The purpose of this exercise is to simulate an international
trade negotiation designed to reduce trade restrictions among three
While the factual scenario is based upon real issues, this case
is hypothetical in terms of the fictional countries identified and
specific facts presented.
This case will include country teams, government teams, industry
association teams, a non-governmental organization, and various forums
including a WTO Dispute Resolution Panel.
The goals of this exercise include:
1) Development of research and investigation skills;
2) Development of analytical, planning, and negotiation strategy
3) Development of negotiation, mediation, and conflict resolution
4) Development of durable written agreements; and,
5) Development of planning
and presentation skills to various official governmental and WTO panels
It is important to carefully read the facts
presented, the negotiation instructions to the parties, and resource
materials as identified.
BACKGROUND, FACTS, AND ISSUES COMMON TO ALL PARTIES
Non-governmental Organizations: (NGO)
The grape producers in the United States believe
that Japan’s imposition of certain sanitary and phytosantiary (SPS)
standards which require the post harvest fumigation of U.S. grown grapes
with methyl bromide (MB) constitutes an unjustified non-tariff, trade
barrier. (The fumigation is required to eradicate pests that may be
present in the grapes.)
Not directly related to the trade issue is growing
international concern regarding the environmental impact of continued
methyl bromide use. International
environmental organizations seek the immediate phase-out of all methyl
bromide use. Organized labour groups have also documented adverse health
impacts to field workers exposed to methyl bromide when used in the soil
and crop cultivation process.
Trade and Tariffs
Trade is the act of the exchange of goods and services between
two or more countries. As a general economic principle, countries should
export those products which they can produce most inexpensively and
efficiently based upon the availability of natural resources, production
capabilities, and marketing efficiency.
Conversely, countries import those products for which consumer,
government, or industry demand surpass the internal production capacity
or efficiency of the importing nation.
Without an international trading system, countries would be
required to produce all goods and services necessary to support societal
needs and demands. Because
of limitations of resources or productive capacity, however, countries
would suffer in a non-trading economic system.
In an open trading system, countries can concentrate on the
production of goods and services based upon specialized resource or
A free trading system would allow for the importation of products
produced and marketed at the lowest price.
Because of the concern that a totally free and open trading
system might seriously jeopardize the survival of domestic producers,
some countries have maintained high tariffs to protect domestic
producers from foreign competition or to protect other identified
national interests (domestic employment, key production sectors,
national defense, etc.). In
addition, many countries still rely on tariff for a significant
percentage of government revenue.
The GATT and WTO system of rules and negotiating and dispute
settlement procedures is designed to promote international commerce by
gradually reducing or eliminating unnecessary barriers to international
trade while at the same time respecting national sovereignty and
legitimate governmental function.
Nontariff Barriers (NTBs)
other than tariffs that burden or restrict international trade. NTBs may
be financial (e.g., internal taxes and customs fees) or nonfinancial
(e.g., quantitative restrictions and excessive documentation
Rules and regulations governing human health, the environment,
and other recognized standards deemed essential for the protection of
national, industrial, or other interests may be nontariff barriers.
Sanitary and phytosantiary regulations Health
and safety standards affecting imports. ("Sanitary"
regulations are those applying to human and animal products; "phytosanitary"
regulations apply to plants and plant products.)
Such standards are established to ensure that animals and plants
and their products are safe for consumption and not damaging to the
environment and have been developed to protect domestic or importing
industries from recognized or identified contaminants, pests, or other
agents that may be contained in a foreign import including produce,
processed foods, timber, and other products.
Sanitary and phytosanitary regulations are permitted by the WTO
rules, but they must be applied only to the extent necessary, cannot
arbitrarily discriminate and must be based on sound technical and
scientific evidence. If such measures are imposed only to protect
domestic markets from foreign competition, however, they may constitute
illegal or unacceptable trade barriers under the GATT and WTO rules.
Under the GATT and WTO.
The World Trade
Organization (WTO), established in 1994, incorporates and extends the
body of agreements that constituted the former General Agreement on
Tariffs and Trade (GATT).
The special treatment of agriculture in the GATT was largely, if
not exclusively, a reflection of the power and influence of the
The special treatment afforded to agriculture under the GATT led
to a large number of disputes over the interpretation and application of
the GATT to agriculture (3).
At the launch of the Uruguay Round of the multilateral trade
negotiations and as early as 1982 at the OECD Ministerial Council, the
parties adopted the position that “agricultural trade should be more
fully integrated into and within the open and multilateral trading
A separate Agreement on Agriculture was finally achieved in 1993
and allowed for the conclusion of the Uruguay Round of GATT
from the Agreement on Agriculture discussed above, the Uruguay Round
negotiators also approved an Agreement on the Application of Sanitary
and Phytosanitary Measures (the “SPS Agreement”),
Below is a brief Summary of the SPS Agreement taken
from the WTO website; for further details see the text of the agreement.
on Sanitary and Phytosanitary Measures
agreement concerns the application of sanitary and phytosanitary
measures - in other words food safety and animal and plant health
regulations. The agreement recognizes that governments have the right to
take sanitary and phytosanitary measures but that they should be applied
only to the extent necessary to protect human, animal or plant life or
health and should not arbitrarily or unjustifiably discriminate between
Members where identical or similar conditions prevail.
order to harmonize sanitary and phytosanitary measures on as wide a
basis as possible, Members are encouraged to base their measures on
international standards, guidelines and recommendations where they
Members may maintain or introduce measures which result in higher
standards if there is scientific justification or as a consequence of
consistent risk decisions based on an appropriate risk assessment. The
Agreement spells out procedures and criteria for the assessment of risk
and the determination of appropriate levels of sanitary or phytosanitary
is expected that Members would accept the sanitary and phytosanitary
measures of others as equivalent if the exporting country demonstrates
to the importing country that its measures achieve the importing
country's appropriate level of health protection. The agreement includes
provisions on control, inspection and approval procedures.
purposes of this simulation, it shall be assumed that parties can resort
to the procedures in WTO Dispute Settlement Understanding (DSU) when
they believe that another government’s measures are inconsistent with
its obligations or impair benefits to which they are entitled.
Relevant provisions of the DSU are attached at appendix B.
Methyl Bromide Use.
Agricultural producers and
exporters in many nations have developed a critical reliance on the use
of a pesticide (biocide) called Methyl-Bromide (MB).
MB is used in the production of many agricultural crops
(tomatoes, grapes, strawberries, etc.)
as a pre-plant soil fumigant. The biocide is injected as a
liquid gas into the soil before planting as a means of eradicating plant
nematodes, weeds, and other organisms. After injection, the liquid gas
converts to a gaseous compound that eventually vents into the earth’s
atmosphere where the bromine works as an efficient ozone depleter.
Because of its capacity to deplete the ozone layer, MB has been
included under the Montreal Protocol on Substances that Deplete the
Ozone Layer and is targeted for elimination according to a schedule set
forth in the Protocol. The phase-out of most MB use will be achieved
similar to the phased elimination of Chloro-Fluoro Carbons (CFCs).
Environmental organizations and labor organizations have
advocated the immediate or more rapid phase-out and elimination of MB
because of concern for the earth’s ozone layer and the attendant risks
to human health and safety posed by the chemical’s continued use.
In addition to the use of MB in agricultural production, MB is
also utilized as a post-harvest
fumigant and is applied to crops after harvest to eradicate
pests prior to shipment to market. Some
countries (including the
The application of MB after the harvest of tomatoes and grapes is
considered to reduce the products shelf life by as much as 5 days to one
week. In addition, the preparation of a crop for fumigation takes one
day and the post-fumigation ventilation requires another full day.
This shelf life reduction when added to the necessary
transportation days to deliver products to foreign markets significantly
reduces the marketability of the crops and results in substantial waste
and a consequent diminished value of the product for export.
For purposes of this
negotiation simulation, we will deal ONLY with the post-harvest
fumigation of agricultural products including fumigations required as a
condition of import by countries who are parties to these negotiations.
Assume the following
4) Under existing sanitary
and phytosanitary requirements, the
Japanese government requires the post harvest MB fumigation of
US-produced grapes and oranges to protect against aphids, nematodes,
Mediterranean fruit flies, and other pests.
6) Assume that aphid
damage is common in the production of US produced grapes, but is
adequately controlled with the use of various organophosphate pesticides
during production. Similar
aphid species have been present in both
7) Fruit flies have not
been discovered in
8) Anecdotal reports have
suggested that the Mediterranean fruit fly has appeared in Chilean
fruit trees. US growers in particular are worried about the importation
of fruit flies on Chilean
grapes and other regional products.
9) The post-harvest
fumigation of crops accounts for approximately 7% of MB use in the
organizations have targeted the agricultural industry in the
Goals and Objectives
Each party is expected to identify its unique and shared
interests vis-à-vis the other parties, and to work to achieve a
negotiated resolution of the dispute.
Because parties will receive separate, confidential instructions,
it should not be assumed that all interests of all parties have been
identified in detail in the outline of facts.
It is fair to assume that
parties to trade negotiations generally seek to reduce trade barriers
that restrict or limit their ability to export products to buyers in
other countries and seek to impose and maintain barriers that will serve
to protect domestic producers from foreign competition.
You may be the sole party representative or you may be part of a
team representing one of the parties. If part of a team, it is important
to work first to build a unified strategy among your team. You may want
to divide subject areas for research, contacts with other parties, or
trade-off roles as lead negotiator for the party.
As part of the process of negotiating and protecting your
principal’s interests, you must effectively identify the interests of
the other parties including what other interest groups might be
contacted, mobilized, or influenced to make a proposed compromise or
settlement more acceptable to one or more parties.
In international negotiations, negotiators often participate with
specific instructions from “home” and with varying degrees of
authority or flexibility to bind their government or organization to
extraordinarily wide-ranging or creative solutions. A process of
communication with the home government, industry, or party officials is
to be expected prior to entry into an enforceable commitment by
The goal of each party should be
to enhance and expand its interests (exports, sales, etc.) while
minimizing costs, and protecting vital national, industry, and consumer
Issues and Instructions
party assignments are made, each party is to engage in further research
and investigation of the issues presented to prepare for bilateral and
multi-lateral negotiations, WTO Dispute Settlement consultations and
panels, and press conferences.
party will receive separate CONFIDENTIAL briefing materials and
instructions to guide you in the negotiations;
3) Parties will be paired for purpose of bilateral
(informal) negotiations first. Then the exercise will expand to
incorporate other parties;
4) Parties may invoke the procedures of the WTO
Dispute Settlement Understanding through the consultation phase, because
of lack of time a Panel may not be convened;
5) Expert testimony, scientific and technical data,
and information pertinent to the negotiations and dispute settlement
proceeding may be shared with the parties.
6) The official language of documents submitted to
the WTO and all other bodies shall be English. The parties may structure
various negotiations and hearings to incorporate interpreters to
facilitate multilingual proceedings;
7) If not otherwise designated, the instructor will
serve as home country government, industry CEO, or organizational leader
for purposes of determining the parameters of authority of the parties.
Where possible, the parameters of authority will be outlined in
the individual party instructions.
of Resource Materials:
1) Michael Johnson, The WTO Dispute Resolution
System: How It Works, included in
3) The WTO Agreement on the Application of Sanitary
and Phytosanitary Measures
4) The General Agreement on Trade and Tariffs
5) EPA regulation and questionnaire on MB