This scenario applies to all of the questions below.
Telopia and Brevalia are both developed countries and both are members of the WTO.
Telopia, under pressure from surrounding island nations to set a good example on climate change, wants to boost the use of electric cars and motorcycles to help reduce its carbon emissions. Telopia is a small island nation, and motorcycles are very popular among locals.
The Telopian government passes the Clean Motor Vehicles Act, which, among other things, provides for an electricity cost subsidy program for any household operating an electric car or motorcycle and a 20% tax on the sale of new petrol cars and motorcycles.
Five years ago, Hushh, the leading car manufacturer in Telopia, diverted 3 of its 5 factories to the production of electric cars, hoping that over time it would be able to expand its business and become a leading exporter of clean cars. 80 per cent of local cars sold in Telopia are Hushh branded vehicles. Prior to the introduction of the Clean Motor Vehicles Act, only petrol motorcycles were available within Telopia.
With the introduction of the Clean Motor Vehicles Act, Hushh sees a run on its existing electric car fleet, and demand is so strong, new buyers face several months waiting for the production of new cars. Hushh is so successful, it converts its remaining two factories in Telopia to the production of electric motorcycles, which it can produce more quickly than cars.
Prior to the Clean Motor Vehicles Act, Brevalia, a close neighbour of Telopia, had exported high volumes of petrol motorcycles to Telopia. Breval MCV, a major motorcycle manufacturer in Brevalia has taken a hit, with its exports to Telopia down 70% compared to the previous year.
Questions
1) Breval MCV approaches you wanting to file a complaint for breach of the WTO rules at the WTO in Geneva.
Advise Breval MCV whether there would be a strong case for establishing that Telopia has breached any of its WTO obligations.
2) If Breval MCV insisted on lodging a complaint with the WTO, what advice would you provide?
3) Meanwhile, the Motor Vehicle Union in Brevalia has been pressuring the Brevalian government to take action against Telopia.
In response to Brevalia’s request for consultations in relation to its tax on petrol vehicles, Telopia indicates it is not interested in consulting, as it claims the petrol tax has the purposes of promoting clean energy and is not relevant to trade policy. What could Brevalia do in response?
4) Eventually, a panel is formed and finds that Telopia has violated the GATT. The Appellate Body upholds the panel’s findings. After adoption of the reports by the dispute settlement body (DSB), Telopia announces that immediate implementation of the reports is impractical. What steps, if any, are available to Brevalia to obtain redress?
