INTERNATIONAL TRADE REGULATION

FINAL EXAMINATION


GOLDEN GATE UNIVERSITY SCHOOL OF LAW

PROFESSOR HELEN E. HARTNELL

MAY 9, 2001


INSTRUCTIONS


1. This is an open-book examination. You are permitted to refer to the casebook, class handouts, class notes, and an outline prepared by you or your study group. Students whose native language is not English may also use an English-foreign language dictionary. USE DURING THE EXAMINATION OF ANY OTHER MATERIALS IS PROHIBITED.

2. WRITE YOUR EXAMINATION NUMBER ON THE TOP OF THIS PAGE.

3. Your answers should be written in ink or typed. DO NOT USE PENCIL.

4. You have three hours to complete this examination, which consists of three questions. The suggested times correspond to the importance (and point value) of each question. Thus, a question where I suggest 60 minutes would be twice as important -- and thus worth twice as many points -- as a question where I suggest only 30 minutes.

5. AT THE END OF THE EXAM, TURN IN THIS EXAMINATION AND ALL SCRATCH PAPER USED.

 

 

 

QUESTION 1

Recommended Time: 75 Minutes

 

In April 2001, the European Union (EU) announced the following new laws pertaining to electronic products:

· Law on Waste from Electronic Equipment (WEE): The WEE Law set minimum standards regarding the amount of material in electronic equipment that must be reused or recycled. For example, under the WEE Law, 75% of the material used to manufacture a refrigerator would have to be reused or recycled.

· Restriction on the Use of Hazardous Substances (RHS): The RHS Law would ban the use of certain chemicals and "heavy" metals -- including lead, mercury and cadmium -- in any electronic equipment.

These new laws cover any product through which electricity flows, including battery-operated items. They have the broadest scope of any EU rule ever adopted, and cover a wide range of electronic goods, including toys, computers, toasters, washing machines, tools, televisions, and cameras.

The United States Trade Representative (USTR) has received a flood of calls and letters from worried U.S. manufacturers, who fear that these new EU rules will close off their European export markets. The USTR has asked you to write a memorandum analyzing the legal issues presented by these new EU laws. In particular, the USTR wants to explore the possibility of challenging these laws under GATT/WTO rules. Prepare a memorandum for the USTR in which you develop arguments that the U.S. (or any other country that manufactures electronic goods and exports them to the EU) could present to a WTO panel. Next, evaluate the arguments you have made, and advise the USTR of the likelihood of winning such a case against the EU under GATT/WTO rules. In your memorandum, be sure to discuss any relevant cases that have been decided by GATT/ WTO panels or by the Appellate Body (AB), in addition to the provisions of the pertinent treaties.

 

 

 

QUESTION TWO

Recommended Time: 60 Minutes

 

This question concerns pots and pans used for cooking ("cookware"). The cookware market in the U.S. has undergone dramatic change in the past 10 years. As in many industries, traditional domestic producers have lost market share to imported goods. The former leader of the U.S. cookware market, Paul Revere Inc. (PR), has seen its share of U.S. cookware sales decline from 65% in 1980, to 45% in 1990, to 20% in 2000, to 10% in the first quarter of 2001. Between. 1980 and 1995, PR continued to produce cookware at full capacity. However, since the WTO Agreement entered into effect in 1995, PR's factories have been operating below capacity. PR has sold off two of its five factories, and has laid off 15% of its employees since 1995. PR's profits declined steadily from 1990 to 1995, but have stabilized since then.

The traditional cookware produced by PR was made of stainless steel and had a copper bottom. U.S. imports of similar (but much cheaper) cookware from South Korea doubled between 1980 and 1990, but have been relatively stable since then. South Korean cookware accounted for 20% of the U.S. cookware market in 2000.

At the low end of the U.S. cookware market, imports of aluminum cookware from India have risen dramatically since the WTO Agreement entered into effect in 1995. Aluminum is much cheaper than the stainless steel and copper used by PR and by South Korean cookware manufacturers. However, aluminum is also less desirable, because it does not conduct heat as well as the materials used in PR's cookware or the newer metal alloys (described below), and because there is some evidence that aluminum cookware poses a health danger to consumers. India's share of the U.S. cookware market has risen from 3% in- 1995 to 15% in 2000.

The high end of the U. S. cookware market is occupied by two types of product: (1) traditional heavy cast iron ware that has been covered with enamel (e.g. Le Creuset), and (2) cookware made from lightweight and energy efficient new metal alloys (e.g. Caphalon). Most enamelware is imported from Europe. Enamelware's share of the U.S. market held relatively constant at around 20% from 1980 to 1995, but has declined since then, to 10% in 2000. In contrast, cookware using new metal alloys first appeared in 1990, and accounted for 35% of the U.S. cookware market in 2000.

PR seeks legal advice regarding possible remedies available to protect it from unfair import competition. Prepare a memorandum in which you outline a plan of action, lay out the legal arguments you would make on PR's behalf, and evaluate the strengths and weaknesses of your client's position. Be sure to explain what procedural steps you would take and what further information you might need to prepare your case.

 

 

 

QUESTION THREE

Total Recommended Time: 45 Minutes

 

Under the North American Free Trade Agreement (NAFTA), Canada, Mexico and the United States have each granted each other most favored nation treatment (MFN) and national treatment (NT) in regard to trade in goods. Assume for purposes of this question that these obligations are identical to the ones found in Articles I and III of the GATT treaty, to which all three countries are also members.

The NAFTA Agreement also provides for extensive liberalization of trade in services, including trucking (i.e. transportation of goods by road). The NAFTA Agreement requires that the U.S. grant Mexican and Canadian trucking service providers full access to U.S. roads. Owing to safety concerns, however, the U.S. has refused to grant such access to Mexican trucking service providers.

The NAFTA Agreement provides as follows:

Mexico filed suit against the U.S. under NAFTA dispute settlement rules, alleging violations of NAFTA Articles 1202(1) and 1203. In response, the U.S. argued that it is not obliged to accord such treatment to Mexican trucking services, since no "like circumstances" are involved. To back up this argument, the U.S. argued that Mexican trucking safety standards fall far below those of the U.S., and that Mexico is in violation of its obligation (under the NAFTA Agreement) to harmonize its trucking safety standards with those of the U.S.

Write the opinion for the NAFTA panel that is deciding this case. Analyze the issues raised by Mexico and by the U.S. under NAFTA Articles 1202(1) and 1203. Focus on the basic obligations contained in those Articles, and on the proper legal standard for determining whether "like circumstances" exist in regard to trade in services. Do not address other issues, such as whether the U.S. is exempt from its obligation to allow free trade in trucking services under a general exception clause like that contained in GATT Article XX. Wherever necessary, assume that NAFTA law is similar to GATT/WTO law.