International Trade and Finance Law
Klausland expressed its willingness to be bound by the provisions of the WTO agreement once it acceded to it in 2008. It is, therefore, under a legal obligation to comply with the rules and principles of international trade. Moreover, it has to accomplish any of the duties imposed upon it by the agreement in order to develop an efficient international trade system. The domestic measures, policies, and actions to be undertaken have to be in accordance with the WTO agreement and other legislations related to the WTO and governing and international trade (Trebilcock 1999).
Klausland is a country vulnerable to the adverse impacts of climate change; therefore, it has to take measures that will ensure environmental protection and conservation. The steps undertaken are gearing towards adopting clean energy production. Consequently, it has imposed a ban on imports of oils and gas from other countries and embraced energy production mechanisms using wind and solar in order to cope with energy deficits. It has come up with several trade restrictions to achieve its aim of producing clean energy. The trade restrictions influence the GATT in a certain way.
The WTO agreement itself has no particular point that addresses environment-related matters. Nevertheless, an equitable, transparent, and non-discriminatory multilateral trading system contributes a lot to the international and national efforts to protect and conserve the environment as well as promote sustainable development. In accordance with the WTO rules, jurisprudence member states have a right to adopt trade-related policies and measures for the purpose of protecting and conserving the environment. In fact, sustainable development and environmental protection are inter-alia incorporated into the preamble of the agreement that establishes the WTO (Veel 2009).
Therefore, Klausland has the right to develop policies mitigating the climate change through the protection of environment. It is within its legal right to impose the ban of oil and gas imports from other countries to protect the environment. Some of the measures instituted by Klausland with the aim of mitigating the adverse impact of climate change include restricting international trade. Therefore, they can have adverse effects on the rights of other members of the WTO. Some of the measures violate the fundamental business rules and principles of WTO hence resulting in tension. The tension has to mitigate the adverse effect of climate change by conserving and protecting the country’s environment through trade restrictions. On the other hand, such restrictions lead to the violation of other states’ rights to trade at the international level (Alexander 2008).
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There are exceptions to Article 20 of GATT that mitigate these types of tension. The exceptions to Article 20 are majorly aimed at establishing a balance between the right of the members of the WTO to take regulatory measures including trade restrictions and the rights of the other WTO members. Members can impose trade restrictions to achieve legal policy objectives, for instance, protect and conserve the environment provided that they did not violate the rights of other WTO members to engage in the international trade (August 2004).
The rights of Klausland to come up with the measure and policies that will help it mitigate the adverse impact of climate change are subject to strict conditions. Moreover, such measures should not violate the principles established in the GATT. It has, therefore, the duty to ensure that the trade restriction does not violate the requirements of Article 20 of GATT. The article expressly establishes the principle of the ‘Most Favored Nation’. The principle prohibits members from instituting trade measures that will favor some states over the others hence restricting a fair competition among the states.
This principle as a matter of the general rule requires that trade should be devoid of any discrimination among states. Hence, to ensure a fair international trade, each state should be treated equally. The states are, therefore, under the obligations not to give a special favor to a particular state. However, if the association gives a particular state a favor, then it should extend the same favor to all the state members of the WTO. For instance, the state cannot lower the customs duty rate for one of the products of a particular state (Mercurio 2010).
Reducing the custom duty rates by 5% on Samoa wind turbines as well as solar panels and imposing a lower tax rate of 15% on the sales of wind turbines produced in Samoa demonstrates a clear violation of the principle of non-discrimination. Lowering customs duty rate and local tax rate shows a preferential treatment of wind turbine and solar panel from Samoa over other countries that is against the principle of non-discrimination. It, however, can give preferential treatment of products from Samoa under certain conditions. The first condition is when the two countries are within a particular trading region and the second one is when they have a free trade agreement that applies only to goods traded within the region (Vranes 2009).
The principle of non-discrimination was well elaborated in the WTO dispute of the United States. In this dispute, the United States wanted to protect a specific species of sea turtles; hence, it banned the import of a particular type of shrimp and shrimp product. Hence, the countries with those species of sea turtle had to use a turtle-excluder device in fishing of shrimp for their shrimp product to be accepted as import in the US. The device was the one used by the US fishermen. However, the US provided technical and financial assistance to countries in the Western Hemisphere. Further, implementing the use of the device took them a longer time. However, it did not give the same advantage to other countries such as India, Malaysia, Pakistan, and Thailand. They, therefore, instituted this joint complaint about the ban (Carr 2005).
According to the appellate body, the rights of countries regarding trade policies and measures of protecting and conserving their environment can never be overstated. Definitely, countries are provided with such rights under Article 20 of GATT. Article 20 provides a number of exceptions from the trade rules of the WTO provided that a certain criterion such as non-discrimination is attained. Therefore, introducing a high customs duty on gas and oil or imposing an import ban on them because of the harmful emissions they produce is legitimate under Article 20 of the GATT. This is because all the imports of gas and oil are banned and a custom handling duty is applied to imports from all countries; hence, no country is discriminated to the extent of the application of these measures. However, in this dispute, the US lost to the complainant, because its measures were discriminatory to the complaining countries.
The appellate body recognized the significance of protecting and preserving the environment by the WTO members. Further, it acknowledged the fact that the sovereign members of the WTO can institute and adopt policies and measures to protect their environment as recognized in Article 20 of the GATT. However, the application of such policies should not result in arbitrariness neither should they discriminate the member states of the WTO (Guzman 2009). Those measures have to qualify for exemption as required under the Article 20. The measures should not be applied discriminatorily to the countries where there are the same prevailing conditions. More so, they should not be used in a way that leads to encumbrance of international trade. It is, therefore, undisputed that Klausland has a right to come up with the trade restrictions for the purpose of protecting and conserving the environment. However, the trade restrictions are legitimate only if they do not infringe the rights of other WTO members’ states to engage fairly in trade under the GATT.
The National Treatment Rule is another important principle that has to be observed while coming up with trade restrictions. It is provided under Article 3 of GATT. This rule requires that a member state must not discriminate imports from other countries in relation to similar domestic products. However, member state can impose special tariffs since it is a border measure. Klausland had, therefore, the right to impose 20% and 10% customs duty on the foreign wind turbine and solar panel respectively (Goyal 2006).
The National Treatment Rule not only prohibits states from adopting policies that discriminate imports from other states but also prohibits states from using non-tariff measures to change the impacts of tariffs. It requires an equal national treatment for all other members. Therefore, as a general principle, internal taxes or other domestic charges should not be used by members as a mechanism to protect the value of their domestic products (Hudec 2002).
Article 3 (2) of GATT also requires members not to apply different standards when they are imposing internal taxes and other internal charges on domestic and imported goods. Neither, should they impose higher charges and rates on imported products than those imposed on domestic product. It is a requirement under Article 3 (4) that members favorably treat the imported goods as well as the “like” domestic goods.
Klausland has complied with the principle of national treatment to a large extent; it has imposed an internal tax rate of 20% which applies both to domestic wind turbines and solar panels and those manufactured abroad . It has also gone further to exempt any wind turbine and solar panel produced domestically or abroad that had fewer parts that are easy to recycle after decommissioning from internal taxation. There is no preferential taxation on one product over the other (Neumann 2003).
However, the rule of national principle has exceptions, especially, when it comes about government procurement, hence permitting the government to purchase domestic product preferentially. The fact that it has limited the government bodies to using only nationally produced solar panels.
The government has the right to take actions against dumping in order to protect their domestic products. The GATT in the Article 6 allows it to institute anti-dumping policies in circumstances where its domestic industry has suffered a genuine and material injury. However, for it to deal with dumping, several factors have to be put into consideration. First, it must be proved that dumping is taking place or has already been occasioned. Second the degree of dumping must be calculated that is how the export price is compared to the exporting company’s home market price. Finally, it must be shown whether dumping is hurting the domestic industry; hence, there must be intensive investigations carried out according to the specified rules (Bhala 2001). If the investigation shows that in the real sense, there is dumping that negatively affects the local industry, then the government has the right to impose anti-dumping measures. Alternatively, the country, which the goods are being imported from, can decide to raise the price to a level agreed with the importing country to avert the anti-dumping import duty (Anden?s 2007).
The anti-dumping measure is, however, valid for five years after its adoption. Nevertheless, if the investigations prove that the determination of such action can result in further injury, then the expiry date can be extended. Klausland is under an obligation to inform in details the committee on the anti-dumping practice about all the preliminary and final anti-dumping measures immediately after taking them (Wright 2012).
For Klausland to impose a countervailing duty on subsidy import given by other states, it must first carry on an investigation on the subsidy so as to ascertain whether it is affecting domestic producers. Countervailing duty on imports from other countries can be imposed only if those subsidy imports are hurting the country’s interest and if it cannot prove that the duty cannot be imposed (Guzman 2009). The fact that China provided subsidies to the local wind turbines manufacturers was hurting the domestic industry; it had every legal right to impose a countervailing duty on the subsidy from China.