Posted: September 8th, 2016

Evaluate the obligations of PG in the three instances as raised in the scenario, and advise PG of its immunities if any

Problem-Question Scenario: Assume Paragon (PG) and Srabon (SN) are Member States of the World Trade Organisation (WTO). Both have been trading partners for a long time but there are no Preferential Trade Agreements (PTAs) between them. On 15 July 2015, PG enacted the ‘Fair Trading and Tariffs Act’ which introduced a new retail excise tax on certain luxury products, including cars, and Quantitative Restrictions (QRs) on the textiles. Consequently, a 30 percent tax has been imposed on all vehicles worth over US$ 30,000 while cars priced at $ 30,000 or under are taxed at 10 percent. Arguably, the 90 percent of the imported cars from SN fell into the high class classification, whereas only 10 percent of domestic cars (PG’s) fell into that high class classification. SN claimed, ‘automobiles costing over $ 30,000 are ‘like products’ to automobiles costing less, since they have the same end use, basic physical characteristics, and tariff classification.’ PG disagrees with this approach, defending, ‘the tax could be imposed on the basis of a threshold of $30,000, as long as the tax was not applied to stimulate direct protectionism for domestic production.’ SN further maintained that QRs are damaging (to its textile sector), discriminatory and inconsistent with the obligations under the General Agreement on Tariffs and Trade (GATT). QRs are discriminatory because Palvion and Domain, the two other Member States of the WTO, are not subjects to QRs. PG justified its action under Article XXIV of GATT as a PTA was concluded among PG, Pavlion and Domain but SN argued, their free trade policies have yet to cover ‘substantially all the trade.’ To make matters worse, very recently the Director of Plant Quarantine of PG has adopted another policy for the importation of bananas from overseas. The policy provides, ‘the importation of bananas can only be permitted subject to the strict adherence to import conditions and risk assessment methods as stipulated under its relevant laws and regulation’. Accordingly, the pre-harvest, harvest and post-harvest practices for the production of bananas are required to be scientifically investigated by a group of experts, and the compliance of these import conditions and assessments will be monitored by PG through verification and audit of maturity testing and packaging practices. SN contends that PG’s measures and proceedings are discriminatory towards imports and more trade restrictive than required under The WTO Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement) and the Agreement on Technical Barriers to Trade (TBT Agreement) to achieve its appropriate level of safety protection. SN now wishes to initiate legal proceedings under the WTO dispute settlement mechanism. Answer the following: (Marks 10+20+10) 1. Identify and briefly examine the major legal issues and trading principles involved in the above scenario from the perspective of International Trade Law. (Marks 10) 2 2. What grounds does SN need to establish to have suitable remedies? Critically analyse these grounds and substantiate your argument by relying on relevant provisions of GATT, SPS and TBT Agreements and the decisions of the Appellate Body under the WTO dispute settlement system. (Marks 20) 3. Evaluate the obligations of PG in the three instances as raised in the scenario, and advise PG of its immunities if any. (Marks 10)