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Reconciliation of non-market economies : GATT trade rules Xia, Yao Yuan 1990-12-31

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RECONCILIATION OF NON-MARKET ECONOMIES: G A T T TRADE R U L E S By YAO YUAN XIA LL.B.  B e i j i n g U n i v e r s i t y , 1983  LL.M. F u d a n U n i v e r s i t y , 1986  A THESIS SUBMITTED IN P A R T I A L F U L F I L L M E N T OF T H E REQUIREMENTS FOR T H E DEGREE OF MASTER OF LAWS in T H E F A C U L T Y OF G R A D U A T E STUDIES (Law  School)  We a c c e p t t h i s t h e s i s a s c o n f o r m i n g to the required  standard  T H E U N I V E R S I T Y OF B R I T I S H C O L U M B I A A p r i l 1990 @  YAO YUAN X I A , 1990  In  presenting this  degree at the  thesis  in  University of  partial  fulfilment  of  of  department  this thesis for or  by  his  or  requirements  British Columbia, I agree that the  freely available for reference and study. I further copying  the  representatives.  an advanced  Library shall make it  agree that permission for extensive  scholarly purposes may be her  for  It  is  granted  by the  understood  that  head of copying  my or  publication of this thesis for financial gain shall not be allowed without my written permission.  Department  of  LAM  The University of British Columbia Vancouver, Canada  D  a  t  e  DE-6 (2/88)  A p r i l , 1990  ABSTRACT  Due  t o the abortion  non-participation  of  o f t h e p r o p o s e d Havana C h a r t e r and  t h e USSR  and  other  economies i n t h e C h a r t e r n e g o t i a t i o n s , as  a traders'  •market  club  - a club  economies.  exclusively  in  Its  no  place  acting  b e n e f i c i a l t o western  are  free  trade  enterprise  basis.  of  trading  GATT h a s b e e n  rules  favor  advantage and p r i v a t e  mainly  State  formulated on  a  comparative  There  f o r NMEs t o h a v e e f f e c t i v e a c c e s s .  almost  i s virtually  As one o f t h e  pivots  o f p o s t - W o r l d - W a r - I I m u l t i l a t e r a l i s m , GATT a s s u m e s a  major  role  i n compromising,  supervising  diversified  member  policies.  I t s legal  deal  the integration  with  framed  discard  government market  intervention  the line  intervention.  and  and  central  trade  however,  o f NME.  ideology  regulating  nations'  framework,  e s s e n t i a l l y along  minimal  integrating,  This  laws  i s because  GATT i s  ideology  NMEs, o n t h e o t h e r wholesale  planning  as  and  i s inadequate t o  o f market  adopt  and  a  and hand,  government  basic  form  of  economy. While  trading  incompatible  with  accommodations membership.  practice the  were  in  NMEs  GATT-promoted  made  free  to facilitate  Consequently,  Poland,  i s  trade  NMEs'  Romania,  70s. A t that  command  state  time  trading  East thus  European were  Hungary  countries unable  rules,  request f o r  Y u g o s l a v i a became GATT members r e s p e c t i v e l y d u r i n g and  basically  to  and  t h e 1960s maintained be  fully  iii integrated During GATT  into  t h e GATT-based  negotiations  countries  on terms  adopted  an  i n t e r n a t i o n a l trade  o f NMEs' a c c e s s i o n  import  commitments  order.  t o GATT,  approach t o  s o l v e t h e c e n t r a l a n d much d e b a t e d i s s u e o f m a r k e t a c c e s s t o NME  countries.  criticized  Despite  i t s merits,  notwithstanding  t h e approach  h a s been  t h e f a c t t h a t no a l t e r n a t i v e h a s  been s u g g e s t e d . Accordingly,  the primary objective of t h e t h e s i s i s t o  rethink the existing new  a p p r o a c h e s t o NMEs i n o r d e r  ways o f e f f e c t i v e l y  t o explore  i n t e g r a t i n g NMEs i n t o t h e GATT  legal  framework. By a p p r o a c h i n g t h e t h e s i s p r o b l e m c a r e f u l l y , t h e writer need  arrives at the conclusion new  assumptions  consensus  of  participation,  broader a  with  a  that  view  although to  international  GATT  regaining  considerable  stressed  i n t o t h e GATT f r a m e w o r k . that  facilitate NMEs  being  a l l GATT  and  should  potential  world  n e e d l e s s t o say,  peace and s e c u r i t y .  traders  would  and  t o adapt i t i s  continue  to  i n t h e hope  that  increase  world  by b r o a d e r p a r t i c i p a t i o n . i s the best  new  substantial  I n t h e meantime,  NMEs' a c c e s s t o t h e GATT f o r u m  p r o s p e r i t y and understanding prosperity,  countries  a  representation  d e c e n t r a l i z a t i o n i n t h e NME i s u n a v o i d a b l e i n o r d e r themselves  would  World  guarantee of world  iv  TABLE OF CONTENTS  Pages Abstract  i  L i s t of Abbreviations.  i  v i i  Acknowledgements  viii  Part I : Introduction  1  1.1  Thesis  P r o b l e m s : M a i n Theme o f t h e T h e s i s  1  1.2  Thesis  Organization  2  1.3  Thesis  Methodology  1.4  Options and P r e l i m i n a r y Conclusions  and A n a l y s i s  4  P a r t I I : O v e r v i e w o f t h e GATT Framework a n d NME  5  12  2.1  H i s t o r i c a l Background  12  2.2  C o m p a r a t i v e A d v a n t a g e a s t h e P i v o t o f GATT  15  2.3  NME a n d GATT M u l t i l a t e r a l i s m  20  2.3(1)  Conflicting Ideologies:  Reconcilable?  2.3(2)  GATT Framework:  and S t r u c t u r a l  A Legal  Overview 2.4  NMEs' M e m b e r s h i p :  20  22 Issue  of Compatibility  Raised  32  2.4(1)  E v o l u t i o n o f East-West R e l a t i o n s h i p  32  2.4(2)  NME M e m b e r s h i p  34  i n GATT  V  2.4(3)  Issue of Compatibility Raised: General  Findings  Part I I I :  3.1  38  F u n d a m e n t a l R u l e s o f GATT: C o m p a t i b l e W i t h  NME  System  58  GATT R u l e s o n S t a t e t r a d i n g a n d NME  59  3.1(1)  GATT R u l e s o n S t a t e T r a d i n g  59  3.1(2)  Article  17 a n d NME  64  3.1(3)  C o n c l u s i o n s and Suggestions  70  3.2  N o n d i s c r i m i n a t o r y A d m i n i s t r a t i o n o f QRs a n d NMEs  74  3.2(1)  GATT R u l e s On QRs  74  3.2(2)  A r e NMEs C o m p a t i b l e W i t h N o n d i s c r i m i n a t o r y U s e  o f QRs  76  3.3  T a r i f f P r o t e c t i o n v. Target P r o t e c t i o n  78  3.4  Domestic  P r i c e Formation:Dumping o r  Subsidies? 3.4(1)  81  GATT A n t i d u m p i n g  a n d C o u n t e r v a i l i n g D u t y Law  a n d NME 3.4(2) 3.5  Problem  85 o f Dumping a n d S u b s i d i e s W i t h NME....87  Conclusions  P a r t I V : R e c o n c i l i a t i o n o f NME W i t h GATT F r a m e w o r k 4.1  94  110  W e a k n e s s e s o f GATT A p p r o a c h e s t o NME S t a t e T r a d i n g System  110  4.2  C r i t i c i s m o f t h e I m p o r t - c o m m i t m e n t A p p r o a c h . . . . 113  4.3  Improving t h e E x i s t i n g Approaches  119  vi 4.4  Discovering  New A p p r o a c h e s t o  Reconciliation...121  4.4(1)  "Gradual and R e a l i s t i c " Approach..  124  4.4(2)  M o d i f i c a t i o n o f GATT R u l e s  130  4.4(3)  "Decentralization": First-best Solution to the  4.5  Incompatibility?  134  O p t i o n s f o r R e g a i n i n g C h i n a ' s GATT M e m b e r s h i p . . 1 3 7  P a r t V:  Summary a n d C o n c l u s i o n s  147  Selected  Bibliography  153  vii LIST OF ABBREVIATIONS  c.i.f—cost,  i n s u r a n c e and f r e i g h t  CMEA—Council f o r Mutual  Economic A i d , a l s o r e f e r r e d t o as  COMECON CPs(cps)—Contracting ECSC—European  Parties  C o u n c i l o f S t e e l and Coals  E E C — E u r o p e a n E c o n o m i c Community EFTA—European  Free Trade A s s o c i a t i o n  f.o.b.—free-on-board F M E s — f r e e - m a r k e t economies G A T T — G e n e r a l Agreement on T a r i f f s and T r a d e GSPs—Generalized  Special Preferences  I M F — I n t e r n a t i o n a l M o n e t a r y Fund I T O — I n t e r n a t i o n a l Trade O r g a n i z a t i o n LDCs--less-developed countries MFN—most-favored-nation M T N — M u l t i n a t i o n a l Trade N e g o t i a t i o n s NMEs—-non-market economies NTBs—non-tariff  bariiers  O E C D — O r g a n i z a t i o n f o r Economic C o o p e r a t i o n and Development OPEC—Organization QRs—quantitative SDRs—Special  of Petroleam Exporting Countries restrictions  Drawing R i g h t s  STEs—state trading enterprises UN—United  Nations  UNCTAD—United Nations Conferences  on Trade and Development  J  viii ACKNOWLEDGEMENTS  W h i l e many a r d e n t s c h o l a r s a n d w r i t e r s h a v e b r o u g h t d i s t i n g u i s h e d c r e d e n t i a l s t o the d i s c i p l i n e o f t h e General A g r e e m e n t o n T a r i f f s a n d T r a d e (GATT), t h e r e i s y e t a g a p l e f t f o r u s t o f i l l i n t h e r e l a t i o n s h i p b e t w e e n t h e GATT t r a d i n g s y s t e m a n d n o n m a r k e t e c o n o m i e s (NMEs). T h e p r i m a r y o b j e c t i v e o f t h e t h e s i s i s t o f i l l t h i s gap. I would l i k e t o thank O s i e r , Hoskin & Harcourt - a law f i r m i n Toronto f o r t h e i r generous f i n a n c i a l support, and t o my s u p e r v i s o r s , P r o f e s s o r s P a t e r s o n and Herbst f o r t h e i r g u i d a n c e a n d comments. I am p a r t i c u l a r l y g r a t e f u l t o P r o f . M a r i l y n MacCrimmon f o r h e r u n f a i l i n g a n d t i r e l e s s h e l p i n doing a c r i t i c a l and c o n s c i e n t i o u s research. My s p e c i a l t h a n k s g o t o my p a r e n t s f o r t h e i r constant encouragement d u r i n g my l o n e s o m e s t a y away f r o m C h i n a . Without their a s s i s t a n c e , a d v i c e a n d e n c o u r a g e m e n t my a c a d e m i c p u r s u i t s h e r e would have been i m p o s s i b l e . On my responsible thesis.  final note I f o r the facts  should add t h a t I am s o l e l y and opinions s e t o u t i n t h i s  Xia,  Vancouver 1988-89  Yaoyuan  1  P A R T  ONE:  I N T R O D U C T I O N  1. T H E S I S PROBLEMS: MAIN THEME OF THE T H E S I S  The  thesis  centers  market-based  GATT  (hereinafter  "NME").  examine  whether  legal  rules.  along  the pattern  the  system  o f market  non-market  of the thesis i s compatible  i s first  with  ideology  of  NME  and t h e a b i l i t y in  essentially  trade created  discrimination enterprise framework  I n view  some  rather  limited.  on t h e p r i n c i p l e  economies,  formulated  which  economies  NMEs  of this  feasible  and  Because  system, is  code o f GATT  particularly t o provide  i s in  GATT  t h e GATT  and p a r t i c u l a r l y  problem  to  of freer trade  i t i s unlikely  with  access  o f NMEs t o meet  f o r market  t o deal  economies.  i s  countries'  to  t h e GATT  exclusively  economy  of  economies  c o n f l i c t with the c e n t r a l l y planned s o c i a l i s t  doubtful,  explore  The p u r p o s e  of reconciliation  with  A s GATT r u l e s a r e a l m o s t  effectiveness  conduct  the issue  framework  t h e NME  trade  constant  on  is  and nonprivate-  an  adequate  state-trading  t h e t h e s i s undertakes t o  rational  mechanisms  that  will  accommodate NMEs t o p a r t i c i p a t e i n t h e GATT. GATT s o l v e d t h e p r o b l e m o f t h e a c c e s s i o n countries pragmatic  to  membership  basis.  on  a  country-by-country  The GATT p r a g m a t i s m  import-commitment-oriented  of East  approach  i s obvious to  solve  European and  by u s i n g  very an  reciprocal  2 market-access  issues  non-discrimination. for  GATT  aside  The r e q u e s t s  membership  liberalization  theoretical  the compatibility  i t s cardinal of China  pose  new  and i n t e g r a t i o n  Some u n s o l v e d to  putting  within  p r i n c i p l e of  a n d e v e n t h e USSR  challenges t h e ambit  and s t r u c t u r a l  and r e c o n c i l a b i l i t y  to  trade  o f t h e GATT.  problems  pertaining  o f t h e NME  a n d GATT  r u l e s m u s t be e x a m i n e d a n d c o n s i d e r e d . The  study i s also  d e s i g n e d t o deepen u n d e r s t a n d i n g o f t h e  GATT l e g a l  framework, t o r e c o n c i l e  with  trade  GATT  integration  2.  rules,  to  the incompatibility  propose  possible  o f NME  solutions  to  o f NMEs i n t o GATT l e g a l r e g i m e .  T H E S I S ORGANIZATION AND ANALYSIS  The  thesis  introduction dominant  begins  (Part  theme  state-trading by  revolves  background the  sense  the  parts  was  besides  (Part  ideological,  of  NME  framed.  doctrines I t will  n e g o t i a t e d and f o r m u l a t e d .  As i t s of  NME  historical  and  o f t h e GATT from  GATT  i tillustrates  basic  on provide  o f how a n d i n w h a t c o n t e x t  the  I I of the thesis  countries  i s c r u c i a l because and  V) .  the reconciliation  f o r the establishment  exclusion  assumptions  multilateralism better  around  out  membership. T h i s p a r t theories,  three  I ) and t h e c o n c l u s i o n  setting  and  of  s y s t e m a n d GATT f r a m e w o r k , P a r t  philosophical system  consists  which  the  readers  GATT  with  t h e GATT r u l e s  a  were  3 It which  then GATT  dominating  states  t h e economic  i s based almost  and  every  and p o l i t i c a l  outlines  socialist  Marxist  country  I I I of the thesis  would r a i s e t h e i s s u e non-market end,  examines  economic  and China.  some m a j o r  economies  a n d GATT  t h e t h e s i s undertakes a rule-by-rule  t o a " l i n e a r approach" employed i n p a r t  Principles  protection,  state-trading, of  ^trade  this  China, and to  rules  and  including  the of  answered  analysis  and  To  this  approach, as opposed  I , t o analyze  selected  t o non-market  non-discrimination,  reciprocity,  requirements  the  (QRs) a r e e x a m i n e d .  reconcilability  economies  which  concerning  u s e o f p r o t e c t i o n i s t mechanisms f o r t h e purpose  approach  better  of  controls  restrictions  areas  rules.  GATT p r i n c i p l e s o r r u l e s a n d t h e i r a p p l i c a b i l i t y  tariff  theory  o f c o m p a t i b i l i t y between t h e f u n c t i o n o f  state-trading  economies.  upon  a n d how o r why t h e  t h e o r y h a s been m o d i f i e d by t h e E a s t e r n b l o c Part  theory  and  be  are essentially i s on s t a t e  t h e USSR  some o t h e r  of  and made  the l i m i t e d resources  GATT  systems  quantitative by  using  compatibility  and  trade  clearer.  and t h e E a s t e r n  OPEC s t a t e  the  state-trading,  trading  of  I t i s believed  question  t h e NME  use  that  rules Since  could  non-market  the focus  1  i n major  European  be  NMEs,  countries.  of t h i s namely, Mexico,  trading  countries  a r e e x c l u d e d due  of those  countries  and t h e  confined  scope o f t h e study. Part desirable account  IV  of  the  thesis  f o r the integration GATT's  previous  proposes  certain  mechanisms  and r e c o n c i l i a t i o n t a k i n g  experience  with  integrating  into the  4 Eastern  bloc  immediate  concern  o f GATT i s w i t h C h i n a ' s  membership r e q u e s t , a p o r t i o n  of this  part  to  will  China's  into  be  t h e GATT. S i n c e t h e m o s t  devoted  economy  with  GATT  discussing  the  and e x p l o r i n g  compatibility  options  of  f o r China's  accession. In the  establishing  thesis  towards  also  a reconciliation  undertakes  accepting  framework. with  some  some  East  Eastern  I t also  European and  resumption. The  t h e GATT  irreconcilable NMEs'  t h e GATT  as  t h e problems  into  experiences problems  part of  approaches  countries  accession  experiences  particularizes  review  European  reviews  apparently  approaches  to  mechanism, t h i s  i n dealing  a t t h e time  to  GATT.  With  guidance,  the  thesis  concerning  i t s  China's  of  these then  accession or  2  thesis  concludes  assessment  o f GATT's r o l e  regulatory  framework.  with  a  summary  i n integrating  of the study t h e NMEs  and  into i t s  3. T H E S I S METHODOLOGY  Traditional more  to  scholars  approaches  philosophical a r e more  or  inclined  t o academic doctrinal  theses  analysis.  are  Today,  t o be p r o b l e m - s o l v i n g  many  theorists.  The. o v e r r i d i n g  methodology o f t h i s  approach  r e q u i r e s a d e d u c t i v e and i n d u c t i v e r e a s o n i n g , a  which  multi-dimensional comparative  analysis  study  with  study  devoted  of theory a  i s a problem-solving  and c u r r e n t p r a c t i c e ,  combination  of  a  descriptive,  5 analytical,  imaginative  and  presupposed  mechanics.  As  compared t o a t r a d i t i o n a l p h i l o s o p h i c a l o r d o c t r i n a l  approach,  the  practical  problem-solving  significance.  approach  I t concentrates  aims a t p r a c t i c a l  S u c h an a p p r o a c h may b u t may  particular  problems  preliminary justify,  There i s , however, a danger  undermine the c r e a t i v i t y  meet t h e u t i l i t y and  of the  novelty  other research, t h i s study begins assumptions.  and  establish  hopefully  be  analysis,  though  might  solutions.  the  Soviet  some  of  so  of  and  the  Union-have  This, would render  study.  advance  in  yet  the  subject  others  might  thus  may  two  i t h a r d l y p r e d i c t a b l e as  analyze,  in  t e r m s o f a c c e s s i o n n e e d t o be  OPTIONS AND  As systems,  changed  have  several  appear  open-  NMEs-China membership. GATT member what  negotiated.  PRELIMINARY CONCLUSION  regards one  of  contentious  GATT  t o how  will  course  major  acquired  down  arguments  the  thesis  to  debatable  because the  not  made  laying  c o u n t r i e s a r e t o i n t e g r a t e them i n t o GATT's f r a m e w o r k and  4.  in  requirements  by  Thesis  remain  unsolved  i s especially  been  supported  would  Admittedly remain  have  assumptions. and  they  Conclusions  ended. T h i s  Efforts  evidenced  circumstances.  the  and  field.  L i k e any  and  more  lack provocative ideas, which are e s s e n t i a l to  a general  issues  have  more on  application.  t h i s approach t h a t w i l l  may  of  the the  integration most  of  East  frustrating  and  and  West much  trading discussed  6 problems market  i s State and  trading.  non-market  economies.  notable b a r r i e r t o trade, odds  with  degree  efficient Revision  rules  State  trade  exists  trading  liberalization.  state  trading  i n dealing  have  with  of state  trading  be  an o b j e c t  a  policy  a  large  become  an  problem.  t o be b o t h c r u c i a l and  s y s t e m shows t h a t  of trade  To  trading  a v i e w t o r e c o n c i l i n g NMEs w i t h  analysis  i n both  remains  not  state  o f some GATT r u l e s i s b e l i e v e d  demanding w i t h  both  on  instrument  trading  a tough trade instrument which i s a t  GATT-promoted  GATT  State  3  GATT. E c o n o m i c  state  t r a d i n g can  and i n s t r u m e n t  of  trade  policy. Traditionally, state  trading  function It  GATT a t t a c h e d  enterprises  (STEs) t h e m s e l v e s .  o f government c o n t r o l  i s thus  submitted  that  state  trading  decentralizing regulating  state  trading  trade policy rather  approach" ,  "result-oriented  no  0  dealt  behind t h e a c t i v i t i e s GATT,  with  system,  an  o f STEs.  objective  should  focus  NME's  with  state  trading  such  approach"  5  as  o r "import  "on a c o u n t r y - b y - c o u n t r y  l o n g e r be a p p r o p r i a t e .  some  workable  diversifying trade However, approach,  on  o f government  Some r e t h i n k i n g  "normative commitment  basis"'  of those  might  approaches  w o u l d be c o n d u c i v e t o i d e n t i f y i n g t h e p r o b l e m s and w o u l d us  of  t h a n o n STEs p e r s e . Some o f p r e v i o u s GATT  to  approach"  I t neglected the  as an implementation  approaches 4  t o o much w e i g h t t o d e f i n i n g  options  for  re-integrating  offer  today's  systems.  the review  result-oriented  o f t h e GATT approach  approaches or  import  (normative commitment  7 approach  and c o u n t r y - b y - c o u n t r y  approach)  i n t e g r a t e t h e NME i n t o t h e GATT s y s t e m task.  I t would  system rules  be s i m p l y  based  reconciliation  were  i f neither  GATT  assumptions  t o be  changed.  on w h i c h In  t h e NME t h e GATT  addressing  i s s u e t h e GATT c o u n t r i e s s h o u l d  continue  attained.  To r e c o n c i l e t h e NME w i t h t h e GATT f r a m e w o r k o r t h e system,  the following  would  t o be  otherwise  t h e NME  of reconciliation  this  realistic  GATT w i t h  the goal  show t h a t t o  i s b y no means a n e a s y  irreconcilable  nor the o r i g i n a l were  would  four  n o t be  options  merit  consideration: Option trade  I: Either  regimes  compatible  to  NMEs r e f o r m  such  enough w i t h  a  their  degree  that  t h e GATT s y s t e m  economies and f o r e i g n their  economies  a n d f o l l o w GATT  are trade  r u l e s a s though t h e y were market economies, o r Option  I I :  liberalization should  Regardless  of  i t s deep-rooted  n o t i o n w i t h t h e f u n c t i o n o f m a r k e t f o r c e , GATT  r e v i s e and i n s e r t  relevant articles  s t a t e t r a d i n g along t h e l i n e s suggested Charter"  for  Organization  control  the  founding  of  the  d e a l i n g w i t h NMEs'  i n t h e U.S. " S u g g e s t e d International  (ITO) a t t h e L o n d o n C o n f e r e n c e ,  q  Charter"  trade  8  Trade  o r " t h e Havana  ,  t o r e c o g n i z e s t a t e t r a d i n g as an instrument and t o use " e f f e c t s  of material i n j u r y "  of trade  approach t o  1 0  overcome t h e dilemma w i t h t h e s t a t e t r a d i n g p r o b l e m , o r Option particular,  I I I : I n t e g r a t i n g NMEs,  China  into  on t h e b a s i s  arrangements.  t h e GATT  Basically  framework  this  and  t h e USSR i n of  i s a country-by-country  special approach  8 by  which  the  Eastern  European  bloc  has  formerly  been  integrated, or Option because accept  of  I V : NMEs their  give  up  inability  any a t t e m p t  to join  or unwillingness  to  t h e GATT completely  t h e m a r k e t - b a s e d GATT f o r u m - a f o r u m w h i c h i s l a b e l l e d  a " r i c h men's c l u b " . The  above  exhaustive. be  mentioned  option  proposals  are illustrative  b u t by  T h e r e may e x i s t o t h e r o p t i o n s w h i c h w i l l i n course  o f d i s c u s s i o n . The f o c a l  a n a l y s i s i s t o see i n t h e f i n a l  i s most a p p r o p r i a t e  no  means  hopefully  point  of the  a n a l y s i s which  option  t o solve t h e problem o f i n t e g r a t i n g s t a t e  t r a d i n g s y s t e m s i n t o GATT l e g a l  regime.  FOOTNOTES S t a t e t r a d i n g , a s compared t o p r i v a t e t r a d i n g , d e n o t e s a t r a d i n g system where t h e volume and p r i c e s o f a c o u n t r y ' s e x p o r t s and imports a r e pre-determined by t h e s t a t e . Foreign trade i s apparently an e x c l u s i v e domain o f g o v e r n m e n t r e g u l a t i o n . See K.W. Dam, The GATT Law and International Economic Organization (1970), concerning " s t a t e t r a d i n g " , pp. 316-31. C h i n a was o n c e t h e o r i g i n a l member o f t h e GATT. I n 1958 t h e N a t i o n a l i s t Government i n Taiwan w i t h d r e w i t s membership f r o m t h e GATT d u e t o e c o n o m i c f a c t o r s . I n s p i t e o f t h e nationalists' withdrawal, PRC's Beijing Government d e c l a r e s t h a t i t was i n v a l i d s i m p l y b e c a u s e o n l y B e i j i n g government i s t h e l e g a l r e p r e s e n t a t i v e o f China. This c l a i m i s c o n s i s t e n t w i t h t h e view expressed i n resuming China's seats i n the United Nations, t h e I n t e r n a t i o n a l M o n e t a r y F u n d a n d t h e W o r l d Bank i n s t i t u t i o n . S e e L i , C h u n g z h o u " R e s u m p t i o n o f C h i n a ' s GATT M e m b e r s h i p " (1987) 21 J.W.T.L., p p . 2 5 - 4 8 .  9 S t a t e t r a d i n g r e f e r s t o t r a d i n g p l a n n e d and t a r g e t e d by t h e S t a t e r a t h e r t h a n by p r i v a t e e n t e r p r i s e s ( s e e s u p r a n o t e 1) . The f o l l o w i n g i s M. K o s t e c k i ' s d e f i n i t i o n of state t r a d i n g : " S t a t e t r a d i n g o c c u r s when a g o v e r n m e n t o r a government-backed agency determines the e s s e n t i a l terms ( i n c l u d i n g p r i c e s or q u a n t i t i e s ) on w h i c h e x p o r t s and imports have to take place." Regardless of the s i g n i f i c a n c e o f p u b l i c o w n e r s h i p , g o v e r n m e n t management, p u b l i c g r a n t of e x c l u s i v e r i g h t s o r s t a t e monopoly of f o r e i g n trade, Kostecki adopts a f u n c t i o n a l approach to d e f i n e s t a t e t r a d i n g a s one o f many m e t h o d s o f g o v e r n m e n t intervention in foreign trade. See Kostecki, "State T r a d i n g By t h e A d v a n c e d and Developing Countries: The B a c k g r o u n d , " i n STATE TRADING IN INTERNATIONAL MARKETS (1982, K o s t e k i ed.), at 6-8. The functional approach perhaps provides the best starting point for later d i s c u s s i o n s i n Part I I I of the d i s s e r t a t i o n s i n c e s t a t e t r a d i n g i s i n terms of f o r e i g n t r a d e at the h e a r t of nonm a r k e t economy. U n d e r " n o r m a t i v e a p p r o a c h " , t h e GATT d e c l a r e s that the p a r t i e s must not i n d u c e o r t o l e r a t e p r a c t i c e s o f state trading enterprises t h a t have e f f e c t s w h i c h would be v i o l a t i o n o f commitments under t h e G e n e r a l Agreement. Roessler, " S t a t e T r a d i n g and Trade L i b e r a l i z a t i o n " , in STATE TRADING IN INTERNATIONAL MARKETS (1982 Kostecki, e d . ) , a t 275. V i e w i n g GATT f r o m a n o r m a t i v e a n g l e , the a u t h o r d i s t i n g u i s h e s r u l e s f r o m measures (a r u l e , b e i n g addressed to an unknown number of enterprises, n e c e s s a r i l y h a s t o be made p u b l i c b e f o r e i t c a n become e f f e c t i v e , a m e a s u r e , h o w e v e r , b e i n g a d d r e s s e d t o one or s e v e r a l s p e c i f i c e n t e r p r i s e s , n e e d n o t be made p u b l i c ) . This rule-oriented approach of the GATT i s n o t an efficient instrument to prevent specific government m e a s u r e s o f a d i s c r i m i n a t o r y o r p r o t e c t i v e n a t u r e , made effective through state-controlled enterprises. For d e t a i l e d d i s c u s s i o n o f t h e drawbacks o f t h e a p p r o a c h , see R o e s s l e r , id., a t 261, 263, 2 7 5 - 7 6 . T h i s a p p r o a c h p r o v i d e s f o r commitments t o a c h i e v e a g r e e d t a r g e t s t h r o u g h s t a t e t r a d i n g e n t e r p r i s e s . I t was first u s e d by France. (See GATT C o n s o l i d a t e d Schedules of T a r i f f C o n c e s s i o n s , V o l . 2 G e n e v a : 1952, p. 200.) and l a t e r o v e r u s e d when d e a l i n g with P o l i s h and Romanian p r o b l e m s o f a c c e s s i o n t o GATT. I t i s b a s i c a l l y synonymous w i t h " i m p o r t commitment a p p r o a c h " . See Roessler, supra n o t e 4, a t 262, 276.  10 I m p o r t commitment a p p r o a c h i s s u c h t h a t t h e b a s i s o f a d m i s s i o n was t o b e p r o v i d e d n o t b y t a r i f f concessions but b y a commitment t o a c h i e v e a minimal volume o f i m p o r t s f r o m t h e GATT c o u n t r i e s . F o r i n s t a n c e t h e p o l i s h P r o t o c o l o f Accession s e t t h e annual i n c r e a s e o f imports f r o m t h e GATT members a t 7%. (GATT D o c . L / 2 8 5 1 J u l y 1 9 7 6 ) . T h e P r o t o c o l o f A c c e s s i o n w i t h R o m a n i a i n 1967 s t a t e d t h a t Romania i n t e n d s " . . . t o i n c r e a s e i t s i m p o r t s from t h e c o n t r a c t i n g p a r t i e s as a whole a t a r a t e n o t smaller than t h e growth of total Romanian imports provided i n i t s F i v e Year P l a n . " (GATT D o c . L / 3 5 5 7 , A c c e s s i o n o f R o m a n i a 5 A u g . 1 9 7 1 , 807 UNTS 3 1 2 ) . A " c o u n t r y b y c o u n t r y a p p r o a c h " became n e c e s s a r y when E a s t e r n E u r o p e a n c o u n t r i e s w e r e a p p l y i n g f o r t h e GATT m e m b e r s h i p n o t s i m u l t a n e o u s l y a n d e a c h h a d more o r l e s s d i f f e r e n t s t a t e t r a d i n g s y s t e m . Some o f t h e m a d o p t e d "command" o r d i r e c t i v e s t a t e t r a d i n g s y s t e m ; some u s e d r e l a t i v e l y " l o o s e " s t a t e t r a d i n g system. See K o s t e c k i , East-West Trade and the GATT System (1978), pp. 46-51. K o s t e c k i a t t a c k e d t h i s approach because i t c o u l d not solve t h e u l t i m a t e problem of integrating t h e NME c o u n t r i e s i n t o t h e GATT f r a m e w o r k , b u t h e f a i l e d t o provide a b e t t e r substitute. I n view of t h i s another w r i t e r tends t o choose " P a r t V approach", i . e . adding P a r t V w h i c h e x c l u s i v e l y d e a l s w i t h NMEs t o t h e o r i g i n a l t e x t o f t h e GATT, t o s o l v e t h e p r o b l e m . S e e E. P a t t e r s o n , " I m p r o v i n g GATT R u l e s f o r NMEs", 20 J.W.T.L. 185 ( 1 9 8 6 ) . Suggested C h a r t e r f o r an I n t e r n a t i o n a l Trade O r g a n i z a t i o n o f t h e U n i t e d N a t i o n s . S e e U.S. D e p t . o f S t a t e P u b . No. 2 5 9 8 , C o m m e r c i a l P o l i c y S e r i e s No. 93 ( 1 9 4 6 ) , P. I l l ( h e r e i n a f t e r c i t e d a s Suggested Charter). The  H a v a n a C h a r t e r a l s o known a s ITO C h a r t e r b e g a n w i t h a S u g g e s t e d C h a r t e r s u b m i t t e d b y t h e U.S. d e l e g a t e s . I t was i n t e n d e d t o b e a f o u n d i n g c h a r t e r o f t h e I T O . The GATT w h i c h was deemed o n l y p r o v i s i o n a l w o u l d h a v e b e e n o u t o f f o r c e , s h o u l d t h e C h a r t e r had been approved a n d ITO e s t a b l i s h e d . U n f o r t u n a t e l y , t h e C h a r t e r was a b o r t e d a n d t h e GATT c o n s e q u e n t l y h a s b e e n u s e d t o d a t e . F o r d e t a i l e d d e s c r i p t i o n o f ITO C h a r t e r n e g o t i a t i o n s , s e e R.E. Hudec, the GATT Legal System and World Trade Diplomacy (1975 P r a e g e r P u b l i s h e r s ) , p p . 14-17.  11 T h i s a p p r o a c h i s s u g g e s t e d b y P r o f . B e r n i e r who c o n c l u d e s t h a t , " i f s t a t e t r a d i n g i s accepted as an a l t e r n a t i v e method o f i n t e r v e n t i o n o f s t a t e i n economic m a t t e r s , i t s treatment should remain b a s i c a l l y c o n s i s t e n t with that g r a n t e d b y t h e GATT t o o t h e r m e t h o d s o f i n t e r v e n t i o n . GATT has overwhelmingly adopted a "material injury philosophy" i n dealing with the injurious effects r e s u l t i n g from dumping and s u b s i d i z a t i o n . B e r n i e r , "State t r a d i n g a n d t h e GATT", i n STATE TRADING IN INTERNATIONAL MARKETS (1982 K o s t e c k i e d . ) , p p . 2 5 7 - 5 8 . 1 1  12  P A R T  OVERVIEW OF  2.1  failure  made by  II.  the  League  lessons  reflected  in  achieved  through  - on and  of  Nations  redefine  NON-MARKET ECONOMY  Woodrow W i l s o n ' s  Great Depression  experience  of  multilateral the  War  common i n t e r e s t s o f international  economic In  It  2  global  War were  became  prosperity  and  organizations  R e c o n s t r u c t i o n and  World  can  or  be  regional  3  regional  W o r l d Bank Group  Fourteen  incidents  system.  that  economic c o - o p e r a t i o n  Trade  and  these  and  the  4  and  framework  T a r i f f s and  prosperity.  the  economic c o o p e r a t i o n e f f o r t s  multilateral  normalize  national  to  after  liberalization.  international  and  p e a c e and  post-war  clear  Post-war  to  the  and  the  increasingly  trade  of  i n d i r e c t l y led The  1  GATT FRAMEWORK AND  HISTORICAL BACKGROUND  The  Points  THE  TWO  was  the  relations.  based which  on  numerous  were  designed  international The  General  society  Agreement  (GATT), I n t e r n a t i o n a l M o n e t a r y F u n d (formerly  known a s  Development barriers  addition,  Bank  IBRD ) w e r e f o r m e d t o  and  increase  some r e g i o n a l  E u r o p e a n E c o n o m i c Community  International  (EEC),  5  world  organizations  Organization  for  (IMF) for  reduce  economic such  as  Economic  Coordination regional  and  Development  economic  management.  a c h i e v e w o r l d economic u n i t y Following and  unity,  dismantle  trade  cause  t h e Great  world-wide (1944), and  new  such  Havana  (1947-48), Trade  aimed t o p r o v i d e observed The  legal  multilateral on  January  86  nations.  exception  and  international  War  (1946),  of  trading  international  some  of  the  t h e Comecon  (1947)  IMF  which  and were  9  decades as t h e  trade.  which f i r s t  nations  Conference  and code o f conduct t o  It  came i n t o  1, 1 9 4 8 , a n d h a s now b e e n a c c e d e d Most  main  Several  Geneva  of  i n force f o r three  treaty  7  to  would  the  I I .  Woods  both  peace  that  were  economic r e l a t i o n s .  of  world  order  which  (ITO)  to  committed  establish  a s e t o f common r u l e s  regime  endeavoring  became  as t h e B r e t t o n  Organization  promote  cooperation.  World  to  to  t o secure  barriers  attempted  GATT h a s now b e e n  central  regional  h e l d a t London  i n international  been  economic  Depression  and c o n f e r e n c e s  8  International  be  monetary  conferences,  have  community  international and  emerged  o f t h e UN  the international a  of  They  through  the formation  construct  (OECD)  with  countries,  a  effect  t o b y more  a r e GATT members (CMEA)  is  than the  China,  M e x i c o a n d some OPEC c o u n t r i e s . The trade not  drafting  policy.  1 0  o f GATT was l a r g e l y a s s o c i a t e d w i t h t h e U.S. The s p i r i t  be p r o p e r l y u n d e r s t o o d  the American delegates order the  was  U.S.  largely  behind without  the General reference  t o t h e views of  because post-war i n t e r n a t i o n a l  i n f l u e n c e d by A m e r i c a n  negotiators  Agreement can  sought  t o achieve  policy.  was  1 1  economic The  to establish  goal an  14 economic  order  under which  promoting  free  and  non-discriminatory  n o n - t a r i f f b a r r i e r s would  be removed  •  trade  and  tariffs  19  reduced through i n t e r n a t i o n a l n e g o t i a t i o n s . * With these in  mind,  t h e American  negotiators  goals  a t t h e London  Conference  s u g g e s t e d a model c h a r t e r t o be used a s a f o u n d i n g  charter of  13  the  ITO.  I n t h e mean  time,  tariff  negotiation  c o n d u c t e d a t Geneva C o n f e r e n c e . U n f o r t u n a t e l y , time  o f ITO C h a r t e r  were  not ready  negotiations,  t o commit  their  trading  policies  i n t e r n a t i o n a l o r g a n i z a t i o n , a n d t h e ITO C h a r t e r t h e Havana C h a r t e r failed  many  the r a t i f i c a t i o n  The f a i l u r e  1 4  exceptions  Soviet  and  escape  clauses  in  ( a l s o known a s  However, successfully  was r o o t e d  was d e s i g n e d  to  i n the 1 5  incorporate  of the Soviet  Union  i n the Charter  a  Protocol  signed  of  Provisional  b y 23 n a t i o n s  negotiations  meaningless. Application  a t t h e Geneva  adoption  the  ITO C h a r t e r ,  was  forced  organization  o f t h e ITO C h a r t e r . t h e ITO n e v e r  t o play with  Under t h e a u s p i c e s  the role  1 7  o f a major  o f GATT t h e r e  of  was  pending  Due t o t h e a b o r t i o n o f  came i n t o b e i n g  the objective  1 6  Conference.  p r o t o c o l p r o v i s i o n a l l y b r o u g h t t h e GATT i n t o f o r c e later  i t into  i t s provisions.  made much o f w h a t t h e A m e r i c a n h a d s u g g e s t e d  a  an  s t a t e t r a d i n g economy i n t o i t s p r o v i s i o n s , t h e n o n -  participation  The  t o such  necessary t o bring  o f t h e ITO C h a r t e r  M o r e o v e r , b e c a u s e t h e ITO C h a r t e r the  states,  s i n c e t h e n e g o t i a t i o n s w e r e h e l d a t Havana)  to receive  operation.  being  however, a t t h e  t h e major trade  was  a n d t h e GATT  international  trade  trade  liberalization.  have been seven major  1 8  rounds  15 of  tariffs  and  Uruguay R o u n d . The  trade  negotiations  international  World  reconstruction  political  and  II.  multilateralism" negotiations  2  The  0  i n trade  developing  formation members East  not  those  GATT,  representative  international trading  peace  Mexico  as an of  largely  so-called  "new  But not a l l countries  to  politically  have  Many  a  say  countries  the Soviet  and most  and  i n the  were  Union,  Middle  not  China,  East  OPEC  international organization,  the  whole  has  been  t h e dream  through  GATT  despite  outside  liberalization 2.2  The  i s  world. limited  Its to  role  some  was in  major  countries.  through remain  rules.  regulation  Admittedly global  the  then  unable  f o r example,  Germany, V e n e z u e l a , Thus  order  post-war  new wave o f m u l t i l a t e r a l i s m .  were  and  trade  o f t h e GATT;  the  i s the d i r e c t r e s u l t of multilateral  countries  dependent  of  countries.  of  o f major economic powers.  economically  on-going  o f t h e G r e a t D e p r e s s i o n and  wave  were a c t i v e p a r t i c i p a n t s i n t h i s Some  of  economic  t o the p a i n f u l lessons  War  the  1 9  successful  attributed  including  free  trade  the fact  t h e GATT. still  of achieving  world  prosperity  has been p a r t i a l l y that  However,  some  fulfilled  important  the goal  and  of global  nations trade  h a s a l o n g way t o g o .  COMPARATIVE ADVANTAGE AS THE PIVOT OF GATT  GATT  which holds  system  that  rests  on an u n d e r l y i n g  i n t e r n a t i o n a l trade  serves  economic  theory  t o increase  global  16 prosperity, countries.  as w e l l  as t h e p r o s p e r i t y of i n d i v i d u a l  I t also  2 1  rests  on t h e c o n c e p t  t r a d e system governed by w i d e l y accepted lessens the r i s k s of  broader  stability. The basis  to  as  opposed  government does domestic  durable  classic  to protection,  part  peace  not discriminate against  imports  or interfere with exports market.  elaborated  elaborated  by  headed by D a v i d  the  o f comparative  trade"  on a  comparative  Stuart  Mill  (1806-73)  well  However,  and  intervention grounds.  3  2 7  the  might  philosopher  trade  Protectionism  English  advantage  was  with  can hardly  Political  the national and economic  Smith  the  trade in his  Nature  and  theory  of  was  classical  systematized by  by  the majority  John of  2 8  be a b s o l u t e .  justified exists  i n t e r e s t s o f n a t i o n s . I n some s i t u a t i o n s , conflict  t o favor  The a r g u m e n t f o r " f r e e  2 6  century.  always  Adam  School  accepted  be  i n favor of  Smith's  2 5  a  ( 1 7 7 2 - 1 8 2 3 ) , who p r o p o u n d e d  advantage.  always  which  i n order  Into  (1776).  Ricardo  and  by  Free  2 3  The b e n e f i t s o f f r e e  i n Inquiry  i n t o t h e 20th  free  2 4  of Nations  economists  economists  advantages. policy  of the Wealth  theory  of comparative  by t h e S c o t t i s h  theory  further  theory  i n t h e home  advanced  country.  world  i s a  products  consumers  may  i s an e s s e n t i a l  f u n d a m e n t a l b e l i e f o f t h e GATT i s " f r e e t r a d e " o n t h e  trade,  Causes  trade  2 2  of the classic  were  maintain  an o r d e r l y  rules f o r world  o f t r a d e wars and thus  efforts  that  trading  due  on  Government  non-economic,  to  conflicting  pure economic  interests realities  of may  a  theory  particular  pressure  the  17 government trade.  3 0  into  Also,  enacting  individual  foreign political  goals  other than maximizing Obviously  nations  that  in  reciprocal tariff  barriers the as  and o t h e r  have  poses  Initially,  security  to  progressive With  an  economic  bilateral  concessions  nation"(MFN)  were  adopted  trade  Clauses  3 2  international enterprise  international law.  to  such  and  and  afford  legal  investment  under  3 3  t h e i n c e p t i o n o f t h e new m u l t i l a t e r a l i s m u n d e r t h e  a n d n a t i o n a l T r e a t m e n t was i n c o r p o r a t e d  ingredient  of free  a  of non-discrimination  trade.  free-trade  nondiscrimination, individual another,  3 5  world  market  t o provide  trading  and  The m a i n g o a l  3 4  to  countries  provide  an  o r emergency n e g o t i a t i o n s  tariffs.  Based  on t h e n o t i o n  liberalization,  a l l tariff  lowest  level.  possible  o f MFN  as an e s s e n t i a l  o f t h e GATT  on  conduct  the  their  international  i sto  basis  of  within  trade  with  forum f o r  o f i n t e r n a t i o n a l t r a d e and  of non-discrimination  and trade  b a r r i e r s a r e t o be r e d u c e d  The r e s u l t s o f t a r i f f  r e c i p r o c a l and m u t u a l l y  unwithdrawable  i n terms  a s e t o f common r u l e s  periodic  a  of  "minimum i n t e r n a t i o n a l s t a n d a r d " ,  clause  one  to  treaties  and removal  the principle  which  problem  commercial  GATT,  create  and  f o r m a l i t i e s were agreed upon, were seen as  " n a t i o n a l treatment", favored  domestic  by p o l i c y concerns  way t o r e d u c e t h e i m p a c t o f p r o t e c t i o n i s m .  "most  on  3 1  protectionism  countries.  restrictions  always  are motivated  output.  exporting which  protectionist  t o the  n e g o t i a t i o n s "on  advantageous b a s i s " a r e b i n d i n g and  unilaterally.  3 6  The g e n e r a l  objective  was t h e  18 reduction Tariff  of t a r i f f  Schedule  barriers. Modification  could  "renegotiation", Otherwise withdraw  o r modify  non-tariff  to  be  measures  of  "conciliation".  3 7  are entitled to concessions  which  hinder  multilateral  a s opposed  as a  free-trade  negotiations  t o other  or  instruments or  s h o u l d b e t h e m a i n weapon f o r i m p o r t c o n t r o l s o r f o r industry.  GATT t o l e r a t e s  state-trading, controls,  including,  4 3  safeguard  or  procedure.  and  4 2  other  level  of  protectionism,  and c o u n t e r v a i l i n g direct  i n special  "escape  4 0  certain  as t h e use of antidumping  clause"  or  indirect  circumstances, and  4 4  duties,  a  4 1  trade  notorious  general  waiver  4 5  Protectionism economic  depression  problems  such  markets,  high  as  i s p a r t i c u l a r l y strong o r when slow  emerged  measures.  a  economic  unemployment,  of protection  protectionist recent  t h e process  affected  (NTBs)  through  Tariffs  3 9  and  parties  barriers  removed  However,  forms  through  3 8  p r o t e c t i o n o f domestic  such  done  substantially equivalent  measure.  renegotiations.  the  contracting  All are  be  "consultation"  other  retaliatory  only  of the established  4 7  together  A i s  protectionist  measures  under  experiences  economic  shrinking  domestic  the  debt  with  disturbing  controls  of world  growth,  and s e v e r e  trade  arrangements outside  country  i n times  problems.  t h e GATT  feature  towards  bilateral  or  4 8  New  permitted  o f t h e more  trend  t h e GATT f r a m e w o r k .  4 6  imposing unilateral  19 As  noted  compromise  earlier,  of trade  the  GATT  protectionism  multilateralism  and t r a d e  liberalism.  c o m p r o m i s e somewhat b a l a n c e s t h e c o n f l i c t i n g producers, the  i s  This  i n t e r e s t s between  on t h e one hand, and consumers, on t h e o t h e r .  GATT s y s t e m  i s framed  basically  a  i n favor  of free  4 9  As  trade,  i t s r u l e s a r e l a r g e l y concerned w i t h t h e p r o d u c e r s and t r a d e r s of  goods,  support  and w i t h of  these  concerned with with  the  obligate  interests  compromise  the  objective  GATT  economic  world  rules  are  little  economic p o l i c y o r  Nonetheless,  GATT  domestic trade  does  policies  5 1  post-war  trade of  o f governments i n  of domestic  consumers.  GATT  liberalism  GATT order  However, t h e f o r c e s  the present to  trade.  between  international trade.  of  5 0  i t s members n o t t o i n s t i t u t e  summary,  ultimate  and p o l i c i e s  enterprises.  broader aspects  t h a t negate f r e e In  t h e laws  multilateralism  i s a  and p r o t e c t i o n i s m .  The  remains that  the institution promotes  of protectionism  free remain  o f an  and  strong i n  and s u b t l e and smart measures a r e b e i n g  s i d e t r a c k GATT r u l e s . The c h a l l e n g e  fair  used  f o r GATT i s t o e n s u r e  t h a t t h e s e p r o t e c t i o n i s t f o r c e s do n o t w i p e away t h e p r o g r e s s made s o f a r i n p r o m o t i n g f r e e a n d f a i r  trade.  20 2.3  2.3(1)  NME AND GATT MULTILATERALISM  CONFLICTING IDEOLOGIES: RECONCILABLE?  The  end o f World  War I I d i v i d e d  some o f t h e d e v e l o p i n g w o r l d West. and  The two p a r t s  ideologies.  communist i d e o l o g y ; capitalist conflict.  i n t o two p a r t s :  a r e based  One  entirely  i s based  These  A t t h e economic  of  minimal  government  economy,  level,  w h o l e s a l e government  5 3  ,  by  regulation  remain  t h e cause  contrast,  o f t h e economy. T h e  entities.  private  laborers  are free  production. system  of  property,  t o work  social  economy  terms.  Under  competition  requires  the daily  f o r private  life  which  distribution  market that  there  profits  be  and  communism i s a  i s based  o f income  on  and  of capitalism  economy,  a r e made  o f t h e means o f  to capitalism,  i s the expression the  government  production  f o r t h e owners  organization  o r an e q u a l  Market  concerning  operating  I n sharp contrast  3  around  5 4  decision  enterprises  enterprise  revolves  of  by  i n constant  i n the private  owns t h e economy, b u t c o n t r o l s  Under c a p i t a l i s m  system and  on t h e p r i n c i p l e  i n NME n o t o n l y i t s economic  and  of c o n f l i c t i s  i s founded  5 2  systems  system  i s on t h e market  intervention  "socialism"  socialist  two i d e o l o g i e s  obvious. While the " c a p i t a l i s m "  t h e E a s t and t h e  on d i f f e r e n t  on t h e  and t h e o t h e r  ideology.  t h e d e v e l o p e d w o r l d and  common  wealth.  5 6  i n economic  the  doctrine  very  little  of  free  government  intervention  in  countries  adopt  economies.  5 8  the  economy.  central  planning  Most Western c o u n t r i e s of  market  European NMEs  economy, countries  their  politics  as  no  management.  Party  their  economies.  seen  later,  officials  forces  at the  center  centrally inflexible  is  along  market  The  Soviet  Marxist are  of by  supply  6 0  and  and  d i s t o r t e d . The  resources. Despite  political relations go  by,  the and  conflicting economic  between  East  " c o l d war"  East-West t r a d e  and  between  e m b a r g o e s r e d u c e d and  the  aspect as  by  economy i s n o t rather  There i s  government  every  economies,  power  will  be  government regulated  manipulated,  distortion  they  are  efficient  are  often  a r i s e s from the  the  by  i s controlled  Because t h e s e economies  6 1  of  fact  allocation  6 2  tension  sense t h a t  almost  For  5 9  the  and  manipulated  t h a t government i n t e r v e n t i o n p r e v e n t s of  on  politics  demand, b u t  supposedly  theory.  Communist P a r t y .  their  The  the government.  planned and  of and  lines.  their  China,  concentrated  dominates  thrust  Union, economic  between p a r t y  directed  party  of  form  Eastern  systems  politics  basic  the  a l l adopt  separation  socialist  pattern  of c e n t r a l committee of the  virtually  a  contrast,  i n c l u d i n g Japan f o l l o w the  whereas  political  By  has  has  ideologies  systems,  and  differences  post-war  international  West h a v e b e e n r e s h a p e d .  East  and  West  been r e p l a c e d  rapprochement  also increased.  has  been  in  As  eased  w i t h detente,  e s t a b l i s h e d . The  years in  the  economic volume  of  What i s more n o t e w o r t h y i s  f a c t t h a t when t h e c a p i t a l i s t w o r l d  s u f f e r e d from  cyclical  22 economic  fluctuations,  state-trading socialist China,  and  system  had  economic economic  other  measures  i n t h e Eastern  revealed  and  strengthened  critical  political  systems  seemed  government of  protectionism,  European problems  reform. to  be  that  leads  us  drawing  to  If the  needed  closer 6 5  radical the  by  changing  the  possible  systems.  GATT FRAMEWORK: A LEGAL AND STRUCTURAL OVERVIEW  t h e Havana  Soviet  Charter  state trading  r e l u c t a n t l y purported  to tolerate  systems so as t o i n t e g r a t e  them  a s i n g l e i n t e r n a t i o n a l b o d y - t h e I T O , GATT, a s a t r a d e r s ' was  two  together  I t i s this  perceive  the  6 3  USSR a n d  Consequently,  6 4  r e c o n c i l i a t i o n o f East-West t r a d i n g  2.3(2^  countries, that  changes c o n v e r g i n g from both d i r e c t i o n s . situation  intervention,  to  exclude  economies,  from  normally  i t s membership  referred  centrally  t o a s NMEs. T h i s  into club,  planned  i s because t h e  GATT's f u n d a m e n t a l b e l i e f i s b a s e d s o l e l y o n m a r k e t  conception  and  NMEs.  i d e o l o g i e s which a r e incompatible From  mainly  the historical  aimed  transparency and  at  and  dismantling  of signatories'  providing  a  forum  6 7  foundations  f o r national  It  o f two A r t i c l e s  cardinal  principle  textual tariff  trade  socialist  perspective,  regulations  comprises trade  four  parts.  legislation  increasing  and  policies,  coordination Part  6 6  GATT i s  barriers,  for international  negotiation.  consists  GATT  with  I  lays  and t r a d e  and down  policy.  w h i c h d e m o n s t r a t e t h e p u r p o s e and  of the General  Agreement and  consolidate  the  established  tariff  Schedule.  discrimination  constitutes  the  multilateralism.  I t i s generally  liberalizing measures  foster  application of  trade  market  world  access  advantage  government  is  designed  formulated  to to  international  ensure  foundation  clause  and  investment  economic w e l l objective.  minimal  government  security  Beyond  6 9  the  to exploit  considered  this  that  that  p r i n c i p l e assures  and  GATT  that,  vital  being.  to GATT  7 0  I t s rules  are  intervention  in  trade.  industrialized MFN  fulfill  the  discriminatory  prosperity  i s also  non-  i n t h e West  specialization.  intervention  promotion of competition  of  eliminating  underwrites  and  the  The  and  economic  and thus  core  believed  of non-discriminatory  comparative minimal  barriers  Admittedly,  a  o f modern  countries  (Article)  i s non-discrimination.  i s an  p r i n c i p l e , which requires  i n t e r n a t i o n a l trade  overall  7 1  r u l e s among The  demonstration  famous  of  this  that:  "any a d v a n t a g e , f a v o r , p r i v i l e g e o r i m m u n i t y g r a n t e d by a n y c o n t r a c t i n g p a r t y t o a n y p r o d u c t o r i g i n a t i n g in or destined f o r any o t h e r country shall be accorded immediately and u n c o n d i t i o n a l l y t o t h e l i k e product o r i g i n a t i n g i n or destined for the t e r r i t o r y of a l l other c o n t r a c t i n g p a r t i e s . " 7 2  This duties  i s comprehensive  and  concerning  charges, imports  but  enough also  and e x p o r t s .  by  a requirement  that  on  among c e r t a i n GATT c o u n t r i e s  members a u t o m a t i c a l l y ,  t o cover a l lrules  This  not only and  i s further  any m o d i f i c a t i o n  customs  formalities strengthened  of concessions  agreed  be a c c o r d e d t o a l l o t h e r  unconditionally  and m u l t i l a t e r a l l y .  GATT 7 3  24 In  theory,  many  agreements entered countries  of  i n c l u d i n g China  import  tariff  bilateral  a n d GATT c o u n t r i e s  GATT,  A l l o f them  7 4  non-discrimination  providing  grandfather  that  obligation  have  certain  i s further  24 u n d e r unions  barriers  between  contracting  will  n o t be by  trade  over the  countries' Poland  t o t h e GATT.  but  i s that  The  7 6  entitlement  to  may  MFN  under  enter  eliminate  treatment  The  7 7  from  rationale  into trade other  for this  such arrangements a r e t r a d e - c r e a t i n g ,  to  those  exceptions,  non-discrimination. negotiations  accession  on  This  some  Part  and Romania,  I I provides to  be  reciprocity  of  the  East  an i m p o r t  basic  observed  participating countries.  true  European  market  access  commitments a p p r o a c h  rather  7 9  commercial  policies  i n international trade 8 0  7 8  often  was p a r t i c u l a r l y  t o GATT. A s a s o l u t i o n t o  t h a n n o n - d i s c r i m i n a t i o n was a d o p t e d .  conduct  of preferences  the  such  1, for  increased.  areas  and w i t h h o l d  Article  provides  t w o o r more c o u n t r i e s  free  them  addition  prevails  to  may  also  margins  of  But i n p r a c t i c e ,  convey compensating b e n e f i t s t o n o n - p a r t i c i p a n t s .  In  during  and  parties  major exception  obligation  qualified  which  7 5  component  i s not absolute.  for existing  t h e margin  customs  and  f o r t h e MFN  rights  specifies  Article  incompatible  T h o s e a g r e e m e n t s a r e c h a r a c t e r i z e d by  c o u n t e r - m u l t i l a t e r a l i s m and d i s c r i m i n a t i o n .  while  are  European  commitments o r q u o t a a l l o c a t i o n s , and p r e f e r e n t i a l  treatment.  within  trade  i n t o b e t w e e n NMEs, s u c h a s E a s t e r n  w i t h t h e GATT p r i n c i p l e . the  discriminatory  and code o f matters  I t c o m p r i s e s 21 a r t i c l e s ,  by  providing  25 rules  of national  goods  that  Articles  are  imported  manufactured  Article  6  resulting and  implementation  dumping. of  While  tariffs  as  or  processed.  Article  11  as  trade,  Article  of  export  requires  instrument  18 p r o h i b i t s e x p o r t  the  of  i n p r o t e c t i n g d o m e s t i c i n d u s t r i e s and r e g u l a t i n g  export  8 1  the injurious  p r a c t i c e s such  t h e main  and  the imposition  t o remedy  from u n f a i r t r a d e  goods  f o r t h e purpose of  authorizes  and c o u n t e r v a i l i n g duty  subsidies  and  domestically  evaluation.  antidumping  policy  f o r foreign  7 and 9 c l a r i f y t h e r u l e o f o r i g i n  customs  effects  treatment  trade import  subsidies but  exempts g o v e r n m e n t a l a s s i s t a n c e t o economic development i n t h e case  of  developing  countries.  s p e c i f i e s t h e circumstances emergency s a f e g u a r d rules,  Furthermore,  Article  i n which t h e government can invoke  measures. I n a d d i t i o n t o these  Part I I also contains  some p r o c e d u r a l and  rules f o r dispute  such  Article  and " n u l l i f i c a t i o n and impairment" i n A r t i c l e 23.  8 2  "consultation"  substantive  resolution, 22  as  19  "conciliation"  in  T h e s e p r o c e d u r e s a r e r e - e m p h a s i z e d i n P a r t I I I o f t h e GATT. Part procedural considered  I I I contains problems.  24 d e a l s  Article  35 d e a l w i t h  with  contracting parties. of  However,  as d e a l i n g w i t h  Article  action  r u l e s which  are mainly  some  of  substantive  customs union  the  concerned rules  problems.  can  the contracting  and f r e e t r a d e  a r e a s and  a c c e s s i o n under A r t i c l e  33.  8 3  between  rules also deal with  parties  under  Article  Moreover, a t h r e e  be  F o r example,  n o n - a p p l i c a t i o n o f t h e Agreement The p r o c e d u r a l  with  year  25  joint and  periodic  26 and  " s p e c i a l circumstance" re-negotiations  for  w i t h d r a w a l s and m o d i f i c a t i o n s  process i s provided  of the Tariff  Schedule.  Sometimes, t h e a p p l i c a t i o n o f t h e p r o c e d u r a l to  the suspension,  under  modification  t h e GATT.  withdrawing  However,  procedures  conditions,  and must  Parties.  Such  8 6  invocation. various all  approval  Moreover,  safeguard  any i n v o c a t i o n  i s  have  or withdrawal  only  may  be  countries  cases  law  should  but  also  party  may  be viewed  retaliate. not only  as an e l a b o r a t e  procedures i s not only circumstances, mechanism.  but  I t also  or  seek  certain  after  the  exceptions  and  consultation  with  I n most  8 8  otherwise the affected  This  8 9  or  Contracting  the organization.  c o m p e n s a t i o n must be n e g o t i a t e d ,  contracting  of the  invoking  t h e p a r t i e s concerned and w i t h  of obligations  under  before  p r o c e d u r e s must a l s o  leads  o f suspending  possible  the approval  rules  8 4  indicates  that  as a s e t o f substantive  s e t of procedures.  GATT rules  The a i m o f t h e s e  t o make GATT r u l e s a m e n a b l e t o c h a n g i n g  also serves  to  provide  t h e common  a  dispute  economic  settlement  and  political  i n t e r e s t s o f members i n t h e c o m p l e x a n d e v e r - c h a n g i n g  economic  and  political  public  opinion  situations. within  the organization  c o l l e c t i v e p e r s u a s i o n and Part  IV e n t i t l e d  The p r o c e d u r e s  pressure.  "Trade  GATT r u l e s  i n 1965 t o a d d r e s s  increasing  the living  also  help  to  form  thus  allowing  for  9 0  And Development" t h e importance  standards  of  was  added t o  of exports i n  Less-Developed-Countries  Q -1  (LDCs) . *  Part  IV constitutes  one o f t h e m a j o r  changes  e x c e p t i o n s t o t h e o r i g i n a l GATT f r a m e w o r k . I t p r o v i d e s  or  special  27 rules  and  parties  treatment  including  f o r trade  LDCs.  system o f Preferences -  with  developing  I t i s the origin  9 2  (GSP)  9 3  of  and t h e t h i r d w o r l d  t h e UN C o n f e r e n c e o n T r a d e a n d D e v e l o p m e n t  UNCTAD),  Generalized trading club  (commonly  called  94  While  the  discrimination national  MFN  against  treatment  internal  market.  clause  i s  foreign  goods  clause  discrimination against  clauses  contracting  i s  imported  at  dismantling  t h e border, to  the prevent  goods i n a c o n t r a c t i n g p a r t y ' s enunciated  and n a t i o n a l t r e a t m e n t  o f t h e GATT. A s G e r a r d C u r z o n  at  designed  Non-discrimination  o f t h e MFN  aimed  i n the  i s foremost  twin  policy  said:  " N o n - d i s c r i m i n a t i o n i s p r o b a b l y t h e most important single concept that informs GATT. Bilateralism, quantitative controls, extension of preferences, s t a t e t r a d i n g and a l l s i m i l a r t o o l s o f c o m m e r c i a l p o l i c y a r e i n p r i n c i p l e anathema t o t h e C o n t r a c t i n g Parties because they make inevitable the p r e f e r e n t i a l treatment o f one c o u n t r y as a g a i n s t another f o r other than commercial r e a s o n s . " 9 5  Non-discrimination liberalization. realized  reciprocal  consultation modified. not that  9 7  reductions  basis.  and m u t u a l l y  unalterable  The  means  to  unilaterally.  result  of  can the established  schedule  continuous  i s partly  negotiations  through  Moreover,  trade  e f f e c t e d on a r e c i p r o c a l ,  Only  9 6  achieve  liberalization  advantageous b a s i s  the level  be i n e x c e s s o f p r e v i o u s with  a  The c o n c e p t o f t r a d e  by t a r i f f  discriminatory  i s  shall  be  of modified  concession,  r e s t r i c t i n g t r a d e w i l l be e v e n t u a l l y removed.  on  withdrawn  schedule 9 8  a  be bound and  renegotiation  agreed s c h e d u l e .  tariffs  non-  or or  should  I t i s thought  tariff  barriers  28 Due the  to the d i f f i c u l t i e s  goal  of trade  accomplished on  easier  liberalization  that  similar  This  similar  culture,  norms  base  t o i n t e g r a t e . Examples  level and  Free  are  i n finding  extremely  particularly  true  when  tariff  concessions  with  every  substantive  rule  exceptions. "legalism" poles  This 1 0 0  decides  "norms  of  GATT  unattainable  as  Exceptions delicately regime.  has  and  long escape  elaborated  I t i s a  sort  customs  has  Agreement  i t s aspirations  formula  GATT  materialistic.  been  softened  the tension  nature  a  The  1 1 1 0 1  countries This  two  i s  formulate Almost  i t s flexible the poles  equally  of  strong  o f GATT t o be a c o m b i n a t i o n "norms  lofty  goal  of  have  t o prevent "soft  to  but  remains be  the collapse law" as  of  aspirations".  i n mind,  protectionism  clauses  of  by  between  and  as  are  union,  almost mathematic p r e c i s i o n . "  obligations"  Admittedly,  and  "pragmatism.  the legal  traditions  contracting parties t r y to  shows  and  justified  trade.  reciprocity  pragmatic  first  o f economy,  Trade  s o o n . I n many p r o v i s i o n s GATT e x p r e s s e d  However,  t o be  a r e t h e Benelux  i n achieving i n t e g r a t i o n of world  integration,  i s often  countries with  E u r o p e a n E c o n o m i c Community, Canada-U.S. and  global  i s expected  by r e g i o n a l i n t e g r a t i o n .  t h e ground  relatively  i n realizing  1 0 2  i ti s strong.  attached  and  o f t h e GATT  opposed  to  "hard  i m law".  U  softly  J  The  softness  and vaguely  o f t h e GATT  formulated  rules.  law i s i m p l i c i t I t i s this  in  softness  encourages a f l e x i b l e almost d i s c r e t i o n a r y i n t e r p r e t a t i o n .  i t s that  29 However, their the  one must n o t e  that  i t i s n o t t h e vagueness of  f o r m u l a t i o n t h a t makes t h e GATT r u l e s " s o f t " ,  numerous  invoked  exceptions  soften  withdraw. rules  obligations that  GATT was  especially  flexibility  intended  when  coupled  negotiations.  and v a r i o u s  procedures  are too rigid  t o contain  negotiating  I t also  tariff  reflects trade  GATT  Nondiscrimination reciprocity;  a  liberalization; product  basis;  transparency;  1 0 6  The  clause  tariff  (6)  of  conflicting  l i b e r a l i s m and p r o t e c t i o n i s m . framework e n a b l e us  as  follows  and n a t i o n a l  consolidation;  (5) 1 0 5  be  formulated  concessions.  compromise  principles  (MFN  (3)  may  t o suspend o r  precisely  A c a r e f u l o v e r v i e w o f t h e GATT l e g a l summarize  that  w i t h vagueness r e f l e c t s t h e i n t r i c a c i e s o f  interests representing  to  but rather  (4)  (8) t a r i f f s  :  (1)  treatment);  (2)  generalization  and  negotiations  consultation  1 0 4  and  protection.  on  a  product-by-  conciliation; Attached  p r i n c i p l e s are following e s s e n t i a l exceptions,  (7)  to  namely:  those  (1) GSP  1 07  system;-  (2) l i n e a r  L U /  asymmetric  or plan  reciprocal  formula  target  negotiations  f o r NME's  (to find  accession);  retaliation  ( i f compensation  negotiated);  (4) r e m e d i e s f o r u n f a i r t r a d e p r a c t i c e s b y t a k i n g  advantage clause, other  of free imposing  admissible  generally  be  used  trade  (including invoking  antidumping forms on  i s not offered  and  temporary  regional integration (Article 24).  Note  cannot  be  safeguard-escape  countervailing  o f remedies. a  or  (3)  that  o r emergency  duty, they  and  should  b a s i s ) ; (5)  30 A fundamental tenet admissible  form  of protection.  conviction that t a r i f f s such  o f GATT i s t h a t t a r i f f s  as s u b s i d i e s ,  trading,  has  the least interference with  are  more  negotiated basis.  less  permit  flexible  i s true,  however,  compromise between  abused".  attach  on a  trade  the  and t r a d e  function  creates  liberalism  just a  of  the  because  sponsorship  I t i salso true  trade  policies  GATT  statically.  plays  o f each  should  be  I t should  results  a  GATT  i s a and  i f one a r g u e s  easily  avoided,  and  a  forum  diverging  individual  viewed  should  as a  Agreement.  1 1 1  not  f o r international role  i n regulating,  national  commercial  participant.  and t a r i f f s . become  Moreover,  1 1 0  rather  continuing  should  be  The GATT n o t  dynamically  on t r a d e  of negotiations  of t h e General  Thus one s h o u l d and f l e x i b i l i t y .  regime  decisive  be v i e w e d  international negotiations GATT,  GATT  or  and s u p e r v i s i n g  part  being  ("mainstream")  of i t s "softness".  compromising,  in  that  liberalization.  i t also  sense  of  They  Y e t , t h e o v e r w h e l m i n g theme o f t h e GATT l a w  1 0 9  negotiations,  and  competition,  non-discriminatory  t o o much w e i g h t t o t h e e x c e p t i o n s  underestimated only  instruments  capable  i f one c o n t e n d s  ("branch s t r e a m " ) .  is nondiscrimination  Also,  on t h e  of resources.  a n d more  t h a t t h e GATT r u l e s a r e " w e a k l y e n f o r c e d ,  not  trade price  allocation  downwards a n d a d m i n i s t e r e d  protectionism  widely  i s based  1 0 8  It typical  policy  a s compared t o o t h e r  state  visible,  This  a r e t h e only  In a than  process of  As p r e s c r i b e d an  integral  many o f t h e GATT  31 rules  benefit  trading  countries-especially  t h o s e who h a v e t h e  same o r s i m i l a r l e v e l o f e c o n o m i c d e v e l o p m e n t . Having  addressed  this,  i t should  be added t h a t  r e g i m e h a s many s h o r t c o m i n g s  and even a degree  if  the perspective  one  looks  contracting  at  parties,  underdeveloped developed  or  and  Others  including  NMEs  whose  substantially  on  planned,  integration  drawbacks  assumption. in favor pattern  be  found  economy  professor  economy,  in  countries  there  Thus  1 1 3  GATT  The r e a s o n f o r  1 1 4  i t s very  fundamental  exclusively  formulated  basis  i s virtually  t o have  1 1 2  global  and t h e u n f a v o r a b l e  A s t h e GATT l a w i s a l m o s t  o f market  NMEs.  i n the context  NMEs.  o f f r e e t r a d e on a p r i v a t e e n t e r p r i s e  nonmarket one  can  to  against  quantitative  enforceable  a dream,  either Western  as r u l e s  e n v i r o n m e n t t o NMEs i s y e t t o b e i m p r o v e d . these  from  state-trading,  target-protected  remains  developing are  inapplicable  on i m p o r t s a r e h a r d l y  centrally  such  unfairness  of  different  are simply  rules  of  economies  Some GATT r u l e s ,  subsidies  restrictions  trade  or  economies.  dumping  of  i t from  t h e GATT  along the  no p l a c e f o r  an e f f e c t i v e  access.  As  well put i t :  "many o f t h e GATT r u l e s make s e n s e o n l y i n the c o n t e x t o f such a market system, s i n c e they r e s t r i c t the types of regulations which governments can impose on i n t e r n a t i o n a l t r a d e r s , b u t do n o t p u r p o r t to regulate the traders themselves." 1 1 5  This applied. GATT  limits This  very  the extent  to  makes t h e p r o b l e m  difficult.  It  which  GATT  of integrating  i s also  said  that  rules  c a n be  NMEs i n t o t h e GATT  rules,  32 especially  rules  on  state  trading  f i t poorly  into  t h e NME  because: "the [GATT] s y s t e m p r e s u p p o s e s t h a t i m p o r t a t i o n a n d e x p o r t a t i o n a r e handled by p r i v a t e firms which, stimulated by profit motives, a r e guided by commercial c o n s i d e r a t i o n s . " 1 1 6  2.4  2.4(1)  NME'S GATT MEMBERSHIP: I S S U E OF C O M P A T I B I L I T Y RAISED  EVOLUTION OF EAST^WEST RELATIONSHIP  Following the  the abortion  ITO was s u p p o s e d  club"  or a traders'  economies.  t o be based, club  GATT l a r g e l y  due t o t h e i r r e c o n c i l a b i l i t y systems  ideology  government  the  and reason  prospect  resulting and  from  belief  became  minimal  was d u e p a r t l y of  capitalist  different  have  a  which  "richmen's  t o Western  market  E a s t e r n b l o c t u r n e d away f r o m t h e  i d e o l o g i e s and economic  Another  GATT  C h a r t e r upon  mainly b e n e f i c i a l  The s o c i a l i s t  1 1 7  o f t h e Havana  political  w i t h t h e GATT p r e f e r r e d intervention  to their world.  systems,  undergone  of their  1 1 8  in  economy.  misunderstandings of Despite  the  the Eastern bloc's  fundamental  market  changes  tension attitude  since  late  1950s. An towards  overview  of  the East  t h e GATT w o u l d  least three distinct  show  that  they  countries' have  s t a g e s : from t h e i n i t i a l  (1947-55) t o t h e p a r t i a l acceptance  European  (1966-70s).  1 1 9  acceptance  gone entire  attitude  through a t rejection  (1955-66) a n d t o t h e f u l l  33 The  initial  historical 1940s  s t a g e o f r e j e c t i o n was b a s e d o n t h e f o l l o w i n g  reasons  and p o l i t i c a l  the Soviets  American U.S.  plan  over  believed  world  that  multilateral  trade,  opportunities  along  with  centralism. Soviet to  countries greater would  carry  and  influence.  1 2 3  evolve  a i d were  together  economic  that  be  the  with  Soviet  and t r a d e  political  accession  t o expand i t s  Soviet  sphere  time  As  a l t e r n a t i v e , they  U n i o n and E a s t e r n  them  1 2 5  contradictions  method o f c o u n t r y - s p e c i f i c p l a n n i n g  away  and from  prefer  Finally, between  there the  m u l t i l a t e r a l i s m and t h e  i n foreign trade  Europe.  system  premature  had kept  certain  another  considerations  a s a more a d v a n t a g e o u s d e a l .  that  suffer  This  of  European  capitalist 1 2 4  and  Also, the  1 2 2  system an  but  system  European  might  centralized.  Western concept o f n o n - d i s c r i m i n a t i o n ,  both Soviet  nothing  t h e U.S.  into  and  p r i n c i p l e s were i n  and, as a r e s u l t , more  They  1 2 0  1 2 1  East  the capitalist  i n t h e GATT.  b i l a t e r a l trade at  that  build  investment  state-trading  leading  power  crisis  to  participating  existed  better  and f r e e t r a d e  risk  to  Furthermore, t h e Soviet as w e l l as East  expected  prediction  a  political  economic  distinct  was  of the  non-discriminatory  domination.  cautiously noticed  would  economic  order  trade,  Soviet  objective  and e c o n o m i e s .  economic  the  In the late  T h e r e seemed no room f o r c o m p r o m i s e .  Union  GATT  with  economic  politics  freer  Moreover, m u l t i l a t e r a l conflict  the real  so-called  strategies t o increase t h i s  direct  that  f o r t h e post-war  domination  firmly  believed  considerations:  1 2 6  sector of  Compliance w i t h non-  34 discrimination planning  methods.  The from  could  later  a  require  substantial  reforms  in  their  attitude  grew  1 2 7  change  complex  i n t h e East  political  and  European  economic  developments.  e x p e r i m e n t o f t h e m a r k e t - t y p e GATT t r a d i n g s y s t e m made t h e m t o r e a l i z e t h a t t h e G A T T - b a s e d t r a d e freer in  trade,  non-discrimination  reason  disproved  the Marxist  would  suffer  depression  was t h a t  between  market-type  o f GATT  the strong  economic  1929-33.  change  was t h e o r e t i c a l l y  a  socialist  peaceful  coexistence  option l e f t  2.4(2)  Another  of capitalism  greater  than  of attitude  justified  world the  towards  by t h e then  1 2 8  which  holds  with  a capitalist  o f two d i f f e r e n t  i f t h e p e a c e were t o be  between c o u n t r i e s  systems  with  economy. The was  the only  maintained.  NME MEMBERSHIP I N GATT  Based  on  understandings West  be  i n some c o u n t r i e s , one must  period of coexistence  economy a n d t h o s e  traders.  co-existence"  that since socialism p r e v a i l s only a necessary  promoting  the capitalist  crisis  Such  wide-spread doctrine of "peaceful  imply  order  vitality  prediction that  another  consequently  and m u l t i l a t e r a l i s m would  t h e i n t e r e s t s o f s m a l l - and m i d d l e - s i z e d  important  The  the  i n t h e GATT  considerations,  and changed environment  relationship,  expressing  above-indicated  their  many  of  t h e East  genuine and s t r o n g  system.  1 2 9  mutual  i n t h e sphere of Eastbloc  interest  countries  began  i n participating  35 P o l a n d was t h e f i r s t t h e GATT i n 1 9 5 7 . to  be a d m i t t e d  these  to indicate i t s interest i n joining  Following  1 3 0  i n t o GATT c l u b  two c o u n t r i e s  joined  LJ  the Polish  GATT, H u n g a r y l a u n c h e d in  1958.  frustrated, with  possible  of  import  formula s o l v i n g t h e market  access  on t h e b a s i s  from  aimed  interest  i t s request f o robserver the  t h e mid-1960s  economy partial  and Romanian  Although  1 3 3  the reform  domestic  However,  1 3 1  S  Following  GATT  i n t h e same y e a r .  t h e GATT  commitments a s a r e c i p r o c i t y 132 issue.- '  t h a t R o m a n i a showed i t s d e s i r e  initial  and  foreign  adjustment  status  was  t h e market  trade.  1 3 4  The  o f t h e Hungarian  role  i n 1 9 6 6 , i t was a c c e p t e d  Romanian  Noticing  pattern,  the  and  weakness  having  enough  of  made  t r a d e regime  request  complications.  i nthe  reform  When H u n g a r y p r e s e n t e d  status  was  preoccupied  t h e t r a d i t i o n a l GATT s y s t e m . f o r observer  i n the  application  on, Hungary  at increasing  i n joining  the  lessons  to  i t s second without  Polish from  and their  n e g o t i a t i o n s w i t h GATT, H u n g a r y d o g g e d l y  b e l i e v e d t h a t t o have  an  markets,  e f f e c t i v e access  t o GATT  economy a n d t r a d e c o n d u c t requirements. economic  Based  decentralized  s h o u l d be c o m p a t i b l e  on t h i s  mechanism"  a n d GATT  belief  commencing  i t s economy.  1 3 5  i tbravely 1968  a with  country's t h e GATT  adopted  and  a "new  remarkably  The r e f o r m e n a b l e d h e r t o a c c e d e  t o t h e GATT o n t h e b a s i s o f t a r i f f  negotiations  i n 1973.  1 3 6  When Y u g o s l a v i a was a c c e p t e d b y t h e GATT, i t s economy h a d already the  been t r e a t e d  moment  as i f i t were a market e c o n o m y .  o f i t s break  with  t h e East  European  1 3 7  From  bloc(1948) ,  36 Yugoslavia  progressively  engaged  process  to establish  a  removal  of p o l i t i c a l  obstacles  Further  reforms  abolition  resulted  of multiple  control,  so-called  and thus  in  "market  kept  i n the  decentralization  socialism".  her closer  introduction  exchange r a t e s ,  brought  the  tariffs  as t h e only  conditions. only  on  The  an  formation, And  accession  GATT.  of  tariffs,  State  economic  occasional  a  unified  i t administered  fashion.  i n 1966, Y u g o s l a v i a  trading  of trade  and  exchange  was  There  1 4 1  rate  i t s desirable  QRs  said  normal  t o be free  export  in a  At the  under  existed  a n d no  1 4 0  foreign  c l a i m e d t o use  control  mechanism  basis.  1 3 9  s i m p l i f i c a t i o n of trade  the Yugoslav  instrument  The  to  t r a d e system f a r c l o s e r t o t h e requirements o f G A T T . time of i t s f u l l  1 3 8  used price  subsidies.  nondiscriminatory  1 4 2  C z e c h o s l o v a k i a h a d o r i g i n a l m e m b e r s h i p i n GATT a n d s o h a d no  accession  p r o b l e m when i t s economy became n o n m a r k e t t y p e o f  state  trading  right  t o apply  members was  and  1 4 4  when  interest clearer  t o Czech  QRs o n C z e c h i m p o r t s . became  a  and 1 4 3  East  reserved i t s  some  other  GATT  The same s i t u a t i o n  satellite  has been an o b s e r v e r  of  the  Communist  i n t h e GATT s i n c e  1967  But i t never  1 4 5  European  i n participating when  t h e U.S.  i n t h e T o k y o Round n e g o t i a t i o n s .  member.  Beyond  treatment  Cuba  Bulgaria  was a c t i v e  became a  MFN  retained  faced  bloc.  i n 1948. N o n e t h e l e s s ,  China  signed  bloc,  China  i n GATT. the  1 4 6  has The  Multifibre  expressed i t s interest  became  Agreement  and  37 acquired  observer  international  status  negotiations.  Interestingly an  observer  interest  its full  i t s request  countries.  since  above  the  GATT-sponsored  Round  negotiation  the Soviet  the Soviet  application  survey  enables  us  to  accession  trade  GATT.  f o r reconsidering  competition  Poland's  t o GATT,  entrance  though  t o negotiate  target-protected  GATT  some c o n c r e t e (as  opposed  o f NME's  provides  a  centrally protection,  provides  technical  the  R o m a n i a a n d somehow i n f l u e n c e d H u n g a r i a n  GATT. H u n g a r i a n broad  formula  of accession  decentralization  Yugoslavia,  Hungary's  of  approach  I ti s first  arrangements  tariff-protected)  e c o n o m i e s i n GATT. The P o l i s h m o d e l was m o s t c l o s e l y by  little  o f East-West  tariff  to  why  Romania  of state trading.  that  the  Among t h e  Poland,  once  t h e GATT c l a i m i n g  with  that  i n the context  and t h e absence  rapprochement  opportunity  strong-  systems e x p l a i n s  the technicalities  Yugoslavia,  economy, e n t e r e d  internal  admitted  Czechoslovakia  relationship.  planned  for  countries  a r e most r e v e a l i n g c a s e s  to  experience  Europe's f o r e i g n t r a d e  conclude  models have been a p p l i e d t o each c o u n t r y .  Hungary  Not  bloc.  different  and  1 4 8  an  i s worth  u n i o n seems t h e l a s t  of East  socialist  with  GATT m e m b e r s h i p i n f u t u r e .  diversity  five  t o acquire  has been r e j e c t e d by t h e m a j o r i t y o f  Perhaps  hold of the s o c i a l i s t The  of  1 4 7  i n t h e Uruguay  i n seeking  reconsideration  many  e n o u g h , e v e n t h e USSR a t t e m p t e d  status  surprisingly, GATT  in  followed  negotiations  with  was made p o s s i b l e b y t h e  i t s economy. provides  NME's  Together  with  new-comers t o  38 GATT  with  very  useful  precursory  experiences  of  reconciliation.  2.4(3)  I S S U E OF COMPATIBILITY RAISED-GENERAL FINDINGS  When E a s t e r n  European c o u n t r i e s  were  applying  for  GATT  m e m b e r s h i p , t h e m o s t f r u s t r a t i n g p r o b l e m was t h e c o m p a t i b i l i t y of  their state  applicability their  trading  o f GATT r u l e s - s u c h  NMEs. A t t h a t  problems w i t h i n Both  GATT  concerned They  of  and  with  CPs  pragmatic  solution.  were  reciprocity  market  1 5 0  with  and dumping t o  exchange  had been  were  overly  of benefits  and  rights.  of  nondiscrimination.  and s t r u c t u r a l GATT  interested  t o solve  CPs  incompatibility  especially  i n finding  t h e most  directions.  the Eastern  t h e approach  invented  neglected.  countries  principle  of  and s t r u c t u r a l  a  T h e y w e r e more c o n c e n t r a t e d  i n both  along  admissions,  more  framework  European  most  formula  openings  pragmatism  East  theoretical  GATT,  European  a  legal  at the cardinal  with  as subsidies  many o f t h e o r e t i c a l  reciprocal  of solving  NMEs  time  t h e GATT  CPs  blinked  Instead  s y s t e m w i t h t h e GATT r e q u i r e m e n t s , a n d  1 5 1  Western fast  on  crucial  was  haste  import  finding  issue  As a r e s u l t  Bloc's  in  be  1 5 2  The a p p r o a c h  seen l a t e r ,  China's fostering  has s u f f e r e d  and i t i s v i r t u a l l y  accession  problem.  1 5 3  fatal  obtaining  commitments-a  I t has  cheap  weakness which  inapplicable been  of  of t h e i r  v e r y p r a g m a t i c way o f a d m i s s i o n a n d y e t a t s u r p r i s i n g l y cost.  and  will  t o t h e case of ineffective  t h e growth o f East-West t r a d e . As t o E a s t e r n  in  Europe,  39 it  won  the battle  membership  but  discrimination. essential  of  lost  obtaining the  This  results  presumption  the certificate  war  against  from  their  on w h i c h  GATT  economy b e t a r i f f - p r o t e c t e d economy  w i t h minimal  non-discrimination  to  neglect been  such  founded.  fair  trade  with  trade  minimal  with  government  o f GATT.  main purpose o f t h e t h e s i s a t t h i s  time  i s therefore  d i s c u s s more t h e o r e t i c a l a n d s t r u c t u r a l p r o b l e m s w h i c h h a v e  been end  ignored  both  i n academic  i ti s unavoidable  are compatible adequate world with  NME,  a  circles.  brief  framework  i n i n t e g r a t i n g t h e NME  comparison  o f GATT  of characteristics  economy  (FME) i s n e c e s s a r y  I n a FME, i n t e r n a t i o n a l  trade  of  economic  self  interest.  used t o a l l o c a t e scarce i n NME,  key  Their  1 5 4  Prices  resources.  acting out  s e t by t h e market a r e  1 5 5  investment,  decisions are,  forces, 1 5 6  t o deepen  i s conducted  t h e independent d e c i s i o n s o f buyers and s e l l e r s  planning.  framework  o f NME a n d  by  market  into  of the subject.  v. NME:  distribution  this  w h e t h e r t h e GATT m a j o r r u l e s  I n examining t h e c o m p a t i b i l i t y  o f free-market  But  To  w i t h NME a n d w h e t h e r t h e GATT c a n b e u s e d a s a n  our u n d e r s t a n d i n g FME  and o f f i c i a l  t o analyze  and e f f e c t i v e  trade.  function  by  CPs'  p l a c e t h a t GATT members'  government i n t e r v e n t i o n . Free  and  of  GATT  and e s s e n t i a l l y p r i v a t e e n t e r p r i s e  i n t e r v e n t i o n i s t h e substance The  Western  has long  Such a s s u m p t i o n r e q u i r e s i n t h e f i r s t  of  production,  purchase  and  f o r t h e most p a r t , d e t e r m i n e d n o t  law o f supply international  a n d demand, trade  b u t by and  state  resources  40 allocation  are also  commercial  considerations  not  regulated  by s t a t e  planning  of c o s t - b e n e f i t .  with  Their  1 5 7  little  prices  do  h a v e t h e same m e a n i n g a s i n FME b e c a u s e : "Not only are the prices of NME enterprise controlled, but i t s costs...also are centrally determined. With administered costs and p r i c e s , profits are effectively administered as well. Finally, economic a c t i v i t y i s centrally directed t h r o u g h t h e use o f a d m i n i s t r a t i v e p r i c e s , p l a n s and targets." 1 5 8  I n FME t h e p r i c e o f a p r o d u c t t e n d s t o i n f l u e n c e quantities prices  f o r consumption and p r o d u c t i o n ,  have  little  influence  whereas  on p r o d u c t i o n  both the  i n NME t h e  quantities.  In  1 5 9  NME p r o d u c t i o n q u a n t i t i e s a r e p l a n n e d i n a d v a n c e a n d t h e p r i c e for  a p a r t i c u l a r product i s s e t a t a l e v e l that w i l l c l e a r the  market.  1 6 0  Furthermore, t a r i f f rates influence tariff  on t h e l e v e l  schedule  origins simply  by  The  importing than  agencies  so-called  foreign  irrelevant. imports  follow  authorities the are  1 6 2  choice  and  i n FME.  c a n be  discharged  imports  from a l l  i n the fact  political  of  considerations,  that  criteria  considerations"  uniformity  in  customs  selecting duties  but p h y s i c a l l y  is  of the sources t h e NME's  u s e i n t e r n a l p r i c i n g power  similar  most rather  to  of  planning influence  o f t h o s e s o u r c e s , p a r t i c u l a r l y when i m p o r t e d  functionally  The  1 6 1  i n determining the  on  i f the determination  commercial  can s t i l l  lies  follow  "commercial  Even  tariffs  for this  i n NME  suppliers  that  commitment  identical  reason  than  i s not essential  a n d a MFN  imposing  countries.  of imports  i n NME  of imports,  i n NME h a v e a much more l i m i t e d  goods  distinguishable.  1 6 3  41 The  incompatibility  w o r s e n e d by of  the  its  market  pricing  rates.  the  NME  through  measures  i t  is  system. trade  elusive  and  is  duality  exclude foreign products control to  subject  to  makes  integrate  over  the  or non-  regulation.  m a r k e t - o r i e n t e d GATT  NME  the  or  GATT  into  r e c i p r o c i t y between  undercuts  from  purchasing  tariffs  to  a dilemma f o r the  and  economy  i t s currencies  recourse  traditionally  also  market  1 6 4  without  difficult  It  with  of  system can  Such s y s t e m c r e a t e s so  system  administrative  decisions,  tariff  NME  inconvertibility  i t s exchange Finally,  of  general  the  GATT  the  1 6 5  and  trading  East  and  West  of  non-  principle  discrimination . Despite share  the  certain  political  above  indicated  similarities  influence  on  p a r t i c u l a r to  state  o f b o t h e c o n o m i e s may  favor  trading  one  the  non-commercial  grounds.  its  over-whelming  ideologies  communist c o u n t r i e s Also, changes  i t  in  is  both  distinction  during  and  b e t w e e n NME  reduce i n f o r m a t i o n a l of  decisions  been  to  systems - 1  power o f  0 0  and  and  STEs  war.  to  notice  FME.  or  some  that  For  1 6 7  central  and  increasing or  for  institutional  instance,  by  organizations  imports  have  inefficiency  by  because  a l l the  cold  systems  U.S.  degree  trade  (STEs).  of  instance,  to  reform  their  For  the  some  of  NME  on  made by  price  foreign  FME  and  case  enterprises  embargoed  the  the  FME  f o r e i g n source over another  inaccuracy  be  decentralized  1 6 6  worthwhile  NME  differences,  blurred i n order  and  planners, introducing the  the  the  to  number  NMEs  have  incentive autonomous  corporations.  1 6 9  As  a  42 result, after  some NME c o u n t r i e s their  trading some  economic  countries.  measures  of  like  reforms Even  1 7 0  reform  Hungary, Y u g o s l a v i a , turn  out  i n Poland,  have  been  to  be  Romania  Soviet other  economic hand,  and p o l i t i c a l  government  opposed  to  in  i n most  Europe,  Canada, Japan,'  unique  1 7 4  3  private  and  FME  some  a  centralized  whereas  occasionally. NME  matter  and beverage  countries  from  trading  of  degree.  One  Airbus  measures  monopolies 1 7 6  trading  i s nothing  state  i n NME a n d  trading  absolutely  i n the  in  i n the  i s systematized  i s using  participating  been  trading i n  economy.  state  there  have  state  guidance  between  the other  Therefore  state  F o r example,  key products  the difference  i s only  I n FMEs o n t h e  1 7 1  1 7 2  U.S., t h e U.K. a n d i n a l m o s t e v e r y m a r k e t Perhaps  I s n o t Mr.  enterprises  administrative  o i l and  a n d t h e USSR  i n reforming the  including  o f Western W o r l d .  t h e Wheat B o a r d  1 7 3  state  s i n c e t h e w o r l d w a r I I . Many STEs a s  traditional  established  structure.  interventions  a c t i v i t i e s have i n c r e a s e d  loose  introduced.  G o r b a c h e v p r o p o u n d i n g r e m a r k a b l e new t h i n k i n g  and China  and only  excluding  GATT-based  world  trade. N e v e r t h e l e s s t h i s does n o t d i m i n i s h the  issue  of compatibility  concluded that unless controlled,  o f NME  with  the ealier  f i n d i n g on  t h e GATT.  I t c a n be  NMEs o p t t o d e c e n t r a l i z e  target-protected  bureaucratic  political  effectiveness  of  their  their centrally  economic s y s t e m and remove  obstacles participating  to and  free  rigid,  trade,  competing  the  i n the  43 free-trade  world  under  undoubtedly  questionable.  In the past incorporating  the  new r u l e s i n t o  one  similar  NME  o f t h e most  t h e GATT f r a m e w o r k  pragmatic  i s  about  accommodating  h a s p r o v e n c o n t r a d i c a t o r y i n C h i n a and  countries. senior  F o r example,  leaders  thinking that  rats regardless follows  structuring. in  GATT  i s not practicable since i t w i l l  the  Regrettably,  t h e course  of  white  communist  economic  workable  f o r t h e obvious  ideology  i s simply  wants  capitalist  reform.  incompatible  i t s  has caused  It is,  reason  I n t h e meantime  in  philosophy  under h i s  c a t i f i t catches  or black".  ideology  this  Xiaoping,  central planning  "a c a t i s a good  of i t s being  M r . Deng  i n China,  market mechanisms t o c o - e x i s t w i t h  he  the  w i t h t h e w e l l f o u n d e d GATT r e g i m e a n d may c a u s e i t t o  collapse. This proposal other  of  many s c h o l a r s a n d p r a c t i t i o n e r s t a l k e d  NMEs i n GATT m e m b e r s h i p . T h i s conflict  promotion  political problems  i n effect,  not  that  communist  political  with  capitalist  economic  ideology. While consider of  deciphering  the possibility  the institutional  between trade import  such  reforms continue  barriers,  would  also  i n a way t h a t much ease  the tension  As economic  and f o r e i g n  t o d e c e n t r a l i z e t h e economy, t o l o o s e n  measures,  and  t o remove  unnecessary  o f t h e two becoming r e c o n c i l e d  As a m a t t e r  are already  i n NME  relationship.  the possibility  become b i g g e r . Yugoslavia  of reconciliation  changes  t h e East-West  controls  i n c o m p a t i b i l i t y one s h o u l d  of fact,  compatible  some NMEs  with  like  t h e GATT  trade will  Hungary,  fundamental  44 requirements. also the  making  NMEs  like  Poland,  efforts t o integrate  GATT s y s t e m .  progressive the  Other  their  GATT-required  reforms  system.  that  will  the  GATT  changed.  system  and economic  system w i l l  upon  system  most  them of  into  started  closer to those  NMEs  t h e gap w i t h  model. c a n b e s a i d i s t h a t NME a n d  remain  nor t h e i r  However,  assumptions  bring  Nonetheless,  At t h e present stage a l lthat GATT t r a d i n g  economic  way t o go b e f o r e t h e y c a n f i l l  the western p o l i t i c a l  the  and China a r e  E v e n t h e USSR a n d E a s t Germany h a v e  economic  would have a long  Romania  irreconcilable i f neither  state  trading  reconcilable  they  will  be  which  GATT  rules  system  a r e based  i s t o be  i f either the o r upon  s t a t e t r a d i n g s y s t e m s o f NMEs a r e b a s e d a r e t o b e  which  changed.  Footnotes J a c k s o n , Implementing 2  the Tokyo  Round  ( 1 9 8 4 ) , p. 1 1 .  Id.  3  Encyclopedia 849-52.  Britannica:  "Free Trade"  ( 1 9 7 8 ) , V o l . 9, p p .  4  J a c k s o n a n d D a v e y , Legal Problems of Relations (1986 2d e d . ) , p p . 281-84.  5  Id. p p . 199-204.  International  OECD was e s t a b l i s h e d i n 1 9 6 1 a s a n e x p a n d e d s u c c e s s o r t o t h e O r g a n i z a t i o n o f European Economic C o o p e r a t i o n (OEEC). F o r a d e t a i l e d e x p l a n a t i o n s e e M. Camps, " F i r s t World" Relationships: The Role of the OECD ( C o u n c i l o n F o r e i g n R e l a t i o n s , 1975).  45 J a c k s o n , supra n o t e 1, p . 1 1 . ( T h e b a s i c t h e m e s t o be c o n s i d e r e d i n t h e p o s t - w a r r e c o n s t r u c t i o n c e n t e r o n : (1) t h e r e l a t i o n s h i p o f economic f o r c e s t o t h e c a u s e s o f war and t h e need t o d e v e l o p i n s t i t u t i o n s t h a t c o u l d p r e s e r v e t h e p e a c e ; a n d (2) t h e e c o n o m i c t h e o r y o f c o m p a r a t i v e advantage t h a t supported a p o l i c y o f t r a d e l i b e r a l i z a t i o n ) . Id. G e r a l d M. M e i e r , "The B r e t t o n Woods A g r e e m e n t s — 2 5 Y e a r s a f t e r " (1971) 39 Stanford L.Rev.235, 2 3 7 , 2 4 5 - 4 6 . (The t e r m " B r e t t o n Woods S y s t e m " i n c o r p o r a t e s t h e GATT a s w e l l a s t h e IMF a n d W o r l d Bank, b e c a u s e t h e B r e t t o n Woods C o n f e r e n c e l o o k e d f o r w a r d t o t h e c r e a t i o n o f a n a n c i l l a r y i n s t i t u t i o n t h a t would reduce o b s t a c l e s of i n t e r n a t i o n a l t r a d e and g i v e s e f f e c t t o t h e p r i n c i p l e o f m u l t i l a t e r a l nondiscriminatory trade). E. M c G o v e r n , International Trade Regulation—GATT, the United States and the European Community ( 1 9 8 2 ) ; K.W. Dam, The GATT Law and International Economic Organization ( 1 9 7 0 ) ; J . J a c k s o n , World Trade and the Law of GATT ( 1 9 6 9 ) ; R. Hudec, The GATT Legal System and World Trade Diplomacy (1975) 10  F o r h i s t o r i c o v e r v i e w o f t h e b a s i c d e s i g n o f GATT, s e e R.E. H u d e c , The GATT Legal System and World Trade Diplomacy ( P r a e g e r P u b l i s h e r s , 1 9 7 5 ) , pp. 44-46.  11  Dam, supra  12  Id.  13  L o n d o n R e p o r t , UN D o c . EPCT/34 ( 1 9 4 7 ) ; UN Doc.EPCT/c.6/w.55(1947).  14  W i t h r e s p e c t t o t h e t r o u b l e d h i s t o r y o f t h e GATT, s e e J . J a c k s o n a n d Davey, supra n o t e 4, p p . 2 9 3 - 9 6 ; G. C u r z o n , M u l t i l a t e r a l Commercial Diplomacy ( 1 9 6 5 ) ; K. Dam, supra n o t e 9, 1 0 - 1 6 ; R. Hudec, supra n o t e 9, 4 - 5 3 ; K. K o c k , International Trade P o l i c y in the GATT, 1947-67 (19 6 9 ) ; P. L o r t i e , Economic Integration and the Law of GATT ( 1 9 7 5 ) ; E. M c G o v e r n , supra n o t e 9, p . ; G. & V. C u r z o n , "The Management o f T r a d e R e l a t i o n s i n t h e GATT" i n A. S h o n f i e l d , G. & V. C u r z o n , T. W o r l e y a n d G. R a y , International Economic Relations of the Western World 1959-1971, V o l . I : P o l i t i c s and Trade (1976);. D i e b o l d , The End of the ITO ( E s s a y s i n I n t e r n a t i o n a l F i n a n c e No. 16, P r i n c e t o n U n i v e r s i t y P r e s s , 1982) .  15  Dam, supra n o t e 9, p p . 1 3 - 1 4 ; s e e "The ITO C h a r t e r , " Fortune, J u l y 1 9 4 9 , p . 6 1 . (An e d i t o r i a l s u b t i t l e d "The ITO i s a l l e x c e p t i o n s . " )  n o t e 9, p p . 5-7.  a t 6.  46 16  K o s t e c k i , East-West pp.1-3.  17  J a c k s o n , supra s.2.4.  18  J a c k s o n , supra n o t e 4, p p . 2 9 4 - 9 6 . ( A l t h o u g h i t was n o t c o n t e m p l a t e d t h a t t h e GATT w o u l d b e a n o r g a n i z a t i o n ) .  19  1 9 4 7 - G e n e v a n e g o t i a t i o n o f t h e o r i g i n a l GATT, i n c l u d i n g t h e t a r i f f s c h e d u l e s ; 1949-And, F r a n c e ; 1 9 5 0 - T o r q u a y , E n g l a n d ; 1 9 5 5 - G e n e v a ( t e n t h GATT s e s s i o n ) ; 1 9 6 0 - 6 1 - t h e D i l l o n Round; 1962-67-the Kennedy Round; 1973-79-the T o k y o R o u n d , o r M u l t i l a t e r a l T r a d e N e g o t i a t i o n (MTN); 1 9 8 3 - p r e s e n t - t h e U r u g u a y Round. F o r d e t a i l e d d i s c u s s i o n o f t h e T o k y o Round, see J a c k s o n , supra n o t e 1.  20  Encyclopedia  21  R. B l a c k h u r s t , N. M a r i a n & J . T u m l i r , Trade L i b e r a l i z a t i o n , Protectionism and interdependence S t u d i e s i n I n t ' l T r a d e , No. 5, G e n e v a 1 9 7 7 ) .  Trade  and the GATT System  (1979),  n o t e 4, p . 2 9 5 ; J a c k s o n , supra  n o t e 9,  Britannica,  supra  n o t e 3, p p . 8 4 5 - 4 9 . (GATT  22  F r a n k S t o n e , Canada the GATT and the International Trade System: E s s a y s i n i n t e r n a t i o n a l e c o n o m i c s ( 1 9 8 4 ) , p. 14.  23  F o r d i s c u s s i o n o f l a w o f c o m p a r a t i v e a d v a n t a g e , see C P . K i n d l e b e r g e r , International Economics, 1 7 - 2 1 , 27,33 ( 5 t h ed. 1973).  24  Encyclopedia  25  Adam S m i t h , Enquiry Into the Nature and causes of the Wealth of Nations ( 1 7 7 6 ) , ( h e r e i n a f t e r Wealth of Nations). (The c e n t r a l c o n t e n t o f Adam S m i t h ' s a r g u m e n t was t h a t d i v i s i o n o f l a b o r l e a d s t o s p e c i a l i z a t i o n , e f f i c i e n c y and g r e a t e r p r o d u c t i o n . C o m p e t i t i o n , i n h i s e y e , was o f p a r a m o u n t i m p o r t a n c e t o t h e g r o w t h o f n a t i o n a l economy a n d i n d i v i d u a l w e a l t h . G o v e r n m e n t t h u s s h o u l d as f a r as p o s s i b l e keep t h e i r hands o f f intervening i n the a f f a i r s of private enterprises.)  26  D a v i d R i c a r d o , P r i n c i p l e of P o l i t i c a l Economy and Taxation (1817). ( e x p l a i n i n g t h e advantages o f s p e c i a l i z a t i o n and c o n t e n d e d t h a t t r a d e b e t w e e n c o u n t r i e s was n o t d o m i n a t e d by r e l a t i v e c o s t s o f p r o d u c t i o n , b u t r a t h e r b y d i f f e r e n c e s i n i n t e r n a l p r i c e s t r u c t u r e s which r e f l e c t e d the c o m p a r a t i v e advantage o f t h e t r a d i n g c o u n t r i e s and made e x c h a n g e d e s i r a b l e . )  Britannica,  supra  n o t e 3, a t 8 4 9 .  47 27  J . S . M i l l , Essays on Some unsettled Questions in P o l i t i c a l Economy (18) ( g i v i n g s o l u t i o n s t o t h e p r o b l e m s o f t h e d i s t r i b u t i o n o f t h e g a i n s o f i n t e r n a t i o n a l commerce, t h e i n f l u e n c e o f c o n s u m p t i o n on p r o d u c t i o n , t h e d e f i n i t i o n o f p r o d u c t i v e and u n p r o d u c t i v e l a b o u r a n d t h e p r e c i s e r e l a t i o n s between p r o f i t s and w a g e s ) .  28  P.  29  J.M. K e y n e s , General Theory of Employment, Interest, and Money (1936) ( u s i n g " f u l l e m p l o y m e n t " a s a c r i t e r i o n o f economic p o l i c y t o argue a g a i n s t f r e e t r a d e ) .  30  S t o n e , supra  31 32 33  S a m u e l s o n , Economics, p. 692 ( 9 t h e d . 1973) (There i s e s s e n t i a l l y o n l y one a r g u m e n t f o r f r e e t r a d e o r f r e e r t r a d e , b u t i t i s an e x c e e d i n g l y p o w e r f u l one, n a m e l y : f r e e t r a d e promotes a m u t u a l l y p r o f i t a b l e d i v i s i o n of l a b o u r g r e a t l y enhances the p o t e n t i a l r e a l n a t i o n a l p r o d u c t o f a l l n a t i o n s and makes p o s s i b l e h i g h e r standard of l i v i n g a l l over the g l o b e ) .  Jackson  and  Encyclopedia  n o t e 22,  pp.  D a v e y , supra Britannica,  15-16. n o t e 4, pp. supra  28-3 0.  n o t e 3, pp.  850-52.  Id.; s e e a l s o , A k e h u r s t , A Modern Introduction to International Law (1987 6 t h e d . ) , pp. 8 7 - 1 0 3 ; D a v i d H O t t , Public International Law in the Modern World (1987, P i t m a n ) , pp. 1 7 6 - 8 9 .  34  GATT A r t i c l e treatment"  35  To q u o t e p r e a m b l e o f t h e GATT, i t i s r e c o g n i z e d t h a t " e c o n o m i c e n d e a v o r s s h o u l d be c o n d u c t e d w i t h a v i e w t o r a i s i n g s t a n d a r d s o f l i v i n g , e n s u r i n g f u l l employment and a l a r g e and s t e a d i l y g r o w i n g v o l u m e o f r e a l i n c o m e and e f f e c t i v e demand, d e v e l o p i n g t h e f u l l u s e o f t h e r e s o u r c e s o f t h e w o r l d and e x p a n d i n g t h e p r o d u c t i o n and exchange of goods...Being d e s i r o u s of c o n t r i b u t i n g t o t h e s e o b j e c t i v e s by e n t e r i n g i n t o r e c i p r o c a l and m u t u a l l y advantageous arrangements d i r e c t e d t o the s u b s t a n t i a l r e d u c t i o n o f t a r i f f s and o t h e r b a r r i e r s t o t r a d e and t o t h e e l i m i n a t i o n o f d i s c r i m i n a t o r y t r e a t m e n t i n i n t e r n a t i o n a l commerce.  36  GATT, A r t i c l e 28 b i s .  37  GATT A r t i c l e 28 p e r m i t s two k i n d s o f r e n e g o t i a t i o n : t h r e e y e a r p e r i o d i c r e n e g o t i a t i o n and " s p e c i a l c i r c u m s t a n c e s " r e n e g o t i a t i o n ( A r t i c l e 2 8 : 4 ) . The p r o c e d u r e a s r e g a r d s c o n s u l t a t i o n w i t h b o t h c p s c o n c e r n e d and CONTRACTING P A R T I E S a n d c o n c i l i a t i o n t h r o u g h t h e CONTRACTING PARTIES i s v a l i d throughout the dispute r e s o l u t i o n .  1: MFN c l a u s e c o u p l e d ( A r t i c l e 3).  with  "National  48 GATT, A r t i c l e  28:4(b).  GATT, A r t i c l e s 2 8 , 28 b i s . GATT A r t i c l e 11 w h i c h p r o v i d e s t h a t , "No p r o h i b i t i o n o r r e s t r i c t i o n s other than d u t i e s , taxes o r other charges), w h e t h e r made e f f e c t i v e t h r o u g h q u o t a s , i m p o r t e x p o r t l i c e n s e s o r o t h e r measures, s h a l l be i n s t i t u t e d o r m a i n t a i n e d by any c o n t r a c t i n g p a r t y on t h e i m p o r t a t i o n of any product." Here o t h e r measures, a c c o r d i n g t o an i n t e r p r e t i v e n o t e , i n c l u d e "exchange c o n t r o l " , "domestic p r i c e f o r m a t i o n " , " i m p o r t mark-up" a n d s t a t e t r a d i n g p r a c t i c e s . This requirement i s t o dismantle t h e various means o f g o v e r n m e n t i n t e r v e n t i o n o r a d m i n i s t r a t i v e c o n t r o l o v e r i m p o r t s . Or o t h e r w i s e t a r i f f n e g o t i a t i o n w i l l be meaningless i f t a r i f f i s n o t main element o f regulating trade. GATT A r t i c l e  6: s o - c a l l e d " T r a c k  I".  GATT A r t i c l e 17 s e t f o r t h c o m m e r c i a l c r i t e r i a s t a t e t r a d i n g e n t e r p r i s e s should observe.  on w h i c h  GATT A r t . 11 c a l l i n g f o r g e n e r a l e l i m i n a t i o n o f i m p o r t l i c e n s i n g and quota system w i t h s e v e r a l important e x c e p t i o n s . A l t h o u g h GATT t r i e s t o m i n i m i z e t h e u s e o f i n d i r e c t t r a d e c o n t r o l s such as " s t a t e t r a d i n g " , exchange c o n t r o l , v o l u n t a r y e x p o r t r e s t r a i n t s , and o t h e r NTBs, t h e i r p r o t e c t i v e u s e s a r e p r e v a l e n t . GATT A r t i c l e 19 p r o v i d e s t h a t , i n t h e c a s e t h a t , " a n y product i s being i m p o r t e d . . . i n such i n c r e a s e d q u a n t i t i e s and u n d e r s u c h c o n d i t i o n s a s t o c a u s e o r t h r e a t e n s e r i o u s i n j u r y t o domestic producers... of l i k e o r d i r e c t l y c o m p e t i t i v e p r o d u c t s " , i m p o r t i n g c p s h a l l be f r e e t o suspend t h e o b l i g a t i o n i n whole o r i n p a r t o r t o w i t h d r a w o r m o d i f y t h e c o n c e s s i o n w i t h r e s p e c t t o some imported goods. GATT A r t . 2 5 : 5 - " i n e x c e p t i o n a l c i r c u m s t a n c e s " , t h e C o n t r a c t i n g P a r t i e s may w a i v e a n o b l i g a t i o n i m p o s e d o n a CP b y t h e GATT. T h i s w a i v e r i s l i m i t e d b y 2/3 m a j o r i t y c o n s e n t i n g v o t e o f CPs. I n t e r p r e t a t i o n o f " e x c e p t i o n a l c i r c u m s t a n c e s " i s w i t h i n t h e r e a c h o f CPs. I n p r a c t i c e , t h i s i s construed very broadly. Stone, Id. Id.  supra  note  2 2 , p . 3.  49 Id. (On t h e o n e h a n d , t h e GATT r u l e s a r e d e s i g n e d t o e s t a b l i s h t h e r i g h t s o f p r o d u c e r s i n one c o u n t r y t o s e l l p r o d u c t s i n o t h e r member c o u n t r i e s . On t h e o t h e r h a n d , t h e r u l e s d e f i n e and l i m i t t h e freedom o f governments t o r e s t r i c t t h e i m p o r t a t i o n o f goods and o t h e r w i s e t o p r o t e c t t h e i r domestic producers against i n t e r n a t i o n a l competition). Id.,  p. 28.  Id. Despite t h e existence of c e r t a i n elements of i n e q u a l i t y b e t w e e n w o r k e r s a n d o w n e r s o f t h e means o f p r o d u c t i o n , and d e s p i t e t h e m o r a l c r i t i c i s m , c a p i t a l i s m has l o n g been c o n s i d e r e d as a b e t t e r form o f systems t o i n c r e a s e s o c i a l wealth. Capitalism, a v i c t o r y over feudalism, r e a c h e d i t s peak i n w e s t e r n Europe w i t h i n t r o d u c t i o n o f Adam S m i t h ' s g r e a t e c o n o m i c t h e o r y a n d i n f l u e n c e o f F r e n c h " l a i s s e z f a i r e " i d e a . Y e t , c a p i t a l i s m met i t s v a l l e y when R u s s i a n R e v o l u t i o n u p r o o t e d o v e r a v a s t a r e a not only t h e basic i n s t i t u t i o n of p r i v a t e property i n t h e means o f p r o d u c t i o n , b u t t h e c l a s s s t r u c t u r e , t h e t r a d i t i o n a l forms o f government. ENCYCLOPEDIA BRITANNICA, V o l . 1 3 , p p . 605-6. For d i s c u s s i o n of t h e M a r x i s t - L e n i n i s t v i s i o n of s o c i a l i s m , s e e G r e g o r y a n d S t u a r t , Comparative Economic Systems ( 1 9 8 0 ) , p p . 1 1 0 - 1 1 ; Encyclopedia Britannica, supra n o t e 2 1 , p. 8 5 1 . Recent Economic Present Views  Thought: Comparative Economic Systems: (1984, Andrew Z i m b a l i s t e d . ) , pp.23-28.  K a r l M a r x ( 1 8 1 8 - 1 8 8 3 ) , Capital I, 1 8 6 7 , p p . 6 3 8 - 6 5 0 . { I n M a r x ' s o r i g i n a l p r e d i c t i o n Communism s h o u l d o v e r c o m e a l l t h e weakness o f c a p i t a l i s m o r s h o u l d e v o l v e from a h i g h e s t s t a g e o f c a p i t a l i s m , w h i c h i n L e n i n ' s word i s " i m p e r i a l i s m " , s e e L e n i n , Imperialism, the Highest State of Capitalism (1916)}. Marx, i d . Adam S m i t h , Wealth 114ff.  of Nations,  1776, pp. 74, 76, l O O f f ,  M a n u e l G o t t l i e b , A Theory 209-215.  of Economic  G r e g o r y a n d S t u a r t , supra  n o t e 53, pp. 109-152,  S e e Comparative Id.,  24-26.  Economic  System,  supra  Systems  (1984), pp. 284-318.  n o t e 5 4 , p p . 23-28.  50 62  Id.,  63  G r e g o r y a n d S t u a r t , supra  64  ENCYCLOPEDIA  65 66 67  26-28.  BRITANNICA,  n o t e 53, pp. 168-187, 235-274. supra  n o t e 3, p . 8 5 2 .  Id. Kostecki,  supra  J a c k s o n , supra t h e GATT).  n o t e 16, p. 35. n o t e 4, p p . 296-98 ( o u t l i n i n g t h e b a s i c s o f  68  GATT A r t . l :  69  Id.  70  Adam S m i t h , Wealth of Nations, 1776, pp. l l l f f , G o t t l i e b , supra n o t e 5 9 , p p . 8 3 - 8 9 .  71  G. S c h w a r z e n b e r g e r , " E q u a l i t y a n d D i s c r i m i n a t i o n i n I n t e r n a t i o n a l E c o n o m i c Law", 25 Yearbook of World A f f a i r s 1 6 3 , 163-65 (1971)  72  GATT A r t i c l e  73  GATT A r t i c l e 2.  74  Kostecki,  75  Id.  7 6  77  MFN C l a u s e a n d A r t . 2 :  binding  tariff  Schedule.  H 4 f f ; M.  1.  supra  n o t e 1 7 , p p . 58-59  GATT A r t i c l e  1: MFN  Treatment.  GATT A r t i c l e  24: R e g i o n a l I n t e g r a t i o n .  78  P a r a . 4 o f A r t i c l e 24 s t a t e s t h a t : " t h e p u r p o s e o f a customs u n i o n o r o f a f r e e - t r a d e a r e a s h o u l d be t o f a c i l i t a t e t r a d e between t h e c o n s t i t u e n t t e r r i t o r i e s and not t o r a i s e b a r r i e r s t o t h e trade of other contracting p a r t i e s w i t h i n such t e r r i t o r i e s . "  79  Kostecki,  80  The p u r p o s e o f P a r t I I i s e n u n c i a t e d i n A r t i c l e 3 w h i c h aims a t removing o r r e d u c i n g i n t e r n a l t a x a t i o n s and r e g u l a t i o n s which a f f o r d p r o t e c t i o n t o domestic production, (para.l of A r t i c l e 3).  81  GATT A r t . 3 : N a t i o n a l  82  GATT A r t i c l e 22 c o n t a i n s s t a g e 1 — b i l a t e r a l " c o n s u l t a t i o n w i t h c p s a f f e c t e d and s t a g e 2 — C o n c i l i a t i o n by t h e plenary organ- t h e Contracting P a r t i e s .  supra  n o t e 1 7 , p p . 134-36.  treatment.  51 83  A r t i c l e 33 makes a 2/3 m a j o r i t y s u f f i c i e n t f o r a c c e s s i o n o f a new n a t i o n t o GATT; a t t h e same t i m e , A r t i c l e 3 5 , however, g i v e s each e x i s t i n g p a r t y t h e p r i v i l e g e t o r e f u s e t o a p p l y GATT t o t h e a c c e d i n g c o u n t r y .  84  A r t i c l e 27, 28, 2 8 b i s . F o r d e t a i l e d a n a l y s i s s e e J a n K o l a s a , " L a w - M a k i n g a n d Law E n f o r c i n g F o r I n t e r n a t i o n a l T r a d e : Some R e f l e c t i o n s o n T h e GATT E x p e r i e n c e " i n World Order Studies Program Occasional Paper No.3 C e n t e r o f I n t e r n a t i o n a l S t u d i e s ( P r i n c e t o n U n i v e r s i t y , 1976), pp. 20-24.  85  K o l a s a , supra  86  Id.  87  Id.  88  Id.  89  GATT A r t i c l e  90  T h i e b a u t F l o r y , L e GATT D r i o t I n t e r n a t i o n a l e t Commerce M o n d i a l ( P a r i s 1969), p. 259.  91  GATT A r t i c l e 36: P r i n c i p l e s a n d o b j e c t i v e s through 8 ) .  92  P a r a . 8 o f GATT A r t i c l e 4, p p . 1 1 3 8 - 6 1 .  93  F o r d i s c u s s i o n o f GSP see J a c k s o n , supra 61.  94  Id,  95  note 84, p. 35.  2 7 , 28.  (paragraphs 1  36; see a l s o J a c k s o n , s u p r a  note  n o t e 4, p p . 1 1 5 4 -  pp. 1141-53.  G e r a r d C u r z o n , M u l t i l a t e r a l Commercial p. 59.  96  GATT, A r t i c l e 2 ( 5 ) .  97  K o l a s a , s u p r a n o t e 8 4 , p p . 19-28.  98  GATT A r t i c l e  99  K o l a s a , supra  2(1)(c). n o t e 84, p. 31.  Policy,  supra  14,  52 Dam, supra n o t e 9. Where he r e f e r s " l e g a l i s m " t o an a p p r o a c h t o t h e d r a f t i n g o f GATT u n d e r w h i c h d r a f t s m e n a t t e m p t t o f o r e s e e a l l o f t h e p r o b l e m s t h a t may a r i s e i n a p a r t i c u l a r a r e a and t o w r i t e down h i g h l y d e t a i l e d r u l e s i n order to eliminate to the greatest extent p o s s i b l e any d i s p u t e s , o r e v e n any d o u b t s , a b o u t t h e r i g h t s and o b l i g a t i o n s o f e a c h a g r e e i n g p a r t y u n d e r a l l f u t u r e c i r c u m s t a n c e s . Id., pp. 3-4. Dam, supra n o t e 9. ( " P r a g m a t i s m " i s m e a n t a n a p p r o a c h t o t h e d r a f t i n g o f t h e GATT u n d e r w h i c h e m p h a s i s i s p l a c e d on m u t u a l a g r e e m e n t on o b j e c t i v e s , r u l e s c o n c e r n i n g r i g h t s and o b l i g a t i o n s a r e c o n s i d e r e d f o r m a l i t i e s t o be a v o i d e d w h e n e v e r p o s s i b l e . ) Id., p.4. J a c k s o n , supra Kolasa,  supra  n o t e 9,  pp.  n o t e 84,  p.  755-63. 31.  c . f . J a c k s o n , supra n o t e 9, p. 760. ( I n w h i c h he s u m m a r i z e s t h e GATT Law a s f o l l o w s : (1) L e g a l n o r m s , b a c k e d by a c o m p l a i n t o r a d i s p u t e - s e t t l i n g p r o c e d u r e , (2) e l a b o r a t e d i s c u s s i o n and c o n s u l t a t i o n w i t h a v i e w t o a l t e r i n g o t h e r n a t i o n s t o f u t u r e n a t i o n a l p o l i c i e s , (3) t h e u s e o f w o r k i n g p a r t i e s , s u b c o m m i t t e e and discussions i n p l e n a r y s e s s i o n s t o b r i n g m o r a l f o r c e upon c o u n t r i e s t o c o n f o r m t h e i r i n d i v i d u a l n a t i o n a l p o l i c i e s and p r a c t i c e s t o e i t h e r t h e l e g a l norms o r t h e s t a t e d o b j e c t i v e s o f GATT, and (4) t h e u s e o f n e g o t i a t i o n o r b a r g a i n i n g a s a means t o f o r m u l a t e new o b l i g a t i o n and a l t e r d i f f e r e n c e s about o l d o b l i g a t i o n s . GATT, A r t i c l e  28 b i s ( 2 ) ( a ) .  GATT A r t i c l e 10 administration  c o n c e r n i n g " p u b l i c a t i o n and of n a t i o n a l trade r e g u l a t i o n s " .  U n l i k e r e c i p r o c a l concessions, b e n e f i t s or p r i v i l e g e s g r a n t e d u n d e r GSP s y s t e m c a n be w i t h d r a w n u n i l a t e r a l l y w i t h o u t g i v e n p r i o r n o t i c e and c o n s u l t a t i o n , b e c a u s e t h e y a r e g i v e n i n one-way d i r e c t i o n and on a n o n reciprocal basis. C a s t e l , International 41. S t o n e , supra  n o t e 22 p.  As t o f u n c t i o n s 43-45. GATT, A r t i c l e  Business  (1986),  p.  13.  o f GATT, see 34.  Transactions  S t o n e , supra  n o t e 22,  pp.  53 112  Dam, supra 1179.  113  K o s t e c k i , supra  114  See E. P a t t e r s o n , " I m p r o v i n g GATT R u l e s f o r N o n m a r k e t E c o n o m i e s " 20 J.W.T.L. 1 8 5 .  115  J a c k s o n a n d D a v e y , supra  116  Dam, supra  117  n o t e 9, p. 3 1 8 ; J a c k s o n , supra n o t e 16, p p . 4 3 - 5 1 ,  n o t e 9, p.  65-70, 72-73, 79-83.  n o t e 4, p . 1 1 7 9 .  n o t e 9, p. 3 1 8 .  G. & V. C u r z o n , "GATT: T r a d e r s ' C l u b " i n R o b e r t Cox e t a l ( e d s ) , The Anatomy of Influence (Yale U n i v e r s i t y Press, 1973).  118  Most E a s t European c o u n t r i e s b e l i e v e d i n Marxism, which e s s e n c e i s t h a t c a p i t a l i s m i s doomed b y i t s e x p l o i t i v e n a t u r e , and p r e d i c t e d t h a t t h e c a p i t a l i s t w o r l d would u n d e r g o a n o t h e r more d e v a s t a t i n g e c o n o m i c c r i s i s t h a n t h e pre-war Great D e p r e s s i o n . F o r d e t a i l e d d i s c u s s i o n s e e K o s t e c k i , supra n o t e 16, p p . 3-6.  119  Id,  p. 1.  120  Id.  p. 3.  121  Id.  p . 4.  122  Id.  p p . 5-6.  123  Id.  p . 5.  124  Id.  125  Id. p p . 4-5. B o t h t h e S o v i e t a n d E a s t e r n E u r o p e a r g u e d t h a t n o n - d i s c r i m i n a t i o n s h o u l d n o t r e s t r a i n any c o u n t r y from d e t e r m i n i n g t h e form o f i t s economic r e l a t i o n s i n i t s own b e s t i n t e r e s t , a n d b i l a t e r a l i s m d i d n o t c o n f l i c t with t h e i r understanding of non-discrimination, instead, i t c o u l d t u r n o u t t o be a n e f f e c t i v e weapon c o u n t r i e s were i m p o r t a n t e x p o r t e r s o f c e r t a i n raw m a t e r i a l s i n g r e a t demand i n w o r l d m a r k e t s .  126  J d . p p . 9-10.  127  Id.  128  The d o c t r i n e w h i c h i s deemed a s a m a j o r a d v a n c e i n p o s t war E a s t - W e s t r e l a t i o n s h i p h a s b e e n w i d e l y a c c e p t e d by a l m o s t a l l s o c i a l i s t c o u n t r i e s a s one o f t h e m a j o r p r i n c i p l e s o f i n t e r n a t i o n a l law i n t h e i r f o r e i g n r e l a t i o n s t o t h e West c o u n t e r p a r t s i n c e i t s i n c e p t i o n .  p. 4.  54 129  K o s t e c k i , supra  130  GATT DOC. MGT/81/58, A u g . 1958 a n d ADD. 1, O c t .  131  GATT Doc. L / 3 0 5 0 , A u g . 1 9 6 8 , p . l .  132  F o r d e t a i l e d d i s c u s s i o n , see K o s t e c k i , supra 27-30, 93-97.  133  GATT D o c . S p e c .  134  M. K o s t e c k i , 19.  135  K o s t e c k i , supra  136  W i t h r e s p e c t t o H u n g a r i a n r e c i p r o c i t y f o r m u l a , see K o s t e c k i , i d , pp. 97-98.  137  Id.  138  G r e g o r y a n d S t u a r t , supra n o t e 5 3 , p p . 2 8 6 - 2 9 6 . Re: "Yugoslavia: Market Socialism".  139  See  140  E v o l u t i o n o f t h e Yugoslav f o r e i g n trade system i s d i s c u s s e d b y H. M a t e j k a , " F o r e i g n T r a d e S y s t e m s " , I n Hans-H. Hohman, M i c h a e l K a s e r , K a r e T h a l h e i m ( e d s ) , The New E c o n o m i c S y s t e m s o f E a s t e r n E u r o p e ( L o n d o n : O x f o r d U n i v e r s i t y P r e s s , 1975), pp. 468-73.  141  GATT B I S D , 1 4 t h s u p p . , 1 9 6 6 , p p . 4 9 - 5 9 .  142  Id.  143  GATT B I S D V o l . I I , p . 36.  144  Id. T h e U.S. C o n g r e s s a c c e p t e d t h e T r a d e A g r e e m e n t E x t e n s i o n A c t r e q u i r i n g w i t h d r a w a l o f MFN t r e a t m e n t i n t r a d e w i t h t h e "communist-dominated c o u n t r i e s " .  145  G r z y b o w s k i , " S o c i a l i s t C o u n t r i e s i n GATT" 28 J.W.T.L. 5 3 9 , 5 4 3 ; E. P a t t e r s o n , " I m p r o v i n g GATT R u l e s f o r N o n m a r k e t E c o n o m i e s " 20 J.W.T.L. 1 8 5 , a t 2 0 4 .  n o t e 1 6 , p p . 10-14. 1958.  n o t e 16, pp.  (1971).  " H u n g a r y a n d GATT", J.W.T.L.  (1974) p p . 4 0 1 -  n o t e 16, pp.31-32.  p p . 25-27.  GATT B S I D , 8 t h Supp., 1 9 6 0 , p. 18.  55 See GATT D o c . C/M/160, a t 2 ( S e p t . 2 4 , 1 9 8 2 ) ; GATT Doc.C/M/173, a t 2 (Nov. 1 6 , 1 9 8 3 ) . A s " o b s e r v e r s " , n o n member n a t i o n s c a n a t t e n d t h e a n n u a l s e s s i o n s o f t h e C P s , b u t may n o t v o t e o n a n y i s s u e s r a i s e d . S e e GATT Rule o f Procedure For Sessions o f t h e C o n t r a c t i n g P a r t i e s 8, r e p r i n t e d i n GATT B I S D , 11 ( 1 2 t h Supp. 1 9 6 4 ) . C h i n a f o r m a l l y n o t i f i e d t h e D i r e c t o r G e n e r a l o f t h e GATT t h a t C h i n a w i s h e s t o r e j o i n t h e GATT o n J u l y 1 0 , 1 9 8 6 . s e e GATT Doc. L/6017 ( J u l y 1 4 , 1 9 8 6 ) . See Trade in T e x t i l e s , B I S D , id., p p . 2 9 3 , 2 9 4 - 9 7 . C h i n a f o r m a l l y became o b s e r v e r i n 1 9 8 4 . See GATT Doc. L/5712 (Oct. 26, 1984). K.C. K e n n e d y , "The A c c e s s i o n o f t h e S o v i e t U n i o n t o GATT" 21 J.W.T.L. 2 3 , ( 1 9 8 7 ) ; N o t e , " S o v i e t * P a r t i c i p a t i o n ' i n GATT: A C a s e f o r A c c e s s i o n " , 20 N.Y.U.J, of I n t ' l Law & P o l i t i c s 477 ( W i n t e r 1 9 8 8 ) . Id. K o s t e c k i , supra  n o t e 16, p p . 1 0 9 - 1 0 .  Id.,  p p . 100-104.  Id.,  p. 134.  R. H e r z s t e i n , " C h i n a a n d The GATT: L e g a l a n d P o l i c y I s s u e s r a i s e d By C h i n a ' s P a r t i c i p a t i o n I n t h e G e n e r a l A g r e e m e n t On T a r i f f s a n d T r a d e " 18 Law & P o l i c y in I n t ' l Business 371, pp. 385-92. See R. C a r b a u g h , International  Economics  180 ( 1 9 8 5 ) .  Id., p . 1 8 3 . S e e Carbon Steel Wire from Poland; Final N e g a t i v e CVD D e t e r m i n a t i o n . 49 F e d . R e g . 19374, 19375 ( D e p , t Comm. 1984) ( h e r e i n a f t e r Carbon Steel Wire from Poland). P l a n s i n NME a r e s e t b y s t a t e p l a n n i n g c o m m i s s i o n a n d o t h e r l o c a l a u t h o r i t i e s . S e e K e n n e d y , supra n o t e 148, pp. 2 5 - 2 6 . Conn, "A C o m p a r i s o n o f A l t e r n a t i v e I n c e n t i v e S t r u c t u r e s f o r C e n t r a l l y P l a n n e d E c o n o m i c S y s t e m s " 3 J. Comp. Econ. 2 6 1 , 262 ( 1 9 7 2 ) . Carbon Steel Wire from Poland, supra ITRD 1176, I T A ( F i n a l , 1 9 8 4 ) . Dam, supra  n o t e 9, p. 3 1 8 .  n o t e 1 5 5 , 19370. 6  56 160  NME c o u n t r i e s u s u a l l y mark up t h e p r i c e o f i m p o r t e d g o o d s t o l i m i t o r c o n t r o l t h e v o l u m e o f i m p o r t s . See K o s t e c k i , supra n o t e 16, pp. 5 7 - 5 8 , 7 9 - 8 1 .  161  Dam,  s u p r a n o t e 3, p.  162  Id.,  pp.  163  Id.,  p.  164  S i n c e a l l o f t h e NMEs' c u r r e n c i e s a r e n o t f r e e l y c o n v e r t i b l e , t r a n s a c t i o n s h a v e t o be s u b j e c t t o e x c h a n g e c o n t r o l s . T h e r e e x i s t v i r t u a l l y no f a c i l i t i e s f o r m u t u a l c l e a r i n g o f a c c o u n t s w i t h FMEs. Dam, id., p.319.  318.  318-19. 319.  J . S p e r o , The P o l i t i c s of International Relations 360-61 ( 1 9 8 5 ) .  Economic  166  Dam,  167  Id.  168  I n c e n t i v e system i n f o r e i g n t r a d e i s such t h a t f o r e i g n t r a d e o r g a n i z a t i o n s or c o r p o r a t i o n s can r e t a i n c e r t a i n sum o f f o r e i g n c u r r e n c y , t h e i r e m p l o y e e s c a n e a r n b o n u s , i f t h e v o l u m e o f t r a d e w i t h FME c o u n t r i e s m e e t s o r e x c e e d s t h e s t a t e - d e t e r m i n e d t a r g e t o r p l a n , see K. K e n n e d y , supra n o t e 1157, p. 26; a l s o R. L i p s e y & P. S t e i n e r , Economics 803 (1969).  169  G r e g o r y and S t u a r t , supra n o t e 53, pp. ( d i s c u s s i n g v a r i a n t s of s o c i a l i s m ) .  170  K o s t e c k i , supra  171  172  supra p.  n o t e 3, p.  319.  320.  n o t e 16,  pp.  284-318.  46-47.  See B i a l e r & A f f e r i c a , "The G e n e s i s o f G o r b a c h e v , s W o r l d " , 64 Foreign A f f a i r s . 605. Where t h e a u t h o r s h a v e i d e n t i f i e d seven reform measures u n d e r t a k e n or c o n t e m p l a t e d by t h e G o r b a c h e v ' s c a b i n e t : " w h o l e s a l e c h a n g e i n m a n a g e r i a l and a d m i n i s t r a t i v e p e r s o n n e l and t h e i r reduction; increase i n labour d i s c i p l i n e ; d i m i n u t i o n o f t h e number o f i n d i c a t o r s i n c e n t r a l p l a n n i n g and g r e a t e r s t r e s s on q u a l i t y and c o s t s ; t e c h n o l o g i c a l p r o g r e s s ; a g r i c u l t u r a l improvement; d e v e l o p m e n t o f i n f r a s t r u c t u r e ; e d u c a t i o n ; and e f f e c t i v e u t i l i z a t i o n of the S o v i e t s t r o n g p o i n t , c e n t r a l i z e d m o b i l i z a t i o n o f r e s o u r c e s f o r e s s e n t i a l g o a l s . " Ibid. p. 615. K o s t e c k i , " S t a t e T r a d i n g By t h e A d v a n c e d and D e v e l o p i n g C o u n t r i e s : The B a c k g r o u n d " , pp. 6-21. i n State Trading in International Markets ( K o s t e c k i ed. 1982)  57 See Comment, " A i r B u s a n d I t s I l k : T u r n i n g N o s e a t GATT" 29 Harv. I n t ' l L.J. I l l ( W i n t e r , 1 9 8 8 ) , 1 1 5 - 1 9 . S t o n e , s u p r a n o t e 2 2 , p p . 173-74. See Y. N a r i t a , " A d m i n i s t r a t i v e G u i d a n c e " (1968) 2 Law in Japan: An Annual 5 8 6 ; K. Y a m a n o u c h i , " A d m i n i s t r a t i v e G u i d a n c e a n d t h e R u l e o f Law" (1979) 7 Law in Japan: An Annual 2 2 . O y s t e i n Noreng, " S t a t e T r a d i n g and t h e P o l i t i c s o f O i l " p p . 1 0 3 - 1 1 6 . i n State Trading In International Markets ( K o s t e c k i ed. 1982).  57 P A R T  T H R E E  FUNDAMENTAL RULES OF GATT: COMPATIBLE WITH NME SYSTEM?  Beyond non-market  conflicting economies,  a number  seem t o b e i n c o m p a t i b l e discussing exports  how  GATT  economy  will  also  discuss  rules  advance  t h e export  the application  agency  determines  and where  government  Additionally, economies  whether  a n d NMEs  determined  tariff  However,  compatibility  i s devoted t o be  applied  of rules against  import  to  and  export  i f import  b u t by economic p l a n s  levels  in  free-market levels are  will  of the discussion  t r a d i n g system  where a  t h e economy.  n e g o t i a t i o n s between  state  subsidies  (QRs) t o a NME  c o n t r o l permeates  t h e focus  o f NME's  can  o f GATT  p r i c e c a n be compared. I t  c a n be m e a n i n g f u l  n o t by t a r i f f s  considered.  rules  and  i s no f r e e l y d e t e r m i n e d p r i c e i n  use of q u a n t i t a t i v e r e s t r i c t i o n s  government  i n market  o f fundamental  antidumping  t o which  reflected  w i t h NMEs. T h i s c h a p t e r  f r o m a NME when t h e r e  that  and  ideologies  with  a l s o be  i s on t h e GATT  major  importance  when  rules. All  these  questions  major t r a d i n g p a r t n e r s these  questions  framework starting of  and with  the thesis,  GATT r u l e s .  are of practical  apply  GATT r u l e s t o a NME c o u n t r y . A l l  a r e c r u c i a l when i n t e g r a t i n g t h e NME i n t o GATT ought  to  be  examined  a r u l e - b y - r u l e approach. t h e examination  in a  reversed  Considering  i s limited  only  order  t h e scope  t o some m a j o r  59 3.1.  GATT RULES ON STATE TRADING AND NME  3 . 1 ( 1 ) GATT RULES ON STATE TRADING  GATT r u l e s 17.  on s t a t e  The f o c u s o f A r t .  criteria  trading  are enunciated  17 i s n o n - d i s c r i m i n a t i o n  and commercial  i n i n t e r n a t i o n a l t r a d i n g . The A r t i c l e  "[S]uch  enterprise  involving  either  consistent  with  imports  in  or  the general  treatment prescribed affecting  shall  in its Art.  states:  i t s purchases  exports,  act  principles of  or  in  a  sales manner  non-discriminatory  i n t h i s Agreement f o r government measures  i m p o r t s o r e x p o r t s by p r i v a t e  I t goes on t o r e q u i r e  traders."  1  that:  " [ S ] u c h e n t e r p r i s e s s h a l l . . . m a k e any such purchases or sales solely i n accordance with commercial considerations, including price, quality, availability, marketability, transportation and other conditions o f purchase o r s a l e , and s h a l l afford the enterprises of the other contracting parties adequate o p p o r t u n i t y . . .to comjpete f o r p a r t i c i p a t i o n i n such purchases o r s a l e s . " Clearly, potentials state  the original  of state  trading  trading  c a n be u s e d  policy,  GATT a l s o r e c o g n i z e s  serious  obstacles  The  t o trade  o f GATT i s t o m i n i m i z e t h e  practices. While as an i n s t r u m e n t that  recognizing of trade  state trading  often  two  main  reasons  obstacles  t o t h e expansion  (1)  trading  might  that  control presents  expansion.  1957 Amendments t o GATT r e i t e r a t e d t h i s  identified  state  intent  that  might  p o s i t i o n and  lead  to  of international trade.  be s e r v e d  a s "a s u b s t i t u t e  serious  They a r e : f o r QRs,  60 tariffs a  and s u b s i d i e s ;  trader  by t h e s t a t e  This  i s because  may  be  functional  equivalent  through  between  external  equivalent  policy  discrimination  determination  of the source  exports.  provisions  prohibited  being  commercial  Art. seem  to  manner  be  17 t o g e t h e r w i t h  state  consistent treatment",  rather  relevant  an  issue  as  markets.  A  requirements to  the  to  minimize  trading  i s not  than  with 5  as  the  long  general  and a c c o r d i n g t o  political  interpretive  in  regulating  that  be a c c o r d e d t o f o r e i g n  domestic  of  or  other  6  A r t . 3(4) i n d i c a t e s  discriminatory the  criteria.  the  or the destination  o f GATT. I t i s a d m i s s i b l e  considerations  the  through  note  of A r t .  state  trading  non-discrimination  a c h i e v e d b y MFN t r e a t m e n t , b u t a l s o b y n a t i o n a l  which s h a l l CP's  "in a  The  practices.  barrier,  3 ( 4 ) , A r t . 2(4) and  practices. only  trade  resale  Furthermore,  implemented  of imports  of non-discriminatory  non-commercial  2(4)  be  the  through  of A r t . 2(4) endeavors  by t h e p r o v i s i o n s  i t i s operated  principle  a  of  f o r exports.  implemented  4  subsidies  and t h e d o m e s t i c  be  may  potentials of state trading Despite  or  determination  B a s e d on t h e s e g r o u n d s , A r t i c l e  supplementary  the  may  situation.  imported or exported.  of  as  of taxes  the prices  o f QRs  determination of quantities  the  i n a monopoly  f o r imports o r domestic purchase p r i c e  functional  a  (2) s p e c i a l p r i v i l e g e s g r a n t e d t o  might r e s u l t  implemented  differential prices  and  whether  treatment  imports a f t e r they enter  proper i n this the  i s not  understanding regard  helps  nondiscriminatory  of to  a  non-  clarify  treatment  61 requirement standard,  coupled  with  the  "commercial  means n o n - d i s c r i m i n a t i o n  among  supply  (MFN t r e a t m e n t )  sources  i n favor o f domestic sources  Also,  Article  maintained  considerations"  foreign  or non-discrimination  sources  against  of  foreign  (national treatment).  2(4) provides  that  any  import  monopoly  by a c o n t r a c t i n g p a r t y :  " s h a l l not... operate so as t o a f f o r d p r o t e c t i o n on t h e a v e r a g e i n e x c e s s o f t h e amount o f p r o t e c t i o n provided f o r i n that Schedule." 7  In  other  trading  words, a c o n t r a c t i n g p a r t y  monopoly  protection  to  accord,  i n t h e case  t o domestic production  i t s negotiated t a r i f f Also,  the  shall  schedule.  not use state  of  bound  items,  beyond t h a t p r o v i d e d  for in  8  interpretive  note  of  A r t . 2(4)  guides  contracting parties i n applying A r t i c l e 2(4): " e x c e p t where o t h e r w i s e the c o n t r a c t i n g p a r t i e s the concession...in t h e A r t i c l e 31 o f t h e H a v a n a Article the  ITO  request to  maintaining  domestic  Thus  an  production was  a duty  import The  Charter  import  r e q u i r e s e a c h member o f  monopoly  afforded  eventually  the interpretive  parties  9  to  o f a n o t h e r member f o r t h e r e d u c t i o n  requirement  to  31 o f t h e H a v a n a  s p e c i f i c a l l y agreed between which i n i t i a l l y negotiated light of the provisions of Charter."  note  t o negotiate  by  omitted does with  monopoly.  GATT  n o t impose respect  upon  of the protection  that  form  negotiate  Article on  This 17.  1 0  contracting  t o products  subject  monopolies. thrust  o f GATT A r t . 17  prohibit  state trading operations.  provide  a  clearly  articulated  i s t o minimize Nevertheless,  definition  of  but not t o  GATT f a i l s t o state  trading  62 enterprises trading  the  occurs  maintains any  in  a  can  when  State  enterprise,  privileges". find  first  formally  privileges".  debates  among  international  government  This  criteria the  and  definition  what  has  centering  has  most  around  (1)  state  (3)  enterprise  s u c h an  there  are  agencies,  or  enterprise  three  may  categories  (2)  regulated  state  trading  or  heated  functional  mode o f  desirable  The  provision according  been  of  used  classified  criteria  one  1 3  owned e n t e r p r i s e s ;  operational  in  criterion  privileged enterprises.  g r a n t s monopoly, Accordingly,  the  are  STEs,  the  to  special  interpret i t  frequently  STEs  or  resulted  optimal  or  "exclusive  regulation.  controversies  state  grants  of  constitutes  ambiguity  and  or  exclusive  understanding.  Consequently,  enterprises;  trading  to  s t a t e t r a d i n g and  control  categories:  an  i s the  coordination  Despite  1 4  as  effect,  that  "establishes  located,  d o o r open f o r s i g n a t o r i e s t o  t o t h e i r own  STEs.  in  economists,  c h a r a c t e r i s t i c s of  the  or  states  party  wherever  this  guidelines  I t merely  contracting  enterprise  special  leaves  a  Assuming  no  place.  (2) 1 5  to  define  into  three  state  controlled  I f Government  central be of  direct  directives  defined agencies:  agencies,  gives  and  as  a  (1) (3)  or STE.  state mixed  agencies. Functionally, and  thus  often  implemented 1  subsidies  and  implemented terms of  to  trade.  7  QRs. protect  i s more  as  a  invisible,  substitute  for  flexible tariffs,  .  It  is  a  substitute  domestic  Economic a n a l y s i s  producers  for and  suggests that  tariffs improve state  when the  trading  63 is  often  a trade  objectives  of  policy  government  trading  and p r i v a t e  pricing  rules  monopoly  instrument  trading  policy. °  trading  by  a  shows  state  a n d ad valorem  a  set •  of  •  ad  valorem  •  competitive  private  tariff  obtained  by e x c l u s i v e  shows  sequence  be  that  "amazingly of state  replaceable  or  government privileges expansions. grant  state  trading by  State introduces Because the  trading  becomes  agencies  under  For  a  on  Economic solutions  specified  pricing  private  trading  taxes-subsidies  these  reasons  the  inter-  2 3  substitute STEs  f o r subsidies  special  foreign partners  exclusive  trading  are i n fact  S i n c e t h e n a t u r e and f u n c t i o n or  state  levied  o f market  and t a r i f f s  afford  of trading with  state  equivalent.  o f ad valorem 2 2  of  ?i  competitive  identical."  used  competitive  subsidies  any sequence  inter-changeable.  trading  special  government,  .  Discriminatory  are also  achieved  instruments  State  l e v i e d on  -  state  commonly  •  under s p e c i f i e d sequence o f s e t s could  .  on  under  of  t h e instrument  taxes  trading  also  and  comparison  •  analysis  rule  A  that  trader  private trading are equivalent. and  and implemented t o pursue  privileges  or  when  exclusive  t o promote  export  of subsidies  areto  or  favors  by  a  they a r e m u t u a l l y comparable and r e p l a c e a b l e . trading  i s  discrimination  of this  so-prescribed  also  categorized  against  sources  substitutability, QRs s h o u l d  GATT  include  e f f e c t i v e through t h e operations  as  QR  when  of foreign gingerly  imports.  states  those r e s t r i c t i o n s  of state t r a d i n g , "  2 4  i t  that "made  and thus  64 extends  i t s general  state trading Tariff internal system  principle  non-discrimination  l e v e l s and  price  discriminatory  manufacturers  and  presents  a  actively  i n the  foreign  major  barrier  tariff  would  global  quota  undertakings.  global  quota  undertakings  as  concessions  a  have  more  s t r u c t u r e s . The prices  for  NME  to  be  of  also  same  called  GATT b e c a u s e mere t a r i f f  the  by  Article  had  17  supposed  "Expansion Products".  Article  Article  31  Trade  of  of Due  2 8  participation ITO,  to  i n the  Article 17  to  (STEs) b o t h i n FME  became  31  therefore  the  commitments that NME  i n NME  on  was  tariff  countries  countries central  to  were  of  planning.  27  applied  to  State  c o u n t r i e s and  NME  countries.  of  be  the  of  the  State USSR  not  provides  U.S.  Suggested  Havana  Charter,  Monopolies  and  Preparatory was  on  2 6  NME  i t s origins in Art.  which  the  was  negotiation  than of  tariff on  import  l i m i t e d m e a n i n g a s m o s t o f NMEs m a i n t a i n e d  A R T I C L E 17 AND  participate  negotiations  time  accession  reductions  to  often  Consequently,  2 5  e f f e c t i v e approach  i n dealing with  domestic  goods)  countries  the  pricing  to  like  replaced  At  dual  applied  imports  negotiations.  negotiations  enterprises  the  n e g o t i a t i o n s w i t h NMEs o f t e n u l t i m a t e l y t o u c h u p o n  (i.e.  3.1.(2)  to  operations.  price  considered  of  other  NME  Work f o r t h e  written the  only  of  into  2 7  entitled Individual non-  establishment text  It  Charter,  countries'  the  basis  trading  of  i n GATT t o  of  GATT. deal  65 with  t h e problem  framework.  of  "occasional"  the Article  state  trading  applicability  intervention  fact  the  that  export  or  o r even  i n market  may  privileges engage  admissible  certain could  t h e GATT  i n trade  circumstances,  t h e n be a c h i e v e d •  .  desirable  minimal  despite  certain  the  enterprises import  (typical  of A r t i c l e  and state  17 was  that  t o c o m m e r c i a l c r i t e r i a and since  form  t h e requirement  state trading i s  of trade  of  by r e q u i r i n g t h a t .  assumed  itself  with  and thus has  i n conducting  I t was t h o u g h t t h a t  and perhaps  t o deal  enterprises  The o v e r w h e l m i n g r e q u i r e m e n t  nondiscrimination.  only  GATT  afford  s t a t e t r a d i n g be o p e r a t e d a c c o r d i n g  an  into  economies  system.  i n private  government  exclusive  trade,  trading).  system  was d r a f t e d  t o NME  government  special  NME  7  Historically,  limited  integrating  non-discrimination  STEs a c t a s i f t h e y  .  .  control i n  T  n  w e r e p r i v a t e e n t e r p r i s e s a i m i n g a t maximum p r o f i t s . This adapted the  assumption,  t o t h e NME  centrally  however,  countries.  planned  state  3 1  i s poorly-framed Considered  trading  i n the context  economies,  i n t e r v e n t i o n i s n o t r a r e b u t permeates t h e i r The  c e n t r a l i d e a and t h r u s t o f A r t i c l e  para.  i l l of  government  economic  systems.  17 i s p r o n o u n c e d i n i t s  1 t o the effect that: "[A state trading] enterprise shall, in i t s purchases or sales involving either imports or e x p o r t s , a c t i n a manner c o n s i s t e n t w i t h t h e o e n e r a l p r i n c i p l e s of nondiscriminatory treatment..." Presumably such requirements can h a r d l y  NMEs  and  since  achieve  STEs  the goals  i n NME that  countries  be e n f o r c e a b l e i n  are created  a r e not normally  precisely to  assumed  by  private  66 enterprises. basically  The  the  function  same a s  that  GATT's a s s u m p t i o n t h a t were p r i v a t e of  state  application occurring  is  is  three  And  categories:  imprecisely  used  system);  the  or  only  •  follows  that: acting  shall  tariffs,  a STE  The  Thus  though  occasional  has  been  they  circumstances  domain  to  the  of  state  its  trading  classified  occasional  to  state  trading  their  state trading an  in term  traditional  i n NMEs. The  GATT  commercial behavior  granted  the  i n NMEs ( h e r e t h e  reflect  and  into  i n market  would  economies.  enterprise  "exclusive  c o n t r o l s the  activities  T 3 J J  earlier,  control  restrictions,  already  the  command s t a t e t r a d i n g  government has  noted  trade  policy  as  is  ,  i t no  longer  enterprise.  As  it  (3)  special privileges"  of the  NMEs.  (1)  nondiscrimination  •  operated  state trading  applicable to occasional once  be  countries  agencies.  amenable t o  in  trading  loose  requirement of be  i s not  (2)  socialist  NME  government  limited  state  m a r k e t economy; NME  in  countries.  Generally, following  of  problem  only  i n FME  STEs  STEs s h o u l d  enterprises  trading  of  not QRs,  state  policy i t can (a)  be and  just  also  as a  can  be  to  other general  trade  regulation  i n the  or  an  object.  object  the  It  3 4  of  trade  counterparts,  provisions  rules since  of  quantitative  i t s private  specific  a trade  instrument  policy  f o r somewhere i n t h e  implemented t o a c t as  an  tariffs  i s o p e r a t e d as  same manner a s  subject  been p r o v i d e d  need s p e c i f i c  be  I f a STE  i n the  trading  other  than  regulation  GATT;  and  (b)  has If  p o l i c y instrument i t would  same way  as  other trade  policy  67 instruments if  a  STE  acting of  s u c h as t a r i f f s ,  i s created  as  i f i t was  compatibility  observing trade  as  subsidies.  object  of  In other  3 6  government  private trading, there w i l l arising  commercial  policy  an  QRs,  with  behavior.  instrument  like  the But  GATT  i f a  tariffs  trade be  policy  no  problem  requirement  STE  or  words,  is  QRs,  of  created  as  i t should  be  subject to specific regulation. The to  the  nature  of  extent  that  central  plan  or  control  their  STEs  privileges liberty supply  s t a t e t r a d i n g i n NME  and  NMEs'  target  allows  i n deciding and  The trading  the  f o r or  system and  the  where  a  domestic  state  exclusive  against  STE  exclusive  through does  or  either  special  c e r t a i n degree  import  i n accordance  support  a  direct  purchases  link  or  enterprise a  with  state  between  sales.  or  The  conditions grants  monopolistic  or  i t  semi-  Once t h e p r i v i l e g e s h a v e b e e n  granted  m o n o p o l i e s e s t a b l i s h e d , government i n t e r f e r e n c e i s  limited  to  traditional  restricting tariffs,  position.  the  of  i n t e r n a t i o n a l markets.  p r o t e c t i o n under normal  owns to  in  not  retain  maintains  prices  privileges  monopolistic  only  to  STEs  government  them  demand i n b o t h d o m e s t i c and  government o n l y uses t a r i f f  and  STEs  i s different  control  FMEs'  granting  FME  GATT r u l e c o u l d a l s o be w e l l a p p l i e d t o " l o o s e "  foreign  and  governments  whereas  after  and  or  to  trade  expanding  production  i s acceptable  3 7  c o n t r o l measures. trade  subsidies  GATT.  3 9  through  and  quotas  This  instruments under  method  of  such  as  circumstances  68 In  Eastern  diversified.  Europe,  foreign  trade  be t r e a t e d  foreign  trade  Bulgaria,  C z e c h o s l o v a k i a seems t o f a l l  state trading  as examples  system  of loose  implemented  economy h a s b e e n d e c e n t r a l i z e d foreign  trade  decentralized empower  conducting further with  trading.  Poland,  reforms  foreign will  trade  The  4 0  t o decide  abolish  mandatory  and  intervention  recent  trade  planning  regulation.  trade  STEs m a i n l y r e f e r s t o f o r e i g n t r a d e c o r p o r a t i o n s  is  limited  and  supervises  rubber. FTCs  regulations  4 4  to  A  fibers,  the source  and  degree  of supply of  implement  foreign  or destination, 4 5  i n the business a c t i v i t i e s and d e t a i l  rules  It  fertilizer,  disused  ships,  called  MOFERT  agency  trade  (not i n c l u d i n g  transformation).  set guidelines  autos,  government  and mandatory p l a n s  as  not  chemical  monopoly  (FTCs) a n d  t o some k e y c o m m o d i t i e s s u c h a s s t e e l , timber,  such  price  o f an F T C .  policies, directives  paid  generally  regarding  mainly without  The t r a d e  4 3  The  4 2  authorities  i n the enterprises.  4 1  of  or replace i t  foreign  regulatory  has  so as  forms  own d e c i s i o n s .  of  interfere  reform  appropriate  administers  economic  o f economic  of foreign  a n d make t h e i r  the State  legal  tobacco  Romania,  system as i t s  the inception  i n 1979.  the enterprises  Currently,  cereals,  The  i n t h e m o d e l o f command  state trading  since  g u i d a n c e p l a n n i n g and market  direct  state  in  the managerial authority  reform  through  very  system.  China i s moving towards loose  to  are  Hungarian and Y u g o s l a v regimes f o r t r a d e w i t h t h e  W e s t may  and  regimes  4 6  o r asked does  Also  not  i t does  the choice  of  69 origin  of imports.  themselves  upon  international  request  to  carry  out Art.  standard.  supply  imports  and  market.  contrast,  complete  foreign  Organizations  supervision  STEs  i n China  and f u l f i l l  and thus  both  no d i s c r i m i n a t i o n a r i s e s  A l s o , t h e volume o r l e v e l  according  t o market  i n the domestic  and  foreign  trade  trade  (FTOs).  conclude  i n t h e USSR  Under  4 9  the Soviet  i s conducted Soviet  5 0  contracts  the appropriate  with  i s a  by  the  producers foreign  and  considerations  Gorbachev h a s been making economic reforms,  firms  without to  the loose  standard.  the State Trade,  and  according  Although  Mr.  political  and  5 1  t o undertake  r a t h e r than  state  the compatibility t h e GATT  efforts  Foreign  going  the overriding feature of the Soviet trading  system remains p o l i t i c a l While  only"  of  Trade  manufacturers  a r e unable t o trade with western partners  "commercial  Ministry  trade  Foreign  FTO. FTOs a r e s u b j e c t  and  somewhat  foreign  therefore  with  forces of  international  Commission  GATT,  are able  "commercial  Planning  to  of  4 7  of imports.  "state monopoly".  regime,  through  conditions  4 8  By  cannot  and  b y FTCs  No c o u n t r y - s p e c i f i c r e s t r i c t i o n s a r e  i s regulated  demand  end-users  o f t h e GATT,  f o r e i g n sources  FTCs'  are decided  shows t h a t  be imposed on t h e i m p o r t s  against of  17  of imports  the administrative  be a b o l i s h e d .  above e x a m i n a t i o n  considerations" to  of  market—though  cannot a t present The  The o r i g i n s  trading  economical. system  o f t h e command  assumption  i s very  i s acceptable  state  doubtful  5 2  to  trading  system  and ought  t o be  70 determined the  GATT  on i n d i v i d u a l  non-discrimination  requires  that  introduced.  5 3  specific  and  no  t o command  i n Poland  policies  state  trading  target  they  towards  differently  the a p p l i c a t i o n of system  controls  be  and Romania were n o t c o u n t r y -  consequently,  did treat  Obviously  country-specific  Targets  discriminatory they  merits.  could  not  particular  convertible  implement  countries,  and  though  non-convertible  54 currency  areas.  If state  country-specific trading  limited would  have  would  character 3.1(3)  be  have  of trade  sum,  economy. trading  i n FME NME  difficulty  as  of  rule  well  tariffs  on  of  concessions on  import  negotiations  to the  state  on  nondiscriminatory targets.  state  "loose"  But  this  plan  foreign  i s implemented  was  trading  5 6  originally in  market  t o "occasional" state  i t would  rule  of central and  trading  applicable  as  countries.  domestic  be  SUGGESTIONS  well  i n applying  between  attached  of  command  will  negotiations  weight  occasional  be  in  on t a r i f f  c o n t r o l measures and i m p o r t  with  the guidance  by  the  exist  negotiations  negotiations  t o be  I t could  selected  instead  tariff  And  5 5  t h e GATT  concerned  controls  accompanied  CONCLUSION AND  In  link  to  commitment.  targets  under  economies,  use. Accordingly,  increase  only  target  t o those  trading have  state  i n some  considerable  STEs  established  where t h e r e  i s no  direct  prices  where  target  as  and  t h e main  element  of  71 protection. assumption that the  The d i f f i c u l t y o f GATT  itself.  i n the inherently  Quite  STEs s h o u l d be e s t a b l i s h e d  contrary  state  trading  trading  similar  way  government special  to  not  which only  from  but  t o achieve 5 7  state  shortcoming  trading  case  through  fulfilled  defected. trading  Under  normative  normative  directs  central  assumed  17 i s b o t h  shows  planning  or  whether t h e  private  u n r e a l i s t i c and system.  that  systems.  approach  approach,  by  GATT  5 8  rules  ( i i ) by e x t e n d i n g n o n d i s c r i m i n a t o r y such STEs;  on  t o NMEs e s p e c i a l l y t h e 5 9  t o state  GATT  by i d e n t i f y i n g what c o n s t i t u t e s  deals  trading with  a STE; MFN t r e a t m e n t t o  ( i i i ) by i m p o s i n g them a d u t y t o a c t a c c o r d i n g t o commercial considerations only, barring t h e use of quantitative restrictions; (iv) by excluding nullification of tariff c o n c e s s i o n s t h r o u g h i m p o r t mark-ups i n t h e c a s e o f import monopolies." 6 0  or  their  as f o l l o w s :  "(i)  The  when STEs a r e e s t a b l i s h e d  command s t a t e t r a d i n g 17  ina  "exclusive  or  not normally  of Art.  "command"  function.  i t i s perplexing  e c o n o m i e s o f command s t a t e t r a d i n g GATT  were  agencies  has l i m i t e d a p p l i c a t i o n  Moreover,  as i fthey  just t o function  controls  In effect, Article  a d a p t e d t o NMEs w i t h This  also  goals  with  the enterprises  t o time  I n such  consistent  i n t h e NMEs w i t h  government  GATT r e q u i r e m e n t s c a n be  enterprises.  STEs  grants  time  measures.  precisely  and a c t i n g  systems have been c r e a t e d  privileges",  activities target  enterprises,  problematic  t o t h e assumption  or maintained  p r i n c i p l e of nondiscrimination  private  ill  lies  is  state  72 The  general  rules  d i s c r i m i n a t i o n and hardly  be  an of  a  effective  through  trading  transparent. can  rarely  that  Deviation hardly the  By  6 2  using  this  detailed the  of  GATT r u l e s c a n do  the  addition,  the  designed  to  approach  gives rise  quantity against;  easily  (2)  determined  in  commitment  can  distorting. employed  to  a  process  surveillance. standard to  disclosed.  c r i t e r i a t o be  6 3  can  survey What  6 4  approach  i s flawed. Although the approach  is  difficulties  (1)  that  t o which  import  not  requirements  advance. easily  Furthermore, deal with  i t i s gravely  are  the " f a i r  can  being  clear  a  have  precisely  minimum  import  superfluous  integration fi7  no  discriminated  share" approach  "more p o l i t i c a l t h a n e c o n o m i c a l i n n a t u r e . "  and  unsatisfactory  h a r d l y be  either  Eastern bloc's  normative  undertakers  Consequently, become  the  obligations  commitments  they  also  6 5  as  ( i . e . t o make t h e  that:  observed.  known  detectable),  assurance and  close  result-oriented  overcome t h e  reasons  non-  i s t o s t a t e b a s i c s t a n d a r d s s u c h as t h e non-  i m p o r t commitment a p p r o a c h  the  or  liberalization  addresses  i s rarely  made  i s because  the information necessary  d i s c r i m i n a t i o n and c o m m e r c i a l  for  and  can  government  invisible  consideration  standard  non-  nature  This  6 1  trade  i t only  commercial  are  specific  protective  approach,  regulation  17  Such g e n e r a l r u l e s  operations.  because  detected. Also,  compliance  Art.  prevent or  trading  achieved  application  In  to  discriminatory  from  be  criteria.  tool  state  in  operations are very f l e x i b l e ,  be  escapes  commercial  efficient  measures  state  articulated  or  which  was  problem  is  73 Accordingly, is  required.  a r e v i s i o n o f t h e GATT r u l e s  and approaches  The r e v i s i o n c a n b e u n d e r t a k e n a l o n g t h e l i n e o f  material  injury  observed  that:  approach  which  deals  with  subsidies.  I ti s  " [ I ] f s t a t e t r a d i n g i s accepted as an a l t e r n a t i v e method of intervention of states i n economic matters, i t s treatment should remain basically c o n s i s t e n t w i t h t h a t g r a n t e d b y t h e GATT t o o t h e r methods o f i n t e r v e n t i o n , a s used i n t h e c a s e o f subsidies." 6 8  "Subsidy" being  used  that  and  of  trading  as instruments  they  both  international are  state  will  trade  a r e analogous  of trade be  owing  controls.  obstacles  to their  to  as  GATT  regards  recognizes  t h e expansion  "injurious  effects"  of  which  s i m i l a r i n nature. ^ Therefore, a s o l u t i o n along the l i n e s the "material  injury" philosophy  adopted  code and a n t i d u m p i n g code would appear GATT What  i s neutral  matters  enterprises.  are  GATT r u l e s  state-controlled control such  as r u l e s  regulate  modes  of  on s t a t e  enterprises.  the operations  "logical".  as t o t h e ownership  the  of  trading  7 0  control  are directed  GATT a s s u m e s t h a t  7 2  on i m p o r t t a r i f f s , the  Subsidies  enterprises.  government  o f STEs m a i n l y  primarily  i n the  through  towards  "general  of  over  governments  QRs a n d s u b s i d i e s , use  7 1  rules"  and thus  such  policy  7 T  i n s t r u m e n t s . ^However, control  trade  also  GATT  through  recognizes  ensure general  those enterprises that  they  policy  governments  " s p e c i f i c m e a s u r e s " made e f f e c t i v e  through t h e operations of state-trading subjects  that  enterprises.  7 4  Thus i t  t o s p e c i a l requirements designed t o  a r e n o t used  instruments,  t o circumvent  and t o m i n i m i z e  the rules  on  the potential of  74 such  operations  expansion  which  will  of international  3.2  create trade.  serious  obstacle  t o the  7 5  NON-DISCRIMINATORY ADMINISTRATION OF QRS AND NMES  3 . 2 ( 1 ) GATT RULES ON QRS  Quantitative restricting  or  specifications. quotas  and  constitute thus  restrictions expanding  foreign  obstacles  GATT  7 7  special  quota  or barriers  exporters.  7 9  by  refer  to  quantitative  undertaking  in  Para.  that  QRs  to international  f o r b i d s t h e use o f such  circumstances,  discriminatory  trade  recognizes  i n s p e c i a l or exceptional circumstances While  normally  T h e y a r e a p p l i e d m o s t f r e q u e n t l y b y means o f  7 6  licenses.  explicitly  (QRs)  nature  should towards  2 of A r t i c l e  t r a d e and  trade controls unless a s p e r m i t t e d by  i s an a d m i s s i b l e term  i t  often  7  8  of trade i n  generally foreign  i t .  be  non-  sellers  or  13 a p p l i c a b l e t o NMEs r e q u i r e s  that: " q u o t a s r e p r e s e n t i n g t h e t o t a l amount o f p e r m i t t e d i m p o r t s ( w h e t h e r a l l o c a t e d among s u p p l y i n g c o u n t r i e s o r n o t ) s h a l l be f i x e d . . . " 8 0  And  contracting parties s h a l l not require that:  "import l i c e n s e s o r p e r m i t s be u t i l i z e d importation of t h e product concerned p a r t i c u l a r country or source.  f o r the from a  1 , 8 1  These licenses should  requirements with  be  aim a t d i s m a n t l i n g  individual  administered  or on  import  quotas o r  c o u n t r y - s p e c i f i c nature.  nondiscriminatory  basis  and  QRs be  applied  to  a l l GATT  extended  t o those  members.  restrictions  This  obligation  i s  "made e f f e c t i v e t h r o u g h  also state  t r a d i n g operations."°  J  Quotas  should  be  allocated  globally  rather  than  to  specific countries or sellers.  The r e a s o n f o r t h i s  requirement  is  t h e more  the direct  that  in a  allocation export  way,  ( i . e . t h e more  and  country  general  source  of  import),  discrimination.  importation  rigidly  product  fixed  should  exporting  the  allocation  of shares i n t h e q u o t a .  GATT  seek 8 5  an  global  Individual handling  specific  maintaining allow  licences  rather  quotas  consultation  8 8  the  Such agreement must  take  such as "changes i n t h e  with  ^ Such i n f o r m a t i o n  of  licensing  not t o  licences but t o licences.  f o r t h e purpose  8 7  of  i s t h e d u t y o f t h e GATT members  should  t o provide to  this  information form  of  and trade  indicate the administration  past  licences  issued  and t h e  9 0  a d d i t i o n , as c l e a r l y  stated  restrictions  "made e f f e c t i v e t h r o u g h  should  be g e n e r a l l y  also  8 6  parties  individual  only  regard  system,  allocation of l i c e n c e s . In  than  and l i c e n c e s  control. the  It  the countries on  contracting  are permitted  quotas.  of  t a r i f f s and s u b s i d i e s " .  intends  licences  allocation  agreement  s p e c i f y countries o r source of import i n t h e i r apply  of  i s desired,  i n t o account commercial c o n s i d e r a t i o n s  Likewise,  t h e danger  i f specific  product  t e r m s o f t r a d e , QRs, e x c e s s i v e  t h e d i r e c t i o n of  the greater  However,  of a particular  specific  eliminated.  i n an i n t e r p r e t i v e note, state trading However,  operation"  no  explicit  76 criteria  of non-discrimination  have  on  o f QRs. using  is  Moreover,  quotas  effective clear  and  through that  formulated  .  qp  type  been  state  ,  the information  licences  requirement  i s n o t imposed  trading  the original  f o r this  operation.  purpose  on  imposed  QRs  Nonetheless,  9 3  o f t h e GATT r u l e s  s u b m i t t h e QRs i m p l e m e n t e d t h r o u g h s t a t e t r a d i n g l i n k s same QRs.  general  principle  bloc countries foreign trade .  global  both  t othe  affecting  other  licensing licences  from  or  licences. NMEs  I n Hungary,  a n d FMEs  the majority  are transacted  9 6  which  with  FMEs.  and  to  problem f o r FME  contained  Although  compatible  accession  discrimination countries  i n Poland  and  than  Romania  the  on  individual  the  t h e GATT  GATT  between  did  quotas  countries.  9 8  p r o t e c t i v e elements  with  t h e Hungarian  with  not issued  under  rather  a r e more c o u n t r y - s p e c i f i c f o r t r a d e  i s basically  Hungary's  Conversely,  systems a r e based, t o a l a r g e e x t e n t ,  f o r trade  quotas  .  i s subject either  l i c e n c e s w h i c h a r e more c o m m o d i t y - s p e c i f i c  country-specific.  system  .  or individual  imports,  global  than  i sto  ARE NMES COMPATIBLE WITH NON-DISCRIMINATORY USE OF QRS?  In Eastern  of  of non-discrimination  i t  9 4  3.2(2)  to  made  NMEs  licensing  requirement, solve  the  for  CMEA  A d d i t i o n a l l y , Hungarian that  would  draw s p e c i a l  a t t e n t i o n t o i t s GATT t r a d i n g p a r t n e r s . In  China  t h e import  licensing  MOFERT o n a g l o b a l b a s i s w i t h o u t  system  quota.  1 0 0  i s administered  by  I t i s not country-  specific some  but commodity-specific.  commodities  restrictions supplying or  i n total  licences.  as  Although  t h e import  planning  i s subject  i t i s not  allocated  The government does n o t g r a n t  privileges  STEs)  x  mandatory volume,  countries.  exclusive  called  under  u  to foreign  regards  their  The government does  trade  to  among special  corporations (so-  applications  n o t deny  of  for  import  any o t h e r e n t e r p r i s e s  t h e r i g h t t o import a c e r t a i n p r o d u c t by n o t g r a n t i n g a p p r o v a l to  import  that  product  or t o acquire  u n l e s s t h e imports o f t h e commodities Regulations. are based and  1 0 3  The c r i t e r i a  the necessary are prohibited  by S t a t e  f o r import r e s t r i c t i o n s  i n China  o n s u p p l y a n d demand c o n d i t i o n s ,  foreign  government licensing imports."  exchange e a r n i n g s . "Questions  system ins  1 0 4  production  i n t h e Chinese  " t h e purpose  o f t h e import  t o regulate, not t o prohibit the  • t h e Chinese  Therefore,  domestic  As expressed  & Replies",  i s simply  licence  • licensing  system  may  well  be c o m p a t i b l e w i t h t h e GATT r e q u i r e m e n t s . In  summary,  GATT  rules  on  non-discriminatory  a d m i n i s t r a t i o n o f QRs may w e l l b e a p p l i e d t o t h e s t a t e system  functioning  only  Hungary,  Romania  regulate  t h e command  Romania  and  through China.  state  requirements  must  trading  However, trading  and t h e S o v i e t Union,  non-discrimination  state  be  be a t t a c h e d t o t h o s e  i f t h e GATT  system  detailed  links  such  explicit  enumerated criteria.  and  as  trading such  as  i s to Poland,  criteria  of  information  78 3.3.  T A R I F F PROTECTION V. TARGET PROTECTION  The  GATT-based m u l t i l a t e r a l t r a d e  link  between f o r e i g n  enter  a CP's t e r r i t o r y ,  price  of imports  This  promotes  trade.  GATT  expects  assumes a d i r e c t  a n d d o m e s t i c p r i c e s . Once f o r e i g n t h e CP s h a l l  unless  fair  order  n o t mark u p t h e o r i g i n a l  f o r customs  and  free  or excise  competition  control  instruments  Tariffs  i n t h e GATT a r e p r e s u m e d t o b e t h e m a i n e c o n o m i c  element.  This  protectionist visible  ( l i c e n s i n g quotas)  and  export  i s because  elements  and l e s s  by u s i n g  are easily  discriminatory  a s s u m p t i o n , GATT i n i t s A r t i c l e be  afforded  t o domestic  customs t a r i f f s . Therefore aspect and on  u  and  through  indirectly  prices  import  than  trade  through  regulating  rather  t a x reasons.  i n international  i t s members t o c o n t r o l  and t a r i f f s  the  key  tariffs  i n nature.  producers  protection  Based  requires  that  exclusively  lever  protective  as  1 0 7  trade  earlier.  a n d become on  more this  protection  through  the  o  t h e use of t a r i f f  instrument  i s an  important  o f p a r t i c i p a t i o n i n t h e GATT. A n d t h e r e c o n c i l i a t i o n  i n t e g r a t i o n o f NMEs i n t o t h e GATT s h o u l d tariffs.  loose  direct  as discussed  identified  11(1)  goods  This  state  system  ceiling  trading  system. state  and undertake of  be  focused  r e q u i r e m e n t c a n e a s i l y be f u l f i l l e d u n d e r t h e  (occasional  standards  also  nominal  A tariff-protected state trading)  can  conform  trading to  meaningful  obligations  regarding  tariff  protection  and  GATT the non-  discrimination.  Negotiations  on  reciprocal  reduction  p r o t e c t i o n can use t h e "symmetric r e c i p r o c i t y f o r m u l a . " The  formula provides  participant  whose  equivalent  economy  t h e GATT, t h i s  pointed  formula  i s basically  would  1 1 0  c o n c e s s i o n s made b y e a c h tariff  H o w e v e r , a s f o r p a r t i c i p a t i o n o f command s t a t e in  of  be l e s s  protected.  trading  effective.  system Kostecki  out that:  "the c e n t r a l r o l e o f t h e customs t a r i f f as an i n s t r u m e n t o f a c o u n t r y ' s p a r t i c i p a t i o n i n t h e GATT may r a i s e some d i f f i c u l t i e s i n a p p l y i n g t h e GATT provisions to the state-trading systems...which r e l i e s on p l a n t a r g e t s " . 1 1 1  Tariffs  i n such  supplementary government  instrument  control  negotiations  trading  maintaining  over  trade,  tariffs  be used  import  and  as t h e only  export  trade,  evaluating  what  classified  two t y p e s  tariffs  play  kind  of  whether there whether there  foreign  implies  of protection  state  prices  protective  trading  our focus roles  determines  element of  tariffs  trading  whether  and f o r e i g n p r i c e s  between economies  i n turn  determines  targets  1 1 3  i s that  examination play  i s on  under  above  The  role  i s a direct  link  1 1 4  of imported  i s a mark u p o f i m p o r t p r i c e s . i s a direct link  that  i n regulating  systems.  there  as a  QRs a n d  o f t h e GATT r e q u i r e m e n t  of state  between domestic p r i c e s  of  That  an "asymmetric r e c i p r o c i t y f o r m u l a " .  Since t h e key ingredient  and  etc.  and  be u s e d  t o subsidies,  reduction  economies  only  multi-commodity o r single-commodity import  would r e q u i r e  that  may  of protection  on. r e c i p r o c a l  tariff-protected  system  goods,  The e l e m e n t  between d o m e s t i c p r i c e s and the compatibility of state  80 trading a  systems w i t h  state  the  trading  direct  prices,  system  linkage  a state  and  use t a r i f f s  and  export trade,  restrict  and Romania such  and  a  i t s economic  and t r a d e  was  1  t o trade,  t o balance  imports  conformed  were  custom quotas, tariff  linkage  were  made  a t using  rates  chief of to  h a n d , due to  tariffs  Its tariff  the  were  employed  efforts  and e x p o r t s . with  1 1 5  variety  on t h e o t h e r  aiming  import  not a  Instead,  remove as a system  non-discriminatory  r e q u i r e m e n t s o f t h e GATT t h o u g h s u c h e x c e p t i o n a l  of  such  influencing  measures  reform,  barriers  generally  using  foreign  requirement. I f ,  Tariffs  Hungary,  0  limit  t o t h e GATT t h e y  of trade.  discriminatory imports.- -  force  lever  acceded  link.  level  foreign  main  and  i s t o maintain  economic  or  i t c o m p l i e s w i t h t h e GATT p r o v i s i o n s .  influencing  unnecessary  prices  t h e GATT  system  requirement. I f  t o eliminate  domestic with  as a main  to establish  protective  to  between  trading  When P o l a n d  instrument  protected  i s established  i t i s incompatible  however,  unable  t h e GATT t a r i f f  p r a c t i c e s as  p e r m i t - s l i p procedure and t h e s u s p e n s i o n remained  unsatisfactory  to  the  GATT  117  countries. X J  In  China  the general  p o l i c y o f t h e Customs t a r i f f  i st o  c a r r y o u t t h e "open d o o r " p o l i c y , t o e n c o u r a g e t h e e x p o r t s , t o promote t h e i m p o r t s o f n e c e s s i t i e s and t o p r o t e c t and improve lis  the  development  level  of trade  of the national  economy.  x  o  i s a primary p o l i c y objective  Influencing the while  revenue i s  1 I Q  only  a  separate  secondary  consideration.  legislation  i n China  Currently,  providing  relief  there to  i s no domestic  81 producers will  from  get  involved  reduction  i n the  and concessions.  taking  into  concession  full  as  contracting of  i n j u r i o u s imports.  an  •  industry  certain  on  the criterion  Customs  goods  adopted  levy  the  of  of  tariff  i t sstatus  as  a  and t h e p r o t e c t i o n  i n t h e Chinese  an "import  purpose  i t s view  For t h e purposes  transformation".  also  for  i pi  tariff  appropriate  f o r resuming  t h e other.  i s "substantial  Chinese  the  China  on  has expressed  t o GATT o n t h e o n e h a n d  customs v a l u a t i o n , of o r i g i n  China  suggests that  negotiations  consideration  •  domestic  future  obligation  party  ^" T h i s  of  rules  1 2 2  regulatory  tax"  protecting  on  domestic  1 ?3  industry. affords  Although i t i s applied  a relative  incompatible 3.4  with  at less  formation be  i t s members t o e s t a b l i s h  and f o r e i g n  than  fair  i s closely fully  whose p r i c e rules  value  related  applicable  formation  prices  and t h u s i s 3.  1 2 4  to  NMEs m a i n t a i n i n g prohibit provision  domestic  loose  i s to to  take  command s t a t e maximum call into  value) .  t o dumping.  conforms w i t h  f o r those account  state  direct  link  Domestic GATT  1 2 5  price  provisions  trading  economies  GATT s t a n d a r d s .  B u t , GATT  o r no s e n s e when a p p l i e d t o  trading.  price  a  a n d n o t t o dump g o o d s b y  (normal  o n d u m p i n g may make l i t t l e  controls  goods  " n a t i o n a l t r e a t m e n t " o f GATT A r t i c l e  requires  between domestic  may  t o domestic  imports, i t  DOMESTIC P R I C E FORMATION: DUMPING OR S U B S I D I E S ?  GATT  sale  preference  to a l l foreign  1 2 6  control. who  T h e GATT d o e s n o t The  apply  core  ofi t s  internal  the interests  of  price  exporting  82 contracting  parties  with  a view  practicable  extent  any  prejudicial  foreign  price  protection  provision  also  applies  imagine that only  state  between  trading  domestic  trading  In  by  generally  based  Considering  and  terms  supply  treatment". i n an  so-called  there  prices.  there  foreign  i s little  or  no  domestic  prices  to  GATT  licensing There  due  to  or  local  authorities.  average  costs  allocation  growth,  these  sector  consumer p r i c e s  formation  have  link  1 3 4  were  The  link little  command between  and  the  prices The  were  the  maintaining  duality  of  1 3 6  of  The p r i c e s  of  function  of  targets i n  practical significance targets,  system:  were h i g h e r t h a n p r o d u c e r p r i c e s  same o r s i m i l a r p r o d u c t s .  1 3 3  not r a t i o n a l i n  allocative  price  were  interest.  requirements  of the equalization the  centrally  prices  excluding  was o f l i t t l e  and t h e e x i s t e n c e  existed  One  prices.  and d e m a n d .  trade  1 3 0  maintaining  price formation within the l i m i t s of the obligatory the  in  countries  i s a direct They  1 3 1  And  "consolidation"  o r economies  i n which  1 2 8  increase  on d o m e s t i c p r i c e  economies  foreign  resource  economic  essence,  t o nonmarket economies m a i n t a i n i n g  on  intensive  In  i n t h e case o f import m o n o p o l y .  and Romania,  central  1 2 7  u p o n b y t h e GATT  This  systems  where  Poland  of  agreed  i n market  domestic and f o r e i g n  fixed  effects.  not result  t h e GATT r u l e s  meaning as a p p l i e d state  should  schedules. "  make s e n s e loose  control  above t h e l e v e l  tariff  could  t o the fullest  e x p o r t s s h o u l d be a c c o r d e d " n a t i o n a l  domestic  in  t o avoiding  individual  mechanism. on  1 3 5  average,  even f o r t h e  of essential  products  83 were  much  items.  lower  Prices  than  that  of  of imported  goods  p u r c h a s a b l e by t h e d o m e s t i c Unlike  Romania  light were  consumers.  and P o l a n d ,  the  way  enterprises  prices  prices;  prices  regulations;  prices  1 4 0  a  However,  licensing  and  commenced i t s r e f o r m i n 1969 a n d t h e r e f o r m  into  conformity  prices.  link  restricted  i n Hungary,  exist  i n China  state  fixed •I  price. state  as a r e s u l t  price,  by  the  price  ^  The r e f o r m  fixing  import  marketplace. commodity  value,  import  commissions,  1 4 3  prices  the enterprise duty,  internal  and t h e e n t e r p r i s e  such  as s t e e l ,  1 4 4  fertilizers  co-  system:  and m a r k e t - r e g u l a t e d  into  assumes  a l l t h e p r o f i t s and l o s s e s .  products  i n pricing  .  .  Enterprises  taxes,  of  1 4 1  presently  the domestic  takes  quotas,  level  method per  of imports according t o  In determining  foreign  of  has shaken t h e p r e v i o u s r i g i d and e x p o r t p r i c e .  price  and western  existed.  prices  of the reform  guidance  fixed  and  use  .  import  for  different  In  official  certain  A p  allowed t o determine in  state  with  of domestic  Additionally,  three  1 3 8  three:  domestic  d i s c r i m i n a t i o n between t h e two p r i c e s s t i l l Like  domestic  The H u n g a r i a n  1 3 9  t i e between  targets.  among  an a l l o c a t i v e f u n c t i o n .  the automatic  somewhat  too high  relationships  in  market  close  t o be  categorized  adjusted  and f r e e  remain  been  fixed  Hungary  assumed  have  assured  prices.  market  and p r i c e s  Hungary,  system  for  luxury  1 3 7  i n economic and f o r e i g n t r a d e s t r u c t u r e paved  i n d u s t r i a l and  se a r e  conditions  price  account  of  o f an  the c.i.f.  banking  charges,  direct responsibility  B u t f o r some and g r a i n s  key  which  import h a v e an  84 important prices  bearing  are  set  responsibility the  other  foreign  on  the  by  national  the  State  the  price  of  an  t r a d e c o r p o r a t i o n s on on  the  basis  market c o n d i t i o n s .  of  The  1 4 6  by  including  transportation export duty  domestic  State  assumes  losses therefrom.  export  product  domestic  costs  and  basically  international by  foreign  value  storage  or  price  discrimination  Prices  i n China between  established.  are  has  expenses,  made e f f o r t s  between  domestic  reflecting  supply  domestic To  and  to  banking  and  foreign  some e x t e n t C h i n a  remove  and  are  production costs, charges,  (when l e v i e d ) and r e a s o n a b l e p r o f i t m a r g i n China  by  or j o i n t l y w i t h producers,  purchased  On  1 4 5  exported  p r i c e s of export products  expenses,  Generally,  link  the  their  a commission b a s i s i s  t r a d e c o r p o r a t i o n s on t h e i r own calculated  and  f o r a l l t h e p r o f i t s and  hand,  determined  economy,  etc.  unnecessary  foreign  demand.  prices  1 4 7  goods.  A  limited  seems  i s able to f u l f i l l  to the  be GATT  requirements. In  the  domestic  prices  imports STEs very or  USSR,  are,  however,  and  prices  f o r the  most  i n USSR known a s  limited  exported  imports  are  political demand.  1 5 1  role  there of  guided  1 5 0  by  imported  part,  fixed  direct goods. by  the  link  between  Prices  1 4 8  state.  1 4 9  " F o r e i g n Trade O r g a n i z a t i o n s " have  i n determining  goods.  i s no  Their  choice  planned  considerations  the p r i c e s in  targets  rather  than  of t h e i r  selecting relying on  pure  of The a  imported  sources  of  heavily  on  economic  85 3 . 4 ( 1 ) GATT ANTIDUMPING AND NME  As n o t e d e a r l i e r , competition direct  the assumption  requires  link  COUNTERVAILING DUTY LAW  that  between  o f GATT c o n c e r n i n g p r i c e  i t s member  domestic  AND  prices  countries and  establish  prices  of  a  foreign  i m p o r t s , a n d n o t t o dump g o o d s f o r e x p o r t a t i o n by s a l e a t l e s s than  "normal"  price  or  fair  v a l u e . As  a  matter  of  fact,  domestic  f o r m a t i o n o f e x p o r t i n g and i m p o r t i n g p r o d u c t s i s c l o s e l y  related  t o dumping and s u b s i d y . S a l e s o f e x p o r t e d p r o d u c t s t o  another c o u n t r y a t l e s s than "normal v a l u e " c o n s t i t u t e within  the  threaten the  meaning  to  cause  of  GATT  material  importing c o u n t r i e s .  export  products  may  Article injury  On  1 5 3  give  GATT A r t i c l e authorizes duty  to  the  6  CPs  equalize  distorted  by  authorization domestic  to  cause  or  industries  of  low p r i c i n g  of  preferences  to  domestic  subsidies.  antidumping  competitive or  i s , however,  1 5 5  t h e o t h e r hand,  impose  dumped  injury.  may  (known a s " T r a c k I") condemns d u m p i n g  industries  material  and  1 5 2  t o domestic  special  p r o d u c e r s and t h u s c o n s t i t u t e  6  conditions subsidized  given  producing Mere  and  only  like  injury  is  that  have  imports. to  goods  injury  draw. the  1 5 6  and m a t e r i a l  injury  has  those  Since the primary objective  always  of Track  of  antidumping  duty  or  countervailing  The  CPs  whose  suffered to  impose between  difficult  to  I i s to set off  i n j u r i o u s e f f e c t s c a u s e d by s u b s i d i z e d / d u m p e d  amount  been  1 5 4  have  insufficient  been  and  countervailing  antidumping or c o u n t e r v a i l i n g duty but the d i s t i n c t i o n mere  dumping  imports, the  duty  shall  not  86 exceed  t h e "dumping  subsidy can  granted.  only  duty.  margin"  or the estimated  1 5 7  The a l l e g e d  1 5 8  be l e v i e d  either  dumped  antidumping  bounty  or subsidized duty  or  imports  or countervailing  1 5 9  In  addition  "Track  II")  products, primary  t o Track  prohibits  with  1 6 0  from  export  leniency  products.  exempted  I , GATT A r t i c l e  this  on  f o r subsidies  general  (referred  subsidy  Although  1 6 1  16  on  non-export prohibition,  t o as  non-primary  the export subsidies  the  of are  subsidizing  c o u n t r y s h a l l n o t i f y t h e C o n t r a c t i n g P a r t i e s o f t h e e x t e n t and the  nature  of subsidization,  subsidization products  on  imported  of the estimated  the quantity into  of  or exported  effect  the affected from  of the  product  i t s territory  the circumstances making t h e s u b s i d i z a t i o n  necessary.  and o f  1 6 2  W i t h r e s p e c t t o s u b s i d i e s , GATT i s g e n e r a l l y a g a i n s t production  s u b s i d i e s and e x p o r t  not f o r b i d  s u b s i d i e s as such,  limits CPs  and requirements.  subsidies.  i t does  i t subjects t h e i r use t o c e r t a i n  GATT A r t .  16 i m p o s e s  Any s u b s i d i z i n g  on  subsidizing  CP i s r e q u i r e d t o g i v e CONTRACTING  PARTIES n o t i f i c a t i o n o n a n y s u b s i d y w h i c h of t r a d e ; (2)  having  influences the level  1 6 3  Although  export  subsidies  that  both  three types o f o b l i g a t i o n s as f o l l o w s : (1)  the  Although  or  developing  of primary  products,  i n a manner w h i c h  more t h a n  product;  1 6 4  c o u n t r i e s may they  results  an e q u i t a b l e share  shall  u s e s u b s i d i e s on not apply  such  i n that contracting party of world  export  trade i n  87 (3)  A third  non-primary CPs.  No  unless  o b l i g a t i o n — t o cease export s u b s i d i e s  products—applies  newly  acceding  CPs  to a (under  they sign the relevant  3.4(2)  small Art.  group  of  on any  developed  33) a r e b o u n d  declaration.  by i t  1 6 5  PROBLEM OF DUMPING AND S U B S I D I E S WITH NMES  Although permitted  to  products  GATT  does  use  countervailing  i f they cause m a t e r i a l  industry.  As  concerned, effective exports.  f a r as  subsidy  the  of trade  subsidies,  duty  injury  members a r e  against  subsidized  t o a member's d o m e s t i c  state  i s considered  instrument  trading  systems  b y GATT c o u n t r i e s  are  t o be a n  c o n t r o l , a means o f i n c r e a s i n g  1 6 7  Under  target-protected  indistinguishable import  not prohibit  subsidy  from under  economies,  equalization a  plan  subsidy  payment  target  i s  (which  but not  nearly i s an  i n t h e GATT  1 /TO  sense).  Under one-commodity t a r g e t , t h e l e v e l  determined  directly  foreign  trade  and t h e e v e n t u a l  unit  i s  the  negative  result  of  t a x paid a  performance. But under multi-commodity t a r g e t , be  used  t o influence  framework  and t h e o p e r a t i o n •I  equalization information subsidy.  1 7 0  the level  system. network  of trade  of plan  of exports i s  given  targets  export  subsidies  within may  t othe  could  the target require  an  CQ  ^  I t would  t o determine  be  crucial  whether  to  have  or not there  an  i s a  88 The  GATT  implemented are  signed  Round  against  dumping  by an Antidumping  Code  and s u b s i d i e s and S u b s i d i e s  have  been  Code  which  by most o f t h e p a r t i c i p a t i n g c o u n t r i e s a t t h e Tokyo  negotiations  Codes). to  rules  on t a r i f f s  and t r a d e  ( r e f e r r e d t o a s MTN  I n t h e two Codes g u i d e l i n e s have been g i v e n  interpret the confusing  "domestic  industry",  "material  injury".  c o n c e p t o f dumping, s u b s i d i z a t i o n ,  and  general  Regrettably,  signatories a general  a s t o how  criteria  t h e two  to  Codes  determine  only  accord  f r a m e w o r k . Much o f t h e i n t e r p r e t i v e  work  remains a t each s i g n a t o r y ' s d i s c r e t i o n . . The and  philosophy  subsidies  specialize  efficiently at  a  cost.  and  competition  by  imports domestic  those  countervailing remedying  unfair pricing o f GATT  producers  between  must  be f i r m l y  or trade  o r have  of like  material  w h i c h p r o m o t e maximum  goods  most  goods t h a t i t c a n produce  only  foremost  GATT  duty  rules  i s to  effects  whether  products.  increase  resulting  1 7 2  from  The o v e r r i d i n g  or not the alleged  material 1 7 3  of  injury  I n doing  t o the  so a  causal  and dumped/subsidized And c u m u l a t i o n  imports  of imports  as a  cause o f i n j u r y e s p e c i a l l y i n i n v o k i n g - "escape c l a u s e "  under  Article  established.  objective  practices.  caused  injury  country  i t can produce  injurious  i s t o define  are causing  link  The  1 7 1  dumping  when f r e e t r a d e a l l o w s e a c h  and i m p o r t i n g those  antidumping  approach  achieved  by e x p o r t i n g  higher  twisted  t h e GATT r u l e s a g a i n s t  i s f r e e market p r i n c i p l e s  market e f f i c i e n c y to  underlying  19 i n t h e c i r c u m s t a n c e s  appropriately  assessed.  1 7 4  of increased  imports  may be  89 The into  GATT  rules  t h e two Codes  signatories trade  competitive  laws  imports. above  subsidies  and  before  GATT  rules  conforms w i t h  state  trading  principles. applying  to  by  may make l i t t l e  equalize  dumped  or  The m a j o r d i f f i c u l t y  dumping/export  state trading  economies  t h e GATT s t a n d a r d s . t o NMEs m a i n t a i n i n g  o r no s e n s e .  are formulated  t h e GATT r u l e s  against  t o loose  t h e GATT r u l e s when a p p l i e d  rules  attempting  unfair  1 7 5  may b e w e l l a p p l i e d  these  t h e Codes'  domestic  distorted  still  that  incorporated  by  of their  measures  described  whose p r i c e f o r m a t i o n  /subsidies  implemented  components  conditions  subsidized  dumping  are further  as foremost  relief  The  against  along  1 7 6  But  command  The r e a s o n i s  1 7 7  the line  of freemarket  f o r GATT t r a d i n g c o u n t r i e s i n  t o NMEs c e n t e r s  on whether  the free  m a r k e t p r i n c i p l e s c a n b e t r a n s l a t e d a n d a p p l i e d t o NMEs. In  any event,  application GATT  t h e GATT r u l e s per se d o e s n o t exempt t h e  t o NMEs a s l o n g  organization.  The  a s NME c o u n t r i e s principal  d e t e r m i n i n g t h e "normal v a l u e " identifying  and  quantifying  market-based  prices,  costs,  difficulty  o f NME  imports,  subsidies  and r e s o u r c e - a l l o c a t i o n  forces  o f s u p p l y a n d demand a n d s c a r c i t y  absence o f government  to  allocate  uses. are  0 0  resources  in  and exchange  prices  the  remain with t h e  and the  rates.  a r e determined by  B u t i n a NME p r o f i t s ,  c o n t r o l l e d by t h e s t a t e  to  prices  their  in  accurately  absence  of  In a  FME  1 7 8  the natural  o f commodit i e s .  intervention, these  efficiently  lies  1 7 9  in  forces  interact  most  valuable  and r e s o u r c e - a l l o c a t i o n  a n d do n o t r e f l e c t  the forces of  90 •  •  1 R1  s u p p l y and  demand o r a l l o c a t i v e e f f i c i e n c y .  commodity  is  government  but  to  of  promote  objectives. reflect  one  its  Prices  the  actual  micro-economic  to  of  efficiency  Furthermore,  reliable  exchange  in  rate  policy  social,  used  costs  NME.  into d o l l a r s .  the  by  generally  to  value  of  This  has  of  a  NME  third  country"  efforts  bridge  called value  NME  applicable  to  subsidies  has  gap  NMEs. the  convert  need  of  in  there  the  not  goal  exist  countries  the  economic  the  not  t o how  is  NME  a no  currency  to  t o determine  calculate  the  country  approach  In  1 8 5  use  the FME  approach  and  to  rendered  of  dumping  constructed  or  U.S.  and  the  the  so-called  Congress  made  NMEs t h r o u g h  determine the  the  so-  normal  antidumping  laws  1 8 6  problem  of  against  been  as  between  country"  alleged  dilemma  because  through  approach.  imports  However,  so  done  market  the  "surrogate of  imports  been  "surrogate to  and  a  1 8 4  value  margin.  by  profits  does  NME  p r i c e of  used  political  A c c o m m o d a t i o n s h a v e b e e n made a s normal  tools  production  which  The  o x  determine  most  •  i d e n t i f y i n g and  NME  has  encountered  by  been  quantifying  unresolved.  the  U.S.  1 8 7  the This  Department  of  1 Rfl  Commerce.  0 0  signatories and  Since  r u l e s have been the  is  one  of  the  most  t o t h e Codes, i t i s h e l p f u l t o use  approaches  In  U.S.  U.S.  in  this  area  as  an  example  U.S. of  important trade  how  the  laws GATT  interpreted. the  t h e a p p l i c a t i o n o f U.S.  t r a d i t i o n a l view countervailing  of duty  Commerce laws  (CVD  concerning laws)  to  91 NMEs i s n e g a t i v e . the  case  filed  unions  against  policy  of  benefits  The  by  a  group  imports  granting to  Commerce's v i e w was  the  from  a  producers subsidy.  disclosed  case  Poland  a  and  distortions", virtually  the  where  conceptually  contention  v.  and  state  and  alleged  act  from  the  received  These  States.  c a n n o t be  subsidies  landmark case The  1 9 3  found  court  However, H o u s e and and bills Bill,  apply one  1987,  Senate t o the of  which  circumvent  in  CVD  the  clearly Rod  from  Department  producers  are  subsidization  is  normal  role  of  task  of  against  most s u c c e s s f u l the  use  implementation  Court of  the  hopeless.  The  Appeals f o r  the  Georgetown S t e e l that  i t s very  a  Corp.  countervailable subsidization is  definition  cannot  1 9 5  several  laws  a  with  NMEs  and that  by  bills  i n v a l i d a t e the  suggests the  economy.  1 9 4  in  of  -  held  i n a NME  m e r e l y a m a r k e t phenomenon t h a t e x i s t i n a non-market  other  riddled  d i s t o r t i o n s make  support from the  in a  Wire  the  state's  and  more  Commerce  of  China's  .  quantifying  Circuit  United  subsidy  an  resources.  identifying  Steel  which  1Q 9  allocating  Federal  Carbon  is  in and  constituted  market s t a n d a r d s . . . i s  inseparable  •  goods  position  in  the  and  manufacturers  exchange  exported  1 9 0  addressed  alleging that  monetary  The  "[by]  same  textile China  concerning  a NME ^  NME  of  Czechoslovakia  contended t h a t  U.S.  preferred  countervailable in  of  first  were  introduced  in  v e r d i c t of Georgetown NME  countries.  i s Section of  157  "surrogate"  problem  of  1 9 6  of  the  Steel  Of  these  1987  Trade  approach  identifying  to and  92 quantifying costs,  subsidies  and exchange  However, subsidies both  as  to  NMEs  laws  prices,  shows  that  dumping  indistinguishable,  appear  meaningless.  laws have a l r e a d y  been a p p l i e d  t o be  applied  and  applying Now  1 9 9  that  t o t h e NMEs,  i n this  context.  t o a p p l y CVD l a w s t o NMEs a r e m i s g u i d e d a n d s h o u l d be  It  2 0 0  i s often  dump t h e i r  STEs  analysis  would  a r e unnecessary  abandoned.  to  o f market-based  1 9 7  i n NMEs a r e v i r t u a l l y  laws  Efforts  rates.  economic  antidumpinmg duty CVD  i n t h e absence  are  i n Western  countries  that  goods on W e s t e r n m a r k e t s . T h i s  based  competitors. market  claimed  on  The  forces  discriminatory  prices of  they  supply  and  i s because  monopoly  determine  do  demand.  NMEs  power  their  without  not r e f l e c t Rather  tend  they  the are  implemented i n s t r u m e n t s o f government p o l i c y r e s u l t i n g i n long term  dumping.  flexibility production  Moreover,  2 0 1  i n the context  trade  Poland  were  They  also  influenced  products  within  somewhat  resembling  subsidies control  were  applied  f o r exports  nature:  through  often and  lacks  domestic  of short-term  subsidy  payments they  plan  the level  t h e framework a  prices  the risk  budgetary  of dual  a l l o c a t i o n of trade  prices.  increases  trade  2 0 2  and Romania,  enterprises  direct  markets.  foreign  of changing  cost which i n t u r n  dumping on Western In  NMEs'  f o r foreign  resulted  targets  under  of exports  GATT  i n t h e Hungarian  t o t h e market  sense.  2 0 4  given  targets  system  economies.  a  on c e r t a i n  of multi-commodity i n the  from  of  u  -  If trade  However, a t  93 the  time  of Hungary's a c c e s s i o n t o the  p a i d on  GATT, t h e y  a s e c t o r b a s i s r a t h e r t h a n on a p r o d u c t  made p u b l i c  by  the  Hungarian  somewhat  problematic  Hungary,  subsidies  adopted  to  were  safeguard  introduction  of  enterprises  to  product-mix  to  "new  as  balance  economic  temporary  of  payments  mechanism"  and  prices  the  when  to  their  production.  eliminate  foreign  b a s i s and  were  This eliminated  2 0 5  p r o g r e s s i v e l y from  to  being  countervailable subsidies.  considered  the  shift  was  and  of  more p r o f i t a b l e  subsidization domestic  issue  authorities.  were  the  permit  some  unprofitable  difference  compared  at  measures after  The  2 0 6  In  purpose  of  between  the  the  commercial  p r»7  exchange r a t e . As  far  concerned, develop owing  to  "infant are  products.  to  export  instrument  system or  means  expand i t s e x p o r t s i n t h e w o r l d economy.  increase  2 0 8  Production  export the  capacity  of  2 0 9  to  market  subsidies  industries.  is  are  Export  exporting  •  This  and  and  essential  i n d u s t r y " or  earn  i s backed foreign  special  arrangements  subsidies  on  mainly  an  i t s low-income  p io  income  production  s u b s i d i e s are  subsidies  export  China's  i t s economy and  to  granted  as  primary  developing  by  hard  for  current  currency.  policy 2 1 1  developing  products,  country  a  and  and  China  Since  promote  GATT  countries'  subsidization  l i m i t e d t o primary products, thus China w i l l  has  export  i s considered a  i t s export  c a r r y o u t t h e r e l e v a n t GATT p r o v i s i o n s .  to  lowis  be a b l e t o  94 3.5  CONCLUSIONS  Fundamentally, of fix  world  trade  t h e GATT  where  state  i s based authorities  which  s t a n d a r d s and so on, a r e c l e a r l y d i s t i n c t  themselves. trading  The  as  a  originally  GATT  in  permissible  concerned  practised  only  i t s Article  loose  of  with  occasional  i n the essentially  state  trading  trading  link  enterprise trader  system  a monopolistic  state-trading  classified Romanian  collect  from t h e t r a d e r s recognizes  trading  state  although state  private-enterprise  i t was  trading system.  Union, as  where  the character  and  on t h e d o m e s t i c  i n Hungary,  the  state  Soviet  The  of the state  of p r i v i l e g e s which  t h e Hungarian  loose  as  i s c e r t a i n l y acceptable f o r the  position  systems  view  duties,  i s l i m i t e d e i t h e r t o s t a t e ownership o f a  or the granting  Soviet  17  form  GATT a p p r o a c h t o s t a t e t r a d i n g  the  on market-economy  Poland,  state  the Among  C h i n a and  systems  systems w h i l e trading  give  market.  Romania,  and Chinese  trading  may  trading  could  be  the Polish,  regimes  have  the  c h a r a c t e r i s t i c s o f t h e command s y s t e m s . Difficulties arise is  i n t h e case  possible  policies targets) which  to  through without  are subject  conclude that  i n the application o f command s t a t e implement the  t o GATT  trading  protectionist  state  recourse  o f t h e GATT r u l e s  trading  and  discriminatory (basically  control  regulations.  i f t h e command s t a t e  s y s t e m s , where i t  link  t o the trade  trading  could  This  instruments  leads  systems  plan  one t o  a r e t o be  a d m i t t e d t o t h e GATT, new r u l e s w o u l d h a v e t o b e a d d e d t o t h e  95 GATT  code  economies  of  conduct.  have  to  be  Otherwise decentralized  command to  state  the extent  trading to  be  c o m p a t i b l e w i t h t h e GATT r e q u i r e m e n t s .  FOOTNOTES 1  GATT, A r t i c l e  2  GATT A r t i c l e  3  17:1(a). 17:1(b).  GATT Basic Instruments and supplementary ( h e r e i n a f t e r " B I S D " ) , 9 t h Supp. 1 9 6 1 , p . 1 8 3 .  Documents  T h i s i d e a u n d e r l i e s p r o v i s i o n s o f A r t i c l e 1 7 ( 4 ) ( b ) o f GATT. F o r a d e t a i l e d d i s c u s s i o n see K o s t e c k i , East-West Trade and the GATT System ( 1 9 7 9 ) , p. 4 5 . 5 6  7 8  9  GATT A r t . 17 ( 1 ) ( a ) . B e r n i e r , " S t a t e T r a d i n g a n d t h e GATT" i n STATE TRADING IN INTERNATIONAL MARKETS ( K o s t e c k i e d . 1 9 8 2 ) , a t 2 48; see also GATT A r t i c l e 17 ( 3 ) . GATT, A r t .  2(4).  K e n n e t h W. Dam, The GATT: Law and International Economic Organization ( C h i c a g o , L o n d o n : The U n i v e r s i t y o f C h i c a g o P r e s s , 1 9 7 0 ) , p. 323 GATT, I n t e r p r e t i v e n o t e , A d A r t i c l e  2, p a r a . 4 .  10 N o t e t h a t A r t i c l e 1 7 , p a r a . 3 o n l y s t a t e s t h a t n e g o t i a t i o n s d e s i g n e d t o l i m i t o r r e d u c e o b s t a c l e s t o t r a d e c r e a t e d by t h e o p e r a t i o n o f STEs " a r e o f i m p o r t a n c e t o t h e e x p a n s i o n o f i n t e r n a t i o n a l t r a d e " . Ibid., A r t . 17:3. 11 1 2  1 3  Dam, supra  n o t e 8, a t 3 2 4 .  GATT A r t i c l e  17:  (1).  F o r a more d e t a i l e d d i s c u s s i o n o f t h e c o n c e p t o f S T E s , s e e J a c k s o n , World Trade and the Law of the GATT (N.Y.: B o b b s - M e r i l l , 1969), pp. 339-45.  96 14  B e r n i e r , supra n o t e 6, p p . 2 4 5 - 2 6 0 ; K o s t e c k i , supra note 4, p . 4 4 ; L l o y d , " S t a t e T r a d i n g a n d I n t e r n a t i o n a l T r a d e Theory", i n State Trading in International Markets ( K o s t e c k i , e d . 1982), pp. 120-29; H a r r i e t M a t e j k a , "Trade Policy Instruments, State Trading and First-Best Intervention", pp. 142-160, i n State Trading in International Markets ( K o s t e c k i ed. 1982).  15  See GATT A r t i c l e 1 7 : ( 1 ) w h i c h r e f e r s S T E s t o t h r e e t y p e s of e n t e r p r i s e s : (1) s t a t e e n t e r p r i s e s ; (2) e n t e r p r i s e s t h a t h a v e b e e n g r a n t e d a " s p e c i a l p r i v i l e g e " ; a n d (3) enterprises that have been granted an exclusive p r i v i l e g e " . See a l s o F r i e d e r R o e s s l e r , " S t a t e T r a d i n g and T r a d e L i b e r a l i z a t i o n " i n State Trading in International Markets ( K o s t e c k i e d . 1982), pp. 262-67.  16  Kostecki,  17  With respect t o the malicious characters see K o s t e c k i , i b i d . , p p . 4 3 - 4 6 , 6 5 - 7 0 .  18  See  19  T h o s e r u l e s a r e : (a) m a x i m i z e a g g r e g a t e p r o f i t s ; (b) f i x a p r o f i t m a r g i n p e r u n i t o f s a l e s ; ( c ) z e r o p r o f i t s ; (d) a f i x e d p r i c e ; (e) m a x i m i z e g a i n s f r o m t r a d e , ( s e e L l o y d , i b i d , p. 1 2 1 ) .  20  Ibid,  21  22 23  24 25  26  Lloyd,  supra  n o t e 4, p . 9.  supra  of state  trading,  n o t e 14, p p . 1 1 8 - 2 0 .  pp. 121-31.  Ibid, 131. t h e second p r o p o s i t i o n o f L l o y d i s : " f o r a given market segmentation, the instrument of a discriminating state trader and a s e t o f ad valorem t a x e s - s u b s i d i e s l e v i e d on c o m p e t i t i v e p r i v a t e t r a d i n g a r e equivalent." Ibid,  p p 132-34.  Ibid., p . 1 3 4 . N o n e t h e l e s s , t h e y may r e m a i n "quasiequivalent". States s t i l l have a c h o i c e between those instruments t o achieve a s i n g l e o b j e c t i v e , though t h e c h o i c e i s n o t a c o m b i n a t i o n o f t h e two b u t e i t h e r s t a t e t r a d i n g o r t a r i f f s o r o t h e r measures. GATT, I n t e r p r e t i v e n o t e t o A r t i c l e s  1 1 , 1 2 , 1 3 , 14 a n d 18.  I n NMEs, t h e v o l u m e o f t h e i m p o r t s i s u s u a l l y d e t e r m i n e d not by t h e margin between i m p o r t p r i c e s and i n t e r n a l p r i c e s , b u t r a t h e r t h a n b y t h e p l a n . Dam, supra n o t e 8, p. 3 2 6 . Dam, supra  n o t e 8, a t p p . 3 2 6 - 2 7 .  97 27  S u g g e s t e d C h a r t e r f o r t h e ITO o f t h e U n i t e d N a t i o n s , o f S t a t e P u b . 2 5 9 8 , i n C o m m e r c i a l S e r i e s 93 ( 1 9 4 6 ) .  28  S e e Dam, supra  29  Ibid.  30  Bernier,  31  Dam, supra  Dept.  n o t e 8, p . 3 1 6 .  p. 317. supra  n o t e 6, a t 2 5 0 .  n o t e 8, p p . 3 1 7 - 8 .  32  The n o n d i s c r i m i n a t i o n i n A r t . 17 s h o u l d b e u n d e r s t o o d along with t h e "commercial criteria" essential i n p u r c h a s e s o r s a l e s a p p l i c a b l e t o NME s y s t e m . A s p a r a . 1(b) requires, "purchases and s a l e s involving either i m p o r t s o r e x p o r t s " a r e t o b e made " s o l e l y i n a c c o r d a n c e w i t h commercial considerations, i n c l u d i n g p r i c e , q u a l i t y , availability, marketability, transportation and other c o n d i t i o n s o f purchase o r s a l e and s h a l l a f f o r d other c o n t r a c t i n g p a r t i e s adequate o p p o r t u n i t y i n accordance with customary business practice, to compete f o r p a r t i c i p a t i o n i n such purchases o r s a l e s . " S e e GATT, Article 17(1)(b).  33  GATT A n n e x I , A d A r t i c l e 17 u s e s n e g a t i v e m e t h o d t o d e f i n e " e x c l u s i v e o r s p e c i a l p r i v i l e g e s " . "Governmental measures imposed t o ensure s t a n d a r d s o f q u a l i t y and e f f i c i e n c y i n the operation of external trade, or p r i v i l e g e s granted for the e x p l o i t a t i o n of national natural resources but w h i c h do n o t empower t h e g o v e r n m e n t t o e x e r c i s e c o n t r o l over the trading activities of the enterprise in question, do not constitute exclusive or special p r i v i l e g e s " . (Para. 1(a) o f Ad A r t i c l e 1 7 ) . x  34  Lloyd,  35  Id.  36  Id.  37  Kostecki,  38  Id.  39  Id.  supra  n o t e 14, p. 129.  p. 129.  supra  n o t e 4, p p . 4 6-47.  98 40  See v a r i e t y o f a r t i c l e s a n d comments on t h e r e f o r m i n PRC, namely, Falkenheim, "China Trade Reforms: Domestic D e t e r m i n a n t s a n d I n t e r n a t i o n a l I m p l i c a t i o n s " , i n EMERGING PACIFIC COMMUNITY 1 3 1 , 136 (R. Dowwnen a n d B. D i c k s o n eds. 1984); Friedman, "Enterprise Reform: The Three L i ' s " , CHINA BUSINESS REV., Mar. - A p r i . 1985, a t 24, 26; P r y b y l a , "The C h i n e s e Economy", 25 Asian Surv. 538, 558 (1985) ; Xu Y i , "The P l a n n e d Economy a n d t h e E c o n o m i c System", CAIZHENG YAN JIU, Jan. 31, 1984 at 21. t r a n s l a t e d i n JPRS-CEA Doc. No. 8 4 , 0 3 8 , MAy, 1984, a t 50. (However the reform on-going, China must restrict e c o n o m i c s p o n t a n e i t y a n d m a i n t a i n a p l a n n e d economy t o ensure t h a t i t s economic activities conforms to the " o b j e c t i v e l a w o f s o c i a l i s t economy", 25 ASIAN SURV., 998 (1985) .  41  S e e GATT Doc. L/6270 (Nov. 27, 1987) t h e W o r k i n g P a r t y on C h i n a ' s S t a t u s a s a C o n t r a c t i n g P a r t y - Q u e s t i o n s and Replies C o n c e r n i n g t h e Memorandum on C h i n a ' s F o r e i g n T r a d e R e g i m e ( h e r e i n a f t e r "QUESTIONS & R E P L I E S " ) , p. 84.  42  QUESTIONS & REPLIES, id. "A m a n d a t o r y p l a n i s a n o r d e r w i t h a l e g a l c o m p u l s o r y n a t u r e i m p o s e d by t h e S t a t e and m u s t be f u l f i l l e d , " a n d an amendment o r a d j u s t m e n t must be s u b j e c t t o t h e a p p r o v a l by t h e c o m p e t e n t d e p a r t m e n t s w h i c h made s u c h p l a n s ; w h e r e a s "a g u i d a n c e p l a n h a s no binding force, and i t s function largely depends on economic l e v e r s , " and t h e g u i d i n g p r i n c i p l e f o r p l a n n i n g coordination i s : appropriate administration at macro l e v e l , i n c r e a s i n g v i t a l i t y a t m i c r o l e v e l and f u l l use o f t h e m a r k e t m e c h a n i s m s o f s u p p l y a n d demand.  43  Id.  44  Id.  45  Id.  46  Regarding QUESTIONS  47  Id.  p.  the main responsibilities & REPLIES, id. p. 8 1 .  of  MOFERT,  see  81.  48  GATT, Doc. m a t e r i a l s (unpublished).  49  K. K e n n e d y , "The A c c e s s i o n o f t h e S o v i e t U n i o n t o GATT" (1987) 21 J.W.T.L. 23, at 33-35; Note, "Soviet *Participation' i n GATT: A C a s e f o r A c c e s s i o n " , 2 0 N.Y.U.J. I n t ' l L. & Pol. 477, ( W i n t e r 1 9 8 7 ) , a t 479.  50  Kennedy, i b i d . ,  51  Id.  submitted to the  pp.34-35.  GATT w o r k i n g  party  99 52  Ibid., p. Gorbachev's  53  Ibid.  p . 49.  54  Ibid.  p . 50.  55  Ibid.  p. 51.  56  Id.  57  B e r n i e r , supra  58  Dam, supra  59  Ibid.,  60  B e r n i e r , supra n o t e 6, p. 2 4 6 ; w i t h A r t . 2(4) and an i n t e r p r e t i v e 14, 18.  35. B i a l e r & Afferica, "The G e n e s i s W o r l d " , 64 FOREIGN A F F A I R S 604 ( 1 9 8 6 ) .  of  n o t e 6, p. 2 4 5 .  n o t e 8, p . 321.  a t 245, 257. note  to Articles  11-  61  B e r n i e r , supra  62  See L l o y d , supra n o t e 14, pp. 134-37. ( " I n v i s i b i l i t y " and "flexibility" a r e n o t advantages from an economic perspective; they instead increase t h e p o s s i b i l i t i e s of harmful i n t e r v e n t i o n s as w e l l as those o f b e n e f i c i a l i n t e r v e n t i o n s . The outcome o f t h e c h o i c e s o f i n v i s i b l e f l e x i b l e s t a t e c o n t r o l w i l l depend on t h e wisdom o f t h e s e c h o i c e s . I t s h o u l d b e b o r n i n m i n d t h a t t h e a i m o f GATT rules i s p r o v i d e common v i s i b l e behavior so as t o increase the stability and t r a s p r e n c y of the world t r a d i n g system).  63  Id.  64  Id.  65  Id.  66  R o e s s l e r , supra  n o t e 15, p. 276.  67  K o s t e c k i , supra  n o t e 4, p . 13 6.  68  Id.  69  Id.  70  Id.  71  Roessler, supra note 1 5 , p . 2 7 4 . A c c o r d i n g t o GATT p r o v i s i o n s , he c l a s s i f i e s STEs i n t o t h r e e t y p e s : ( i ) state-owned enterprises; ( i i ) privileged enterprises; ( i i i ) government monopolies. Ibid.  n o t e 6, p . 2 7 5 .  p.257.  100 72  Id.  73  Id.  74  GATT, Interpretive note to Articles 11-14, and 18; R o e s s l e r , supra n o t e 1 5 , w h e r e h e made a d i s t i n c t i o n between RULES, which are abstract and o f general applicability, a n d MEASURES, which are applied i n concrete circumstances t o achieve predetermined results. Ibid., a t 261, 263, 275.  75  Ibid,  76  c.f.  77  GATT, A r t .  78  GATT, i d . T h e r e a r e f i v e e x c e p t i o n s e n u m e r a t e d i n t h e GATT which include:  p. 274.  a t 275. K o s t e c k i , supra  note  4, p . 5 1 .  13:2(b).  (a) quantitative restrictions are permitted to r e s t o r e o r maintain balance-of-payments e q u i l i b r i u m as p r o v i d e d by A r t i c l e X I I and i n t h e case o f t h e low-income economies by A r t i c l e X V I I I : B ; (b) t h e low-income economies a r e a l s o a l l o w e d t o u s e quotas to a s s i s t the establishment of p a r t i c u l a r industries ( A r t i c l e X V I I : C ) ; (c) q u a n t i t a t i v e r e s t r i c t i o n s have c o n t i n u a l l y used by t h e d e v e l o p e d n a t i o n s t o p r o t e c t agriculture; (d) q u o t a s are also permitted to prevent market d i s r u p t i o n (Article X X I ; a n d (e) moreover, i t i s possible t o use q u a n t i t a t i v e restriction against 'scarcity currency' countries ( A r t i c l e XIV). ( S e e K o s t e c k i , s u p r a n o t e 4, p . " 5 2 ) . 79  GATT, A r t . 13. (QRs s h o u l d nondiscriminatory basis.")  80  GATT A r t 1 3 : 2 ( a ) .  81  GATT A r t .  82  GATT, A r t . 1 3 : 1 .  83  GATT, i n t e r p r e t i v e n o t e , A d A r t i c l e s  84  K o s t e c k i , supra  85  GATT, A r t .  86  GATT, i n t e r p r e t i v e n o t e , A d A r t . 12 4 ( e ) .  be  administered  13:2(c).  note  1 1 - 1 4 , a n d 18.  4, a t 5 3 .  12:4(d).  "on  a  101 87  GATT A r t i c l e 1 3 : 2 ( c ) ; K o s t e c k i , supra n o t e 4, a t 54. (Global licence permits conclusion of the transaction s p e c i f i e d i n t h e l i c e n c e w i t h any c o u n t r y , meaning i t i s n o t c o u n t r y - s p e c i f i c . The i n d i v i d u a l l i c e n c e r e f e r s t o a c o n c r e t e t r a n s a c t i o n d e f i n i n g t h e import and e x p o r t v a l u e of a given product with a given country and under established conditions).  88  GATT, A r t .  13:2(c).  89  GATT, A r t .  13:2(c).  90  GATT, A r t .  13:3(a),  91  GATT, i n t e r p r e t i v e n o t e t o A r t i c l e s  3(c). 11-14 a n d 18.  92  Note t h a t n o n d i s c r i m i n a t o r y operation of state trading e n t e r p r i s e s h a s b e e n i n c o r p o r a t e d i n t o A r t . 17 o f GATT.  93  H o w e v e r , p a r a . 4 ( c ) o f GATT A r t . 1 7 , d o e s r e q u i r e CPs maintaining STEs, upon request of being adversely affected party, t o supply information about their o p e r a t i o n s o f s t a t e t r a d i n g . See GATT, A r t . 1 7 : 4 ( c ) .  94  Kostecki,  95  c.f.  96  GATT Doc L / 3 3 0 1 , J a n . 1970,  97  Kostecki,  98  Id.  99  Id.  n o t e 4, P . 54.  supra  supra n o t e 8 7 .  supra  pp. 19-21 and 29.  n o t e 4, P . 7 3 .  100  QUESTIONS  &  REPLIES, supra  101  QUESTIONS  &  REPLIES, id.  102  QUESTIONS  &  REPLIES, id.  103  QUESTIONS  &  REPLIES, id,  pp.  104  QUESTIONS  &  REPLIES, id.  p. 1 2 1 .  105  QUESTIONS  &  REPLIES, id.  p. 1 2 5 .  106  GATT, A r t . 1 1 .  107  C a s t e l , International 1988), a t 41.  108  P  a  r  a  >  x  0  f GATT A r t i c l e  n o t e 4 1 , p. 118.  120-21.  Business 11 s t a t e s  Transactions that,  102 "No p r o h i b i t i o n o r r e s t r i c t i o n s o t h e r t h a n d u t i e s , taxes or other charges, w h e t h e r made effective through quotas, import o r export l i c e n c e s o r other measures, s h a l l be i n s t i t u t e d o r m a i n t a i n e d by any c o n t r a c t i n g p a r t y on t h e i m p o r t a t i o n o f any p r o d u c t o f t h e t e r r i t o r y o f any o t h e r c o n t r a c t i n g p a r t y o r on t h e e x p o r t a t i o n o r s a l e f o r e x p o r t o f a n y p r o d u c t d e s t i n e d f o r t h e t e r r i t o r y o f any o t h e r c o n t r a c t i n g p a r t y . " I b i d . , GATT A r t . 1 1 : 1 . 109  K o s t e c k i , supra  110  A f o r m u l a f o r e x c h a n g e o f c o n c e s s i o n s o f same n a t u r e . F o r instance, tariff reduction i s exchanged for tariff r e d u c t i o n . S e e K o s t e c k i , supra n o t e 4, a t 4 0 .  111  K o s t e c k i , supra  112  Id.  113  Id. (A f o r m u l a p r o v i d i n g e x c h a n g e o f c o n c e s s i o n s o f d i f f e r e n t n a t u r e such as exchange t a r i f f r e d u c t i o n s w i t h import increase undertakings).  114  Id.,  115  Id.  116  Id. a t 73, 74. Note lately.  1 1 7  note  note  4, a t 5 5 .  4, p. 4 1 .  a t 41, 55. p. 5 8 . that  the situation  has  changed  Id. a t 74  118  GATT D o c . L / 6 1 2 5 , (18 F e b . 1987) , " C h i n a ' s S t a t u s A s a C o n t r a c t i n g P a r t y : Memorandum o n C h i n a ' s F o r e i g n T r a d e R e g i m e , " ( h e r e i n a f t e r MEMO), a t 1 3 .  119  See R e g u l a t i o n s 1984.  120  QUESTIONS  & REPLIES,  supra  n o t e 4 1 , pp. 87-88.  121  QUESTIONS  & REPLIES,  supra  note  122  Ibid, p . 1 0 1 . " S u b s t a n t i a l t r a n s f o r m a t i o n " means t h a t t h e manufacturing or processing operations of t h e products e n t a i l a change i n t h e 4 - d i g i t t a r i f f h e a d i n g of the Customs Import and E x p o r t T a r i f f , o r t h e p e r c e n t a g e o f t h e v a l u e a d d e d i s o v e r 3 0% o f t h e w h o l e v a l u e o f new p r o d u c t . (See R e g u l a t i o n s on I m p o r t and E x p o r t D u t i e s o f PRC 1984.)  123  QUESTIONS  on I m p o r t  & REPLIES,  supra  and E x p o r t  note  Duties  o f PRC o f  41, a t 89.  4 1 , p. 103.  103 124  QUESTIONS  125  GATT A r t . 6 a n d t h e A n t i d u m p i n g Code (1979) GATT Doc. MTN/NTM/W 2 3 6 . F o r a n a l y s i s s e e J a c k s o n , s u p r a n o t e 3, p p . 4 1 1 - 2 4 . "Dumping" i s a f o r m o f i n t e r n a t i o n a l p r i c e d i s c r i m i n a t i o n whereby a p r o d u c e r c h a r g e s a l o w e r p r i c e f o r i t s p r o d u c t i n a f o r e i g n market than i t charges f o r t h e p r o d u c t i n i t s d o m e s t i c m a r k e t . Dumping o c c u r s when the p r o d u c t i s s o l d i n a f o r e i g n market a t a p r i c e t h a t i s l e s s t h a n t h e p r o d u c t ' s f a i r v a l u e . See J . V i n e r , Dumping: A Problem in International Trade (1923 & r e p r i n t 1966) .  126  Kostecki,  127  GATT, A r t . 3:9.  128  GATT, A r t . 3:4.  129  GATT, A r t . 2 : 1 ( c ) .  130  GATT, A r t . 2 ( 4 ) .  131  J.H. J a c k s o n , Legal Problems of International Relations ( 1 9 8 6 2 d ed) , p. 1 1 7 9 ; K o s t e c k i , supra p. 5 7 ; Dam, supra n o t e 8, p . 3 1 8 .  132  J a c k s o n , id., p . 1 1 7 9 ; K o s t e c k i ,  133  Kostecki,  134  Id.  135  A s y s t e m o f p r i c e e q u a l i z a t i o n ( e q u a l i z a t i o n s y s t e m ) was m a i n t a i n e d i n P o l a n d and Romania t o t u r n t h e i m p o r t e r ' s p r o f i t over t o t h e s t a t e and t o o f f s e t t h e e x p o r t e r ' s l o s s o u t o f t h e s t a t e b u d g e t . The r e a s o n f o r a d o p t i n g t h i s s y s t e m was b e c a u s e i t c a n c o m p e n s a t e differences between t h e e x p o r t revenues and i m p o r t expenses c o n v e r t e r at the o f f i c i a l exchange rate which was n o t an e q u i l i b r i u m e x c h a n g e r a t e . Id., p . 7 9 .  136  Id.  pp. 79-80.  137  Id.  p. 80.  138  Kostecki,  " H u n g a r y a n d GATT" 8 J.W.T.L. 4 0 1 , a t 4 0 6 .  139  Kostecki,  supra  140  Kostecki, 411-12.  141  Kostecki,  & REPLIES,  supra  supra  supra  n o t e 41, a t 102, 103.  n o t e 4, p . 5 8 .  supra  Economic n o t e 4,  n o t e 4, p . 5 8 .  n o t e 4, p p . 7 9 - 8 0 .  p. 79.  supra supra  n o t e 4, a t 7 9 . n o t e 4, p . 8 1 ; also n o t e 138, pp. 407-8.  supra  note  138, pp.  104 1 4 2  MEMO, supra  1 4 3  QUESTIONS  1 4 4  MEMO, supra  1 4 5  MEMO, id.  1 4 6  MEMO, id.  1 4 7  MEMO, id.  1 4 8  K. K e n n e d y , supra  149  Id.  150  Id.  n o t e 11<8, a t 6. & REPLIES,  supra  n o t e 4 1 , p p . 135-3 6.  n o t e 118, a t 19.  n o t e 49, p. 27.  1 5 1  S e e Berman, B a n s t i n , "The S o v i e t S y s t e m o f Foreign T r a d e " , i n BUSINESS TRANSACTIONS WITH USSR, (R. S t a r r , ed. 1973).  1 5 2  See GATT Doc. MTN/NTM/W 2 3 6 , s u p r a n o t e 1 2 5 .  1 5 3  I n d e t e r m i n i n g whether o r not there are material i n j u r i e s , an a p p r o p r i a t e understanding o f t h e concepts o f " d o m e s t i c i n d u s t r y " a n d " l i k e p r o d u c t " i s most c r u c i a l . See L a n g e r , "The C o n c e p t s o f L i k e P r o d u c t a n d D o m e s t i c I n d u s t r y Under t h e U n i t e d S t a t e s Trade Agreements A c t o f 1 9 7 9 " , (1983) 17 Geo. Wash. J. I n t ' l L. & Econ. 4 9 5 ; Palmeter, "Injury Determinations i n Antidumping and Countervailing Duty Cases—A Commentary o n U.S. P r a c t i c e " , (1987) 2 1 J.W.T.L. 7.  1 5 4  GATT A r t i c l e  6:2, 3.  1 5 5  GATT A r t i c l e 6:6. M a t e r i a l i n j u r y t e s t i s t h e t h r u s t o f GATT a n t i d u m p i n g and S u b s i d i e s Codes. S e e , P a l m e t e r , supra n o t e 153.  1 5 6  P a l m e t e r , id. a t 1 9 .  1 5 7  GATT A r t i c l e 6.  158  GATT A r t i c l e  1 5 9  R . P a t e r s o n , Canadian Regulation of International Trade and Investment (Carswell 1988), a t 140. ( d i s c u s s i n g f u n c t i o n s o f T r a c k I - A r t i c l e s 7-13 o f S u b s i d i e s Code a n d T r a c k I I - A r t i c l e s 1-6 o f t h e C o d e ) .  160  GATT A r t i c l e 1 6 : 4 .  1 6 1  GATT A r t i c l e 1 6 : 3 .  6:2, 4.  105 162  GATT A r t i c l e 1 6 : 1 .  163  GATT A r t i c l e 1 6 : 1 .  1 6 4  GATT A r t i c l e 1 6 : 3 .  165  GATT A r t i c l e : 4 .  166  GATT A r t i c l e  167  GATT, B I S D , 9 t h Supp. 1 9 6 1 , a t 191.213  168  F o r e x p l a n a t i o n , s e e K o s t e c k i , supra n o t e 4, a t 5 5 , 7 7 78. ( " t h e e q u a l i z a t i o n s y s t e m a s p r a c t i s e d i n P o l a n d a n d R o m a n i a c o u l d n o t b e c o n s i d e r e d s u b s i d i z i n g i n t h e GATT s e n s e . " ) Id., a t 7 8 .  169  Id. p . 5 7 . F o r d e f i n i t i o n n o t e supra 1 3 5 .  170  H o w e v e r , i t i s up t o e a c h member o f GATT t o d e t e r m i n e w h e t h e r c o u n t e r v a i l a b l e . GATT B I S D , s u p p . 1 9 6 1 , p . 1 9 1 .  171  See generally S a m u e l s o n , Economics 620-30. ( 1 1 t h ed. 1980) (explaining t h e theory of comparative advantage). Comments, " I m p l e m e n t a t i o n a n d P o l i c y : Problems i n t h e Application o f C o u n t e r v a i l i n g Duty Laws t o N o n m a r k e t Economy C o u n t r i e s " 136 University of Pennsylvania Law Review 1647, ( 1 9 8 8 ) .  172  T.R. H o w e l l & A l a n Wm W o l f , "The R o l e o f T r a d e Law i n t h e M a k i n g o f T r a d e P o l i c y " i n International Trade Policy: The Lawyers' Perspective ( J . H . J a c k s o n , R.O. C u n n i n g h a m a n d C l a u d e G.B. F o n t h e m e d . 1 9 8 5 ) , a t 3 - 1 1 , 3-15-19. ( d i s c u s s i n g p r i m a c y o f t h e r u l e o f l a w on c o m p e t i t i o n and current U.S. t r a d e remedies f o r domestic industries s u f f e r i n g m a t e r i a l i n j u r y r e s u l t i n g from u n f a i r trade practices).  6.  of equalization  system, see  1 7 3  H.M. A p p l e b a u m , P.G. G a s t o n , "What i s a ^Domestic I n d u s t r y ' f o r P u r p o s e s o f A p p l i c a t i o n o f t h e U.S. T r a d e Laws" i n International Trade Policy: The Lawyers' Perspective ( J . H . J a c k s o n , R.O. C u n n i n g h a m a n d C l a u d e G.B. F o n t h e m e d . 1 9 8 5 ) , a t 1 3 - 1 1 - 1 7 .  1 7 4  S.M. R o s e n & C.H. B a y a r , " C o m p a r i n g C a u s e s o f I n j u r y U n d e r t h e E s c a p e C l a u s e " i n International Trade Policy: The Lawyers' Perspective ( J . H . J a c k s o n , R.O. C u n n i n g h a m a n d C l a u d e G.B. F o n t h e m e d . 1 9 8 5 ) , a t 5-1-23.  106 175  J a c k s o n , Implementing the Tokyo Round (1984) ( g i v e s a comparative study o f three trade p a r t n e r s ' trade law a f t e r t h e T o k y o Round m u l t i n a t i o n a l t r a d e n e g o t i a t i o n s ) . I n Canada, r u l e s a g a i n s t dumping/subsidy a r e i n c o r p o r a t e d i n t o S p e c i a l I m p o r t M e a s u r e s A c t o f 1984 (SIMA) ; i n t h e U n i t e d S t a t e s Trade Agreements A c t o f 1979; i n Japan and EC, t h e r e h a v e b e e n i n c o r p o r a t e d i n t o s p e c i a l l a w a n d procedures g o v e r n i n g t h e i m p o s i t i o n o f antidumping and CVD d u t y . B u t J a p a n , d u e t o i t s a g g r e s s i v e e x p o r t p o l i c y , the antidumping law i s b a s i c a l l y dismantled. In the a l t e r n a t i v e , i t i s compelled t o enter i n t o various socalled voluntary export restraints (VERs) with i t s leading trade partners.  176  K o s t e c k i , supra  177  Id.  178  S o l t y s i n s k i , " P r i c e C o m p e t i t i o n Between Free-Market and S t a t e - C o n t r o l l e d Economy E n t e r p r i s e s : T h e L e g a c y o f t h e OMC v. P e z e t e l Litigations", 24 Swiss Rev. Int'l Competition L. 6. ( " [ T ] h e f r e q u e n c y a n d s c o p e o f s t a t e i n t e r v e n t i o n i n t h e market i s incomparably wider i n t h e centrally planned economy c o u n t r i e s [than i n market economies] . ) .  note  4, p . 5 8 .  11  179  P.  180  Id.  181  Id,  182  Id.,  183  Id.  184  Downey & Graham, "The R e g u l a t i o n o f Dumping f r o m S t a t e Controlled E c o n o m i e s : Where N e x t ? " i n INTERFACE TWO: CONFERENCE PROCEEDINGS ON THE LEGAL FRAMEWORK OF EASTWEST TRADE 4 3 5 , a t 4 3 8 - 4 3 9 . (D. W a l l a c e & D. F l o r e s e d s . 1982) .  185  A surrogate approach i s used t o determine t h e normal v a l u e o f NMEs' i m p o r t s b y h a v i n g r e f e r e n c e t o t h e p r i c e o f t h e l i k e p r o d u c t t o b e s o l d i n a t h i r d m a r k e t economy country. For a d e t a i l e d explanation, see Jackson, supra n o t e 1 3 1 , pp. 697-99. A r t i c l e 1 5 ( 2 ) o f S u b s i d i e s Code provides that:  S a m u e l s o n , supra  note  171,  a t 39-41.  a t 821-23. p. 823.  107 I t i s u n d e r s t o o d t h a t i n [ t h e case o f nonmarket economy] c o u n t r i e s t h e c a l c u l a t i o n o f t h e m a r g i n o f d u m p i n g o r o f t h e amount o f t h e e s t i m a t e d s u b s i d y c a n b e made b y c o m p a r i s o n of the export price w i t h : (a) t h e p r i c e a t w h i c h a l i k e p r o d u c t o f a country other than the importing signatory... i s s o l d , o r (b) t h e c o n s t r u c t e d v a l u e o f a l i k e p r o d u c t in a country other than the importing signatory...". The A g r e e m e n t o n I n t e r p r e t a t i o n a n d A p p l i c a t i o n o f A r t i c l e s 6, 16 a n d 23 o f t h e GATT ( S u b s i d i e s C o d e ) , A p r i l 12, 1 9 7 9 , 31 U.S.T. 5 1 3 . T . I . A . S . No. 9 6 1 9 ; GATT B I S D , 2 6 t h Supp. 56 ( 1 9 8 0 ) , a t 7 4 . 186  Comment, supra  187  Id.  p.  1667.  188  Id.  p.  1669.  n o t e 171, a t 1669-70.  ,  i o n  S e e T e x t i l e s , A p p a r e l , a n d R e l a t e d P r o d u c t s f r o m PRC, D e p t . o f Comm. D o c k e t No. C 5 7 0 - 0 0 5 ; 48 F e d . R e g . 46,400 (Dep't Comm. 1983) (initiation) (hereinafter CVD P e t i t i o n ) . See Recent Development, " C o u n t e r v a i l i n g D u t i e s and Non-market Economies: The Case o f t h e People's R e p u b l i c o f C h i n a , " 10 Syracuse J. I n t ' l L. & Competition 4 0 5 , p p . 418-20 (1983) ( r e j e c t i n g t h e a p p l i c a t i o n o f CVD l a w s a g a i n s t NME a s a n e t h n o c e n t r i c v a l u e j u d g m e n t ) . 190  C a r b o n Steel from Poland, 49 F e d . R e g . 19,3 74 (Dep't Comm. 1984) (final det.); Carbon Steel from Czechoslovakia, 49 F e d . R e g . 19,370 ( D e p ' t Comm., f i n a l det. 1984).  191  Carbon  192  Recent Development, " I n t e r n a t i o n a l Trade: I m p o s i t i o n o f Countervailing Duty Laws o n P r o d u c t s From Nonmarket C o u n t r i e s — C o n t i n e n t a l S t e e l C o r p . v . U n i t e d S t a t e s " , 27 Harv. I n t ' l L. J. 7 4 5 , 749 ( 1 9 8 6 ) .  193  801 F. 2 d 1 3 0 8 , ( F e d C i r . 1 9 8 6 ) .  194  Id,  195  Id.  196  Comment, supra  197  Id. , p p . 1 6 6 5 - 6 7 ; see T r a d e a n d I n t ' l e c o n o m i c Policy R e f o r m A c t o f 1 9 8 7 . H.R. 3, s . 1 5 7 , 1 0 0 t h Cong. 1 s t S e s s . (1987) ( a p p l y i n g t h e CVD l a w s t o NMEs t o t h e e x t e n t t h a t a s u b s i d y c a n be i d e n t i f i e d and q u a n t i f i e d by t h e a d m i n i s t e r i n g a u t h o r i t y ( h e r e i n a f t e r 1987 T r a d e B i l l ) .  Steel  form  Czech,  id, a t 1 9 , 3 7 1 .  1315-16.  n o t e 171, a t 1665.  108 198  Comment, supra n o t e 1 7 1 , a t 1652, 1 6 7 1 ; S e e also Denton, The N o n m a r k e t Economy: R u l e s o f t h e E u r o p e a n Economic Community's Antidumping and Countervailing Duties Legislation, 36 I n t ' l & Comp. L.Q. 198, 236 (1987) ("[I]n [nonmarket economies] i t can be argued that d u m p i n g a n d s u b s i d i e s a r e b u t two s i d e s o f t h e same coin"). 1 1  199 S e e , e . g . , Rawson, "An O u t l i n e o f U n i t e d S t a t e s R e g u l a t i o n o f T r a d e w i t h N o n - m a r k e t Economy C o u n t r i e s , " i n INTERRACE TWO, supra note 184, at 538. (noting that use of surrogate country procedures i n an antidumping case would, i n effect, "transferring a countervailing duty c a s e i n t o an a n t i d u m p i n g c a s e " ) ; Comment, " G e o r g e t o w n S t e e l c o r p . v. U n i t e d S t a t e s : A p p l y i n g t h e C o u n t e r v a i l i n g D u t y Law t o I m p o r t s f r o m N o n m a r k e t Economy C o u n t r i e s , " 18 Law & Pol'y I n t ' l Bus. 313, a t 332 ("adoption of the s u r r o g a t e m e t h o d w o u l d mean t h a t a n t i d u m p i n g d u t y a n d CVD p e t i t i o n s i n v o l v i n g i m p o r t s f o r m NMEs w o u l d be almost i d e n t i c a l . " ) ; N o t e , "An A r g u m e n t f o r F r e e r T r a d e : The N o n m a r k e t Economy P r o b l e m u n d e r t h e U.S. Countervailing D u t y L a w s , " 17 N.Y.U.J. I n t ' l L. & Pol. 407, 425 ( 1 9 8 5 ) . ( " s u b s i d i z a t i o n and dumping a r e s i m i l a r c o n c e p t i o n i n t h e n o n m a r k e t s e t t i n g b e c a u s e t h e r e i s no p r i v a t e s e c t o r o f t h e economy.") D e s p i t e t h e a b o v e comments, one s h o u l d note t h e l a t e s t d r a m a t i c changes i n E a s t B l o c . 200  Comment, supra  n o t e 1 7 1 , pp.  201  K o s t e c k i , supra  n o t e 4, pp.  202  Id.  pp.  203  Id.  p.  204  K o s t e c k i , supra  205  Id., pp. 4 0 9 - 1 0 . (However, t h e H u n g a r i a n e x p o r t s u b s i d i e s c o u l d be c o n s i d e r e d a s c o m p a t i b l e w i t h t h e GATT a s l o n g a s H u n g a r y f u l f i l l e d t h e o b l i g a t i o n s o f GATT i m p o s e d on a l l t h e c o n t r a c t i n g p a r t i e s m a i n t a i n i n g s u b s i d i e s ) . Note t h a t t h e r e a r e two o b l i g a t i o n s i m p o s e d on C P s : (a) n o t t o g r a n t e x p o r t s u b s i d i e s on p r i m a r y p r o d u c t s t h a t would r e s u l t i n "more t h a n a n e q u i t a b l e s h a r e o f w o r l d e x p o r t t r a d e . " ( A r t . 1 6 : 3 ) ; (b) t o n o t i f y GATT a b o u t any e x p o r t s u b s i d y i f used. ( A r t . 16:1).  206  K o s t e c k i , supra  207  Id. p. 7 8 ; s e e also Economic U n i t e d N a t i o n s , 1 9 6 9 ) , p. 102.  208  MEMO, supra  1671-74. 78-79.  78-79. 79. n o t e 138,  n o t e 4, p.  n o t e 118, pp.  at  409.  78.  10-11.  Survey  of  Europe  (N.Y. :  209  MEMO, id., P-  210  MEMO, id.  211  MEMO, id.  1 0  •  110  P A R T  RECONCILIATION  Although  OF  GATT  F O U R  NME  WITH  reluctantly  economies i n t o i t s framework, non-discrimination approach  to  oriented  This  would  approach  China's  accession  reconciliation focus  on  a  import-commitment-  has  been  t o suggest  will  unsuccessful  relationship. A  workable  be d i s c u s s e d  options  i n t h e context  t o GATT, a n d d i r e c t e d t o t h e p r o b l e m o f  and r e i n t e g r a t i o n o f w o r l d  of the following discussion w i l l  possibilities  modelled  GATT  and weakness o f t h e approach i s  be made  i m p r o v e m e n t . The o p t i o n s  t h e problem of  basically  basis with pragmatically  non-market  The d o m i n a n t  t o t h e growth o f East-West t r a d e  necessary.Efforts  of  problem.  was  re-evaluation of the strengths  for  some  i t d i dnot solve  accession  character.  contributing  FRAMEWORK  admitted  and r e c i p r o c i t y  NME's  country-to-country  GATT  to ascertain  which  trade  systems.  be on a n a l y z i n g  option  would  be  The  various  best f o r  r e c o n c i l i n g t h e NME w i t h t h e GATT t r a d e r u l e s . 4.1  WEAKNESS OF GATT APPROACHES TO STATE TRADING SYSTEM  I n d e f i n i n g s t a t e t r a d i n g e n t e r p r i s e s A r t . 17 an  important  benefit part  from of  distinction subsidies  the  between  granted  political  private  openly  process  equivocates  enterprises  that  i n market  economies as  (so-called  "privileged  Ill enterprises") as  part  and publicly-owned  of the operation  enterprises"). because subsidy  as  a  normal  not  complicated  to clarify  as  as  definition  o f STEs  privileged of  politically  when  should  the  cover  enterprises  subsidies  only  and  would would  controlled  activity.  an  o f STEs s h o u l d enterprises  noted  illusionary  commercial  earlier,  t o request  countries  to  reality,  operations  an  objective  that the state-owned  appear  granting  "solely" to  illogical  but  according  delete  rather  factors.  5  or  established i n  the  1(b) s i n c e c o n s i d e r a t i o n s  t o provide 6  definition  agencies  e s p e c i a l l y those  commercial  of STEs.  the  the  f o r or the effects  state  would  and commercial  be m o d i f i e d  from  4  I t i s better  "solely"  political  i t  that  Accordingly,  excluded  i t on  are  appropriate  encompass n o t o n l y  operated  wording " s o l e l y " i n para.  therefore  base  but also  STEs  be  standard.  and t h e  enterprises  render  a  provided  I t i s also submitted  3  special or exclusive p r i v i l e g e s . As  be  r a t h e r t h a n on t h e m o t i v a t i o n  the enterprise's  social,  gives  are  that  those  should  This  neutral  GATT d e f i n i t i o n  the  government  I t i s submitted  2  STEs.  determination  in  a  distinction  s u b s t a n t i a l l y government-owned o r c o n t r o l l e d .  category  NME  when  their  and q u a n t i f i c a t i o n o f t h e s u b s i d y  internally.  or  (state-controlled  practice,  completely  of  of the enterprise  t o a private firm, i t s actions are transparent of detection  the  that are assisted  I t i s important  1  problems  are  enterprises  a  Para.  a more r e a l i s t i c  to  the  original  c a n n o t be, mixture 1(b)  of  should  standard f o r  112 In  addition,  emphasis  on  i t i s important  regulating  STEs'  t o note  behavior  that  on  t h e GATT's  enterprises  is  m i s p l a c e d b e c a u s e i t i s g o v e r n m e n t n o t e n t e r p r i s e s who i s i n a .  .  .  position  t o grant  particularly true  . .  special or exclusive  economies,  controlled  privileges.  and d i r e c t i o n s . Secondly,  the distinction  enterprises  has  between  been  i n today's  private  blurred  and s t a t e -  simply  governments i n t h e developed w o r l d have a c q u i r e d • • discretion t o subject a l l enterprises t o s p e c i f i c Therefore,  t h e focus  should  on  be  legislations. Applying not  only  result, be  than  monopolies would  be  articulated  liberalization policies  and  but also subject  i n the  that  the operations  t o t h e same  GATT  rules  provisions.  enunciated  of  1 0  i n Art.  a  and  As  a  17 w o u l d  n o t j u s t t o t h e above n o t e d p r i v i l e g e d e n t e r p r i s e s  operative meaningful  "forms"  trade  commercial  a l s o t o government a g e n c i e s g r a n t i n g  giving more  on  tremendous ft measures.  such a concept o f s t a t e t r a d i n g would imply  t h e r e p o r t i n g requirement  applied  but  GATT  because  9  agency  requirements  of the  individual countries'  import  government  This i s  i n some NMEs w h e r e e n t e r p r i s e s a r e m e r e l y t o  accept governments' p l a n mixed  7  of  directions.  f o r t h e GATT  government  distinctions  intervention  1 1  In this t o make  intervention between  special privileges or respect,  i t would  be  d i s t i n c t i o n s between  (rules/measures)  "objects"  of  rather  governments  (private/ State-controlled enterprises).  113 4.2  A PRELIMINARY EVALUATION OF APPROACH  As  indicated earlier,  economies pricing  controlling  occasional in  trade  is  regard  by  GATT  r e c i p r o c i t y and The  could  i t s provisions  the  to  be  of  from  country  economies  by  are  Article in  import  usually  17  of  rather  expansion  employed than  the  more  1 3  time  of  Eastern  the a  of  to  varying  finding  be  either  standard  and  of  had  with  been the  used,  and  1 6  After  the  This  pragmatic.  in  GATT  t o GATT, import the  fair  countries  development i s because  One  a  commercial  "fair  geographical  Romanian i m p o r t s .  realistic  1 5  to  1 4  operated  non-discrimination  the  a  target-protected  commitment  STEs  access.  formula  problem  non-discrimination.  method  satisfaction  is  by  whose  and  with  directs  with  expected  when d e a l i n g w i t h NMEs' a c c e s s i o n  H u n g a r i a n , P o l i s h and approach  trade  an  non-discrimination  reciprocity  approached  GATT  on  with  at  the  of  especially  or to reduce l e v e l of p r o t e c t i o n .  countries  expressed  well  the problem of market  And  for  compliance  expansion"  of  finding  country.  c o n s i d e r a t i o n s . But GATT  of  formula  increase import  fashion  way  to  reciprocity  targets,  solved  b l o c ' s a c c e s s i o n t o t h e GATT was solved  means  state trading only t h e r e f o r e be  principles  to  market  s t a t e t r a d i n g economies  means  problem  for  by  t o t h e GATT r u l e s on i n t e g r a t i o n .  basic  T h i s was  essentially  resorting to  controlled  to  drafted mainly  trade  basis. Difficulty  applying  IMPORT COMMITMENT  GATT was  their  m e c h a n i s m s and  THE  would  what b e t t e r a p p r o a c h w o u l d have been u n d e r t a k e n i n t h e  of such  wonder absence  114 of  this  approach.  However,  namely t h e r e v i s i o n provisions of  NME  into  state  trading  systems  t o worth  o f NMEs  approaches  full  decentralization  a r e t o o u n r e a l i s t i c and  to utterly  accept  b e i n g . And t h e market  GATT members a r e n o t w i l l i n g  t o change t h e i r  market  i t i s not l i k e l y  rules  will  Furthermore,  be  because  even  change  their  fundamentally  systems  that  even  the  into  amount  decentralization o r even  changed.  t h e market  economies  of  well-established that  I t i s  t h e GATT  time-consuming  of  cannot  market time  type,  to  i t would  a  Their  full  be e x p e c t e d t o be a c c o m p l i s h e d  within  t e n y e a r s . Moreover,  i f some o f t h e b e t t e r  complete.  take  i t i s r e a s o n a b l e t o assume approaches  were b e i n g t a k e n ,  E a s t e r n b l o c w o u l d n o t h a v e a c q u i r e d GATT m e m b e r s h i p . This  i s certainly  not  p u r s u i t o f b e t t e r approaches. least of  because  i f NME n a t i o n s s u c h a s C h i n a a n d t h e USSR w e r e t o  considerable  five  o f new  pursuing. I t i s u n r e a l i s t i c  f o r t h e time  exist  s o a s t o be c o m p a t i b l e w i t h t h e  are not prepared  notion.  do  17, i n c o r p o r a t i o n  But these approaches  time-consuming  principles  o f GATT A r t i c l e  t h e GATT a n d r e q u i r i n g  GATT f r a m e w o r k .  some  some b e t t e r  intellectually,  t h e GATT e c o n o m i c  more  weaknesses  weaknesses  to  discourage  the  continuing  I t i s perhaps t h e r i g h t time, a t  t o reconsider t h e fundamental and l e g a l  o f GATT  originated  have  from  system been  especially  exposed.  i t s inception.  ideologies a s more a n d  Some  o f GATT's  Some  of i t s  a s s u m p t i o n s may b e o u t o f d a t e a s t i m e e l a p s e s . A s f a r a s t h e fair  import  questionable  expansion as t o whether  approach  i s  the accession  concerned, o f Hungary,  i t i s Poland  115 and  Romania  t o t h e GATT  has brought  •  a  more  multilateral  •  17  c h a r a c t e r t o t h e s e c o u n t r i e s ' t r a d e w i t h GATT members. As  to  mentioned  reciprocity  between  arrangements  have  East  proved  and West,  t h e above-  disadvantageous  t o the  t h r e e E a s t European c o u n t r i e s a t l e a s t from t h e p e r s p e c t i v e o f b a l a n c e - o f - t r a d e between E a s t and W e s t .  1 8  T a k i n g t h e P o l i s h a c c e s s i o n t o GATT f o r a n e x a m p l e , from  little  concern  reciprocity, accession target and  the  with  import  discourages  amount.  the  Such  interests  apart  the balance-of-trade  criterion  commitment  to  approach  Poland's  Poland  t o increase  formula  i s c o n t r a r y t o GATT p h i l o s o p h y  of  most  CPs  import  of  because  beyond t h e  i t supports  the  a d m i n i s t r a t i v e measures and s t a t e c o n t r o l t h a t a r e p o s s i b l e t o guarantee  fixed  import  levels  while  decentralization  and o t h e r economic r e f o r m s  role  forces.  of  formula  market  2 0  c a n be d i s c h a r g e d  government.  The  obligations  b y v a r i o u s means  Px I .  ,  S i n c e t h e volume o f i m p o r t s  discouraging  that increase the imposed available  into  can  deflation.  2 2  be More  eroded  by  than  that,  such  t o NME  NMEs i s t o be  e v a l u a t e d on t h e b a s i s o f c u r r e n t d o l l a r p r i c e s , burden  on  i t s v a l u e and  inflation  and  increased  by  because  the  commitment  i s  d e n o m i n a t e d i n a p a r t i c u l a r c u r r e n c y i t s v a l u e c a n be a f f e c t e d by  manipulation  Furthermore,  of  the  t h e import  exchange  commitment  rate formula  by  seems  t o s p e c i a l a r r a n g e m e n t s b e t w e e n CMEA c o u n t r i e s , the  door  of discrimination  between  and  t h o s e f r o m CMEA c o u n t r i e s .  imports  Finally,  the  from  state.  2 3  indifferent  i t l e a v e s open t h e West CPs  i t d o e s n o t seem t o be  116 an  appropriate  framework  openings f o r P o l i s h The later  Romanian  exports. import  stated a  diversify  i t s "firm whole  Romanian might  at  commitment  have  i t s trade  a  rate  not  negotiated  for  interpreted  imports  from  CPs  from the Eastern  intend." rather  The  2 8  than  certain  2 9  level  governmental  of  "develop  that  acceptable  and  import  commitment  makes  as  of  total Some  2 5  I t i s possible that  over  time  at  the  cps  non-discriminatory.  a  faster rate  than  i s hardly enforceable  levels.  diversify" on  and  provisions  those  and  "ambiguity"  abuse.  3 0  i t i s perhaps  the  import  GATT this  expansion  GATT.  plan  subject not  less  to be has  available for  is  notorious  flexibility formula  in and  easily  o b l i g a t i o n imposed  3 1  demonstrated and  to  "firmly  " u n e n f o r c e a b i l i t y " should  and  due  i n the  I t i s therefore  more w o r k a b l e t h a n t h e r i g i d  approach  growth  the  It  not  and  "flexibility"  the  from  i n t e r n a t i o n a l a g r e e m e n t more o r  on P o l a n d ' s a c c e s s i o n t o Stressing  a whole.  does  i s based  Ironically,  vagueness  as  to  commitment  formula  manipulation  regard.  of  2 6  However, t h i s  s i n c e any  i t undertook  CPs  the  years  2 7  commitment  actual  manipulation. overstated  of  several  imports  than  formula  increase  Worse t h a n t h a t , t h e ambiguity  the  increase  fulfillment  bloc.  market  in i t s five-year plans.  this  would  with  smaller  provided  the  to  guarantee n o n - d i s c r i m i n a t i o n .  this  Western  2 4  intention"  imports  Unfortunately  the  determining  o v e r c a m e some o f P o l a n d ' s w e a k n e s s e s a s  d e v e l o p and  as  in  shortcomings  increasing role  of  market  of  import  forces  in  117 its  economy,  tariff  Hungary  concessions  without  during t h e working undertake firmly  as Poland  The  are s t i l l  entities  foreign  volumes  import  sense  specific  economic  access  are  incompatibility  3 5  a c c e s s i o n . Here t h e  revealing be t i r e d  a specific  and  than  ever.  o f any  Not  Chinese trade  i f t h a t i s not t h e case,  foreign  import trade  This i s particularly determined  or  trade policies  commitment  reforms  are  commitment provisions  might  3 8  be  t h e fundamental  "the  weak  unsolved.  they  flexible, limit  Although  3 7  containing able  by t h e  obviously  trade.  a  with  for  use,  a  s e t of  t o introduce  problems  precedent  w i t h t h e reforms  controlled  nature w i l l  scheme"  t r u e when t r a d e  become more  i n dealing with world  foreclosure  probably remain  c o m m i t m e n t w o u l d be  a n d e n t e r p r i s e s much more p o w e r i n t r a d i n g  of f l e x i b i l i t y ,  market  n o t as  and n o n - t r a n s p a r e n t  Even  3 4  t o expect  As China's  3 6  import  commitments  and  i s more  i n sight.  partners.  discretion  detailed  Hungary d i d  t h e cps-though  o f China's  commitment w i t h a r i g i d  "modified  However,  3 2  Here a g a i n , market  3 3  unstable  are not entirely  government.  China's  when  unrealistic  t h e on-going  according  an  from  t h e GATT members w i l l  commitments  remains  with  and Romania d i d .  i n the context  surprisingly,  when  p a r t y s e s s i o n on i t s p r o t o c o l ,  of t h e precedent  policies  the basis of  commitment.  problems w i t h use o f t h e import  weakness  it  any import  on  unsolved.  evident  import  t o t h e GATT  t o increase i t s imports  i s s u e remained  more  acceded  a  import their  now u n d e r way, t h e r i g i d i t i e s  leave  i n place".  3 9  This  would  118 Admittedly, approach  t h e GATT  failed  t o provide  discrimination  Eastern  problem targets on  the basis  x  fair'  import  according during the  nondiscrimination, implicit  expansion.  and  Czech use  This  being  the  t h e GATT  fair  increases  attain  r e c i p r o c a l market  (market openings) openings  minded t o have necessary  protection  The force  approach  with  alternatives reforming  that  were  i n t h e West.  a  view  t o replace  t h e GATT  element t o  politically-  almost  both  nothing  of which are  4 2  the validity  t o improving the existing  system  and  4 0  spells 4 1  to  Secondly, the  i s too  and n o n - d i s c r i m i n a t i o n  t o rethink  Poland,  unable  above weaknesses o f t h e a p p r o a c h w o u l d be one  imports  i t d i d not touch  as a b a r g a i n i n g  approach"  a  i s scrutinized  f o r concession-making  t h e approach  t h e t w i n themes o f t h e G A T T .  t h e matter  of their  members  economic m e a n i n g .  unfortunate,  plan  preferred  f o r t h e reasons  GATT  "import-commitment  Equally  the  on a r e q u i r e m e n t  share  development  instrument  import  so-called  f o r non-  foreign  of settling  s o l u t i o n based  of non-discrimination  effectively  to  of  periodic consultations. Unfortunately  Romania  about  framework  operations  t o the geographical  basis  expansion  I t d i d n o t reduce  and Romania. I n s t e a d  of  import  I t d i d not successfully solve the  non-discriminatory  i n Poland  of  discriminatory quantitative restrictions  pragmatic and r a t h e r of  trade.  European e x p o r t s .  of  share  an e f f e c t i v e  i n East-West  Western counterpart's on  fair  towards  and  i t by  sufficient  effects  of the  exploring  better  a r r a n g e m e n t . The t a s k o f i n t e g r a t i n g NME  countries  119 would  be  attainable  i n the context  of  the following  two  options: (1)  Improving  maintaining approach;  the existing  i t s present  economic  cooperation.  4.3  stand  on  arrangements  while  the country-by-country  or  4 3  (2) D i s c o v e r i n g changed  technical  new a p p r o a c h e s and  t o adapt  political  t h e GATT t o t h e  realities  of  East-West  t h e terms  o f NMEs'  4 4  IMPROVING THE E X I S T I N G ARRANGEMENTS  As  t h e theme  of  negotiations  accession  c e n t e r s around  "entrance  fees",  assumption  on  "reciprocity"  improvements  could  (market  be  openings)  guided  by  and  such t h e  that:  " I f NMEs a r e t o be i n t e g r a t e d i n t o t h e m a i n s t r e a m o f t h e GATT a n e n t r a n c e f e e must be d e v i s e d w h i c h i s both workable and c o n s i d e r e d by b o t h sides t o r e p r e s e n t e q u i t a b l e compensation f o r the benefits r e c e i v e d b y t h e a c c e d i n g NME." 5  Based  on t h i s  assumption  the entrance  f e e o r terms  of  a c c e s s i o n s h o u l d b e t h e o n e w i t h w h i c h NME's c o m p l i a n c e c a n be easily monitored. in  respect  systems GATT  link  T h i s would  could  commitment  a mere p r o m i s e between  require s u f f i c i e n t transparency  the functioning  f o r t h e purpose  cps. This  import not  of  4 6  of  political-economic  o f d e t e r m i n i n g market  openings f o r  be a c h i e v e d b y a m o d i f i e d a n d  which  requires  be u n d e r t a k e n .  import  NME's  and  export  that  a  firm  refined  o b l i g a t i o n and  I t also  requires  a  direct  levels,  t h e assurance  of  120 national  treatment  (non-discrimination  between  imports  domestic p r o d u c t i o n ) , and t h e e v a l u a t i o n o f r e c i p r o c i t y basis  of balance-of-trade c r i t e r i a .  readjustment levels.  of  import  target  Finally,  to reflect  i s note worthy  a b l e t o improve Romania,  i t requires the changes  they  that  even  the existing would  be  though  Any  arrangements  unable  made f o r P o l a n d a n d  t o function  i n t h e case  accession  a s p e c t s . Weight  should  be  aimed  provided f o r  a t two  should  participation  consider  the  likelihood  The new  4 8  of  wider  o f o t h e r NMEs s u c h a s C h i n a a n d S o v i e t U n i o n i n  GATT f o r u m o n t h e b a s i s o f t a r i f f All  different  and a t t e n t i o n s h o u l d be g i v e n t o i m p r o v i n g t h e  n e g o t i a t i o n s o f c o n c e s s i o n s on t h e b a s i s o f t a r g e t s . approach  approaches  two broad  toward  state  categories:  those  protection.  trading which  may  deal  4 9  be  classified  with  commercial  p o l i c y measures and t h o s e which d e a l w i t h t r a d e e f f e c t s . acceptability that  state  o f t h e former  trading  category rests  i m p l i e s no f u r t h e r  restraint  n o m i n a l commercial p o l i c y measures imposed  it  covers.  Verification  of this  product-by-product investigations. state  trading  approach, concessions  on  has the  wide other  may b e d e f i n e d  hand,  on t r a d e t h a n  would  require  This i s impracticable 5 2  offers  The a  The  on t h e p r o d u c t s  assumption  coverage.  5 0  on t h e a s s u m p t i o n  the  5 1  of  earlier.  improvement o f t h e e x i s t i n g arrangements  European  into  i n price  t h e s e p r o p o s a l s were  n e g o t i a t i o n s w i t h China's a c c e s s i o n as mentioned  the  on t h e  4 7  It  East  and  "trade means  s i m p l y and s u r v e i l l a n c e  since  effects" by  which  conducted  121 easily. trade  H o w e v e r , one w o u l d h a v e t o n o t e t h a t n e g o t i a t i o n s on  J  targets  commercial ensuring nor  are  policy  that  necessarily  measures.  state  discriminatory.  4.4  not  trading  Focus  5 4  practices  easier  than  those  on  be  placed  on  should  are neither  restrictive  5 5  DISCOVERING NEW APPROACHES TO RECONCILIATION  It the  s h o u l d be b o r n e  new  approaches  i n mind  that  i s t o widen  the basic  the possibility  more e x t e n s i v e p a r t i c i p a t i o n o f t h e s o c i a l i s t GATT. S u c h the  new a p p r o a c h e s  should not l i m i t  e v e r more i m p o r t a n t s p h e r e  aim  in  mind,  the  objective of  countries  of  i n the  t h e GATT's r o l e i n  o f East-West  possibility  of eventual  trade.  With  reconciliation  this  can  be  considered. O b v i o u s l y t o make a r e c o n c i l i a t i o n o f NME a n d t h e GATT i s to  make a r e c o n c i l i a t i o n  end,  market  practical  economies,  o f NME a n d m a r k e t  economies.  To  o n t h e one h a n d , s h o u l d c o n s i d e r  difficulties  i n completing t h e i r  readjustments  to join  t h e GATT a n d t h e i r  participating  i n today's  world  reforms or  positive  efforts i n  t r a d e system.  GATT  s h o u l d be  w e l l p r o v e d t h a t t h e s u c c e s s o f GATT m u l t i l a t e r a l i s m flexibility  and  different  some  consensus  to tolerate national could  and compromise  interests.  have  never  Without been  NMEs'  economic  more t o l e r a n t a n d c o o p e r a t i v e t o w a r d s NME p a r t i c i p a t i o n .  its  this  i s due t o  conflicting such  reached.  It is  ideas  compromise, Without  such  122 flexibility,  GATT  cannot  play  any d e c i s i v e  role  i n world  trade. Certainly, in  GATT r u l e s  reform  their  non-market economies s h o u l d  to  economic systems s o a s t o be c o m p a t i b l e  power w i l l  system. probably  With  change  t h e U.S.  t a k e a d v a n t a g e o f NME  accession  framework  as a  decentralization.  However,  U.S.  o f EC  and o t h e r  with the  regard t o t h i s ,  u s e t h e GATT  interests  less  o r market economies' s t r u c t u r e and r e a d j u s t and  e s t a b l i s h e d GATT l e g a l as a super  expect  ball will  t o require have  middle-sized  NME's  to yield  full  t o the  t r a d i n g powers.  c o u n t r i e s and most m i d d l e - s i z e d t r a d e r s have p o s i t i v e  EEC  attitude  t o w a r d s NMEs' p a r t i c i p a t i o n i n GATT. What  has  been  reconciling  NMEs  directions  as  neither two  with  who  i s to  GATT  earlier  realistic  sides  said  i s only  insisting  makes  a n d who  spoil  the possible reconciliation. both  side  are conditioned  because  a r e demanding  i n today's  by  world  that  becomes  countries.  epidemic  What makes  degree o f c o n t r o l .  5 6  occur  One-sided  because  h i s own c o n c e s s i o n s This  concessions that  of  o f mixed  i n both  of  another  would  and c o n c e s s i o n s  economy,  is  any o f  simply  i s particularly  the other.  of  i n both  concession  i n concessions  country has a c e r t a i n degree o f monopolies. trade  the task  would  I t i s unrealistic  party  when  rules  discussed.  nor f a i r .  never  trade  stress  true  o f one  I t i s unfair virtually  every  State control  capitalist  t h e d i f f e r e n c e i s merely  and  over  socialist  a matter  of  123 With  a  view  reconciliation, major  market  to  GATT  contracting  economies  ideological  difficulty  possibility  of p o l i t i c a l  between  East  solutions  and  widening  should in  the parties  first  s o l u t i o n s can then  this be  those  a l l overcome  understanding  Once  of  especially  of  and economic  West.  possibility  the  peaceful i s done  considered  the  realistic  co-existence comprehensive  a n d f u r t h e r be  worked o u t t o r e s o l v e t h e t a s k o f i n t e g r a t i o n . The and  GATT  pragmatic"  membership finished period the  t h e p r e v i o u s l y adopted  approach t o accept  despite  the fact  and t h e i r  that  economies  countries like their  Contracting Parties  members  conformity reforms.  who,  with  This  GATT  original undertook European  the  world  t o make  are s t i l l  solve  And  this  approach t h e subject matter  to  request full  f u r t h e r adjustments  and  the influence of the  o r g a n i z a t i o n . I n t h e case  was  t h e problem  countries. In addition,  transitional  not i n  i n expanding trade  in a  measures  GATT o u g h t t o s e e k o t h e r  framework. to  rules  are not yet  a c c e s s i o n t o t h e GATT,  take  accession,  i s crucial  as a broader  necessity,  after  might  "gradual  PRC i n t o i t s  reforms  are s t i l l  o f p l a n a n d m a r k e t . Upon t h e i r  GATT  those  GATT  can maintain  of  what  of  remedies o u t s i d e i t s t h e GATT  market  access  t h e GATT s h o u l d  actually to  East  continue t o  g r a d u a l l y and r e a l i s t i c a l l y .  5 7  124 4.4(1)  GRADUAL AND R E A L I S T I C APPROACH  This East  approach  European  justified their by  the fact  that  within  a  interest  option refuse  short  period  towards valid to  Realizing  Eastern  I t was  regardless  of time.  When  i n t h e GATT  illustrated  NMEs  revealed  trading  them  rejection  system,  first  either  and  i s meaningless and r e a l i s t i c  integration. China  of  then  a r e a b l e t o c a r r y o u t t h e GATT  that  bloc's  f o r dealing with  This  or the Soviet  attitude  approach Union's  and  remains accession  t h e GATT.  accept For  and r e a l i s t i c "  t h e NME  instance,  GATT w o r k i n g  into  accede f u l l y  there  i s no a b s o l u t e distinction  relatively  determined.  and  member  method  t o t h e GATT.  definition  between  5 8  and  t h e stage  should  focus  basis.  t o GATT, t h e  i n determining  t o serve whether  As i n d i c a t e d e a r l i e r ,  o f "market  market  During  nations  accession  could establish c r i t e r i a  or "graduation"  could  on a s t e p - b y - s t e p  o f China's  p a r t y and China  "milestones"  GATT  p r i m a r i l y means t h a t t h e GATT c a n  i t s membership  i n t h e case  China  The  they  with  economic and f o r e i g n t r a d e  t h e GATT a d o p t e d t h e g r a d u a l  "Gradual  as  a l l NMEs,  a p p l i c a t i o n s o r accept  n e g o t i a t e w i t h them u n t i l  fruitless,  t o t h e GATT.  f o r t h e GATT c o n t r a c t i n g p a r t i e s w e r e  their  requirements.  t o deal  t h e market p r i n c i p l e s  i n participating  left  b y t h e GATT  almost  t h e GATT, c a n n o t c o m p l e t e t h e i r  their  to  by  used  countries' accession  w i l l i n g n e s s t o accept  regimes  the  NME  was f i r s t  and "non-market".  non-market  i s  of "milestone", on  the  only China  essentially  125 practical the  goals  that  opportunity  want  that there GATT  with  so that  each c o u n t r y .  t h e GATT. T h e s e a r e m a x i m i z i n g  f o r e c o n o m i c e x c h a n g e among t h e c o u n t r i e s  t o trade  fairness  underlie  each  other  t h e system w i l l  The m i l e s t o n e s  5 9  and m a i n t a i n i n g enjoy  should  a  continuing  sense  that of  support i n  be s u f f i c i e n t t o j u s t i f y  i s a l a r g e and f r e e market i n C h i n a opening t o t h e  countries.  The f r e e  market  pricing  and  transactions.  China's  trade  and t a r i f f  whether  or  not  China  6 0  i s achieved  The  ultimate  system  with  i s able  to  by  freedom o f  compatibility of  t h e GATT achieve  depends  the  on  following  milestones: (1)  relaxation of price  products,  reduction  making such  that  of price  controls  categories of  a n d demand,  on t h e i n p u t s  used i n  products,  gradual  purchasing  quality  on major  with p r i c e s responding t o supply  (2)  (3)  controls  and  elimination of central planning decisions  other  a r e made  commercial  on  the basis  factors,  rather  measures so of price, than  upon  a d m i n i s t r a t i v e quotas o r goals, (4) d e c e n t r a l i z a t i o n o f e c o n o m i c d e c i s i o n m a k i n g s o t h e r e would  be  a  each other (5)  plurality  o f Chinese  t o purchase f o r e i g n substantial  availability  Chinese  purchasers,  business  with  them,  with  of  export  subsidies  and  subsidies,  of  their  competing  products,  elimination  trade-distorting internal (6)  enterprises  information needs,  concerning  potential  and procedures  f o r doing  126 (7)  an adequate  suppliers full  legal  and purchasers  protections  framework  can enter  for  t o ensure  into  proprietary  valid  that  foreign  contracts  information,  with  patents,  t e c h n o l o g y t r a n s f e r and t h e l i k e , and (8) system.  the  presence  of  a  codified  and  uniform  tariff  6 1  Among t h e s e m i l e s t o n e s ,  C h i n a h a s met i n p a r t ,  (1) ,  (2) ,  (3) ,  (4) a n d (6) . A s f o r t h e f i f t h r e q u i r e m e n t s C h i n a c a n u s e  some  o f t h e exemptions  countries.  China  be g r a d u a l l y  fulfilled.  i t i s already  employs  Economic  different tariffs  Zones  (SEZs).  trading  GATT,  area  in  treatment.  system could  and  Special  applicable  t o the  be implemented i n t h e  reduction  basis.  f o r China  6 4  provisions  f o r "graduation"  membership s h o u l d be i n c l u d e d  NMEs  as  they  instrument  discriminatory  are  initially  subject  from  i n every  to  now  adopt  of trade  a  custom  regulation.  6 6  tariff  special  t o be  a transparent  GATT p r o v i s i o n s  economic  on m a r k e t  an  In addition, the  QRs o n NME p r o d u c t s s h o u l d be e l i m i n a t e d  NMEs h a d a d o p t e d regular  cities  However,  6 3  P o l i s h a n d R o m a n i a n i m p o r t c o m m i t m e n t s s h o u l d be  renegotiated effective  specific  to full  which 6 5  accessible.  m i l e s t o n e m e t h o d t o t e s t NMEs' c o m p a t i b i l i t y  some  observer status  to the tariff  i t w o u l d c e r t a i n l y be e a s i e r  t o a c c e d e t o GATT o n a t a r i f f  with  i s concerned,  respect  f o r open  If tariffs  system,  While using  and  listed  f o r developing  requirement With  codified  SEZs a n d t h o s e open c i t i e s entire  b y t h e GATT  ^ As f a r as t h e seventh  they w i l l system,  provided  system  disruption  i f the  t o which t h e  c a n be  applied  127 effectively. priced rely  As  6 7  imports  t o whether  special  rules  f r o m NME s h o u l d b e m a i n t a i n e d  on whether  market  applied o r not,  forces are operative  t o lowi t should  i n the  domestic  m a r k e t o f t h e NME c o u n t r i e s . To  avoid  determining working  unnecessary  the status  party  accepted review.  should  criteria  NME's  economy,  disputes i n a  panel  and  b e e s t a b l i s h e d t o u s e a s e t o f commonly  6 8  the marginal special  and m i l e s t o n e s  status of observer  interest  particular  MTN  observership  such  codes.  as  agriculture,  i n t h e GATT,  can begin  with  i n v a r i o u s GATT c o m m i t t e e s o f  And t h i s  6 9  examination  textiles  could  be  provisional  and/or  followed  accession  in  by t h e  based  on  n e g o t i a t i o n s (type o f quasi-membership o r "experimental  association"  and  7 0  experimental their  of the  and minimize  and g u i d e l i n e s f o r i n v e s t i g a t i o n s and annual  A step-by-step  tariff  arguments  finally  association with  commercial  relations  full  membership.  t h e GATT, NMEs  with  other  During  should  conduct  cps i n accordance  with 71  t h e GATT " t o t h e e x t e n t p o s s i b l e " u n d e r i t s e c o n o m i c This  i s the so-called  NMEs s u c h  as China  "second  periodic  with  as a t r a n s i t i o n a l  stage,  consultations  examinations evaluate  this  would  membership"  which  some  a n d t h e S o v i e t U n i o n w o u l d be u n h a p p y w i t h .  However, i t c a n be u s e d NME h a s p a s s e d  class  system.  phase and once t h e  i t can acquire f u l l coupled  certainly  with  help  the  m e m b e r s h i p . The  the working  "milestones" party  to  t h e NME's e c o n o m i c d e v e l o p m e n t a n d i t s c o m p a t i b i l i t y  t h e GATT m u l t i l a t e r a l  framework.  I f compatible  enough,  128 the  special  could  be  removed  available and  safeguard and  i n Article  associate  clauses  imposed  replaced  19.  7 2  membership  with  provisionally t h e normal  safeguards  The l e n g t h o f t i m e o f  o f NMEs  needed  observership  f o r acquiring  m e m b e r s h i p w o u l d d e p e n d o n t h e economy o f i n d i v i d u a l their  w i l l i n g n e s s t o accept  Normally,  as soon  reciprocity  formula  upon,  GATT  full  complications. The cps  each  would  be  a  of using  this  accession.  been  access  NMEs a n d  achieved  problem  granted  with  7 3  and  agreed  no  more  approach  i s that  both  GATT  the transitional  as w e l l  as  t o be  periods.  t o be f a m i l i a r  an  institution  conversant T h e NMEs  7 5  with  which  t h e GATT  has  proved  i n n e g o t i a t i n g t h e i r terms o f membership as w e l l as  under t h e m .  informed  NMEs.  during  advantage o f t h e steps  contract  living  of  full  7 4  other  beneficial  On t h e o t h e r  7 6  o f every  h a n d , GATT c o u n t r i e s c a n be  development  and p r o g r e s s  made  i nthe  7 7  In the  f o r s o l v i n g market  membership  advantage  may t a k e  well  have  a n d NMEs a p p l i c a n t s h a v e t h e o p p o r t u n i t y  with  as  " s p e c i a l terms"  as t h e milestones  by c p s  any event,  traditional  individual  basis  preferable,  now  what  remains  practice should that  a  t o be d e t e r m i n e d  of  dealing  be  continued  significant  with or  amount  i s whether  each  NME  whether of  to  participation. provisions  7 8  should  the  common  Some  of t h e advocates  be added  problems  t o t h e GATT a s " P a r t  trade  provisions  involved suggest  an  i t is  world  i n v o l v e s NMEs, t o amend t h e GATT b y a d d i n g g e n e r a l addressed  on  that  in  NME  further  V", t h e s o -  129 called of  "Part  this  V approach".  approach,  characteristics. Others  follow  Regardless of t h e possible  7 9  Each  Some  loose  NME  are  has  command  state  trading  i t s own  state  r e l a t i v e l y developed such as Yugoslavia also  those that  simple of The with  sunt  l a b e l o f NME  merit  attached  o f adopting  the  servenda)  following  d i f f e r e n t NME  hand,  others  are  and Hungary. There a r e  a s t o w h e t h e r a NME i s a b l e  (pacta  development  Still  systems.  a r e low-income economies s u c h a s Romania and  C h i n a . The q u e s t i o n obligations  non-common  trading  system.  merits  a  i s not determined  b i tdifferent trading  individual protocols  of  its  by  a  t o a l l NMEs i n d i f f e r e n t s t a g e s  on c o u n t r y - b y - c o u n t r y  merit  to fulfill  protocols  i s that  basis.  i s  systems.  8 0  i t deals  On t h e o t h e r  undermined  by i t s  d i s a d v a n t a g e s w h i c h c a n be overcome by an o v e r a l l a p p r o a c h . Thus approach one  a  would  hand,  along  combination  incorporate  the  Charter".  be m o s t  lines This  applicable  as can  of  preferable. new  be  with  whether  they  Article  17 o r c a n b e c o m b i n e d  should due  depends  to the fact  situation. party  would  be  done  each  For instance, prefer  acceding t o t h e GATT.  to 8 1  t h e NME  i n the unfulfilled  "Havana  providing  common  with  as  resume  Part  a revised  rules  V  deleting  Article  17,  i t  The GATT c a n h a v e v a r i a t i o n  i n d i v i d u a l NME China  general  c h a r a c t e r i s t i c s . As t o  t o GATT  on c o n v e n i e n c e . that  accommodating  by  added  and o v e r a l l  T h e GATT C P s c a n , o n t h e  provisions  suggested  t o a l l NMEs should  i n d i v i d u a l approach  as her  an  h a s i t s own  original  membership  unique  contracting instead  of  130 Obviously general  rules  protocols, cps  this and  with  of  status"  inserting  w o u l d be r e c t i f i e d .  cannot  to  be  NME  GATT  system.  freezing  by  each  with  i t s economic  effects  i t has  which  i n accordance  under  variation  NMEs  can conduct  rules  into  "fixed  addressed  set forth  a  rules  with  possible"  the possible  special,  "negative  less  of general  other  favorable  applicability"  Thus g r e a t e r d e c e n t r a l i z a t i o n and r e l i a n c e individually.  8 3  MODIFICATION OF GATT RULES  Any not  by t h e  individual  trade  on t h e m a r k e t w o u l d b e e n c o u r a g e d a n d r e w a r d e d  4.4(2)  in  " t o t h e extent  With t h i s  8 2  be  approach outside  heal  the inherent  ultimately better  solve  approach  t h e a m b i t o f t h e GATT f r a m e w o r k c a n  or internal diseases  t h e problem would  be  of world  to  find  o f GATT a n d c a n n o t  trade  causes  integration. A  and  location of  weaknesses.  One f a t a l  s h o r t c o m i n g o f GATT a c c o m m o d a t i o n s f o r  integrating  East-West  trading  refer  explicitly  Europe.  a remedying  made  referring and  enough t o t h e p l a n n i n g  i s that  they  techniques  do n o t  i n Eastern  8 4  As be  systems  to  approach, t h e f i r s t  introduce  into  t h e GATT  effort  should  provisions  explicitly  t o t h e t a r g e t - p r o t e c t e d and s t a t e t r a d i n g  recognizing  those  organizing a country's Indeed,  systems  as  foreign trade.  i t i s both  possible  d e v e l o p A r t . 17 o n t h e b a s i s  alternative  perhaps  economies  methods^ o f  8 5  and d e s i r a b l e  of u n f u l f i l l e d  f o r GATT t o  provisions  along  131 the of  l i n e s a s s u g g e s t e d i n t h e "Havana C h a r t e r " i t s requirements with  Indeed, are  w h i c h NME o b v i o u s l y  t h e arrangements  f o r East-West  even l e s s s a t i s f a c t o r y  "Suggested  Charter"  than those  and  r e l a x some  cannot  comply.  trade  i n this  8 6  respect  o f f e r e d by t h e American  a n d t o some e x t e n t  t h e Havana C h a r t e r o f  f o r t y y e a r s ago. To  be  provisions  specific,  U.S.  code  GATT  should  on n o n - d i s c r i m i n a t i o n on p l a n  also provide the  the  f o ra reciprocity  "Suggested  o f conduct  Charter"  targets.  arrangement along and should  on dumping,  incorporate  market  new  I t should the lines of  contain  a clear set  d i s r u p t i o n and  safeguard  c l a u s e s adapted t o t h e s t a t e t r a d i n g systems o f t h e c e n t r a l l y planned  economies.  planning  techniques  assurances. and  Respective  could  revising Article  part  be a c c o m p l i s h e d  Part  V)  membership a t b o t h p r o c e d u r a l  dealing  a l t e r n a t i v e approach  two  or  progressively  more  be  reduced  introduced  provisions reduced  through  alternative  approach  commitment  systems  target  by  itself  rate  clause.  h a s some  could  should  liberalization these  incorporating  24 o r b y i n s e r t i n g  mark-up  levels.  Modifications along  9 0  NME  be  mark-up r a t e s on t r a d e  trading  either  into Article import  expanding  exclusively with  t o import  state  domestic p r i c e adjustments. could  to  s t a t e m e n t s and  e i t h e r by  and s u b s t a n t i v e  based on t h e a s s e r t i o n t h a t t h e import between  refer  17 o f t h e GATT o r b y i n s e r t i n g a d d i t i o n a l  ( f o r instance,  One  should  r a t h e r t h a n r e l y on g e n e r a l  This  8 9  provisions  a waiver 9 1  some  be and lines new  under t h e  However,  this  c o n s t r a i n t s . I t c a n be  132 weakened  by  variety  of  central  example, s a l e s o f imports  planning  c a n be l i m i t e d  measures.  by i s s u i n g  t i c k e t and e r e c t i n g r e s t r i c t i o n s on e n t r a n c e . China,  this  Chinese  would  reforms  government  r u n counter  fixed  targets  G o v e r n m e n t h a s no r e a s o n  volume o f i m p o r t s a t a p a r t i c u l a r A  further  applicants criteria  approach  to  increase  the  functioning  of  a  GATT  should  provisions  NME's  transparency have  party  of  adequate  acceptance  at  and  their  of  systems.  information  system  the  has  been  9 5  Under  those  specific  submit  to a  areas  f o r t h e purpose  The i n f o r m a t i o n s u b m i t t e d  bidding  transparency can  be  of purchasing  specified  a  the major  either  of the improved  NMEs a n d p r e s e n t  NME C P s working  particularly of  influencing  i s s u b j e c t t o supplement  u p o n f u r t h e r r e q u e s t b y GATT c p s a n d S e c r e t a r i a t . regarding  on  and d e t a i l e d  transparency  on, and/or  those  t o manipulation  purchasing  markets.  t o include specific  data  members o r  i n t o t h e GATT, t h e a t t e n t i o n o f  increasing  trade  t o provide  examination  9 6  be t o r e q u i r e NME  p r o v i s i o n s a l l acceding  susceptible trade.  level.  economic  be s h i f t e d  aimed  NMEs'economic  of  The  commitments t o a c h i e v e  transparency  absence  barrier to i t s full  would  corporations.  and c o m p e t i t i v e b i d d i n g i n domestic  Since  the  would  of the current  lead t o elimination of  f o r individual t o make s u c h  admission  I n t h e case o f  9 3  to the s p i r i t  because t h e reform w i l l  For  criteria i n the  P r o c u r e m e n t Code o r i n a n a n n e x t o t h e C o d e .  and c o m p e t i t i v e GATT  9 7  Requirements  Government  133 In addition trading  t o t h i s approach, i n d e a l i n g  problems  with  t h e dilemma  with  state-trading  subsidy  problems.  acknowledge  a necessary instrument  renegotiate use  more  detailed  and m i n i m i z i n g  operations  state  approach  i n dealing  as  NME's  GATT may u s e t h e same " i n j u r y "  used  GATT may f i r s t  with  9 8  t o overcome  In i t s refined  state-trading of trade  trading  obstacles"  provisions, the  system  control.  mechanisms  "serious  of state  issue  as  9 9  and r e g a r d i t I t would  then  f o r discouraging t o trade  and p r o v i d e p o s s i b l e  their  due t o t h e remedies f o r  c o m p e n s a t i n g " i n j u r i o u s e f f e c t s " r e s u l t i n g from STEs. In  conclusion,  a l l approaches  are  vulnerable.  As  c i r c u m s t a n c e s c h a n g e , t h e a p p r o a c h s h o u l d a l s o b e c h a n g e d . Any a p p r o a c h t o NMEs' i n t e g r a t i o n s h o u l d be b a s e d o n c e r t a i n The  realization  viability that  of the approach.  t h e proposed  periodic long  new a p p r o a c h e s m i g h t b e u s e d t o g e t h e r  with  and a r e a b l e  solution with state  resolving  I n any event,  special  the opportunity  integration. problem.  There  t h e problem  might of  be  will  of  the f i r s t  incompatibility  solving  be no  But d e c e n t r a l i z a t i o n  o f command s t a t e t r a d i n g  system  safeguards as  t o reconciling d i v e r s i f y i n g trade  t o increase  to the thesis  trading  1 0 0  and p r o v i s i o n a l  of global  transformation  be t h e t o u c h s t o n e o f t h e note  consultations  problem  should  one s h o u l d  as they a r e appropriate  systems the  of the goal  goal.  single coupled  system i n t o best  solution  between  r e q u i r e m e n t s o n w o r l d t r a d e a n d NME s t a t e t r a d i n g  loose to  t h e GATT  systems.  134 4.4(3)  "DECENTRALIZATION"-THE INCOMPATIBILITY?  Economic and t r a d e forces  into  their  solution  reforms aim both a t introducing  t h e NMEs'  foreign  trade  to  domestic  economy  activities.  This  solving  incompatibility  FIRST-BEST SOLUTION TO THE  the  problem  and i s  of  market  decentralizing the  market  first-best access  b e t w e e n NME a n d t h e GATT l e g a l s y s t e m .  and I t i s  s u b m i t t e d t h a t GATT r u l e s a r e f o r m u l a t e d e x c l u s i v e l y a l o n g t h e line  o f t h e m a r k e t economy  are  founded  on  sound  ideology.  The r u l e s  assumptions.  To  and p r i n c i p l e s  change  the  original  a s s u m p t i o n s w o u l d d i s m a n t l e t h e GATT r u l e s . I f NMEs c a n r e f o r m t h e i r economic s y s t e m t o be c o m p a t i b l e w i t h l o o s e n command s t a t e t r a d i n g in  purchases  or sales  sure  that  the task  well  completed. The f o c u s  tariff  with  with  guideline to  those  i t i s  of the  trading  system  (licensing)  system  state  of t h e planned  t a r i f f - p r o t e c t e d economy  should  In dealing with  what market  there  conditions  to  economy  be  market  be t h e  general  t h i s the key issue i s  a r e needed  t h e GATT r e q u i r e m e n t s , e x i s t s a market  be  areas  system  that  system,  be on s u c h  trading  h a v e NMEs c o n f o r m w i t h considered  state  and o b j e c t i v e .  determine  should  Decentralization  target-protected  economy  competition  o f r e c o n c i l i a t i o n and i n t e g r a t i o n w i l l  i m p o r t and e x p o r t c o n t r o l  system.  free  trading  as t h e i r p r i c i n g system,  in foreign trade, and  and a l l o w  and d e c e n t r a l i z e  of t h e reforms  incompatibility  links  market p r i n c i p l e s ,  that  i n order t o  when  i t c a n be  can i n t e r a c t  o f FMEs' GATT C P s a n d f u r t h e r m o r e w h a t c r i t e r i a  with  should  135 be u s e d  t o determine  NMEs  accept  the  that  f o r the  determined commercial  a market.  established  most  by  such  part,  fundamental  the  flow  principles  considerations.  of  a n d FME  be  that  minor  participating  factors  i n the GATT.  countries  lack  of  consensus  marketplace deemed  i n joining  comparative NMEs  i s that  conduct  NME  and  GATT.  GATT by  the  of  and  E a s t European to  have  China  western  considerable  a  from  of  w h i c h may  problem  members  on  lies  the  of  a  system  show t h a t  t o form market  time  But to  for  the  kinds  of  that  global  rules.  institutions,  are  market  1 0 4  found i n the  habits,  which  may  of Eastern  code  of  not  be  European  i t would  be  easier  for  notion  since  they  used  China,  establish  i t will  such  h a b i t s a n d c u l t u r e t h a t w o u l d make i t a " m a r k e t  take  a  institutions, economy"  China e v o l v e d from i n c r e d i b l y long p e r i o d of feudalism. It  bother in  governments  development  market  tradition.  amount  the  d i s c o u r a g e NMEs  One  national  lack  would  countries  so,  will  a c h i e v e d w i t h i n a few y e a r s . A c o m p a r i s o n countries  do  p e r h a p s common p r o b l e m  countries  culture  can  and  systems  a n d t h e l a c k o f a s e t o f commonly a g r e e d - u p o n  NME  GATT  advantage  i n t h e i r economic  the  A n o t h e r more t y p i c a l ,  i n the  among members i s  obvious problems  among  with  that  1 0 3  interventions  inconsistent  goods  should not  H o w e v e r , t h e r e a r e two NME  of  belief  Supposing  1 0 2  d i f f e r e n c e s b e t w e e n NME only  I t i s important  1 0 1  since "  J  i s r e c o g n i z e d t h a t t h e most i m p o r t a n t component o f t h e  r e f o r m s i s t o change t h e o r i g i n a l p r i c i n g  s y s t e m . The  the  was  Hungarian  "New  Economic  Mechanism"  the  focus of  freedom  of  136 pricing  in  system.  addition  China  1 0 6  to  the  readjustment  i s now a i m i n g  at replacing  of  i t s tariff  t h e long-adopted  m a n d a t o r y p r i c i n g w i t h more o f g u i d a n c e p r i c i n g . I t a l s o to  introduce  commercial reforms trade  market  prices  transactions.  t o regulate The p u r p o s e  1 0 7  i s t o decentralize  system.  u  a high  once  centralized  I t i s also t o introduce  o  part  o f China's  part  of  percentage of  o f massive  highly  trade  reform,  on-going foreign  market f o r c e s  i n t e r n a l economy a s r e g u l a t o r y  the foreign  wants  tariff  into  forces.  system  1 0 9  i s being  c o d i f i e d and u n i f i e d . Import l i c e n s i n g system o f China w i l l a  r e s u l t o f t h e reforms have a g l o b a l  and  n a t u r e towards each i n d i v i d u a l c o u n t r y . However, economy  an  remains  Moreover,  essential either  the institutions  would  principles are  facing  does n o t g i v e  of  employees,  This  and  them  major  part  locally  bureaucratic  enough  t o carry Also,  1 1 2  reality  a d i r e c t access  supplies  controlled. habits  that  a more p r o f o u n d  principles  1 1 1  brought  that  o u t t h e market many  enterprises  freedom  of pricing  t o t h e market  due t o t h e  raw  materials  recruitment  and  financing  1 1 3  implies  hardly  of  of the  system and p a r t l y by t r a d i t i o n a l  i n the GATT.  the crucial  non-discriminatory  and l e g a l l i m i t a t i o n s on t h e u s e o f l a n d ,  facilities.  in  i t hard  enunciated  still  policy  make  and  or  as  1 1 0  perhaps  centrally  about p a r t l y by t h e s o c i a l i s t culture  and  As  the reforms  and broader  understandable  i n C h i n a m u s t be c o n t i n u e d  fashion.  f o r China  I t i s contradictory to  introduce  i n t o i t s economy a n d p r e p a r e s t o j o i n  market  t h e GATT b u t  137 keeps  itself  "a  help wondering on  planing  the  viability  of  implemented  further  dominant  how  much  reforms "one  will  state,  after  on  1997  be  two  mainland  applied  perhaps,  all,  no  hindered.  The  answer  too  much  to  the  laissez  Taiwan  and  problem the  to  and  say  principles far  the problem  economic  the  ultimately  extended  be  tell.  to  will the  the Only  even  direction  China  i n which  itself  i t should  has go:  assuming  and  In  or  non-market".  i t would  fundamental  not  be  tenet  of  behavior behind  unchanged, t h e  and  through  short,  the  commercial  i s t o be only  1 1 6  "market"  most  decentralization  effective  substantial  t h e GATT  option  decentralization  for can  o f i n c o m p a t i b i l i t y a n d r e c i p r o c i t y be b e s t s o l v e d .  OPTIONS FOR  China has at  to  t h a t t h e same scheme  i s that  found.  that  advantage  reconciliation.  But  as  f a i r e or to maintaining i t s "centralism";  i s y e t t o be  comparative  4.5  possible  blueprint designed to  state-ownership or p r i v a t e ownership;  by  This  1 1 5  soon as  Moreover,  future  t a k e - o v e r o f Hong K o n g , t i m e w i l l  i d e a about  e i t h e r t o go  is  cannot  China.  Above  rules  principles.  removed as  system"  One  1 1 4  be p l a c e d i n t h e  market  i s manageable, i t i s l i k e l y be  country."  much e m p h a s i s w i l l  c o n t r a d i c t i o n m u s t be  otherwise  this  how  and  ideological  If  socialist  least and  REGAINING CHINA'S GATT MEMBERSHIP  been i n t e r e s t e d at  the  present  political  in joining stage  reforms  to  China commit  t h e GATT f o r y e a r s . cannot  make  herself  to  radical accept  138 GATT r u l e s several  to a full  options  participation  extent. Nonetheless,  f o r reconciliation.  in  GATT,  the  there  As  following  still  regards  options  exist China's  are  worth  and f o r e i g n  trade  considering: (1) system  Either  China  reforms  t o such a degree  i t s economy  t h a t h e r economic  system  c o m p a t i b l e w i t h GATT a s i f i t w e r e a m a r k e t (2)  Regardless  liberalism, "the  of  t h e GATT  American  economy; o r  i t s deep-rooted  inserts  special  C h a r t e r " o r "Havana  c a n be q u i t e  MFN  provisions  Charter"  notion  and  suggested  to tolerate  by and  compromise w i t h s t a t e t r a d i n g c o u n t r i e s ; o r (3)  China  arrangement; (4) of  accedes  GATT  on  the basis  of  special  t h e GATT  because  or  China  g i v e s up any a t t e m p t  i t s inability  based  to  GATT  to join  or unwillingness t o f u l l y  regime  and  seek  other  accept t h e market-  viable  avenues  such  as  b i l a t e r a l o r r e g i o n a l t r a d e arrangements; o r (5) C h a n g e s i n b o t h GATT's a n d C h i n a ' s t r a d i n g economic  policies.  Among t h e s e o p t i o n s t h e f i r s t least  ideology  considerably certain  termed  seems t o b e u n r e a l i s t i c a t  i n t h e near f u t u r e . Even i f C h i n a were w i l l i n g t o a c c e p t  market  that  systems o r  long  from  China  without period  i t s recent  will  "planned  only  reservation, of time economic  reform  commodity  i t would  t o complete. and p o l i t i c a l  i t s economy economy"  a  I t i s quite reform  t o a model  which  take  plan  of so-  represents  co-  139 existence  of plan  and market  which  i s essentially  a  mixed  system o f s t a t e ownership and market r e g u l a t i o n . In or  considering  t o what e x t e n t  with  NMEs.  principles accepted  As  t h e second  already  assumptions  Japan,  like  Australia,  t h e EEC,  changed  i n market  a n d some  C a n a d a a n d New  some  well  on  considered  a new  of  between  this  other  GATT  gap and h i n d e r  rules  and  and a r e based theory  namely, t h e  middle-sized  assumptions. when  on  and f a i r  countries  Z e a l a n d . To c h a n g e GATT  rules  Indeed,  imposing  GATT  exchange  o n LDCs. H o w e v e r , t h i s c h a n g e i s t o MFN p r i n c i p l e  as long  LDCs a n d d e v e l o p e d  increase The  that  to reconcile  trading partners  i t s assumptions  as an e x c e p t i o n  assumption  major  economies  founded  o b l i g a t i o n s and " r e c i p r o c i t y " only  the  o f comparative advantage  means t o c h a n g e t h e i r has  stated,  d o c t r i n e among m a j o r  U.S,  o n e may w o n d e r how f a r  t h e GATT r u l e s c a n be c h a n g e d  are rooted  competition  option  as there  i s a  factual  applying  GATT  rules  world, their  and i s based  ability  t o expand  gap would  exports.  b e n e f i t o f t h i s c h a n g e i s y e t t o b e e x t e n d e d t o NMEs. As f a r a s t h e t h i r d  o p t i o n i s concerned, China as a major  political  a n d m i l i t a r y p o w e r w o u l d t h i n k t h a t p a r t i c i p a t i o n on  special  terms  would  amount  to  accepting  second-class  membership. The if  fourth option  i s actually  neither  China  n o r GATT  changes,  impossible.  But  i t still  gives  including  regional or bilateral  no o p t i o n .  I t implies  reconciliation China  arrangements  some  that  i s simply  alternatives  through which i t  140 can  gradually  trade  succeed  i n GATT-based  above a n a l y s i s enables  that practically left  change  speaking,  of the five  f o r accommodation  of either  GATT  u s t o come t o t h e c o n c l u s i o n  o f NMEs'  o r t h e NME  options there membership.  system.  to  be  suggested  incorporated earlier.  decentralized rules as  The  NME,  t o t h e most  and requirements.  t h e case  into  may  the on  One  rules  legal  the other  compatible  Once b o t h  be, t h e i r  GATT  are only  The o t h e r  s i d e s m a k i n g moves t o c h a n g e . New a d a p t a b l e is  world  system. The  two  i n participating  extent  i s the i s both  t o t h e NME  framework  hand,  as  i s t o be  with  t h e GATT  s i d e s make moves t o c h a n g e ,  ingrained market-oriented  o r non-  m a r k e t s t a t e t r a d i n g - o r i e n t e d s y s t e m s , a r e c o n c i l i a t i o n may be achieved.  I t i s expected  t h a t t h e GATT f u n d a m e n t a l b e l i e f  which i t s r u l e s are formulated w i l l d e g r e e . Thus  i t w o u l d be r e a s o n a b l e  n o t be m o d i f i e d t o a l a r g e t o assume t h a t t h e o p t i o n  o f d e c e n t r a l i z i n g NME s y s t e m i s b y f a r t h e f i r s t - b e s t for  upon  t h e NME c o u n t r i e s t o r e c o n c i l e w i t h t h e GATT l e g a l  approach regime.  FOOTNOTES 1  2  Comment: " A i r b u s a n d I t s I l k : T u r n i n g N o s e Harv. I n t ' l L.J. I l l , ( 1 9 8 8 ) , p p . 1 2 0 - 2 1 .  a t GATT"  20  Id. Id. p . 1 2 1 . ("Such a n e u t r a l s t a n d a r d w o u l d s u i t t h e p o l i t i c a l r e a l i t i e s o f today's w o r l d , where i n t e r n a t i o n a l tensions can be unnecessarily exacerbated by misunderstandings of t h e purposes behind countries' encouragement o f domestic i n d u s t r i e s " ) .  4  5  Id. Id. ; s e e a l s o B e r n i e r , " S t a t e T r a d i n g a n d t h e GATT" i n STATE TRADING I N INTERNATIONAL MARKETS ( K o s t e c k i ed 1 9 8 2 ) , p. 252.  141 For a m o d i f i e d 122. 7  8  9  s e e Comment, supra  note  1, p.  R o e s s l e r , " S t a t e T r a d i n g and Trade L i b e r a l i z a t i o n " , i n STATE TRADING IN INTERNATIONAL MARKETS ( K o s t e c k i , ed. 1982) p p . 2 8 0 - 8 1 . Id. a t 2 8 1 . Jd.  1 0  Id.  1 1  Id. a t 2 8 0 .  12  definition,  Id. K o s t e c k i , East West Trade and the GATT System (1978) ( f o r t h e Trade P o l i c y Research Center p u b l i s h e d by M a c m i l l a n ) , at 91.  14  Jd.  15  Id.,  16  p. 91. p. 127.  Id. p . 1 2 5 . ("In t h a t r e s p e c t t h e t h r e e E a s t E u r o p e a n c o u n t r i e s met t h e e x p e c t a t i o n s o f t h e i r GATT p a r t n e r s . " ) ibid.  17  Id.  p. 125.  18  Id.  p. 128.  19  Jd. p. 95, 109. ( d i s c u s s i n g weakness o f t h e P o l i s h r e c i p r o c i t y f o r m u l a ) ; s e e E. P a t t e r s o n , " I m p r o v i n g GATT r u l e s f o r Nonmarket Economies" 20:2 J.W.T.L.185, pp. 188-89. (enumerating s h o r t c o m i n g s o f t h e P o l i s h , Romanian and H u n g a r i a n i m p o r t commitment). i b i d .  20  P a t t e r s o n , i b i d . , a t 188.  21  K o s t e c k i , supra  22  n o t e 13, p. 95.  Jd. p p . 9 5 , 114-16. (" E v e n P o l a n d ' s g l o b a l import commitment, c a l c u l a t e d i n c u r r e n t d o l l a r p r i c e s , h a s been d e p r i v e d o f any r e a l s i g n i f i c a n c e - f o r two main r e a s o n s : (a) inflation, which increased substantially after P o l a n d ' s a c c e s s i o n ; a n d , (b) r e d u c t i o n o f v a l u e o f t h e d o l l a r i n t e r m s o f o t h e r W e s t e r n c u r r e n c i e s . " ) i b i d . , p. 114. S e e a l s o P a t t e r s o n , i b i d . , a t 1 8 8 .  23  Patterson, ibid.  24  K o s t e c k i , supra  n o t e 13, p. 95, 109.  142 GATT D o c , B I S D , 1 8 t h Supp. 1 9 7 2 , p . 1 0 . T h e d e a d l i n e f o r a t r a n s i t i o n a l p e r i o d i s a s o f J a n . 1, 1973 o r a n y d a t e a t w h i c h Romania i n t r o d u c e d a customs t a r i f f . GATT DOC. B I S D ,  ibid.  E. P a t t e r s o n , supra  n o t e 19, a t 189.  Id. Id. Id. Id. K o s t e c k i , supra n o t e 1 3 , p . 3 1 . c . f . Y u g o s l a v i a ' s p a t h t o t h e GATT, i b i d . , p p . 2 5 - 2 7 . Ibid., p p . 9 7 - 9 8 . ("[D]ue t o t h e p o l i t i c a l s y m p a t h y o f t h e Western governments towards H u n g a r i a n e f f o r t s a t economic decentralization", " t h e GATT countries accepted t h e t a r i f f a p p r o a c h a s v a l i d f o r Hungary and c o n c u r r e d t h a t r e c i p r o c i t y c o u l d be r e a c h e d o n t h e b a s i s o f a s y m m e t r i c reciprocity formula as t r a d i t i o n a l l y adopted i n t h e n e g o t i a t i o n s o f t a r i f f - p r o t e c t e d members o f t h e GATT".) i b i d . , a t 3 1 , 9 8 . S e e a l s o GATT D o c , B I S D , 2 0 t h Supp. p p . 37-41. R o b e r t E. H e r z s t e i n , " C h i n a a n d t h e GATT: l e g a l a n d P o l i c y I s s u e s R a i s e d by C h i n a ' s P a r t i c i p a t i o n i n t h e G e n e r a l A g r e e m e n t o n T a r i f f s a n d T r a d e " 18 Law & P o l i c y in I n t ' l Business, a t 388-89. GATT D o c . L/6270 (Nov. 2 7 , 1 9 8 7 ) , QUESTIONS AND R E P L I E S CONCERNING THE MEMORANDUM ON CHINA'S FOREIGN TRADE REGIME, ( h e r e i n a f t e r QUESTIONS &REPLIES), p p . 9-3 6. GATT D o c . L / 6 1 2 5 , (18 F e b . 1 9 8 7 ) , " C h i n a ' s S t a t u s A s a C o n t r a c t i n g P a r t y : Memorandum o n C h i n a ' s F o r e i g n T r a d e R e g i m e , " ( h e r e i n a f t e r MEMO), p . 1 2 . H e r z s t e i n , supra Id.  pp. 388-89.  n o t e 34, a t 388. ( " m o d i f i e d i m p o r t commitment s c h e m e s " ) .  Id. K o s t e c k i , supra Id.  a t 109-10.  Id.  p. 109.  n o t e 13, pp. 110, 136-37,  144-45.  143 I d . p. 110.  4 3  Id.  4 4  4 5  E. P a t t e r s o n ,  4 6  I d . a t 190.  4 7  I d . pp.  4 8  K o s t e c k i , supra  4 9  I d . p. 139.  5 0  Id.  5 2  Id.  5 3  Id.  5 4  Id.  5 6  n o t e 19, a t 1 8 9 .  190-91. n o t e 13, a t 103, 135, and 139.  K. G r z y b o w s k i , " S o c i a l i s t J.W.T.L. 5 3 9 , p p . 5 5 1 - 2 .  5 1  5 5  supra  Countries  i n GATT",  Chen, T u n g p i : " A r e t h e A n t i d u m p i n g Other Western Countries Keeping Economic S t r u c t u r a l Reform?, (1987) I n t ' l Bus. I l l , a t 7 2 5 .  Laws o f C a n a d a a n d Pace with China's 19 Law & P o l i c y in  K o s t e c k i , supra n o t e 13, pp. 144-45; P a t t e r s o n , 24, p p . 1 9 0 - 9 1 .  5 8  R.E. H e r z s t e i n , supra  5 9  I d . p. 411.  6 0  Id.  6 1  Id.  6 2  GATT A r t . 28 i d .  6 3  QUESTIONS  6 5  28  I d . p. 552.  5 7  6 4  (1980)  & REPLIES,  E. P a t t e r s o n ,  supra  Id.  6 6  I d . , p. 203.  6 7  I d . , p p . 199-20.  n o t e 34, a t 4 1 0 .  supra  note 35, a t  note 19, a t 203.  supra note  144 68  J d . , a t 203.  69  J d . p. 204. B u l g a r i a d i d a c q u i r e o b s e r v e r s t a t u s i n 1967, b u t i t h a s been u n s u c c e s s f u l t o d a t e i n e f f o r t s t o j o i n t h e S t a n d a r d s Code. I t h a s n o t s o u g h t a c c e s s i o n t o t h e GATT i t s e l f . Note, however, t h a t China has acquired o b s e r v e r s t a t u s i n s e v e r a l p a s t GATT n e g o t i a t i o n s a n d i s now a n x i o u s t o r e g a i n t h e GATT m e m b e r s h i p i n t h e c u r r e n t round.  70  H e r z s t e i n , supra  71  Jd.  72  J d . p p . 4 1 2 - 1 3 ; GATT, A r t i c l e 1 9 .  73  E. P a t t e r s o n ,  74  H e r z s t e i n , supra  75  J d . a t 413.  76  E. P a t t e r s o n ,  77  J d . a t 204.  78  J d . T h i s i d e a was p r o p o s e d b y F r a n c e , A u s t r i a , Sweden i n 1 9 5 0 s .  79  The i d e a t o accommodate NMEs b y i m p r o v i n g t h e GATT m a j o r t r a d e r u l e s was a d v a n c e d t o d a t e known a s " t h e P a r t V approach", under which rules r e g u l a t i n g NMEs' state t r a d i n g systems would be s e t o u t . Opponents t o t h i s n o v e l approach argues vehemently t h a t " t h e NME-versus-market economy i s n o t a u s e f u l d i s t i n c t i o n a c e n t r a l l y - p l a n n e d n o n m a r k e t economy i s n o t t h e r e l e v a n t c h a r a c t e r i s t i c a s f a r a s a c o u n t r y ' s s t a t u s i n t h e GATT i s c o n c e r n e d . " ( s e e P a t t e r s o n , i d . p.204)  80 81  Jd.  supra  n o t e 19, a t 204.  n o t e 34, a t 413.  supra  n o t e 19, p. 204.  B r a z i l , and  204-05.  See generally L i Chungzhou, "Resumption M e m b e r s h i p " 21 J.W.T.L 2 5 , 25-48 (1987)  82  E. P a t t e r s o n ,  83  Jd.  84  n o t e 34, a t 412.  supra  o f China's  GATT  n o t e 1 9 , p . 2 05.  K o s t e c k i , supra note important omissions of f o r a c c e s s i o n seems t o the non-discriminatory p. 1 0 3 .  1 3 , p. 1 3 5 . A l s o , "one o f t h e t h e P o l i s h and Romanian p r o t o c o l s b e t h e l a c k o f s p e c i f i c r u l e s on operations of plan targets."i d .  145 85  K o s t e c k i , i d . p . 144.  86  Jd.  87  Jd.  88  Jd.  89  Roessler,  90  K o s t e c k i , supra n o t e 1 3 , p . 1 4 4 ; s e e also Herzstein, supra n o t e 39, a t 390, c o n c e r n i n g " R e s t r i c t Mark-up on Import".  91  K o s t e c k i , i d . , p . 144.  92  H e r z s t e i n , supra  93  Jd.  94  supra  n o t e 11, a t 279-81.  n o t e 34, a t 3 9 0 .  Jd.  95  P a t t e r s o n , supra n o t e 19, pp. 199-201; supra n o t e 34, p . 3 9 1 .  also,  Herzstein,  96  F o r d e t a i l e d d i s c u s s i o n s e e P a t t e r s o n , i d . p. 200. ( A r e a s i n w h i c h i n f o r m a t i o n m i g h t n o r m a l l y be r e q u e s t e d i n c l u d e : domestic price formation and i t s methodology, plan f o r m u l a t i o n and i t s c o n t e n t , t r a d e s t a t i s t i c s and other relevant data).  97  Herzstein,  98  Bernier,  99  Comment, supra  supra  supra  n o t e 34, p p . 391-92. n o t e 5, p . 2 5 2 . n o t e 1, p p . 127-29.  100  K o s t e c k i , supra  101  Herzstein,  102  Jd.  103  J d . , pp. 395-96.  104  William P. A l f o r d , "When C h i n a i s Paraguay? - An E x a m i n a t i o n o f The A p p l i c a t i o n o f t h e A n t i d u m p i n g a n d C o u n t e r v a i l i n g D u t y Laws o f t h e U n i t e d S t a t e s t o C h i n a a n d O t h e r N o n m a r k e t Economy' N a t i o n s " , 61:79 Southern C a l i f o r n i a L. Rev.(1987), 79, a t 130.  supra  n o t e 13, pp. 144-45. n o t e 34, a t 394.  x  105 1  0  6  H e r z s t e i n , supra Kostecki, 406.  n o t e 34, a t 396.  "Hungary  a n d GATT"  8 J.W.T.L  (1974)  401, a t  146 1  0  7  GATT Doc. L / 6 1 2 5 , Contracting Party: R e g i m e ) , a t 6-7.  (18 F e b . 1987) ( C h i n a ' s S t a t u s A s a Memorandum o n C h i n a ' s F o r e i g n T r a d e  108  Zheng T u o b i n , " P l a n n i n g F u r t h e r INTERTRADE, ( O c t . 1 9 8 4 ) , a t 24.  Foreign  109  Id.  110  Id.  111  H e r z s t e i n , supra & R E P L I E S , supra  112  H e r z s t e i n , id., p . 3 9 6 .  113  Id.  114  Id.  115  Id.  116  See generally Halpern, China's Industrial Economic R e f o r m s , 25 A S I A N SURV. 998 (1985) ( R e f o r m s h a v e come a n d gone a s t h e C h i n e s e government has searched f o r t h e proper b a l a n c e between state planning and economic i n c e n t i v e s . ) Id., p. 9 9 8 .  n o t e 34, p p . 3 9 5 - 9 7 ; n o t e 3 5 , p p . 22-24.  Trade  s e e also  Reforms"  QUESTIONS  147  PART F I V E : CLOSING REMARKS AND PERSPECTIVES  To  integrate  fashioned  NME  state  trading  GATT l e g a l f r a m e w o r k  Because o f t h e inherent  the  be s i m p l y  i n c o m p a t i b i l i t y between s t a t e  experience  accession  t o t h e GATT  h a s shown,  difficulties  GATT t o i n t e g r a t e  command s t a t e systems. NMEs'  trading  NME  system nor  trade.  prices  system  i n t o t h e GATT t r a d i n g  difficulty  import  to  influence  be  and e x p o r t  h a s been  foreign  operated  a r e t o be  give  up  prices  applied  o n MFN  by  guided  government  tariffs  economic  could  lever  and n o t i m p o r t i n g or  on  by t h e r e l a t i o n  but  the only  that  control  are not simply  r e s t r i c t i o n s . Thus, as  r u l e s and  i n the fact  nor determined  t h e c h o i c e between i m p o r t i n g  tariffs  lies  not possibly  and q u a n t i t a t i v e  possibly  there  s y s t e m s i n NMEs e s p e c i a l l y  "commercial c o n s i d e r a t i o n s " domestic  the Eastern  state-trading  could  Their  with  t h e o r i g i n a l framework o f  The f u n d a m e n t a l  direction  if  task.  i n using  trading  governments  foreign  not  irreconcilable i fneither  o f t h e GATT  considerable  of  old-  s y s t e m u n d e r t h e GATT,  t h e review  Europe's  by  the  o r i g i n a l GATT r e g i m e i s t o b e c h a n g e d . As  the  into  i s b y n o means a n e a s y  s y s t e m s o f t h e NMEs a n d p r i v a t e t r a d i n g both w i l l  systems  to even  non-discriminatory  basis. In  the light  frustrating However,  o f such  t o consider  incompatibility,  the possibilities  the possibilities  i t i s certainly  of reconciliation.  of r e c o n c i l i a t i o n l i e i n a  very  148 fundamental  assumption.  NMEs' s t a t e  trading  framing main  i t s major  task  degree  They  systems rules  have  reconciliation  o r t h e o r i g i n a l GATT  t o be  modified.  state  trading  The  possibility  systems.  the policy  inconsistent.  towards  decentralization i n  fluctuate  of  but takes will  time.  of  as t h e i r  decentralization  And i n c o n s i s t e n c y  will  e x p e c t a t i o n s o f t h e GATT c o u n t r i e s . stage  of decentralization  no  policy  NME  political  full  integration.  This  may  undermine t h e  The dilemma i s t h a t  was  completed,  shown  be  i f the  there  i n t h e U.S.  will trade  f o r t h e a c c e s s i o n o f Hungary, P o l a n d and Romania t o t h e  these countries maintained Eastern  until  by most  bloc's  o f Western  accession.  legally within  was  temporary  solved  on  I t i s certainly  towards  reconciliation  however, w i l l best,  not lead  i t i s only  integration.  or apply  i t s MFN t r e a t m e n t t o  l a t e i n 1 9 7 0 s . M o r e o v e r , QRs w e r e  integration  basis.  i n NME  certainly  h a s n o t been  GATT. T h e U.S. d i d n o t e x t e n d  At  way  changes from time t o time. Also,  be  the  and t o what  the political  g o v e r n m e n t s . The p o s s i b i l i t y w i l l will  how  i s possible  by  assumptions  easiest  i s a full  This  i s limited  The  i f either  Accordingly,  i s to illustrate  and i n t e g r a t i o n  the  be r e c o n c i l a b l e  a r e t o be changed.  of resolution  they  will  European  The  GATT  countries has  not  after the solved  i t s o r i g i n a l framework. a  country-by-country  worthwhile outside  t o seek  the  and  a  Reconciliation  means  of  pragmatic  systems  This,  integration.  reconciliation  of different  avenues  framework.  t o a genuine and complete  the  Rather, i t  the other  GATT  still  may  and n o t be t h e  149 first  step  t o achieve  integration one  a  participating  single  partial  trading  countries  another.  trading  least  means g l o b a l i n t e g r a t i o n .  finds  one  at  With  systems,  Within  system  to  ideal  a  under  n o t be  which a l l  their  co-existence  will  Full  such i n t e g r a t i o n  i n t h e GATT c o n d u c t  regard  this  integration.  trade  of  with  diverging  accomplished  in a  short-run. I n any event t h e a c c e s s i o n o f s o c i a l i s t is  a  realistic  integration first  step  into  step.  which  a world  Each  case  prove  at liberalizing  socialist The  subtle  system.  of  and o n l y  and  eventually  trade  experiment best  may  economy.  integration  trade  i s not  due t o t h e f a c t  free  develop  market  their  that  economies.  economies  advanced  technology  currency  reserve.  and  by  minimal  Stressing  allows various trade.  5  t h e NMEs  government  This  show  an  independent method  free-market  7  time-consuming  will  economy  t o a f f o r d economic Their  3  basic  borrowing  industrial goals.  political  system  common  aim i s t o capital  and have and h i g h  more  i s out of p o l i t i c a l  and hard  technology  4  and economic  systems  problem w i t h f r e e competition  of participation  also  cooperation  foreign  exports  but  t h e GATT  i n t e r v e n t i o n , t h e framework  levels  their  i s only the  which  NMEs' a c c e p t i n g  t o increase  the varying  understanding  was  between  only  p r o d u c t i o n would f r u s t r a t e those Recognizing  about  2  w o u l d be l i m i t e d by t h e a b i l i t y with  will  bring  But t h i s  1  accession  the future  c o u n t r i e s t o GATT  with  o f t h e GATT  i n t h e program o f f r e e  c o n s i d e r a t i o n s r a t h e r than of  150 pure  commercial  socialist  concern.  countries  (Romania,  addition to the original  GATT's  Poland,  two) i n t o  expectations r a t h e r than  Obviously,  such  political  admittance  Yugoslavia,  expectations  policies.  widened  6  NMEs'  participation  would  i n turn  being.  World p r o s p e r i t y and economic w e l l - b e i n g a r e e v e n t u a l l y  the best  guarantee  world  four  Hungary i n  o f pure trade  i n t h e GATT. A n d t h e NMEs' b r o a d e r increase  of  i t s f r a m e w o r k was more o u t  of p o l i t i c a l  participation  (  The  of world  p r o s p e r i t y and economic  peace  and s e c u r i t y .  well-  Grzybowski  7  wrote: "Economic development and w o r l d p r o s p e r i t y a r e t h e b e s t g u a r a n t e e o f p e a c e ; t r a d e , one o f t h e m o s t important f a c t o r s i n r a i s i n g the standard of l i v i n g , responds t o a p o l i t i c a l c l i m a t e which promotes t h e sense o f s e c u r i t y . " 8  Indeed, to  a s many GATT members a r e a w a r e ,  GATT h a v e  the  brought  rest of the World.  "there  i s  more  participation affairs  than  Admittedly, in  there NME  t o achieve  will  increase world  ideological  I n t h e words  9  be  gained  to bring  of Prof.  by  full  accession  benefits to  John and  discussions  Jackson, universal  of  economic  i s by t h e e x c l u s i o n o f c e r t a i n s t a t e s " .  membership and t h e i r  GATT-sponsored  the f i r s t  to  continue  i n the international  help  be  and w i l l  NME's  continuous  multinational negotiations  the goal  of a single  world  participation  will  definitely  trade  system and  peace and p r o s p e r i t y . Economic u n i t y  and i n d i s p e n s a b l e  step  1 0  to f u l f i l l  political  will or  u n i t y w h i c h was o n c e t h e d r e a m a n d a s p i r a t i o n o f  the United Nations  and ITO-based  multilateralism.  151 Unfortunately,  the leaders  of  t h e West  namely,  the  U n i t e d S t a t e s , J a p a n a n d t h e E u r o p e a n E c o n o m i c Community (EEC) are  still  economies. fully will  distrustful 1 1  They s i m p l y  regard  socialist  i s confirmed  trading  economies. If  that  trading  lack of p o l i t i c a l  b y many W e s t e r n w r i t e r s who  remain  impossible  prevalent  as long as  i n the  socialist  1 2  we  departed  system  state  w i l l and confidence i n  t h e GATT. T h i s  the issue of i n t e g r a t i o n simply  state  appreciate  from  market  facilitates  international more  the  lack p o l i t i c a l  i n t e g r a t i n g NMEs i n t o and confidence  the  of  trade  realistic.  the extent principle  trade, that  to  ideals  the task  which  t h e GATT  t o reach  a  has  framework  o f c r e a t i n g new r u l e s f o r  accommodate  a l l nations  will  become  1 3  FOOTNOTES 1  Grzybowski, (1980),  2  3 4  a t pp. 551-52.  I d . p. 552. Jd. Jd.  "Socialist  Countries  i n GATT" 28 J.W.T.L  539  152 Id. I n d e e d , GATT seems t o p r o v i d e a f r a m e w o r k f o r t r a d e c o o p e r a t i o n o f a l e a s t t h r e e groups o f c o u n t r i e s : ( i ) highly industrialized economies, which c a n meet t h e c h a l l e n g e o f f r e e t r a d e and t h e i n t e r n a t i o n a l d i v i s i o n o f l a b o r w i t h no p r e j u d i c e t o t h e i r l i v i n g s t a n d a r d ; ( i i ) the d e v e l o p i n g economies, w h i c h need a s s i s t a n c e , and a r e unable t o r e c i p r o c a t e f u l l y t h e advantages o f admission t o GATT o n t e r m s o f e q u a l i t y ( s e e A r t i c l e s 18 a n d 3 6 - 3 8 ) ; ( i i i ) f i n a l l y , s t a t e t r a d i n g e c o n o m i e s w h i c h a r e n o t , due to their social, political and economic order, fully c o m p a t i b l e w i t h t h e m a r k e t - t y p e GATT s y s t e m a n d t h u s u n a b l e t o be f u l l y integrated into the world trade mechanism. 6  id.  7  Id. p . 5 5 3 .  8  Id.  9  1 0  F r a n k S t o n e , Canada the GATT and System ( 1 9 8 4 ) , p. 1 6 7 . J . J a c k s o n , World at 777.  Trade  the International  and the Law of GATT 329-32  Trade (1969),  1 1  G r z y b o w s k i , supra n o t e 1, p. 5 5 4 . Y e t , i t m u s t be recognized that trust i s a condition related primarily t o the conduct o f governments i n international relations. Ibid.  1 2  J a c k s o n , supra n o t e 1 0 , p. 1179. ("many o f t h e GATT r u l e s make s e n s e o n l y i n t h e c o n t e x t o f s u c h a m a r k e t s y s t e m , since they restrict the types of regulations which g o v e r n m e n t s c a n i m p o s e o n i n t e r n a t i o n a l t r a d e r s , b u t do n o t p u r p o r t t o r e g u l a t e t h e t r a d e r s t h e m s e l v e s . " ) ; K.W. Dam, The GATT Law and International Economic Organization (1972) ("[The GATT t a r i f f ] system presupposes that i m p o r t a t i o n and e x p o r t a t i o n a r e h a n d l e d by p r i v a t e f i r m s which, stimulated b y p r i v a t e m o t i v e s , a r e g u i d e d by commercial c o n s i d e r a t i o n s . . . w h e n one c o n s i d e r s state t r a d i n g , t h e u n d e r l y i n g a s s u m p t i o n o f t h e GATT s y s t e m i s i t s e l f no l o n g e r a p p l i c a b l e " ) , i d . , p . 3 1 8 ; K. K e n n e d y , "The A c c e s s i o n o f t h e S o v i e t U n i o n t o t h e GATT" ( 1 9 8 7 ) , 21 J.W.T.L. 23 (with respect t o t h e Soviet accession t o GATT, " u n l e s s t h e S o v i e t s a r e p r e p a r e d t o make g r a d u a l but nevertheless dramatic reforms i n their economic system, t h e answer i s c e r t a i n l y 'no'"), a t 33.  1 3  W i l l i a m P. A l f o r d , "When I s C h i n a P a r a g u a y ? A n E x a m i n a t i o n of t h e A p p l i c a t i o n o f t h e A n t i d u m p i n g and C o u n t e r v a i l i n g D u t i e s Laws o f t h e U n i t e d S t a t e s t o C h i n a a n d O t h e r N o n m a r k e t Economy' N a t i o n s " 96 Southern C a l i f o r n i a Law Review V o l . 6 1 : 7 9 , a t 1 3 2 . x  153  SELECTED BIBLIOGRAPHY GENERAL WORKS Akehurst, A M o d e r n I n t r o d u c t i o n 6 t h ed.)  t o International  Camps and D i e b o l d , j r . , T h e New M u l t i l a t e r a l i s m F o r e i g n R e l a t i o n s (New Y o r k : 1 9 8 3 ) . Castel, I n t e r n a t i o n a l Business T r a n s a c t i o n s  Law,(1987, C o u n c i l on  (1988 C a s w e l l ) .  Gerard Curzon, M u l t i l a t e r a l C o m m e r c i a l D i p l o m a c y M i c h a e l Joseph, 1965).  (London:  K. W. Dam, T h e GATT Law a n d I n t e r n a t i o n a l E c o n o m i c Organization ( C h i c a g o , L o n d o n : The U n i v e r s i t y o f Chicago Press, 1970). L. P u l l e r , L e g a l F i c t i o n 9-10 ( 1 9 7 0 ) . Joseph Gold, T h e Fund a n d Non-Member S t a t e s . E f f e c t s ( W a s h i n g t o n : IMF, 1 9 6 6 ) .  Some L e g a l  John H. Jackson, W o r l d T r a d e a n d t h e Law o f GATT Jackson, Cunningham and Fontheim, I n t e r n a t i o n a l P o l i c y : The L a w y e r s P e r s p e c t i v e (1985)  (1969) Trade  7  Jackson, e t a l , I m p l e m e n t i n g t h e T o k y o Round  (1984)  Jackson and Davey, I n t e r n a t i o n a l E c o n o m i c R e l a t i o n s ( 1 9 8 6 2nd Ed.) (A b a s i c book f o r u n d e r s t a n d i n g GATT l e g a l s y s t e m a n d U.S. f o r e i g n t r a d e s t r a t e g i e s . ) M. K o s t e c k i , S t a t e T r a d i n g i n I n t e r n a t i o n a l M a r k e t s (1982) ( I t i s p e r h a p s t h e o n l y v o l u m e , w r i t t e n b y 13 d i f f e r e n t authors, which p r o v i d e s an extensive u n d e r s t a n d i n g i n depth o f t h e c h a r a c t e r i s t i c s and consequences o f t h e o p e r a t i o n s o f s t a t e - t r a d i n g f i r m s a n d e x p o s e s much o f t h e w e a k n e s s e s o f A r t i c l e 17 o f GATT.) M. K o s t e c k i , (1978)  E a s t - W e s t T r a d e a n d t h e GATT L e g a l  System  K. K r a v i s , D o m e s t i c I n t e r e s t s a n d I n t e r n a t i o n a l O b l i g a t i o n s : S a f e g u a r d s i n I n t e r n a t i o n a l Trade O r g a n i z a t i o n s (1963, University of Pennsylvania Press). K a r l Marx, Das C a p i t a l ( 1 9 0 6 , E n g l i s h New Y o r k : T h e M o d e r n L i b r a r y o f t h e World Best Books).  154 McGovern, I n t e r n a t i o n a l T r a d e R e g u l a t i o n (1986 2nd Ed.) (The book a n a l y z e s i n t e r n a t i o n a l t r a d e r e g u l a t i o n o f t h r e e m a j o r l e g a l s y s t e m s , U.S., EC a n d o t h e r r e g i o n a l o r g a n i z a t i o n s , i n t h e a r e a s o f customs law, p r i v a t e i n t e r n a t i o n a l law and r u l e s r e g u l a t i n g c a r t e l s and t r u s t s . T h i s i s a book a b o u t l a w r a t h e r t h a n e c o n o m i c s o r p o l i t i c s m o s t l y on GATT.) Samuelson, E c o n o m i c s  ( 1 1 t h e d . 1980)  620-30.  Stone, C a n a d a t h e GATT and t h e I n t e r n a t i o n a l T r a d e S y s t e m (1984) ( t h e y a r e among t h e b e s t e s s a y s i n i n t e r n a t i o n a l economics & law and e x c e l l e n t summaries i n r e l a t i o n t o Canada.) J.  W i l c z y n s k i , The E c o n o m i c s a n d P o l i t i c s (New Y o r k : P r a e g e r , 1 9 6 9 ) .  of East-West Trade  P e t e r Wiles, Communist I n t e r n a t i o n a l E c o n o m i c s Oxford U n i v e r s i t y P r e s s , 1968). ARTICLES AND W.P.  R.  (Oxford:  MONOGRAPHS  A l f o r d , "When C h i n a i s P a r a g u a y ? An E x a m i n a t i o n o f t h e A p p l i c a t i o n of the United States Countervailing duty Laws t o C h i n a and O t h e r N o n m a r k e t Economy N a t i o n s " , 61 S o u t h e r n C a l f . L. Rev. 79. Baban, " S t a t e t r a d i n g and t h e GATT" 11 J.W.T.L. 334 B e h r m a n , J.H., " S t a t e T r a d i n g by U n d e v e l o p e d C o u n t r i e s , " a n d "The L e g a l Framework o f T r a d e B e t w e e n P l a n n e d and M a r k e t E c o n o m i e s : t h e S o v i e t A m e r i c a n E x a m p l e , " Law a n d C o n t e m p o r a r y P r o b l e m s . (Summer 1 9 5 9 ) , pp. 4 5 4 - 4 8 1 .  Behrman, J.H., " S t a t e T r a d i n g By u n d e v e l o p e d C o u n t r i e s " , "The L e g a l F r a m e w o r k o f T r a d e B e t w e e n P l a n n e d a n d M a r k e t E c o n o m i e s : The S o v i e t - A m e r i c a n E x a m p l e " , Law Contemp. P r o b . (summer, 1 9 5 9 ) , pp. 4 5 4 - 8 1 .  and &  Behrman, B a n s t i n , "The S o v i e t S y s t e m o f F o r e i g n T r a n s a c t i o n s " I n BUSINESS TRANSACTIONS WITH USSR, (R. S t a r r , e d . 1973) Ivan B e r n i e r , " S t a t e T r a d i n g a n d t h e GATT" i n STATE TRADING IN INTERNATIONAL MARKETS ( 1 9 8 2 , K o s t e c k i , e d ) . Chen, Tungpi " A r e t h e A n t i d u m p i n g Laws o f C a n a d a a n d O t h e r Western C o u n t r i e s K e e p i n g Pace w i t h C h i n a ' s Economic S t r u c t u r a l R e f o r m ? " (1987) 19 L. & P o l . I n t ' l B u s . 717 Comments, " I m p l e m e n t a t i o n and P o l i c y : P r o b l e m s i n t h e A p p l i c a t i o n o f C o u n t e r v a i l i n g D u t y Law t o N o n m a r k e t E c o n o m i e s " , 136 U n i v . o f P e n n s . L. Rev. 1646.  155  Comments, " A i r B u s a n d I t s I l k : T u r n i n g N o s e a t GATT" 2 0 H a r v . I n t ' l L . J . 1 1 1 ( 1 9 8 8 ) , 111-25. M. Domke, J . Hazard, " S t a t e - T r a d i n g a n d t h e MFN C l a u s e " A . J . I . L (1958) p p . 5 5 - 6 8 . Downey & Graham, "The R e g u l a t i o n o f Dumping From S t a t e C o n t r o l l e d E c o n o m i e s : Where N e x t ? " i n INTERFACE TWO: CONFERENCE PROCEEDINGS ON THE LEGAL FRAMEWORK OF EASTWEST TRADE 4 3 5 . Friedmann, W., " C h a n g i n g S o c i a l A r r a n g e m e n t s i n S t a t e T r a d i n g S t a t e s a n d T h e i r E f f e c t o n I n t e r n a t i o n a l Law," Law a n d C o n t e m p o r a r y P r o b l e m s (Summer, 1 9 5 9 ) , p p . 3 6 9 397. H e r z t e i n , " C h i n a a n d t h e GATT: L e g a l a n d P o l i c y i s s u e s R a i s e d b y C h i n a ' s P a r t i c i p a t i o n i n t h e GATT" 18 Law & P o l i c y i n I n t ' l B u s . 371 (1986) ( d i s c u s s i n g t h e i m p l i c a t i o n o f C h i n a ' s a d m i t t a n c e t o t h e GATT) Kevin C. Kennedy, "The A c c e s s i o n o f t h e S o v i e t U n i o n t o GATT", 21 J.W.T.L. 23-39 (1987) M. K o s t e c k i , " H u n g a r y a n d GATT" 8 J . W.T.L.401 (1974) ( d e t a i l e d d i s c u s s i o n o f H u n g a r y ' s a c c e s s i o n t o GATT: r e c o n c i l i a t i o n and i n t e g r a t i o n ) Li,  Chungchou, " R e s u m p t i o n o f C h i n a ' s GATT M e m b e r s h i p " J.W.T.L. p p 25-48 (1987)  21  Lloyd, " S t a t e T r a d i n g and I n t e r n a t i o n a l Trade Theory" i n STATE TRADING I N INTERNATIONAL MARKETS ( 1 9 8 2 , K o s t e c k i ed.) Matejka, H., " S t a t e T r a d i n g : I n s t r u m e n t o f T r a d e C o n t r o l o r B a r r i e r t o T r a d e , " 8 J.W.T.L.. No.2 ( 1 9 7 4 ) , pp.209-14. Note, " E a s t - W e s t T r a d e : t h e A c c e s s o f P o l a n d t o t h e GATT" ( 1 9 7 1 ) , 24 S t a n . L. R e v . 748 E. P a t t e r s o n , " I m p r o v i n g GATT R u l e s f o r NMEs", 20 J . W.T.L. 185 (1986) ( o p i n i o n s a n d s u g g e s t i o n s a s t o w h a t r u l e s o f GATT s h o u l d be i m p r o v e d i n s o l v i n g " i n t e r f a c e " p r o b l e m s a n d i n a p p l y i n g r u l e s t o NMEs) Recent Developments, " C o u n t e r v a i l i n g D u t y Laws a n d N o n m a r k e t e c o n o m i e s : The C a s e o f t h e P e o p l e ' s R e p u b l i c o f C h i n a " , 10 S y r . J . I n t ' l L. & Com. 372  156 Recent Developments, " G e o r g e t o w n S t e e l C o r p . v . U.S.: A p p l y i n g t h e C o u n t e r v a i l i n g D u t y Law t o I m p o r t s From N o n m a r k e t Economy C o u n t r i e s " (1986) 19 L. & P o l . I n t ' l B u s . 313. Recent Developments, " I n t e r n a t i o n a l T r a d e : I m p o s i t i o n o f C o u n t e r v a i l i n g D u t y Laws on P r o d u c t s From N o n m a r k e t Economy C o u n t r i e s - C o n t i n e n t a l S t e e l C o r p . v . U n i t e d S t a t e s " , 27 H a r v . I n t ' l L. J . 7 4 8 . Reuland, "GATT a n d S t a t e - T r a d i n g C o u n t r i e s " 9 J . W.T.L. 318 (1975) ( e x a m i n i n g p r o b l e m s o f GATT A r t . 17 when applying to State Trading Countries, e s p . NMEs). R o e s s l e r , " S t a t e T r a d i n g a n d T r a d e L i b e r a l i z a t i o n " i n STATE TRADING I N INTERNATIONAL MARKETS, ( 1 9 8 2 , K o s t e c k i e d . ) . S o l t y s i n s k i , " P r i c e C o m p e t i t i o n Between F r e e M a r k e t and S t a t e C o n t r o l l e d E c o n o m i e s E n t e r p r i s e s : The L e g a c y o f t h e OMC v . P e z e e t e l L i t i g a t i o n s " , 24 S w i s s Rev. I n t ' l Comp. L. 6. Zheng, Tuobin, " P l a n n i n g F u r t h e r F o r e i g n T r a d e R e f o r m s " , i n INTERTRADE ( O c t . 1 9 8 4 ) . GATT DOCUMENTS & OFFICIAL PUBLICATIONS L Series L / 8 7 0 , O c t . 1958 L / 1 0 3 7 , A d d . 1, S e p t . 1959. L / 2 4 0 9 , M a r c h 1965. L / 3 0 5 0 , A u g u s t , 1968. L / 3 2 1 1 , May 1969. L / 3 3 0 1 , J a n . 1970. L / 4 3 2 6 , S e p t . 1970. L / 3 6 5 3 , A d d . 10, 1 1 , J u n e , 1972. L / 3 8 7 5 , J u l y 1973. L / 4 0 9 6 , O c t . 1074. L / 4 2 2 8 , O c t . 1975. L / 4 2 3 0 , O c t . 1975. L / 6 1 2 5 , F e b . 1987. L / 6 2 7 0 , Nov. 1987. Other S e r i e s MGT/81/58, A u g . 1958. TN 6 4 / N T B / l , O c t . 1963. TN 64/NTB/9, Nov. 1964. E/PC/T 160 ECOSOC, UNCTAE ( H a v a n a : Aug. 1 9 4 7 ) . E/AC.62/9., U n i t e d N A t i o n s , A new U n i t e d N a t i o n s S t r u c t u r e f o r G l o b a l E c o n o m i c C o - o p e r a t i o n (New Y o r k : May 1 9 7 5 ) . TD/B/535, UNCTAD, Q u e s t i o n s o f t h e E s t a b l i s h m e n t o f a C o m p r e h e n s i v e T r a d e O r g a n i z a t i o n ( G e n e v a : December 1 9 7 4 ) .  157 Other O f f i c i a l P u b l i c a t i o n s B a s i c I n s t r u m e n t s a n d S e l e c t e d Documents (BISD) ( G e n e v a : GATT S e c r e t a r i a t , 1 9 5 2 ) , V o l . I I . 3 r d Supp. Geneva, 1955. 8 t h Supp. Geneva, 1960. 9 t h Supp. Geneva, 1961. 1 1 t h Supp. G e n e v a , 1 9 6 3 . 1 3 t h Supp. G e n e v a , 1 9 6 5 . 1 4 t h Supp. G e n e v a , 1 9 6 6 . 1 5 t h Supp. G e n e v a , 1 9 6 8 . 1 7 t h Supp. G e n e v a , 1 9 7 0 . 1 8 t h Supp. G e n e v a , 1 9 7 2 . 1 9 t h Supp. G e n e v a , 1 9 7 3 . 2 0 t h Supp. G e n e v a , 1 9 7 4 . I n t e r n a t i o n a l T r a d e 1974-75, Geneva, J u l y 1975. China: GATT D o c . L / 6 1 2 5 , ( 1 8 F e b . 1987) ( C h i n a ' s S t a t u s A s a C o n t r a c t i n g P a r t y : Memorandum o n C h i n a ' s F o r e i g n T r a d e R e g i m e ) ; GATT Doc. L/6270 (27 Nov. 1987) ( W o r k i n g P a r t y on C h i n a ' s S t a t u s As a C o n t r a c t i n g P a r t y : Q u e s t i o n s and R e p l i e s C o n c e r n i n g t h e Memorandum o n C h i n a ' s F o r e i g n T r a d e Regime.) China: D e c i s i o n o f t h e C e n t r a l C o m m i t t e e o f t h e Communist P a r t y o f C h i n a on Reform o f t h e Economic S t r u c t u r e , r e p r i n t e d i n R e p o r t on C h i n a ' s Economic Development and U.S. T r a d e I n t e r e s t s , a t 8 5 - 8 6 . ( S t a f f o f t h e S p e c i a l Subcomm. o n US T r a d e w i t h C h i n a o f t h e H o u s e Comm. o n E n e r g y a n d Commerce, 9 9 t h Cong., 1 s t S e s s . , P r i n t 1985).  

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