Special Economic Zones and WTO law © Prof.Dr.Werner Meng.
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Transcript of Special Economic Zones and WTO law © Prof.Dr.Werner Meng.
Special Economic Special Economic Zones and WTO Zones and WTO
lawlaw
© Prof.Dr.Werner Meng © Prof.Dr.Werner Meng
(c) Prof.Dr.Werner (c) Prof.Dr.Werner Meng Meng
LiteratureLiterature
Creskoff, S., Walkenhorst, P., Achieving WTO Compliance Creskoff, S., Walkenhorst, P., Achieving WTO Compliance for Special Economic Zones in Developing Countries, for Special Economic Zones in Developing Countries, World Bank, PremNotes Nr. 134 (2009)World Bank, PremNotes Nr. 134 (2009)
id., Implcations of WTO Disciplines for Special Economic id., Implcations of WTO Disciplines for Special Economic Zones in Developing Countries, World Bank Policy Zones in Developing Countries, World Bank Policy Research Working Paper 4892 (2009)Research Working Paper 4892 (2009)
Akinci, G., Crittle, J, Special Economic Zones, World Bank Akinci, G., Crittle, J, Special Economic Zones, World Bank (2008)(2008)
Engman, M, Onodera, O, Pinali, E., Export Processing Engman, M, Onodera, O, Pinali, E., Export Processing Zones, OECD (2007)Zones, OECD (2007)
(c) Prof.Dr.Werner (c) Prof.Dr.Werner Meng Meng
ExamplesExamples
Kaliningrad (Russia)Kaliningrad (Russia)
Shenzen, Macao, Hongkong etc. and now Shanghai (China)Shenzen, Macao, Hongkong etc. and now Shanghai (China)
Over 2300 SEZ in 119 developing countriesOver 2300 SEZ in 119 developing countries
in China 660 + 1350 (local) zonesin China 660 + 1350 (local) zones
In Vietnam over 125 In Vietnam over 125
(c) Prof.Dr.Werner (c) Prof.Dr.Werner Meng Meng
Different Variations of SEZDifferent Variations of SEZ
Export processing zoneExport processing zone
Special industrial zone (manufacturing SEZ)Special industrial zone (manufacturing SEZ)
Technology parksTechnology parks
Recreation zonesRecreation zones
Port SEZs (sea, air, rivers)Port SEZs (sea, air, rivers)
Free Trade zoneFree Trade zone
(c) Prof.Dr.Werner (c) Prof.Dr.Werner Meng Meng
Different advantages in SEZDifferent advantages in SEZ
Less taxes and customs dutiesLess taxes and customs duties
Less state controlLess state control
Less bureaucracyLess bureaucracy
More possibilities of doing businessMore possibilities of doing business
(c) Prof.Dr.Werner (c) Prof.Dr.Werner Meng Meng
SEZ in WTO countriesSEZ in WTO countries
WTO law restrains the freedom of states to set up and WTO law restrains the freedom of states to set up and structure SEZsstructure SEZs
SEZs are not prohibitedSEZs are not prohibited
But they are conditioned by WTO lawBut they are conditioned by WTO law
SEZs may thus be subject to disputes and WTO dispute SEZs may thus be subject to disputes and WTO dispute settlementsettlement
States will have to stand checks of their SEZ policies by WTO States will have to stand checks of their SEZ policies by WTO organsorgans
(c) Prof.Dr.Werner (c) Prof.Dr.Werner Meng Meng
WTO Problems?WTO Problems?
Subidies for activities in the SEZ (SCMA conformity?)Subidies for activities in the SEZ (SCMA conformity?)
Discrimination between foreigners (MFN principle - Most Discrimination between foreigners (MFN principle - Most favored nation principle, Art. I GATT)favored nation principle, Art. I GATT)
Discrimination between foreigners and nationals (NT - Discrimination between foreigners and nationals (NT - national Treatment principle Art. III GATT)national Treatment principle Art. III GATT)
Elimination of quantitative restrictions (Art. XI)Elimination of quantitative restrictions (Art. XI)
Transparency (Art. X GATT)Transparency (Art. X GATT)
The TRIMS Agreement, Art. 2 with Art. III 4 and XI 1 GATTThe TRIMS Agreement, Art. 2 with Art. III 4 and XI 1 GATT
Similar provisions in the GATS agreementSimilar provisions in the GATS agreement
(c) Prof.Dr.Werner (c) Prof.Dr.Werner Meng Meng
SCMASCMAGenerally prohibited subsidies (Art. 3)Generally prohibited subsidies (Art. 3)
• Export subsidies (contingent in law or in fact upon export Export subsidies (contingent in law or in fact upon export performance) see Annex I to SCMAperformance) see Annex I to SCMA
• Subsidies contingent upon import substitution or domestic content Subsidies contingent upon import substitution or domestic content requirements (the use of domestic over imported goods)requirements (the use of domestic over imported goods)
Other subsidies are countervailable (actionable, Art. 5-7)Other subsidies are countervailable (actionable, Art. 5-7)
If granted by states or on their behalfIf granted by states or on their behalf
If subsidies are specific (Art. 2)If subsidies are specific (Art. 2)
not: generally applicable tax incentives for the national not: generally applicable tax incentives for the national economyeconomy
(c) Prof.Dr.Werner (c) Prof.Dr.Werner Meng Meng Export Subsidies - Export Subsidies -
ExamplesExamplesContingent on exportation, in law or in fact (Art. 3.1 (a) Contingent on exportation, in law or in fact (Art. 3.1 (a) SCMA)SCMA)
List of examples in Annex I to SCMAList of examples in Annex I to SCMA
Direct subsidiesDirect subsidies
Bonus through currency retention schemesBonus through currency retention schemes
Preferential transport and freight chargesPreferential transport and freight charges
Preferential products and services (e.g. transport) for exportPreferential products and services (e.g. transport) for export
special direct tax deductions for exportsspecial direct tax deductions for exports
Exemption or remission of indirect taxes on exportsExemption or remission of indirect taxes on exports
Exemption, remission or deferral of prior-stage cumulative taxes for pre-Exemption, remission or deferral of prior-stage cumulative taxes for pre-products or -servicesproducts or -services
Export guarantees or insurances at inadequate premium conditionsExport guarantees or insurances at inadequate premium conditions
Export credits below the market conditionsExport credits below the market conditions
(c) Prof.Dr.Werner (c) Prof.Dr.Werner Meng Meng
Import substitutionImport substitution
Advantages contingent on the use of domestic over imported Advantages contingent on the use of domestic over imported products (Art. 3.1 (b) SCMA)products (Art. 3.1 (b) SCMA)
(c) Prof.Dr.Werner (c) Prof.Dr.Werner Meng Meng
Relevant exceptionsRelevant exceptions
SCMA Note 1 („shall not be deemed to be a subsidy“)SCMA Note 1 („shall not be deemed to be a subsidy“)
the exemption of an exported product from duties or the exemption of an exported product from duties or taxestaxes
borne by the like product when destined for local consumptionborne by the like product when destined for local consumption
e.g. import duties, indirect taxese.g. import duties, indirect taxes
for products and pre-productsfor products and pre-products
produced or stored in a countryproduced or stored in a country
the remission of such duties or taxes the remission of such duties or taxes
in amounts not in excess of those which have accruedin amounts not in excess of those which have accrued
(c) Prof.Dr.Werner (c) Prof.Dr.Werner Meng Meng
Other exceptions in SCMAOther exceptions in SCMA
Poor countries (Art. 27 SCMA): Poor countries (Art. 27 SCMA):
27.2 a and Annex VII a: Least developed countries27.2 a and Annex VII a: Least developed countries
27.2 a and Annex VII b: Countries with income per capita 27.2 a and Annex VII b: Countries with income per capita of less then 1000 $ per annumof less then 1000 $ per annum
27.4: countries with extended transition period for export 27.4: countries with extended transition period for export subsidiessubsidies
Grandfather rights (Art. 28 SCMA)Grandfather rights (Art. 28 SCMA)
(c) Prof.Dr.Werner (c) Prof.Dr.Werner Meng Meng
Art. I GATTArt. I GATT
Most - favored - nation principleMost - favored - nation principle
No discrimination btw. foreign countriesNo discrimination btw. foreign countries
concerning imports or exports of goodconcerning imports or exports of good
relating e.g. to duties or sales taxesrelating e.g. to duties or sales taxes
(c) Prof.Dr.Werner (c) Prof.Dr.Werner Meng Meng
Art. III GATTArt. III GATT
No discrimination btw. national and foreign goodsNo discrimination btw. national and foreign goods
Once duties are paid and other formalities settledOnce duties are paid and other formalities settled
e.g. requirement to use national goods instead of foreign e.g. requirement to use national goods instead of foreign ones (TRIMS agreement)ones (TRIMS agreement)
making importation conditional on the amount of exports making importation conditional on the amount of exports (TRIMS)(TRIMS)
export restrictions based upon a certain volume or value export restrictions based upon a certain volume or value of local productionof local production
(c) Prof.Dr.Werner (c) Prof.Dr.Werner Meng Meng
Exemption of import dutiesExemption of import dutiesNon - discriminatory btw. foreign countries (Art. I GATT)Non - discriminatory btw. foreign countries (Art. I GATT)
Not only for products that are finished and then exported (3 Not only for products that are finished and then exported (3 SCMA)SCMA)
in foreign countriesin foreign countries
in the host statein the host state
See the customs regime for the Kaliningrad regionSee the customs regime for the Kaliningrad region
customs free importationcustoms free importation
but later payment of the import customs if goods are exported, but later payment of the import customs if goods are exported, to Russia (customs for pre-products) as well as to third to Russia (customs for pre-products) as well as to third countries (customs for the finished product)countries (customs for the finished product)
no discrimination by the origin of the imported productsno discrimination by the origin of the imported products
(c) Prof.Dr.Werner (c) Prof.Dr.Werner Meng Meng
Treatment of investmentsTreatment of investments
If regulated in an investment treaty (bi- or multilateral)If regulated in an investment treaty (bi- or multilateral)
duty not to discriminate btw. foreign sources of investmentduty not to discriminate btw. foreign sources of investment
privileges of all foreign investments in SEZs are admissibleprivileges of all foreign investments in SEZs are admissible
(c) Prof.Dr.Werner (c) Prof.Dr.Werner Meng Meng
Questionable casesQuestionable cases
Tax privileges for production equipment ?Tax privileges for production equipment ?
Subsidies for infrastructure in the SEZSubsidies for infrastructure in the SEZ
Cheaper materials or pre-products for production ?Cheaper materials or pre-products for production ?
Governmental improvement of infrastructure?Governmental improvement of infrastructure?
Aim of the protection?Aim of the protection?Contingency?Contingency?Factual Effects?Factual Effects?
(c) Prof.Dr.Werner (c) Prof.Dr.Werner Meng Meng
Control mechanismsControl mechanisms
TPRM - Trade Policy review mechanismTPRM - Trade Policy review mechanism
Notification requirements (Art. 25 SCMA)Notification requirements (Art. 25 SCMA)
Surveillance (Art. 26 SCMA)Surveillance (Art. 26 SCMA)
Transparency Requirement (Art. X GATT)Transparency Requirement (Art. X GATT)
Dispute Settlement ProcedureDispute Settlement Procedure