Digestion Of International Balance Of Payments Exceptions In GATT1994 And Their Application

As a result of the financial crisis started in United States, there is a large number of countries are increasingly inclined to trade protectionism. This situation, to some extent, will affect the international balance of payments. In this case, all countries need not only a clear understanding of the situation for the international balance of payments imbalances that may occur, but also need a Comprehensive preparation for at the first time. All countries shall learn provisions to their advantage in the current international legal system, and use them timely and effectively.This article first introduces the relevant theory of international balance of payments. The concept of balance of payments originated in the early 17th century. From the initial "trade balance" theory (the embryonic form of the balance of payments) to "a foreign exchange balance theory" (the narrow balance of payments); from the "Foreign Trade Balance of Payments theory "(broadly defined international balance of payments), to the official definition of the International Monetary Fund (IMF), the definition of balance of payments has had a big progress. There are two states of balance of payments, namely, balance and imbalance. Further more imbalance has two kinds of performance:surplus and deficit. However, no matter what kind of imbalance it is, will cause great economic losses if the situation of payments is too bad.The second part analyzes the relevant provisions of the international balance of payments (notably GATT Article 12 and GATT Article 18, section B) of the main content and clarifies some key words by studying the GATT1994, along with two procedural rules (1970 and 1972),1979 "On the balance of payments for the purpose of the Declaration on trade measures taken" (hereinafter "1979 Declaration") and the Uruguay Round to achieve a "balance of payments on the terms of the 1994 GATT Understanding" (hereinafter referred to as "1994 Understanding") and other documents.GATT 1994 Article 12 contains five paragraphs. Paragraph 1, in a position of general principles, outsets the purpose of the provisions, namely, "in order to safeguard its external financial position and balance of payments", members could be "allowed to limit the quantity or value of imported goods." After "the 1994 understanding" the "quantitative restriction" measures here explaned that the price-based measure should be also included. Further more, at the same conditions, the price-based measure should be given priority to be applied. Paragraph 2 points out the physical conditions of application of article 12, namely:(1) To prevent a serious decline in monetary reserves or to stop the imminent threat of a serious decline in monetary reserves; or (2) For the Parties who's monetary reserves is very low, take measures to achieve a reasonable growth rate of its reserves. It should also be noted that there is a limitation while applying Article 12. The limitation is that the restrictive measures shall fit the situation of the member's currency reserves and balance of payments. Paragraph 3 provides the rights and obligations for members who take restrictive measures. Paragraph 4 provides the procedural obligations for the Parties who take the restrictive measures. There are three main procedures:consultation, review and reverse the consultative process. Consultation includes general consultations and regular consultations. Paragraph 5 provides the case review mechanism while the trade restriction measures is persistent and extensive. In addition, the Note of Article 12 also emphasized that the General Council in participating in the process of consultation should always be to fulfill the maximum obligation of confidentiality.GATT Article 18, section B is designed for developing countries. Different from the developed countries, developping members are given preferential treatment not only in the physical conditions but also in procedures. Firstly, the physical conditions of the application is defferent. Comparing to Article 12, Article 18 section B paragraph 9 doesn't mention "imminent". As to the monetary reserves, Article 18 section B paragraph 9 replaces "very low level of reserves" with "inadequate level of reserves." The second defferece is about easing or lifting of restriction requirements gradually. Article 18 paragraph 11 provides that where relaxation or elimination of such restrictions will cause the Party to change its development policies, it may not revoke or modify the trade-restrictive measures. The "Notes" of this paragraph has made a further explanation. Thirdly, the review procedures is not the same. Different from the developed countries, developing countries have a more favorable treatment in period of consultation, consultation process and the right to withdraw from the GATT.The third part discussed IMF's effection in applying the international balance of payment exceptions, mainly about the cooperation and coordination between GATT/WTO and IMF. Based on Article 15 of GATT 1994 and Article 10 of IMF Agreement, especially on the exchange notes reached in 1947 and "IMF and the WTO Agreement" in 1996, WTO and the IMF should carry out extensive cooperation. However, on the one hand because of the legal basis for cooperation between the two organizations was too general and vague, the other hand, because the reality is very complex, cooperation between IMF and WTO is always a lot of controversy about the mechanism and the scope of cooperation, which is mainly Focused on three aspects:cross-conflicting obligations between IMF and WTO, jurisdiction between DSB and the BOP Committee, coordination between the panel and IMF.The fourth part describes the practical situation of this kind of provisions and clears the followings by analyzing typical case:first, to further clarify the GATT1994 Article 18, section B, paragraph 9 and paragraph 11, and relevant content of their comments. Secondly, to make the relationship between the panel and the IMF clear. If the panel has an obligation to consult with the IMF, what kind of information can IMF provide. And when IMF presents its report, what extent shall the panel decide to accept.Part V sets out the relationship between China and the exceptions of international balance of payments. According to China's WTO accession protocol, China has full right to apply WTO provisions of the international balance of payments. China also committed to full compliance with GATT1994 and "Understanding the 1994" requirement in the WTO accession protocol. When China apply these kind of articles, China shall comply with GATT's substantive and procedural requirements and it's own commitments. On the other hand, when other countries using these articles, China shall make a full preparation for the situation. First of all, China could, according to the procedural requirements of GATT, requests the parties who take the exceptions of international balance of payments to consult actively and requests the BOP Committee to review the monetary reserve situation. Secondly, China shall try to be a member of the BOP Committee, so as to play a role in the review. Finally, while facing the deadlock inter the BOP Committee, China shall submit the case to DSB timely, in order to safeguard China's legitimate rights and interests.