Posted: March 1st, 2014

law (international trade law)

Terranueva’s Trade Barriers Affecting Imported Beer and Whiskey1
You are an associate with the law firm of Ruth, Gehrig & DiMaggio. The firm’s clients
include the National Restaurant Federation of Terranueva, a developing country in Latin
America. The National Restaurant Federation is a private business association in the country.
The National Restaurant Federation asks your law firm to assist Terranueva’s Delegation to the
World Trade Organization (WTO) in the matter described below.

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The Mission of Terranueva to the WTO has received a request for consultations pursuant
to the WTO Dispute Settlement Understanding from the Mission of Richland to the WTO. The
request for consultations explains that Superbrew, Inc., a Richland company that is one of the
world’s largest producers of beer and distilled alcoholic beverages, has reported that it faces
unlawful and unjustifiable trade barriers in Terranueva that restrict its efforts to export its
products to Terranueva. The trade barriers in question apply to lager beer, specialty beer (i.e.,
ales, dark beers & other non-lager types of beers), non-alcoholic beer, and whiskey. The request
for consultations asserts that the trade barriers constitute violations of GATT articles I(1), II(1),
III(2), III(4), and XI(1).
In connection with Richland’s request for consultations, Terranueva’s Permanent
Representative to the WTO, Ambassador Teresa Mendoza, requests you to prepare a
memorandum to her advising her on whether any of the trade barriers identified by Richland in
paragraphs 1 through 9 below constitutes a violation of one or more of the cited GATT
provisions (i.e., GATT articles I (1), II (1), III (2), III (4) and XI (1)). Ambassador Mendoza
asks you to include in your analysis whether the measure in question 2 is justifiable under GATT
article XXIV and in question 9 she asks you to discuss article XXIII.
1. Under its tariff statute and its WTO Schedule of Concessions (“bindings”),
Terranueva imposes the following ad valorem customs duties:
10 percent on wine and non-alcoholic beer
20 percent on lager beer
30 percent on specialty beers
Richland alleges that this treatment violates GATT article I. Ambassador Mendoza asks you to
include an analysis of the pertinent “like products” criteria. 2. Pursuant to a bilateral trade agreement with Bugslavia governing trade in food and
beverages and no other products, Terranueva imposes customs duties of 20 percent on specialty
beers produced in microbreweries in Bugslavia and imported into Terranueva. Microbreweries
are defined in the trade agreement as breweries whose production capacity does not exceed a
specified volume. Richland alleges that this treatment violates GATT article I. You should
evaluate, first, whether this treatment is protected under GATT article XXIV. Then, you should
assume for purpose of analysis that it is not protected under article XXIV and, based on this
assumption, whether it is a violation of article I.
1 Adapted from Peter Van den Bossche, The Law and Policy of the World Trade Organization, pp. 372-73.3. Terranueva imposes a value-added tax (VAT) of 2 percent on retail sales of
domestically produced non-alcoholic beverages (including non-alcoholic beer) and a VAT of 3
percent on retail sales of imported non-alcoholic beverages. Richland alleges that this treatment
violates GATT articles I:1, II:1, and III: 2.
4. Terranueva imposes a “user fee” of 0.1 percent (0.001) on all commercial
importations, in addition to the ad valorem customs duties, in order to defray the costs of
customs administration. Richland alleges that this “user fee” violates GATT article II.
5. Terranueva imposes internal excise taxes of 15 percent on wine, 15.5 percent on lager
beer, and 30 percent on specialty beer. Richland alleges that this treatment violates GATT
article III:2. Ambassador Mendoza asks you to include an analysis of the pertinent “like
products” criteria.
6. Terranueva has established a program of government-subsidized low-interest loans to
assist small businesses. Under the program, microbreweries in Terranueva are eligible to receive
loans to assist them in purchasing equipment for the production of specialty beers. The loans are
available only to microbreweries operating and producing in Terranueva. In addition, under the
same small-business program, small bars and cafes in Terranueva are eligible to receive
government-subsidized low-interest loans to assist them in financing the purchase of specialty
beers produced by microbreweries operating in Terranueva. Again, microbreweries are defined
as breweries whose production capacity does not exceed a specified volume. Richland alleges
that this program violates GATT article III: 4. (In this question, you do not need to consider any
issues under the WTO Agreement on Subsidies and Countervailing Measures, as another lawyer
is researching these questions.)
7. Terranueva law prohibits the retail sale of distilled alcoholic beverages including
whiskey, bourbon, gin, and vodka, including prohibiting the serving of such beverages in
restaurants, bars, and cafes. Richland alleges that this prohibition violates GATT articles III:4
and XI:1. Ambassador Mendoza asks you to include an analysis of the pertinent “like products”
criteria.
8. Under Government Services Reform Act of 2001, the cafeterias in all government
ministries and agencies in Terranueva are permitted to buy domestically produced wine and beer,
but are prohibited from buying imported alcoholic beverages. Richland alleges that this program
violates GATT article III:4.
9. Your firm’s client, Terranueva’s National Restaurant Federation, a private business
association, has instructed its 10,000 members to serve only domestically produced wine, and not
beer, with traditional Terranueva dishes. Richland alleges that this treatment violates GATT
articles III:4 and/or XI:1 or, if it is not a violation, constitutes non-violation nullification and
impairment within the meaning of GATT article XXIII(1)(b).

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