international trade law

Problem Question Scenario:

Assume that the newly enacted Tariff Amendment Act 2010 of Australia has introduced a new retail excise tax on certain luxury products, including cars and jewellery. Accordingly, a 30 percent tax has been imposed on all vehicles worth over US$ 30,000 while cars priced at $30,000 or under are taxed at 10 percent. Arguably, the 90 percent of the imported cars from Japan fell into the high tax classification, whereas only 10 percent of domestic cars fell into that high tax classification. Japan asserts that ‘automobiles costing over $30,000 are ‘like products’ to automobiles costing less, since they have the same end use, basic physical characteristics, and tariff classification.’ Further, a mere difference in price between the imported and domestic products is not sufficient for those products to be considered unlike for the purposes of General Agreement on Tariffs and Trade (GATT). Australia disagrees with this approach, arguing that the tax could be imposed on the basis of a threshold of $30,000 as long as the tax is not applied so as to afford protection to domestic production. The purpose of Article III of GATT is not to prevent contracting parties from differentiating between products for policy purposes unrelated to the production of domestic production. Australia claims further that it did not intend to discriminate against Japan. Yet, Japan threatens to go for a legal battle.
To make matters worse, very recently the Director of Animal and Plant Quarantine of Australia has adopted another policy for the importation of bananas from Papua New Guinea. The policy provides that ‘the importation of bananas can only be permitted subject to the strict adherence to import conditions throughout the supply chain, the Quarantine Act 1908, and the application of phytosanitary measures as specified in the import proper risk assessment methods based on international standards.’ The assessment methods require proper investigation of the pre-harvest, harvest and post-harvest practices for the production of bananas in respective countries by a group of experts. The compliance of these requirements will be monitored by Australia through verification and audit of maturity testing and packinghouse practices. Consequently, ‘the computer model based warning systems must be used …to predict weather conditions suitable for potential infection events ensuring the targeted application of biological controls.’
Papua alleged that Australian measures are more trade-restrictive than required under the WTO Agreements, especially under SPS Agreement (WTO Agreement on the Application of Sanitary and Phytosanitary Measures) and TBT Agreement (Agreement on Technical Barriers to Trade) to achieve its appropriate level of phytosanitary protection, and are also inconsistent with its international obligation because they are not sufficiently supported by science. Papua therefore wants to initiate legal proceedings under the WTO dispute settlement system.

Answer the following:

1. What are possible legal issues raised in the above scenario from the perspective of International Trade Law (ITL)? Identify and examine briefly statutory and judicial authorities that could be relevant to adequately deal with those issues. (10 Marks)

2. Advise Australia, Japan as to:

2.1. Whether Australia can adopt such a tax measure and policy. What grounds does Japan need to establish in order to obtain possible remedies? Analyse these by referring to the interpretation of ‘like products’ and ‘less favourable treatment’ by the Appellate Body.

2.2. What are other issues that may also arise in evaluating legal issues and determining Australia’s obligation under ITL? Support your argument with special reference to relevant laws and judicial decisions.

3. Advise both Australia and Papua about their prospects of success in the WTO dispute settlement system. )