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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 ACWH with the help of Mr. Kea Lee, Ms. Ivy Yu And Ms. Isa Liu (30-103). INTRODUCTION.

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state trading enterprises and asia

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 ACWH with the help of Mr. Kea Lee, Ms. Ivy Yu And Ms. Isa Liu (30-103)

RTPC-Hong Kong

introduction
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

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general principles
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

RTPC-Hong Kong

what is a state trading enterprise
WHAT IS A STATE TRADING ENTERPRISE?
  • Article XVII describes three types of enterprises:
    • State enterprises
    • Enterprises granted exclusive privileges
    • Enterprises granted special privileges

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what is a state trading enterprise5
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 STE prohibited if complying with WTO rules

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problems with the definitions
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

RTPC-Hong Kong

objectives of stes
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

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objectives of stes8
OBJECTIVES OF STEs
  • Various objectives among them
    • 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

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types of stes
TYPES OF STEs
  • Statutory marketing boards
  • Export marketing boards
  • Regulatory marketing boards
  • Fiscal monopolies
  • Foreign trade enterprises
  • Boards or corporations resulting from nationalized industries

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exclusive rights or privileges
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

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wto rules on stes
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 “STE”
    • Establishes a working party

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regulation of state trading enterprises in the wto
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”

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general exceptions article xx d of gatt 94
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

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wto obligations concerning stes
WTO OBLIGATIONS CONCERNINGSTEs
  • 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

RTPC-Hong Kong

non discrimination
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

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non discrimination17
NON-DISCRIMINATION
  • Non-discrimination = MFN principle tempered by commercial considerations
  • 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

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no quantitative restrictions
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.”

RTPC-Hong Kong

no quantitative restrictions19
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)

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preservation of the value of tariff concessions
PRESERVATION OF THE VALUEOF TARIFF CONCESSIONS
  • Article II: GATT schedules of concessions (MA)
  • 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

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preservation of the value of tariff concessions21
PRESERVATION OF THE VALUEOF TARIFF CONCESSIONS
  • “Import mark-up” definition in Ad Article XVII:4(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

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notification
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

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what information does the questionnaire seek
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

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what information does the questionnaire seek24
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?

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what information does the questionnaire seek25
WHAT INFORMATION DOES THE QUESTIONNAIRE SEEK?
  • Description of the functioning of the STE
    • 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

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what information does the questionnaire seek26
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

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what happens once a notification is made
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 STE (a standing WTO body)
  • Additional information from notifying Member if requested

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what happens in the working party
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
    • Notifying member may respond orally if possible; if not, a written response may be submitted later
    • For transparency, all questions and responses are circulated as WTO documents
    • Possibility of counter-notifications

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what happens in the working party29
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 STEs;
    • Kinds of activities engaged in by these enterprises
      • Accomplished in 1999 (G/STR/4)

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the sources of data
The Sources of Data
  • Accession Report
  • Notification
    • Coverage of STEs
    • Reasons
    • Functioning
  • Trade Policy Review Policy

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stes in china
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]

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stes in china36
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.

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stes in china37
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.

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stes in china38
STEs in China
  • 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.

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stes in china41
STEs in China
  • Reasons:
    • To ensure thestable 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.

RTPC-Hong Kong

stes in china42
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.

RTPC-Hong Kong

stes in china43
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.

RTPC-Hong Kong

stes in india
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.

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stes in india45
STEs in India
  • 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.

RTPC-Hong Kong

stes in india46
STEs in India
  • Reason
    • 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.

RTPC-Hong Kong

stes in india47
STEs in India
  • Functioning
    • The Indian Export and Import Policyrequires 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.

RTPC-Hong Kong

stes in india48
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 of the domestic requirement as well as the need to conserve exhaustible natural resources.

RTPC-Hong Kong

stes in india49
STEs in India
  • Functioning (Import):
    • Agricultural products: Domestic and int’l prices as well as supply conditions are the main determinants of quantities of imports.
    • Fertilizers: The STE imports or procures domestically keeping in view of the int’l 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.

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stes in india50
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 reduction…of 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 STE has also been removed.

RTPC-Hong Kong

stes in indonesia
STEs in Indonesia
  • Perum Bulog, as a STE, 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 was 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).

RTPC-Hong Kong

stes in indonesia52
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.

RTPC-Hong Kong

stes in indonesia53
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.

RTPC-Hong Kong

stes in indonesia54
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

RTPC-Hong Kong

stes in japan
STEs in Japan

Japan maintains 5 STEs in respective areas.

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stes in japan56
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.

RTPC-Hong Kong

stes in japan57
STEs in Japan

Alcohol

  • Entity: New Energy and Industrial Technology Development Organization (NEDO)
  • Reasons: as a transitional mechanism, NEDO took over the MITI’s 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.
    • Import and export prices are not restricted by law. Resale prices must be approved by METI.

RTPC-Hong Kong

stes in japan58
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.

RTPC-Hong Kong

stes in japan59
STEs in Japan

Import of rice, wheat, and barley in 2002:

(Unit: 1000 tons)

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stes in japan60
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.

RTPC-Hong Kong

stes in japan61
STEs in Japan

Imports/exports of livestock in 2002:

(Unit: Metric tons)

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stes in japan62
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]

RTPC-Hong Kong

stes in korea
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.

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stes in korea65
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.

RTPC-Hong Kong

stes in korea66
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.

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stes in korea67
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.

RTPC-Hong Kong

stes in philippines
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.

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stes in philippines69
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.

RTPC-Hong Kong

stes in chinese taipei
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.

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stes in chinese taipei71
STEs in Chinese Taipei
  • Chinese Taipei notified 7 STEs in 2004.

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stes in chinese taipei72
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.

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stes in chinese taipei73
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.

RTPC-Hong Kong

stes in chinese taipei74
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.

RTPC-Hong Kong

stes in chinese taipei75
STEs in Chinese Taipei

TRQ products

  • Entity: Central Trust of China/Trading Department (CTC/TD)
  • Reason: to conduct int’l 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 agro- 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.

RTPC-Hong Kong

stes in thailand
STEs in Thailand
  • Thailand notified 3 STEs in 2004.

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stes in thailand77
STEs in Thailand

Garlic

  • Entity: Public Warehouse Organization (PWO)
  • Reason: to provide stability and predictability of prices and quantities.
  • Functioning
    • PWO does not conduct direct import operations, but allocate quantities to import under in-quota tariff. Importers will have to perform import operations themselves and then submit an import request to PWO.

RTPC-Hong Kong

stes in thailand78
STEs in Thailand

Ethyl alcohol

  • Entity: Liquor Distillery Organization (LDO)
  • Reason: to control the supply in order to keep down the number of alcohol beverage producers.
  • Functioning
    • LDO only deals with the production of ethyl alcohol 95 per cent to be distributed within the country. Presently there is no import or export of ethyl alcohol 95 per cent by LDO.

RTPC-Hong Kong

stes in thailand79
STEs in Thailand

Cigarettes

  • Entity: Thailand Tobacco Monopoly (TTM)
  • Reason: to reduce negative consequence of cigarette consumption.
  • Functioning
    • TTM is authorized to be the sole importer of tobacco, which is used for producing cigarettes in Thailand. There is no restriction for private companies to import or export cigarettes.

RTPC-Hong Kong

cases
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)
  • Canada – Measures Relating to Exports of Wheat and Treatment of Imported Grain (2003)

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japan trade in semi conductors
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.

RTPC-Hong Kong

japan trade in semi conductors83
Japan - Trade in Semi-Conductors
  • Arguments
    • EEC and Canada contented that such actions were inconsistent with the obligation in Article XVII:1(c) that no contracting party should prevent any enterprise, whether or not a state trading enterprise, from acting solely in accordance with commercial considerations.

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japan trade in semi conductors84
Japan - Trade in Semi-Conductors
  • Arguments
    • Japan argued that Article XVII:1(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 XVII:1(a). Since the monitoring was implemented on a MFN basis, and it did not contain any restrictive effect, Article XVII:1(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 VII:1(c) any more.

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japan restrictions on imports of certain agricultural products
Japan ‑ Restrictions on Imports of Certain Agricultural Products
  • 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 products86
Japan ‑ Restrictions on Imports of Certain Agricultural Products
  • 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 II:4 and XVII in parallel with the admittance for private‑trading to be exempted from the obligation under Article XI:1 in case there existed reasons under Article XI:2.”

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Japan ‑ Restrictions on Imports of Certain Agricultural Products
  • Arguments
    • 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.
    • 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
  • 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 II:4.

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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.

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Japan ‑ Restrictions on Imports of Certain Agricultural Products
  • Finding
    • 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 XI:1 was not covered by Article XX(d) .

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republic of korea restrictions on imports of beef
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.

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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 ArticleXI.

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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 XI:1 and XVII.
    • In accordance with Article XVII, the Panel stated that the mere existence of producer‑controlled import monopoliescould 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.

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korea measures affecting imports of fresh chilled and frozen beef
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.

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Korea - Measures Affecting Imports of Fresh, Chilled and Frozen Beef
  • Arguments (related to STE)
    • 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.

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Korea - Measures Affecting Imports of Fresh, Chilled and Frozen Beef
  • Arguments (related to STE)
    • 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.

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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.

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Korea - Measures Affecting Imports of Fresh, Chilled and Frozen Beef
  • Finding
    • The Panel stated that the distinction between grass-fed/grain-fed beef was not mentioned in Korea’s Schedule, and constituted an import restriction. Thus, the Panel believed that the LPMO didn’t follow the principle of non-discriminatory treatment in Article XVII.

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canada measures relating to exports of wheat and treatment of imported grain
Canada – Measures Relating to Exports of Wheat and Treatment of Imported Grain
  • Factual aspects (Related to STE)
    • The Canada Wheat Board (CWB) Export Regime contains provisions which grants the CWB with exclusively rights and privilege over the purchases and sales of wheat. The US argued that the Regime is inconsistent with GATT Art. XVII:1.
  • Arguments
    • The US contended that in view of the legal structure and mandate, its exercise of privileges, its incentives to act in a discriminatory manner, and the absence of governmental supervision or other countervailing incentives, the CWB as a whole violates GATT Art. XVII:1.

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Canada – Measures Relating to Exports of Wheat and Treatment of Imported Grain
  • Arguments
    • The US argued that the “non-discriminatory treatment” mentioned in sub-para (a) encompasses not only MFN treatment but also two other types of conducts, and that sub-paras (a) & (b) contains distinct legal obligations.
    • The US also submitted that the first sentence of sub-para (b) must be intended to ensure that the STEs do not use their privileges to the disadvantages of commercial actors, and that the second sentence of it includes STE’s competitors.
    • Applying Art. XVII:1 to the present case, the US based its claim on four broad assertions. (Panel Report 6.109-114)

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Canada – Measures Relating to Exports of Wheat and Treatment of Imported Grain
  • Finding
    • The AB found sub-para (a) is the general principal provision, and (b) explains it by identifying types of differential treatment in commercial transactions.
    • The Panel declined to decide whether sub-para (a) refers to concepts other than the MFN treatment since it does not affect its analysis.
    • The Panel stated that since it is an export STE involved here, the obligation in sub-para (b) can be rephrased as: “shall afford the enterprises of the other Members adequate opportunity … to compete for participation for its sales.” And the STE’s competitors, instead of “competing for participation”, ordinarily prevent such sales. Thus they are not encompassed by this provision.

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Canada – Measures Relating to Exports of Wheat and Treatment of Imported Grain
  • Finding
    • In the Panel’s view, the requirement in sub-para (b) is simply intended to prevent STEs from behaving like political actors, but not forcing STEs to refrain from using their privileges.
    • Concerning the present dispute, since the Panel is not persuaded by the US’ 3rd assertion which relates to the incentive created by the CWB Regime, the Panel found the claims based on Art. XVII:1 to be groundless.

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Thank you!

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