General Agreement on Trade and Tariffs

MILLAR KREKLEWETZ LLP is a boutique Canadian law firm with lawyers who have significant expertise in matters involving the General Agreement on Trade and Tariffs (the GATT)

The following is a short introduction to the GATT, and various aspects of its implementation under Canadas customs and trade laws.

Canada is a member of the GATT, which was originally signed in 1947 and subsequently continued as the GATT 1994 with the signing of the World Trade Organization Agreement, which also established the WTO.

The GATT

The GATT is at the heart of the world multilateral trading system. As its name implies, the GATT is aimed principally reducing tariffs and other barriers to trade (e.g., quotas) between GATT members, and the elimination of discriminatory treatment in international commerce. These objectives of the GATT influence domestic law of member countries, discussed below.

The focus of GATT is trade in goods; trade in services, intellectual property, and investment are covered under separate agreements (GATS, TRIPs, and TRIMs, respectively) which are also administered by the WTO.

The WTO

The WTO was established in 1994 under the WTO Agreement. The WTO is the primary institution of the world multilateral trading system. The WTO is responsible for the administration of the trade agreements above (i.e., GATT, GATS, TRIPs, and TRIMs), ongoing trade negotiations, dispute settlement, and enforcement. Currently, approximately 150 countries are members of the WTO.

Basic GATT Obligations

As a member country, Canada has bound itself to conduct its international trade according to the rules of the GATT. Canada, like other member countries, has the following basic obligations:

Tariff levels commitment to apply GATT-negotiated tariff levels (and associated rules for valuation and origin);
Most Favoured Nation (MFN) principle commitment to not discriminate in the treatment of like goods imported from different trading partners (subject to exception for free trade areas, such as NAFTA);
National Treatment commitment to not discriminate between like goods of domestic and foreign origins;
Subsidies and Countervailing Duties rules; and
Dumping and Anti-Dumping Duties rules.

These obligations are reflected in Canadian domestic customs laws, discussed below.

Canadian Domestic Law Customs Laws

In order to fulfill Canadas obligations under the GATT, Canadian domestic laws reflect the basic GATT obligations.

For example, the Canadian rules on tariffs, set out in the Customs Tariff, reflect the tariffs for goods negotiated under the GATT/WTO framework. These tariffs are the basic GATT MFN rate, but the Customs Tariff also sets out more preferential rates, which reflects the rates negotiated under free trade agreements such as NAFTA and arrangements with developing countries (e.g., the General System of Preferences rate).

As a further example, the Canadian rules for valuation for duty purposes reflect the requirements of GATTS Article VII, which requires member countries determine the value based on the actual value of the imported goods (a separate agreement on the implementation of Article VII further specifies that this value is to be the transaction value of the imported goods. For more information on investor disputes, please return to our Practice Area Index and select Valuation).

Canadian Domestic Law Trade Laws

The GATT permits countries to continue applying domestic trade remedies laws such as anti-dumping and countervailing duties to tackle the unfair trade practices of other countries. However, the GATT imposes general conditions before these measures can apply, and these conditions are reflected in Canadas trade laws under the Special Import Measures Act (SIMA).

For example, Article VI of GATT condemns dumping of products of one country into another country at less than the normal value of those products if it causes or threatens material injury to an established industry in that country or materially retards the establishment of a domestic industry.

This requirement for injury is reflected in the bifurcated approach to anti-dumping remedies under SIMA, where the Canadian Border Agency makes an initial determination of whether dumping has occurred, and then the Canadian International Trade Tribunal determines whether there is injury, threat of injury or retardation of an industry, and whether this is caused by the dumping (if so, then anti-dumping remedies may be applied to the imports of the offending goods).

Dispute Settlement

Finally, note that the nature of dispute settlement under the WTO concerns challenges by one state of another states fulfillment of its GATT obligations. These are state-to-state disputes, and as such, there is no formal mechanism through which private enterprises can challenge the activities of a country in which they operate.

In contrast, the North American Free Trade Agreement (the NAFTA) and bilateral investment treaties provide an avenue for private enterprises to challenge governmental actions that threaten their investments. For more information on investor disputes, please return to our Practice Area Index and select NAFTA Chapter 11 Disputes and NAFTA Investor Disputes.