Bite-sized chunks learning:
TRADE -> Trading under WTO Terms -> Dispute Settlement mechanism
Learning Level: P1 - Awareness
On 02 April 2019, the EU brought two disputes in the World Trade Organization (WTO). This was about import duties which were imposed and unlawful measures on
1. India: Information and Communication Technology (ICT) products
2. Turkey: Pharmaceuticals.
What are the issues and why are the measures against the WTO rules? What can be done about it? We explore this in our 5 minute bite-sized chunks reading.
The ICT Agreement
The Information Technology Agreement (ITA) was concluded by 29 participants at the Singapore Ministerial Conference in December 1996. Since then, the number of participants has grown to 82, representing about 97 per cent of world trade in IT products. The participants are committed to completely eliminating tariffs on IT products covered by the Agreement. At the Nairobi Ministerial Conference in December 2015, over 50 members concluded the expansion of the Agreement, which now covers an additional 201 products valued at over $1.3 trillion per year. Consequently, the EU says that under ICT rules India must abide by its own commitment to allow duty free trade in ICT products. Currently, the EU is challenging the introduction of import duties on a wide range of ICT products, for instance mobile phones and components, base stations, integrated circuits and optical instruments. Despite its earlier legally binding commitment in the WTO not to charge any duties on these products, India has been applying duties ranging from 7.5% to 20%.
The WTO Non-discrimination rule
Turkey is discriminating against EU pharmaceuticals producers by forcing them to move production there, if they want their medicines to be eligible for reimbursement for consumers under the Turkish health system. Non-discrimination is a fundamental principle of the multilateral trading system and is recognized in the Preamble to of the WTO Agreement as a key instrument to achieve the objectives of the WTO. In the Preamble, WTO members express their desire to eliminate discriminatory treatment in international trade relations. Non-discrimination in the WTO is embodied by two principles, the most favoured nation (MFN) treatment obligation and the national treatment obligation.
The WTO national treatment obligation
Whilst the MFN principle seeks to ensure that a WTO Member does not discriminate between “like products originating in or destined for other WTO Members” the National Treatment principle addresses the treatment to be applied to imported products once they are in a Member's territory. The National Treatment principle prohibits a Member from favouring its domestic products over the imported products of other Member countries, as the EU thinks Turkey is doing! According to the National Treatment principle, each trading partner should treat imports no less favourably than they treat like domestically produced goods. The national treatment obligation for goods is provided in Article III of the GATT 1994.
The WTO Dispute Settlement Mechanism
Resolving trade disputes is one of the core activities of the WTO. A dispute arises when a member government believes another member government is violating an agreement or a commitment that it has made in the WTO. The WTO has one of the most active international dispute settlement mechanisms in the world. Since 1995, over 500 disputes have been brought to the WTO and over 350 rulings have been issued.
The first step of the dispute settlement under the multilateral WTO dispute settlement mechanism consist of 60-day long consultations. If the consultations requested today with both India and Turkey do not result in a satisfactory solution, the EU can request that the WTO set up a panel in each case to rule on the issues raised.
You can follow the case here: http://trade.ec.europa.eu/doclib/press/index.cfm?id=2001
Would you like to know more about the Dispute settlement process, the Dispute Settlement Understanding (DSU) is the main WTO agreement on settling disputes, the rules and procedures for settling disputes, the working procedures for Appellate Review and the current controversy involving the US? Please let us know in the comments and more learning opportunities.