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STATE TRADING ENTERPRISES AND ASIA

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Title: STATE TRADING ENTERPRISES AND ASIA


1
STATE TRADING ENTERPRISES AND ASIA
  • Presented by Mr. Johann Human and Prof. Chang-fa
    Lo
  • Material prepared by Rules Division of WTO
    Secretariat (1-29) and National Taiwan University
    College of Law WTO Research Center with the help
    of Mr. Kea Lee (29-89)

2
INTRODUCTION
  • Why do we need special rules on State Trading
    Enterprises (STEs)?
  • Danger that an STE because of its special
    position may have significant power in a given
    market
  • Preservation of principle of comparative
    advantage
  • Possibility for governments acting indirectly
    through STEs to create trade distortion
  • It would be relatively easy for Members to evade
    their WTO commitments through an STE

3
GENERAL PRINCIPLES
  • STEs not prohibited by WTO
  • Enterprise should abide by WTO commitments
  • Enterprise should operate on the basis of
    commercial considerations
  • Objective of WTO place the STE in the same
    competitive position as the private enterprise

4
WHAT IS A STATE TRADING ENTERPRISE?
  • Article XVII describes three types of
    enterprises
  • State enterprises
  • Enterprises granted exclusive privileges
  • Enterprises granted special privileges

5
WHAT IS A STATE TRADING ENTERPRISE?
  • Clarification in the WTO understanding
    definition of STE
  • Governmental and non-governmental enterprises
  • Granted exclusive or special rights or privileges
  • In exercise of which they influence through their
    purchases / sales the level / direction of
    imports / exports
  • Not necessary to be state-owned or have a
    monopoly
  • No state trading enterprise prohibited if
    operated according to WTO rules

6
PROBLEMS WITH THE DEFINITIONS
  • Differences in scope
  • State enterprise (ownership), exclusive rights
    and privileges (activities), influence on imports
    exports (trade distortion)
  • Which definition controls?
  • Substantive disciplines vs. notification
    obligation

7
OBJECTIVES OF STEs
  • Various objectives among them
  • income support for domestic producers
  • price stabilization
  • expansion of domestic output
  • continuity in domestic food supply
  • increase in government revenue, or decrease in
    government spending
  • rationalization and control of foreign trade
    operations
  • protection of public health and strategic
    control
  • management of important domestic resources
  • fulfilment of international commitments on
    quantity and/or price
  • administration of quantitative restrictions

8
TYPES OF STATE TRADING ENTERPRISES
  • Statutory marketing boards
  • Export marketing boards
  • Regulatory marketing boards
  • Fiscal monopolies
  • Foreign trade enterprises
  • Boards or corporations resulting from
    nationalized industries

9
EXCLUSIVE RIGHTS OR PRIVILEGES
  • Examples of exclusive rights or privileges and
    STE activities
  • Monopoly importer
  • Single desk seller
  • Statutory power to control imports or exports
    even if not exercised
  • Responsibility for issuing import/export licences
  • Responsibility for administering tariff rate
    quotas
  • Responsibility for distribution and/or pricing of
    imports
  • Intervention purchase sales
  • Preferential access to foreign exchange
  • Stocking of strategic/agricultural goods

10
WTO RULES ON STEs
  • Article XVII of GATT
  • Basic obligations for Members using STEs
  • Understanding on the Interpretation of Article
    XVII
  • Clarifies the provisions of Article XVII and
    closes the loophole
  • Defines state trading enterprise
  • Establishes a working party

11
REGULATION OF STATE TRADING ENTERPRISES IN THE WTO
  • Other Articles in GATT
  • Articles II, XI, XIII, XIV, XVIII, XX, and XXXVII
  • Agreed interpretations of these Articles -
    interpretative notes

12
GENERAL EXCEPTIONS - ARTICLE XX(d) of GATT 94
  • Exempt from general WTO rules
  • Laws or regulations . . . relating to . . . the
    enforcement of monopolies operated under Articles
    II and XVII of GATT 94
  • Provided that such measures are not
    discriminatory or a disguised restriction on
    international trade

13
WHICH ARE THE FUNDAMENTAL WTO PRINCIPLES STEs
MUST FOLLOW?
14
WTO OBLIGATIONS CONCERNINGSTATE TRADING
ENTERPRISES
  • Four main rules based on fundamental GATT / WTO
    principles
  • 1. Non-discrimination
  • 2. No quantitative restrictions (on imports or
    exports)
  • 3. Preservation of the value of tariff
    concessions
  • 4. Transparency

15
NON-DISCRIMINATION
  • Members undertake that STEs shall act in a manner
    consistent with the principle of
    non-discriminatory treatment
  • All decisions to be based on commercial
    considerations
  • Price
  • Quality
  • Availability
  • Marketability
  • Transport
  • Other conditions of purchase or sale
  • Must allow other Members to compete freely for
    purchases or sales
  • Tied loan qualifies as a commercial
    consideration
  • Non-discrimination MFN principle tempered by
    commercial considerations

16
NON-DISCRIMINATION
  • Scope of the non-discrimination principle
  • Non-discrimination principle does not apply to
    imports for governmental use
  • Differential prices for exports are not
    prohibited
  • MFN (Art. I) and National Treatment (Art. III)
  • Negotiating history
  • GATT panel reports (Belgian family allowances,
    Canada - FIRA, Canada - Provincial liquor board)
  • Uruguay Round proposal by the US
  • Korea - Beef

17
NO QUANTITATIVE RESTRICTIONS
  • Interpretative note to Articles XI, XII, XIII,
    XIV, and XVIII
  • Throughout these Articles, the terms import
    restrictions and export restrictions include
    restrictions made effective through state trading
    operations.

18
NO QUANTITATIVE RESTRICTIONS
  • Not just because imports are conducted through an
    STE and there are no imports you have a
    quantitative restriction (India-Quantitative
    Restrictions)
  • Ad Article XI prohibits an STE that enjoys a
    monopoly on importation and distribution from
    imposing internal restrictions against the
    imported products (Korea-Beef)

19
PRESERVATION OF THE VALUEOF TARIFF CONCESSIONS
  • Article II GATT schedules of concessions
    (market access)
  • Main obligation in Article II.4
  • Monopoly on any product must not result in
    protection greater than what the bound tariff
    provides
  • (Means that import mark-up charged by the
    monopoly cannot yield more protection to the
    domestic industry than the tariff rate does)
  • Reference to Article 31 of the Havana Charter

20
PRESERVATION OF THE VALUEOF TARIFF CONCESSIONS
  • Import mark-up definition in Ad Article
    XVII4(b)
  • Need to preserve the value of negotiated tariff
    concessions
  • Inform Members of import mark-up or of resale
    price for import monopoly products where there
    are no concessions
  • Applies to import monopolies whether or not they
    are STEs

21
NOTIFICATION
  • Article XVII, paragraph 4
  • Members shall notify . . . the products that are
    imported into or exported from their territories
    by state trading enterprises
  • Revised questionnaire developed in 1998 is basis
    for notification

22
WHAT INFORMATION DOES THE QUESTIONNAIRE SEEK?
  • Enumeration of STEs
  • Identify state trading enterprise
  • List products for which it has exclusive or
    special rights or privileges
  • Reason and purpose
  • State reason or purpose for establishing /
    maintaining STE
  • Summarise legal basis for granting exclusive or
    special rights or privileges

23
WHAT INFORMATION DOES THE QUESTIONNAIRE SEEK?
  • Description of the functioning of the STE
  • Give overview of operations of STE
  • Identify exclusive or special rights or
    privileges enjoyed by the STE
  • Other entities engaging in import/export
  • How are import / export levels established?
  • How are export prices determined?
  • How is the resale price of imported products
    (import mark-up) determined?
  • Are long-term contracts negotiated by the STE?
    Is the STE used to fulfil obligations entered
    into by the government?
  • Describe market structure

24
WHAT INFORMATION DOES THE QUESTIONNAIRE SEEK?
  • Statistical information
  • Provide statistics on quantity and value of
    imports, exports, and national production for
    products concerned (Tables I-III)
  • If no foreign trade has taken place, explain why
  • Any additional information

25
WHAT HAPPENS ONCE ANOTIFICATION IS MADE?
  • Frequency of notifications New and Full every two
    years, with no updating (G/STR/5)
  • Distribution to all WTO Members as a WTO document
  • Examination by the Working Party on State Trading
    enterprises (a standing WTO body)
  • Additional information from notifying Member if
    requested

26
WHAT HAPPENS IN THE WORKING PARTY?
  • Each notification comes before the Working Party
    for review
  • Members may ask questions of the notifying member
    about the notification
  • (oral questions must be submitted later in
    writing if written response desired)
  • Notifying member may respond orally if this is
    possible if not, a written response may be
    submitted later
  • (either way, all responses must be submitted in
    writing)
  • For transparency, all questions and responses are
    circulated as WTO documents
  • Possibility of counter-notifications

27
WHAT HAPPENS IN THE WORKING PARTY?
  • Other tasks mandated by ministers at Marrakech
  • Revision of 1960 questionnaire on state trading
  • Accomplished in 1998 (G/STR/3)
  • Development of illustrative list of
  • Relationships between governments and state
    trading enterprises and
  • Kinds of activities engaged in by these
    enterprises
  • Accomplished in 1999 (G/STR/4)

28
Current developments
  • Dispute settlement
  • Canada Measures relating to exports of wheat
    and treatment of imported grain (WT/DS276)
    Panel and Appellate Body reports

29
State Trading Enterprises in East and South-East
Asian Members
30
The Sources of Data
  • Accession Report
  • Notification
  • Coverage of STEs
  • Reasons
  • Functioning
  • Trade Policy Review Policy

31
Notifications of Asian Members
32
Notifications of Asian Members
33
Notifications of Asian Members
34
STEs in China
  • Accession process of China in 2001
  • Some concerns were provided in the accession
    process of China
  • Not sufficient transparency of the STEs.
  • Governmental influence to the STEs
  • The allocation of import quantities of
    fertilizers and oil products
  • Trading right of raw materials in the textile
    sectors
  • Mark-up of agricultural commodities. 1

35
STEs in China
  • Pursuant to her Protocol of Accession, China
    committed
  • China shall ensure that import purchasing
    procedures of state trading enterprises are fully
    transparent, and in compliance with the WTO
    Agreement, and shall refrain from taking any
    measure to influence or direct state trading
    enterprises as to the quantity, value, or country
    of origin of goods purchased or sold, except in
    accordance with the WTO Agreement.
  • China also committed that she would observe the
    obligations of notification pursuant to WTO
    rules.

36
STEs in China
  • Import
  • 96 items of products are subject to 97 importing
    STEs.
  • Products grain, vegetable oil, sugar, tobacco,
    crude and processed oil, chemical fertilizer, and
    cotton.
  • Export
  • 142 items of products are subjects to 60
    exporting STEs.
  • Products tea, rice, corn, soybean, tungsten ore,
    ammonium paratungstates, tungstate products,
    coal, crude and processed oil, silk and
    unbleached silk, cotton, antimony ore, antimony
    oxide, antimony products, silver, cotton yarn,
    and woven fabrics of cotton.

37
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38
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39
STEs in China
  • Reasons
  • To ensure the stable supply of the products
    subject to state trading
  • To prevent the interests of the consumers from
    being affected by drastic price fluctuations in
    the international market
  • To safeguard the food safety of the nation
  • To protect the exhaustible and non-recyclable
    natural resources and the environment.

40
STEs in China
  • Functioning of STEs
  • The STEs maintained by both central (e.g. China
    National Cereals, Oil and Foodstuff Import and
    Export Co.) and sub-national governments (e.g.
    Jilin Grain Group Import and Export Co.).
  • Export and import prices are determined by the
    STEs themselves. They are usually construed based
    on the costs and the international markets
    prices.

41
STEs in China
  • Functioning of STEs
  • Domestic procurement price basically is the
    domestic wholesale price. Delivery terms of
    domestic procurement usually are same as those
    generally applied to domestic trade.
  • In cases where financing is needed, state trading
    enterprises turn to commercial banks for
    commercial loans.
  • Export volumes of STEs are determined taking into
    account the demand and supply situation in both
    the international and domestic markets.

42
STEs in India
  • Export
  • 17 enterprises are granted special privileges on
    export of 36 items of products.
  • Products onions and Niger seeds iron ore,
    manganese ore, chrome ore, low silica, friable
    ore, mica scrap, kerosene, rare earths and other
    minerals crude oil.
  • Import
  • 6 enterprises are granted special privileges on
    import of 26 items of products.
  • Products wheat, and other cereals urea and
    ammonium Sulphonitrate processed oil and fuel
    oil vegetable oil.

43
STEs in India
  • Reasons
  • Export
  • For better marketing some agricultural and minor
    forest products.
  • For conservation and proper utilization of some
    ores of metals and rare earths
  • Import
  • Agricultural products to support small farmers
    and to ensure food security.
  • Petroleum products to maintain a system of
    cross subsidisation of fuels.
  • Fertilizers to ensure the availability for
    farmers.

44
STEs in India
  • Functioning
  • The Indian Export and Import Policy requires that
    any listed good may be imported or exported by
    the STEs subject to the conditions specified
    therein.
  • The Director General of Foreign Trade may grant a
    licence to any other person to import or export
    any of these goods.

45
STEs in India
  • Functioning (Export)
  • Onion, Niger bean and other forest produce
  • Minimum price system of onion is maintained by
    STEs
  • STEs provide marketing assistance to poor tribes.
  • Minerals and ores
  • Prices of iron ore may be fixed under long-term
    contracts.
  • Quantities available for export of minerals are
    restricted keeping in view the domestic
    requirement as well as the need to conserve
    exhaustible natural resources.

46
STEs in India
  • Functioning (Import)
  • Agricultural products Domestic and international
    prices as well as supply conditions are the main
    determinants of quantities of imports.
  • Fertilizers The STE imports or procures
    domestically keeping in view the international
    prices, the domestic demand and the necessity of
    assured supply to farmers.
  • Petroleum products India imports a major portion
    of its requirements, with the STEs following the
    normal commercial practices.

47
STEs in India
  • In Trade Policy Review in 2002, the Paper of
    Secretariat stated that
  • Since the last Review of India in 1998,
    there has been a significant reductionof
    products subject to state-trading, mainly
    involving edible oils, seeds, and some petroleum
    products. The value of imports by state trading
    companies has been declining, and was estimated
    to be some Rs 55 billion in 2000/01 (2 of
    merchandise imports, down from 19 in 1996/97)
    the main import was petroleum, which accounted
    for around 98 of all imports by state trading
    companies.
  • India stated that the condition of export of
    kerosene and LPG through State Trading Enterprise
    has also been removed.

48
STEs in Indonesia
  • Perum Bulog, as State Trading Enterprise, is in
    charge of export/import of rice. In reality,
    while Perum Bulog imported 655,126,000 tons of
    rice in 2003, it exported nothing in that year.
  • Bulog established under the Presidential Decree
    in 1967. Since 1993, Bulog was transformed from a
    non-departmental government agency into a
    state-owned enterprise (Perum Bulog).

49
STEs in Indonesia
  • Reason
  • to support domestic rice producers,
  • to stabilize the price of rice at consumer and
    producer levels.
  • Functioning of STEs
  • to import and distribute rice, maintain national
    rice reserve stock
  • Bulog's source of funding comes from the state
    budget and dominantly from commercial credit
    guaranteed by the government.

50
STEs in Indonesia
  • In 2003 Trade Policy Review Report, Secretariat
    listed 35 enterprises involved Indonesian
    government, raging from agriculture to financial
    service. Most of the enterprises are owned by the
    government.

51
STEs in Indonesia
  • Secretariat stated that, in Indonesia
  • Exclusive import rights have been maintained for
    certain firms or certain categories of goods or
    expanded depending on the product.
  • Imports of alcoholic beverages are authorized for
    three registered importers, including one
    state-owned enterprise.
  • Imports of cloves, textile cloth , hot- and
    cold-rolled coil iron and steel products, as from
    8 November 2002 and through 2003 have been
    permitted only by local producers of similar
    products and by registered importers

52
STEs in Japan
  • Japan maintains 5 STEs in respective areas.

53
STEs in Japan
  • Leaf tobacco
  • Entity Japan Tobacco Inc. (JTI)
  • Reason promoting sound development of the
    tobacco industry.
  • Functioning the JTI is engaged predominantly in
    the manufacture and sales of tobacco products.
    The prices are determined on commercial
    consideration.

54
STEs in Japan
  • Alcohol
  • Entity New Energy and Industrial Technology
    Development Organization (NEDO)
  • Reasons as a transitional mechanism, NEDO took
    over the MITIs monopoly on certain alcohol on 31
    March 2001 for about five years.
  • Functioning
  • NEDO is granted the function of monopoly to
    purchase and sell all alcohol which is imported
    by permitted importers and produced by permitted
    producers.
  • Import and export prices are not restricted by
    law. Resale prices must be approved by METI.

55
STEs in Japan
  • Rice, Wheat and Barley
  • Entity The Ministry of Agriculture, Forestry
    Fisheries ( MAFF)
  • Reason food security and price stabilization
  • Functioning
  • importing rice under the minimum access
    opportunities and wheat and barley under the
    current access opportunities, both of which are
    established in the Schedule
  • collecting mark-ups on imported rice, wheat and
    barley which are bound in the Schedule
  • selling rice destined for food aid.

56
STEs in Japan
  • Import of rice, wheat, and barley in 2002

(Unit 1000 tons)
Products Total quantity imported Quantity imported by STE
Rice 664 663
Wheat 5,033 5,031
Barley 1,450 1,450
57
STEs in Japan
  • Designated dairy products
  • Entity Agriculture and Livestock Industries
    Corporation (ALIC)
  • Reason to stabilize supply and prices, to
    promote dairy industries and to improve national
    diet.
  • Functioning (similar to MAFF)
  • dealing with in-quota imports of designated dairy
    products established in Schedule
  • collecting a part of over-quota tariffs of such
    imports
  • the resale prices are determined by a tender.

58
STEs in Japan
  • Imports/exports of livestock in 2002

(Unit Metric tons)
Description of products Import Import Export Export
Description of products Total quantity imported Quantity imported by STEs Total quantity exported Quantity exported by STEs
Skimmed milk powder and solids 3431 0 10 0
Whole milk powder and other solids 21 0 28 0
Condensed milk 19 0 14 0
Buttermilk powder and other solids 10 0 86 0
Whey and modified whey 16475 4,555 1792 0
Butter and butter oil 6648 6318 3 0
59
STEs in Japan
  • In 2002 Trade Policy Review Report, Secretariat
    stated that
  • On 31 March 2002, the Salt Industry Centre of
    Japan ceased its role of state trading enterprise
    owing to the deregulation of salt business.1

60
STEs in Korea
  • Korea has not updated her notification since
    1999.
  • In according to her notification, Korean
    maintained 7 STEs in respective products. Most of
    the STEs deal with agro-products, including
    rice genus capsicum, garlic, onions, sesamum
    seeds, and ground nuts meat of bovine animals
    natural honey oranges and other tangerines
    ginseng pine nuts.

61
Entities Products
Ministry of Agriculture Forestry (MAF) Rice
Agricultural and Fishery Marketing Corporation (AFMC) Genus Capsicum, Garlic, Onions, Sesamum seeds, Ground Nuts, etc.
Livestock Products Marketing Organization (LPMO) Meat of bovine animals
National Livestock Cooperatives Federation (NLCF) Natural honey
Cheju Citrus Grower's Agricultural Cooperative, (CCGAC) Oranges, Mandarins and other tangerines
Korea Ginseng Cooperative Federation (KGCF) Ginseng
National Forestry Cooperatives Federation (NFCF) Pine nuts
62
STEs in Korea
  • Rice
  • Entity Ministry of Agriculture Forestry (MAF)
  • Reasons to stabilize domestic markets
  • Functioning
  • The MAF has the exclusive rights to import tariff
    quotas on rice and barley as established in
    Korea's C/S
  • The domestic sales prices of rice are determined
    by the MAF based on import prices, management
    costs, domestic consumer prices and other
    economic factors.

63
STEs in Korea
  • Livestock products
  • Entity Livestock Products Marketing Organization
    (LPMO)
  • Reason to stabilize domestic markets
  • Functioning
  • To purchase foreign beef directly
  • To approve and manage the beef quota allocated to
    private companies under the Simultaneous Buy and
    Sell(SBS) system.

64
STEs in Korea
  • Ginseng
  • Entity Korea Ginseng Cooperative Federation
    (KGCF)
  • Reason to stabilize domestic market, and to
    promote ginseng industry
  • Functioning
  • To administer tariff quotas on ginseng products.
  • To purchase ginseng products and sell the
    products to consumers through wholesale markets.

65
STEs in Philippines
  • National Food Authority (NFA) is accorded the
    exclusive authority on the importation and
    exportation of rice, corn and other grains.
  • Reasons to ensure food security and to stabilize
    the price.
  • NFA imported 746,124 tons of rice in 2001,
    amounting to 97.7 total importation.

66
STEs in Philippines
  • Functioning
  • Being accorded exclusive authority to import rice
    and to issue import quotas and import permits for
    rice, corn and other cereals
  • The import quantity is determined by an
    Inter-Agency Committee on Rice and Corn led by
    Department of Agriculture (DA), with the NFA as a
    member.
  • To engage in domestic grain procurement to
    support prices
  • To ensure food security, especially to response
    the requirements from calamity stricken areas.

67
STEs in Chinese Taipei
  • In her accession process, Chinese Taipei stated
    that
  • All state-enterprises are profit-oriented.
  • Chinese Taipei would observe the obligation of
    transparency in addition, Chinese Taipei would
    provide all information of particular transaction
    by specific STEs upon the request
  • STEs would not be used as a conduit to protect
    domestic industry or to subsidize export tariff
    quota would not be reserved to STEs.

68
STEs in Chinese Taipei
  • Chinese Taipei notified 7 STEs in 2004.

Entities Products
Taiwan Sugar Company (TSC) Sugar
Taiwan Salt Industrial Corporation (TSI Corp.) Salt
Taiwan Tobacco and Liquor Corporation (TTL) Tobacco and Alcohol
Taiwan Provincial Fruit Marketing Cooperative (TPFMC) Banana
Council of Agriculture (COA) Rice
China Engraving and Printing Works (CEPW) Bank note paper
Central Trust of China/Trading Department (CTC/TD) Agricultural and fishery products which are subject to TRQ (TRQ products)
69
STEs in Chinese Taipei
  • Tobacco and Alcohol
  • Entity Taiwan Tobacco and Liquor Corporation
    (TTL)
  • Reason The TTL was established to supersede the
    Taiwan Tobacco and Wine Board. It will be
    privatised in the future.
  • Functioning
  • To reserve an exclusive privilege for the
    domestic production and repackaging of tobacco
    products until the end of 2003.
  • To enjoy no special privileges. Any entity
    approved by the Ministry of Finance can engage in
    importation/exportation.

70
STEs in Chinese Taipei
  • Rice
  • Entity Agriculture and Food Agency, Council of
    Agriculture (AFA)
  • Reason to ensure food security, market stability
    and the security of the incomes of farmers
  • Functioning
  • To purchase a portion of the rice paddies owned
    by farmers to serve as food security stock
  • To import 65 of the rice tariff quota
    registered importers can participate in the
    allocation of rice quotas for private imports.

71
STEs in Chinese Taipei
  • Banknote paper
  • Entity Central Engraving and Printing Plant
    (CEPP)
  • Reason to stabilize financial markets and to
    prevent counterfeiting through the use of
    banknote paper.
  • Functioning
  • Being solely responsible for printing currency.

72
STEs in Chinese Taipei
  • TRQ products
  • Entity Central Trust of China/Trading Department
    (CTC/TD)
  • Reason to conduct international trade and/or
    other related operations for the government
  • Functioning
  • To be entrusted by the MOF to administer the
    allocation of tariff rate quotas for 24
    agricultural and fishery products, and rice and
    rice products
  • Any enterprise registered as an importer/exporter
    is eligible to apply for a certificate under each
    the quota allocation system.

73
STEs in Thailand
  • Thailand notified 3 STEs in 2004.

Entities Products
Public Warehouse Organization (PWO) garlic
Liquor Distillery Organization (LDO) ethyl alcohol
Thailand Tobacco Monopoly (TTM) cigarettes
74
WTO Disputes relating to STEs in the East and
South-East Asia
75
The Relating Cases
  • Japan - Trade in Semi-Conductors (1988)
  • Japan - Restrictions on Imports of Certain
    Agricultural Products (1988)
  • Republic Of Korea - Restrictions on Imports of
    Beef - Complaint By The United States (1989)
  • Korea - Measures Affecting Imports of Fresh,
    Chilled and Frozen Beef (2000)

76
Japan - Trade in Semi-Conductors
  • Factual Aspects
  • In 1986, Japan and the U.S. concluded an
    Arrangement concerning Trade in Semi-Conductor
    Products. According to the Arrangement, MITI
    would monitor the export prices of
    semi-conductors. When MITI found cases in which
    export prices were "extremely below costs", it
    would inform the companies concerned of the facts
    and of MITI's concern.
  • Aruements
  • EEC and Canada contented that such actions were
    inconsistent with the obligation in
    Article XVII1(c) that no contracting party
    should prevent any enterprise, whether or not a
    state trading enterprise, from acting solely in
    accordance with commercial considerations.

77
Japan - Trade in Semi-Conductors
  • -- Japan argued that Article XVII1(c) was
    interpreted on the basis that "commercial
    considerations" referred to in sub-paragraph (b)
    was merely an articulation of the general
    principle of non-discriminatory treatment
    prescribed in Article XVII1(a). Since the
    monitoring was implemented on a
    most-favoured-nation basis, and it did not
    contain any restrictive effect, Article XVII1(c)
    was irrelevant in the consideration of the
    dispute.
  • Finding
  • -- Because the Panel found the measures to be
    inconsistent with Article VI, it did not examine
    them under Article VII1(c) any more.

78
Japan - Restrictions on Imports of Certain
Agricultural Products (1988)
  • Factual Aspects
  • In 1986, the U.S. requested to establish a panel,
    claiming that the quantitative restrictions on 12
    items of agro-products maintained by Japan were
    contrary to GATT rules.
  • Arguments
  • As to some diary products and beef, Japan stated
    that those products are subject to monopoly
    trading by LIPC. Since LIPC was a STE, Japan
    argued that LIPC should bear the obligation of
    non-discrimination under Article XVII rather than
    the obligation of national treatment under
    Article III.

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Japan - Restrictions on Imports of Certain
Agricultural Products (1988)
  • Arguments
  • Considering the drafting history, Japan also
    stated that ad Article XI was a provision just
    to allow an exception for state-trading
    operations to impose trade restrictions beyond
    the disciplines stipulated under Article II4 and
    XVII in parallel with the admittance for
    private-trading to be exempted from the
    obligation under Article XI1 in case there
    existed reasons under Article XI2.
  • Japan also argued that pursuant to Article XX(d),
    trade restrictions are unavoidable for operation
    of STEs and such restrictions are exempt from
    GATT rules.

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Japan - Restrictions on Imports of Certain
Agricultural Products (1988)
  • Arguments
  • The U.S. argued that LIPC only imported 50 of
    beef imports and was closely controlled by
    Japanese government. Its actions should be
    examined under Article III rather than XVII.
  • Even if LIPC were a STE, it was nonetheless
    subject to Article XI, especially in as much as
    it laid down regulations governing private trade.

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Japan - Restrictions on Imports of Certain
Agricultural Products (1988)
  • Arguments
  • The U.S. stated that note ad Articles XI, XII,
    XIII, XIV and XVIII clearly indicated that the
    operation of a quantitative restriction through a
    STE did not make it any less a restriction nor
    any less subject to Article XI.
  • As to Article XX(d), the U.S. stated that it
    could not be used to enforce a GATT-inconsistent
    import monopoly such as one inconsistent with
    Article II4.

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Japan - Restrictions on Imports of Certain
Agricultural Products
  • Finding
  • The Panel stated that the basic purpose of ad
    Article XI is to extend to state-trading the
    rules of the GATT and to ensure that the members
    cannot escape their obligations by establishing
    state-trading operations. Thus, the import
    restrictions applied by Japan fell under
    Article XI independent of whether they were made
    effective through quotas or through import
    monopoly operations.
  • The Panel stated that Article XX(d) only exempts
    from the obligations under the GATT measures
    necessary to secure compliance with those laws
    and regulations which are not inconsistent with
    the provisions of GATT. The Panel therefore found
    that the enforcement of laws or regulations
    providing for an import restriction through an
    import monopoly inconsistent with Article XI1
    was not covered by Article XX(d) .

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Republic Of Korea - Restrictions on Imports of
Beef
  • Factual aspects
  • In 1988, Australia, New Zealand and the U.S.
    respectively requested to establish panels,
    claiming that the import regimes of beef
    maintained by Korean government , including the
    state-trading monopoly, the LPMO, were
    inconsistent with GATT.

84
Republic Of Korea - Restrictions on Imports of
Beef
  • Arguments
  • the U.S. argued that LPMO was a monopoly
    controlled by domestic producers and "commercial
    considerations" would be presumed to be secondary
    to the basic self-interest of the domestic
    producers in limiting import competition. Thus,
    the U.S. believed that the LPMO represented a
    separate and independent restriction on beef
    trade in violation of the Article XI.
  • Korea replied that the LPMO was not a
    state-trading monopoly it did not decide
    independently on restrictions on imports. LMPO
    was only an implement mechanism and did not
    constitute a independent restriction under
    Article XI.

85
Republic Of Korea - Restrictions on Imports of
Beef
  • Finding
  • The Panel stated that the LPMO had been granted
    exclusive privileges as the sole importer of
    beef. Thus, the LPMO had to comply with the
    provisions of the GATT applicable to STEs,
    including Articles XI1 and XVII.
  • In accordance with Article XVII, the Panel stated
    that the mere existence of producer-controlled
    import monopolies could not be considered as a
    separate import restriction inconsistent with the
    GATT, However, the Panel had already found the
    operations of the LMPO were inconsistent with
    Article XI.

86
Korea - Measures Affecting Imports of Fresh,
Chilled and Frozen Beef
  • Factual aspects
  • After the Korea- Beef in1988, Korea concluded
    bilateral Understandings with the U.S.,
    Australia, and New Zealand in 1990 and 1993. the
    monopoly on importation of beef of the LPMO was
    abolished. The import quota would be allocated to
    private importers through Simultaneous Sell/Buy
    (SBS) system.
  • In 1999, Australia and the U.S. respectively
    requested to establish panels, claiming that the
    import regimes of beef maintained by Korean
    government , including the state-trading
    monopoly, the LPMO, were inconsistent with GATT.

87
Korea - Measures Affecting Imports of Fresh,
Chilled and Frozen Beef
  • Arguments (relating to STEs)
  • Australia contented that various "operating
    procedures" of the LPMO, including the alleged
    refusal or delays in calling for tenders and the
    alleged delays selling into the Korean market
    such imported beef, were inconsistent with
    Article XVII.
  • Australia also contented that in its tender
    practices, LPMO constricted the imports of
    grass-fed beef. Such practices would constitute
    discriminatory measures, and LPMO would violate
    the provisions of article XVII.

88
Korea - Measures Affecting Imports of Fresh,
Chilled and Frozen Beef
  • Arguments (relating to STEs)
  • Korea argued that the import quota had been
    fulfilled in 1998. LPMO suspected the discharge
    practices of imported beef to avoid further
    losses.
  • As to distinction between grass-fed/grain-fed
    beef, Korea argued that the tender practices were
    not discriminatory. Australian exporters were
    free to participate in both tenders.

89
Korea - Measures Affecting Imports of Fresh,
Chilled and Frozen Beef
  • Finding
  • The Panel stated that Korea did not provide
    sufficient facts to explain why LPMO suspected
    discharges. The Panel stated such practices would
    constitute quantitative restrictions under
    Article XI and violate the principle of
    non-discriminatory treatment in Article XVII.
  • The Panel stated that the distinction between
    grass-fed/grain-fed beef was not mentioned in
    Koreas Schedule, and constituted an import
    restriction. Thus, the Panel believed that the
    LPMO didnt follow the principle of
    non-discriminatory treatment in Article XVII.

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