1 1 1 1 1 1 1 1 1 1

ECONOMICS

PROJECT REPORT ON:

WTO & DISPUTE RESOLUTION MECHANISM

SUBMITTED BY: NAME: NIRMAL MAYUR PANDYA ROLL NO: 138

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INDEX
SR. NO 1 2 TOPIC INTRODUCTION TO WTO INTRODUCTION TO WTO DISPUTE RESOLUTION 3 O ER IEW O! THE DISPUTE 8 PG. NO. REMARKS 3 5

SETTLEMENT UNDERSTANDING " THE WTO#S DISPUTE SETTLEMENT SYSTEM IN OPERATION 5 WTO DISPUTE PANELS AND THE 2$ 15

BALANCE BETWEEN TRADE

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INTRODUCTION TO WTO In 1947, 23 countries came into an agreement in Geneva on multilateral Trade. This agreement was termed as The General Agreement on Tariffs and Trade GATT! which came into effect on 1st of "an. 194#. These countries sought to e$%and multilateral trade among them. India was one of the founder mem&ers of GATT. 'an( countries signed this agreement in 1994 which resulted no. of mem&ers of GATT to 124.

The agreement consists of two main themes)*

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1! The agreement formulated some regulations which were to &e o&served &( the mem&er countries. 2! The mem&er countries were to com%l( with was the 'ost +avoured ,ation '+,! clause. GATT was not an organi-ation &ut was a

multilateral treat(, it had no legal status. It %rovided a %latform to its mem&er nations to negotiate and enlarge their trade.

OBJECTI ES O! GATT

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The %rimar( o&.ective of GATT was to e$%and international trade &( /i&eralising trade to &ring economic %ros%erit(. GATT mentions the following im%ortant o&.ectives. 1! 0aising standard of living of the mem&er countries. 2! 1nsuring full em%lo(ment through a stead( growth of effective demand and real income. 3! 2evelo%ing o%timum utilisation of resources of the world. 4! 1$%ansion in %roduction e$change of goods and services on a glo&al level. PRINCIPLES 1! +ollow the 'ost +avoured ,ation '+,! clause.

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2! 3arr( on trade in a non discriminator( wa(. 3! Grant %rotection to domestic industries. 4! 3ondemn the use of 4uantitative restrictions or 4uotas. 5! /i&eralise tariff and non*tariff measures through multilateral negotiations. INTRODUCTION TO WTO DISPUTE RESOLUTION The 6T78s 2is%ute 9ettlement :nderstanding 29:! evolved out of the ineffective means used under the GATT for settling disagreements among mem&ers. :nder the GATT, %rocedures for settling dis%utes were ineffective and time consuming since a single nation, including the nation who8s actions were the su&.ect of com%laint, could effectivel( &loc; or dela( ever( stage of the dis%ute resolution %rocess. 1! It remains to &e seen

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whether countries will com%l( with the new 6T7 dis%ute settlement mechanism, &ut thus far the %rocess has met with relative success. The 29: was designed to deal with the com%le$it( of reducing and eliminating non*tariff &arriers to trade. A non*tariff trade &arrier can &e almost an( government %olic( or regulation that has the effect of ma;ing it more difficult or costl( for foreign com%etitors to do &usiness in a countr(. In the earl( (ears of the GATT, most of the %rogress in reducing trade &arriers focused on trade in goods and in reducing or eliminating the tariff levels on those goods. 'ore recentl(, tariffs have &een all &ut eliminated in a wide variet( of sectors. This has meant that non*tariff trade &arriers have &ecome more im%ortant since, in the a&sence of tariffs, onl( such &arriers significantl( distort the overall %attern of trade* li&erali-ation. +re4uentl(, such non*tariff trade &arriers are the inadvertent

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conse4uence of well meaning attem%ts to regulate to ensure safet( or %rotection for the environment, or other %u&lic %olic( goals. In other cases, countries have &een sus%ected of deli&eratel( creating such regulations under the guise of regulator( intent, &ut which have the effect of %rotecting domestic industries from o%en international com%etition, to the detriment of the international free*trade regime. The 6T78s strengthened dis%ute resolution mechanism was designed to have the authorit( to sort out this <fine line &etween national %rerogatives and unacce%ta&le trade restrictions< 9everal of the su%%lemental agreements to the GATT created during the :rugua( 0ound, such as the 9=9 Agreement, sought to s%ecif( the conditions under which national regulations were %ermissi&le even if the( had the effect of restraining trade. The :nited 9tates, %erha%s more than an( other countr(, has found

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itself on &oth sides of this delicate &alance. In 19##, it was the :nited 9tates who %ushed for strengthening the 2is%ute 9ettlement %rovisions of the GATT during the :rugua( 0ound, in %art &ecause 3ongress was not convinced that, <the GATT, as it stood, could offer the :nited 9tates an e4uita&le &alance of advantage.< The concern was that formal concessions granted to :.9. e$%orts going into other countries would &e eroded &( hidden &arriers to trade. 7n the other hand, the :nited 9tates har&ors reservations in regards to its sovereignt(, with much of the negative reaction to the 6T7 itself centered around the concern that :.9. laws and regulations ma( &e reversed &( the 29: %anels or the A%%ellate >od(. 3ritics argued that the 6T7 would <com%el 3ongress and our states to a&andon man( health and environmental standards< if the( were at odds with international trade rules. =articularl(, these critics noted that the

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:nited 9tates would not have a veto in the 6T7 and that each nation would have an e4ual sa( in the 29>, which ultimatel( votes to ado%t or re.ect %anel re%orts. The( further noted that the A%%ellate >od( and the dis%ute settlement %anels vote in secret, and that the( could authori-e nations to retaliate against violations of the trade agreements with unilateral sanctions. It was argued &( some that the cumulative effect of 6T7 dis%ute %anel decisions would &e to erode the sovereignt( of the :nited 9tates. 7ne of the %ur%oses of this review is to assess the validit( of this claim in light of the actual functioning of the 6T7 s(stem over the last three (ears.

O ER IEW

O!

THE

DISPUTE

SETTLEMENT

UNDERSTANDING:

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The 2is%ute 9ettlement :nderstanding 29:!, formall( ;nown as the :nderstanding on 0ules and =rocedures Governing the 9ettlement of 2is%utes, esta&lishes rules and %rocedures that manage various dis%utes arising under the 3overed Agreements of the +inal Act of the :rugua( 0ound. All 6T7 mem&er nation*states are su&.ect to it and are the onl( legal entities that ma( &ring and file cases to the 6T7. The 29: created the 2is%ute 9ettlement >od( 29>!, consisting of all 6T7 mem&ers, which administers dis%ute settlement %rocedures. It %rovides strict time frames for the dis%ute settlement %rocess and esta&lishes an a%%eals s(stem to standardi-e the inter%retation of s%ecific clauses of the agreements. It also %rovides for the automatic esta&lishment of a %anel and automatic ado%tion of a %anel re%ort to %revent nations from sto%%ing action &( sim%l( ignoring com%laints. 9trengthened rules and %rocedures

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with strict time limits for the dis%ute settlement %rocess aim at %roviding <securit( and %redicta&ilit( to the multilateral trading s(stem< and achieving <?a@ solution mutuall( acce%ta&le to the %arties to a dis%ute and consistent with the covered agreements.< The &asic stages of dis%ute resolution covered in the understanding include consultation, good offices, conciliation and mediation, a %anel %hase, A%%ellate >od( review, and remedies. C%&'()*+*,%& A mem&er*countr( ma( re4uest consultations when it considers another mem&er* countr( to have <infringed u%on the o&ligations assumed under a 3overed Agreement.< If the res%ondent fails to res%ond within ten da(s or enter into consultations within thirt( da(s, the com%laint <ma( %roceed directl( to re4uest the esta&lishment of a %anel.<

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G%%- O..,/0'1 C%&/,),+*,%& +&- M0-,+*,%& :nli;e consultation in which <a com%lainant has the %ower to force a res%ondent to re%l( and consult or face a %anel, good offices, conciliation and mediation <are underta;en voluntaril( if the %arties to the dis%ute so agree.< ,o re4uirements on form, time, or %rocedure for them e$ist. An( %art( ma( initiate or terminate them at an( time. The com%laining %art( ma( re4uest the formation of %anel, <if the %arties to the dis%ute .ointl( consider that the good offices, conciliation or mediation %rocess has failed to settle the dis%ute.< Thus the 29: recogni-ed that what was im%ortant was that the nations involved in a dis%ute come to a wor;a&le understanding on how to %roceed, and that sometimes the formal 6T7 dis%ute resolution %rocess would not &e the &est wa( to find such an accord. 9till, no nation could sim%l( ignore its o&ligations under

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international trade agreements without ta;ing the ris; that a 6T7 %anel would ta;e note of its &ehavior. P+&0) P2+'0 If consultation, good offices, conciliation or mediation fails to settle the dis%ute, the com%laining %art( ma( re4uest the formation of %anel. The 29> shall form a %anel, <unless at that meeting the 29> decides &( consensus not to esta&lish a %anel.< <=anels shall &e com%osed of well* 4ualified governmental andAor non*governmental individuals< <with a view to ensuring the inde%endence of the mem&ers,< and whose governments are not the %arties to the dis%ute, <unless the %arties to the dis%ute agree otherwise.< Three %anelists com%ose a %anel unless the %arties agree to have five %anelists.

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The 9ecretariat %ro%oses nominations for %anels that the %arties shall not o%%ose <e$ce%t for com%elling reasons.< If the %arties disagree on the %anelists, u%on the re4uest of either %art(, <the director*general in consultation with the chairman of the 29> and the chairman of the relevant council or committees< shall a%%oint the %anellists. 6hen multi%le %arties re4uest the esta&lishment of a %anel with regard to the same matter, the 29: suggests a strong %reference for a single %anel to &e esta&lished <to e$amine these com%laints ta;ing into account the rights of all mem&ers concerned.< The 29: gives an( mem&er that has <a su&stantial interest in a matter &efore a %anel< and notifies <its interest to the 29><! an o%%ortunit( <to &e heard &( the %anel and to ma;e written su&missions to the %anel.<

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<The %anel shall su&mit its findings in the form of written re%ort to the 29>.< As a general rule, it shall not e$ceed si$ months from the formation of the %anel to su&mission of the re%ort to the 29>. In interim review stage, the %anel su&mits an interim re%ort to the %arties. The %anel <shall hold a further meeting with the %arties< if the %arties %resent written comments. If no comments are %rovided &( the %arties within the comment %eriod, the <re%ort shall &e the final re%ort and circulated %rom%tl( to the mem&ers.< 6ithin si$t( da(s after the re%ort is circulated to the mem&ers, <the re%ort shall &e ado%ted at a 29> meeting unless a %art( to the dis%ute formall( notifies the 29> of its decision to a%%eal or the 29> decides &( consensus not to ada%t the re%ort.< A330))+*0 B%-4 R05,06

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The 29> esta&lishes a standing A%%ellate >od( that will hear the a%%eals from %anel cases. The A%%ellate >od( <shall &e com%osed of seven %ersons, three of whom shall serve on an( one case.< Those %ersons serving on the A%%ellate >od( are to &e <%ersons of recogni-ed authorit(, with demonstrated e$%ertise in law, international trade and the su&.ect matter of the 3overed Agreements generall(.< The >od( shall consider onl( <issues of law covered in the %anel re%ort and legal inter%retations develo%ed &( the %anel.< Its %roceedings shall &e confidential, and its re%orts anon(mous. This %rovision is im%ortant &ecause, unli;e .udges in the :nited 9tates, the mem&ers of the a%%ellate %anel do not serve for life. This means that if their decisions were %u&lic, the( would &e su&.ect to %ersonal retaliation &( governments unha%%( with decisions, thus corru%ting the fairness of the %rocess. 2ecisions made &( the A%%ellate

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>od( <ma( u%hold, modif(, or reverse the legal findings and conclusions of the %anel.< The 29> and the %arties shall acce%t the re%ort &( the A%%ellate >od( without amendments <unless the 29> decides &( consensus not to ado%t the A%%ellate >od( re%ort within thirt( da(s following its circulation to the mem&ers.< R070-,0' There are conse4uences for the mem&er whose measure or trade %ractice is found to violate the 3overed Agreements &( a %anel or A%%ellate >od(. The dis%ute %anel issues recommendations with suggestions of how a nation is to come into com%liance with the trade agreements. If the mem&er fails to do so within the determined <reasona&le %eriod of time,< the com%lainant ma( re4uest negotiations for com%ensation. 6ithin twent( da(s after the e$%iration of the reasona&le %eriod of time, if

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satisfactor( com%ensation is not agreed, the com%laining %art( <ma( re4uest authori-ation from the 29> to sus%end the a%%lication to the mem&er concerned of concessions or other o&ligations under the 3overed Agreements.< 0etaliation shall &e first limited to the same sector s!. If the com%laining %art( considers the retaliation insufficient, it ma( see; retaliation across sectors. The 29> <shall grant authori-ation to sus%end concessions or other o&ligations within thirt( da(s of the e$%ir( of the reasona&le time unless the 29> decides &( consensus to re.ect the re4uest.< The defendent ma( o&.ect to the level of sus%ension %ro%osed. <The original %anel, if mem&ers are availa&le, or an ar&itrator a%%ointed &( the director*general< ma( conduct ar&itration. A89,*8+*,%&

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'em&ers ma( see; ar&itration within the 6T7 as an alternative means of dis%ute settlement <to facilitate the solution of certain dis%utes that concern issues that are clearl( defined &( &oth %arties.< Those %arties must reach mutual agreement to ar&itration and the %rocedures to &e followed. Agreed ar&itration must &e notified to all mem&ers %rior to the &eginning of the ar&itration %rocess. Third %arties ma( &ecome %art( to the ar&itration <onl( u%on the agreement of the %arties that have agreed to have recourse to ar&itration.< The %arties to the %roceeding must agree to a&ide &( the ar&itration award. <Ar&itration awards shall &e notified to the 29> and the 3ouncil or 3ommittee of an( relevant agreement where an( mem&er ma( raise an( %oint relating thereto.<

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THE WTO#S DISPUTE SETTLEMENT SYSTEM IN OPERATION ,ow that the 6T7 2is%ute 9ettlement %rocedures have &een in use for three (ears, it is %ossi&le to ma;e a tentative anal(sis of the im%act of this institutional evolution of the international trading s(stem. A rich variet( of cases have &een addressed &( the 6T7 dis%ute settlement %rocedures. 9ee +igure 1! These include com%laints against countries with economies as small as Guatemala, and as large as the 1uro%ean :nion. The( have also targeted countries at vastl( different stages of develo%ment, including countries li;e India at one end of the s%ectrum and the :nited 9tates and "a%an on the other.

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!,:(80 1 WTO DISPUTE CASES BY INDUSTRY I&-('*84 Agricultural =roducts Alcoholic and other >everages Te$tile and 3lothing Animal 9;in =roducts 1lectronics Telecommunications Automo&iles Aircraft 9atellite 9(stems 3ement =roducts N(7908 %. /+'0' 32 B 1C 2 3 3 5 2 1 1

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3hemical =roducts =harmaceutical =roducts 7ther Industrial =roducts

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,ote) Among eight(*three distinct matters, including settled and inactive casesD a&ove statistics include five cases of dis%utes involving more than two industries.

In the entire fort(*seven (ears of the GATT, onl( some 2CC cases were dis%uted. In the first three (ears of the 6T7, 11# com%laints have &een &rought, dealing with eight(*three distinct matters. ,ine of these cases have gone through the entire %rocess, resulting in the ado%tion of a%%ellate re%orts &( the 29>. The increased use of the dis%ute settlement %rocedures under the 6T7 suggests that nations see value in the reforms that were im%lemented, and that the( have increased confidence that other

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nations will a&ide &( their trade o&ligations if the 29> finds them to &e in violation of s%ecific %rovisions. 2ue to the wide range of to%ics addressed &( the dis%ute settlement %anels, it is difficult to ma;e generali-ations a&out the overall im%act of the 29:. ,evertheless, a few earl( trends are evident. The ma.orit( of com%laints have &een &rought &( develo%ed countries against other develo%ed countries, with the ne$t largest categor( &eing com%laints &( develo%ed countries against develo%ing nations. Eowever, at least twent(* five com%laints have &een initiated &( develo%ing countries. 9ee +igure 2! !,:(80 2 CASE CHARACTERISTICS BY COUNTRY

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C%73)+,&+&*' 2evelo%ed 3ountr( against 2evelo%ing 3ountr( 2evelo%ed 3ountr( against 2evelo%ed 3ountr( 2evelo%ing 3ountr( against 2evelo%ed 3ountr( 2evelo%ing 3ountr( against 2evelo%ing 3ountr(

!80;(0&/,0' 7+**08 27 3B 1B 9

94

,ote) +our matters were more than dou&l( counted &ecause the suits were &rought &( multi%le com%lainants.

These com%laints have dealt with traditional sectors such as trade in goods, manufactures, and agricultural %roducts, &ut the( have also dealt with newer trade issues such as intellectual %ro%ert( rights. 9ee +igure 3!

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!,:(80 3 NEW AREAS BEGIN TO EMERGE S0/*%8 'anufacturing Agricultural General Goods Intellectual =ro%ert( 7thers B4 R0;(0'* 4# 42 9 1C B

,ote) 9tatistics are from data %rovided through the 6T7 we&site and :9T0 %ress releases.

WTO DISPUTE PANELS AND THE BALANCE BETWEEN TRADE A:80070&*' +&- N+*,%&+) P%),/4

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9ince the various agreements that constitute the 6T7 cover such a wide range of to%ics, dis%ute settlement %anelists find that a num&er of su&.ects come under their authorit(. This %laces 6T7 dis%ute %anels in a delicate %osition. 7n the one hand the( must identif( cases where nations are failing to com%l( with international trade agreementsD on the other, the( must &e cautious when ma;ing recommendations that reverse the %references of national governments. Thus far, in the decisions of the %anels and the A%%ellate >od(, there has &een a tendenc( to write decisions in a wa( that minimi-es the &urden on nations to change their regulations and laws in order to com%l( with their 6T7 trade o&ligations. This does not mean that dis%ute settlement %anels have not found nations in violation of the trade agreements. 6hen the(

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have, however, the( have left national governments with a variet( of o%tions in order to come into com%liance.

Two cases in which %anel re%orts were ado%ted reflect the 6T78s tendenc( to avoid &ecoming overl( involved in the internal regulator( affairs of nations. These cases have &een selected as e$am%les &ecause the( have received a lot of attention, &ut the trend descri&ed can &e found in each case where a %anel re%ort has &een issued. >oth e$am%les are com%laints &( the :nited 9tates, one against the 1uro%ean :nion 1:! regarding restrictions on im%ort of hormone treated meat, and the other against "a%an regarding the %hotogra%hic film industr(. In the first case the :nited 9tates won the concessions it soughtD in the second case the %anel found no evidence of violation of the trade agreements.

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E(8%30+& H%87%&0 C+'0 In the 1uro%ean Eormone 3ase the %anel found the scientific evidence for the im%ort restrictions on &eef treated with growth hormones to &e insufficient to .ustif( the restriction on trade, &ut, in effect, left o%en a wide variet( of wa(s for the 1: to com%l(. The 1: is conducting further studies in the ho%es of .ustif(ing the &an. This was a case where the 6T7 %anel clearl( confronted the democratic will of the %eo%le, as e$%ressed through their national legislatures and the 1uro%ean =arliament, since the hormone restrictions were initiall( ado%ted under intense %u&lic %ressure. The %anel sided with the :nited 9tates &( finding that the %rovisions were ar&itrar( and had the effect of restricting trade, &ut left o%tions for the 1: as well &( suggesting that more com%lete scientific evidence would .ustif( the &an. Alternativel(, the %anel indicated that technical changes in the

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wa( the %olic( is im%lemented could reduce the %olic(8s negative im%act on trade. 9till, the %anel was firm in ruling that the current %olic( is inconsistent with the 9=9 Agreement, and the 1: will have to ma;e su&stantive changes to come into com%liance. If it does not, the 1: will &e re4uired to offer other trading concessions to com%ensate for losses, some F2CC million %er (ear according to the :nited 9tates. The 1: has until 1999 to com%l(. K%-+<=!(>, C+'0 The Goda;*+u.i film dis%ute centers on the distri&ution s(stem in "a%an. In 'a( 1995, 1astman Goda;, 3o. as;ed the :.9. Trade 0e%resentative :9T0! to investigate the "a%anese %hotogra%hic film and %a%er mar;et. Goda; charged that +u.i =hoto +ilm, 3o., "a%an8s &iggest %hotogra%hic film and %a%er %roducer, was involved in <anti*com%etitive trade

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%ractices< in "a%an. Goda; asserted that +u.i, with the su%%ort of the "a%anese government, tacitl( dominated the consumer film mar;et in "a%an using unfair %ractices. According to Goda;, "a%anese regulations im%licitl( favored +u.i &( ma;ing it difficult for im%orted consumer %hotogra%hic film and %a%er to &e mar;eted in "a%anese sho%s. Goda; also said that some sho%s in "a%an were not allowed to carr( Goda;8s %roducts &ecause of &ac; room deals with +u.i. According to Goda;, this e$%lained wh( +u.i had a 75 %ercent mar;et share in "a%an while Goda; had onl( a 7 %ercent share in 199B. Goda; estimated its losses since the 197Cs due to the unfair %ractices at F5.B &illion. Accordingl(, Goda; re4uested that "a%anese regulations &e changed in order to &rea; u% +u.i8s e$clusive distri&ution s(stem.

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In the Goda;*+u.i case, the %anel ruled that "a%anese regulations %redated the reductions in tariffs that had &een negotiated on %hotogra%hic film. 3onse4uentl(, those regulations could not have negated the &enefits accruing to the :nited 9tates in the trade agreement. This technical ruling allowed the 6T7 to avoid a far*reaching decision that could have found "a%anese vertical integration of &usiness in conflict with the intent of the 6T7 regime. 3urrentl(, there is no international standard for anti*trust regulation. If the 6T7 dis%ute settlement %anel had found in favor of the :nited 9tates, it would have &een involved in creating new international o&ligations, an act not sanctioned &( the 6T7 Agreement. The ruling suggests that the :nited 9tates and other nations need not &e overl( concerned that the 6T78s dis%ute settlement mechanism will overtl( threaten national sovereignt(.

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In "une of 1995, the :nited 9tates &egan to investigate "a%anese mar;et &arriers for %hotogra%hic films and %a%ers, and found that three <li&erali-ation countermeasures< discriminated against im%orted goods. The first measure was e$clusive wholesaling arrangements currentl( dominated &( +u.iD the second was the large*stores law enacted in 1974. According to the :nited 9tates, this law discouraged large stores from carr(ing film other than +u.i8s. The third discriminator( measure cited involved controls on %rice com%etition and %romotion as su%ervised &( the "a%anese +air Trade 3ommission. After eleven months of investigation, the :nited 9tates filed a com%laint in the 6T7 on "une 13, 199B, re4uesting consultations with "a%an. The :nited 9tates argued that the im%ort*resistant mar;et structure created &( the "a%anese government violated the national treatment %rinci%le of the GATT Article III. The

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:nited 9tates also asserted that "a%an8s restrictions on retail o%erations and %romotional activities ran counter to the trans%arenc( standard set out in the GATT Article H, even if "a%an a%%ears to offer neutral treatment of im%orted goods. The :nited 9tates also made a <non*violation< claim that these measures nullif( or im%air &enefits accruing to the :nited 9tates. A <non*violation< claim is s%ecificall( authori-ed in the GATT Agreements if the actions of another nation reduce the value of negotiated trade concessions, even if the s%ecific measure ta;en &( the other countr( does not directl( violate an( of the Articles of the trade agreements. The t(%es of redress availa&le under such com%laints, however, are limited. +u.i denied Goda;8s assertion. +u.i asserted that it had never cons%ired with the "a%anese government to discriminate against im%orted goods. +urthermore, +u.i claimed that Goda;8s loss of mar;et share in "a%an

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could &e attri&uted to Goda; for a num&er of reasons. +irst, Goda; failed to introduce innovative %roducts to com%ete with +u.i8s new %roducts. 9econd, Goda;8s mar;eting strateg( was not su%erior to that of +u.i8s. Third, there was no &ottlenec; to &loc; Goda; from the mar;et since it had the same access to consumers as +u.i. These mar;et channels included selling directl( to retailers, selling to secondar( dealers, and selling to smaller retailers through %hoto finishing la&s. +ourth, +u.i stated that its mar;et share in the :nited 9tates is onl( 11 %ercent while Goda; dominates the mar;et with a 75 %ercent share. Thus, the %ro%ortion is e$actl( the reverse of the situation in "a%an suggesting that &oth Goda; and +u.i have difficult( %enetrating the domestic mar;et of its rival. Therefore, consumers8 lo(alt( to the domestic &rand, and not formal restrictions on trade, can e$%lain low mar;et %enetration &( foreign

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com%etition. There is also a claim that, although Goda; is chea%er in "a%an, customers &u( +u.i &ecause of its investment in innovative %roducts and its creative mar;eting s;ills and services. The :nited 9tates, failing to reach an agreement with "a%an, re4uested a dis%ute settlement %anel on 9e%tem&er 2C, 199B. The %anel was tas;ed to investigate Goda;8s allegations that "a%anese regulations had the effect of su%%orting anti*com%etitive %ractices &( +u.i film. After more than a (ear8s investigation, the 6T7 interim re%ort was su&mitted on 2ecem&er 5, 1997. The re%ort re.ected the :.9. com%laint against +u.i. The tri&unal ar&itration %anelists were from >ra-il, 9wit-erland, and ,ew Iealand. The( determined that the :nited 9tates had not demonstrated that its 6T7 rights had &een im%aired.

37 37 37 37 37 37 37 37 37 37

1ven though the %anel did not rule as Goda; would have li;ed, there is evidence that +u.i8s mar;et share in "a%an has diminished from 74 %ercent in the earl( 199Cs to B7 %ercent at the end of 1997, though +u.i denies this. The %rofit margin of the color film industr( in "a%an used to &e close to 12 %ercent, com%ared to B %ercent on overseas sales, &ut this has also fallen. 3urrent retail %rices for %hotogra%hic film and %a%er in "a%an reflect this, with %rices a&out 3C to 4C %ercent &elow com%ara&le %rices in the :nited 9tates. Goda;8s mar;et share in "a%an now accounts for a&out 11 %ercent since it won the ,agano 7l(m%ic Games s%onsorshi% &( %a(ing F44 million in 199B. In the ,agano area where the Games were held, Goda; has dou&led its mar;et share to 2C %ercent. In the :.9. mar;et, however, Goda;8s %rofits decreased &( 25 %ercent in 1997 from the (ear &efore. +u.i8s &usiness in the :.9. mar;et is also im%roving. +u.i

38 38 38 38 38 38 38 38 38 38

increased its mar;et share to 14 %ercent while Goda; had 7B %ercent of the mar;et. Goda; announced %lans to cut costs &( a &illion dollars and la( off 1C,CCC .o&s over ne$t two (ears in order to remain com%etitive. 9ee +igure 4!

!,:(80 " K%-+<#' L+4%..' M%&*2?Y0+8 "anuar( 1993 J%9' C(* 2,CCC

39 39 39 39 39 39 39 39 39 39

August 1993 ,ovem&er 1994 +e&ruar( 1995 ,ovem&er

1C,CCC #CC 4,CCC 1C,CCC

1997 T%*+) 2B,#CC 9ource) 3hallenger, Gra( J 3hristmas, Inc.

Increased mar;et share for +u.i in the :nited 9tates, and for Goda; in "a%an, suggests that consumers are increasingl( tr(ing the im%orted &rand. In the end, it is consumers who &enefit from increased glo&al com%etition through lower %rices.

!,:(80 5

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