Page 286 - DMGT401Business Environment

Unit 13: World Trade Organization

Quantitative Restrictions (QRs) on imports are maintained on Balance-of-Payments (BOP) grounds Notes
but nation is reducing it QR gradually.
India has fulfilled its commitment by reducing tariff and eliminating QR, it had also implemented
the TRIPS measures by implementing new patent laws and presently, Indian patent law is at par
with international patent law following a product patent and that too for 20 years. India has also
implemented Trade Related Investment Measures (TRIMs) and General Agreement on Trade
and Services (GATS).

The Indian economy has grown rapidly over the past decade, with real GDP growth averaging
some 6% annually, in part due to the continued structural reform, including trade liberalisation,
according to a WTO Secretariat report on the trade policies and practices of India. Social indicators
such as poverty and infant mortality have also improved during the last ten years.

Case Study Dispute Settlement

n 23rd January 1995, Venezuela complained to the Dispute Settlement Body that
the United States was applying rules that discriminated against gasoline imports,
Oand formally requested consultations with the United States. Just over a year
later (on 29th January 1996) the dispute panel completed its final report. (By then, Brazil
had joined the case, lodging its own complaint in April 1996. The same panel considered
both complaints.) The United States appealed. The Appellate Body completed its report,
and the Dispute Settlement Body adopted the report on 20th May 1996, one year and four
months after the complaint was first lodged.
The United States and Venezuela then took six and a half months to agree on what the
United States should do. The agreed period for implementing the solution was 15 months
from the date the appeal was concluded (20th May 1996 to 20th August 1997).

The case arose because the United States applied stricter rules on the chemical characteristics
of imported gasoline than it did for domestically-refined gasoline.
Venezuela (and later Brazil) said this was unfair because US gasoline did not have to meet
the same standards — it violated the “national treatment” principle and could not be
justified under exceptions to normal WTO rules for health and environmental conservation
measures. The dispute panel agreed with Venezuela and Brazil. The appeal report upheld
the panel’s conclusions (making some changes to the panel’s legal interpretation. The
United States agreed with Venezuela that it would amend its regulations within 15 months
and on 26 August 1997 it reported to the Dispute Settlement Body that a new regulation
had been signed on 19 August. (www.wto.org)
Question
Do you think US was right in doing what it did?
Ans. No, US was not right in doing what it did. Considering the international business
environment, US should apply same or similar policies for every nation and every
transaction. In this case, US was following a discriminated policy towards import of
gasoline under which they applied different rules for imported gasoline and
domestically refined gasoline. Venezuela and Brazil were correct in their approach.
If US has to apply a strict standards test for imported gasoline, it should also apply
the same for its own domestically produced gasoline or relax the rules from the
imported gasoline also.
Source: Vivek Mittal, Business Environment, First Edition, Excel Books, New Delhi, 2007

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