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International Trade and the WTO. By WTO Cell Trade Development Authority of Pakistan 3 rd September 2008. International Trade and the WTO. WTO – An Introduction GATT: Negotiations on Agriculture in the WTO NAMA Negotiations in the WTO GATS TRIPS

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International Trade and the WTO

By

WTO Cell

Trade Development Authority of Pakistan

3rd September 2008


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International Trade and the WTO

  • WTO – An Introduction

  • GATT: Negotiations on Agriculture in the WTO

    NAMA Negotiations in the WTO

  • GATS

  • TRIPS

  • Regulatory Framework in Pakistan & NTC

  • Regionalism

  • WTO’s Dispute Settlement Mechanism


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WTO – An Introduction

By

Abdul Aleem Khan

Economist, Advisory Unit,

WTO Cell, TDAP


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WTO – An Introduction

  • The World Trade Organization (WTO) is the principal international organization governing world trade.

  • It was established in 1995 as a successor institution to the General Agreement on Tariffs and Trade (GATT) which was a post-World War II institution.

  • WTO has 153 member countries, representing 95% of world trade.

  • It aims to provide fair and stable conditions for the conduct of international trade with a view to encouraging trade and investment that will raise living standards worldwide.

  • WTO is a forum where countries continuously negotiate exchanges of trade concessions to further lower the trade barriers all over the world.


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WTO – An Introduction(cont…. 2)

  • Decisions within the WTO are made by member countries, not by staff and by consensus, not by formal vote.

  • High-level policy decisions are made by the Ministerial Conference, which is a body of political representatives (trade ministers) which meet at least every two years.

  • Operational decisions are made by the General Council ( representative from each member country) which meets monthly and chair rotates annually.


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WTO – An Introduction(cont…. 3)

  • GATT came into force in1948 with 23 founding members.

  • It was intended to promote nondiscrimination in trade among countries, with the view that open trade was crucial for economic stability and peace.

  • Different trade rounds were held so as to liberalize the trade.


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GATT and WTO Trade Rounds

  • 1st Round -Geneva in 1947

    23 Countries participated

    Decided to cut 45,000 trade tariffs

  • 2nd Round -France in 1949

    13 Countries participated

    Proposed further reductions in 5,000 tariffs

  • 3rd Round -Britain in 1950-51

    38 Countries participated

    Proposed further reductions in 8,700 tariffs

  • 4th Round -Geneva in 1955-56

    26 Countries participated

    Proposed to Cut Custom Tariffs with a total value of US$2.5 bn

  • 5th Round -(Dillion Round) in Geneva in 1960-62

    26 Countries participated

    Proposed to cut 4,400 tariffs covering US$.9 bn worth of trade

  • 6th Round -(Kennedy Round) in Geneva in 1964-67

    62 Countries participated

    Decided on substantial tariffs reductions on all industrial productscovering US$40bn of trade.


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GATT and WTO Trade Rounds … Cont… 2

  • 7th Round -(Tokyo Round) in Geneva in 1973-79102 countries participated

    -Customs cuts averaging 20% to 30% covering US$300 bn

    - Improved framework for subsidies, customs rates and technical obstacles to trade.

  • 8th Round -(Uruguay Round) started in Uruguay ended in Morroco 1986-94

    123 countries participated

    The round led to the creation of WTO, and extended the range of trade negotiations, leading to major reductions in tariffs (about 40%) and agricultural subsidies, an agreement to allow full access for textiles and clothing from developing countries, and an extension of intellectual property rights.

  • 9th Round -(Doha Round) started - in Doha in 2001 ( at forth Ministerial Conference)

    - in Cancun in 2003 (at fifth Ministerial Conference)

    - in Hong Kong in 2005 (at sixth Ministerial Conference)

    - in Geneva in July 2006 (at seventh Ministerial ConferenceNot yet concluded.

    141 countries participated,

    Subject covered are tariffs, non-tariffs measures, agriculture, labour standards, environment, competition, investment, transparency, patents etc.


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WTO Agreements

  • Agreement on Agriculture

  • Agreement on Textiles & Clothing (ATC)

  • Agreement on Subsidies and Countervailing Measures

  • Agreement on Anti-Dumping

  • Agreement on Safeguards

  • Agreement on Trade Related Investment Measures (TRIMs)

  • Agreement on Custom Valuation

  • Agreement on Technical Barriers to Trade (TBT) and on Sanitary and Phytosanitary Measures (SPS)

  • Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS)

  • General Agreement on Trade in Services (GATS)

  • Understanding on Dispute Settlement (DSU)

  • Special & Differential Treatment ( S& D )


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GATTNegotiations on Agriculture in the WTO

Presentation by:

Mujeeb Ahmed Khan

Head WTO Cell

Trade Development Authority of Pakistan


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Agreement on Agriculture - Objectives

  • To establish a fair and market-oriented agriculture trading system.

  • To initiate a reform process through negotiation of commitments on support and protection.

  • To establish strengthened and operationally effective rules and disciplines.

  • To provide for substantial progressive reduction in support and protection.

  • To correct and prevent restrictions and distortions in world agricultural markets.

  • To achieve specific binding commitments in ;market access, domestic support and export competition.


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Special and Differential treatment for developing countries

  • S & D is an integral element of the negotiations, and taking into account the possible negative effect of the implementation of the reform programme on least-developed and net food-importing developing countries.

  • While implementing their commitments the developed countries to take fully into account the particular needs and conditions of developing countries.

  • Greater market access for agriculture products of particular interest to developing countries.

  • Fullest liberalization of trade in tropical products and products of importance to the diversification of production from the growing of illicit narcotic crops.


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Reduction commitments in the Uruguay Round

Developed Developing

(1995-2000)(1995-2004)

  • Market Access

    Average tariff cuts for all ag.products -36% -24%

    Minimum tariff cuts per product -15% -10%

  • Domestic Support

    Total cuts in aggregate measurement of

    support -20% -13%

  • Export Subsidies

    Value cut -36% -24%

    Volume Cut -21% -14%


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Domestic Support

  • Green Box - Research, Extension, PDS,Decoupled payments etc.

  • Blue Box - Production Limiting Subsidies ;

  • Amber Box - AMS-subject to reduction commitments;

    - Product specific (MSP)

    - Non product specific (input subsidies; fertilizers, power, irrigation etc


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Domestic Support (contd)

  • De minimis support;

    Allowed WTO Members to exempt from the calculation of the AMS, below a certain threshold level;

    - Developed countries: 5% of the value of agricultural production of the product concerned and 5% of total value of agricultural production.

    - Developing countries: 10% of the value…………..


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The Doha Mandate for negotiations

“We commit ourselves to comprehensive negotiations aimed at:

  • Substantial improvement in MARKET ACCESS;

  • Reductions of, with a view to phasing out, all forms of EXPORT SUBSIDIES;

  • Substantial reductions in trade distorting DOMESTIC SUPPORT.


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Negotiating priorities for Pakistan

  • Highest possible tariff reductions. (even U.S proposal for 55%-90% for developed and slightly less for developing)

  • Maximum tariff caps.(75% for developed and 100% for developing)

  • Expansion of tariff rate quotas. (from the current 5% to 20% of domestic consumption, with and end-date agreed for their eventual elimination)


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Negotiating priorities for Pakistan (contd)

  • The TRQ in-quota tariffs should be eliminated where substantial under fill exists.

  • Sensitive products must be limited to maximum of 1% -2% of all tariff lines.

  • Special products must be limited to 2% - 3% of all tariff lines.

  • A Special Safeguard Mechanism, with strict and transparent guidelines.


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Negotiating priorities for Pakistan (contd)

  • Elimination of Tariff escalation through the use of progressively higher tariff reductions for more processed products.

  • Most restrictive overall level of support. (minimally acceptable position is the G-20 proposal of 80% reduction for EU and 70% for the U.S).

  • Product specific caps for the Amber Box and the Blue Box.


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Negotiating priorities for Pakistan (contd)

  • Capping of the Blue box at 2.5% of the value of production.

  • Commitment to review the Green and Blue box criteria to ensure that these programs are truly non-trade distorting and production limiting.

  • Possibility of a cap on Green Box expenditures.

  • Elimination of all forms of export subsidies, including subsidy elements of export credits, state trading and food aid.


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NAMA Negotiationsin the WTO

By

Tippu Sultan

Head Advisory Unit, WTO Cell

TDAP


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WTO NAMA Negotiations : (Non Agriculture Market Access)Challenges and opportunities for Pakistan

The Doha Ministerial Declaration requires that negotiations should aim by modalities to be agreed upon to

  • Reduce or eliminate tariffs

  • Reduce or eliminate tariff peaks

  • Reduce or eliminate non tariff barriers

  • Not exclude any products

  • Allow less than full reciprocity to developing countries in making reduction commitments.


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NAMA Tariff Cut formulas

  • The United States (US) has proposed to use simple Swiss formula with a negotiated coefficient.

  • The US elaborated that there could be two coefficients, one separately applied by developing countries and another applied by developed countries.

  • The Simple Swiss formula is expressed as follows:

    Final tariff = Coefficient (a) x Initial tariff

    Coefficient (a) + Initial tariff

    Where the:

    Initial tariff is the bond rate, as listed in national schedules, and

    Coefficient is a figure to be negotiated


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Different Proposals

  • EU and US proposal:

    In 6th Ministerial Conference at Hong Kong, the EU and US proposed using coefficient of a = 10 for developed countries and a coefficient of a = 15 for developing countries.

  • THE ABI formula:

    The second proposal has been presented by Argentina, Brazil and India, modified Swiss-type formula, which incorporates national tariff averages into the formula reducing the impact of the coefficient and establishing a linkage between tariff reductions and a country’s current tariff levels. It is expressed as follows:

    Final tariff = (Coefficient x National average of bond rates) x Initial tariff

    (Coefficient x National average of bond rates) + Initial tariff

    Where the:

    Initial tariff is the bond rate, as listed in national schedules, and

    Coefficient is a figure to be negotiated

    National average of bond rates is calculated using all non-agricultural bond duties


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Different Proposals …. Cont…

  • Coefficient proposed by Pakistan:

    At the mini-ministerial meeting held in China, Pakistan put forward a proposal to bridge the difference between the supporters of the Simple Swiss formula and the supporters of the ABI formula.

    The coefficients proposed by Pakistan would be around a = 6 for developed countries and around a = 30 for developing countries


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Pakistan’s position after NAMA Negotiations

Pakistan is fairly comfortably place in this negotiation, because:

  • Our tariff rates are relatively low

  • We are hardly giving any subsidy

  • Our reliance on custom revenue has reduced drastically and constitutes only 15% of our total revenue.


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Conclusions

  • In order to get greater market access, we would like to see:

  • Tariff reductions by other developing countries

  • Reduction / elimination of peak tariffs in developed countries in products of our export interest; most of their tariffs are otherwise very low.

  • Reduction / elimination of non tariff barriers in all countries


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GATS

Presentation by:

Mujeeb Ahmed Khan

Head WTO Cell

Trade Development Authority of Pakistan


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General Agreement on Trade in Services (GATS)

The Service Agreement rests on three pillars.

  • The first is the framework Agreements containing the basic obligations which apply to all members.

  • The second concerns national schedules of commitments.

  • The third is a number of measures addressing the special situations of individual services sectors.


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WTO classification of Services Sectors

  • The four modes:

    Mode I: cross-border -- when a Pakistani firm delivers to an overseas customer without leaving home. Some examples of this mode are internet, telecom, financial services etc.

    Mode II: consumption abroad -- when a foreign consumer is in the Pakistani market and receives or uses a service. Examples of this mode include tourism, education, machinery sent for repairs etc.


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WTO Classification – (contd)

  • Mode III: Commercial presence -- when the Pakistani firm establishes an office abroad; Illustrations of Mode-III are branches set up by banks and Hotel chains etc.

  • Mode IV: movement of natural persons -- when Pakistani service employees travel to another country to provide a service. Examples of this mode are Doctors, engineers, skilled or semi skilled laborers etc.


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Commitments on services in the WTO

  • Each member will submit schedules of commitments pertaining to different services sectors on each of the four modes.

  • These schedules will then be negotiated in a request and offer format resulting in submission of revised schedules.

  • 11 sectors were approved by the ECC for the proposal

  • Pakistan has submitted its initial offer on 9 services sectors including 68 sub-sectors (on 24th May 2005).


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  • ECC approved Sectors:

    (Marked Red were not in the initial offer)

  • Business Services

  • Communication Services

  • Construction and related engineering Services

  • Distribution services

  • Educational services

  • Environmental services

  • Financial services

  • Health and related social services

  • Tourism and travel related services

  • Recreational, cultural and sporting services

  • Transport services


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  • SALIENT FEATURES OF ECC APPROVED OFFER:

  • ‘Commercial presence' - subject to incorporation in Pakistan with maximum foreign equity participation of70% is inscribed against a particular sector or subsector.

  • Establishments to be located in Export processing zones may negotiate higher than 70 percent limits on foreign investment .

  • Profits of foreign-invested companies will be fully repatriable except as provided in specific sector commitments.


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SALIENT FEATURES OF ECC APPROVED OFFER (contd)

  • No legal restriction on acquisition of real estate by foreign-invested judicial entities or natural persons.

  • Subsidies, if any, will be granted to domestic companies only.

  • Movement of natural persons - Unbound, except for measures concerning the entry or temporary stay of natural persons falling in specified categories. E.g.Intracorporate transferees, Business visitors, Independent Professionals etc...


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SALIENT FEATURES OF ECC APPROVED OFFER (contd)

vii. The commitments relating to ‘Professional services’ apply only to countries that provide similar commitments to Pakistan except natural persons qualified in the United Kingdom and the USA.

viii. In specific sectors; Access granted both to natural persons and companies based on economic needs test. Criteria include rate of growth of the services sector recorded by the national accounts in the previous 5 years.


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Pakistan’s offer

  • SALIENT FEATURES OF INITIAL OFFERS:

  • ‘Commercial presence' - subject to incorporation in Pakistan with maximum foreign equity participation of60% is inscribed against a particular sector or subsector. In certain sub sectors e.g. Engineering services it is 51%.

  • In specific sectors; Access granted both to natural persons and companies based on economic needs test.


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SALIENT FEATURES OF INITIAL OFFERS (contd)

iii. ‘Presence of natural persons’ – in certain sub sectors there are conditions that qualifications for foreign service suppliers will be set by the concerned Pakistani Association/Council and any other relevant law in force.

iv. ‘Commercial presence’ – in certain sub sectors there are conditions of Economic needs test e.g. wholesale trade services, Franchising etc.

v. The commitments in Financial Services are given to the nationals and financial institutions of the Members whose laws and policies do not bar the provision of similar commitments to the Pakistani nationals and financial institutions.


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Pakistan’s offer

SALIENT FEATURES OF PROPOSED REVISED OFFER:

  • As per the ECC mandate all 11 sectors and 86 sub-sectors covered.

  • Commercial presence' - subject to incorporation in Pakistan with maximum foreign equity participation of70% is inscribed against a particular sector or sub sector. (ECC mandate)


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SALIENT FEATURES OF PROPOSED REVISED OFFER (contd)

iii. No limitations on Market Access or National treatment in Cross border supply (mode I) and Consumption abroad (mode II) except for Financial Sector and its sub sectors.

  • Movement of natural persons - Unbound, except for measures concerning the entry or temporary stay of natural persons falling in specified categories. E.g.Intracorporate transferees, Business visitors, Independent Professionals etc...


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SALIENT FEATURES OF PROPOSED REVISED OFFER (contd)

v. No commitments contingent upon reciprocity by other countries. (ECC plus)

vi. No requirement of Economic Need Test for granting Market Access or National Treatment. (ECC plus)

vii.Presence of natural persons’ – in certain sub sectors there are conditions that qualifications for foreign service suppliers will be set by the concerned Pakistani Association/Council and any other relevant law in force.

(Initial offer)


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Pakistan’s View in Service Sector

Pakistan believes that the liberalization in Services sector is in our own interest, as it will enhance the efficiency of local service suppliers through competition and introduction of new techniques apart from improving the quality of manufactured goods, since the service are also inputs for manufacturing.

Pakistan is presently consulting various Domestic stakeholders before a final offer is made.


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Trade Related Intellectual Property RightTRIPS

Presentation by:

Mujeeb Ahmed Khan

Head WTO Cell

Trade Development Authority of Pakistan


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TRIPS

  • TRIPs included in the single undertaking of the UR

  • It establishes minimum standards for all types of IPRs (but utility models and breeders’ rights)

  • It is based on and supplements, with additional obligations, the Paris, Berne, Rome and Washington Conventions

  • It extends to IPRs the principles governing international trade: MFN, NT

  • It contains provisions relating to enforcement of IPRs, amendment and reservation


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TRIPS (cont…2)

TRIPS requires member states to provide strong protection for intellectual property rights. For example, under TRIPS:

  • Copyright terms must extend to 50 years after the death of the author, although films and photographs are only required to have fixed 50 and to be at least 25 year terms, respectively.(Art. 7(2),(4)).

  • Copyright must be granted automatically, and not based upon any "formality", such as registrations or systems of renewal.


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TRIPS (cont…3)

  • Computer programs must be regarded as "literary works" under copyright law and receive the same terms of protection.

  • National exceptions to copyright (such as "fair use" in the United States) are constrained by the Berne three-step test .

  • Patents must be granted in all "fields of technology," although exceptions for certain public interests are allowed (Art. 27.2 and 27.3 [1]) and must be enforceable for at least 20 years (Art 33).


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TRIPS (cont…4)

  • Exceptions to the exclusive rights must be limited, provided that a normal exploitation of the work (Art. 13) and normal exploitation of the patent (Art 30) is not in conflict.

  • No unreasonably prejudice to the legitimate interests of the right holders of computer programs and patents is allowed.

  • Legitimate interests of third parties have to be taken into account by patent rights (Art 30).

  • In each state, intellectual property laws may not offer any benefits to local citizens which are not available to citizens of other TRIPs signatories by the principles of national treatment (with certain limited exceptions, Art. 3 and 5 [2]). TRIPS also has a most favored nation clause.


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TRIPS (cont…5)

  • Many of the TRIPS provisions on copyright were imported from the Berne Convention for the Protection of Literary and Artistic Works and many of its trademark and patent provisions were imported from the Paris Convention for the Protection of Industrial Property.


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IPRs addressed under TRIPs

  • Copyrights.

  • Patents.

  • Trade Marks.

  • Industrial Designs.

  • Layout designs of Integrated circuits.

  • Geographical Indications.

  • Traditional Knowledge and Folklore


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Regulatory Framework in Pakistan and NTC

Tippu Sultan

Head Advisory Unit, WTO Cell

TDAP


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Regulatory Framework in Pakistan

  • Ministry of Commerce is responsible for negotiating and representing Pakistan at multilateral negotiations.

  • MOC takes its position after consultation with all ministries, divisions, associations and chambers.


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National Tariff Commission

Established in 1990 under the National Tariff Commission Act, 1990

Function

Implementation of Trade Defense Laws


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Functions of the Commission

The Commission is the implementing body for two WTO agreements, namely, Agreement on Subsidies & CVDs, and Agreement on Safeguards.

Pakistan’s Trade Defence Laws:

Anti-Dumping Duties Ordinance, 2000

Countervailing Duties Ordinance, 2001

Safeguards Measures Ordinance, 2002


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Implementation of Trade Defense Laws

Anti-Dumping Duties Ordinance, 2000

Mandate

Imposition of anti-dumping measures after due process

Procedure

Application processing, preliminary investigation, preliminary determination, final investigation, final determination, imposition of anti-dumping measures.

The anti-dumping duty is imposed for a period of 5 years.

Time frame: 365 days


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TRANSPARENCY

Commission maintains a Public File in each investigation, which contains all documents (non-confidential) including application, notices, reports, comments and correspondence with interested parties and other related documents.

The public file is open for inspection and copying to all interested parties.

The public file is usually inspected by domestic industry, foreign missions, foreign exporters and producers, lawyers etc.


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TRANSPARENCY

Throughout the investigation, the Commission keeps all interested parties including the governments of exporting countries informed of the developments in an investigation.

In addition, the following documents are available on the Commission’s website and are, therefore, in the public domain:

Notice of Initiation

Notice of Preliminary Determination

Report on Preliminary Determination

Notice of Final Determination

Report on Final Determination

Commission’s website: www.ntc.gov.pk


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Implementation of Trade Defense Laws

Anti-Dumping Actions Taken by Pakistan

Anti-dumping duties imposed after final determination remain in force for a period of five years.

*15 Price undertakings have been accepted from the exporters and are being monitored


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Implementation of Trade Defense Laws

Anti-Dumping Actions Taken by Pakistan


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Implementation of Trade Defense Laws

Reviews of Anti-dumping Measures


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Implementation of Trade Defense LawsAPPEAL AGAINST THE COMMISSION’S DECISION

Appellate Tribunal (Pakistan)

Any interested party can file an appeal against a final determination made by the Commission

Dispute Settlement Body (Geneva)

The government of exporting country may approach the DSB to challenge the inconsistencies of a measure with the WTO Agreements


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Implementation of Trade Defense Laws

Countervailing Duties Ordinance, 2001

Mandate

Imposition of countervailing measures after due process

Procedure

Application processing, preliminary investigation, preliminary determination final investigation, final determination, imposition of Countervailing measures.

The countervailing duty is imposed for a period of 5 years.

Time frame: 365 days.


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Safeguard Measures Ordinance, 2002

Mandate

Safeguard Measures against surge of imports.

Procedure

Application processing, investigation, determination and making recommendations to the Government.

Recommendations

NTC sends recommendations on safeguard measures to the Federal Govt. for consideration.

Safeguard Measures are imposed for a period of 4 years.

Time Frame: 120 days.

Implementation of Trade Defense Laws


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Implementation of Trade Defense Laws

Safeguard Investigation by Pakistan


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Assisting Exporters Facing Trade Defense Actions

Assisting Pakistani exporters facing foreign actions under WTO Trade Defense Agreements.

NTC assisted Pakistani exporters of Ethyl Alcohol, Pet Resin and Match Boxes.


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Assisting Exporters Facing Trade Defense Actions

The Commission has been assisting the exporters from Pakistan facing anti-dumping actions by other WTO Member countries, mainly in the following:

Response to the questionnaires

Accounting details

Procedural compliance

DSB proceedings


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REGIONALISM

By

AamirHussainSiddiqui

Economist, Research & Information Unit, WTO Cell, TDAP


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WTO Provisions for Regionalism

  • Article XXIV of GATT 1994:

  • Para 4 of the Doha Declaration: We stress our commitment to the WTO as the unique forum for global trade rule-making and liberalization, while also recognizing that regional trade agreements can play an important role in promoting the liberalization and expansion of trade and in fostering development.


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Global tendency of RTAs

  • Some 380 RTAs have been notified to the GATT/WTO up to July 2007. Of these, 300 RTAs were notified under Article XXIV of the GATT 1947 or GATT 1994; 22 under the Enabling Clause; and 58 under Article V of the GATS. At that same date, 205 agreements were in force.


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  • If we take into account RTAs which are in force but have not been notified, those signed but not yet in force, those currently being negotiated, and those in the proposal stage, we arrive at a figure of close to 400 RTAs which are scheduled to be implemented by 2010.

  • Of these RTAs, free trade agreements (FTAs) and partial scope agreements account for over 90%, while customs unions account for less than 10 %.


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World major RTAs

European Union (EU) – Custom Union

North America Free Trade Area (NAFTA)

ASEAN Free Trade Area (AFTA)

Gulf Cooperation Council (GCC) – Custom Union

MERCOSUR (South American Common Market) – Custom Union


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Pakistan’s position

  • Pakistan has signed following Trade Agreements

  • a.SAFTA (RTA)

  • b.FTAs with(1)Sri Lanka

  • (2)China

  • (3)Malaysia

  • c.PTAs with(1)Mauritius

  • (2)Iran


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South Asian Association for Regional Cooperation

  • The South Asian Association for Regional Cooperation (SAARC) was established when its Charter was formally adopted on December 8, 1985 by the Heads of State or Government of Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka.

  • SAARC provides a platform for the peoples of South Asia to work together in a spirit of friendship, trust and understanding. It aims to accelerate the process of economic and social development in Member States.

  • SAFTA is an economic agreement for free trade among member states.


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South Asian Free Trade Area (SAFTA)

Article-7 of the Agreement contains modalities of tariff reduction under TLP, which are as follows:-

No tariff reduction on items in the Sensitive List.

Non-LDCs (Pakistan, India, Sri Lanka) shall reduce tariff to 0-5% for LDCs (Bangladesh, Bhutan, Nepal, Maldives) within three years (2009)

Tariff Reduction by Non-LDCs for Non-LDCs Reduction in two phases:Phase-I (2006-2008)Existing tariff rates above 20% to be reduced to 20% within two years           Tariff below 20% to be reduced on margin of preference basis of 10% per year.Phase-II (2008-2013)Tariff to be reduced to 0-5% within 5 years.

Tariff Reduction by LDCs for all SAARC Members     Reduction in two phases:Phase-I (2006-2008)Existing tariff rates above 30% to be reduced to 30% within two years           Tariff below 30% to be reduced on margin of preference basis of 5% per year.Phase-II (2008-2016)           Tariff to be reduced to 0-5% within 8 years.


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Sensitive List


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SAFTA Rules of Origin

Annex IV deals with the rules of origin  under the SAFTA required to qualify products for preferential duty benefits. Rules of Origin – to be operative on 01.07.2006. Basic Criteria is as under:

  • For non-LDCs40% value addition + change in tariff heading at 4 digits (CTH).

  • For LDCs30% value addition + CTH.


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Pak-Sri Lanka Free Trade Agreement

Salient Features

• Came into force from June 2005.

• Establishment of a Free Trade Area through complete or phased elimination of tariffs.

• The FTA does not remove all tariffs on all goods at once.

• Negative Lists to protect national interests of both countries.

• The Rules of Origin (ROO) criteria to ensure a minimum local content.

• Adequate safety clauses to protect domestic and national interests of both countries.

• Review and consultation mechanisms to ensure the smooth operation of the Agreement.


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Pakistan Commitments

From the date of entry into force Pakistan has granted 100% immediate tariff concessions on 206 items. In addition Sri Lanka can export up to 10,000 MT of tea per financial year free of duty.

Pakistan has also granted 35% of margin of preference on applied (MFN1) tariff rate to exports of beetle leaves from Sri Lanka. Apparel exports from Sri Lanka (21 categories) are also granted 35% margin of preference on applied (MFN) tariff rate up to 3 million pieces. Ceramic exports from Sri Lanka to Pakistan are given a margin of preference of 20% on applied (MFN) tariff rate.

There is no limit on the quantity of exports. About 10% of tariff lines at 6-digit level (i.e. 540 items) are included in the negative list of Pakistan. These consist of very sensitive items where Pakistan is not in a position to offer any preferential treatment to Sri Lanka.

All other items that are not included in the negative list and immediate concession list are subject to a tariff phase out and would have duty free access to Pakistan by 2008.


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Sri Lanka Commitments

  • From the date of entry into force Sri Lanka has granted immediate duty free access to Pakistan for 102 products. In addition, Sri Lanka has allowed Pakistan to export Long Grained Pakistan Rice (Basmathi) up to 6000 MT per year and potatoes up to 1000 MT during the off season (i.e. June-July & Oct-Nov) free of duty.

  • The negative list of Sri Lanka has about 13% of tariff lines at 6-digit level (697 items) where the country would not give any preferential concessions to Pakistan.

  • All other items, which are not included in the immediate 100% concession list and the negative list, are subject to a duty phase out and would be made duty free by 2010.


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Pak-China FTA

  • Pak China Free Trade Agreement was concluded on July 1, 2007. The FTA covers overall 14353 products at 8-digit level of H.S. Code including 7550 under tariff reduction modality provided by China and 6803 under Tariff reduction modality of Pakistan.

  • Pak- China FTA comprises two phases, providing elimination and reduction of tariffs within the time frame as provided under the agreement. The base year for tariff reduction/elimination is 2006 for China while the base year for tariff reduction/ elimination is the fiscal year of 2006-2007 for Pakistan. It is worth mentioning here that the elimination of tariff on the products covered in the Early Harvest Program (EHP) shall continue in accordance with the earlier agreed modality of tariff elimination for EHP.


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Tariff Reduction Modality of China (Phase-I)


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Tariff Reduction Modality of Pakistan (Phase-I)


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Phase II:Both Parties shall endeavor to eliminate the tariffs of no less than 90% of products, both in terms of tariff lines and trade volume within a reasonable period of time on the basis of friendly consultation and accommodation of the concerns of both Parties.


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Malaysia-Pakistan Closer Economic Partnership Agreement (MPCEPA)

  • This Agreement is the 1st bilateral FTA between two Muslim Countries - members of OIC. This Agreement is Pakistan’s first comprehensive FTA incorporating trade in goods, trade in services, investment and Economic Co-operation and Malaysia’s first bilateral FTA with any south Asian country.

  • For trade in Goods Pakistan will eliminate tariff on 43.2% of the current imports from Malaysia by 2012. On the other hand Malaysia will eliminate tariff on 78% of imports from Pakistan.

  • In trade in services, both countries have provided WTO plus market accesses to each other. In the field of computer and I.T related services, Islamic Banking, Islamic Insurance (Takaful) Pakistan has secured 100% equity in Malaysia. Market access in services provided by both countries will impact positively on investment and trade in goods. Mutual recognition arrangements are also apart of the FTA.

  • The Agreement also contains a chapter on investment to facilitate entrepreneurs of both countries. The incentives available to both countries will not be available to investors from other countries and the bilateral investment treaty signed by Pakistan will have no impact on the investment provisions under the FTA.


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Tariff Reduction Modality by Malaysia

450 items are in Highly Sensitive List, where no concession is given

16 items are in Tariff Rate Quota List

102 items are in Exclusion List


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Tariff Reduction Modality by Pakistan

765 items are in Highly Sensitive List, where no concession is given

129 items are in Margin of Preference -1, on which 5%, 10%, 15% and 20% MOP would given in 2008, 2009, 2010 and 2011, respectively

9 items related to Palm nut and oil, are in Margin of Preference -2, where MOP would be given 10% in 2008 and 2009 and 15% in 2010.

179 items are in Exclusion List


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Pak – Iran PTA

Pakistan signed Preferential Trade Agreement with Islamic Republic of Iran on 4th March 2004. The Cabinet ratified the agreement on 25th May 2005. As mutually agreed the agreement has become operational from 1st September 2006.

Preferences granted by both countries to each other cover approximately 18% of MFN tariff of both countries.


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Preferences given by Iran to Pakistan

Total 309 Items

Main items are Textile and Clothing (125 items), Chemicals, Marble & Granite, Fish, Bananas, Mangoes and Citrus fruits, Pharmaceutical, Plastics, Rubber & Articles, Footwear, Cutleries, Refrigerators, Electric Motors, Brushes, Pens, Pencils & Markers, etc.

Margin of Preference is between 10 to 30 percent, except Rice, which is given TRQ status, but Commercial benefit is about 96%.


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Preference given by Pakistan to Iran

Total 475 items

Major items, are animal products, vegetables, fruits, tea & spices, oilseeds, animal of vegetable oils, confectionary, salts and minerals, fuels Petroleum and LPG etc. Organic & Inorganic Chemicals, Pharmaceuticals, Fertilizers, Chemicals, Textile & Clothing materials, Articles Stones, Glass & Glassware, Pig iron and Ferrous alloy, Copper and Industrial Machines etc.

Margin of Preference is between 10 to 30 percent, Organic and Inorganic, Ores and other are given highest MOP of 30%


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Pak – Mauritius PTA

Pakistan signed Preferential Trade Agreement with Republic of Mauritius on 30th July 2007. As mutually agreed the agreement has become operational from 1st December 2007.


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Preference granted by Mauritius

Total 101 items

Major items are Vegetables and Fruites, Rice, Biscuits, Tobacco, Marble & Granites, Articles of Wood, Carpets, Textile Made-ups, etc.

Margin of Preference would become 100% one year.


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Preference granted by Pakistan

Total 66 items

All are related to Garments (Chapter 61: Knitted garments and Chapter 62: Woven Garments)

Margin of Preference is between 30 to 50%

Most of the items are subject TRQs.


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ECO Trade Agreement

Economic Cooperation Organization (ECO), is an intergovernmental regional organization established in 1985 by Iran, Pakistan and Turkey for the purpose of promoting economic, technical and cultural cooperation among the Member States. In 1992, the Organization was expanded to include seven new members, namely: Afghanistan, Azerbaijan, Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan and Uzbekistan.

The Organization has a permanent Secretariat in Tehran Iran headed by a Secretary General. Mr. Khursheed Anwar, from Pakistan is the current Secretary General of ECO Secretariat.

ECO Trade Agreement was approved in 2005 in Turkey and need ratification by member governments after which it will become operational.


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Dispute Settlement Mechanism (DSM) of the WTO

By

Abdul Aleem khan

Economist, Advisory Unit,

WTO Cell, TDAP


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Introduction to the DSU

  • What is WTO’s DSS & DSU

  • Need for a DSU

  • Principles: equitable, fast, effective, mutually acceptable

  • How are disputes settled?

  • The case has been decided: what next?


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What is WTO’s DSU

  • WTO’s DSU is the Central Pillar of MTS

  • Evolved through years of negotiations

  • Important achievement of UR

  • Based on Clearly defined rules


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Need for a DSU

  • System without DSU is fragile

  • Enhances the Practical Value of the Commitments

  • Settles disputes in a timely & structured manner

  • Mitigates the imbalances between stronger and weaker players

  • Members Trust it!


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Improvements over GATT 1947 - a set of Principles

  • The system is designed to be: Equitable, Fast, Effective, Mutually Acceptable

  • Following agreed procedures instead of taking unilateral action

  • Clearly defined stages

  • Flexible-but not so flexible deadlines

  • A case shall normally take 12-15 months

  • Blocking the ruling is difficult

  • Encourages consultation & mediation


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How are Disputes Settled?

  • Settling disputes is the responsibility of DSB.

  • Consultation (1st stage – up to 60 days)

  • The Panel (2nd stage – 45 days + 6 months)

  • How the Panel works?


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How the Panel Works?

  • Before the First Hearing

  • First Hearing

  • Rebuttals

  • Experts

  • First Draft

  • Interim Report

  • Review

  • Final Report

  • The Report becomes a ruling


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Appeal

  • Either side can appeal a panel’s ruling. (Sometimes both sides do so)

  • Each appeal is heard by 3 members of a permanent 7-member Appellate Body

  • The appeal can uphold, modify or reverse the panel’s legal findings and conclusions.

  • DSB has to accept or reject the appeals report within 30 days


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The case has been decided what next?

  • Bring Policy in line with the Ruling

  • Inform the DSB

  • Adjustment Period

  • Mutually Acceptable – Compensation

  • Limited Trade Sanctions

  • How to impose sanctions?

  • DSB watches


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Pakistan’s Experience


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Major Cases


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DS 58: Import Prohibition of Certain Shrimp and Shrimp Products

  • Complainant: Pakistan, Malaysia, India, Thailand

  • Respondent: USA

  • Third Parties: Australia; Colombia; Costa Rica; European Communities; Ecuador; El Salvador; Guatemala; Hong Kong, China; Japan; Mexico; Nigeria; Pakistan; Philippines; Senegal; Singapore; Sri Lanka; Venezuela

  • 8 October 1996: Complainants requested for consultation concerning a ban on Importation of Shrimp & Shrimp Products from the complainants, imposed by US under section 609 of US Public Law 101-162. Violations of Articles I, XI and XIII of GATT 1994, as well nullification and impairment of benefits, were alleged.


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DS 58 (cont.)

  • 9 January 1997: Malaysia and Thailand requested the establishment of a panel.

  • 22 Jan 1997: the DSB deferred the establishment of a panel.

  • 30 January 1997: Pakistan also requested the establishment of a panel.

  • 25 February 1997: DSB established a panel

  • 25 February 1997: India also requested the establishment of a panel on the same matter.

  • 20 March 1997: DSB deferred the establishment of a panel.

  • 10 April 1997: Further to a second request to establish a panel by India, the DSB agreed to establish a panel. It was also agreed to incorporate this panel with that already established in respect of the other complainants.

  • On 15 April 1997, the Panel was composed.


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DS 58 (cont.)

  • 15 May 1998: Report of the Panel was circulated to Members.

  • The Panel found that the import ban in shrimp and shrimp products as applied by the United States is inconsistent with Article XI:1 of GATT 1994, and cannot be justified under Article XX of GATT 1994.

  • 13 July 1998: the US notified its intention to appeal certain issues of law and legal interpretations developed by the Panel.

  • 12 October 1998: Appellate Body’s Report was circulated to Members.

  • The Appellate Body reversed the Panel’s finding that the US measure at issue is not within the scope of measures permitted under the chapeau of Article XX of GATT 1994, but concluded that the US measure, while qualifying for provisional justification under Article XX(g), fails to meet the requirements of the chapeau of Article XX.


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DS 58 (cont.)

  • 6 November 1998: The DSB adopted the Appellate Body Report and the Panel Report, as modified by the Appellate Body Report.

  • On 25 November 1998, the US informed the DSB that it was committed to implementing the recommendations of the DSB and was looking forward to discussing with the complainants the question of implementation. The parties to the dispute announced that they had agreed on an implementation period of 13 months from the date of adoption of the Appellate Body and Panel Reports, i.e. it expired on 6 December 1999.

  • On 22 December 1999, Malaysia and the United States informed the DSB that they had reached an understanding regarding possible proceedings under Articles 21 and 22 of the DSU.


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DS 58 (cont.)

  • 27 January 2000: US stated that it had implemented the DSB’s rulings and recommendations.

  • 12 October 2000: Malaysia requested that the matter be referred to the original panel pursuant to Article 21.5 of the DSU, considering that by not lifting the import prohibition and not taking the necessary measures to allow the importation of certain shrimp and shrimp products in an unrestrictive manner, the US had failed to comply with the recommendations and rulings of the DSB.

  • 23 October 2000: DSB referred the matter to the original panel pursuant to Article 21.5 DSU.

  • 15 June 2001: The Panel circulated its report.


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DS 58 (cont.)

The Panel concluded that:

  • the measure adopted by the US in order to comply with the recommendations and rulings of the DSB violated Article XI.1 of the GATT 1994;

  • in light of the recommendations and rulings of the DSB, Section 609 of Public Law 101-162, as implemented by the Revised Guidelines of 8 July 1999 and as applied so far by the US authorities, was justified under Article XX of the GATT 1994 as long as the conditions stated in the findings of this Report, in particular the ongoing serious good faith efforts to reach a multilateral agreement, remain satisfied.

  • should any one of the conditions referred above cease to be met in the future, the recommendations of the DSB may no longer be complied with. In such a case, any complaining party in the original case may be entitled to have further recourse to Article 21.5 of the DSU.


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DS 58 (cont.)

  • 23 July 2001: Malaysia notified the DSB its intention to appeal the above report. Malaysia, in particular, sought review by the Appellate Body of the Panel’s finding mentioned in point 2 in previous slide.

  • 19 September 2001: the Appellate Body informed the DSB of a delay in the circulation of its Report in this appeal.

  • 22 October 2001: Report was circulated to the Members.

  • The Appellate Body upheld the contested findings of the Panel: Since it had upheld the Panel’s findings that the US measure was now applied in a manner that met the requirements of Article XX of the GATT 1994, the Appellate Body refrained from making any recommendations.

  • 21 November 2001: DSB adopted the Appellate Body Report and the Panel Report, as upheld by the Appellate Body Report.


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DS 192: Transitional Safeguard Measure on Combed Cotton Yarn from Pakistan

  • Complainant: Pakistan

  • Respondent: USA

  • 3 April 2000: Pakistan requested consultations with the US in respect of a transitional safeguard measure applied by the US, as of 17 March 1999, on combed cotton yarn from Pakistan.

    Pakistan claimed as follows:

  • the transitional safeguards applied by the United States are inconsistent with the United States’ obligations under Articles 2.4 of the ATC and not justified by Article 6 of the ATC;

  • the US restraint does not meet the requirements for transitional safeguards set out in paragraphs 2, 3, 4 and 7 of Article 6 of the ATC.


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DS 192 (cont.)

  • 3 April 2000, Pakistan requested the establishment of a panel.

  • 18 May 2000, the DSB deferred the establishment of a panel.

  • Further to a second request to establish a panel by Pakistan, the DSB established a panel at its meeting on 19 June 2000

  • On 30 August 2000, the Panel was composed.

  • The panel circulated its report on 31 May 2001.

  • The Panel concluded that the transitional safeguard measure (quantitative restriction) imposed by the US on imports of combed cotton yarn from Pakistan as of 17 March 1999, and extended as of 17 March 2000 for a further year is inconsistent with the provisions of Article 6 of the ATC.

  • With respect to the other claims, the Panel found that Pakistan did not establish that the measure at issue was inconsistent with the US obligations under Article 6 of the ATC.


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DS 192 (cont.)

  • The Panel recommended that the DSB request that the US bring the measure at issue into conformity with its obligations under the ATC, and suggested that this can best be achieved by prompt removal of the import restriction.

  • On 9 July 2001, the US notified its decision to appeal to the Appellate Body certain issues of law covered in the Panel Report and certain legal interpretations developed by the Panel.

  • On 5 September 2001, the Appellate Body informed the DSB that it would not be able to circulate its report within the 7 September deadline.

  • The Report was circulated to Members on 8 October 2001.

  • The Appellate Body upheld the Panel’s overall conclusion that the transitional safeguard measure taken by the United States with respect to imports of combed cotton yarn from Pakistan was inconsistent with the ATC.


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DS 192 (cont.)

  • The DSB adopted the Appellate Body Report and the Panel Report, as modified by the Appellate Body Report, on 5 November 2001.

  • 21 November 2001: the US stated that it had implemented the DSB’s recommendations and rulings. Specifically, on 8 November 2001, the Committee for the Implementation of Textile Agreements, chaired by the Department of Commerce, had directed the US Customs Service to eliminate the limit on imports of combed cotton yarn from Pakistan. This action was effective from 9 November 2001.


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Ds 327: Anti-Dumping Duties on Matches from Pakistan

  • Complainant: Pakistan

  • Respondent: Egypt

  • On 21 February 2005, Pakistan requested consultations with Egypt regarding definitive anti-dumping duties imposed by Egypt on matchboxes from Pakistan. According to Pakistan, these measures appear to be inconsistent with Egypt’s obligations under the GATT 1994 and the Anti-Dumping Agreement.

  • On 9 June 2005, Pakistan requested the establishment of a panel.  At its meeting on 20 June 2005, the DSB deferred the establishment of a panel. At its meeting on 20 July 2005, the DSB established a panel.

  • On 27 March 2006, Pakistan and Egypt informed the DSB that they had reached a mutually agreed solution under Article 3.6 of the DSU in the form of price undertaking agreements between the concerned Pakistani exporters and the Egyptian Investigating Authority.


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DS 36: Patent Protection for Pharmaceutical and Agricultural Chemical Products

  • Complainant: USA

  • Respondent: Pakistan

  • In its request for consultations dated 30 April 1996, the United States claimed that the absence in Pakistan of (i) either patent protection for pharmaceutical and agricultural chemical products or a system to permit the filing of applications for patents on these products and (ii) a system to grant exclusive marketing rights in such products, violates TRIPS Agreement Articles 27, 65 and 70.

  • On 4 July 1996, the United States requested the establishment of a panel.

  • The DSB considered the request at its meeting on 16 July 1996, but did not establish a panel due to Pakistan’s objection.


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DS 36 (cont.)

  • At the DSB meeting on 25 February 1997, both parties informed the DSB that they had reached a mutually agreed solution to the dispute and that the terms of the agreement were being drawn up, and would be communicated to the DSB once finalized.

  • On 28 February 1997, the terms of the agreement were communicated to the Secretariat.


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DS 243: Rules of Origin for Textiles and Apparel Products

  • Complainant: India

  • Respondent: USA

  • Third Parties: Bangladesh; China; European Communities; Pakistan; Philippines.

  • On 11 January 2002, India requested consultations with the United States in respect of its rules of origin applicable to imports of textiles and apparel products as set out in Section 334 of the Uruguay Round Agreements Act, Section 405 of the Trade and Development Act of 2000 and the customs regulations implementing these provisions.

  • On 7 May 2002, India requested the establishment of a panel.

  • On 22 May 2002, the DSB deferred the establishment of a panel.


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DS 243 (cont.)

  • Further to a second request by India, the DSB established a panel on 24 June 2002.

  • EC, Pakistan and the Philippines reserved their third party rights. On 3 July 2002, Bangladesh reserved its third party rights. On 4 July 2002, China reserved its third party rights.

  • On 10 October 2002, the Panel was composed.

  • On 9 April 2003, the Chairman of the Panel informed the DSB that due to the complexity of the matter, the Panel would not be able to complete its work in six months. The Panel expects to issue its final report to the parties in early May 2003.

  • On 20 June 2003, the Panel Report was circulated to Members.


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DS 243 (cont.)

On 20 June 2003, the Panel Report was circulated to Members. The Panel found that:

  • India failed to establish that section 334 of the Uruguay Round Agreements Act is inconsistent with Articles 2(b) or 2(c) of the RO Agreement; and

  • India failed to establish that section 405 of the Trade and Development Act is inconsistent with Articles 2(b), 2(c) or 2(d) of the RO Agreement;

  • India failed to establish that the customs regulations contained in 19 C.F.R. § 102.21 are inconsistent with Articles 2(b), 2(c) or 2(d) of the RO Agreement;

    At its meeting on 21 July 2003, the DSB adopted the Panel Report.


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DS 246: Conditions for the Granting of Tariff Preferences to Developing Countries

  • Complainant: India

  • Respondent: European Communities

  • Third Parties: Bolivia; Brazil; Colombia; Costa Rica; Cuba; Ecuador; El Salvador; Guatemala; Honduras; Mauritius; Nicaragua; Pakistan; Panama; Paraguay; Peru; Sri Lanka; Venezuela; United States.

  • On 5 March 2002, India requested consultations with the EC concerning the conditions under which the EC accords tariff preferences to developing countries under its current scheme of generalized tariff preferences (“GSP scheme”). India presented this request pursuant to Article 4 of the DSU, Article XXIII:1 of the GATT 1994 and paragraph 4(b) of the so-called Enabling Clause.

  • On 6 December 2002, India requested the establishment of a panel.

  • On 19 December 2002, the DSB deferred the establishment of a panel.


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DS 246 (cont.)

  • At its meeting on 27 January 2003, the DSB established a Panel.

  • On 24 February 2003, India requested the Director-General to compose the Panel.

  • On 6 March 2003, the Director-General composed the Panel.

  • On 22 September 2003, the Chairman of the Panel informed the DSB that it would not be possible to complete its work in six months due to the complexity of the matter involved and that the Panel expected to complete its work at the end of October 2003.

  • On 1 December 2003, the Panel report was circulated to the Members.

  • On 8 January 2004, the European Communities notified its decision to appeal to the Appellate Body certain issues of law covered in the Panel Report.


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DS 246 (cont.)

  • On 5 March 2004, the Chairman of the Appellate Body informed the DSB that it would not be possible for the Appellate Body to complete its work within the 60-day period due to the time required for completion and translation of its Report. The Appellate Body estimated that the Report would be circulated to Members no later than 7 April 2004.

  • On 7 April 2004, the Appellate Body Report was circulated to Members.

  • On 20 April 2004, the DSB adopted the Appellate Body report and the Panel report, as modified by the Appellate Body report.


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DS 267: United States — Subsidies on Upland Cotton

  • Complainant: Brazil

  • Respondent: USA

  • Third Parties: Argentina; Australia; Benin; Canada; Chad; China; Chinese Taipei; European Communities; India; New Zealand; Pakistan; Paraguay; Venezuela; Japan; Thailand.

  • 27 September 2002: Request for Consultation made by Brazil, concerning US agricultural "domestic support" measures, export credit guarantees and other measures alleged to be export and domestic content subsidies on Upland Cotton.

  • Panel was established on 18 March 2003.

  • Panel report was circulated on 8 September 2004.

  • Appellate body report was circulated on 3 March 2005

  • On 18 August 2006, Brazil requested the establishment of an Article 21.5 panel.


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DS 267 (cont.)

  • On 1 September 2006, the DSB deferred the establishment of an Article 21.5 panel. Further to a second request, at its meeting on 28 September 2006, the DSB agreed, if possible, to refer the matter raised by Brazil to the original panel.

  • On 18 and 20 October 2006, Brazil and the United States respectively requested the Director-General to compose the Article 21.5 panel. On 25 October 2006, the Director-General composed the panel.

  • On 18 December 2007, the compliance panel report was circulated to Members.

  • On 12 February 2008, the US and on 25 February 2008, Brazil notified their decision to appeal to the Appellate Body.

  • Compliance panel report is currently under appeal.


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DS 316: Measures Affecting Trade in Large Civil Aircraft


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Thank You


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