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I. Language Incorporating GATT 1947 and other
Instruments into GATT 1994 back to top
A. Text of the Language
Incorporating GATT 1947 and other Instruments into GATT 1994
1. The
General Agreement on Tariffs and Trade 1994 (“GATT 1994”) shall
consist of:
(a)
the provisions in the General Agreement on Tariffs and Trade, dated 30
October 1947, annexed to the Final Act Adopted at the Conclusion of the
Second Session of the Preparatory Committee of the United Nations
Conference on Trade and Employment (excluding the Protocol of
Provisional Application), as rectified, amended or modified by the terms
of legal instruments which have entered into force before the date of
entry into force of the WTO Agreement;
(b)
the provisions of the legal instruments set forth below that have
entered into force under the GATT 1947 before the date of entry into
force of the WTO Agreement:
(i)
protocols and certifications relating to tariff concessions;
(ii)
protocols of accession (excluding the provisions (a) concerning
provisional application and withdrawal of provisional application and
(b) providing that Part II of GATT 1947 shall be applied provisionally
to the fullest extent not inconsistent with legislation existing on the
date of the Protocol);
(iii)
decisions on waivers granted under Article XXV of GATT 1947 and still in
force on the date of entry into force of the WTO Agreement(1);
(footnote original) 1 The waivers
covered by this provision are listed in footnote 7 on pages 11 and 12 in
Part II of document MTN/FA of 15 December 1993 and in MTN/FA/Corr.6 of
21 March 1994.(1) The Ministerial Conference shall establish at
its first session a revised list of waivers covered by this provision
that adds any waivers granted under GATT 1947 after 15 December 1993 and
before the date of entry into force of the WTO Agreement, and deletes
the waivers which will have expired by that time.
(iv)
other decisions of the CONTRACTING PARTIES to GATT 1947;
(c)
the Understandings set forth below:
(i)
Understanding on the Interpretation of Article II:1(b) of the General
Agreement on Tariffs and Trade 1994;
(ii)
Understanding on the Interpretation of Article XVII of the General
Agreement on Tariffs and Trade 1994;
(iii)
Understanding on Balance-of-Payments Provisions of the General Agreement
on Tariffs and Trade 1994;
(iv)
Understanding on the Interpretation of Article XXIV of the General
Agreement on Tariffs and Trade 1994;
(v)
Understanding in Respect of Waivers of Obligations under the General
Agreement on Tariffs and Trade 1994;
(vi)
Understanding on the Interpretation of Article XXVIII of the General
Agreement on Tariffs and Trade 1994; and
(d)
the Marrakesh Protocol to GATT 1994.
2.
Explanatory Notes
(a)
The references to “contracting party” in the provisions of GATT 1994
shall be deemed to read “Member”. The references to “less-developed
contracting party” and “developed contracting party” shall be
deemed to read “developing country Member” and “developed country
Member”. The references to “Executive Secretary” shall be deemed
to read “Director-General of the WTO”.
(b)
The references to the CONTRACTING PARTIES acting jointly in Articles
XV:1, XV:2, XV:8,
XXXVIII and the Notes Ad Article XII and
XVIII;
and in the provisions on special exchange agreements in Articles
XV:2, XV:3, XV:6,
XV:7 and XV:9 of GATT 1994 shall be deemed to be references
to the WTO. The other functions that the provisions of GATT 1994 assign
to the CONTRACTING PARTIES acting jointly shall be allocated by the
Ministerial Conference.
(c) (i)
The text of GATT 1994 shall be authentic in English, French and Spanish.
(ii)
The text of GATT 1994 in the French language shall be subject to the
rectifications of terms indicated in Annex A to document MTN.TNC/41.
(iii)
The authentic text of GATT 1994 in the Spanish language shall be the
text in Volume IV of the Basic Instruments and Selected Documents
series, subject to the rectifications of terms indicated in Annex B to
document MTN.TNC/41.
3. (a)
The provisions of Part II of GATT 1994 shall not apply to measures taken
by a Member under specific mandatory legislation, enacted by that Member
before it became a contracting party to GATT 1947, that prohibits the
use, sale or lease of foreign-built or foreign-reconstructed vessels in
commercial applications between points in national waters or the waters
of an exclusive economic zone. This exemption applies to: (a) the
continuation or prompt renewal of a non-conforming provision of such
legislation; and (b) the amendment to a non-conforming provision of such
legislation to the extent that the amendment does not decrease the
conformity of the provision with Part II of GATT
1947. This exemption is
limited to measures taken under legislation described above that is
notified and specified prior to the date of entry into force of the WTO
Agreement. If such legislation is subsequently modified to decrease its
conformity with Part II of GATT 1994, it will no longer qualify for
coverage under this paragraph.
(b)
The Ministerial Conference shall review this exemption not later than
five years after the date of entry into force of the WTO Agreement and
thereafter every two years for as long as the exemption is in force for
the purpose of examining whether the conditions which created the need
for the exemption still prevail.
(c) A
Member whose measures are covered by this exemption shall annually
submit a detailed statistical notification consisting of a five-year
moving average of actual and expected deliveries of relevant vessels as
well as additional information on the use, sale, lease or repair of
relevant vessels covered by this exemption.
(d) A
Member that considers that this exemption operates in such a manner as
to justify a reciprocal and proportionate limitation on the use, sale,
lease or repair of vessels constructed in the territory of the Member
invoking the exemption shall be free to introduce such a limitation
subject to prior notification to the Ministerial Conference.
(e)
This exemption is without prejudice to solutions concerning specific
aspects of the legislation covered by this exemption negotiated in
sectoral agreements or in other fora.
B. Interpretation and Application of the Language
Incorporating GATT 1947 and other Instruments into GATT 1994
1. General
1. The
text entitled “General Agreement on Tariffs and Trade 1994”
specifies provisions of the GATT 1947 that are incorporated by reference
in the GATT 1994, specifies certain matters concerning the
interpretation of provisions of the GATT 1947 in the context of the GATT
1994, and provides for a reservation to the GATT 1994.
2. Paragraph 1
(a) Paragraph 1(a): “the
provisions in the General Agreement on Tariffs and Trade, dated 30
October 1947 … as rectified, modified or amended …”
2. The
negotiations that led to the GATT took place in 1946–47 during and
after the sessions of the Preparatory Committee of the United Nations
Conference on Trade and Employment. The Final Act Adopted at the
Conclusion of the Second Session of the Preparatory Committee, signed at
Geneva on 30 October 1947, included the 30 October 1947 original text of
the General Agreement on Tariffs and Trade, the Schedules of tariff
concessions negotiated in 1947, and the Protocol of Provisional
Application.
3. The
GATT 1947 was provisionally applied from 1 January 1948 until 31
December 1995. Concerning provisional application of the GATT. The GATT 1994 does not include
the Protocol of Provisional Application, nor the provisions in protocols
of accession that provided for provisional application of the GATT. The
date and source of amendments to the GATT are provided in the GATT Status
of Legal Instruments.
(b) Paragraph 1(b): Legal
instruments under the GATT 1947
(i) “protocols and
certifications relating to tariff concessions”
4. The
Panel in Japan — Film found that “The ordinary meaning of the
text of paragraphs 1(b)(i) and 1(d) of GATT
1994, read together, clearly
suggests that all protocols relating to tariff concessions, both those
predating the Uruguay Round and the Marrakesh Protocol to GATT 1994, are
incorporated into GATT 1994 and continue to have legal existence under
the WTO Agreement.”(2)
5. In US
— FSC, the Appellate Body examined a 1981 decision by the GATT
1947 Council and found:
“[I]n terms of Article II:2 of the WTO
Agreement, these various ‘legal instruments’ are, in themselves,
‘integral parts’ of the WTO Agreement and are ‘binding on
all Members’. The inclusion of these ‘legal instruments’ in the
GATT 1994 recognizes that the legal character of the rights and
obligations of the contracting parties under the GATT 1994 is not fully
reflected by the text of the GATT 1994 because those rights and
obligations are conditioned by the ‘protocols’, ‘decisions’ and
other ‘legal instruments’ to which paragraph 1(b) refers.”(3)
(ii) “protocols of
accession”
6. See
above concerning the non-incorporation into GATT 1994 of the provisions
on provisional application in GATT accession protocols.
(iii) “decisions
on waivers granted under GATT 1947 and still in force …”
7. The
GATT 1994 incorporated some, but not all, of the waivers granted under
Article XXV:5 of the GATT 1947 that were in force as of 1 January 1995.
The list in MTN/W/FA referred to in footnote 6 omitted the 1955 waiver
granted to the United States in connection with import restrictions
imposed under Section 22 of the U.S. Agricultural Adjustment Act.(4)
A revision of this list was issued in 1995.(5)
8. The
Understanding in Respect of Waivers of Obligations under the GATT 1994
provides:
“Any waiver in effect on the date of entry into
force of the WTO Agreement shall terminate, unless extended in
accordance with the procedures [in the Understanding] and those of
Article IX of the WTO Agreement, on the date of its expiry or two years
from the date of entry into force of the WTO Agreement, whichever is
earlier.”(6)
(iv) Item (iv) — “other decisions of the CONTRACTING PARTIES to GATT 1947”
9. In Japan
— Alcoholic Beverages II, the Appellate Body reversed a panel
finding that the “other decisions” incorporated into the GATT 1994
include panel reports adopted by the CONTRACTING PARTIES to GATT 1947,
noting that the decision to adopt a panel report was not intended by the
GATT 1947 CONTRACTING PARTIES to “constitute a definitive
interpretation of the relevant provisions of GATT 1947”:
“Article XVI:1 of the WTO Agreement and
paragraph 1(b)(iv) of the language of Annex 1A incorporating the GATT
1994 into the WTO Agreement bring the legal history and
experience under the GATT 1947 into the new realm of the WTO in a way
that ensures continuity and consistency in a smooth transition from the
GATT 1947 system. … (7) Adopted panel reports are an important
part of the GATT acquis. They are often considered by subsequent
panels. They create legitimate expectations among WTO Members, and,
therefore, should be taken into account where they are relevant to any
dispute. However, they are not binding, except with respect to resolving
the particular dispute between the parties to that dispute.(8) In
short, their character and their legal status have not been changed by
the coming into force of the WTO Agreement.
[W]e do not agree with the Panel’s conclusion in
the same paragraph of the Panel Report that adopted panel reports in
themselves constitute ‘other decisions of the CONTRACTING PARTIES to
GATT 1947’ for the purposes of paragraph 1(b)(iv) of the language of
Annex 1A incorporating the GATT 1994 into the WTO Agreement.”(9)
10.
In EC — Poultry, the Appellate Body found that the Oilseeds
Agreement, concluded between Brazil and the European Communities was not
one of the legal instruments enumerated in paragraph
1(b):
“The Oilseeds Agreement […] is a bilateral
agreement negotiated by the European Communities and Brazil under
Article XXVIII of the GATT 1947, as part of the resolution of the
dispute in EEC — Oilseeds.(10) … Although the
provisions of certain legal instruments that entered into force under
the GATT 1947 were made part of the GATT 1994 pursuant to the language
in Annex 1A incorporating the GATT 1994 into the WTO Agreement(11),
the Oilseeds Agreement is not one of those legal instruments.”(12)
11.
In US — FSC, the Appellate Body found that an understanding
adopted by the GATT Council in connection with the adoption of four
panel reports, read in the light of the circumstances, was not an “other
decision” within the meaning of paragraph
1(b)(iv).(13) The
Appellate Body remarked that “The inclusion of these ‘legal
instruments’ in the GATT 1994 recognizes that the legal character of
the rights and obligations of the contracting parties under the GATT
1994 is not fully reflected by the text of the GATT 1994 because those
rights and obligations are conditioned by the ‘protocols’, ‘decisions’
and other ‘legal instruments’ to which paragraph 1(b) refers.”(14)
12.
In EC — Tariff Preferences, the Appellate Body held that the
Enabling Clause is one of the “other decisions of the CONTRACTING
PARTIES” within the meaning of paragraph 1(b)(iv). On that basis the
Appellate Body found that the Enabling Clause is “an integral part of
the GATT 1994.”(15)
(c) Relationship with
Article XVI:1 of the WTO Agreement
13.
Regarding the relationship between Article XVI:1 of the WTO Agreement
and paragraph 1(b), see the material under Article XVI:1 in the Chapter
on the WTO Agreement.
3. Paragraph 2
(a) Allocation of
functions of the CONTRACTING PARTIES acting jointly
14. Paragraph 2(b) of the GATT 1994 incorporation text provides that the
references to the CONTRACTING PARTIES acting jointly in Articles
XV:1, XV:2, XV:8,
XXXVIII and the Notes Ad Article XII and
XVIII of
the GATT 1994, and in the provisions on special exchange agreements in Articles
XV:2, XV:3, XV:6,
XV:7 and XV:9 of
the GATT 1994, shall be
deemed to be references to the WTO; these powers of the CONTRACTING
PARTIES are therefore exercised by the Ministerial Conference or by the
General Council.
15. Paragraph 2(b) also provides that the other functions that the
provisions of GATT 1994 assign to the CONTRACTING PARTIES acting jointly
may be allocated to the various WTO organs by decision of the
Ministerial Conference; as of 30 September 2011, such a decision had not
taken place.
(b) Authentic texts of
GATT 1994
16.
The text of Parts I through III of the GATT 1947 was authentic in
English and French only. Part IV of the GATT 1947 was authentic in
English, French and Spanish. The Secretariat prepared and published on
its own responsibility a Spanish translation of the text of the GATT
1947, in Volume IV of the Basic Instruments and Selected Documents
series. No authentic Spanish text was ever agreed for Parts I through
III of the General Agreement; Parts I–III of the Spanish-language text
of the GATT 1947 had no formal status.
17.
During the final Uruguay Round legal drafting process, participants
noted a lack of concordance between the French and Spanish versions of
the Uruguay Round texts and the French and Spanish texts respectively of
the GATT 1947. They also noted instances of a lack of concordance
between the English, French and Spanish texts of the GATT 1947. Upon
discussion participants concluded that the preferable course would be to
conform the French and Spanish texts of the GATT 1947 to the linguistic
usage reflected in the English language text and in the Uruguay Round
Agreements. In addition, Spanish-speaking participants sought to
establish an authentic text of Parts I–III of the General Agreement in
Spanish.
18.
Participants decided to implement these objectives by preparing lists of
rectifications to the French and Spanish texts of the GATT 1947, and
providing in paragraph 2 of the GATT 1994 incorporation text that the
GATT 1994 would reflect those rectifications. With the agreement of
participants, a list of agreed rectifications to the authentic French
text of the GATT 1947, and a list of corrections to Parts I–III of the
Spanish text published as Volume IV of the BISD, were drawn up by the
Secretariat Translation and Documentation Division and were circulated
as annexes to MTN.TNC/41, a Decision of the Trade Negotiations Committee
(TNC) on “Corrections to be Introduced in the General Agreement on
Tariffs and Trade”. The French and Spanish language texts of the GATT
1994 published by the Secretariat incorporate those rectifications. For
further discussion regarding this process.
4. Paragraph 3
19.
The measures referred to in paragraph 3 were notified to the
Director-General of the GATT.(16) The General Council conducted
reviews of these measures in 1999–2000, 2002, 2005, 2007, 2009 and
2011.(17)
PART I
II. Preamble
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A. Text of the Preamble
The Governments of the Commonwealth of Australia,
the Kingdom of Belgium, the United States of Brazil, Burma, Canada,
Ceylon, the Republic of Chile, the Republic of China, the Republic of
Cuba, the Czechoslovak Republic, the French Republic, India, Lebanon,
the Grand-Duchy of Luxemburg, the Kingdom of the Netherlands, New
Zealand, the Kingdom of Norway, Pakistan, Southern Rhodesia, Syria, the
Union of South Africa, the United Kingdom of Great Britain and Northern
Ireland, and the United States of America:
Recognizing that their relations in the field of
trade and economic endeavour should be conducted with a view to raising
standards of living, ensuring full employment and a large and steadily
growing volume of real income and effective demand, developing the full
use of the resources of the world and expanding the production and
exchange of goods,
Being desirous of contributing to these objectives
by entering into reciprocal and mutually advantageous arrangements
directed to the substantial reduction of tariffs and other barriers to
trade and to the elimination of discriminatory treatment in
international commerce,
Have through their Representatives agreed as
follows:
B. Interpretation and Application of the Preamble
1. Second recital
20.
The Appellate Body Report on EC — Tariff Preferences,
discussing the history of Part IV and the Enabling Clause, observed:
“When the GATT 1947 entered into force, the
Contracting Parties stated that one of its objectives was to ‘rais[e]
standards of living’. However, this objective was to be achieved in
countries at all stages of economic development through the universally-applied
commitments embodied in the GATT provisions.”(18)
21.
In EC — Bananas III (Article 21.5 — Ecuador II)/EC — Bananas
III (Article 21.5/US), the Appellate Body observed:
“We agree with the Panel that ‘concessions
made by WTO Members should be interpreted so as to further the general
objective of expanding trade in goods and services and reducing barriers
to trade, through the negotiation of reciprocal and mutually
advantageous arrangements.’”(19)
2. Third recital
22.
In Korea — Various Measures on Beef, the Appellate Body
referred to the third recital in the Preamble and stated that an
evaluation of whether an enforcement measure is “necessary” in terms
of Article XX(d) must take into account “the extent to which the
measure produces restrictive effects “on international commerce”.(20)
3. GATT practice
23.
For GATT practice regarding the Preamble.
III. Article I
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A. Text of Article
I
Article I: General Most-Favoured-Nation
Treatment
1.
With respect to customs duties and charges of any kind imposed on or in
connection with importation or exportation or imposed on the
international transfer of payments for imports or exports, and with
respect to the method of levying such duties and charges, and with
respect to all rules and formalities in connection with importation and
exportation, and with respect to all matters referred to in paragraphs 2
and 4 of Article III,* any advantage, favour, privilege or
immunity granted by any contracting party to any product originating in
or destined for any other country shall be accorded immediately and
unconditionally to the like product originating in or destined for the
territories of all other contracting parties.
2.
The provisions of paragraph 1 of this Article shall not require the
elimination of any preferences in respect of import duties or charges
which do not exceed the levels provided for in paragraph 4 of this
Article and which fall within the following descriptions:
(a)
Preferences in force exclusively between two or more of the territories
listed in Annex A, subject to the conditions set forth therein;
(b)
Preferences in force exclusively between two or more territories which
on July 1, 1939, were connected by common sovereignty or relations of
protection or suzerainty and which are listed in Annexes B, C and D,
subject to the conditions set forth therein;
(c)
Preferences in force exclusively between the United States of America
and the Republic of Cuba;
(d)
Preferences in force exclusively between neighbouring countries listed
in Annexes E and F.
3.
The provisions of paragraph 1 shall not apply to preferences between the
countries formerly a part of the Ottoman Empire and detached from it on
July 24, 1923, provided such preferences are approved under paragraph 5(1)
of Article XXV which shall be applied in this respect in the light of
paragraph 1 of Article XXIX.
(footnote original) 1 The authentic text
erroneously reads “subparagraph 5 (a)”.
4.
The margin of preference* on any
product in respect of which a preference is permitted under paragraph 2
of this Article but is not specifically set forth as a maximum margin of
preference in the appropriate Schedule annexed to this Agreement shall
not exceed:
(a)
in respect of duties or charges on any product described in such
Schedule, the difference between the most-favoured-nation and
preferential rates provided for therein; if no preferential rate is
provided for, the preferential rate shall for the purposes of this
paragraph be taken to be that in force on April 10, 1947, and, if no
most-favoured-nation rate is provided for, the margin shall not exceed
the difference between the most-favoured-nation and preferential rates
existing on April 10, 1947;
(b)
in respect of duties or charges on any product not described in the
appropriate Schedule, the difference between the most-favoured-nation
and preferential rates existing on April 10, 1947.
In the case of the contracting parties named in
Annex G, the date of April 10, 1947, referred to in subparagraph (a) and
(b) of this paragraph shall be replaced by the respective dates set
forth in that Annex.
B. Text of Notes Ad Article I
Ad Article I:
Paragraph 1
The obligations
incorporated in paragraph 1 of Article I by reference to
paragraphs 2
and 4 of Article III and those incorporated in
paragraph 2(b) of Article
II by reference to Article VI shall be considered as falling within
Part
II for the purposes of the Protocol of Provisional Application.
The cross-references, in
the paragraph immediately above and in paragraph 1 of Article
I, to paragraphs 2
and 4 of Article III shall only apply after
Article III has
been modified by the entry into force of the amendment provided for in
the Protocol Modifying Part II and
Article XXVI of the General Agreement
on Tariffs and Trade, dated September 14, 1948.(1)
(footnote original) 1 This Protocol entered
into force on 14 December 1948.
Paragraph 4
The term “margin of
preference” means the absolute difference between the most-favoured-nation
rate of duty and the preferential rate of duty for the like product, and
not the proportionate relation between those rates. As examples:
(1) If the most-favoured-nation
rate were 36 per cent ad valorem and the preferential rate were
24 per cent ad valorem, the margin of preference would be 12 per
cent ad valorem, and not one-third of the most-favoured-nation
rate;
(2) If the most-favoured-nation
rate were 36 per cent ad valorem and the preferential rate were
expressed as two-thirds of the most-favoured-nation rate, the margin of
preference would be 12 per cent ad valorem;
(3) If the most-favoured-nation
rate were 2 francs per kilogramme and the preferential rate were 1.50
francs per kilogramme, the margin of preference would be 0.50 franc per
kilogramme.
The following kinds of
customs action, taken in accordance with established uniform procedures,
would not be contrary to a general binding of margins of preference:
(i) The re-application to
an imported product of a tariff classification or rate of duty, properly
applicable to such product, in cases in which the application of such
classification or rate to such product was temporarily suspended or
inoperative on April 10, 1947; and
(ii) The classification of
a particular product under a tariff item other than that under which
importations of that product were classified on April 10, 1947, in cases
in which the tariff law clearly contemplates that such product may be
classified under more than one tariff item.
C. Interpretation and Application of Article I
1. Article I:1
(a) General
(i) Object and
purpose
24.
In Canada — Autos, in support of its interpretation of Article
I:1, the Appellate Body explained that the object and purpose of Article
I “is to prohibit discrimination among like products originating in or
destined for different countries”(21).
(ii)
Application to de facto discrimination
25.
In EC — Bananas III, in support of the proposition that Article
II of GATS prohibits de facto discrimination as well as de
jure discrimination, the Appellate Body noted that GATT Article I
applies to de facto discrimination. See the Chapter on the GATS
under Article II.
26.
In Canada — Autos, the Appellate Body reviewed the Panel’s
finding that the Canadian import duty exemptions granted to motor
vehicles originating in certain countries were inconsistent with Article
I:1. The Appellate Body found the prohibition of discrimination under
Article I:1 to include both de jure and de facto discrimination:
“[T]he words of Article I:1 do not restrict its
scope only to cases in which the failure to accord an ‘advantage’ to
like products of all other Members appears on the face of the
measure, or can be demonstrated on the basis of the words of the measure.
… Article I:1 does not cover only ‘in law’, or de jure,
discrimination. As several GATT panel reports confirmed, Article I:1
covers also ‘in fact’, or de facto, discrimination.(22) Like
the Panel, we cannot accept Canada’s argument that Article I:1 does
not apply to measures which, on their face, are ‘origin-neutral’.”(23)
(iii) Order of
examination
27.
In Indonesia — Autos, the Panel explained how to carry out the
examination of a measure under Article I:1:
“The Appellate Body, in Bananas III,
confirmed that to establish a violation of Article
I, there must be an
advantage, of the type covered by Article I and which is not accorded
unconditionally to all ‘like products’ of all WTO Members. Following
this analysis, we shall first examine whether the tax and customs duty
benefits are advantages of the types covered by Article
I. Second, we
shall decide whether the advantages are offered (i) to all like products
and (ii) unconditionally.”(24)
(b) “All
rules and formalities in connection with importation or exportation”
28.
The Panel in EC — Bananas III noted that “Article I requires
MFN treatment in respect of ‘rules and formalities in connection with
importation’, a phrase that has been interpreted broadly in past GATT
practice, such that it can appropriately be held to cover rules related
to tariff quota allocations. Such rules are clearly rules applied in
connection with importation. Indeed, they are critical to the
determination of the amount of duty to be imposed.”(25) The
Panel further found that “import licensing procedures, including the
operator category rules” are “rules and formalities in connection
with importation” in the meaning of Article I:1.(26)
29.
In Colombia — Ports of Entry, textile, apparel and footwear
importers arriving from Panama or the Colon Free Zone (CFZ) were subject
to a special advance import declaration requirement for imports of
textiles, apparel and footwear, and had to pay customs duties and sales
tax on the basis of the advance declaration. Imports of these products
originating in countries other than Panama were not subject to these
requirements. Also, importers of textiles arriving from Panama and the
CFZ were subject to additional legalization fees and customs compliance
requirements. The parties agreed that these measures constituted “rules and
formalities in connection with importation.”(27)
30.
The dispute in US — Poultry (China) concerned a US legislative
provision (“Section 727”) restricting the use of funds allocated by
the US Congress to the US Department of Agriculture and its agency, the
Food Safety and Inspection Service (FSIS). The legislation provided that
these funds could not be used to establish or implement a rule allowing
poultry products to be imported from China into the United States.(28)
The Panel observed: “We conclude that ‘in connection with
importation’ as used in Article I, not only encompasses measures which
directly relate to the process of importation but could also include
those measures, such as Section 727, which relate to other aspects of
the importation of a product or have an impact on actual importation.
Given the foregoing, we determine that Section 727 is a rule in
connection with importation within the meaning of Article I:1 of the
GATT 1994.”(29)
(c) “all
matters referred to in paragraphs 2 and 4 of Article III”
31.
In EC — Trademarks and Geographical Indications (US), the Panel
found that the EC regulation related to protection of geographical
indications and designations of origin was a law or regulation affecting
the internal sale and offering for sale of products within the meaning
of Article III:4 of GATT 1994, and therefore fell within the “matters
referred to in paragraphs 2 and
4 of Article III” as that phrase is
used in Article I:1.(30)
32.
In EC — Commercial Vessels, Korea challenged an EC Regulation
providing aid in support of EC shipbuilders competing for shipbuilding
contracts where Korean shipyards had offered a lower price. Korea argued
that this provision breached Article I:1 because bids competing with
Korean shipyards would be subsidized but bids competing with other
shipyards would not. Korea argued that the Regulation was a measure
within the scope of GATT Article
III:4, and therefore subject to Article I:1.(31) The Panel found:
“[W]e have concluded that the TDM Regulation is
a measure that falls within the scope of Article III:8(b) of the GATT
1994 because it provides for ‘the payment of subsidies exclusively to
domestic producers’ and that the TDM Regulation is therefore not
inconsistent with Article III:4. In that connection, we have rejected
the argument of Korea that since Korea challenges the TDM Regulation as
a regulatory framework, Article III:8(b) is irrelevant.
…
… the issue here is not whether Article III:8(b)
somehow affects the scope of Article I in its entirety. Rather, the
question is limited to whether and if so how Article III:8(b) affects
the scope of ‘all matters referred to in paragraphs 2 and
4 of Article
III’. In this connection, the argument of Korea that Article III:8(b)
only refers to ‘the provisions of this Article’ and therefore does
not apply to Article I is unpersuasive. To the extent that
Article
III:8(b) plays a role in determining the scope of the matters referred
to in Article III:2 and III:4, a direct reference to
Article I is not
necessary.
… Articles III:2 and
4 lay down substantive
legal obligations. In light of this use of the word ‘matters’ to
refer to provisions containing legal obligations, we consider that among
the various dictionary definitions, ‘subject’ and ‘substance’
are particularly pertinent to define the meaning of the word ‘matters’
as used in Article I:1. Therefore, interpreting the ordinary meaning of
the terms used in their context, the Panel considers that the phrase ‘matters
referred to in …’ in Article I:1 refers to the subject matter of
those provisions in terms of their substantive legal content. Understood
in this sense, it is clear to us that the ‘matters referred to in paragraphs 2 and
4 of Article III’ cannot be interpreted without
regard to limitations that may exist regarding the scope of the
substantive obligations provided for in these paragraphs. If it is
explicitly provided that a particular measure is not subject to the
obligations of Article III, that measure in our view does not form part
of the ‘matters referred to’ in Articles III:2 and
4. Thus, since
Article III:8(b) provides that Article III ‘shall not prevent the
payment of subsidies exclusively to domestic producers’, such
subsidies are not part of the subject matter of Article III:4 and cannot
be covered by the expression ‘matters referred to in paragraphs 2 and
4 of Article III’ in Article I:1.”(32)
(d) “Any
advantage, favour, privilege or immunity granted by any Member”
(i) General
33.
In EC — Bananas III, the Panel considered that “advantages”
in the sense of Article I:1 are those that create “more favourable
import opportunities” or affect the commercial relationship between
products of different origins.(33)
34.
In Canada — Autos, the Appellate Body found that Canada’s
import duty exemption accorded to motor vehicles originating in some
countries in which affiliates of certain designated manufacturers were
present, was inconsistent with Article I:1. The Appellate Body noted:
“Article I:1 requires that ‘any advantage,
favour, privilege or immunity granted by any Member to any product originating
in or destined for any other country shall be accorded immediately and
unconditionally to the like product originating in or destined for the
territories of all other Members.’ (emphasis added) The words
of Article I:1 refer not to some advantages granted ‘with
respect to’ the subjects that fall within the defined scope of the
Article, but to ‘any advantage’; not to some products,
but to ‘any product’; and not to like products from some other
Members, but to like products originating in or destined for ‘all
other’ Members.”(34)
(ii) Allocation
of tariff quotas
35.
The appeal in EC — Bananas III focused inter alia on the
banana tariff rate quota (TRQ) “activity function” rules, under
which the requirements for TRQ allocation to importers differed
depending on the origin of the imported bananas.
“[T]he Panel found that the procedural and
administrative requirements of the activity function rules for importing
third-country and non-traditional ACP bananas differ from, and go
significantly beyond, those required for importing traditional ACP
bananas. This is a factual finding. Also, a broad definition has been
given to the term ‘advantage’ in Article I:1 of the GATT 1994 by the
panel in United States — Non-Rubber Footwear. It may well be
that there are considerations of EC competition policy at the basis of
the activity function rules. This, however, does not legitimize the
activity function rules to the extent that these rules discriminate
among like products originating from different Members. For these
reasons, we agree with the Panel that the activity function rules are an
‘advantage’ granted to bananas imported from traditional ACP States,
and not to bananas imported from other Members, within the meaning of Article I:1. Therefore, we uphold the Panel’s finding that the
activity function rules are inconsistent with Article I:1 of the GATT
1994.”(35)
(iii)
Flexibility in import procedures
36.
In Colombia — Ports of Entry, the Panel found that the advance
import declaration and legalization requirements referred to in
paragraph 29 above conferred an advantage on imports of the relevant
products from other WTO Members, as compared with the like products
imported from Panama or the Colon Free Zone (CFZ). The Panel observed
that these requirements applied to goods originating in Panama or the
CFZ, as well as goods originating elsewhere which transited Panama or
the CFZ before arriving in Colombia. Like products originating elsewhere
that did not transit Panama or the CFZ were not subject to the
requirements. Observing that “[i]nherently, an advantage arises for an
importer that can choose how to operate his business in order to enhance
his profitability and competitiveness, among other concerns”, the
Panel found that:
“[O]ne advantage arises from the fact that
importers of subject goods from territories other than Panama or the CFZ
are granted flexibility to make customs duty and tax payments when they
see fit. Additionally, an importer that has not filed an advance import
declaration would retain the option to inspect his goods on site upon
arrival, verifying its dimension and weight, prior to submitting a
declaration, thereby assuring himself of the accuracy of the declaration
and avoiding fees required to file a legalization declaration.”(36)
(iv) Access to
certification procedures
37.
In US — Poultry (China), in examining the measure described in
paragraph 30 above, the Panel observed that
“[S]uccessful completion of the mentioned
procedures is the only way that an importer can enter the United States
market for poultry products. The opportunity to sell poultry products in
the United States market is therefore a very favourable market
opportunity and not having such an opportunity would mean a serious
competitive disadvantage, or rather would amount to an exclusion from
competition in the US market. Such an opportunity would also affect the
commercial relationship between products of two different origins where
one of the countries of origin is denied access to the PPIA and the FSIS
procedures.
The Panel thus considers that the opportunity to
export poultry products to the United States after successful completion
of the PPIA and the FSIS procedures is an advantage within the
meaning of Article I:1 of the GATT 1994 because it creates market access
opportunities and affects the commercial relationship between products
of different origins.”(37)
(v) GATT
practice
38.
Regarding GATT practice concerning the term “any advantage, favour,
privilege or immunity granted by any contracting party”.
(e) “like
products”
39.
In Indonesia — Autos, examining the consistency of the
Indonesian National Car Programme with Article
I:1, the Panel compared
the concepts of “like products” under Articles I and
III:
“We have found in our discussion of like
products under Article III:2 that certain imported motor vehicles are
like the National Car. The same considerations justify a finding that
such imported vehicles can be considered like National Cars imported
from Korea for the purpose of Article I.”(38)
40.
In Colombia — Ports of Entry, the Panel found that because the
measures at issue explicitly discriminated, a full like product analysis
was not needed:
“In the Panel’s view, it is not necessary to
determine through lengthy analysis whether textiles, apparel or footwear
arriving from other countries are in fact like products to those goods
originating in and arriving from Panama. Based on the design of the
ports of entry measure, any textiles, apparel or footwear imported from
territories other than Panama or the CFZ, are like products, and would
necessarily be allowed entry at 11 ports of entry in Colombia without
presenting an advance import declaration, as long as the product did not
circulate through Panama or the CFZ prior to arrival in Colombia.”(39)
41.
Citing the like product analysis based on hypothetical imports in the
Appellate Body Report on Canada — Periodicals, the Panel then
found:
“[S]ince Panama does not currently produce any
of these products for export to Colombia, but in light of the fact that
the Panel views it as proper to consider Panama’s claim, hypothetical
imports from Panama or the CFZ are appropriate for consideration. An
advance import declaration, advance payment of customs duties and taxes,
and special rules concerning legalization would be required simply
because of the products’ origin. In the Panel’s view, the
hypothetical origin-based distinction that would arise if Panama were to
produce the subject goods and export those goods to Colombia is
sufficient for the Panel to proceed in considering Panama’s claim
under Article I:1 of the GATT 1994.”(40)
42.
In US — Poultry (China), the Panel set out the main approaches
to determining “likeness” of products:
“The concept of like product has been abundantly
interpreted in the prior decisions of panels and the Appellate Body.
Whatever the provision at issue, the Appellate Body has explained that a
like product analysis must always be done on a case-by-case basis.
The traditional approach for determining ‘likeness’
has, in the main, consisted of employing four general criteria: ‘(i)
the properties, nature and quality of the products; (ii) the end-uses of
the products; (iii) consumers’ tastes and habits — more
comprehensively termed consumers’ perceptions and behaviour — in
respect of the products; and (iv) the tariff classification of the
products.’
A different approach used by panels and the
Appellate Body to determine the likeness of the products has been to
assume — hypothetically — that two like products exist in the market
place when one of two situations arises: first cases concerning
origin-based discrimination, and second, cases where it was not possible
to make the like product comparison because of — for example — a ban
on imports.
The panel in China — Publications and
Audiovisual Products recalled the relevant WTO jurisprudence which
supports a hypothetical like product analysis where a difference in
treatment between domestic and imported products is based exclusively on
the products’ origin. In these cases, the complainant did not need to
identify specific domestic and imported products and establish their
likeness in terms of the traditional criteria in order to make a prima
facie case of ‘likeness’. Instead, when origin is the sole criterion
distinguishing the products, it has been sufficient for a complainant to
demonstrate that there can or will be domestic and imported products
that are ‘like’. … We also note that panels have found that
foreign origin cannot serve as a basis for a determination that imported
products are ‘unlike’ domestic ones.
…
We note that the United States has argued that the
differing safety levels of poultry from China vis-à-vis other
WTO Members may have an impact on the like products analysis. However,
the United States did not provide specific evidence relating to
different safety levels between poultry products From China and other
WTO Members. Therefore, we see no reason not to proceed with the ‘hypothetical’
like products analysis and base our determination on whether the
products alleged to be ‘like’ are distinguished solely because of
their origin.”(41)
43.
Noting that the funding restriction in question was “origin-based in
respect of the products it affects”, that Panel followed a
hypothetical like products analysis.(42)
44.
For the treatment of this subject-matter under GATT 1947.
(f) “any
product originating in or destined for any other country”
45.
In EC — Bananas III, the Appellate Body reviewed the Panel’s
finding that the EC import regime for bananas was inconsistent with
Article XIII in that the European Communities allocated tariff quota
shares to some Members without allocating such shares to other Members.
Pointing out that “there [were] two separate EC import regimes for
bananas, the preferential regime for traditional ACP bananas and the erga
omnes regime for all other imports of bananas”, the European
Communities appealed that “the non-discrimination obligations of
Article I:1, X:3(a) and
XIII of GATT 1994 and Article 1.3 of the Licensing
Agreement apply only within each of these separate regimes.”(43)
The Appellate Body responded as follows:
“The essence of the non-discrimination
obligations is that like products should be treated equally,
irrespective of their origin. As no participant disputes that all
bananas are like products, the non-discrimination provisions apply to all
imports of bananas, irrespective of whether and how a Member
categorizes or subdivides these imports for administrative or other
reasons. If, by choosing a different legal basis for imposing import
restrictions, or by applying different tariff rates, a Member could
avoid the application of the nondiscrimination provisions to the imports
of like products from different Members, the object and purpose of the
non-discrimination provisions would be defeated. It would be very easy
for a Member to circumvent the non-discrimination provisions of the GATT
1994 and the other Annex 1A agreements, if these provisions apply only within
regulatory regimes established by that Member.”(44)
(g) “shall
be accorded immediately and unconditionally”
(i) General
46.
In Indonesia — Autos, the Panel found that the exemption of
import duties and sales taxes to automobiles which met certain
origin-neutral requirements was inconsistent with Article
I:1, because
of the existence of a number of “conditions”:
“Indeed, it appears that the design and
structure of the June 1996 car programme is such as to allow situations
where another Member’s like product to a National Car imported by PT
PTN from Korea will be subject to much higher duties and sales taxes
than those imposed on such National Cars. … The distinction as to
whether one product is subject to 0% duty and the other one is subject
to 200% duty or whether one product is subject to 0% sales tax and the
other one is subject to a 35% sales tax, depends on whether or not PT
TPN had made a ‘deal’ with that exporting company to produce that
National Car, and is covered by the authorization of June 1996 with
specifications that correspond to those of the Kia car produced only in
Korea. In the GATT/WTO, the right of Members cannot be made dependent
upon, conditional on or even affected by, any private contractual
obligations in place.(45) The existence of these conditions is
inconsistent with the provisions of Article I:1 which provides that tax
and customs duty benefits accorded to products of one Member (here on
Korean products) be accorded to imported like products from other
Members ‘immediately and unconditionally’.(46)
We note also that under the February 1996 car
programme the granting of customs duty benefits to parts and components
is conditional to their being used in the assembly in Indonesia of a
National Car. The granting of tax benefits is conditional and limited to
the only Pioneer company producing National Cars. And there is also a
third condition for these benefits: the meeting of certain local content
targets. Indeed under all these car programmes, customs duty and tax
benefits are conditional on achieving a certain local content value for
the finished car. The existence of these conditions is inconsistent with
the provisions of Article I:1 which provides that tax and customs duty
advantages accorded to products of one Member (here on Korean products)
be accorded to imported like products from other Members ‘immediately
and unconditionally’.
For the reasons discussed above, we consider that
the June 1996 car programme which introduced discrimination between
imports in the allocation of tax and customs duty benefits based on
various conditions and other criteria not related to the imports
themselves and the February 1996 car programme which also introduce
discrimination between imports in the allocation of customs duty
benefits based on various conditions and other criteria not related to
the imports themselves, are inconsistent with the provisions of Article
I of GATT.”(47)
47.
In Canada — Autos, the Canadian measure at issue was an
exemption of import duties, granted for motor vehicles if the exporter
of the vehicles was affiliated with a manufacturer/importer in Canada
that had been designated (contingent on compliance with other allegedly
WTO-inconsistent requirements) as eligible to import motor vehicles
duty-free under the Motor Vehicle Tariff Order (MVTO) 1998 or under a
so-called Special Remission Order (SRO). In practice, exporters of motor
vehicles affiliated with a manufacturer/importer in Canada were located
in a small number of countries. The Panel found the Canadian measure
breached Article I:1. On appeal, the Appellate Body first discussed the
concepts of de jure and de facto discrimination under Article I:1
(see paragraph 25 above) and then held that, by granting an advantage to
some products from some Members and not to others, the measure in
question was inconsistent with Article I:1:
“[F]rom both the text of the measure and the
Panel’s conclusions about the practical operation of the measure, it
is apparent to us that ‘[w]ith respect to customs duties … imposed
on or in connection with
importation … ,’ Canada has granted an ‘advantage’ to some
products from some Members that Canada has not ‘accorded immediately
and unconditionally’ to ‘like’ products ‘originating in or
destined for the territories of all other Members.’ (emphasis
added) And this, we conclude, is not consistent with Canada’s
obligations under Article I:1 of the GATT 1994.”(48)
48.
The Appellate Body in Canada — Autos added that the context and
the “pervasive character” of the MFN principle supported its
finding:
“The context of Article I:1 within the GATT 1994
supports this conclusion. Apart from Article I:1, several ‘MFN-type’
clauses dealing with varied matters are contained in the GATT 1994.(49)
The very existence of these other clauses demonstrates the pervasive
character of the MFN principle of non-discrimination.”(50)
49.
The Panel in Canada — Autos also clarified the meaning of the
term “unconditionally”. With respect to this term, Japan argued
that, by making the import duty exemption conditional upon criteria
related to the importer but unrelated to the imported product itself,
Canada failed to accord the import duty exemption immediately and
unconditionally to like products originating in all WTO Members. The
Panel held that the term “unconditionally” could not be “determined
independently of an examination of whether it involves discrimination
between like products of different countries”. The Panel emphasized
the “important distinction to be made between, on the one hand, the
issue of whether an advantage within the meaning of Article I:1 is
subject to conditions, and, on the other, whether an advantage, once it
has been granted to the product of any country, is accorded ‘unconditionally’
to the like product of all other Members”:
“[W]e believe that this interpretation of Japan
does not accord with the ordinary meaning of the term ‘unconditionally’
in Article I:1 in its context and in light of the object and purpose of
Article I:1. In our view, whether an advantage within the meaning of
Article I:1 is accorded ‘unconditionally’ cannot be determined
independently of an examination of whether it involves discrimination
between like products of different countries.
Article I:1 requires that, if a Member grants any
advantage to any product originating in the territory of any other
country, such advantage must be accorded ‘immediately and
unconditionally’ to the like product originating in the territories of
all other Members. We agree with Japan that the ordinary meaning of ‘unconditionally’
is ‘not subject to conditions’. However, in our view Japan
misinterprets the meaning of the word ‘unconditionally’ in the
context in which it appears in Article I:1. The word ‘unconditionally’
in Article I:1 does not pertain to the granting of an advantage per
se, but to the obligation to accord to the like products of all
Members an advantage which has been granted to any product originating
in any country. The purpose of Article I:1 is to ensure unconditional
MFN treatment. In this context, we consider that the obligation to
accord ‘unconditionally’ to third countries which are WTO Members an
advantage which has been granted to any other country means that the
extension of that advantage may not be made subject to conditions with
respect to the situation or conduct of those countries. This means that
an advantage granted to the product of any country must be accorded to
the like product of all WTO Members without discrimination as to origin.
In this respect, it appears to us that there is an
important distinction to be made between, on the one hand, the issue of
whether an advantage within the meaning of Article I:1 is subject to
conditions, and, on the other, whether an advantage, once it has been
granted to the product of any country, is accorded ‘unconditionally’
to the like product of all other Members. An advantage can be granted
subject to conditions without necessarily implying that it is not
accorded ‘unconditionally’ to the like product of other Members.
More specifically, the fact that conditions attached to such an
advantage are not related to the imported product itself does not
necessarily imply that such conditions are discriminatory with respect
to the origin of imported products. We therefore do not believe that, as
argued by Japan, the word ‘unconditionally’ in Article I:1 must be
interpreted to mean that making an advantage conditional on criteria not
related to the imported product itself is per se inconsistent with
Article I:1, irrespective of whether and how such criteria relate to the
origin of the imported products.
We thus find that Japan’s argument is
unsupported by the text of Article I:1.”(51)
50.
The Panel in Canada — Autos rejected Canada’s defence that
the Canadian import duty exemption, as described in paragraph 47
above,
was a permitted exception under Article XXIV because, on the one hand,
Canada was not granting the import duty exemption to all NAFTA
manufacturers and because, on the other hand, manufacturers from
countries other than the United States and Mexico were being
provided duty-free treatment.(52) As this finding of the Panel
was not appealed, the Appellate Body concluded:
“The drafters also wrote various exceptions to
the MFN principle into the GATT 1947 which remain in the GATT 1994.(53)
Canada invoked one such exception before the Panel, relating to customs
unions and free trade areas under Article
XXIV. This justification was
rejected by the Panel, and the Panel’s findings on Article XXIV were
not appealed by Canada. Canada has invoked no other provision of the
GATT 1994, or of any other covered agreement, that would justify the
inconsistency of the import duty exemption with Article I:1 of the GATT
1994.
The object and purpose of Article I:1 supports our
interpretation. That object and purpose is to prohibit discrimination
among like products originating in or destined for different countries.
The prohibition of discrimination in Article I:1 also serves as an
incentive for concessions, negotiated reciprocally, to be extended to
all other Members on an MFN basis.”(54)
51.
In US — Certain EC Products, the United States increased the
bonding requirements on imports from the European Communities in order
to secure the payment of additional import duties to be imposed in
retaliation for certain EC measures. Examining the consistency of the
increased bonding requirements with GATT Article I, the Panel stated,
with reference to the finding of the Panel in Indonesia — Autos referenced
in paragraph 46 above:
“We find that the 3 March additional bonding
requirements violated the most-favoured-nation clause of Article I of
GATT, as it was applicable only to imports from the European
Communities, although identical products from other WTO Members were not
the subject of such an additional bonding requirement. The regulatory
distinction (whether an additional bonding requirement is needed) was
not based on any characteristic of the product but depended exclusively
on the origin of the product and targeted exclusively some imports from
the European Communities.(55)”(56)
52.
In EC — Tariff Preferences, the Panel interpreted the term “unconditionally”
as meaning “not limited by or subjected to any conditions”:
“In the Panel’s view, moreover, the term ‘unconditionally’
in Article I:1 has a broader meaning than simply that of not requiring
compensation. While the Panel acknowledges the European Communities’
argument that conditionality in the context of traditional MFN clauses
in bilateral treaties may relate to conditions of trade compensation for
receiving MFN treatment, the Panel does not consider this to be the full
meaning of ‘unconditionally’ under Article
I:1. Rather, the Panel
sees no reason not to give that term its ordinary meaning under Article
I:1, that is, ‘not limited by or subject to any conditions’.(57)
Because the tariff preferences under the Drug
Arrangements are accorded only on the condition that the receiving
countries are experiencing a certain gravity of drug problems, these
tariff preferences are not accorded ‘unconditionally’ to the like
products originating in all other WTO Members, as required by Article
I:1. The Panel therefore finds that the tariff advantages under the Drug
Arrangements are not consistent with Article I:1 of GATT
1994.”(58)
53.
In Colombia — Ports of Entry, the Panel found that the
advantage described in paragraph 36 above was not extended “immediately
and unconditionally” to imports from Panama, because an advantage
granted to the subject goods of other Members is not similarly accorded
to those products originating in Panama for reasons related to its
origin or the conduct of Panama.(59)
54.
In US — Poultry (China), the Panel observed:
“[E]ven if Chinese poultry production system is
found to provide equivalent food safety standards as those applied in
the United States, it will not be able to export poultry products
because of the funding prohibition. Further, the United States
acknowledges that the purpose and effect of Section 727 was to prevent
Chinese poultry products from being imported into the United States.
No other country was subject to the funding
prohibition that Section 727 imposed on China. This means that China is
the only WTO Member that is denied the advantage that the Panel
identified earlier — the opportunity to export poultry products to the
United States after the successful completion of the FSIS procedures.
Therefore, Section 727 discriminates against China with respect to other
WTO Members by denying the above-mentioned advantage, and this
discriminatory treatment means that the United States is not extending
an advantage ‘immediately and unconditionally’.(60)
55.
Regarding GATT practice concerning the term “shall be accorded
immediately and unconditionally”.
2. Articles I:2
and I:4: historical preferences
56. A
Secretariat Note dated 18 December 1992 provides an overview of the
status of historical preferences under Article 1:2 as of that date.(61)
57.
On 14 October 1996, the General Council approved waivers in respect of
the base date for Article I:4 for South Africa and Zimbabwe until 31
December 1997, anticipating that the bilateral agreements of these
countries would be incorporated in a regional trade agreement before the
expiration date of 31 December 1997.(62)
3. Exceptions
and derogations to the MFN principle
(a) Enabling
Clause
(i) Text and
adoption of the Enabling Clause
58.
On 28 November 1979, the GATT Council adopted the Decision on
Differential and More Favourable Treatment, Reciprocity and Fuller
Participation of Developing Countries (the “Enabling Clause”).(63)
The text of the Enabling Clause is set out below:
“Following negotiations within the framework of
the Multilateral Trade Negotiations, the CONTRACTING PARTIES decide as
follows:
1.
Notwithstanding the provisions of Article I of the General Agreement,
contracting parties may accord differential and more favourable
treatment to developing countries(64), without according such
treatment to other contracting parties.
2.
The provisions of paragraph 1 apply to the following:(65)
(a)
Preferential tariff treatment accorded by developed contracting parties
to products originating in developing countries in accordance with the
Generalized System of Preferences;(66)
(b)
Differential and more favourable treatment with respect to the
provisions of the General Agreement concerning non-tariff measures
governed by the provisions of instruments multilaterally negotiated
under the auspices of the GATT;
(c)
Regional or global arrangements entered into amongst less-developed
contracting parties for the mutual reduction or elimination of tariffs
and, in accordance with criteria or conditions which may be prescribed
by the CONTRACTING PARTIES, for the mutual reduction or elimination of
non-tariff measures, on products imported from one another;
(d)
Special treatment on the least developed among the developing countries
in the context of any general or specific measures in favour of
developing countries.
3.
Any differential and more favourable treatment provided under this
clause:
(a)
shall be designed to facilitate and promote the trade of developing
countries and not to raise barriers to or create undue difficulties for
the trade of any other contracting parties;
(b)
shall not constitute an impediment to the reduction or elimination of
tariffs and other restrictions to trade on a most-favoured-nation basis;
(c)
shall in the case of such treatment accorded by developed contracting
parties to developing countries be designed and, if necessary, modified,
to respond positively to the development, financial and trade needs of
developing countries.
4.
Any contracting party taking action to introduce an arrangement pursuant
to paragraphs 1, 2 and
3 above or subsequently taking action to
introduce modification or withdrawal of the differential and more
favourable treatment so provided shall:(67)
(a)
notify the CONTRACTING PARTIES and furnish them with all the information
they may deem appropriate relating to such action;
(b)
afford adequate opportunity for prompt
consultations at the request of any interested contracting party with
respect to any difficulty or matter that may arise. The CONTRACTING
PARTIES shall, if requested to do so by such contracting party, consult
with all contracting parties concerned with respect to the matter with a
view to reaching solutions satisfactory to all such contracting parties.
5.
The developed countries do not expect reciprocity for commitments made
by them in trade negotiations to reduce or remove tariffs and other
barriers to the trade of developing countries, i.e., the developed
countries do not expect the developing countries, in the course of trade
negotiations, to make contributions which are inconsistent with their
individual development, financial and trade needs. Developed contracting
parties shall therefore not seek, neither shall less-developed
contracting parties be required to make, concessions that are
inconsistent with the latter’s development, financial and trade needs.
6.
Having regard to the special economic difficulties and the particular
development, financial and trade needs of the least-developed countries,
the developed countries shall exercise the utmost restraint in seeking
any concessions or contributions for commitments made by them to reduce
or remove tariffs and other barriers to the trade of such countries, and
the least-developed countries shall not be expected to make concessions
or contributions that are inconsistent with the recognition of their
particular situation and problems.
7.
The concessions and contributions made and the obligations assumed by
developed and less-developed contracting parties under the provisions of
the General Agreement should promote the basic objectives of the
Agreement, including those embodied in the Preamble and in Article
XXXVI. Less-developed contracting parties expect that their capacity to
make contributions or negotiated concessions or take other mutually
agreed action under the provisions and procedures of the General
Agreement would improve with the progressive development of their
economies and improvement in their trade situation and they would
accordingly expect to participate more fully in the framework of rights
and obligations under the General Agreement.
8.
Particular account shall be taken of the serious difficulty of the
least-developed countries in making concessions and contributions in
view of their special economic situation and their development,
financial and trade needs.
9.
The contracting parties will collaborate in arrangements for review of
the operation of these provisions, bearing in mind the need for
individual and joint efforts by contracting parties to meet the
development needs of developing countries and the objectives of the
General Agreement.”
59.
Further information concerning the background and GATT practice in
respect of the Enabling Clause.
(ii)
Notification, consultation and transparency for preferential measures
60.
The functions of the CONTRACTING PARTIES under Paragraph 4 with respect
to notification and consultations have been carried out by the Committee
on Trade and Development under the GATT 1947 and the WTO.
61.
On 14 December 2010, the General Council adopted a Transparency
Mechanism for Preferential Trade Arrangements (PTAs), applying to all
preferences under paragraph 2 of the Enabling Clause except for those
under paragraph 2(c); to “preferential treatment accorded by any
Member to products of least-developed countries”; and to “any other
non-reciprocal preferential treatment authorized under the WTO Agreement”.(68)
62.
The Transparency Mechanism for PTAs calls for Members granting such
non-reciprocal preferences to notify them as early as possible (when
practicable before the application of preferential treatment and at the
latest within three months after the treatment is in force);
notifications are to provide legislation and related instruments, and
are to be considered by the Committee on Trade and Development on the
basis of a factual presentation prepared by the Secretariat. Each
preference arrangement is to be considered in a single formal meeting of
the Committee. Changes affecting the implementation of a PTA are also to
be notified. For each preference arrangement existing as of December
2010, the Secretariat is to prepare a factual abstract. All information
notified is to be made available on the WTO website, and the Secretariat
is to maintain an electronic database accessible to the public. The
Transparency Mechanism is to apply on a provisional basis until Members
approve its permanent application.(69)
63.
From 1 January 1995 through 30 September 2011, the following Members
have notified GSP schemes to the WTO: Australia(70);
Canada(71); EU(72);
Iceland(73); Japan(74); New
Zealand(75); Norway(76);
Switzerland(77); and United States.(78)
GSP schemes notified to the GATT.
(iii) Regional
trade agreements (RTAs) notified under the Enabling Clause
64.
As noted above, functions concerning notifications and consultation
under Paragraph 4 have been carried out by the Committee on Trade and
Development under GATT 1947 and the WTO. Under paragraph 4(a) of the
Enabling Clause, Members are required to notify arrangements concluded
under the legal cover of the Enabling Clause, and the modification or
withdrawal thereof, to the Committee on Trade and Development.
65.
From 1 January 1995 through 30 September 2011, the Committee on Trade
and Development has received notifications of 25 regional trade
agreements among developing country Members.(79) For a complete
list of RTAs notified to the GATT/WTO, see the table at the end of this
Chapter.
66.
Additional information on three regional trade agreements previously
notified to the GATT Committee on Trade and Development has also been
submitted to the WTO Committee on Trade and Development:
(a) the Memorandum of
Understanding on Closer Relations between Bolivia and the Southern
Common Market Agreement (MERCOSUR);(80)
(b) Common Effective
Preferential Tariffs (CEPT) scheme for the ASEAN Free Trade Area (AFTA);(81)
and
(c) periodical reports on
measures taken under the 1980 Treaty of Montevideo of the Latin American
Integration Association (LAIA).(82)
67.
At the entry into force of the WTO on 1 January 1995, one agreement
(Southern Common Market, or MERCOSUR) notified to the GATT 1947 under
the Enabling Clause was being examined in a working party established by
the GATT 1947 Committee on Trade and Development. In order to facilitate
continuation of the work of the MERCOSUR Working Party in the WTO, on 14
September 1995, the Committee on Trade and Development adapted its terms
of reference as follows(83):
“To examine the Southern Common Market Agreement
(MERCOSUR) in the light of the relevant provisions of the Enabling
Clause and of the GATT 1994, including Article
XXIV, and to transmit a
report and recommendations to the Committee on Trade and Development for
submission to the General Council, with a copy of the report transmitted
as well to the Council for Trade in Goods. The examination in the
Working Party will be based on a complete notification and on written
questions and answers.”(84)
68.
The review of MERCOSUR was later taken over by the Committee on RTAs.(85)
69.
Up to December 2006, the Committee reviewed RTAs on the basis of
procedures applied in respect of all notifications under the Enabling
Clause. When an agreement was notified under the Enabling Clause, it was
inscribed on the agenda of the Committee on Trade and Development.
Subsequent actions of the Committee might have included “noting” the
agreement, requesting additional information, or transferring it to the
Committee on RTAs for examination. In addition, the Committee also
reviewed reports made by parties on changes to, or operation of, their
agreements.
70.
On 2 November 1998, the Committee on Trade and Development adopted
general guidelines with respect to information on RTAs submitted to it.(86)
On 6 March 2007, the Committee on Trade and Development adopted a common
and simplified notification format for regional trade agreements.(87)
71.
On 14 December 2006, the General Council adopted a Decision on a
Transparency Mechanism for Regional Trade Agreements,(88) to be
applied on a provisional basis and replaced by a permanent mechanism
adopted as part of the overall results of the Doha Round. The Decision
applies to RTAs notified under paragraph 2(c) of the Enabling
Clause, as
well as RTAs notified under GATT Article XXIV and
GATS Article V.
72.
This Decision calls on Members to notify RTAs as early as possible, and
no later than directly after ratification and before the application of
preferential treatment. All notified agreements, irrespective of the
clause under which they had been notified, are subject to common
transparency procedures. The Decision also provides that Members’
consideration of each notified RTA shall be normally concluded within
one year after the notification date. To assist Members in their
consideration, the Secretariat is to prepare a factual presentation of
the RTA, on its own responsibility and in full consultation with the
parties of the RTA. The Secretariat is also to prepare a factual
abstract for each RTA notified under the Enabling Clause up to 31
December 2006. These Secretariat reports and other written materials
submitted are to be made available on the WTO website. Each notified RTA
is to be considered at a single formal meeting.
73.
On 4 December 2007, the Committee on Trade and Development agreed that
the consideration of regional trade agreements notified under paragraph
2(c) of the Enabling Clause, carried out in dedicated sessions of the
Committee, would essentially follow the same procedures used by the
Committee on Regional Trade Agreements in its consideration of
agreements notified under Article XXIV of the GATT 1994 and
Article V of
the GATS.(89) Regarding the procedures for the examination and
consideration of RTAs, see the Section of the Committee on Regional
Trade Agreements in the Chapter on the WTO Agreement.
74.
During 2008–2011, discussions have taken place in the Committee on
Trade and Development concerning the notification status of the GCC
Customs Union and other RTAs notified under both Article XXIV of the
GATT 1994 and the Enabling Clause.(90)
75.
As regards agreements notified under the Enabling Clause involving non-WTO
Members, the Committee on Trade and Development agreed on 13 March 2009
to adopt the procedures used by the Committee on Regional Trade
Agreements in the consideration of these agreements in the Committee on
Trade and Development. Regarding the procedures of the Committee on
Regional Trade Agreements with respect to agreements involving non-WTO
Members, see paragraph 1025 below.(91)
76.
The Committee on Trade and Development has held dedicated sessions on
RTAs on 16 October 2008, 15 July and 14 September 2009, and 28 June
2010;(92) four RTAs have been considered in these sessions. The
notifications, other documentation, and status of WTO consideration of
RTAs notified under the Enabling Clause are available from the Regional
Trade Agreements Information System on the WTO website.(93)
77.
As of 30 September 2011, all factual abstracts due for agreements
notified under the Enabling Clause had been posted at the WTO Database
on Regional Trade Agreements.
(iv) Special
treatment of the least-developed countries
78.
The Transparency Mechanism for Preferential Trade Arrangements adopted
on 14 December 2010 applies in respect of preferential trade
arrangements taking the form of preferential treatment accorded by any
Member to products of least-developed countries. These arrangements are
to be considered by the Committee on Trade and Development; see
paragraph 61 above.
79.
From 1999 through December 2010, the Committee on Trade and Development
received notifications under the Enabling Clause from the following
Members, of their special treatment in respect of the least-developed
countries in the context of any general or specific measures in favour
of developing countries: Australia;(94)
Canada;(95)
European Communities;(96) Iceland;(97)
Japan;(98) Korea;(99)
Norway;(100) New Zealand;(101)
Switzerland;(102) and United States.(103)
See also the Waiver
on Preferential Tariff Treatment for Least-Developed Countries (referred
to in paragraph 101).
(v)
Interpretation
The Enabling Clause as an
exception to Article I:1 of the GATT 1994
80.
In EC — Tariff Preferences, the Appellate Body addressed the
relationship between Article I:1 of the GATT 1994 and the Enabling
Clause and upheld the Panel’s characterization of the Enabling Clause
as an exception to Article I:1 based on the ordinary meaning of
paragraph 1 of the Enabling Clause. It also stated that such a
characterization does not affect the importance of the policy objectives
of the Enabling Clause:
“By using the word ‘notwithstanding’,
paragraph 1 of the Enabling Clause permits Members to provide ‘differential
and more favourable treatment’ to developing countries ‘in spite of’
the MFN obligation of Article I:1. Such treatment would otherwise be
inconsistent with Article I:1 because that treatment is not extended to
all Members of the WTO ‘immediately and unconditionally’.(104)
Paragraph 1 thus excepts Members from complying with the obligation
contained in Article I:1 for the purpose of providing differential and
more favourable treatment to developing countries, provided that such
treatment is in accordance with the conditions set out in the Enabling
Clause. As such, the Enabling Clause operates as an ‘exception’ to
Article I:1.
…
In sum, in our view, the characterization of the
Enabling Clause as an exception in no way diminishes the right of
Members to provide or to receive ‘differential and more favourable
treatment’. The status and relative importance of a given provision
does not depend on whether it is characterized, for the purpose of
allocating the burden of proof, as a claim to be proven by the
complaining party, or as a defence to be established by the responding
party. Whatever its characterization, a provision of the covered
agreements must be interpreted in accordance with the ‘customary rules
of interpretation of public international law’, as required by Article
3.2 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes (the ‘DSU’).(105) Members’
rights under the Enabling Clause are not curtailed by requiring
preference-granting countries to establish in dispute settlement the
consistency of their preferential measures with the conditions of the
Enabling Clause. Nor does characterizing the Enabling Clause as an
exception detract from its critical role in encouraging the granting of
special and differential treatment to developing-country Members of the
WTO.”(106)
Order of analysis
81.
The Appellate Body stated in EC — Tariff Preferences that the
Enabling Clause does not exclude the applicability of Article
I:1.
Rather, it is amore specific rule [on GSP matters] that prevails over
Article I:1. According to the Appellate Body, a panel should first
examine the consistency of a challenged measure with Article I:1 and
then proceed to examine the justifiability of the measure under the
Enabling Clause:
“It is well settled that the MFN principle
embodied in Article I:1 is a ‘cornerstone of the GATT’ and ‘one of
the pillars of the WTO trading system’, which has consistently served
as a key basis and impetus for concessions in trade negotiations.
However, we recognize that Members are entitled to adopt measures
providing ‘differential and more favourable treatment’ under the
Enabling Clause. Therefore, challenges to such measures, brought under
Article I:1, cannot succeed where such measures are in accordance with
the terms of the Enabling Clause. In our view, this is so because the
text of paragraph 1 of the Enabling Clause ensures that, to the extent
that there is a conflict between measures under the Enabling Clause and
the MFN obligation in Article I:1, the Enabling Clause, as the more
specific rule, prevails over Article I:1. In order to determine whether
such a conflict exists, however, a dispute settlement panel should, as a
first step, examine the consistency of a challenged measure with Article
I:1, as the general rule. If the measure is considered at this stage to
be inconsistent with Article I:1, the panel should then examine, as a
second step, whether the measure is nevertheless justified by the
Enabling Clause. It is only at this latter stage that a final
determination of consistency with the Enabling Clause or inconsistency
with Article I:1 can be made.
In other words, the Enabling Clause ‘does not
exclude the applicability’ of Article I:1 in the sense that, as a
matter of procedure (or ‘order of examination’, as the Panel
stated), the challenged measure is submitted successively to the test of
compatibility with the two provisions. But, as a matter of final
determination — or application rather than applicability —
it is clear that only one provision applies at a time …”.(107)
Burden of proof under the
Enabling Clause
82.
The Appellate Body stated in EC — Tariff Preferences that as an
exception provision, the ultimate burden of proof under the Enabling
Clause falls on the respondent:
“As a general rule, the burden of proof for an
‘exception’ falls on the respondent, that is, as the Appellate Body
stated in US — Wool Shirts and Blouses, on the party ‘assert[ing]
the affirmative of a particular … defence’.(108) From this
allocation of the burden of proof, it is normally for the respondent,
first, to raise the defence and, second, to prove that the
challenged measure meets the requirements of the defence provision.
We are therefore of the view that the European
Communities must prove that the Drug Arrangements satisfy the
conditions set out in the Enabling Clause. Consistent with the principle
of jura novit curia, it is not the responsibility of the European
Communities to provide us with the legal interpretation to be given to a
particular provision in the Enabling Clause; instead, the burden of the
European Communities is to adduce sufficient evidence to substantiate
its assertion that the Drug Arrangements comply with the requirements of
the Enabling Clause.”(109)
83.
However, the Appellate Body also found in EC — Tariff Preferences that
the complainant bears the burden of raising the Enabling Clause in its
panel request, although the ultimate burden of justifying the challenged
measure under the Enabling Clause is with the respondent:
“In our view, the special status of the Enabling
Clause in the WTO system has particular implications for WTO dispute
settlement. As we have explained, paragraph 1 of the Enabling Clause
enhances market access for developing countries as a means of improving
their economic development by authorizing preferential treatment for
those countries, ‘notwithstanding’ the obligations of Article
I. It
is evident that a Member cannot implement a measure authorized by the
Enabling Clause without according an ‘advantage’ to a developing
country’s products over those of a developed country. It follows,
therefore, that every measure undertaken pursuant to the Enabling Clause
would necessarily be inconsistent with Article I, if assessed on that
basis alone, but it would be exempted from compliance with Article I
because it meets the requirements of the Enabling Clause. Under these
circumstances, we are of the view that a complaining party challenging a
measure taken pursuant to the Enabling Clause must allege more than mere
inconsistency with Article I:1 of the GATT 1994, for to do only that
would not convey the ‘legal basis of the complaint sufficient to
present the problem clearly’. In other words, it is insufficient in
WTO dispute settlement for a complainant to allege inconsistency with
Article I:1 of the GATT 1994 if the complainant seeks also to argue that
the measure is not justified under the Enabling Clause. This is
especially so if the challenged measure, like that at issue here, is
plainly taken pursuant to the Enabling Clause, as we discuss infra.
…
The responsibility of the complaining party in
such an instance, however, should not be overstated. It is merely to identify
those provisions of the Enabling Clause with which the scheme is
allegedly inconsistent, without bearing the burden of establishing the
facts necessary to support such inconsistency. That burden, as we
concluded above, remains on the responding party invoking the Enabling
Clause as a defence.”(110)
Footnote 3 to paragraph
2(a): “generalized”
84.
The Appellate Body addressed the meaning of the term “generalized”
as context for the interpretation of the term “non-discriminatory”
in EC — Tariff Preferences and found that its ordinary meaning
is to “apply more generally”. The Appellate Body also took note of
the historical context leading to this requirement:
“We continue our interpretive analysis by
turning to the immediate context of the term ‘non-discriminatory’.
We note first that footnote 3 to paragraph 2(a) stipulates that, in
addition to being ‘non-discriminatory’, tariff preferences provided
under GSP schemes must be ‘generalized’. According to the ordinary
meaning of that term, tariff preferences provided under GSP schemes must
be ‘generalized’ in the sense that they ‘apply more generally;
[or] become extended in application’.(111) However, this
ordinary meaning alone may not reflect the entire significance of the
word ‘generalized’ in the context of footnote 3 of the Enabling
Clause, particularly because that word resulted from lengthy
negotiations leading to the GSP. In this regard, we note the Panel’s
finding that, by requiring tariff preferences under the GSP to be ‘generalized’,
developed and developing countries together sought to eliminate existing
‘special’ preferences that were granted only to certain designated
developing countries.(112) Similarly, in response to our
questioning at the oral hearing, the participants agreed that one of the
objectives of the 1971 Waiver Decision and the Enabling Clause was to
eliminate the fragmented system of special preferences that were, in
general, based on historical and political ties between developed
countries and their former colonies”.(113)
Footnote 3 to paragraph
2(a): “non-discriminatory”
85.
In EC — Tariff Preferences, the European Communities appealed
the Panel’s findings based on the drafting history of the Generalized
System of Preferences that the term “non-discriminatory” in footnote
3 to paragraph 2 of the Enabling Clause requires that identical tariff
preferences be provided to all developing countries without
differentiation, except as regards the implementation of a priori limitations.(114)
While rejecting the Panel’s findings, the Appellate Body interpreted
the ordinary meaning of the term “nondiscriminatory” as requiring
that preference-giving countries make identical tariff preferences
available to all similarly-situated beneficiary developing countries:
“[T]he ordinary meanings of ‘discriminate’
point in conflicting directions with respect to the propriety of
according differential treatment. Under India’s reading, any
differential treatment of GSP beneficiaries would be prohibited, because
such treatment necessarily makes a distinction between beneficiaries. In
contrast, under the European Communities’ reading, differential
treatment of GSP beneficiaries would not be prohibited per se.
Rather, distinctions would be impermissible only where the basis for
such distinctions was improper. Given these divergent meanings, we do
not regard the term ‘nondiscriminatory’, on its own, as
determinative of the permissibility of a preference-granting country
according different tariff preferences to different beneficiaries of its
GSP scheme.
Nevertheless, at this stage of our analysis, we
are able to discern some of the content of the ‘non-discrimination’
obligation based on the ordinary meanings of that term. Whether the
drawing of distinctions is per se discriminatory, or whether it
is discriminatory only if done on an improper basis, the ordinary
meanings of ‘discriminate’ converge in one important respect: they
both suggest that distinguishing among similarly-situated beneficiaries
is discriminatory. For example, India suggests that all beneficiaries of
a particular Member’s GSP scheme are similarly-situated, implicitly
arguing that any differential treatment of such beneficiaries
constitutes discrimination. …
Paragraph 2(a), on its face, does not explicitly
authorize or prohibit the granting of different tariff preferences to
different GSP beneficiaries. It is clear from the ordinary meanings of
‘non-discriminatory’, however, that preference-granting countries
must make available identical tariff preferences to all
similarly-situated beneficiaries.”(115)
86.
After taking into account the stated objectives of the Preamble to the
WTO Agreement, the Appellate Body stated in EC — Tariff Preferences
that the interpretation of the term “non-discriminatory” in the
Enabling Clause should allow the possibility of additional preferences
to be given to developing countries with particular needs:
“We are of the view that the objective of
improving developing countries’ ‘share in the growth in
international trade’, and their ‘trade and export earnings’, can
be fulfilled by promoting preferential policies aimed at those interests
that developing countries have in common, as well as at those
interests shared by subcategories of developing countries based on their
particular needs. An interpretation of ‘non-discriminatory’ that
does not require the granting of ‘identical tariff preferences’
allows not only for GSP schemes providing preferential market access to
all beneficiaries, but also the possibility of additional preferences
for developing countries with particular needs, provided that such
additional preferences are not inconsistent with other provisions of the
Enabling Clause, including the requirements that such preferences be ‘generalized’
and ‘non-reciprocal’. We therefore consider such an interpretation
to be consistent with the object and purpose of the WTO Agreement and
the Enabling Clause.”(116)
87.
After considering its ordinary meaning, its context and the object and
purpose of the WTO Agreement, the Appellate Body found in EC — Tariff Preferences
that the term “non-discriminatory” in
footnote 3 to paragraph 2 of the Enabling Clause requires that identical
preference be made available to all similarly situated GSP beneficiaries
that have the “development, financial and trade needs” to which the
preference is intended to respond:
“Having examined the text and context of
footnote 3 to paragraph 2(a) of the Enabling Clause, and the object and
purpose of the WTO Agreement and the Enabling Clause, we conclude
that the term ‘non-discriminatory’ in footnote 3 does not prohibit
developed-country Members from granting different tariffs to products
originating in different GSP beneficiaries, provided that such
differential tariff treatment meets the remaining conditions in the
Enabling Clause. In granting such differential tariff treatment,
however, preference-granting countries are required, by virtue of the
term ‘non-discriminatory’, to ensure that identical treatment is
available to all similarly-situated GSP beneficiaries, that is, to all
GSP beneficiaries that have the ‘development, financial and trade
needs’ to which the treatment in question is intended to respond.”(117)
88.
The Appellate Body further found in EC — Tariff Preferences that
due to the closed nature of the beneficiary list and the lack of
objective criteria or standards in its GSP Regulation, the European
Communities failed to make its special preferences (i.e., the Drug
Arrangements) available to all similarly situated beneficiaries:
“We recall our conclusion that the term ‘nondiscriminatory’
in footnote 3 of the Enabling Clause requires that identical tariff
treatment be available to all similarly-situated GSP beneficiaries. We
find that the measure at issue fails to meet this requirement for the
following reasons. First, as the European Communities itself
acknowledges, according benefits under the Drug Arrangements to
countries other than the 12 identified beneficiaries would require an
amendment to the Regulation. Such a ‘closed list’ of beneficiaries
cannot ensure that the preferences under the Drug Arrangements are
available to all GSP beneficiaries suffering from illicit drug
production and trafficking.
Secondly, the Regulation contains no criteria or
standards to provide a basis for distinguishing beneficiaries under the
Drug Arrangements from other GSP beneficiaries. Nor did the European
Communities point to any such criteria or standards anywhere else,
despite the Panel’s request to do so. As such, the European
Communities cannot justify the Regulation under paragraph
2(a), because
it does not provide a basis for establishing whether or not a developing
country qualifies for preferences under the Drug Arrangements. Thus,
although the European Communities claims that the Drug Arrangements are
available to all developing countries that are ‘similarly affected by
the drug problem’, because the Regulation does not define the criteria
or standards that a developing country must meet to qualify for
preferences under the Drug Arrangements, there is no basis to determine
whether those criteria or standards are discriminatory or not.”(118)
89.
The Appellate Body also stated in EC — Tariff Preferences that
in addition to the non-discriminatory requirement in paragraph
2(a), the
Enabling Clause also sets out other conditions in paragraphs 3(c) and
3(a) that must be complied with by any particular GSP preference scheme.
However, the Appellate Body did not examine per se the
consistency of the Drug Arrangements with the conditions set out in paragraphs 3(c) and
3(a) due to the fact that the Panel had not made
findings in this regard:
“Although paragraph 3(c)
informs the
interpretation of the term ‘non-discriminatory’ in footnote 3 to
paragraph 2(a), as detailed above, paragraph 3(c)
imposes requirements
that are separate and distinct from those of paragraph
2(a). We have
already concluded that, where a developed-country Member provides
additional tariff preferences under its GSP scheme to respond positively
to widely-recognized ‘development, financial and trade needs’ of
developing countries within the meaning of paragraph 3(c) of the
Enabling Clause, this ‘positive response’ would not, as such, fail
to comply with the ‘non-discriminatory’ requirement in footnote 3 of
the Enabling Clause, even if such needs were not common or shared by all
developing countries. We have also observed that paragraph 3(a) requires
that any positive response of a preference-granting country to the
varying needs of developing countries not impose unjustifiable burdens
on other Members. With these considerations in mind, and recalling that
the Panel made no finding in this case as to whether the Drug
Arrangements are inconsistent with paragraphs 3(a) and
3(c) of the
Enabling Clause, we limit our analysis here to paragraph 2(a) and do not
examine per se whether the Drug Arrangements are consistent with
the obligation contained in paragraph 3(c) to ‘respond positively to
the development, financial and trade needs of developing countries’ or
with the obligation contained in paragraph 3(a) not to ‘raise barriers’
or ‘create undue difficulties’ for the trade of other Members.”(119)
Paragraph 2: “developing
countries”
90.
Based on its findings on the term “nondiscriminatory” in footnote 3
of paragraph 2 and on its discussion of paragraph
3(c), the Appellate
Body found in EC — Tariff Preferences that the phrase “developing
countries” in paragraph 2 of the Enabling Clause does not mean “all
developing countries”:
“We have concluded, contrary to the Panel, that
footnote 3 and paragraph 3(c) do not preclude the granting of
differential tariffs to different sub-categories of GSP beneficiaries,
subject to compliance with the remaining conditions of the Enabling
Clause. We find, therefore, that the term ‘developing countries’ in
paragraph 2(a) should not be read to mean ‘all’ developing countries
and, accordingly, that paragraph 2(a) does not prohibit
preference-granting countries from according different tariff
preferences to different sub-categories of GSP beneficiaries.”(120)
Relationship between
paragraphs 2(a) and 2(d)
91.
The Appellate Body stated in EC — Tariff Preferences that
paragraph 2(d) is not an exception to paragraph 2(a) of the Enabling
Clause. Rather, it found that by virtue of paragraph
2(d),
preference-giving countries need not establish that the differentiation
between developing and the least-developed countries is “non-discriminatory”:
“We do not agree with the Panel that paragraph
2(d) is an ‘exception’ to paragraph
2(a), or that it is rendered
redundant if paragraph 2(a) is interpreted as allowing developed
countries to differentiate in their GSP schemes between developing
countries. To begin with, we note that the terms of paragraph 2 do not
expressly indicate that each of the four sub-paragraphs thereunder is
mutually exclusive, or that any one is an exception to any other.
Moreover, in our view, it is clear from several provisions of the
Enabling Clause that the drafters wished to emphasize that
least-developed countries form an identifiable sub-category of
developing countries with ‘special economic difficulties and …
particular development, financial and trade needs’.(121) When a
developed-country Member grants tariff preferences in favour of
developing countries under paragraph 2(a), as we have already found,
footnote 3 imposes a requirement that such preferences be ‘non-discriminatory’.
In the absence of paragraph 2(d), a Member granting preferential tariff
treatment only to least-developed countries would therefore need to
establish, under paragraph 2(a), that this preferential treatment did
not ‘discriminate’ against other developing countries contrary to
footnote 3. The inclusion of paragraph 2(d), however, makes clear that
developed countries may accord preferential treatment to least-developed
countries distinct from the preferences granted to other developing
countries under paragraph 2(a). Thus, pursuant to
paragraph 2(d),
preference-granting countries need not establish that differentiating
between developing and least-developed countries is ‘non-discriminatory’.
This demonstrates that paragraph 2(d) does have an effect that is
different and independent from that of paragraph
2(a), even if the term
‘nondiscriminatory’ does not require the granting of ‘identical
tariff preferences’ to all GSP beneficiaries.”(122)
Paragraph 3(a)
92.
The Appellate Body found in EC — Tariff Preferences although
there was a requirement of non-discrimination, this did not mean that
identical tariff preferences should be granted to “all” developing
countries. The Appellate Body concluded that the Enabling Clause
contains sufficient other conditions on the granting of preferences,
including those under paragraph 3(a), to guard against such a
conclusion:
“It does not necessarily follow, however, that
‘nondiscriminatory’ should be interpreted to require that
preference-granting countries provide ‘identical’ tariff preferences
under GSP schemes to ‘all’ developing countries. In concluding
otherwise, the Panel assumed that allowing tariff preferences such as
the Drug Arrangements would necessarily ‘result [in] the collapse of
the whole GSP system and a return back to special preferences favouring
selected developing countries’.(123) To us, this conclusion is
unwarranted. We observe that the term ‘generalized’ requires that
the GSP schemes of preference-granting countries remain generally
applicable.(124) Moreover, unlike the Panel, we believe that the
Enabling Clause sets out sufficient conditions on the granting of
preferences to protect against such an outcome. As we discuss below(125),
provisions such as paragraphs 3(a) and 3(c) of the Enabling Clause
impose specific conditions on the granting of different tariff
preferences among GSP beneficiaries.”(126)
93.
The Appellate Body stated in EC — Tariff Preferences that
paragraph 3(a) requires that any positive response of a
preference-giving country to the varying needs of developing countries
not impose unjustifiable burdens on other Members:
“Finally, we note that, pursuant to paragraph
3(a) of the Enabling Clause, any ‘differential and more favourable
treatment … shall be designed to facilitate and promote the trade of
developing countries and not to raise barriers to or create undue
difficulties for the trade of any other contracting parties.’ This
requirement applies, a fortiori, to any preferential treatment
granted to one GSP beneficiary that is not granted to another.(127)
Thus, although paragraph 2(a) does not prohibit per se the
granting of different tariff preferences to different GSP beneficiaries(128),
and paragraph 3(c) even contemplates such differentiation under certain
circumstances(129),
paragraph 3(a) requires that any positive
response of a preference-granting country to the varying needs of
developing countries not impose unjustifiable burdens on other Members.”(130)
Paragraph 3(c) “to
respond positively to the development, financial and trade needs of
developing countries”
94.
The Appellate Body stated in EC — Tariff Preferences that in
the light of one of the stated objectives of the Preamble to the WTO
Agreement, the text of paragraph 3(c) authorizes preference-giving
countries to treat different developing countries differently:
“[T]he
Preamble to the WTO Agreement, which informs all the covered
agreements including the GATT 1994 (and, hence, the Enabling Clause),
explicitly recognizes the ‘need for positive efforts designed to
ensure that developing countries, and especially the least developed
among them, secure a share in the growth in international trade
commensurate with the needs of their economic development’. The word
‘commensurate’ in this phrase appears to leave open the possibility
that developing countries may have different needs according to their
levels of development and particular circumstances. The Preamble to the WTO
Agreement further recognizes that Members’ ‘respective needs and
concerns at different levels of economic development’ may vary
according to the different stages of development of different Members.
In sum, we read paragraph 3(c)
as authorizing
preference-granting countries to ‘respond positively’ to ‘needs’
that are not necessarily common or shared by all developing
countries. Responding to the ‘needs of developing countries’ may
thus entail treating different developing-country beneficiaries
differently.”(131)
95.
The Appellate Body in EC — Tariff Preferences also stated that paragraph 3(c)
requires that a response to a particular “development,
financial and trade needs” based on objective standard. These
standards could be those particular needs as broadly recognized and
explicitly set out in the WTO Agreement or in multilateral instruments
adopted by international organizations. It also stated that in order to
make the “response” “positive”, sufficient nexus should exist
between the preferential treatment and the likelihood of alleviating the
relevant need:
“At the outset, we note that the use of the word
‘shall’ in paragraph 3(c) suggests that
paragraph 3(c) sets out
obligations for developed-country Members in providing preferential
treatment under a GSP scheme to ‘respond positively’ to the ‘needs
of developing countries’. …
…
However, paragraph 3(c)
does not authorize any kind
of response to any claimed need of developing countries. First,
we observe that the types of needs to which a response is envisaged are
limited to ‘development, financial and trade needs’. In our view, a
‘need’ cannot be characterized as one of the specified ‘needs of
developing countries’ in the sense of paragraph 3(c)
based merely on
an assertion to that effect by, for instance, a preference-granting
country or a beneficiary country. Rather, when a claim of inconsistency
with paragraph 3(c) is made, the existence of a ‘development,
financial [or] trade need’ must be assessed according to an objective
standard. Broad-based recognition of a particular need, set out in
the WTO Agreement or in multilateral instruments adopted by
international organizations, could serve as such a standard.
Secondly, paragraph 3(c)
mandates that the
response provided to the needs of developing countries be ‘positive’.
‘Positive’ is defined as ‘consisting in or characterized by
constructive action or attitudes’. This suggests that the response of
a preference-granting country must be taken with a view to improving the
development, financial or trade situation of a beneficiary country,
based on the particular need at issue. As such, in our view, the
expectation that developed countries will ‘respond positively’ to
the ‘needs of developing countries’ suggests that a sufficient nexus
should exist between, on the one hand, the preferential treatment
provided under the respective measure authorized by paragraph 2, and, on
the other hand, the likelihood of alleviating the relevant ‘development,
financial [or] trade need’. In the context of a GSP scheme, the
particular need at issue must, by its nature, be such that it can be
effectively addressed through tariff preferences. Therefore, only if a
preference-granting country acts in the ‘positive’ manner suggested,
in ‘respon[se]’ to a widely-recognized ‘development, financial
[or] trade need’, can such action satisfy the requirements of paragraph 3(c).”(132)
(b)
Anti-dumping and countervailing duties
96.
In Brazil — Coconut, the Appellate Body upheld the Panel’s
finding that the applicability of GATT Article VI to a countervailing
duty investigation also determined the applicability of GATT Articles I
and II. The panel had found that
Article VI of the GATT 1994 did not
apply to a countervailing duty measure that was the result of an
investigation initiated prior to 1 January 1995, and as a consequence,
claims under Articles I
and II based on claims of inconsistency with
GATT Article VI could not succeed.(133)
97.
In EC — Fasteners, the Appellate Body examined a Panel finding
that an EC anti-dumping Regulation applying only to imports from
non-market economy countries violated the MFN obligation of Article
I:1;
the complaining party, China, had not raised a claim under Article VI in
respect of the measure at issue. The Appellate Body declined to rule on
this finding and declared it moot and of no legal effect(134),
observing:
“Article VI of the GATT 1994 permits the
imposition of anti-dumping duties, which may otherwise be inconsistent
with other provisions of the GATT 1994, such as Article
I:1. Therefore,
in our view, a preliminary question to be addressed before determining
whether an antidumping duty has been imposed inconsistently with Article
I:1 of the GATT 1994 is whether the anti-dumping duty had been imposed
consistently with Article VI of the GATT
1994.
…
… [I]t was not argued before the Panel and it is
not disputed before us whether Article 9(5) of the Basic AD Regulation
is applied consistently with the provisions of Article VI of the GATT
1994. This has significant implications for the question of whether
Article 9(5) of the Basic AD Regulation is inconsistent with Article I:1
of the GATT 1994.
… The Panel did not engage with the implications
of the absence of a claim under Article VI of the GATT 1994 for a claim
under Article I:1 of the GATT 1994. Nor did the Panel consider the
relationship between Article VI of the GATT 1994 and the provisions of
the Anti-Dumping Agreement, which according to Article 1 of the Anti-
Dumping Agreement ‘govern the application of, Article VI of the
GATT 1994’. We thus consider that the Panel’s finding under Article
I:1 of the GATT 1994 lacks an essential step in the sequence of its
legal analysis, that is, the determination of whether and under what
circumstances an anti-dumping measure that is inconsistent with the Anti-Dumping
Agreement may be reviewed under Article I:1 of the GATT 1994 in the
absence of a review under Article VI of the GATT
1994.”(135)
98.
Regarding GATT practice concerning antidumping and countervailing duties
as an exception to Article I:1.
(c) Frontier
traffic, customs unions and free trade areas
99.
In Canada — Autos, Canada invoked an Article XXIV exception
with respect to a certain import duty exemption which had been found
inconsistent with GATT Article
I. The Panel rejected this defence,
because, on the one hand, Canada was not granting the import duty
exemption to all NAFTA manufacturers and because, on the other
hand, manufacturers from countries other than the United States
and Mexico were being provided duty-free treatment.(136) Since
Canada did not appeal this finding of the Panel, the Appellate Body did
not address the issue.
100.
Regarding GATT practice concerning frontier traffic, customs unions and
free trade areas.
(d) Waivers
of Article I:1
(i) Waiver on
Preferential Tariff Treatment for Least-Developed Countries
101.
At its meeting of 15 June 1999, the General Council adopted a decision
on Preferential Tariff Treatment for Least-Developed Countries. This
decision waives GATT Article I:1(137) in order to provide a means
for developing-country Members to offer preferential tariff treatment to
products of least-developed countries. The decision sets forth:
“1. Subject to the terms
and conditions set out hereunder, the provisions of paragraph 1 of
Article I of the GATT 1994 shall be waived until 30 June 2009, to the
extent necessary to allow developing country Members to provide
preferential tariff treatment to products of least-developed countries,
designated as such by the United Nations, without being required to
extend the same tariff rates to like products of any other Member.
2. Developing country
Members wishing to take actions pursuant to the provisions of this
Waiver shall notify to the Council on Trade in Goods the list of all
products of least-developed countries for which preferential tariff
treatment is to be provided on a generalized, non-reciprocal and
non-discriminatory basis and the preference margins to be accorded.
Subsequent modifications to the preferences shall similarly be notified.
3. Any preferential tariff
treatment implemented pursuant to this Waiver shall be designed to
facilitate and promote the trade of least-developed countries and not to
raise barriers or create undue difficulties for the trade of any other
Member. Such preferential tariff treatment shall not constitute an
impediment to the reduction or elimination of tariffs on a most-favoured-nation
basis.
4. In accordance with the
provisions of paragraph 4 of Article IX of the WTO
Agreement, the
General Council shall review annually whether the exceptional
circumstances justifying the Waiver still exist and whether the terms
and conditions attached to the Waiver have been met.
5. The government of any
Member providing preferential tariff treatment pursuant to this Waiver
shall, upon request, promptly enter into consultations with any
interested Member with respect to any difficulty or any matter that may
arise as a result of the implementation of programmes authorized by this
Waiver. Where a Member considers that any benefit accruing to it under
GATT 1994 may be or is being impaired unduly as a result of such
implementation, such consultation shall examine the possibility of
action for a satisfactory adjustment of the matter. This Waiver does not
affect Members’ rights as set forth in the Understanding in Respect of
Waivers of Obligations under GATT 1994.
6. This waiver does not
affect in any way and is without prejudice to rights of Members in their
actions pursuant to the provisions of the 1979 Decision on Differential
and More Favourable Treatment, Reciprocity and Fuller Participation of
Developing Countries.”(138)
102.
On 27 May 2009, the General Council adopted a decision extending this
waiver until 30 June 2019.(139)
103.
The Transparency Mechanism for Preferential Trade Arrangements referred
to in paragraph 61 above includes within its stated scope preferences
“taking the form of preferential treatment accorded by any Member to
products of least-developed countries.” On 14 March 2001, the Council
for Trade in Goods agreed that any market access measures taken in
favour of the least-developed countries, whether under the Enabling
Clause or under the 1999 waiver, would be referred for advice to the
Sub-Committee on LDCs of the Committee on Trade and Development.(140)
104.
From the date of the 1999 waiver through 30 September 2011, Morocco,
Korea, India and China notified preferential tariff treatment for the
least-developed countries to the Council for Trade in Goods.(141)
The following developing country Members notified tariff reduction or
duty-free treatment for the least-developed countries to the Committee
on Trade and Development before June 1999: (i) Turkey(142); (ii)
Egypt(143); and (iii) Mauritius.(144)
(ii) Decision
on duty-free and quota-free market access for least-developed countries
105.
At the Sixth Ministerial Conference in Hong Kong, China, the Ministers
adopted a decision regarding provision of duty-free and quota-free (DFQF)
market access to least-developed countries(145), as follows:
“We agree that developed-country Members shall,
and developing-country Members declaring themselves in a position to do
so should:
(a) (i)
Provide duty-free and quota-free market access on a lasting basis, for
all products originating from all LDCs by 2008 or no later than the
start of the implementation period in a manner that ensures stability,
security and predictability.
(ii)
Members facing difficulties at this time to provide market access as set
out above shall provide duty-free and quota-free market access for at
least 97 per cent of products originating from LDCs, defined at the
tariff line level, by 2008 or no later than the start of the
implementation period. In addition, these Members shall take steps to
progressively achieve compliance with the obligations set out above,
taking into account the impact on other developing countries at similar
levels of development, and, as appropriate, by incrementally building on
the initial list of covered products.
(iii)
Developing-country Members shall be permitted to phase in their
commitments and shall enjoy appropriate flexibility in coverage.
(b) Ensure that
preferential rules of origin applicable to imports from LDCs are
transparent and simple, and contribute to facilitating market access.
Members shall notify the implementation of the
schemes adopted under this decision every year to the Committee on Trade
and Development. The Committee on Trade and Development shall annually
review the steps taken to provide duty-free and quota-free market access
to the LDCs and report to the General Council for appropriate action.
We urge all donors and relevant international
institutions to increase financial and technical support aimed at the
diversification of LDC economies, while providing additional financial
and technical assistance through appropriate delivery mechanisms to meet
their implementation obligations, including fulfilling SPS and TBT
requirements, and to assist them in managing their adjustment processes,
including those necessary to face the results of MFN multilateral trade
liberalisation.”
106.
On 3 March 2006, the Committee on Trade and Development agreed to
include an agenda item concerning the above decision and the steps taken
by Members to provide DFQF market access to least-developed countries.(146)
Following the mandate in the above decision, the Committee carried out
its first annual review of the decision’s implementation on 28
November 2006.(147)
(iii) Other
waivers of Article I:1
107.
As of 30 September 2011, there had been 14 decisions under Article IX:3–4
of the WTO Agreement waiving Article I:1 and/or
XIII:1 of the GATT 1994
in connection with trade preferences; also, a waiver of Article
I:1,
XI:1 and XIII:1 implementing the Kimberley Process Certification Scheme
for Rough Diamonds. See the list of all waivers with document references
at the end of the Chapter on the WTO Agreement.
4. Relationship
with other GATT provisions
(a) Article
III
108.
In US — Gasoline, with respect to the relationship between
Articles I and III, the Panel considered:
“[The Panel’s] findings on treatment under the
baseline establishment methods under Articles III:4 and
XX (b), (d) and
(g) would in any case have made unnecessary the examination of the 75
per cent rule under Article I:1.”(148)
109.
With respect to GATT practice regarding the relationship between Article
I and Article III.
(b) Article
VI
110.
The Panel in Brazil — Desiccated Coconut found that because
Article VI of the GATT 1994 did not constitute applicable law for the
purposes of the dispute, the claims made under Articles I and
II of the
GATT 1994, which were derived from claims of inconsistency with Article
VI of the GATT 1994, could not succeed.(149) The Appellate Body
in Brazil — Desiccated Coconut confirmed this finding.(150)
111.
In EC — Fasteners, the Appellate Body found:
“Article VI of the GATT 1994 permits the
imposition of anti-dumping duties, which may otherwise be inconsistent
with other provisions of the GATT 1994, such as Article
I:1.
Therefore, in our view, a preliminary question to be addressed before
determining whether an antidumping duty has been imposed inconsistently
with Article I:1 of the GATT 1994 is whether the anti-dumping duty had
been imposed consistently with Article VI of the GATT 1994.”(151)
112.
The Appellate Body considered that the Panel’s finding that a
particular EC measure violates Article I:1 “lacks an essential step in
the sequence of its legal analysis” because China had not claimed that
the measure at issue violated Article VI and the parties did not present
arguments regarding the relationship between the Anti-Dumping Agreement
and GATT Articles VI and I. The Appellate Body then ruled that the Panel
findings that the EC measure violated Article I:1 were “moot and of no
effect”.(152)
(c) Article
XI
113.
In US — Shrimp, with respect to the relationship between
Articles I and XI, the Panel stated:
“Given our conclusion in paragraph 7.17 above
that Section 609 violates Article
XI:1, we consider that it is not
necessary for us to review the other claims of the complainants with
respect to Articles I:1 and XIII:1. This is consistent with GATT(153)
and WTO(154) panel practice and has been confirmed by the
Appellate Body in its report in the Wool Shirts case, where the
Appellate Body mentioned that ‘A panel need only address those claims
which must be addressed in order to resolve the matter in issue in the
dispute’.(155)
Therefore we do not find it necessary to review
the allegations of the complainants with respect to Articles I:1 and
XIII:1. On the basis of our finding of violation of
Article XI:1, we
move to address the defence of the United States under Article XX.”(156)
(d) Article
XIII
114.
In EC — Bananas III, the European Communities argued that a
violation of Article XIII in respect of its tariff regime for bananas
was covered by the Lomé waiver, whereby the provisions of Article I:1
of the GATT 1994 were waived in respect of the allocation of
country-specific tariff quotas for bananas to certain countries. The
Panel agreed with this argument, however on appeal, the Appellate Body
reversed this conclusion, finding that the Lomé waiver waives only the
provisions of Article I:1.(157)
(e) Article
XXIV
115.
In Canada — Autos, the Panel found that a Canadian duty
exemption was inconsistent with Article I:1 and Canada raised
Article
XXIV as a defence. The Panel rejected this defence, because, on the one
hand, Canada was not granting the import duty exemption to all NAFTA
manufacturers and because, on the other hand, manufacturers from
countries other than the United States and Mexico were being
provided duty-free treatment.(158) Canada did not appeal this
finding of the Panel. In this regard, the Appellate Body noted:
“The drafters also wrote various exceptions to
the MFN principle into the GATT 1947 which remain in the GATT 1994.(159)
Canada invoked one such exception before the Panel, relating to customs
unions and free trade areas under Article
XXIV. This justification was
rejected by the Panel, and the Panel’s findings on Article XXIV were
not appealed by Canada. Canada has invoked no other provision of the
GATT 1994, or of any other covered agreement, that would justify the
inconsistency of the import duty exemption with Article I:1 of the GATT
1994.”(160)
(f) Article
XXVIII
116.
In EC — Poultry, the Appellate Body addressed a complaint
against the allocation of tariff quotas for certain poultry products by
the European Communities, and rejected Brazil’s appeal that Articles I
and XIII of the GATT 1994 were not applicable to the allocation of
tariff quotas resulting from negotiations under Article XXVIII of the
GATT 1994. The Appellate Body first confirmed its finding in EC — Bananas III
according to which Members may, in their concessions and
commitments set out in their schedules annexed to the GATT 1994, yield
rights but may not diminish their obligations.(161) The Appellate
Body then held that: “[t] herefore, the concessions contained in
Schedule LXXX pertaining to the tariff-rate quota for frozen poultry
meat must be consistent with Article I and XIII of the GATT 1994.”(162)
5. Relationship
with other WTO Agreements
(a) SCM
Agreement
117.
In Indonesia — Autos, the Panel rejected Indonesia’s argument
that the SCM Agreement was exclusively applicable to measures involving
subsidies and referred to its finding on the relationship between the
SCM Agreement and Article III of the GATT
1994.(163) With respect
to the exemption of customs duties and domestic taxes, the Panel
indicated:
“The customs duty benefits of the various
Indonesian car programmes are explicitly covered by the wording of
Article I. As to the tax benefits of these programmes, we note that
Article I:1 refers explicitly to ‘all matters referred to in paragraphs 2 and
4 of Article III’. We have already decided that the
tax discrimination aspects of the National Car programme were matters
covered by Article III:2 of GATT. Therefore, the customs duty and tax
advantages of the February and June 1996 car programmes are of the type
covered by Article I of GATT.”(164)
Footnotes:
1. By Procès-Verbal
of rectification the correct date of document MTN/FA/Corr.6 was noted as
18 March 1994. back to text
2. Panel Report, Japan — Film, para.
10.64. back to text
3. Appellate Body Report, US — FSC,
para. 107. back to text
4. BISD 3S/32. back to text
5. WT/L/3 and
WT/L/Corr.1. back to text
6. See under Article XXV below. back to text
7. Appellate Body Report, Japan — Alcoholic Beverages II, p. 13. back to text
8. (footnote original) It is worth
noting that the Statute of the International Court of Justice has an
explicit provision, Article 59, to the same effect. This has not
inhibited the development by that Court (and its predecessor) of a body
of case law in which considerable reliance on the value of previous
decisions is readily discernible. back to text
9. Appellate Body Report, Japan — Alcoholic Beverages II, p. 14. In
India
— Patents (US), the
Appellate Body acknowledged the first of the paragraphs cited above. Appellate Body Report, India — Patents (US), para. 50. Also, in
US — FSC, the Appellate Body endorsed the second paragraph.
Appellate Body Report, US — FSC, para. 108. back to text
10. (footnote original) Adopted 25
January 1990, BISD 37S/86; and
DS28/R, 31 March 1992. back to text
11. (footnote original) Those legal
instruments are described in paragraph 1(b) of that incorporating
language as including certain protocols and certifications relating to
tariff concessions, certain protocols of accession, certain decisions on
waivers granted under Article XXV of the GATT
1947, and “other
decisions of the CONTRACTING PARTIES to GATT 1947”. back to text
12. Appellate Body Report, EC — Poultry,
para 79. back to text
13. Appellate Body Report, US — FSC,
para. 111. back to text
14. Appellate Body Report, US — FSC,
para. 107. back to text
15. Appellate Body Report, EC — Tariff
Preferences, para 90. back to text
16. WT/GC/W/228. back to text
17. WT/GC/M/48,
50,
53, 55, 57, 61 (1999–2000);
WT/L/44, WT/GC/M/72, 74, 75, 77 (2002); WT/GC/M/92, 100 (2005);
WT/GC/M/107, 112 (2007); WT/GC/M/124 (2009). back to text
18. Appellate Body Report, EC — Tariff
Preferences, para.107. back to text
19. Appellate Body Report, EC — Bananas
III (Article 21.5 — Ecuador II)/EC — Bananas III (Article 21.5/US),
para. 433, quoting Panel Report, EC — Bananas III (Article 21.5 —
Ecuador II), para. 7.434. back to text
20. Appellate Body Report, Korea — Various Measures on Beef, para. 163; see also
Appellate Body Report,
China — Publications and Audiovisual Products, para. 304,
citing and analogizing to this example. back to text
21. Appellate Body Report, Canada — Autos,
para. 84. back to text
22. (footnote original) We note,
though, that the measures examined in those reports differed from the
measure in this case. Two of those reports dealt with “like” product
issues: Panel Report, Spain — Unroasted Coffee; Panel Report, Japan
— SPF Dimension Lumber. In this case, as we have noted, there is
no dispute that the motor vehicles subject to the import duty exemption
are “like” products. Furthermore, two other reports dealt with
measures which, on their face, discriminated on a strict “origin”
basis, so that, at any given time, either every product, or no
product, of a particular origin was accorded an advantage. See Panel
Report, Belgium — Family Allowances; Panel Report, EEC — Imports of Beef. In this case, motor vehicles imported into Canada
are not disadvantaged in that same sense. back to text
23. Appellate Body Report, Canada — Autos,
para. 78. back to text
24. Panel Report, Indonesia — Autos,
para. 14.138. In EC — Bananas III, the Appellate Body stated as
follows: “ … Also, a broad definition has been given to the term “advantage”
in Article I:1 of the GATT 1994 by the panel in United States — Non-Rubber Footwear. It may well be that there are considerations of
EC competition policy at the basis of the activity function rules. This,
however, does not legitimize the activity function rules to the extent
that these rules discriminate among like products originating from
different Members.” See Appellate Body Report, EC — Bananas III,
para. 206. back to text
25. Panel Report, EC — Bananas III,
para. 7.107. back to text
26. Panel Report, EC — Bananas III,
para. 7.189. back to text
27. Panel Report, Colombia — Ports of
Entry, para. 7.342. back to text
28. Panel Report, US — Poultry (China),
paras. 2.2–2.3. back to text
29. Panel Report, US — Poultry (China),
para. 7.410. back to text
30. Panel Report, EC — Trademarks and
Geographical Indications (US), para. 7.713. back to text
31. Panel Report, EC — Commercial Vessels,
paras. 7.79–7.81. back to text
32. Panel Report, EC — Commercial Vessels,
paras 7.81–7.83. back to text
33. Panel Report, EC — Bananas III,
para. 7.239. back to text
34. Appellate Body Report, Canada — Autos,
para. 79. back to text
35. Appellate Body Report, EC — Bananas III,
para. 206. back to text
36. Panel Report, Colombia — Ports of
Entry, para. 7.352. back to text
37. Panel Report, US — Poultry (China),
para. 7.416–7.417. back to text
38. Panel Report, Indonesia — Autos,
para. 14.141. back to text
39. Panel Report, Colombia — Ports of
Entry, para. 7.355. back to text
40. Panel Report, Colombia — Ports of
Entry, para. 7.356. back to text
41. Panel Report, US — Poultry (China),
paras. 7.424–7.427, 7.429. back to text
42. Panel Report, US — Poultry (China),
paras. 7.430–7.432. back to text
43. Appellate Body Report, EC — Bananas III,
para. 189. back to text
44. Appellate Body Report, EC — Bananas III,
para. 190. back to text
45. (footnote original) For instance in
the FIRA case, the Panel rejected Canada’s argument that the
situation under examination was the consequence of a private contract
with an investor: “5.6 The Panel carefully examined the Canadian view
that the purchase undertakings should be considered as private
contractual obligations of particular foreign investors vis-à-vis the
Canadian government. The Panel recognized that investors might have an
economic advantage in assuming purchase undertakings, taking into
account the other conditions under which the investment was permitted.
The Panel felt, however, that even if this were so, private contractual
obligations entered into by investors should not adversely affect the
rights which contracting parties, including contracting parties not
involved in the dispute, possess under Article III:4 of the General
Agreement and which they can exercise on behalf of their exporters.”
See Panel Report, Canada — FIRA, para. 5.6. back to text
46. (footnote original) See Working
Party Report, the Accession of Hungary, BISD 20S/34. back to text
47. Panel Report, Indonesia — Autos,
paras. 14.145–14.147. Preceding the cited paragraphs, the Panel refers
to the GATT Panel Report, Belgium — Family Allowances. back to text
48. Appellate Body Report, Canada — Autos,
para. 81. back to text
49. (footnote original) These relate to
such matters as internal mixing requirements (Article
III:7); cinema
films (Article IV(b)); transit of goods
(Article V:2, 5,
6); marks of
origin (Article IX:1); quantitative restrictions
(Article XIII:1);
measures to assist economic development (Article
XVIII:20); and measures
for goods in short supply (Article XX(j)). back to text
50. Appellate Body Report, Canada — Autos,
para. 82. back to text
51. Panel Report, Canada — Autos,
paras 10.22–10.25 (not reviewed by the Appellate Body). back to text
52. Panel Report, Canada — Autos,
paras. 10.55–10.56; see also para.
1030. back to text
53. (footnote original) Such as in
Articles XX (general exceptions), XXI (security exceptions) and
XXIV
(customs unions and free trade areas). back to text
54. Appellate Body Report, Canada — Autos,
paras. 83–84. back to text
55. (footnote original) Panel Report, Indonesia — Autos,
para. 14.147. back to text
56. Panel Report, US — Certain EC
Products, para. 6.54. back to text
57. (footnote original) The New
Shorter Oxford English Dictionary, 4th Edition, p. 3465. back to text
58. Panel Report, EC — Tariff Preferences,
paras. 7.59–7.60. back to text
59. Panel Report, Colombia — Ports of
Entry¸ paras. 7.632–7.365. back to text
60. Panel Report, US — Poultry (China),
paras. 7.439–7.440. back to text
61. MTN.TNC/LD/W/1. See also US reports on the
waiver in respect of the Former Trust Territory of the Pacific Islands
(e.g. WT/L/816), referring to the US Virgin Islands, Guam and American
Samoa as territories subject to Article I:2 and Annex D to the GATT. back to text
62. WT/L/188, WT/L/189;
WT/GC/M/13. back to text
63. BISD 26S/203. back to text
64. (footnote original) The words “developing
countries” as used in this text are to be understood to refer also to
developing territories. back to text
65. (footnote original) It would remain
open for the CONTRACTING PARTIES to consider on an ad hoc basis
under the GATT provisions for joint action any proposals for
differential and more favourable treatment not falling within the scope
of this paragraph. back to text
66. (footnote original) As described in
the Decision of the CONTRACTING PARTIES of 25 June 1971, relating to the
establishment of “generalized, non-reciprocal and nondiscriminatory
preferences beneficial to the developing countries” (BISD 18S/24). back to text
67. (footnote original) Nothing in
these provisions shall affect the rights of contracting parties under
the General Agreement. back to text
68. WT/L/806. back to text
69. WT/L/806. The decision provides templates
for abstracts and for notifications. back to text
70. WT/COMTD/N/18. back to text
71. WT/COMTD/N/15 and
addenda. back to text
72. WT/COMTD/N/4 and addenda. back to text
73. WT/COMTD/N/17 and Corr.1. back to text
74. WT/COMTD/N/2 and addenda. back to text
75. WT/COMTD/N/5 and addenda. back to text
76. WT/COMTD/N/6 and addenda. back to text
77. WT/COMTD/N/7 and addenda. back to text
78. WT/COMTD/N/1 and addenda. back to text
79. Regarding regional trade agreements
notified under the Enabling Clause within the GATT framework, Article I
. Also, regarding the role
of the GATT Committee on Trade and Development in the operation of the
Enabling Clause. back to text
80. The Memorandum was circulated in WT/COMTD/4.
Parties to MERCOSUR are: Argentina, Brazil, Paraguay and Uruguay. back to text
81. See WT/COMTD/3. ASEAN is the abbreviation
of the Association of South-East Asian Nations, whose members are Brunei
Darussalam, Cambodia, Indonesia, Lao People’s Democratic Republic,
Malaysia, Myanmar, Philippines, Singapore, Thailand and Viet Nam. back to text
82. See WT/COMTD/7, WT/COMTD/11, WT/COMTD/59
and WT/COMTD/72. back to text
83. MERCOSUR was notified to the GATT 1947
under the Enabling Clause (GATT 1947 document L/6985 and L/4044). See
also documents in the WT/COMTD/1 series and GATT documents L/7370/Add.1
and L/7540. back to text
84. WT/COMTD/M/3, section A; WT/COMTD/5.
Regarding the discussions leading to these terms of reference, Article I. back to text
85. The tasks of this working party, as well
as all other working parties established by the Council for Trade in
Goods for the examination of regional trade agreements notified under
Article XXIV of GATT 1947 or 1994, were taken over by the Committee on
RTAs after its establishment on 6 February 1996. See WT/L/127, fn. 2. In
this regard, see also Section XXVI of this Chapter on Article XXIV
below. back to text
86. WT/COMTD/M/22, section H. The text of the
adopted procedures can be found in WT/COMTD/16. These procedures were
adopted following recommendations made by the Committee on Regional
Trade Agreements (Committee on RTAs) at its meeting on 20 February 1998.
See the material on the Committee on Trade and Development in the
Chapter on the WTO Agreement under Article
IV. back to text
87. Notification format: WT/COMTD/63. This
format had been previously adopted on 13 October 2006 by the Committee
on RTAs; following its adoption, the Committee on RTAs agreed to
recommend it to the relevant bodies. See also WT/REG/M/44, paras. 17–19
and WT/COMTD/M/62, paras. 49–55. back to text
88. WT/L/671. See also
Section XXVI of this
Chapter on Article XXIV below. back to text
89. WT/COMTD/M/67, paras. 47–49. back to text
90. See WT/COMTD/66 and Add.1–3;
WT/COMTD/W/175;
WT/COMTD/M/79, 80, 81 and 82. back to text
91. WT/COMTD/M/73, paras 66–72. back to text
92. WT/COMTD/RTA/M/1–4. back to text
93. Website: http://rtais.wto.org/ui/PublicMaintainRTAHome.aspx
back to text
94. WT/COMTD/N18. back to text
95. WT/COMTD/N/15. back to text
96. WT/COMTD/N/4/Add.2. back to text
97. WT/COMTD/N/17 and Corr. back to text
98. WT/COMTD/N/2/Add.10. See also
WT/COMTD/29
and WT/LDC/SWG/IF/12. back to text
99. WT/COMTD/N/12. back to text
100. WT/COMTD/N/6. back to text
101. WT/COMTD/N/5/Add.2. See also
WT/GC/36 and
WT/COMTD/27. back to text
102. WT/COMTD/N/7. back to text
103. WT/COMTD/N/1/Add.2. back to text
104. (footnote original) GATT 1994,
Art. I:1. back to text
105. (footnote original) In this
regard, we recall the Appellate Body’s statement in EC — Hormones
that:
… merely characterizing a treaty provision as
an “exception” does not by itself justify a “stricter” or “narrower”
interpretation of that provision than would be warranted by examination
of the ordinary meaning of the actual treaty words, viewed in context
and in the light of the treaty’s object and purpose, or, in other
words, by applying the normal rules of treaty interpretation.
(Appellate Body Report, para. 104) back to text
106. Appellate Body Report, EC — Tariff
Preferences, paras. 90 and 98. back to text
107. Appellate Body Report, EC — Tariff
Preferences, paras. 101–102. back to text
108. (footnote original) Appellate Body
Report, p. 14, DSR 1997:I, at 335. (See also, Appellate Body Report on US
— FSC (Article 21.5 — EC), para. 133; and Appellate Body Report
on India — Quantitative Restrictions, para. 136) back to text
109. Appellate Body Report, EC — Tariff
Preferences, paras. 104–105. back to text
110. Appellate Body Report, EC — Tariff
Preferences, paras. 110 and 115. back to text
111. (footnote original) Shorter
Oxford English Dictionary, 5th ed., W. R. Trumble, A. Stevenson
(eds.) (Oxford University Press, 2002), Vol. 1, p. 1082. back to text
112. (footnote original) Panel Report,
paras. 7.135–7.137. The Panel also observed that statements by
developed and developing countries indicated the aim of providing GSP
schemes with a broad scope, encompassing the granting of preferences by all
developed countries to all developing countries. (Ibid.,
paras. 7.131–7.132) back to text
113. Appellate Body Report, EC — Tariff
Preferences, para. 155. back to text
114.Panel Report, EC — Tariff Preferences, paras. 7.126–7.161. back to text
115. Appellate Body Report, EC — Tariff
Preferences, paras. 152–154. back to text
116. Appellate Body Report, EC — Tariff
Preferences, para. 169. back to text
117. Appellate Body Report, EC — Tariff
Preferences, para. 173. back to text
118. Appellate Body Report, EC — Tariff
Preferences, paras. 187–188. back to text
119. Appellate Body Report, EC — Tariff
Preferences, para. 179. Actually, in this case, India had not
challenged the inconsistency of the Drug Arrangements with either paragraph 3(c)
or paragraph 3(a) during the proceedings. See Appellate Body Report, EC — Tariff
Preferences, para. 178. back to text
120. Appellate Body Report, EC — Tariff
Preferences, para. 175. back to text
121. (footnote original) Enabling
Clause, para. 6 (attached as Annex 2 to this Report). Similarly,
paragraph 8 of the Enabling Clause refers to the “special economic
situation and [the] development, financial and trade needs” of
least-developed countries. back to text
122. Appellate Body Report, EC — Tariff
Preferences, para. 172. back to text
123. (footnote original) Panel Report,
para. 7.102. back to text
124. (footnote original) The European
Communities argues in this respect that the GATT Contracting Parties and
the WTO Members have granted a number of waivers, as mentioned in the
Panel Report, for tariff preferences that are “confined ab initio and
permanently to a limited number of developing countries located in a
certain geographical region”. (European Communities’ appellant’s
submission, paras. 184–185 (referring to Panel Report, para. 7.160))
See also, Panel Report, footnote 31 to para. 4.32 (referring to Waiver
Decision on the Caribbean Basin Economic Recovery Act, GATT Document
L/5779, 15 February 1985, BISD 31S/20, renewed 15 November 1995, WT/L/104; Waiver Decision on CARIBCAN, GATT Document L/6102, 28 November
1986, BISD 33S/97, renewed 14 October 1996, WT/L/185; Waiver Decision on
the United States — Andean Trade Preference Act, GATT Document L/6991,
19 March 1992, BISD 39S/385, renewed 14 October 1996, WT/L/184; Waiver
Decision on The Fourth ACP–EEC Convention of Lomé, GATT Document
L/7604, 9 December 1994, BISD 41S/26, renewed 14 October 1996, WT/L/186; and Waiver Decision on European Communities
— The ACP–EC
Partnership Agreement, WT/MIN(01)/15, 14 November 2001. back to text
125. (footnote original) Infra,
paras. 157–168. back to text
126. Appellate Body Report, EC — Tariff
Preferences, para. 156. back to text
127. (footnote original) We note in
this respect that the language contained in paragraph 3(a) of the
Enabling Clause is reflected in waivers referred to in supra,
footnote 323. back to text
128. (footnote original) Supra,
paras. 153–154. back to text
129. (footnote original) Supra,
paras. 162–165. back to text
130. Appellate Body Report, EC — Tariff
Preferences, para. 167. back to text
131. Appellate Body Report, EC — Tariff
Preferences, paras. 161–162. back to text
132. Appellate Body Report, EC — Tariff
Preferences, paras. 158, 163 and 164. back to text
133. Appellate Body Report, Brazil — Coconut, paras. 280–281. back to text
134. Appellate Body Report, EC — Fasteners, para. 398. back to text
135. Appellate Body Report, EC — Fasteners, paras. 388, 395. back to text
136. Panel Report, Canada — Autos,
paras. 10.55–10.56; see para. 1032 of this
Chapter. back to text
137. WT/L/304. back to text
138. WT/L/304. back to text
139. WT/L/759. back to text
140. G/C/M/47, section IV. back to text
141. G/C/6 and WT/LDC/SWG/IF/18 (Morocco); WT/COMTD/N/12
and Rev.1 (Korea);
WT/COMTD/N/38 (India);
WT/COMTD/N/39 and Add.1
(China). back to text
142. WT/COMTD/W/39. back to text
143. WT/COMTD/W/47. back to text
144. WT/COMTD/W/53. back to text
145. Decision 36 on Measures in Favour of
Least-Developed Countries, in Annex F of the Hong Kong Ministerial
Declaration (WT/MIN(05)/DEC). back to text
146. The discussion that took place under this
agenda item in 2006 can be found in the minutes of the meetings, WT/COMTD/M/57–
WT/COMTD/M/59. back to text
147. Report, review transmitted as part of CTD
annual report to the General Council: WT/COMTD/58. See also WT/COMTD/M/61.
back to text
148. Panel Report, US — Gasoline,
para. 6.19. back to text
149. Panel Report, Brazil — Desiccated
Coconut, para. 281. back to text
150. Appellate Body Report, Brazil — Desiccated Coconut, p. 21. back to text
151. Appellate Body Report, EC — Fasteners, para. 392. back to text
152. Appellate Body Report, EC — Fasteners, paras. 395–398. back to text
153. (footnote original) See, e.g.,
Panel Report, Canada — FIRA, para. 5.16. back to text
154. (footnote original) See, e.g., Panel Report, Brazil — Desiccated
Coconut, para. 293. back to text
155. (footnote original) Appellate Body
Report, US — Wool Shirts and Blouses, p. 19. back to text
156. Panel Report, US — Shrimp, paras.
7.22–7.23. back to text
157. Appellate Body Report, EC — Bananas III,
paras. 183–187. back to text
158. Panel Report, Canada — Autos,
paras. 10.55–10.56, which is referenced in para. 1032 of this
Chapter.
back to text
159. (footnote original) Such as in
Articles XX (general exceptions), XXI (security exceptions) and
XXIV
(customs unions and free trade areas). back to text
160. Appellate Body Report, Canada — Autos,
para. 83. back to text
161. Appellate Body Report, EC — Poultry,
para. 98, citing Appellate Body Report, EC — Bananas III,
para.
154, which is referenced in para. 139 of this
Chapter. back to text
162. Appellate Body Report, EC — Poultry,
para. 99. back to text
163. See para. 419 of this
Chapter. back to text
164. Panel Report, Indonesia — Autos,
para. 14.139. back to text
* For the convenience of the reader,
asterisks mark the portions of the text which should be read in
conjunction with notes and supplementary provisions.
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