Assume that all the following facts in both cases are fictional. Do not make any additional factual assumptions
1. Mars is a WTO member country. It imposes a 20% tax on sales of soft drinks that use black tea as ingredient; 10% sales tax is imposed on soft drinks that use green tea as ingredient. Domestic soft drink manufacturers produce both green tea and black tea soft drinks. Mars’s law requires that only soft drinks made with added caffeine should include caffeine content in their labels. Both green tea and black tea soft drinks contain naturally generated caffeine. Domestic soft drinks made of green tea do not include caffeine content in their labels, because they do not add caffeine during the production process. Domestic soft drinks made of black tea include caffeine content in the labels because caffeine is added in the production process. The caffeine content included in the labels of soft drinks has the effect of reducing the overall consumption of the soft drinks. HS Codes for green tea and black tea are 090210 and 090230 respectively. The applied MFN duty rates for black tea and green tea are 10% and 10%. For climatic reason, black teas are not produced in Mars. However, Mars produces green teas. Green tea producers are farmers living in the island of Pluto in southern part of Mars. The green tea production is the main source of their income. Green tea soft drinks produced in Mars use both domestic green teas from Pluto island and imported green teas. In contrast, black tea soft drinks produced in Mars use only imported black teas. The HS Code for soft drinks made of green tea or black tea is identically 210120. The applied MFN duty rate for both soft drinks is identically 100%, resulting in minimal quantities of imports of both soft drinks. DRI, a marketing research firm, once reported that as the black tea soft drink price rises by 10%, the consumption of green tea soft drinks rises as much as 9%.
Indus is a WTO member country and is the world’s largest exporter of black teas. Indus claims that Mars is not meeting its WTO obligations in its treatment of black teas imported from Indus. The Indus government is seeking your expert opinion regarding WTO claims against Mars. Write a short memo exploring the validity of possible claims against Mars.
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