STATE TRADING ENTERPRISES AND ASIA

1
STATE TRADING ENTERPRISES AND ASIA

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

2
INTRODUCTION

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

3
GENERAL PRINCIPLES

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

4
WHAT IS A STATE TRADING ENTERPRISE?

• Article XVII describes three types of
  enterprises
• State enterprises
• Enterprises granted exclusive privileges
• Enterprises granted special privileges

5
WHAT IS A STATE TRADING ENTERPRISE?

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

6
PROBLEMS WITH THE DEFINITIONS

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

7
OBJECTIVES OF STEs

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

8
TYPES OF STATE TRADING ENTERPRISES

• Statutory marketing boards
• Export marketing boards
• Regulatory marketing boards
• Fiscal monopolies
• Foreign trade enterprises
• Boards or corporations resulting from
  nationalized industries

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EXCLUSIVE RIGHTS OR PRIVILEGES

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

10
WTO RULES ON STEs

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

11
REGULATION OF STATE TRADING ENTERPRISES IN THE WTO

• Other Articles in GATT
• Articles II, XI, XIII, XIV, XVIII, XX, and XXXVII
• Agreed interpretations of these Articles -
  interpretative notes

12
GENERAL EXCEPTIONS - ARTICLE XX(d) of GATT 94

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

13
WHICH ARE THE FUNDAMENTAL WTO PRINCIPLES STEs
MUST FOLLOW?
14
WTO OBLIGATIONS CONCERNINGSTATE TRADING
ENTERPRISES

• Four main rules based on fundamental GATT / WTO
  principles
• 1. Non-discrimination
• 2. No quantitative restrictions (on imports or
  exports)
• 3. Preservation of the value of tariff
  concessions
• 4. Transparency

15
NON-DISCRIMINATION

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

16
NON-DISCRIMINATION

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

17
NO QUANTITATIVE RESTRICTIONS

• Interpretative note to Articles XI, XII, XIII,
  XIV, and XVIII
• Throughout these Articles, the terms import
  restrictions and export restrictions include
  restrictions made effective through state trading
  operations.

18
NO QUANTITATIVE RESTRICTIONS

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

19
PRESERVATION OF THE VALUEOF TARIFF CONCESSIONS

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

20
PRESERVATION OF THE VALUEOF TARIFF CONCESSIONS

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

21
NOTIFICATION

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

22
WHAT INFORMATION DOES THE QUESTIONNAIRE SEEK?

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

23
WHAT INFORMATION DOES THE QUESTIONNAIRE SEEK?

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

24
WHAT INFORMATION DOES THE QUESTIONNAIRE SEEK?

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

25
WHAT HAPPENS ONCE ANOTIFICATION IS MADE?

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

26
WHAT HAPPENS IN THE WORKING PARTY?

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

27
WHAT HAPPENS IN THE WORKING PARTY?

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

28
Current developments

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

29
State Trading Enterprises in East and South-East
Asian Members
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The Sources of Data

• Accession Report
• Notification
• Coverage of STEs
• Reasons
• Functioning
• Trade Policy Review Policy

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Notifications of Asian Members
32
Notifications of Asian Members
33
Notifications of Asian Members
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STEs in China

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

35
STEs in China

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

36
STEs in China

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

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STEs in China

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

40
STEs in China

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

41
STEs in China

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

42
STEs in India

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

43
STEs in India

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

44
STEs in India

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

45
STEs in India

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

46
STEs in India

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

47
STEs in India

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

48
STEs in Indonesia

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

49
STEs in Indonesia

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

50
STEs in Indonesia

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

51
STEs in Indonesia

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

52
STEs in Japan

• Japan maintains 5 STEs in respective areas.

53
STEs in Japan

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

54
STEs in Japan

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

55
STEs in Japan

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

56
STEs in Japan

• Import of rice, wheat, and barley in 2002

(Unit 1000 tons)
Products Total quantity imported Quantity imported by STE
Rice 664 663
Wheat 5,033 5,031
Barley 1,450 1,450
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STEs in Japan

• Designated dairy products
• Entity Agriculture and Livestock Industries
  Corporation (ALIC)
• Reason to stabilize supply and prices, to
  promote dairy industries and to improve national
  diet.
• Functioning (similar to MAFF)
• dealing with in-quota imports of designated dairy
  products established in Schedule
• collecting a part of over-quota tariffs of such
  imports
• the resale prices are determined by a tender.

58
STEs in Japan

• Imports/exports of livestock in 2002

(Unit Metric tons)
Description of products Import Import Export Export
Description of products Total quantity imported Quantity imported by STEs Total quantity exported Quantity exported by STEs
Skimmed milk powder and solids 3431 0 10 0
Whole milk powder and other solids 21 0 28 0
Condensed milk 19 0 14 0
Buttermilk powder and other solids 10 0 86 0
Whey and modified whey 16475 4,555 1792 0
Butter and butter oil 6648 6318 3 0
59
STEs in Japan

• In 2002 Trade Policy Review Report, Secretariat
  stated that
• On 31 March 2002, the Salt Industry Centre of
  Japan ceased its role of state trading enterprise
  owing to the deregulation of salt business.1

60
STEs in Korea

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

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Entities Products
Ministry of Agriculture Forestry (MAF) Rice
Agricultural and Fishery Marketing Corporation (AFMC) Genus Capsicum, Garlic, Onions, Sesamum seeds, Ground Nuts, etc.
Livestock Products Marketing Organization (LPMO) Meat of bovine animals
National Livestock Cooperatives Federation (NLCF) Natural honey
Cheju Citrus Grower's Agricultural Cooperative, (CCGAC) Oranges, Mandarins and other tangerines
Korea Ginseng Cooperative Federation (KGCF) Ginseng
National Forestry Cooperatives Federation (NFCF) Pine nuts
62
STEs in Korea

• Rice
• Entity Ministry of Agriculture Forestry (MAF)
• Reasons to stabilize domestic markets
• Functioning
• The MAF has the exclusive rights to import tariff
  quotas on rice and barley as established in
  Korea's C/S
• The domestic sales prices of rice are determined
  by the MAF based on import prices, management
  costs, domestic consumer prices and other
  economic factors.

63
STEs in Korea

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

64
STEs in Korea

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

65
STEs in Philippines

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

66
STEs in Philippines

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

67
STEs in Chinese Taipei

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

68
STEs in Chinese Taipei

• Chinese Taipei notified 7 STEs in 2004.

Entities Products
Taiwan Sugar Company (TSC) Sugar
Taiwan Salt Industrial Corporation (TSI Corp.) Salt
Taiwan Tobacco and Liquor Corporation (TTL) Tobacco and Alcohol
Taiwan Provincial Fruit Marketing Cooperative (TPFMC) Banana
Council of Agriculture (COA) Rice
China Engraving and Printing Works (CEPW) Bank note paper
Central Trust of China/Trading Department (CTC/TD) Agricultural and fishery products which are subject to TRQ (TRQ products)
69
STEs in Chinese Taipei

• Tobacco and Alcohol
• Entity Taiwan Tobacco and Liquor Corporation
  (TTL)
• Reason The TTL was established to supersede the
  Taiwan Tobacco and Wine Board. It will be
  privatised in the future.
• Functioning
• To reserve an exclusive privilege for the
  domestic production and repackaging of tobacco
  products until the end of 2003.
• To enjoy no special privileges. Any entity
  approved by the Ministry of Finance can engage in
  importation/exportation.

70
STEs in Chinese Taipei

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

71
STEs in Chinese Taipei

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

72
STEs in Chinese Taipei

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

73
STEs in Thailand

• Thailand notified 3 STEs in 2004.

Entities Products
Public Warehouse Organization (PWO) garlic
Liquor Distillery Organization (LDO) ethyl alcohol
Thailand Tobacco Monopoly (TTM) cigarettes
74
WTO Disputes relating to STEs in the East and
South-East Asia
75
The Relating Cases

• Japan - Trade in Semi-Conductors (1988)
• Japan - Restrictions on Imports of Certain
  Agricultural Products (1988)
• Republic Of Korea - Restrictions on Imports of
  Beef - Complaint By The United States (1989)
• Korea - Measures Affecting Imports of Fresh,
  Chilled and Frozen Beef (2000)

76
Japan - Trade in Semi-Conductors

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

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Japan - Trade in Semi-Conductors

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

78
Japan - Restrictions on Imports of Certain
Agricultural Products (1988)

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

79
Japan - Restrictions on Imports of Certain
Agricultural Products (1988)

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

80
Japan - Restrictions on Imports of Certain
Agricultural Products (1988)

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

81
Japan - Restrictions on Imports of Certain
Agricultural Products (1988)

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

82
Japan - Restrictions on Imports of Certain
Agricultural Products

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

83
Republic Of Korea - Restrictions on Imports of
Beef

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

84
Republic Of Korea - Restrictions on Imports of
Beef

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

85
Republic Of Korea - Restrictions on Imports of
Beef

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

86
Korea - Measures Affecting Imports of Fresh,
Chilled and Frozen Beef

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

87
Korea - Measures Affecting Imports of Fresh,
Chilled and Frozen Beef

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

88
Korea - Measures Affecting Imports of Fresh,
Chilled and Frozen Beef

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

89
Korea - Measures Affecting Imports of Fresh,
Chilled and Frozen Beef

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

90

• Thank you!