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THE DISPUTE OVER THE INDONESIAN NATIONAL CAR PROGRAM Case Study A | Case Study B | Simulations
& Questions for Students Case A
| Case B APPENDIX A Selected
Articles Article
III*
1. The
contracting parties recognize that internal taxes and other internal
charges, and laws, regulations and requirements effecting the internal
sale, offering for sale, purchase, transportation, distribution or use of
products, and internal quantitative regulations requiring the mixture,
processing or use of products in specified amounts or proportions, should
not be applied to imported or domestic products so as to afford protection
to domestic production. 2.
The products of the territory of any contracting party imported
into the territory of any other contracting party shall not be subject,
directly or indirectly to internal taxes or other internal charges of any
kind in excess of those applied, directly or indirectly, to like domestic
products. Moreover, no
contracting party shall otherwise apply internal taxes or other internal
charges to imported or domestic products in a manner contrary to the
principles set forth in paragraph I. 4. The
products of the territory of any contracting party imported into the
territory of any other contracting party shall be accorded treatment no
less favourable than that accorded to like products of national origin in
respect of all laws, regulations and requirements affecting their internal
sale, offering for sale, purchase, transportation, distribution or use….
8.
(a) The
provisions of this Article shall not apply to laws, regulations or
requirements governing the procurement by governmental agencies of
products purchased for governmental purposes and not with a view to
commercial resale or with a view to use in the production of goods for
commercial sale.
(b) The provision of this Article shall not prevent the payment of
subsidies exclusively to domestic producers, including payments to
domestic producers derived from the proceeds of internal taxes or charges
applied consistently with the provisions of this Article and subsidies
effected through governmental purchases of domestic products. In
addition, Article III must be read in light of the following
interpretative provisions found in Annex I of GATT 1994 Notes and
Supplementary Provisions: Ad
Article III Any
internal tax or other internal charge, or any law, regulation or
requirement of the kind referred to in paragraph 1 which applies to an
imported product and to the like domestic product and is collected or
enforced in the case of the imported product at the time or point of
importation, is nevertheless to be regarded as an internal tax or other
internal charge, or a law, regulation or requirement of the kind referred
to in paragraph 1, and is accordingly subject to the provisions of Article
III. Paragraph
1 The
application of paragraph 1 to internal taxes imposed by local governments
and authorities with the territory of a contracting party is subject to
the provisions of the final paragraph of Article XXIV.
The term "reasonable measures" in the last-mentioned
paragraph would not require, for example, the repeal of existing national
legislation authorizing local governments to impose internal taxes which,
although technically inconsistent with the letter of Article III, are not
in fact inconsistent with its spirit, if such repeal would result in a
serious financial hardship for the local governments or authorities
concerned. With regard to
taxation by local governments or authorities which is inconsistent with
both the letter and spirit of Article III, the term "reasonable
measures" would permit a contracting party to eliminate the
inconsistent taxation gradually over a transition period, if abrupt action
would create serious administrative and financial difficulties. Paragraph
2 A tax conforming to
the requirements of the first sentence of paragraph 2 would be considered
to be inconsistent with the provisions of the second sentence only in
cases where competition was involved between, on the one hand, the taxed
product and, on the other hand, a directly competitive or substitutable
product which was not similarly taxed. WTO Agreement on Trade-Related Investment Measures Article 2 1.
Without prejudice to other rights and obligations under GATT 1994,
no Member shall apply any TRIM that is inconsistent with the provisions of
Article III or Article XI of GATT 1994. 2.
An illustrative list of TRIMs that are inconsistent with the
obligation of national treatment provided for in paragraph 4 of
Article III of GATT 1994 and the obligation of general elimination of
quantitative restrictions provided for in paragraph 1 of Article XI
of GATT 1994 is contained in the Annex to this Agreement.
Article 3
All exceptions under GATT 1994 shall apply, as appropriate, to the
provisions of this Agreement. Annex 1. TRIMs
that are inconsistent with the obligation of national treatment provided
for in paragraph 4 of Article III of GATT 1994 include those which are
mandatory or enforceable under domestic law or under administrative
rulings, or compliance with which is necessary to obtain an advantage, and
which require: a.
the purchase or use
by an enterprise of products of domestic origin or from any domestic
source, whether specified in terms of particular products, in terms of
volume of products, or in terms of a proportion of volume of its local
production… WTO AGREEMENT ON SUBSIDIES AND COUNTERVAILING MEASURES PART
I: GENERAL PROVISIONS Definition
of a Subsidy 1.1
For the purpose of this Agreement, a subsidy shall be deemed to
exist if:
(a)(1) there is a financial contribution by a government
or any public body within the territory of a Member (referred to in this
Agreement as "government"), i.e. where:
(i)
a government practice involves a direct transfer of funds (e.g.
grants, loans, and equity
infusion), potential direct transfers of funds or liabilities (e.g. loan
guarantees);
(ii)
government revenue that is otherwise due is foregone or not
collected (e.g. fiscal incentives such as tax credits)[37];
(iii)
a government provides goods or services other than general
infrastructure, or purchases goods;
(iv)
a government makes payments to a funding mechanism, or entrusts or
directs a private body to carry out one or more of the type of functions
illustrated in (i) to (iii) above which would normally be vested in the
government and the practice, in no real sense, differs from practices
normally followed by governments;
or
(a)(2) there is any form of income or price support in the
sense of Article XVI of GATT 1994;
and
(b)
a benefit is thereby conferred. 1.2
A subsidy as defined in paragraph 1 shall be subject to the
provisions of Part II or shall be subject to the provisions of
Part III or V only if such a subsidy is specific in accordance
with the provisions of Article 2. Article 2
2.1
In order to determine whether a subsidy, as defined in
paragraph 1 of Article 1, is specific to an enterprise or industry or
group of enterprises or industries (referred to in this Agreement as
"certain enterprises") within the jurisdiction of the granting
authority, the following principles shall apply:
(a)
Where the granting authority, or the legislation pursuant to which
the granting authority operates, explicitly limits access to a subsidy to
certain enterprises, such subsidy shall be specific.
(b)
Where the granting authority, or the legislation pursuant to which
the granting authority operates, establishes objective criteria or
conditions[38]
governing the eligibility for, and the amount of, a subsidy, specificity
shall not exist, provided that the eligibility is automatic and that such
criteria and conditions are strictly adhered to.
The criteria or conditions must be clearly spelled out in law,
regulation, or other official document, so as to be capable of
verification.
(c)
If, notwithstanding any appearance of non‑specificity
resulting from the application of the principles laid down in
subparagraphs (a) and (b), there are reasons to believe that the subsidy
may in fact be specific, other factors may be considered.
Such factors are: use
of a subsidy programme by a limited number of certain enterprises,
predominant use by certain enterprises, the granting of disproportionately
large amounts of subsidy to certain enterprises, and the manner in which
discretion has been exercised by the granting authority in the decision to
grant a subsidy.[39]
In applying this subparagraph,
account shall be taken of the extent of diversification of economic
activities within the jurisdiction of the granting authority, as well as
of the length of time during which the subsidy programme has been in
operation. 2.2
A subsidy which is limited to certain enterprises located within a
designated geographical region within the jurisdiction of the granting
authority shall be specific. It
is understood that the setting or change of generally applicable tax rates
by all levels of government entitled to do so shall not be deemed to be a
specific subsidy for the purposes of this Agreement.
2.3
Any subsidy falling under the provisions of Article 3 shall be
deemed to be specific. 2.4
Any determination of specificity under the provisions of this
Article shall be clearly substantiated on the basis of positive evidence. PART II:
PROHIBITED SUBSIDIES Prohibition 3.1
Except as provided in the Agreement on Agriculture, the following
subsidies, within the meaning of Article 1, shall be prohibited:
(a)
subsidies contingent, in law or in fact[40],
whether solely or as one of several other conditions, upon export
performance, including those illustrated in Annex I[41];
(b)
subsidies contingent, whether solely or as one of several other
conditions, upon the use of domestic over imported goods. 3.2
A Member shall neither grant nor maintain subsidies referred to in
paragraph 1. PART III:
ACTIONABLE SUBSIDIES Article 5
No Member should cause, through the use of any subsidy referred to
in paragraphs 1 and 2 of Article 1, adverse effects to the interests
of other Members, i.e.:
(a)
injury to the domestic industry of another Member[42];
(b)
nullification or impairment of benefits accruing directly or
indirectly to other Members under GATT 1994 in particular the
benefits of concessions bound under Article II of GATT 1994[43];
(c)
serious prejudice to the interests of another Member.[44] This
Article does not apply to subsidies maintained on agricultural products as
provided in Article 13 of the Agreement on Agriculture. Article
6 6.1
Serious prejudice in the sense of paragraph (c) of Article 5
shall be deemed to exist in the case of:
(a)
the total ad valorem subsidization[45]
of a product exceeding 5 per cent[46];
(b)
subsidies to cover operating losses sustained by an industry; (c)
subsidies to cover operating losses sustained by an enterprise,
other than one time measures which are non-recurrent and cannot be
repeated for that enterprise and which are given merely to provide time
for the development of long‑term solutions and to avoid acute social
problems;
(d)
direct forgiveness of debt, i.e. forgiveness of government-held
debt, and grants to cover debt repayment.[47] 6.2
Notwithstanding the provisions of paragraph 1, serious
prejudice shall not be found if the subsidizing Member demonstrates that
the subsidy in question has not resulted in any of the effects enumerated
in paragraph 3. 6.3
Serious prejudice in the sense of paragraph (c) of
Article 5 may arise in any case where one or several of the following
apply:
(a)
the effect of the subsidy is to displace or impede the imports of a
like product of another Member into the market of the subsidizing Member;
(b)
the effect of the subsidy is to displace or impede the exports of a
like product of another Member
from a third country market;
(c)
the effect of the subsidy is a significant price undercutting by
the subsidized product as compared with the price of a like product of
another Member in the same market or significant price suppression, price
depression or lost sales in the same market;
(d)
the effect of the subsidy is an increase in the world market share
of the subsidizing Member in a particular subsidized primary product or
commodity[48]
as compared to the average share it had during the previous period of
three years and this increase follows a consistent trend over a period
when subsidies have been granted. 6.4
For the purpose of paragraph 3(b), the displacement or impeding of
exports shall include any case in which, subject to the provisions of
paragraph 7, it has been demonstrated that there has been a change in
relative shares of the market to the disadvantage of the non-subsidized
like product (over an appropriately representative period sufficient to
demonstrate clear trends in the development of the market for the product
concerned, which, in normal circumstances, shall be at least one year). "Change
in relative shares of the market" shall include any of the following
situations: (a) there
is an increase in the market share of the subsidized product;
(b) the market share of the subsidized product remains
constant in circumstances in which, in the absence of the subsidy, it
would have declined; (c) the
market share of the subsidized product declines, but at a slower
rate than would have been the case in the absence of the subsidy. 6.5
For the purpose of paragraph 3(c), price undercutting shall include
any case in which such price undercutting has been demonstrated through a
comparison of prices of the subsidized product with prices of a
non-subsidized like product supplied to the same market.
The comparison shall be made at the same level of trade and at
comparable times, due account being taken of any other factor affecting
price comparability. However,
if such a direct comparison is not possible, the existence of price
undercutting may be demonstrated on the basis of export unit values. 6.6
Each Member in the market of which serious prejudice is alleged to
have arisen shall, subject to the provisions of paragraph 3 of
Annex V, make available to the parties to a dispute arising under
Article 7, and to the panel established pursuant to paragraph 4
of Article 7, all relevant information that can be obtained as to the
changes in market shares of the parties to the dispute as well as
concerning prices of the products involved. 6.7
Displacement or impediment resulting in serious prejudice shall not
arise under paragraph 3 where any of the following circumstances
exist[49]
during the relevant period:
(a)
prohibition or restriction on exports of the like product from the
complaining Member or on imports from the complaining Member into the
third country market concerned; (b)
decision by an importing government operating a monopoly of trade
or state trading in the product concerned to shift, for non‑commercial
reasons, imports from the complaining Member to another country or
countries;
(c)
natural disasters, strikes, transport disruptions or other force
majeure substantially affecting production, qualities, quantities or
prices of the product available for export from the complaining Member;
(d)
existence of arrangements limiting exports from the complaining
Member; (e)
voluntary decrease in the availability for export of the product
concerned from the complaining Member (including, inter alia,
a situation where firms in the complaining Member have been autonomously
reallocating exports of this product to new markets);
(f)
failure to conform to standards and other regulatory requirements
in the importing country. 6.8
In the absence of circumstances referred to in paragraph 7,
the existence of serious prejudice should be determined on the basis of
the information submitted to or obtained by the panel, including
information submitted in accordance with the provisions of Annex V. 6.9
This Article does not apply to subsidies maintained on agricultural
products as provided in Article 13 of the Agreement on Agriculture. PART VIII:
DEVELOPING COUNTRY MEMBERS Special and Differential Treatment
of Developing Country Members 27.1
Members recognize that subsidies may play an important role in
economic development programmes of developing country Members. 27.2
The prohibition of paragraph 1(a) of Article 3 shall not apply
to:
(a)
developing country Members referred to in Annex VII.
(b)
other developing country Members for a period of eight years
from the date of entry into force of the WTO Agreement, subject to
compliance with the provisions in paragraph 4. 27.3
The prohibition of paragraph 1(b) of Article 3 shall not
apply to developing country Members for a period of five years, and shall
not apply to least developed country Members for a period of eight years,
from the date of entry into force of the WTO Agreement. 27.4
Any developing country Member referred to in paragraph 2(b)
shall phase out its export subsidies within the eight-year period,
preferably in a progressive manner. However,
a developing country Member shall not increase the level of its export
subsidies[50],
and shall eliminate them within a period shorter than that provided for in
this paragraph when the use of such export subsidies is inconsistent
with its development needs. If
a developing country Member deems it necessary to apply such subsidies
beyond the 8-year period, it shall not later than one year before the
expiry of this period enter into consultation with the Committee, which
will determine whether an extension of this period is justified, after
examining all the relevant economic, financial and development needs of
the developing country Member in question.
If the Committee determines that the extension is justified, the
developing country Member concerned shall hold annual consultations with
the Committee to determine the necessity of
maintaining the subsidies. If
no such determination is made by the Committee, the developing country
Member shall phase out the remaining export subsidies within two years
from the end of the last authorized period. 27.5
A developing country Member which has reached export
competitiveness in any given product shall phase out its export subsidies
for such product(s) over a period of two years.
However, for a developing country Member which is referred to in
Annex VII and which has reached export
competitiveness in one or more products, export subsidies on such
products shall be gradually phased out over a period of eight years. 27.6
Export competitiveness in a product exists if a developing country
Member's exports of that product have reached a share of at least
3.25 per cent in world trade of that product for two consecutive
calendar years.
Export competitiveness shall exist either (a) on the basis
of notification by the developing country Member having reached export
competitiveness, or (b) on the basis of a computation undertaken
by the Secretariat at the request of any Member.
For the purpose of this paragraph, a product is defined as a
section heading of the Harmonized System Nomenclature.
The Committee shall review the operation of this provision
five years from the date of the entry into force of
the WTO Agreement. 27.8
There shall be no presumption in terms of paragraph 1 of
Article 6 that a subsidy granted by a developing country Member
results in serious prejudice, as defined in this Agreement.
Such serious prejudice, where applicable under the terms of
paragraph 9, shall be demonstrated by positive evidence, in
accordance with the provisions of paragraphs 3 through 8 of
Article 6. 27.9
Regarding actionable subsidies granted or maintained by a
developing country Member other than those referred to in paragraph 1
of Article 6, action may not be authorized or taken under
Article 7 unless nullification or impairment of tariff concessions or
other obligations under GATT 1994 is found to exist as a result of
such a subsidy, in such a way as to displace or impede imports of a like
product of another Member into the market of the subsidizing developing
country Member or unless injury to a domestic industry in the market of an
importing Member occurs. 27.13
The provisions of Part III shall not apply to direct forgiveness of
debts, subsidies to cover social costs, in whatever form, including
relinquishment of government revenue and other transfer of liabilities
when such subsidies are granted within and directly linked to a
privatization programme of a developing country Member, provided that both
such programme and the subsidies involved are granted for a limited period
and notified to the Committee and that the programme results in eventual
privatization of the enterprise concerned. 27.14
The Committee shall, upon request by an interested Member,
undertake a review of a specific export subsidy practice of a developing
country Member to examine whether the practice is in conformity with its
development needs. 27.15
The Committee shall, upon request by an interested developing
country Member, undertake a review of a specific countervailing measure to
examine whether it is consistent with the provisions of paragraphs 10
and 11 as applicable to the developing country Member in question.
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