This dispute wasbrought about by Panama who alleged that a “compound tariff” had been imposedby Colombia on certain textiles, apparel and footwear. Columbia had beenimposing a compound tariff (in the form of an ad valorem levy, expressed as apercentage of the customs value of the goods) and a specific levy (WTO Appellate Body Report: Colombia – Textiles , 2016) against the importof textiles, apparel, and footwear from Panama. Panama disagreed with thispractice and filed a dispute with the World Trade Organization (WTO). The Panelagreed with Panama that the compound tariff was a customs duty that exceededthe levels bound in Colombia’s tariff schedule, in violation of GATT ArticleII:1(a) and (b) (WTO Appellate Body Report: Colombia – Textiles , 2016). The Colombian compound tariff had beenenforced since 2013, and consisted of a combination of 10 percent of the importprice as well as a “specific component,” the latter of which varies accordingto the import price and customs classification (McGivern, 2016).According to Colombia, the thresholds incorporated inthe compound tariff “reflected a distinction between licit imports, aswell as imports that they had determined were imported at artificially lowprices to launder money, on the other hand” (McGivern, 2016).
Colombia alsoargued that “a measure designed to combat illegal trade operations thatare not covered by Article II of the GATT 1994” (WTO Appellate Body Report: Colombia – Textiles , 2016). The WTO Appellate Body ruled that a Colombian lawdesigned to combat money laundering violates Colombia’s tariff obligationsunder Article II of the General Agreement on Tariffs and Trade (GATT) 1994 (McGivern, 2016). Colombia argued thatcertain goods entering its territory at “artificially low prices”were being used to launder money, and therefore implemented a “compoundtariff” to impose higher duties.
In upholding the complaint by Panama, theAppellate Body rejected Colombia’s argument that GATT Article II did not applyto illicit trade. It also rejected Colombia’s arguments that its measure was”necessary to protect public morals” and “necessary to securecompliance” with Colombia’s anti-money laundering laws (McGivern, 2016).This dispute and decision are notable because they enforce other rulings wereWTO members tried to use “public morals” to implement inconsistent regulations.The basis for Colombia’s argument was that it wastrying to combat money laundering into the country. However, in the priorproceedings of the disputes they were unable to show proof. According to theWTO judges, the combating money laundering reflected “societal interests”.Based upon this and the arguments on both sides I agree with the appellatebody’s decision. I believe that given Colombia’s history of corruption and illicitactivities they felt that they could impose whatever types of tariffs they feltnecessary.
This is a prime example of why the World Trade Organization wascreated. If they were not around there would be trade disputes among countriesconsistently. Possibly effecting political relations. Without them to regulatethe trade industry countries would be able to do as they please in regards toimports and exports. Those costs would then be passed until us the consumers.
Imagine the costs of our imported goods. The WTO is a place for its members to go and sort out any trade problemsthat may exist amongst each other. ReferencesHill, C. W. (2014). International BusinessCompeting in the Global Marketplace.
New York, NY: McGraw-Hill Education.McGivern, B. (2016, June 16). WTO Appellate Body Report:Colombia – Textiles. Retrieved from White & Case:https://www.
whitecase.com/publications/alert/wto-appellate-body-report-colombia-textilesWTO Appellate Body Report: Colombia – Textiles . (2016, June 16). Retrieved January 21, 2018, from Lexologyweb site: https://www.lexology.com/library/detail.aspx?g=bc31dd73-5f81-4d4a-971f-0568c98d0896