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Appropriate rules and customs are required to be enforced in the context of trade between different countries. Most of the governments have become a part of world trade being a member of WTO or World Trade Organisation. These regulations improve the business outcomes as it brings different opportunity to expand business potential across the world. Along with this, the international trade has created many business difficulties also. The WTO provides framework following which countries come to administer and implement the agreements. This also creates further forums through which better negotiation can be conducted. This organisation applies trade policy review mechanism those are effectively developed with the help of appropriate policy terms. The current study will evaluate relevance of international law in the context of Drink it and LeDrink as presented in the case study.
Overview of the relevant WTO regulatory context
The WTO is responsible for facilitating the implementation, operation and administration of the trade agreements. WTO creates a forum for trade negotiations through lowering the barriers in trade among the member’s governments. Barriers that may occur between the trading economies and people have also been broken down by the current organisation. This is embedded with a goal of this organisation is welfare of the trade of the member countries and its people.
WTO has demonstrated a high degree of growth in world trade in past 70 years. It has been observed that the merchandise exports have grown by 6% on average (World Trade Organistion, 2020). This is the way through which WTO has proved itself as a powerful mechanism for expansion of the overall economy. A prosperous trading system has been has been developed through the collaboration between GATT and WTO which has improved the process of negotiation.
The agreements made by following the frameworks provided by WTO are the insurer of fair trade. This has become possible through negotiating rules and abiding by them. The members of the organisation are ensured to be provided with high fair means of trade maintaining consistency with the other member countries.
The principles of the WTO that are driving the functions of this organisation is non-discriminatory approach to the member countries, maintaining reciprocity between the member countries. This enforces some commitments that are required to be followed by the member countries. Maintaining transparency regarding the trade relationship is also established by the current organisation and safety rules are valued to the highest (Ogunjuyigbe, Ayodele & Ogunmuyiwa, 2020).
Most importantly, the dispute settlement system of the organisation can be considered as the result of upheaval of the regulations, processes and practices that were created under GATT in the year 1947 (World Trade Organistion, 2020). One of the core activities of WTO is to settle the disputes associated with international trades. Here, dispute can be defined as when a member country holds that other member country is violating the committed terms or agreement that it has once made with WTO. It has been working as one of the most effective dispute settlement process in the international business context.
WTO is developed as a rule-based and an organisation that is driven by its member governments along with the rules that resulted from the negotiation between the member countries. The decision-making process of WTO is highly dominated by the practice related to consensus.
The main competitor of Drink it is LeDrinks Ltd. of Solia. As 60% of the exports is absorbed by Solia it is very important for Drink It to maintain the reputation through the sustainable approach to business by reducing 30% of emission within 2030. As LeDrinks already have demonstrated their effective performance is reducing the carbon emission by 30%. Therefore, the main concern of Drink it will be improving their performance through bringing changes in the operation.
Development of policies
As the main concern of Drink It is to reduce carbon emission where it is required for the company members to follow same rules and procedures for conducting the organisational procedures so that the efficiency of the organisation in reducing carbon emission can be increased without harming the performance of the organisation (Sun et al., 2020).
Million tons of greenhouse gases emission from global beverage industry has been estimated to be taken place. Most of the emissions have been observed to be caused due to the business operations of food and beverage industry. The organisation may bring revolution in their refrigeration system by using cooler without doors. Through sealing the heating and cooling ducts, carbon emission from the refrigeration can be reduced.
After manufacturing the products Drink It is required to export them to Solia where a particular tax can be avoided by reducing carbon emission by 30%. It is required for Drink it’s authority to monitor the performance of the vehicles used during carrying the products. It will increase the concern regarding using the vehicles that produce carbon at a lower rate (Rudin et al., 2017). The impact of freight transport is required to be reduced so that Drink It may explore the alternative fuels. On the other hand, electric vehicle may also be used to reduce carbon emission.
Using renewable energy
In order to reduce the use of natural fuels that produce carbon at higher rate solar panels can be used for producing the required level of energy. Combined heat and power and wind turbines can also be used in order to naturally produce the energy. During the time of production, the use of natural energy may increase the chances of reduced carbon emission. This organisation may also focus in energy efficiency of the products used for producing the Beverages.
Regular equipment maintenance
The equipments used in the process of producing beverages are required to be monitored on a regular basis. This will provide understanding on how the equipments can be used in an intelligent way that helps in reducing the carbon emission (Cimini & Moresi, 2018). For instance, it is required to be conscious about how the equipments used generally by the production team are performing. If any discrepancy is found in actual performance and expected performance, new energy efficient equipments are required to be brought.
In order to avail the offer of 0% import tax, it is required to decrease the carbon emission by 30%. However, the current position of the organisation in performing sustainably with low production of carbon is required to be audited. The audit results will help the organisation to develop policies and procedures through which the performance of the organisation in performing effectively in carbon emission reduction will be effectively applied.
The above stated opportunities for the organisation to reduce the carbon emission can be applied though it may have some certain impacts upon the business of Drink It. It will require development of different policies and procedures. Employees will be required to be trained and provided information regarding how they can use fuels in an effective way. This may lead the organisation to face issues regarding financial investment (Urbinati, Chiaroni & Toletti, 2019). As it is situated in Lalaland which is considered to be underdeveloped it may become possible for attract investments.
The rules of global trade of World Trade Organization (WTO) have three agreements such as “The General Agreement on Tariffs and Trade (GATT)”, the “General Agreement on Trade in Services (GATS)” and “Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)”. These agreements focus on free trade that can foster an environment conducive. GATT has been signed to minimise the international trade barriers, reducing tariffs and quotas based on significant regulations (World Trade Organistion, 2020). However, the common principles of WTO trade rules include non-discrimination, free trade as well as promotion of growth and economic development. The agreement of “Most-favoured-nation (MFN)” is also included in the WTO rules that states that if a country grants any tariff or non-tariff treatment to one state that is under WTO membership, all members must be granted by the same treatment (American Express, 2020).
GATT and GATS also provide commitment that individual countries have to allow different products and service providers to their markets. Transparency in trade is also necessary as per the principles of predictability of WTO. As per this regulation, a country needs to have bound commitments for ceiling the customs tariff after negotiating with the trading partner to compensate the partners for loss of trade. WTO article 24 and the article XXIV of GATT provides the regulations of free-trade areas and customs unions (World Trade Organisation, 2020). As per this article, the agreement of the free trade and custom unis will be applied to the metropolitan customs territories of the contracting parties as well as it will be applied under Article XXVI and Article XXXIII to the “Protocol of Provisional Application”. It also states that the agreements of customs territory will be any territory to which separate rule and any other regulations of commerce are maintained for the substantial part of the trade (World Trade Organistion, 2020). The provisions of this agreement will not be considered and no advantage will be provided to any contracting party to adjacent countries to facilitate frontier traffic.
It is identified in the case study that “The Republic of Solia '' has modified their “Generalised System of Preferences (GSP)” via national legislation. It states that the GSP import tariffs for all soft drink products will increase from 5% to 7%, but listed “Least Developed Country (LDC)” like Lalaland will have special tariff regime that will keep customs at 0%, as per WTO law, a country needs to maintain anti-discrimination rule and if favour is given to one country, other countries need to be provided same treatment. Therefore, discrimination in trade is observed in the rules of GSP of Solia that can offend other countries which are bound with the international trade agreements with Solia. However, WTO supports economic development, the 0% customs and lower tariff to the LCD listed countries can help them to develop their economic status and global growth.
On the other hand, as per the regulations of custom territory of article XXVI of GATT, a separate tariff can be provided to a country if the territorial application of agreement is provided. However, no advantage of a country can be provided without voluntary agreements to avoid the conflicts. In the case of Solia, no agreement with other countries has been issued as well as other countries have no information about the changes in trade agreements, customs and tariffs. Therefore, it can raise an area of conflict that offends other countries and create trade barriers among the countries. Therefore, it is not legal under WTO law and violation of article XXIV of GATT.
For example, Japanese Liquor Tax Law has created a system of internal taxes that are applicable to all liquors that have different tax rates that have depended on which category they fell within. A taxed sochu at a lower rate has been issued to other products. Therefore, vodka and other alcoholic beverages like rum, whiskey, gin and other products have faced issues. In this case, GATT article III2 has been applied and as per this regulation, vodka was taxed in excess of sochu. conformity of internal tax measures is required by ensuring two elements such as whether the tax imported on domestic products and whether the taxes applied to imported products are in excess of those applied (World Trade Organistion, 2020). It also analyses whether the products are directly substitutable or competitive products imported and domestic products are not taxed similarly. In this case violation of GATT III2 has been observed because the domestic products have not been taxed similarly and violates the protection to the domestic production and for this reason.
On the other hand, it has been noticed from the case scenario that national “GSP Act” ofSolia contains special climate change action that states that if any GSP eligible country can implement climate change policies and reduce 30% of their greenhouse gas emission by 2010, the country can enjoy duty-free imports on some specific products. As per the regulations of WTO law, trade opening can lead to improvement in energy efficiency and one country can focus on the production of goods and services that generates less greenhouse gas (Skelton et al., 2018). The WTO does not have specific rules related to climate change. Free trade will increase the availability of environmentally friendly products as well as reduce its costs. For the exporters, it helps the country to gain additional market access to develop new products. As per the WTO articles, eliminating the trade barriers in products and services that can benefit the environment is effective to improve energy efficiency and facilitates natural resource conservation. Reducing and eliminating the import tariff and non-tariff barriers in the environment friendly products can reduce its price and accessibility (World Trade Organistion, 2020). As per the recent study of the World Bank on climate change and trade, the elimination of both tariffs and non-tariff barriers can increase trade by 14%.
WTO members ensure harmonious coexistence between specific trade obligations and WTO rules to protect the environment. Proper negotiation between the countries and reinforcement of the relationship between two legal regimes is required and for this purpose, “Multilateral environmental agreements (MEAs)” needs to be implemented at the national level. Rules of the WTO and the “UN Framework Convention on Climate Change (UNFCCC)” also ensure environment and trade regimes. However, Article 2.3 of the “Kyoto Protocol” and Article 3.5 of UNFCCC also ensures that any unjustifiable restrictions or disguised restrictions on international trade will not be provided at the time of international trading that will have special, economic and environmental impact on other parties (World Trade Organistion, 2020).
The “GSP Act” on climate change is effective for improving the energy efficiency, accessibility of products and economic development. As per this act, if a country can reduce 30% of the greenhouse gas emissions that can be beneficial for other countries. Therefore, Solia can provide duty-free imports on the products to encourage green production. But, it is identified from the case scenario that a list of products is provided by Solia for duty-free imports that includes soft drinks. However, the rules of UNFCCC and Kyoto Protocol have not been maintained by Solia in which they have enforced unjustifiable restrictions in some products and have allowed only listed products. On the other hand, the production of soft drinks has high carbon emission and they are not environmentally friendly products. Therefore, it is not convenient for Solia to enlist the soft drink product to their listed products. No agreements on the international trade for environmental friendly products have been considered. It can create a conflicting situation among the countries and it becomes illegal under WTO law.
In the organic drink market of Solia, the main competitor of Drink-it Ltd. is LeDrinks Ltd that is based on Dodoland. Dodoland is an environmentally friendly developing country and has adopted the “National Climate Change Act” for carbon reduction. Therefore, this company is more suitable under “GSP Act” than Drink-it Ltd. However, Solia has decided to apply duty free imports in the products without considering the economic status of a country. Therefore, the Solia “GSP Act” is effective for both the countries. It is required for Lalaland to bring an environmentally friendly act to obtain the opportunities of duty free imports from Solia. It can help Drink-it to gain competitive advantage over the LeDrinks of Dodoland.
It was observed in a case in 2003 that EC has provided approvals of biotech products and State Safeguard measures ofEC members have prohibited marketing and import of specific biotech products within the territories of these member states. It has affected agricultural biotech products from the US, Canada and Argentina. It has been found that a general “de facto” moratorium on approvals of biotech products has been in effect from 2003 but it has not been formally adopted. The general moratorium has been a decision concerning the application of approval processes and it has not been applied for achieving EC level of sanitary protection that has violated article 5.1 and 2.2 of SPS measure (World Trade Organistion, 2020). Henceforth, there has been insufficiency in scientific evidence that has been provided by EC. Therefore, the international law to WTO interpretation has been maintained in this case and the disclosure of the products is unauthorised.
The member governments of WTO can participate in the dispute resolution or dispute settlement. This can also take part as third parties or parties. Some of the entities are not entitled to initiate dispute directly; those entities include, the secretariat of WTO, WTO observer countries, regional and local governments and other international organisations. Therefore, it can be stated that as an international organisation Drink It also may not take part in the dispute resolution. When the dispute is presented by any member as complaining party or the complainant, it can be considered as Dispute settlement understanding (World Trade Organistion, 2020). “Party to whom the request for consultations is addressed” does not have any equivalent short term. The term mostly used by the DSU is the respondent. Therefore, Drink it my raise its concern to the complaint regarding this factor.
It has been identified that only the WTO member government can only bring the disputes. It has been depicted that individuals and companies may not access the dispute settlement system directly. This is required to be maintained even if the companies are advisedly affected through the actions taken by other member organisations that violate the agreements of WTO. It is also applicable for the non-government organisation also.
Drink It can raise the concern to the government that is a WTO Member regarding the dispute. This can be performed through influencing or creating pressure on the member government. Several governments such as Solia have taken under consideration some certain internal legislation. This might help Drink It to petition the government to bring about the WTO dispute.
It can be concluded that in order to avail the relaxation of tax for importing goods to Solia, Drink It is required to reduce their carbon emission by 30% within 2030. The processes and procedures that can be taken under consideration for reducing the carbon emission includes developing new policies, modifying or purchasing new equipments and others. It has been identified that the current organisation cannot raise the dispute directly to the dispute settlement system of WTO.
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