In the Xia case, if the WTO were to rule in favor of Brazil, which of the WTO trade agreements would contain the justification and why?
Brazil banned imports of Xia goods from China because there was allegations and unconfirmed speculation pertaining to China’s use of hazardous materials (for example, lead paint and potentially carcinogenic plastic and rubbers) to manufacture toys cheaply, which sparked consumer panic around the globe. The imports of Xia goods were banned until the test was performed to guarantee that these goods do not possess any health risk. The Chinese government completely refuted this claim and fearing that other country might follow the similar pattern, took the matter before WTO for resolution.
If WTO were to rule in favor of Brazil, it would justify it on the basis of “Technical Barriers to Trade Agreement (TBT)”. This agreement is intended that technical regulations, standards and procedures of conformity assessment do not unnecessarily international trade barriers, while recognizing the right of Members to take regulatory measures to achieve its legitimate objectives, including: the imperatives of national security, the requirements in terms of quality, the protection of human health or safety and the life or health of animals, plant life, environmental protection and prevention practices likely to mislead. (Fliess and Schonfeld, 2011)
TBT Agreement applies to:
•Technical regulations: These are measures that establish the features of a product and the processes and production methods which compliance is mandatory.
•Standards: These are measures approved by a recognized body that provide, for common and repeated use, rules, guidelines or characteristics for products and processes and production methods which compliance is voluntary. •The procedures for conformity assessment: procedures that are used,
directly or indirectly, to determine that relevant requirements in technical regulations or standards are fulfilled.
These measures should be applied only to extent necessary to protect human, plan or animal life and should be based on scientific principles. Since Xia goods are alleged to have some health risks, the temporary ban on its import was justified until it was provided that it is free of health hazards.
2.If the details of the Xia case were indeed presented to the WTO, explain what the WTO ruling would most likely be and why. Answer: The objective of the dispute settlement mechanism is to secure a positive solution to a dispute. This is clearly to be preferred to a mutually acceptable to the parties to the dispute and consistent with the covered agreements. Failure to reach a mutually agreed solution, the first objective of the dispute settlement mechanism is usually to secure the withdrawal of the measures concerned if these are found to be inconsistent with the provisions of any of the covered agreements. Do not resort to compensation only where it is not feasible immediately suppress inconsistent with a covered agreement and as a temporary measure pending the withdrawal. The last resort which this Understanding to the Member invoking the dispute settlement procedures is the possibility of suspending a discriminatory manner against another Member, the application of concessions or other obligations under the covered agreements provided that the DSB authorize the adoption of these measures. (Raghavan, 2000).
If it is indeed proved that Xia goods are manufactured from hazardous materials, the ruling of WTO is likely to be in favor of Brazil. In such a case, WTO is likely to define an international standard for Xia’s goods to be exported to other countries. If the quality of product falls below this minimum standard, the ban on imports will be justifiable. On the other hand, if goods from China are meeting these standards, the ruling would be in favor of China and Brazil would not be able to restrict its import.
3.In the soybean case, what was the measure adopted by the Chinese government to protect soybean farmers from import surges, and what are the
WTO parameters for instituting such measures?
China imported 49% of Brazil’s soybean sued until July 2012. These were 17.1 million tones from 34.9 Total you bought. Thus, the South American country is located on the first exporter of oilseed Asian giant, the largest global importer of the product. (Kassai and Colitt, 2013)
Brazilian soybean exports to China were being used to feed domestic cattle and poultry stocks in China. This rise in the demand for soybeans reflected the discovery by animal nutritionists that combining 1 part soybean meal with 4 parts grain, usually corn, in feed rations would sharply boost the efficiency with which livestock and poultry converted grain into animal protein.
Chinese government restricted imports on soybean and argued that surge of imported soybeans and its lower cost were negatively affecting the livelihood of domestic coastal farmers who were being forced to increase the domestic price of soybean to offset crop losses from flooding. Here, the Chinese government has used “Agreement on Safeguard” to protect soybean farmers from import surges. Such measures are used when increased import of particular products seriously threatens the importing country’s domestic industry.
WTO parameters for instituting such measures:
a) Imports must have serious implications for domestic industry b) Measures should only be temporary
c) Should not be discrimination while imposing such measures on different countries.
4. If the details of the soybean case were indeed presented to the WTO, explain what the WTO ruling would most likely be and why.
The Chinese government would reduce or eliminate the quotas and other
measures which until now have protected domestic production of soybeans from cheaper imports. China’s consumption of soybeans ballooned by more than 160% between 2000 and 2011 when import barriers were removed, but the area planted with soybeans declined by 20% during those same years. Chinese farmers were simply unable to compete with imported soybeans that were RMB 300 to 600 (US$45-90) cheaper per ton than domestic beans. Imported soybeans now account for three-quarters of the soybeans processed into cooking oil and feed in China, the products of soybean crushing.
If China is able to prove that domestic soybean producers are not able to survive because of low cost imports from Brazil, the WTO ruling would be in favor of China and such measures would be upheld. However, if such measures were used as retaliation to Brazilian ban on Chinese toys, the WTO ruling would be in favor of Brazil and China would not be able to restrict import of Soybean from Brazil.
Raghavan, Chakravarthi (2000). The World Trade Organization and its Dispute Settlement System. Retrieved from: http://www.twnside.org.sg/title/tilting.htm
Kassai Lucia, Colitt Raymond. (2013). Brazil Soy Boom Bottlenecked as China Left Waiting: Commodities. Retrieved from http://www.bloomberg.com/
Busch, Marc L. Eric Reinhardt (2003), “Developing Countries and GATT/WTO Dispute Settlement”, Journal of World Trade 37(4)
Filess Barbara, Schonfeld Raymond, (2011). Using International Standards in Regulations. OECD Provides a New Tool for Governments. Retrieved from: http://www.astm.org/SNEWS/MJ_2011/perspective_mj11.html
World Trade Organization. (2014). Technical barriers to trade. Retrieved from: http://www.wto.org
World Trade Organization. (2014). Agreement on Safeguards. Retrieved from: http://www.wto.org
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