This dispute was
brought about by Panama who alleged that a “compound tariff” had been imposed
by Colombia on certain textiles, apparel and footwear. Columbia had been
imposing a compound tariff (in the form of an ad valorem levy, expressed as a
percentage of the customs value of the goods) and a specific levy (WTO Appellate
Body Report: Colombia – Textiles , 2016) against the import
of textiles, apparel, and footwear from Panama. Panama disagreed with this
practice and filed a dispute with the World Trade Organization (WTO). The Panel
agreed with Panama that the compound tariff was a customs duty that exceeded
the levels bound in Colombia’s tariff schedule, in violation of GATT Article
II:1(a) and (b) (WTO Appellate Body Report:
Colombia – Textiles , 2016). The Colombian compound tariff had been
enforced since 2013, and consisted of a combination of 10 percent of the import
price as well as a “specific component,” the latter of which varies according
to the import price and customs classification (McGivern, 2016).
According to Colombia, the thresholds incorporated in
the compound tariff “reflected a distinction between licit imports, as
well as imports that they had determined were imported at artificially low
prices to launder money, on the other hand” (McGivern, 2016). Colombia also
argued that “a measure designed to combat illegal trade operations that
are not covered by Article II of the GATT 1994” (WTO Appellate
Body Report: Colombia – Textiles , 2016).
The WTO Appellate Body ruled that a Colombian law
designed to combat money laundering violates Colombia’s tariff obligations
under Article II of the General Agreement on Tariffs and Trade (GATT) 1994 (McGivern, 2016). Colombia argued that
certain goods entering its territory at “artificially low prices”
were being used to launder money, and therefore implemented a “compound
tariff” to impose higher duties. In upholding the complaint by Panama, the
Appellate Body rejected Colombia’s argument that GATT Article II did not apply
to illicit trade. It also rejected Colombia’s arguments that its measure was
“necessary to protect public morals” and “necessary to secure
compliance” with Colombia’s anti-money laundering laws (McGivern,
This dispute and decision are notable because they enforce other rulings were
WTO members tried to use “public morals” to implement inconsistent regulations.
The basis for Colombia’s argument was that it was
trying to combat money laundering into the country. However, in the prior
proceedings of the disputes they were unable to show proof. According to the
WTO judges, the combating money laundering reflected “societal interests”.
Based upon this and the arguments on both sides I agree with the appellate
body’s decision. I believe that given Colombia’s history of corruption and illicit
activities they felt that they could impose whatever types of tariffs they felt
necessary. This is a prime example of why the World Trade Organization was
created. If they were not around there would be trade disputes among countries
consistently. Possibly effecting political relations. Without them to regulate
the trade industry countries would be able to do as they please in regards to
imports 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 problems
that may exist amongst each other.
Hill, C. W. (2014). International Business
Competing 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:
WTO Appellate Body Report: Colombia – Textiles . (2016, June 16). Retrieved January 21, 2018, from Lexology
web site: https://www.lexology.com/library/detail.aspx?g=bc31dd73-5f81-4d4a-971f-0568c98d0896