurisdiction is not required to be pleaded.

ICJ's Jurisdiction
In Barcelona Traction Case, the ICJ ruled that special and different mechanism should be
established for commercial matters in which the ICJ does not have expertise.

In case of RTA Dispute Resolution,

Article 16.5.4 of Marrakesh Agreement states that it is a standalone agreement. Article 41 of
VCLT cannot be used for the purpose of modification of WTO agreement.
The successful RTAs dispute resolution mechanism at WTO. RTAs are in consonance with
WTO. Countries sign it for economic and political reasons.
RTAs are required to be in compliance with WTO provisions. The panel and appellate body have
jurisdiction over RTAs.
Overall compliance of RTAs can be examined only by a political body - CRTA which works
specifically for the purpose of regional members notification. If some provisions of the RTAs are
not in compliance with WTO provisions, then panel and appellate body can look into. This has
been laid down in Turkey Textiles Case 2003 and Mexico Soft Drink Case 2006.
CRTA works on consensus. The countries in the meeting would have to agree that their
obligations have not been adhered with. The Lithuania and Armenia RTAs have been declared
not in compliance with the WTO provisions.

CRTA is not a judicial body. The countries signing RTA are required to notify the CRTA. The
CRTA on its own examines these notifications, without initiation by any country.

Security & Predictability

Security can be understood as a state of affairs in which one can rely on the ability of the legal
and institutional system to take care of one's rights and interest. Article 3.2 states that DSU
brings security.
Predictability means conditions, rules and rights set up in the present will also be valid and
enforceable in the future.

12th March 2024

Dispute:

i. diplomatic means of settling dispute

ii. Rule oriented manner

Advantages of diplomatic means:

i. flexibility of procedure

ii. parties are having control over dispute

iii. freedom to accept or reject settlement

iv. possibility of avoiding winner loser situation with their repercussions on the prestige of the
parties

v. Limited influence of the legal consultation

vi. relative political weight of each party

Disadvantages of diplomatic means:

i. dependence on the consent and the goodwill of defendant

ii. Bilateral ad hoc solutions possible by reflecting power of the parties rather than merits of
the case

iii. weakening effect on the legal rules and on their uniform multilateral interpretation.
 Should The WTO system be based on Diplomatic means?

Many countries are putting this demand that this is better than rule-oriented manner of settling
disputes i.e. consultation, panel and AB. they argue that this will be more useful. they also argue
that in case of violation of WTO norms, instead of raising a dispute it is better to ensure
compliance through transparency mechanism by demeaning country, but this is too idealistic,
Germany was also humiliated during treaty of Versailles however it did nothing except for
resulting in WW-II.

But in case of power oriented, it will result in inconsistent interpretation, countries will lose faith
in judicial system, diplomatic means maybe useful for Developed countries, however it will
affect the DCs and LDCs badly.

i. negotiation

ii. at all stages the disputes can be settled outside court, they can inform the panel to wait for a
while and then again go back to panel. Mutually agreed solution is the best solution given
under Article-3.

therefore, a balance has to be maintained between the two and this diplomatic means is not a
rational demand.

Locus standi:

I. Systemic interest- existing or future interest, Legal interest or economic interest neither of the
two but Systemic interest

EC Banana third- AB held that it is not necessary that a member has legal interest as a pre-
requisite to initiate a dispute, US is not an exporter of Bananas to EU but was a potential exporter
and producer and this is why US is having systemic interest and hence can bring a dispute.

Vestinian Island under Lome convention was getting preference in EU as exporters of banana, US
challenged this and EU argued that US doesn’t have legal interest but it was rejected.

Korea-Dairy case: AB had held that there is no requirement that parties have economic interest for
initiating a dispute at WTO.

II. Exhaustion of local remedies: ICJ case- exhaustion of Local remedies is a customary
principle of IL. however, CIL is not required at WTO.

disputes where some kind local remedies are available:

IP dispute ADD
Subsidies TBT/SPS
However, for WTO exhaustion of local remedies isn’t required.

Amicus Curie: if the panel or AB asks, they can make submissions but their submissions are
discretionary in nature. DSU-13

DSB
i. only the members can precipitate

ii. WTO secretariat, observers, Regional or local govt, other international entities cannot
initiate a dispute.

Article 2 of DSU talks about DSB

• the membership is open to all members

• the general council of WTO works as a DSB

• it has its own chairperson and not the chairperson of GC

Powers of DSB

i. to establish panel- court of first instance- first place where adjudication takes place
although there is three tier mechanism- Panel, Consultation, AB)

ii. to adopt panel reports- unless DSB adopts the panel report it wouldn’t be considered
binding, panel has to submit the report to DSB and DSB consisting of all members if
adopted then only will be considered binding, under WTO it is not possible to have
unadopted report unlike GATT, only one situation where it is not binding- when they
appeal the decision. if both the parties appeal, appeal will be issue based, the aggrieved
party can appeal, if appeal is made then there will be no DSB proceedings, and it will be
halted for that particular panel.

iii. adopt AB reports: again, unless it is adopted by DSB, it cannot be binding. as per article
XVII third parties cannot appeal

iv. to maintain surveillance of the implementation of the rulings and recommendations, the
parties are required to give in writing whether they have implemented the report.

US Gambling Case- Vestinian Island won the case but they didn’t have guts to ask the
panel for implementation of report.

v. Suspension of obligations: DSB authorises it, unless adopted by DSB there will be no
suspension of obligations, when panel recommends and DSB adopts, then it becomes final,
this is binding recommendation.
Meeting of DSB:

i. to adhere to time frames as provided under DSU

ii. every one month

iii. when member requests special DSB meeting can be called.

What is the role of DSU?

i. administers rules and regulations pertaining to dispute is getting addressed.

Consultation:

first and foremost, method of settling dispute

Article-4,
Two types:

i. general consultation- which is as per article IV of DSU

ii. special consultation – under any of the covered agreements other than DSU

consultations are an instrument for obtaining a satisfactory adjustment of disputed matters

between members of bilateral basis before the formalized action is taken.

article IV.11- third parties are permitted to be the part of consultations.

Whether consultation failure is mandatory for establishment of panel?

Article VI.1- the complaining party if so requests panel will be established

article VI.2- requirement is there that request for panel should be in writing, request matters not
whether consultation has taken place or not.

Importance of consultation:

DS 34-Turkey Textile case- consultations are crucial and integral part of DSU and are intended
to facilitate a MAS, consistent with article 3.7 of DSU.

DS 132 High Fructose corn syrup case-

a. exchange of info between the parties

b. assessment of the strength and weakness of respective cases

c. narrow the scope of differences

d. consultation may lead to MAS

e. provide the parties with opportunities to define and delimit the scope of the dispute.
13th March 2024

Consultation
There are three types of consultation
: Informal Consultation
This is where the DSB has not been informed or notified. Notification is needed for third party
participation for the consultation.
Time: 60 days
Unless this notification is there, 60 days' time is not possible.
Third party participation is regulated by 4.11 of DSU.

: General Consultation
It is formalized and takes place under article 4 (footnote 4) of DSU.

: Special Consultation
These take place on special provisions of the special covered agreements.

Consultation should be effective. Sympathetic consultation is required to be provided.

Consultation must be successful or failure. If the consultation will fail, it will lead to panel
establishment. If it is successful, it would lead to MAS.

Article 4.3
The reply must come within 10 days. Consultation must start within 30 days.
It can be extended on the request of either of the parties.
After the expiry of thirty days, the panel request can be made.

Article 4.3 read with 6.2 clarify that panel can be established without the consultation. Request
of consultation is mandatory. It might or might not take place.
Panel Report
Some scholars state that fourth stage is waiting period requirement. When any of the party asks
for more time for consultation, the panel is not established and waiting period starts.

Stage 1: Informal Consultation

Stage 2: Consultation
Stage 3: Waiting Period
Stage 4: Panel
Stage 5: Panel Submissions
Stage 6: Suspension of the Panel
- If both the parties require more time for consultation, the panel can be suspended.
Stage 7: Adoption of Panel Report if not appealed
Stage 8: If appealed, Appellate Body
Stage 9: Compliance
Stage 10: Surveillance, Compensation, Retaliation, Cross Retaliation, Counter Measures
authorized by the DSB.

Compliance report ensures that adoption of panel report is done in reasonable period of time. For
the same, compliance panel is formed.

Time for Each Stage:

Consultation, Mediation, Conciliation: 60 days (article 4, 5)
Panel Establishment, Composition of Panel Decided: 45 Days
Panel Report: 6 months
Final Panel Report to all WTO members: Three Weeks
Next 60 days: DSB required to adopt panel report
Panel report will now be considered binding.
60 - 90 days for appellate body report

Some disputes,
EC Large Aircarft Case, EC Boeing Case: time exceeded

60 days - consultation
1 year - Panel
3 months - appellate body proceeding
Consultation time may be shortened as well depending on the request of the members.
Four principles:
- Equitable: All parties irrespective of economic strata are equal\
- Fast: Time bound manner of solving disputes
- Effective: Binding
Only 1 AB report not complied - US Gamlin's Case
- Mutually Acceptable:

If the complaining party asks for DSB body when the panel is not formed. In no circumstances it
will take more than a month to establish the panel.
The consent of only one party is needed for the establishment of the panel.

If the panel has given the judgement or ruling, it is required to be adopted by the DSU.
Third Parties:
Land Island and Maritime Frontier Dispute 1990:
ICJ dealt with this case on article 62 and 63 of ICJ Statute.

A country having substantial trade interest in any dispute.

Substantial trade interest is declaratory in nature. Any country having systematic interest in the
dispute can participate as third party. Third parties participation participation:
- Consultation (Art. 4.11)
- Panel (Art. 10)
- AB (Art.17)

Article 4.11 is restrictive in nature. The third party showing their interest to be well founded,
post the DSB consultation, can request the existing members to be consulted. They are required
to have substantial trade interest.

Article 17 states that third participants who have already participated in the panel proceedings
cannot be third participants in AB.
Parties who have not participated in the consultation stage, can be thrid parties in panel stage.
Rights of Third Parties.
These are two fold:
- Participatory Rights
They are allowed to participate in the meetings

- Right to make submissions. These submission rights are only available in the first meeting
of the panel.
Existing third party rights are confined to the first meeting. This is why many countries have
asked for enhanced third party rights.
Enhanced third party rights originated from the case of EC Banana Third. It means
participatory rights at all stages, right to make submissions at all stages, right to get the copy of
the dispute in advanced, right to get information about dispute at all stage

The developing, least developing, newly accessed countries and sometimes the developed
countries participate.
India has participated as third party 167 times. Out of 600 times.

There is no necessary party concept here. In Turkey Textiles case, India was demanding EU to
be a necessary party. This was rejected by the panel.

The third parties come into picture at the formation of panel. By rasining the hand in DSB
Meeting,l the country submits request for being third party.

It is not mandatory to make oral or written submissions.

The countries participate in order to gang up with the system to show strength. Enhanced third
parties are getting asked by the developing and least developed countries:
- Problem of understanding the DSU
- Training for Future disputes
- Economic Reasons (create fund for purpose of dispute resolution)
- Lack of expertise
- Fear to loose the case

If the judge is biased, the judge can be removed by an arrangement as provided in the Rules of
Conduct WT/DSB/RC/1 adopted on 11th December 1996. The request will be made to the DG

Why don’t states get their dispute resolved under this multilateral system?
This is because a lots of fund and money is involved. Least developing countries may not be
thinking of using the fund. Some scholars argue that a fund should be created for the same.
High level of expertise is needed for winning the case.
Closer public scrutiny is there. Media attention to losing a case etc. Losers don’t want to have a
closer public scrutiny. Therefore countries prefer mutually agreed solution which is called
systemic interest. So, the countries avoid going for dispute.