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ON THIS PAGE:
> Article XX — Two-tier analysis
> Article XX(b) —
Relationship with Article III
> Article XX(b) —
Evidence. See also General Exceptions: Article XX of the GATT 1994,
Article XX(d) — Necessity test (G.3.6)
> Article XX(a) and (b)
— Necessity test
> Article XX(b) —
Objective pursued
> Article XX(b) —
Alternative measures
> Article XX(d) —
Level of enforcement — Alternative measure
> Article XX(d) —
“laws or regulations”
> Article XX(d) —
“to secure compliance”
> Article XX(d) —
Necessity test
> Article XX(g) —
“conservation of exhaustible natural resources”
> Article XX(g) —
“measures made effective in conjunction with”
> Article XX(g) —
“relating to”
> Article XX(g) —
Jurisdictional limitation. See also National Treatment, Relationship between Article III and Article XX (N.1.12)
> Chapeau of Article XX
— General
> Chapeau of Article XX
— “arbitrary or unjustifiable discrimination between countries where the same conditions prevail”
> Chapeau of Article XX
— “disguised restriction on international trade”
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G.3.1 Article XX — Two-tier analysis back to top
G.3.1.1 US — Gasoline, p. 22, DSR 1996:I, p. 3 at 20
(WT/DS2/AB/R)
… In order that the justifying protection of Article XX may be
extended to it, the measure at issue must not only come under one or
another of the particular exceptions — paragraphs (a) to (j) — listed under Article XX; it must also satisfy the requirements imposed
by the opening clauses of Article XX. The analysis is, in other words,
two-tiered: first, provisional justification by reason of
characterization of the measure under XX(g); second, further appraisal
of the same measure under the introductory clauses of Article XX.
G.3.1.2 US — Shrimp, paras. 119-120
(WT/DS58/AB/R)
The sequence of steps indicated above in the analysis of a claim of
justification under Article XX reflects, not inadvertence or random
choice, but rather the fundamental structure and logic of Article XX
. …
The task of interpreting the chapeau so as to prevent the abuse or
misuse of the specific exemptions provided for in Article XX is rendered
very difficult, if indeed it remains possible at all, where the
interpreter (like the Panel in this case) has not first identified and
examined the specific exception threatened with abuse. …
G.3.2 Article XX(b)
— Relationship with Article III back to top
G.3.2.1 EC — Asbestos, para. 115
(WT/DS135/AB/R)
We do not agree with the Panel that considering evidence relating to
the health risks associated with a product, under Article III:4,
nullifies the effect of Article XX(b) of the GATT 1994. Article XX(b)
allows a Member to “adopt and enforce” a measure, inter alia,
necessary to protect human life or health, even though that measure is
inconsistent with another provision of the GATT 1994. Article III:4 and
Article XX(b) are distinct and independent provisions of the GATT 1994
each to be interpreted on its own. The scope and meaning of Article
III:4 should not be broadened or restricted beyond what is required by
the normal customary international law rules of treaty interpretation,
simply because Article XX(b) exists and may be available to justify
measures inconsistent with Article III:4. The fact that an
interpretation of Article III:4, under those rules, implies a less
frequent recourse to Article XX(b) does not deprive the exception in
Article XX(b) of effet utile. Article XX(b) would only be
deprived of effet utile if that provision could not serve
to allow a Member to “adopt and enforce” measures “necessary to
protect human … life or health”. Evaluating evidence relating to the
health risks arising from the physical properties of a product does not
prevent a measure which is inconsistent with Article III:4 from being
justified under Article XX(b). We note, in this regard, that different
inquiries occur under these two very different Articles. Under Article
III:4, evidence relating to health risks may be relevant in assessing
the competitive relationship in the marketplace between allegedly
“like” products. The same, or similar, evidence serves a different
purpose under Article XX(b), namely, that of assessing whether a Member
has a sufficient basis for “adopting or enforcing” a WTO-inconsistent
measure on the grounds of human health.
G.3.3 Article
XX(b) — Evidence. See also General
Exceptions: Article XX of the GATT 1994, Article XX(d) — Necessity
test (G.3.6) back to top
G.3.3.1 EC — Asbestos, para. 178
(WT/DS135/AB/R)
… In justifying a measure under Article XX(b) of the GATT 1994, a
Member may also rely, in good faith, on scientific sources which, at
that time, may represent a divergent, but qualified and respected,
opinion. A Member is not obliged, in setting health policy,
automatically to follow what, at a given time, may constitute a majority
scientific opinion. Therefore, a panel need not, necessarily, reach a
decision under Article XX(b) of the GATT 1994 on the basis of the “preponderant”
weight of the evidence.
G.3.3A Article XX(a) and (b)
— Necessity test back to top
G.3.3A.1 Brazil — Retreaded Tyres, paras. 145-147
(WT/DS332/AB/R)
We turn to the methodology used by the Panel in analysing the
contribution of the Import Ban to the achievement of its objective. Such
a contribution exists when there is a genuine relationship of ends and
means between the objective pursued and the measure at issue. The
selection of a methodology to assess a measure’s contribution is a
function of the nature of the risk, the objective pursued, and the level
of protection sought. It ultimately also depends on the nature,
quantity, and quality of evidence existing at the time the analysis is
made. Because the Panel, as the trier of the facts, is in a position to
evaluate these circumstances, it should enjoy a certain latitude in
designing the appropriate methodology to use and deciding how to
structure or organize the analysis of the contribution of the measure at
issue to the realization of the ends pursued by it. This latitude is
not, however, boundless. Indeed, a panel must analyse the contribution
of the measure at issue to the realization of the ends pursued by it in
accordance with the requirements of Article XX of the GATT 1994 and
Article 11 of the DSU.
We note that the Panel chose to conduct a qualitative analysis of the
contribution of the Import Ban to the achievement of its objective. In
previous cases, the Appellate Body has not established a requirement
that such a contribution be quantified. To the contrary, in EC — Asbestos, the Appellate Body emphasized that there is “no
requirement under Article XX(b) of the GATT 1994 to quantify, as
such, the risk to human life or health”. In other words, “[a] risk
may be evaluated either in quantitative or qualitative terms.”
Although the reference by the Appellate Body to the quantification of a
risk is not the same as the quantification of the contribution of a
measure to the realization of the objective pursued by it (which could
be, as it is in this case, the reduction of a risk), it appears to us
that the same line of reasoning applies to the analysis of the
contribution, which can be done either in quantitative or in qualitative
terms.
Accordingly, we do not accept the European Communities’ contention
that the Panel was under an obligation to quantify the contribution of
the Import Ban to the reduction in the number of waste tyres and to
determine the number of waste tyres that would be reduced as a result of
the Import Ban. In our view, the Panel’s choice of a qualitative
analysis was within the bounds of the latitude it enjoys in choosing a
methodology for the analysis of the contribution.
G.3.3A.2 Brazil — Retreaded Tyres, paras. 150-151 and
footnotes 242-243
(WT/DS332/AB/R)
As the Panel recognized, an import ban is “by design as
trade-restrictive as can be”. We agree with the Panel that there may
be circumstances where such a measure can nevertheless be necessary,
within the meaning of Article XX(b). We also recall that, in Korea —
Various Measures on Beef, the Appellate Body indicated that “the
word ‘necessary’ is not limited to that which is ‘indispensable’
”. Having said that, when a measure produces restrictive effects on
international trade as severe as those resulting from an import ban, it
appears to us that it would be difficult for a panel to find that
measure necessary unless it is satisfied that the measure is apt to make
a material contribution to the achievement of its objective. Thus, we
disagree with Brazil’s suggestion that, because it aims to reduce risk
exposure to the maximum extent possible, an import ban that brings a
marginal or insignificant contribution can nevertheless be considered
necessary.242
This does not mean that an import ban, or another trade-restrictive
measure, the contribution of which is not immediately observable, cannot
be justified under Article XX(b). We recognize that certain complex
public health or environmental problems may be tackled only with a
comprehensive policy comprising a multiplicity of interacting measures.
In the short-term, it may prove difficult to isolate the contribution to
public health or environmental objectives of one specific measure from
those attributable to the other measures that are part of the same
comprehensive policy. Moreover, the results obtained from certain
actions — for instance, measures adopted in order to attenuate global
warming and climate change, or certain preventive actions to reduce the
incidence of diseases that may manifest themselves only after a certain
period of time — can only be evaluated with the benefit of time.243 In
order to justify an import ban under Article XX(b), a panel must be
satisfied that it brings about a material contribution to the
achievement of its objective. Such a demonstration can of course be made
by resorting to evidence or data, pertaining to the past or the present,
that establish that the import ban at issue makes a material
contribution to the protection of public health or environmental
objectives pursued. This is not, however, the only type of demonstration
that could establish such a contribution. Thus, a panel might conclude
that an import ban is necessary on the basis of a demonstration that the
import ban at issue is apt to produce a material contribution to the
achievement of its objective. This demonstration could consist of
quantitative projections in the future, or qualitative reasoning based
on a set of hypotheses that are tested and supported by sufficient
evidence.
G.3.3A.3 Brazil — Retreaded Tyres, para. 153
(WT/DS332/AB/R)
… As the Panel’s analysis was qualitative, the Panel did not seek
to estimate, in quantitative terms, the reduction of waste tyres that
would result from the Import Ban, or the time horizon of such a
reduction. Such estimates would have been very useful and, undoubtedly,
would have strengthened the foundation of the Panel’s findings. Having
said that, it does not appear to us erroneous to conclude, on the basis
of the hypotheses made, tested, and accepted by the Panel, that fewer
waste tyres will be generated with the Import Ban than otherwise.
G.3.3A.4 Brazil — Retreaded Tyres, paras. 154-155
(WT/DS332/AB/R)
… [W]e wish to underscore that the Import Ban must be viewed in the
broader context of the comprehensive strategy designed and implemented
by Brazil to deal with waste tyres. This comprehensive strategy includes
not only the Import Ban but also the import ban on used tyres, as well
as the collection and disposal scheme adopted by CONAMA Resolution
258/1999, as amended in 2002, which makes it mandatory for domestic
manufacturers and importers of new tyres to provide for the safe
disposal of waste tyres in specified proportions. For its part, CONAMA
Resolution 258/1999, as amended in 2002, aims to reduce the exposure to
risks arising from the accumulation of waste tyres by forcing
manufacturers and importers of new tyres to collect and dispose of waste
tyres at a ratio of five waste tyres for every four new tyres. This
measure also encourages Brazilian retreaders to retread more domestic
used tyres by exempting domestic retreaders from disposal obligations as
long as they process tyres consumed within Brazil. Thus, the CONAMA
scheme provides additional support for and is consistent with the design
of Brazil’s strategy for reducing the number of waste tyres. The two
mutually enforcing pillars of Brazil’s overall strategy — the Import
Ban and the import ban on used tyres — imply that the demand for
retreaded tyres in Brazil must be met by the domestic retreaders, and
that these retreaders, in principle, can use only domestic used tyres
for raw material. Over time, this comprehensive regulatory scheme is apt
to induce sustainable changes in the practices and behaviour of the
domestic retreaders, as well as other actors, and result in an increase
in the number of retreadable tyres in Brazil and a higher rate of
retreading of domestic casings in Brazil. Thus, the Import Ban appears
to us as one of the key elements of the comprehensive strategy designed
by Brazil to deal with waste tyres, along with the import ban on used
tyres and the collection and disposal scheme established by CONAMA
Resolution 258/1999, as amended in 2002.
As we explained above, we agree with the Panel’s reasoning
suggesting that fewer waste tyres will be generated with the Import Ban
in place. In addition, Brazil has developed and implemented a
comprehensive strategy to deal with waste tyres. As a key element of
this strategy, the Import Ban is likely to bring a material contribution
to the achievement of its objective of reducing the exposure to risks
arising from the accumulation of waste tyres. On the basis of these
considerations, we are of the view that the Panel did not err in finding
that the Import Ban contributes to the achievement of its objective.
G.3.3A.5 Brazil — Retreaded Tyres, para. 156
(WT/DS332/AB/R)
In order to determine whether a measure is “necessary” within the
meaning of Article XX(b) of the GATT 1994, a panel must assess all the
relevant factors, particularly the extent of the contribution to the
achievement of a measure’s objective and its trade restrictiveness, in
the light of the importance of the interests or values at stake. If this
analysis yields a preliminary conclusion that the measure is necessary,
this result must be confirmed by comparing the measure with its possible
alternatives, which may be less trade restrictive while providing an
equivalent contribution to the achievement of the objective pursued. …
G.3.3A.6 Brazil — Retreaded Tyres, para. 182
(WT/DS332/AB/R)
In sum, the Panel’s conclusion that the Import Ban is necessary was
the result of a process involving, first, the examination of the
contribution of the Import Ban to the achievement of its objective
against its trade restrictiveness in the light of the interests at
stake, and, secondly, the comparison of the possible alternatives,
including associated risks, with the Import Ban. The analytical process
followed by the Panel is consistent with the approach previously defined
by the Appellate Body. The weighing and balancing is a holistic
operation that involves putting all the variables of the equation
together and evaluating them in relation to each other after having
examined them individually, in order to reach an overall judgement. We
therefore do not share the European Communities’ view that the Panel
did not “actually” weigh and balance the relevant factors, or that
the Panel made a methodological error in comparing the alternative
options proposed by the European Communities with the Import Ban.
G.3.3A.7 Brazil — Retreaded Tyres, paras. 210-211
(WT/DS332/AB/R)
… [T]he issue of whether the Import Ban is necessary within the
meaning of Article XX(b) of the GATT 1994 … illustrates the tensions
that may exist between, on the one hand, international trade and, on the
other hand, public health and environmental concerns arising from the
handling of waste generated by a product at the end of its useful life.
In this respect, the fundamental principle is the right that WTO Members
have to determine the level of protection that they consider appropriate
in a given context. Another key element of the analysis of the necessity
of a measure under Article XX(b) is the contribution it brings to the
achievement of its objective. A contribution exists when there is a
genuine relationship of ends and means between the objective pursued and
the measure at issue. To be characterized as necessary, a measure does
not have to be indispensable. However, its contribution to the
achievement of the objective must be material, not merely marginal or
insignificant, especially if the measure at issue is as trade
restrictive as an import ban. Thus, the contribution of the measure has
to be weighed against its trade restrictiveness, taking into account the
importance of the interests or the values underlying the objective
pursued by it. As a key component of a comprehensive policy aiming to
reduce the risks arising from the accumulation of waste tyres, the
Import Ban produces such a material contribution to the realization of
its objective. Like the Panel, we consider that this contribution is
sufficient to conclude that the Import Ban is necessary, in the absence
of reasonably available alternatives.
The European Communities proposed a series of alternatives to the
Import Ban. Whereas the Import Ban is a preventive non-generation
measure, most of the proposed alternatives are waste management and
disposal measures that are remedial in character. We consider that
measures to encourage domestic retreading or to improve the
retreadability of tyres, a better enforcement of the import ban on used
tyres, and a better implementation of existing collection and disposal
schemes, are complementary to the Import Ban; indeed, they constitute
mutually supportive elements of a comprehensive policy to deal with
waste tyres. Therefore, these measures cannot be considered real
alternatives to the Import Ban. As regards landfilling, stockpiling,
co-incineration of waste tyres, and material recycling, these remedial
methods carry their own risks or, because of the costs involved, are
capable of disposing of only a limited number of waste tyres. The Panel
did not err in concluding that the proposed measures or practices are
not reasonably available alternatives.
G.3.3A.8 China — Publications and Audiovisual Products, para.
242 and footnote 455
(WT/DS363/AB/R)
We do not see that the Appellate Body’s approach to the “necessity”
analysis in Brazil — Retreaded Tyres differs from that in US
— Gambling, which in turn referred to Korea — Various
Measures on Beef.455 In each case, a sequential process of weighing
and balancing a series of factors was involved. … Although the
language used is not identical, both reports articulate the same
approach and, like the Appellate Body report in Korea — Various
Measures on Beef, emphasize the need to identify relevant factors
and undertake a weighing and balancing process including, where
relevant, with respect to proposed alternative measures that may be less
trade restrictive while making an equivalent contribution to the
relevant objective. These three reports also all recognize that a
comprehensive analysis of the “necessity” of a measure is a
sequential process. As such, the process must logically begin with a
first step, proceed through a number of additional steps, and yield a
final conclusion.
G.3.3A.9 China — Publications and Audiovisual Products, paras.
247-249, 251-253
(WT/DS363/AB/R)
… [T]he Panel, confronted with the task of analysing the “necessity”
of multiple provisions and requirements, undertook an analysis that was,
in part, aggregated and relevant to all such provisions and requirements
and, in part, disaggregated and specific to each provision or
requirement. The Panel’s analysis also involved distinct steps
contemplated under the “weighing and balancing” test. The Panel did
not, however, complete all of the analytical steps relevant to each
provision in consecutive paragraphs of its Report. …
In separating parts of its overall analysis of specific provisions in
this way, the Panel may have created some confusion. In particular, the
Panel’s use of the word “conclude” in setting out its intermediate
findings risks misleading a reader, as does its characterization of
certain requirements as “necessary” before it had considered
the availability of a less restrictive alternative measure. Yet, a
careful reading of the Panel’s analysis of the necessity of the State
plan requirement, in its entirety, makes clear that the Panel included
all relevant factors in its weighing and balancing exercise, including
with respect to the alternative measures proposed by the United States.
Read in this broader context, it is clear that the “conclusion”
reached by the Panel after having completed one part of the overall
weighing and balancing process did not constitute a “finding” that
the State plan requirement is “necessary” in the sense of Article
XX(a) of the GATT 1994. Rather, this conclusion was in the nature of a
preliminary result, an indication that the Panel had completed certain
steps of its analysis. Moreover, the Panel was careful to add the
qualification that its “conclusion” was reached only “in the
absence of reasonably available alternatives”. Had there not been a
less restrictive alternative measure reasonably available to China, the
Panel’s intermediate finding would have stood as part of an ultimate
finding of necessity. Given the outcome of the Panel’s analysis of the
alternative measure proposed by the United States, however, it did not.
… The Panel chose to group together all of the relevant provisions
for purposes of certain steps of its analysis but to analyse these
provisions individually for purposes of other steps in its analysis.
While this was not necessarily the only way that the Panel could have
approached its task, we do not see that, in the circumstances of this
case, the Panel’s approach amounted to error or contradicted the
approach set out in previous Appellate Body reports.
…
… [T]he term “necessary”, in the abstract, refers to a range of
degrees of necessity. The Appellate Body explained that determining
whether a measure is “necessary” involves a process of weighing and
balancing a series of factors that prominently include the contribution
made by the measure to secure compliance with the law or regulation at
issue, the importance of the common interests or values protected by
that law or regulation, and the accompanying impact of the law or
regulation on imports or exports. The greater the contribution a measure
makes to the objective pursued, the more likely it is to be
characterized as “necessary”.
In Brazil — Retreaded Tyres, the Appellate Body clarified
how the analysis of the contribution made by a challenged measure to the
achievement of the objective pursued is to be undertaken. The Appellate
Body noted that a party seeking to demonstrate that its measures are “necessary”
should seek to establish such necessity through “evidence or data,
pertaining to the past or the present”, establishing that the measures
at issue contribute to the achievement of the objectives pursued. In
examining the evidence put forward, a panel must always assess the
actual contribution made by the measure to the objective pursued.
However, this is not the only type of demonstration that could
establish such a contribution. The Appellate Body explained that a panel
is not bound to find that a measure does not make a contribution to the
objective pursued merely because such contribution is not “immediately
observable” or because, “[i]n the short-term, it may prove difficult
to isolate the contribution [made by] one specific measure from those
attributable to the other measures that are part of the same
comprehensive policy”. Accordingly … :
… a panel might conclude that [a measure] is necessary on the basis
of a demonstration that [it] is apt to produce a material contribution
to the achievement of its objective. This demonstration could consist of
quantitative projections in the future, or qualitative reasoning based
on a set of hypotheses that are tested and supported by sufficient
evidence.
G.3.3A.10 China — Publications and Audiovisual Products, paras.
288, 292, 294
(WT/DS363/AB/R)
We recall that, in US — Gambling, the Appellate Body stated
that a panel must independently and objectively assess the “necessity”
of the measure before it, based on the evidence in the record. The
Appellate Body also affirmed that it is for the responding party to make
a prima facie case that its measure is “necessary” by putting
forward evidence and arguments that enable the panel to assess the
challenged measure in the light of the relevant factors to be “weighed
and balanced”.
…
We note that the Panel did not cite any evidence in support of its
assumption that the State plan requirement imposed a limitation on the
number of import entities. We also note that the Panel did not explain
why the contribution made by the presumed limitation in the State plan
requirement would be a “material” one. …
…
In reaching its finding regarding the contribution made by the State
plan requirement to the protection of public morals in China, the Panel
simply stated that limiting the number of import entities “can make a
material contribution” to the protection of public morals in China.
Yet, the Panel neither addressed quantitative projections nor provided
qualitative reasoning based on evidence before it to support that
finding. The Panel Report contains no discussion of how or to what
extent the State plan requirement can or does make a contribution. For
these reasons, we disagree with the Panel’s finding that China had met
its burden of proof regarding the contribution of the State plan
requirement to the protection of public morals in China.
G.3.3A.11 China — Publications and Audiovisual Products, para.
303
(WT/DS363/AB/R)
At the outset of our analysis, we recall that the assessment of the
restrictive effect of a measure on international trade is part of the
“weighing and balancing” approach for assessing “necessity” — including within the meaning of Article XX(a) of the GATT 1994
— employed by WTO panels and the Appellate Body. The text of Article XX(a),
however, refers only to measures “necessary to protect public morals”.
It does not, therefore, provide explicit guidance on the question of
whether, in assessing “necessity”, a panel may take into account
only the restrictive effect the measures have on imports of relevant
products, or whether a panel may also consider the restrictive effect of
the measures on importers or potential importers. The text of Article
XX(a) does not specifically refer to “imports” or “importers”
or, in different terms, “products” or “traders”. However, the
chapeau of Article XX of the GATT 1994 refers in a somewhat different
context to “restrictions on international trade”.
G.3.3A.12 China — Publications and Audiovisual Products, paras.
306-307
(WT/DS363/AB/R)
… [W]hile in principle a panel must assess the restrictive effect
of a measure on international commerce, this test must be applied in the
light of the specific obligation of the covered agreements that the
respective measure infringes. The assessment of the restrictive effect
to be taken into account in a particular dispute may, in appropriate
cases, extend beyond an assessment of the restrictive effect on imported
products, as this assessment must be undertaken in the light of the
measure at issue, the specific obligation of the covered agreements that
the measure infringes, and the defence being invoked.
In the present case, the Panel found China’s measures to be
inconsistent with, inter alia, China’s obligation in paragraph
5.1 of its Accession Protocol to grant the right to trade to all
enterprises with respect to goods. This obligation is not only concerned
with the question of what can be traded, but more directly with
the question of who is entitled to engage in trading. In view of,
on the one hand, China’s measures, which impose a restriction on who
can engage in importing the relevant products, and, on the other
hand, the nature of the specific obligation in paragraph 5.1, which
stipulates who China must permit to engage in importing, we see
no error in the Panel’s tailoring its assessment of the restrictive
effect of the provisions of China’s measures to take into account the
restrictive effect on beneficiaries of the right to trade. …
G.3.3A.13 China — Publications and Audiovisual Products, para.
308
(WT/DS363/AB/R)
We turn next to China’s allegation that the Panel committed a “logical
error” in finding that the provisions of its measures are not “necessary”
for essentially the same reasons as the ones for which the Panel found
those provisions to be in violation of China’s trading rights
commitments. China suggests that the restrictive effect of a measure
could be relevant to a panel’s analysis of whether a measure is
consistent with an obligation, or its analysis of whether that measure
can be justified under an exception, but that it could not be relevant
for both questions. We disagree. The fact that the restrictive effect of
a measure is relevant in one context does not preclude that it may also
be relevant in the other. In analyzing whether the provisions of China’s
measures are inconsistent with Article 5.1 of China’s Accession
Protocol, the Panel assessed whether the provisions restrict the
enterprises that may engage in importing. Thereafter, in analysing
whether the provisions could be justified as “necessary” under
Article XX(a) of the GATT 1994, the Panel assessed to what extent the
provisions restrict those wishing to engage in importing, as well as how
the restrictive effect comports with the degree of contribution to
the achievement of the objective, and the societal importance and value
of the legitimate objective concerned. The restrictive effect of the
provision was relevant to each of these distinct analytical inquiries.
Therefore, we do not believe that the Panel’s approach constitutes
circular reasoning. On the contrary, it is the result of a proper
sequential analysis.
G.3.3A.14 China — Publications and Audiovisual Products, para.
310
(WT/DS363/AB/R)
… The less restrictive the effects of the measure, the more likely
it is to be characterized as “necessary”. Consequently, if a Member
chooses to adopt a very restrictive measure, it will have to ensure that
the measure is carefully designed so that the other elements to be taken
into account in weighing and balancing the factors relevant to an
assessment of the “necessity” of the measure will “outweigh”
such restrictive effect. …
G.3.3A.15 China — Publications and Audiovisual Products, paras.
318-319
(WT/DS363/AB/R)
… In Korea — Various Measures on Beef and EC
— Asbestos, the Appellate Body clarified that, as part of an overall
evaluation of “necessity” using the “weighing and balancing”
process, a panel must examine whether the responding party could
reasonably be expected to employ an alternative measure, consistent (or
less inconsistent) with the covered agreements, that would achieve the
objectives pursued by the measure at issue. An alternative measure may
be found not to be “reasonably available” where it is merely
theoretical in nature, for instance, where the responding party is not
capable of taking it, or where the measure imposes an undue burden on
that Member, such as “prohibitive costs or substantial technical
difficulties”. Moreover, a “reasonably available” alternative
measure must be a measure that would preserve the responding party’s
right to achieve its desired level of protection with respect to the
objective pursued under Article XX of the GATT 1994.
As regards the burden of proof with respect to “reasonably
available alternatives”, the Appellate Body explained in US — Gambling that a responding party invoking Article XIV(a) of the GATS
bears the burden of demonstrating that its GATS-inconsistent measure is
“necessary” to achieve the objective of protecting public morals.
This burden does not imply that the responding party must take the
initiative to demonstrate that there are no reasonably available
alternatives that would achieve its objectives. When, however, the
complaining party identifies an alternative measure that, in its view,
the responding party should have taken, the responding party will be
required to demonstrate why its challenged measure nevertheless remains
“necessary” in the light of that alternative or, in other words, why
the proposed alternative is not a genuine alternative or is not “reasonably
available”. If a responding party demonstrates that the alternative is
not “reasonably available”, in the light of the interests or values
being pursued and the party’s desired level of protection, it follows
that the challenged measure must be “necessary”.
G.3.3A.16 China — Publications and Audiovisual Products, paras.
327-328
(WT/DS363/AB/R)
… As the Appellate Body report in US —Gambling makes
clear, an alternative measure should not be found not to be reasonably
available merely because it involves some change or
administrative cost. Changing an existing measure may involve cost and a
Member cannot demonstrate that no reasonably available alternative
exists merely by showing that no cheaper alternative exists. Rather, in
order to establish that an alternative measure is not “reasonably
available”, the respondent must establish that the alternative measure
would impose an undue burden on it, and it must support such an
assertion with sufficient evidence.
In the present case, China did not provide evidence to the Panel
substantiating the likely nature or magnitude of the costs that would be
associated with the proposed alternative, as compared to the current
system. Nor has China, in its appeal, pointed to specific evidence in
the Panel record that would allow us to conclude that the Panel erred in
failing to attribute sufficient significance to the evidence of
financial and administrative burden that may attach to the proposed
alternative measure. Instead, China simply argues that the proposal
would involve “tremendous restructuring” and would “obviously put
on China an excessively heavy financial and administrative burden”.
However, as we see it, adopting any alternative measure will, by
definition, involve some change, and this alone does not suffice to
demonstrate that the alternative would impose an undue burden.
G.3.3A.17 China — Publications and Audiovisual Products, para.
335
(WT/DS363/AB/R)
Finally, it may be useful to indicate what we are not saying
in reaching the above conclusion. … we are agreeing with the
Panel that the United States has demonstrated that the proposed
alternative would be less restrictive and would make a contribution that
is at least equivalent to the contribution made by the measures at issue
to securing China’s desired level of protection of public morals.
China, in turn, has not demonstrated that this alternative is not
reasonably available. This does not mean that having the Chinese
Government assume sole responsibility for conducting content review is
the only alternative available to China, nor that China must adopt
such a scheme. It does mean that China has not successfully justified
under Article XX(a) of the GATT 1994 the provisions and requirements
found to be inconsistent with China’s trading rights commitments under
its Accession Protocol and Working Party Report. It follows, therefore,
that China is under an obligation to bring those measures into
conformity with its obligations under the covered agreements, including
its trading rights commitments. Like all WTO Members, China retains the
prerogative to select its preferred method of implementing the rulings
and recommendations of the DSB for measures found to be inconsistent
with its obligations under the covered agreements.
G.3.4 Article XX(b)
— Objective pursued back to top
G.3.4.1 EC — Asbestos, para. 172
(WT/DS135/AB/R)
… In this case, the objective pursued by the measure is the
preservation of human life and health through the elimination, or reduction, of the
well-known, and life-threatening, health risks posed by asbestos fibres.
The value pursued is both vital and important in the highest degree. The
remaining question, then, is whether there is an alternative measure
that would achieve the same end and that is less restrictive of trade
than a prohibition.
G.3.4.2 Brazil — Retreaded Tyres, para. 170
(WT/DS332/AB/R)
We note that the objective of the Import Ban is the reduction of the
“exposure to the risks to human, animal or plant life or health
arising from the accumulation of waste tyres” and that “Brazil’s
chosen level of protection is the reduction of [these] risks … to the
maximum extent possible”, and that a measure or practice will not be
viewed as an alternative unless it “preserve[s] for the responding
Member its right to achieve its desired level of protection with respect
to the objective pursued”.
G.3.4A Article XX(b)
— Alternative measures back to top
G.3.4A.1 Brazil — Retreaded Tyres, para. 156
(WT/DS332/AB/R)
In order to determine whether a measure is “necessary” within the
meaning of Article XX(b) of the GATT 1994, a panel must assess all the
relevant factors, particularly the extent of the contribution to the
achievement of a measure’s objective and its trade restrictiveness, in
the light of the importance of the interests or values at stake. If this
analysis yields a preliminary conclusion that the measure is necessary,
this result must be confirmed by comparing the measure with its possible
alternatives, which may be less trade restrictive while providing an
equivalent contribution to the achievement of the objective pursued. It
rests upon the complaining Member to identify possible alternatives to
the measure at issue that the responding Member could have taken. As the
Appellate Body indicated in US — Gambling, while the responding
Member must show that a measure is necessary, it does not have to “show,
in the first instance, that there are no reasonably available
alternatives to achieve its objectives”. We recall that, in order to
qualify as an alternative, a measure proposed by the complaining Member
must be not only less trade restrictive than the measure at issue, but
should also “preserve for the responding Member its right to achieve
its desired level of protection with respect to the objective pursued”.
If the complaining Member has put forward a possible alternative
measure, the responding Member may seek to show that the proposed
measure does not allow it to achieve the level of protection it has
chosen and, therefore, is not a genuine alternative. The responding
Member may also seek to demonstrate that the proposed alternative is
not, in fact, “reasonably available”. As the Appellate Body
indicated in US — Gambling, “[a]n alternative measure may be
found not to be ‘reasonably available’ … where it is merely
theoretical in nature, for instance, where the responding Member is not
capable of taking it, or where the measure imposes an undue burden on
that Member, such as prohibitive costs or substantial technical
difficulties.” If the responding Member demonstrates that the measure
proposed by the complaining Member is not a genuine alternative or is
not “reasonably available”, taking into account the interests or
values being pursued and the responding Member’s desired level of
protection, it follows that the measure at issue is necessary.
G.3.4A.2 Brazil — Retreaded Tyres, paras. 171-172
(WT/DS332/AB/R)
We recall that tyres — new or retreaded — are essential for
modern transportation. However, at the end of their useful life, they
turn into waste that carries risks for public health and the
environment. Governments, legitimately, take actions to minimize the
adverse effects of waste tyres. They may adopt preventive measures
aiming to reduce the accumulation of waste tyres, a category into which
the Import Ban falls. Governments may also contemplate remedial measures
for the management and disposal of waste tyres, such as landfilling,
stockpiling, incineration of waste tyres, and material recycling. Many
of these measures or practices carry, however, their own risks or
require the commitment of substantial resources, or advanced
technologies or know-how. Thus, the capacity of a country to implement
remedial measures that would be particularly costly, or would require
advanced technologies, may be relevant to the assessment of whether such
measures or practices are reasonably available alternatives to a
preventive measure, such as the Import Ban, which does not involve “prohibitive
costs or substantial technical difficulties”.
Among the possible alternatives, the European Communities referred to
measures to encourage domestic retreading or improve the retreadability
of used tyres, as well as a better enforcement of the import ban on used
tyres and of existing collection and disposal schemes. In fact, like the
Import Ban, these measures already figure as elements of a comprehensive
strategy designed by Brazil to deal with waste tyres. Substituting one
element of this comprehensive policy for another would weaken the policy
by reducing the synergies between its components, as well as its total
effect. We are therefore of the view that the Panel did not err in
rejecting as alternatives to the Import Ban components of Brazil’s
policy regarding waste tyres that are complementary to the Import Ban.
G.3.4A.3 Brazil — Retreaded Tyres, paras. 174-175
(WT/DS332/AB/R)
In evaluating whether the measures or practices proposed by the
European Communities were “alternatives”, the Panel sought to
determine whether they would achieve Brazil’s policy objective and
chosen level of protection, that is to say, reducing the “exposure to
the risks to human, animal or plant life or health arising from the
accumulation of waste tyres” to the maximum extent possible. In this
respect, we believe, like the Panel, that non-generation measures are
more apt to achieve this objective because they prevent the accumulation
of waste tyres, while waste management measures dispose of waste tyres
only once they have accumulated. Furthermore, we note that, in comparing
a proposed alternative to the Import Ban, the Panel took into account
specific risks attached to the proposed alternative, such as the risk of
leaching of toxic substances that might be associated to landfilling, or
the risk of toxic emissions that might arise from the incineration of
waste tyres. In our view, the Panel did not err in so doing. Indeed, we
do not see how a panel could undertake a meaningful comparison of the
measure at issue with a possible alternative while disregarding the
risks arising out of the implementation of the possible alternative. In
this case, the Panel examined as proposed alternatives landfilling,
stockpiling, and waste tyre incineration, and considered that, even if
these disposal methods were performed under controlled conditions, they
nevertheless pose risks to human health similar or additional to those
Brazil seeks to reduce through the Import Ban. Because these practices
carry their own risks, and these risks do not arise from non-generation
measures such as the Import Ban, we believe, like the Panel, that these
practices are not reasonably available alternatives.
With respect to material recycling, we share the Panel’s view that
this practice is not as effective as the Import Ban in reducing the
exposure to the risks arising from the accumulation of waste tyres.
Material recycling applications are costly, and hence capable of
disposing of only a limited number of waste tyres. We also note that
some of them might require advanced technologies and know-how that are
not readily available on a large scale. Accordingly, we are of the view
that the Panel did not err in concluding that material recycling is not
a reasonably available alternative to the Import Ban.
G.3.4A.4 Brazil — Retreaded Tyres, para. 182
(WT/DS332/AB/R)
In sum, the Panel’s conclusion that the Import Ban is necessary was
the result of a process involving, first, the examination of the
contribution of the Import Ban to the achievement of its objective
against its trade restrictiveness in the light of the interests at
stake, and, secondly, the comparison of the possible alternatives,
including associated risks, with the Import Ban. The analytical process
followed by the Panel is consistent with the approach previously defined
by the Appellate Body. The weighing and balancing is a holistic
operation that involves putting all the variables of the equation
together and evaluating them in relation to each other after having
examined them individually, in order to reach an overall judgement. We
therefore do not share the European Communities’ view that the Panel
did not “actually” weigh and balance the relevant factors, or that
the Panel made a methodological error in comparing the alternative
options proposed by the European Communities with the Import Ban.
G.3.4A.5 Brazil — Retreaded Tyres, para. 207
(WT/DS332/AB/R)
… The European Communities argues that the Panel erred in rejecting
material recycling applications [as a reasonably available alternative
measure] on the basis of their costs, suggesting that the Panel
erroneously equated high costs with prohibitive costs,
when only the latter would justify a finding that a given alternative is
not “reasonably available”. This argument is based on an artificial
distinction between high and prohibitive costs. Further, in our view,
this is not an issue relating to the Panel’s appreciation of the
evidence, but rather to its legal characterization of the facts. In any
event, what disqualifies these alternatives, according to the Panel, is
not their high costs as such, but the effect of these high costs in
limiting the disposal capacity of these methods.
G.3.5 Article XX(d)
— Level of enforcement — Alternative measure back to top
G.3.5.1 Korea — Various Measures on Beef, para. 176
(WT/DS161/AB/R, WT/DS169/AB/R)
It is not open to doubt that Members of the WTO have the right to
determine for themselves the level of enforcement of their WTO-consistent
laws and regulations. We note that this has also been recognized by the
panel in United States — Section 337, where it said: “The
Panel wished to make it clear that this [the obligation to choose a
reasonably available GATT-consistent or less inconsistent measure] does
not mean that a contracting party could be asked to change its
substantive patent law or its desired level of enforcement of
that law. … ” (emphasis added). …
G.3.5A Article XX(d)
— “laws or regulations” back to top
G.3.5A.1 Mexico — Taxes on Soft Drinks, para. 69
(WT/DS308/AB/R)
… Neither disputes that the expression “laws or regulations”
encompasses the rules adopted by a WTO Member’s legislative or
executive branches of government. We agree with the United States that
one does not immediately think about international law when confronted
with the term “laws” in the plural. Domestic legislative or
regulatory acts sometimes may be intended to implement an international
agreement. In such situations, the origin of the rule is international,
but the implementing instrument is a domestic law or regulation. In our
view, the terms “laws or regulations” refer to rules that form part
of the domestic legal system of a WTO Member. Thus, the “laws or
regulations” with which the Member invoking Article XX(d) may seek to
secure compliance do not include obligations of another WTO
Member under an international agreement.
G.3.5A.2 Mexico — Taxes on Soft Drinks, paras. 70-71
(WT/DS308/AB/R)
… the illustrative list [of “laws or regulations” provided in
Article XX(d)] reinforces the notion that the terms “laws or
regulations” refer to rules that form part of the domestic legal
system of a WTO Member and do not extend to the international
obligations of another WTO Member.
Our understanding of the terms “laws or regulations” is
consistent with the context of Article XX(d). … For example,
paragraph (h) of Article XX refers to “obligations under any
intergovernmental commodity agreement”. The express language of
paragraph (h) would seem to contradict Mexico’s suggestion that
international agreements are implicitly included in the terms “laws or
regulations”. … Article X:1 of the GATT 1994 … refers to
“[l]aws, regulations, judicial decisions and administrative rulings”
and to “[a]greements affecting international trade policy which are in
force between a government … of any Member and the government … of
any other Member”. Thus, a distinction is drawn in the same provision
between “laws [and] regulations” and “international agreements”.
…
Thus, Articles X:1 and XX(h) of the GATT 1994 do not lend support
to interpreting the terms “laws or regulations” in Article XX(d) as
including the international obligations of a Member other than that
invoking the provision.
G.3.5B Article XX(d)
— “to secure compliance” back to top
G.3.5B.1 Mexico — Taxes on Soft Drinks, para. 72
(WT/DS308/AB/R)
… The terms “to secure compliance” speak to the types of
measures that a WTO Member can seek to justify under Article XX(d). They
relate to the design of the measures sought to be justified. There is no
justification under Article XX(d) for a measure that is not designed “to
secure compliance” with a Member’s laws or regulations. Thus, the
terms “to secure compliance” do not expand the scope of the terms
“laws or regulations” to encompass the international obligations of
another WTO Member. Rather, the terms “to secure compliance”
circumscribe the scope of Article XX(d).
G.3.5B.2 Mexico — Taxes on Soft Drinks, paras. 74-75
(WT/DS308/AB/R)
…We see no reason … to derive from the Appellate Body’s
examination of “necessity”, in US — Gambling, a requirement
of “certainty” applicable to the terms “to secure compliance”.
In our view, a measure can be said to be designed “to secure
compliance” even if the measure cannot be guaranteed to achieve its
result with absolute certainty. Nor do we consider that the “use of
coercion” is a necessary component of a measure designed “to secure
compliance”. Rather, Article XX(d) requires that the design of the
measure contribute “to secur[ing] compliance with laws or regulations
which are not inconsistent with the provisions of” the GATT 1994.
… Even if “international countermeasures” could be described as
intended “to secure compliance”, what they seek “to secure
compliance with” — that is, the international obligations of another
WTO Member — would be outside the scope of Article XX(d). This is
because “laws or regulations” within the meaning of Article XX(d)
refer to the rules that form part of the domestic legal order of the WTO
Member invoking the provision and do not include the international
obligations of another WTO Member.
G.3.5B.3 Mexico — Taxes on Soft Drinks, para. 77
(WT/DS308/AB/R)
We observe, furthermore, that Mexico’s interpretation of Article
XX(d) disregards the fact that the GATT 1994 and the DSU specify the
actions that a WTO Member may take if it considers that another WTO
Member has acted inconsistently with its obligations under the GATT 1994
or any of the other covered agreements. … By the same logic,
such action under Article XX(d) would evade the specific and detailed
rules that apply when a WTO Member seeks to take countermeasures in
response to another Member’s failure to comply with rulings and
recommendations of the DSB pursuant to Article XXIII:2 of the GATT 1994
and Articles 22 and 23 of the DSU. Mexico’s interpretation would allow
WTO Members to adopt WTO-inconsistent measures based upon a unilateral
determination that another Member has breached its WTO obligations,
in contradiction with Articles 22 and 23 of the DSU and Article XXIII:2
of the GATT 1994.
G.3.5B.4 Mexico — Taxes on Soft Drinks, para. 79
(WT/DS308/AB/R)
For these reasons, we agree with the Panel that Article XX(d) is not
available to justify WTO-inconsistent measures that seek “to secure
compliance” by another WTO Member with that other Member’s
international obligations. In sum, while we agree with the Panel’s
conclusion, several aspects of our reasoning set out above differ from
the Panel’s own reasoning. First, we conclude that the terms “laws
or regulations” cover rules that form part of the domestic legal
system of a WTO Member, including rules deriving from international
agreements that have been incorporated into the domestic legal system of
a WTO Member or have direct effect according to that WTO Member’s
legal system. Second, we have found that Article XX(d) does not require
the “use of coercion” nor that the measure sought to be justified
results in securing compliance with absolute certainty. Rather, Article
XX(d) requires that the measure be designed “to secure compliance with
laws or regulations which are not inconsistent with the provisions of”
the GATT 1994. Finally, we do not endorse the Panel’s reliance on the
Appellate Body’s interpretation in US — Gambling of the term
“necessary” to interpret the terms “to secure compliance” in
Article XX(d).
G.3.6 Article XX(d)
— Necessity test back to top
G.3.6.1 Korea — Various Measures on Beef, para. 161
(WT/DS161/AB/R, WT/DS169/AB/R)
We believe that, as used in the context of Article XX(d), the reach
of the word “necessary” is not limited to that which is “indispensable”
or “of absolute necessity” or “inevitable”. Measures which are
indispensable or of absolute necessity or inevitable to secure
compliance certainly fulfil the requirements of Article XX(d). But other
measures, too, may fall within the ambit of this exception. As used in
Article XX(d), the term “necessary” refers, in our view, to a range
of degrees of necessity. At one end of this continuum lies “necessary”
understood as “indispensable”; at the other end, is “necessary”
taken to mean as “making a contribution to”. We consider that a “necessary”
measure is, in this continuum, located significantly closer to the pole
of “indispensable” than to the opposite pole of simply “making a
contribution to”.
G.3.6.2 Korea — Various Measures on Beef, para. 162
(WT/DS161/AB/R, WT/DS169/AB/R)
… It seems to us that a treaty interpreter assessing a measure
claimed to be necessary to secure compliance of a WTO-consistent law or
regulation may, in appropriate cases, take into account the relative
importance of the common interests or values that the law or regulation
to be enforced is intended to protect. The more vital or important those
common interests or values are, the easier it would be to accept as “necessary”
a measure designed as an enforcement instrument.
G.3.6.3 Korea — Various Measures on Beef, para. 163
(WT/DS161/AB/R, WT/DS169/AB/R)
There are other aspects of the enforcement measure to be considered
in evaluating that measure as “necessary”. One is the extent to
which the measure contributes to the realization of the end pursued, the
securing of compliance with the law or regulation at issue. The greater
the contribution, the more easily a measure might be considered to be
“necessary”. Another aspect is the extent to which the compliance
measure produces restrictive effects on international commerce, that is,
in respect of a measure inconsistent with Article III:4, restrictive
effects on imported goods. A measure with a relatively slight
impact upon imported products might more easily be considered as “necessary”
than a measure with intense or broader restrictive effects.
G.3.6.4 Korea — Various Measures on Beef, para. 164
(WT/DS161/AB/R, WT/DS169/AB/R)
In sum, determination of whether a measure, which is not “indispensable”,
may nevertheless be “necessary” within the contemplation of Article
XX(d), involves in every case a process of weighing and balancing a
series of factors which prominently include the contribution made by the
compliance measure to the enforcement of the law or regulation at issue,
the importance of the common interests or values protected by that law
or regulation, and the accompanying impact of the law or regulation on
imports or exports.
G.3.6.5 Dominican Republic — Import and Sale of Cigarettes,
para. 70
(WT/DS302/AB/R)
The Appellate Body Reports in Korea — Various Measures on Beef,
EC — Asbestos and US—Gambling indicate that, in the
assessment of whether a proposed alternative to the impugned measure is
reasonably available, factors such as the trade impact of the measure,
the importance of the interests protected by the measure, or the
contribution of the measure to the realization of the end pursued,
should be taken into account in the analysis. The weighing and balancing
process of these three factors also informs the determination whether a
WTO-consistent alternative measure which the Member concerned could
reasonably be expected to employ is available, or whether a less WTO-inconsistent
measure is reasonably available. …
G.3.6.6 Dominican Republic — Import and Sale of Cigarettes,
para. 72
(WT/DS302/AB/R)
Having assessed the importance of the interests protected by the tax
stamp requirement, its trade impact, and its contribution to the
realization of the end pursued, the Panel also considered whether a WTO-consistent
alternative measure is reasonably available to secure compliance with
the Dominican Republic’s tax laws and regulations appropriate to the
level of enforcement pursued by the Dominican Republic. In the light of
its analysis of the relevant factors, especially the measure’s
contribution to the realization of the end pursued, the Panel opined
that the alternative of providing secure tax stamps to foreign
exporters, so that those tax stamps could be affixed on cigarette
packets in the course of their own production process, prior to
importation, would be equivalent to the tax stamp requirement in terms
of allowing the Dominican Republic to secure the high level of
enforcement it pursues with regard to tax collection and the prevention
of cigarette smuggling. The Panel gave substantial weight to its finding
that the tax stamp requirement is of limited effectiveness in preventing
tax evasion and cigarette smuggling; in particular, it found “no
evidence to conclude that the tax stamp requirement secures a zero
tolerance level of enforcement with regard to tax collection and the
prevention of cigarette smuggling”. We consider that the Panel
conducted an appropriate analysis, following the approach set out in Korea
— Various Measures on Beef and in EC — Asbestos, and
affirmed in US — Gambling. We see no reason to disturb the
Panel’s conclusions in respect of the existence of a reasonably
available alternative measure to the tax stamp requirement.
G.3.6.7 Mexico — Taxes on Soft Drinks, para. 74
(WT/DS308/AB/R)
… A measure that is not suitable or capable of securing compliance
with the relevant laws or regulations will not meet the “necessity”
requirement. …
G.3.6.8 Mexico — Taxes on Soft Drinks, para. 79
(WT/DS308/AB/R)
… we do not endorse the Panel’s reliance on the Appellate Body’s
interpretation in US —Gambling of the term “necessary” to
interpret the terms “to secure compliance” in Article XX(d).
G.3.6.9 US — Shrimp (Thailand) / US — Customs Bond Directive,
paras. 307, 310, 316-317, 319
(WT/DS343/AB/R, WT/DS345/AB/R)
… the Panel addressed at the interim stage the issue of whether the
United States should be permitted to “defend” the [enhanced
continuous bond requirement] simultaneously under the Ad Note and
under Article XX(d) of the GATT 1994. India had argued, first, that the
Panel should have evaluated whether a Member must invoke footnote 24 of
the Anti-Dumping Agreement in order to assert an affirmative
defence under Article XX; and, secondly, given that the Panel had found
that Article VI and the Ad Note and the Anti-Dumping Agreement
constitute lex specialis, the Panel should have refused to
evaluate the defence of the [enhanced continuous bond requirement]
raised by the United States under Article XX(d) of the GATT 1994. The
Panel rejected India’s arguments …
…
India’s appeal raises systemic issues about the availability of a
defence under Article XX(d) to justify a measure found to constitute “specific
action against dumping” under Article 18.1 of the Anti-Dumping
Agreement, and not to be in accordance with the Ad Note to
Article VI:2 and 3 of the GATT 1994, as well as Article 18.1 of the Anti-Dumping
Agreement. Assuming, arguendo, that such a defence is
available to the United States, we proceed to consider the United States’
appeal of the Panel’s finding that the [enhanced continuous bond
requirement], as applied to subject shrimp, is “necessary” to secure
compliance with certain United States laws and regulations within the
meaning of Article XX(d). …
…
… we are of the view that the “necessity” test under Article
XX(d) is different from the “reasonableness” test under the Ad Note.
Relying on Appellate Body jurisprudence, the Panel considered that the
following factors are relevant in determining whether a measure is “necessary”
to secure compliance with laws and regulations: (i) the relative
importance of the values or objectives the law or regulation is intended
to protect; (ii) the extent to which the measure contributes to the
realization of the end pursued — the securing of compliance with the
law or regulation at issue; and (iii) the restrictive impact of the
measure at issue on imports. We see no error in the Panel’s analysis
of the meaning of the term “necessary” and the factors relied upon
by it to evaluate the necessity of the [enhanced continuous bond
requirement] to secure compliance with certain laws and regulations of
the United States, as the Panel’s analysis is in consonance with the
previous jurisprudence of the Appellate Body.
The [enhanced continuous bond requirement] is intended to secure
potential additional liability that might arise from significant
increases in the amount of dumping after the imposition of an
anti-dumping duty order. The United States has not demonstrated that the
margins of dumping for subject shrimp were likely to increase
significantly so as to result in significant additional liability over
and above the cash deposit rates. Like the Panel, we do not, therefore,
see how taking security, such as the [enhanced continuous bond
requirement], can be viewed as being “necessary” in the sense of it
contributing to the realization of the objective of ensuring the final
collection of anti-dumping or countervailing duties in the event of
default by importers.
…
In view of this conclusion that the [enhanced continuous bond
requirement], as applied to subject shrimp, is not “necessary”
within the meaning of Article XX(d), we do not express a view on the
question of whether a defence under Article XX(d) of the GATT 1994 was
available to the United States.
G.3.7 Article XX(g)
— “conservation of exhaustible natural
resources” back to top
G.3.7.1 US — Shrimp, para. 128
(WT/DS58/AB/R)
… Textually, Article XX(g) is not limited to the
conservation of “mineral” or “non-living” natural resources. The
complainants’ principal argument is rooted in the notion that “living”
natural resources are “renewable” and therefore cannot be “exhaustible”
natural resources. We do not believe that “exhaustible” natural
resources and “renewable” natural resources are mutually exclusive.
One lesson that modern biological sciences teach us is that living
species, though in principle, capable of reproduction and, in that
sense, “renewable”, are in certain circumstances indeed susceptible
of depletion, exhaustion and extinction, frequently because of human
activities. Living resources are just as “finite” as petroleum, iron
ore and other non-living resources.
G.3.7.2 US — Shrimp, para. 130
(WT/DS58/AB/R)
From the perspective embodied in the preamble of the WTO Agreement,
we note that the generic term “natural resources” in Article XX(g)
is not “static” in its content or reference but is rather “by
definition, evolutionary”. It is, therefore, pertinent to note that
modern international conventions and declarations make frequent
references to natural resources as embracing both living and non-living
resources. …
G.3.7.3 US — Shrimp, para. 153
(WT/DS58/AB/R)
[The language of the Preamble of the WTO Agreement]
demonstrates a recognition by WTO negotiators that optimal use of the
world’s resources should be made in accordance with the objective of
sustainable development. As this preambular language reflects the
intentions of negotiators of the WTO Agreement, we believe it
must add colour, texture and shading to our interpretation of the
agreements annexed to the WTO Agreement, in this case, the GATT
1994. We have already observed that Article XX(g) of the GATT 1994 is
appropriately read with the perspective embodied in the above preamble.
G.3.8 Article XX(g)
— “measures made effective in conjunction
with” back to top
G.3.8.1 US — Gasoline, pp. 20-21, DSR 1996:I, p. 3 at 19-20
(WT/DS2/AB/R)
… the clause “if such measures are made effective in conjunction
with restrictions on domestic product or consumption” is appropriately
read as a requirement that the measures concerned impose restrictions,
not just in respect of imported gasoline but also with respect to
domestic gasoline. The clause is a requirement of even-handedness in
the imposition of restrictions, in the name of conservation, upon the
production or consumption of exhaustible natural resources.
… if no restrictions on domestically produced like products
are imposed at all, and all limitations are placed upon imported
products alone, the measure cannot be accepted as primarily or
even substantially designed for implementing conservationist goals. The
measure would simply be naked discrimination for protecting locally
produced goods.
We do not believe … that the clause “if made effective in
conjunction with restrictions on domestic production or consumption”
was intended to establish an empirical “effects test” for the
availability of the Article XX(g) exception. …
G.3.8.2 US — Shrimp, paras. 144-145
(WT/DS58/AB/R)
… We believe that, in principle, Section 609 is an even-handed
measure.
Accordingly, we hold that Section 609 is a measure made
effective in conjunction with the restrictions on domestic harvesting of
shrimp, as required by Article XX(g).
G.3.9 Article XX(g)
— “relating to” back to top
G.3.9.1 US — Gasoline, pp. 17-18, DSR 1996:I, p. 3 at 16
(WT/DS2/AB/R)
… In enumerating the various categories of governmental acts, laws
or regulations Which WTO Members may carry out or promulgate in pursuit
of differing legitimate state policies or interests outside the realm of
trade liberalization, Article XX uses different terms in respect of
different categories:
“necessary” — in paragraphs (a), (b) and (d); “essential”
— in paragraph (j); “relating to” — in paragraphs (c), (e) and
(g); “for the protection of” — in paragraph (f); “in pursuance
of” — in paragraph (h); and “involving” — in paragraph (i).
It does not seem reasonable to suppose that the WTO Members intended
to require, in respect of each and every category, the same kind or
degree of connection or relationship between the measure under appraisal
and the state interest or policy sought to be promoted or realized.
G.3.9.2 US — Gasoline, p. 18, DSR 1996:I, p. 3 at 16-17
(WT/DS2/AB/R)
… Article XX(g) and its phrase, “relating to the conservation of
exhaustible natural resources,” need to be read in context and in such
a manner as to give effect to the purposes and objects of the General
Agreement. The context of Article XX(g) includes the provisions of
the rest of the General Agreement, including in particular
Articles I, III and XI; conversely, the context of Articles I and III
and XI includes Article XX. Accordingly, the phrase “relating to the
conservation of exhaustible natural resources” may not be read so
expansively as seriously to subvert the purpose and object of Article
III:4. Nor may Article III:4 be given so broad a reach as effectively to
emasculate Article XX(g) and the policies and interests it embodies. …
G.3.9.3 US — Gasoline, pp. 18-19, DSR 1996:I, p. 3 at 17
(WT/DS2/AB/R)
All the participants and the third participants in this appeal accept
… that a measure must be “primarily aimed at” the conservation of
exhaustible natural resources in order to fall within the scope of
Article XX(g). Accordingly, we see no need to examine this point
further, save, perhaps, to note that the phrase “primarily aimed at”
is not itself treaty language and was not designed as a simple litmus
test for inclusion or exclusion from Article XX(g).
G.3.9.4 US — Gasoline, p. 19, DSR 1996:I, p. 3 at 18
(WT/DS2/AB/R)
… We consider that, given that substantial relationship, the
baseline establishment rules cannot be regarded as merely incidentally
or inadvertently aimed at the conservation of clean air in the United
States for the purposes of Article XX(g).
G.3.9.5 US — Shrimp, paras. 141-142
(WT/DS58/AB/R)
In its general design and structure, therefore, Section 609 is not a
simple, blanket prohibition of the importation of shrimp imposed without
regard to the consequences (or lack thereof) of the mode of harvesting
employed upon the incidental capture and mortality of sea turtles.
Focusing on the design of the measure here at stake, it appears to us
that Section 609, cum implementing guidelines, is not
disproportionately wide in its scope and reach in relation to the policy
objective of protection and conservation of sea turtle species. The
means are, in principle, reasonably related to the ends. The means and
ends relationship between Section 609 and the legitimate policy of
conserving an exhaustible, and, in fact, endangered species, is
observably a close and real one. …
In our view, therefore, Section 609 is a measure “relating to”
the conservation of an exhaustible natural resource within the meaning
of Article XX(g) of the GATT 1994.
G.3.10 Article XX(g)
— Jurisdictional limitation. See also National
Treatment, Relationship between Article III and Article XX (N.1.12) back to top
G.3.10.1 US — Shrimp, para. 121
(WT/DS58/AB/R)
… conditioning access to a Member’s
domestic market on whether
exporting Members comply with, or adopt, a policy or policies
unilaterally prescribed by the importing Member may, to some degree, be
a common aspect of measures falling within the scope of one or another
of the exceptions (a) to (j) of Article XX. Paragraphs (a) to (j)
comprise measures that are recognized as exceptions to substantive
obligations established in the GATT 1994, because the domestic
policies embodied in such measures have been recognized as important and
legitimate in character. It is not necessary to assume that requiring
from exporting countries compliance with, or adoption of, certain
policies (although covered in principle by one or another of the
exceptions) prescribed by the importing country, renders a measure a
priori incapable of justification under Article XX. Such an
interpretation renders most, if not all, of the specific exceptions of
Article XX inutile, a result abhorrent to the principles of
interpretation we are bound to apply.
G.3.10.2 US — Shrimp (Article 21.5 — Malaysia), para. 138
(WT/DS58/AB/RW)
In our view, Malaysia overlooks the significance of this statement
[in paragraph 121 of US — Shrimp]. Contrary to what Malaysia
suggests, this statement is not “dicta”. As we said before,
it appears to us “that conditioning access to a Member’s domestic
market on whether exporting Members comply with, or adopt, a policy or
policies unilaterally prescribed by the importing Member may, to some
degree, be a common aspect of measures falling within the scope of one
or another of the exceptions (a) to (j) of Article XX”. This statement
expresses a principle that was central to our ruling in United States
— Shrimp.
G.3.10.3 US — Shrimp, para. 133
(WT/DS58/AB/R)
… We do not pass upon the question of whether there is an implied
jurisdictional limitation in Article XX(g), and if so, the nature or
extent of that limitation. We note only that in the specific
circumstances of the case before us, there is a sufficient nexus between
the migratory and endangered marine populations involved and the United
States for purposes of Article XX(g).
G.3.11 Chapeau of Article XX
— General back to top
G.3.11.1 US — Gasoline, p. 22, DSR 1996:I, p. 3 at 20
(WT/DS2/AB/R)
The chapeau by its express terms addresses, not so much the
questioned measure or its specific contents as such, but rather the
manner in which that measure is applied. It is, accordingly, important
to underscore that the purpose and object of the introductory clauses of
Article XX is generally the prevention of “abuse of the exceptions …
”. …
G.3.11.2 US — Gasoline, p. 22, DSR 1996:I, p. 3 at 21
(WT/DS2/AB/R)
… If those exceptions are not to be abused or misused, in other
words, the measures falling within the particular exceptions must be
applied reasonably, with due regard both to the legal duties of the
party claiming the exception and the legal rights of the other parties
concerned.
G.3.11.3 US — Gasoline, p. 23, DSR 1996:I, p. 3 at 21
(WT/DS2/AB/R)
… The provisions of the chapeau cannot logically refer to the same
standard(s) by which a violation of a substantive rule has been
determined to have occurred. …
G.3.11.4 US — Gasoline, p. 25, DSR 1996:I, p. 3 at 23
(WT/DS2/AB/R)
“Arbitrary discrimination”, “unjustifiable discrimination”
and “disguised restriction” on international trade may, accordingly,
be read side-by-side; they impart meaning to one another. It is clear to
us that “disguised restriction” includes disguised discrimination
in international trade. It is equally clear that concealed or
unannounced restriction or discrimination in international trade
does not exhaust the meaning of “disguised restriction”. …
G.3.11.5 US — Shrimp, para. 159
(WT/DS58/AB/R)
The task of interpreting and applying the chapeau is, hence,
essentially the delicate one of locating and marking out a line of
equilibrium between the right of a Member to invoke an exception under
Article XX and the rights of the other Members under varying substantive
provisions (e.g., Article XI) of the GATT 1994, so that neither of the
competing rights will cancel out the other and thereby distort and
nullify or impair the balance of rights and obligations constructed by
the Members themselves in that Agreement. The location of the line of
equilibrium, as expressed in the chapeau, is not fixed and unchanging;
the line moves as the kind and the shape of the measures at stake vary
and as the facts making up specific cases differ.
G.3.11.6 US — Shrimp, paras. 156-157
(WT/DS58/AB/R)
… we consider that [the chapeau of Article XX] embodies the
recognition on the part of WTO Members of the need to maintain a balance
of rights and obligations between the right of a Member to invoke one or
another of the exceptions of Article XX, specified in paragraphs (a) to
(j), on the one hand, and the substantive rights of the other Members
under the GATT 1994, on the other hand. Exercise by one Member of its
right to invoke an exception, such as Article XX(g), if abused or
misused, will, to that extent, erode or render naught the substantive
treaty rights in, for example, Article XI:1, of other Members.
Similarly, because the GATT 1994 itself makes available the exceptions
of Article XX, in recognition of the legitimate nature of the policies
and interests there embodied, the right to invoke one of those
exceptions is not to be rendered illusory. The same concept may be
expressed from a slightly different angle of vision, thus, a balance
must be struck between the right of a Member to invoke an
exception under Article XX and the duty of that same Member to
respect the treaty rights of the other Members. …
In our view, the language of the chapeau makes clear that each of the
exceptions in paragraphs (a) to (j) of Article XX is a limited and
conditional exception from the substantive obligations contained in
the other provisions of the GATT 1994, that is to say, the ultimate
availability of the exception is subject to the compliance by the
invoking Member with the requirements of the chapeau. …
G.3.11.7 US — Shrimp, para. 160
(WT/DS58/AB/R)
… We note, preliminarily, that the application of a measure may be
characterized as amounting to an abuse or misuse of an exception of
Article XX not only when the detailed operating provisions of the
measure prescribe the arbitrary or unjustifiable activity, but also
where a measure, otherwise fair and just on its face, is actually
applied in an arbitrary or unjustifiable manner. The standards of the
chapeau, in our view, project both substantive and procedural
requirements.
G.3.11.8 US — Shrimp (Article 21.5 — Malaysia), para. 118
(WT/DS58/AB/RW)
The chapeau of Article XX establishes three standards regarding the application
of measures for which justification under Article XX may be sought:
first, there must be no “arbitrary” discrimination between countries
where the same conditions prevail; second, there must be no “unjustifiable”
discrimination between countries where the same conditions prevail; and,
third, there must be no “disguised restriction on international trade”.
The Panel’s findings appealed by Malaysia concern the first and second
of these three standards.
G.3.11.9 Brazil — Retreaded Tyres, para. 215
(WT/DS332/AB/R)
The focus of the chapeau, by its express terms, is on the application
of a measure already found to be inconsistent with an obligation of the
GATT 1994 but falling within one of the paragraphs of Article XX. The
chapeau’s requirements are twofold. First, a measure provisionally
justified under one of the paragraphs of Article XX must not be applied
in a manner that would constitute “arbitrary or unjustifiable
discrimination” between countries where the same conditions prevail.
Secondly, this measure must not be applied in a manner that would
constitute “a disguised restriction on international trade”. Through
these requirements, the chapeau serves to ensure that Members’ rights
to avail themselves of exceptions are exercised in good faith to protect
interests considered legitimate under Article XX, not as a means to
circumvent one Member’s obligations towards other WTO Members.
G.3.11.10 Brazil — Retreaded Tyres, para. 224
(WT/DS332/AB/R)
We begin our analysis by recalling that the function of the chapeau
is the prevention of abuse of the exceptions specified in the paragraphs
of Article XX. In US — Shrimp, the Appellate Body stated that
“[t]he chapeau of Article XX is, in fact, but one expression of the
principle of good faith.” The Appellate Body added that “[o]ne
application of this general principle, the application widely known as
the doctrine of abus de droit, prohibits the abusive exercise of
a state’s rights and enjoins that whenever the assertion of a right
‘impinges on the field covered by [a] treaty obligation, it must be
exercised bona fide, that is to say, reasonably’.” Accordingly, the
task of interpreting and applying the chapeau is “the delicate one of
locating and marking out a line of equilibrium between the right of a
Member to invoke an exception under Article XX and the rights of the
other Members under varying substantive provisions (e.g., Article XI) of
the GATT 1994, so that neither of the competing rights will cancel out
the other and thereby distort and nullify or impair the balance of
rights and obligations constructed by the Members themselves in that
Agreement”. The location of this line of equilibrium may move “as
the kind and the shape of the measures at stake vary and as the facts
making up specific cases differ”.
G.3.12 Chapeau of Article XX
— “arbitrary or unjustifiable
discrimination between countries where the same conditions prevail” back to top
G.3.12.1 US — Gasoline, pp. 23-24, DSR 1996:I, p. 3 at 22
(WT/DS2/AB/R)
… It was asked whether the words incorporated into the first two
standards “between countries where the same conditions prevail”
refer to conditions in importing and exporting countries, or only to
conditions in exporting countries. The reply of the United States was to
the effect that it interpreted that phrase as referring to both the
exporting countries and importing countries and as between exporting
countries. … At no point in the appeal was that assumption
challenged by Venezuela or Brazil. …
… we see no need to decide the matter of the field of application
of the standards set forth in the chapeau nor to make a ruling at
variance with the common understanding of the participants.
G.3.12.2 US — Shrimp, para. 150
(WT/DS58/AB/R)
… In order for a measure to be applied in a manner which would
constitute “arbitrary or unjustifiable discrimination between
countries where the same conditions prevail”, three elements must
exist. First, the application of the measure must result in discrimination.
As we stated in United States — Gasoline, the nature and
quality of this discrimination is different from the discrimination in
the treatment of products which was already found to be inconsistent
with one of the substantive obligations of the GATT 1994, such as
Articles I, III or XI. Second, the discrimination must be arbitrary or
unjustifiable in character. We will examine this element of arbitrariness
or unjustifiability in detail below. Third, this
discrimination must occur between countries where the same conditions
prevail. In United States — Gasoline, we accepted the
assumption of the participants in that appeal that such discrimination
could occur not only between different exporting Members, but also
between exporting Members and the importing Member concerned. Thus, the
standards embodied in the language of the chapeau are not only different
from the requirements of Article XX(g); they are also different from the
standard used in determining that Section 609 is violative of the
substantive rules of Article XI:1 of the GATT 1994.
G.3.12.3 US — Shrimp, paras. 164-165
(WT/DS58/AB/R)
… It may be quite acceptable for a government, in adopting and
implementing a domestic policy, to adopt a single standard applicable to
all its citizens throughout that country. However, it is not acceptable,
in international trade relations, for one WTO Member to use an economic
embargo to require other Members to adopt essentially the same
comprehensive regulatory programme, to achieve a certain policy goal, as
that in force within that Member’s territory, without taking
into consideration different conditions which may occur in the
territories of those other Members.
… We believe that discrimination results not only when countries in
which the same conditions prevail are differently treated, but also when
the application of the measure at issue does not allow for any inquiry
into the appropriateness of the regulatory programme for the conditions
prevailing in those exporting countries.
G.3.12.4 US — Shrimp, para. 177
(WT/DS58/AB/R)
… Section 609, in its application, imposes a single, rigid and
unbending requirement that countries applying for certification …
adopt a comprehensive regulatory programme that is essentially the same
as the United States’ programme, without inquiring into the
appropriateness of that programme for the conditions prevailing in the
exporting countries. Furthermore, there is little or no flexibility in
how officials make the determination for certification pursuant to these
provisions. In our view, this rigidity and inflexibility also constitute
“arbitrary discrimination” within the meaning of the chapeau.
G.3.12.5 US — Shrimp (Article 21.5 — Malaysia), paras. 122-123
(WT/DS58/AB/RW)
We concluded in United States — Shrimp that, to avoid “arbitrary
or unjustifiable discrimination”, the United States had to provide all
exporting countries “similar opportunities to negotiate” an
international agreement. Given the specific mandate contained in Section
609, and given the decided preference for multilateral approaches voiced
by WTO Members and others in the international community in various
international agreements for the protection and conservation of
endangered sea turtles that were cited in our previous Report, the
United States, in our view, would be expected to make good faith efforts
to reach international agreements that are comparable from one forum of
negotiation to the other. The negotiations need not be identical.
Indeed, no two negotiations can ever be identical, or lead to identical
results. Yet the negotiations must be comparable in the sense
that comparable efforts are made, comparable resources are invested, and
comparable energies are devoted to securing an international agreement.
So long as such comparable efforts are made, it is more likely that “arbitrary
or unjustifiable discrimination” will be avoided between countries
where an importing Member concludes an agreement with one group of
countries, but fails to do so with another group of countries.
Under the chapeau of Article XX, an importing Member may not treat
its trading partners in a manner that would constitute “arbitrary or
unjustifiable discrimination”. With respect to this measure, the
United States could conceivably respect this obligation, and the
conclusion of an international agreement might nevertheless not be
possible despite the serious, good faith efforts of the United States.
Requiring that a multilateral agreement be concluded by the
United States in order to avoid “arbitrary or unjustifiable
discrimination” in applying its measure would mean that any country
party to the negotiations with the United States, whether a WTO Member
or not, would have, in effect, a veto over whether the United States
could fulfil its WTO obligations. Such a requirement would not be
reasonable. For a variety of reasons, it may be possible to conclude an
agreement with one group of countries but not another. The conclusion of
a multilateral agreement requires the cooperation and commitment of many
countries. In our view, the United States cannot be held to have engaged
in “arbitrary or unjustifiable discrimination” under Article XX
solely because one international negotiation resulted in an agreement
while another did not.
G.3.12.6 US — Shrimp (Article 21.5 — Malaysia), para. 124
(WT/DS58/AB/RW)
As we stated in United States — Shrimp [Appellate Body
Report, para. 168], “the protection and conservation of highly
migratory species of sea turtles … demands concerted and cooperative
efforts on the part of the many countries whose waters are traversed in
the course of recurrent sea turtle migrations”. Further, the “need
for, and the appropriateness of, such efforts have been recognized in
the WTO itself as well as in a significant number of other international
instruments and declarations”. For example, Principle 12 of the Rio
Declaration on Environment and Development states, in part, that “[e]nvironmental
measures addressing transboundary or global environmental problems
should, as far as possible, be based on international consensus”.
Clearly, and “as far as possible”, a multilateral approach is
strongly preferred. Yet it is one thing to prefer a multilateral
approach in the application of a measure that is provisionally justified
under one of the subparagraphs of Article XX of the GATT 1994; it is
another to require the conclusion of a multilateral agreement as
a condition of avoiding “arbitrary or unjustifiable discrimination”
under the chapeau of Article XX. We see, in this case, no such
requirement.
G.3.12.7 US — Shrimp (Article 21.5 — Malaysia), para. 130
(WT/DS58/AB/RW)
… The Panel compared the efforts of the United States to negotiate
the Inter-American Convention with one group of exporting WTO Members
with the efforts made by the United States to negotiate a similar
agreement with another group of exporting WTO Members. The Panel rightly
used the Inter-American Convention as a factual reference in this
exercise of comparison. It was all the more relevant to do so given that
the Inter-American Convention was the only international agreement that
the Panel could have used in such a comparison. As we read the Panel
Report, it is clear to us that the Panel attached a relative value to
the Inter-American Convention in making this comparison, but did not
view the Inter-American Convention in any way as an absolute standard.
Thus, we disagree with Malaysia’s submission that the Panel raised the
Inter-American Convention to the rank of a “legal standard”. The
mere use by the Panel of the Inter-American Convention as a basis for
a comparison did not transform the Inter-American Convention into a
“legal standard”. Furthermore, although the Panel could have chosen
a more appropriate word than “benchmark” to express its views,
Malaysia is mistaken in equating the mere use of the word “benchmark”,
as it was used by the Panel, with the establishment of a legal standard.
G.3.12.8 US — Shrimp (Article 21.5 — Malaysia), para. 144
(WT/DS58/AB/RW)
In our view, there is an important difference between conditioning
market access on the adoption of essentially the same programme, and
conditioning market access on the adoption of a programme comparable
in effectiveness. Authorizing an importing Member to condition
market access on exporting Members putting in place regulatory
programmes comparable in effectiveness to that of the importing
Member gives sufficient latitude to the exporting Member with respect to
the programme it may adopt to achieve the level of effectiveness
required. It allows the exporting Member to adopt a regulatory programme
that is suitable to the specific conditions prevailing in its territory.
As we see it, the Panel correctly reasoned and concluded that
conditioning market access on the adoption of a programme comparable
in effectiveness, allows for sufficient flexibility in the
application of the measure so as to avoid “arbitrary or unjustifiable
discrimination”. We, therefore, agree with the conclusion of the Panel
on “comparable effectiveness”.
G.3.12.9 US — Shrimp (Article 21.5 — Malaysia), paras. 149-150
(WT/DS58/AB/RW)
We need only say here that, in our view, a measure should be designed
in such a manner that there is sufficient flexibility to take into
account the specific conditions prevailing in any exporting
Member, including, of course, Malaysia. Yet this is not the same as
saying that there must be specific provisions in the measure aimed at
addressing specifically the particular conditions prevailing in every
individual exporting Member. Article XX of the GATT 1994 does not
require a Member to anticipate and provide explicitly for the specific
conditions prevailing and evolving in every individual Member.
We are, therefore, not persuaded by Malaysia’s argument that the
measure at issue is not flexible enough because the Revised Guidelines
do not explicitly address the specific conditions prevailing in
Malaysia.
G.3.12.10 Brazil — Retreaded Tyres, para. 225
(WT/DS332/AB/R)
Analysing whether discrimination is arbitrary or unjustifiable
usually involves an analysis that relates primarily to the cause or the
rationale of the discrimination. Thus, we observe that, in US — Gasoline, the Appellate Body assessed the two explanations provided
by the United States for the discrimination resulting from the
application of the baseline establishment rules at issue. As it found
them unsatisfactory, the Appellate Body concluded that the application
of the baseline establishment rules resulted in arbitrary or
unjustifiable discrimination. In US — Shrimp, the Appellate
Body relied on a number of factors in finding that the measure at issue
resulted in arbitrary or unjustifiable discrimination. The assessment of
these factors by the Appellate Body was part of an analysis that was
directed at the cause, or the rationale, of the discrimination. US —
Shrimp (Article 21.5 — Malaysia) concerned measures taken by
the United States to implement recommendations and rulings of the DSB in
US — Shrimp. The Appellate Body’s analysis of these measures
under the chapeau of Article XX focused on whether discrimination that
might result from the application of those measures had a legitimate
cause or rationale in the light of the objectives listed in the
paragraphs of Article XX.
G.3.12.11 Brazil — Retreaded Tyres, paras. 226-228
(WT/DS332/AB/R)
… the analysis of whether the application of a measure results in
arbitrary or unjustifiable discrimination should focus on the cause of
the discrimination, or the rationale put forward to explain its
existence. In this case, Brazil explained that it introduced the
MERCOSUR exemption to comply with a ruling issued by a MERCOSUR arbitral
tribunal. This ruling arose in the context of a challenge initiated by
Uruguay against Brazil’s import ban on remoulded tyres, on the grounds
that it constituted a new restriction on trade prohibited under MERCOSUR.
The MERCOSUR arbitral tribunal found Brazil’s restrictions on the
importation of remoulded tyres to be a violation of its obligations
under MERCOSUR. These facts are undisputed.
We have to assess whether this explanation provided by Brazil is
acceptable as a justification for discrimination between MERCOSUR
countries and non-MERCOSUR countries in relation to retreaded tyres. In
doing so, we are mindful of the function of the chapeau of Article XX,
which is to prevent abuse of the exceptions specified in the paragraphs
of that provision. In our view, there is such an abuse, and, therefore,
there is arbitrary or unjustifiable discrimination when a measure
provisionally justified under a paragraph of Article XX is applied in a
discriminatory manner “between countries where the same conditions
prevail”, and when the reasons given for this discrimination bear no
rational connection to the objective falling within the purview of a
paragraph of Article XX, or would go against that objective. The
assessment of whether discrimination is arbitrary or unjustifiable
should be made in the light of the objective of the measure. We note,
for example, that one of the bases on which the Appellate Body relied in
US — Shrimp for concluding that the operation of the measure at
issue resulted in unjustifiable discrimination was that one particular
aspect of the application of the measure (the measure implied that, in
certain circumstances, shrimp caught abroad using methods identical to
those employed in the United States would be excluded from the United
States market ) was “difficult to reconcile with the declared
objective of protecting and conserving sea turtles”. Accordingly, we
have difficulty understanding how discrimination might be viewed as
complying with the chapeau of Article XX when the alleged rationale for
discriminating does not relate to the pursuit of or would go against the
objective that was provisionally found to justify a measure under a
paragraph of Article XX.
In this case, the discrimination between MERCOSUR countries and other
WTO Members in the application of the Import Ban was introduced as a
consequence of a ruling by a MERCOSUR tribunal. The tribunal found
against Brazil because the restriction on imports of remoulded tyres was
inconsistent with the prohibition of new trade restrictions under
MERCOSUR law. In our view, the ruling issued by the MERCOSUR arbitral
tribunal is not an acceptable rationale for the discrimination, because
it bears no relationship to the legitimate objective pursued by the
Import Ban that falls within the purview of Article XX(b), and even goes
against this objective, to however small a degree. Accordingly, we are
of the view that the MERCOSUR exemption has resulted in the Import Ban
being applied in a manner that constitutes arbitrary or unjustifiable
discrimination.
G.3.12.12 Brazil — Retreaded Tyres, paras. 229-230
(WT/DS332/AB/R)
The Panel considered that the MERCOSUR exemption resulted in
discrimination between MERCOSUR countries and other WTO Members, but
that this discrimination would be “unjustifiable” only if imports of
retreaded tyres entering into Brazil “were to take place in such
amounts that the achievement of the objective of the measure at issue
would be significantly undermined”. The Panel’s interpretation
implies that the determination of whether discrimination is
unjustifiable depends on the quantitative impact of this discrimination
on the achievement of the objective of the measure at issue. As we
indicated above, analysing whether discrimination is “unjustifiable”
will usually involve an analysis that relates primarily to the cause or
the rationale of the discrimination. By contrast, the Panel’s
interpretation of the term “unjustifiable” does not depend on the
cause or rationale of the discrimination but, rather, is focused
exclusively on the assessment of the effects of the
discrimination. The Panel’s approach has no support in the text of
Article XX and appears to us inconsistent with the manner the Appellate
Body has interpreted and applied the concept of “arbitrary or
unjustifiable discrimination” in previous cases.
Having said that, we recognize that in certain cases the effects of
the discrimination may be a relevant factor, among others, for
determining whether the cause or rationale of the discrimination is
acceptable or defensible and, ultimately, whether the discrimination is
justifiable. The effects of discrimination might be relevant, depending
on the circumstances of the case, because, as we indicated above, the
chapeau of Article XX deals with the manner of application of the
measure at issue. Taking into account as a relevant factor, among
others, the effects of the discrimination for determining whether the
rationale of the discrimination is acceptable is, however, fundamentally
different from the Panel’s approach, which focused exclusively on the
relationship between the effects of the discrimination and its
justifiable or unjustifiable character.
G.3.12.13 Brazil — Retreaded Tyres, paras. 232
(WT/DS332/AB/R)
… [W]e believe that Brazil’s decision to act in order to comply
with the MERCOSUR ruling cannot be viewed as “capricious” or “random”.
Acts implementing a decision of a judicial or quasi-judicial body — such as the MERCOSUR arbitral tribunal
— can hardly be characterized
as a decision that is “capricious” or “random”. However,
discrimination can result from a rational decision or behaviour, and
still be “arbitrary or unjustifiable”, because it is explained by a
rationale that bears no relationship to the objective of a measure
provisionally justified under one of the paragraphs of Article XX, or
goes against that objective.
G.3.13 Chapeau of Article XX
— “disguised restriction on
international trade” back to top
G.3.13.1 US — Gasoline, p. 25, DSR 1996:I, p. 3 at 23
(WT/DS2/AB/R)
… It is equally clear that concealed or unannounced restriction
or discrimination in international trade does not exhaust the
meaning of “disguised restriction”. We consider that “disguised
restriction”, whatever else it covers, may properly be read as
embracing restrictions amounting to arbitrary or unjustifiable
discrimination in international trade taken under the guise of a measure
formally within the terms of an exception listed in Article XX. Put in a
somewhat different manner, the kinds of considerations pertinent in
deciding whether the application of a particular measure amounts to “arbitrary
or unjustifiable discrimination”, may also be taken into account in
determining the presence of a “disguised restriction” on
international trade. The fundamental theme is to be found in the purpose
and object of avoiding abuse or illegitimate use of the exceptions to
substantive rules available in Article XX.
242. Brazil’s appellee’s submission, paras. 80 and 83. According
to Brazil, given its chosen level of protection to reduce the risk of
waste tyre accumulation to the maximum extent possible, “[i]f the
Panel finds that there are no reasonable alternatives to the measure,
the measure is necessary — no matter how small its contribution — because the WTO does not second-guess the Member’s chosen level of
protection” (Ibid., para. 80). back to text
243. In this respect, we note that, in US
— Gasoline, the
Appellate Body stated, in the context of Article XX(g) of the GATT 1994,
that, “in the field of conservation of exhaustible natural resources,
a substantial period of time, perhaps years, may have to elapse before
the effects attributable to implementation of a given measure may be
observable” (Appellate Body Report, US — Gasoline, p. 21, DSR
1996:I, 3, at 20). back to text
455. In articulating the proper approach in Brazil
— Retreaded
Tyres, the Appellate Body referred to its report in US — Gambling without distinguishing that case or suggesting any
intention to depart from the approach articulated in US — Gambling (or,
for that matter, Korea — Various Measures on Beef) (Appellate
Body Report, Brazil — Retreaded Tyres, footnote 319 to para.
178 (referring to Appellate Body Report, US — Gambling, para.
307)). back to text
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