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> Paragraph 1. See also
Burden of Proof, Defences and exceptions (B.3.3); Request for the Establishment of a Panel, Article 6.2 of the DSU — Claims and legal basis of the complaint (R.2.2)
> Paragraph 2(a)
> Paragraph 2(d)
> Paragraph 3(a)
> Paragraph 3(c)
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E.1.1 Paragraph 1. See also Burden of Proof, Defences and
exceptions (B.3.3); Request for the Establishment of a Panel, Article
6.2 of the DSU — Claims and legal basis of the complaint (R.2.2)
back to top
E.1.1.1 EC — Tariff Preferences, para. 90
(WT/DS246/AB/R)
… 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”. 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.
E.1.1.2 EC — Tariff Preferences,
paras. 101-102
(WT/DS246/AB/R)
… 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. …
E.1.1.3 EC — Tariff Preferences, para. 109
(WT/DS246/AB/R)
We thus understand that, between the entry into force of the GATT and
the adoption of the Enabling Clause, the Contracting Parties determined
that the MFN obligation failed to secure adequate market access for
developing countries so as to stimulate their economic development.
Overcoming this required recognition by the multilateral trading system
that certain obligations, applied to all Contracting Parties, could
impede rather than facilitate the objective of ensuring that developing
countries secure a share in the growth of world trade. This recognition
came through an authorization for GSP schemes in the 1971 Waiver
Decision and then in the broader authorization for preferential
treatment for developing countries in the Enabling Clause.
E.1.1.4 EC — Tariff Preferences, para. 110
(WT/DS246/AB/R)
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.
E.1.2 Paragraph 2(a)
back to top
E.1.2.1 EC — Tariff Preferences, para. 145
(WT/DS246/AB/R)
Paragraph 2(a) of the Enabling Clause provides …
that, to be
justified under that provision, preferential tariff treatment must be
“in accordance” with the GSP “as described” in the Preamble to the 1971 Waiver
Decision. “Accordance” being defined in the dictionary as “conformity”,
only preferential tariff treatment that is in conformity with the
description “generalized, non-reciprocal and nondiscriminatory”
treatment can be justified under paragraph 2(a).
E.1.2.2 EC — Tariff Preferences,
paras. 152-153
(WT/DS246/AB/R)
… the 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 “non-discriminatory”, 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. …
E.1.2.3 EC — Tariff Preferences, para. 154
(WT/DS246/AB/R)
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.
E.1.2.4 EC — Tariff Preferences, para. 155
(WT/DS246/AB/R)
… footnote 3 to paragraph 2(a) stipulates that, in addition to
being “nondiscriminatory”, 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”. 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. 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.
E.1.2.5 EC — Tariff Preferences, para. 169
(WT/DS246/AB/R)
… 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
sub-categories of developing countries based on their particular needs.
An interpretation of “nondiscriminatory” 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.
E.1.2.6 EC — Tariff Preferences, para. 173
(WT/DS246/AB/R)
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.
E.1.2.7 EC — Tariff Preferences, paras. 187-188
(WT/DS246/AB/R)
We recall our conclusion that the term “non-discriminatory” 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.
E.1.3 Paragraph 2(d) back to top
E.1.3.1 EC — Tariff Preferences, para. 172
(WT/DS246/AB/R)
… 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 “nondiscriminatory”.
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.
E.1.4 Paragraph 3(a) back to top
E.1.4.1 EC — Tariff Preferences, para. 167
(WT/DS246/AB/R)
… 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. …
E.1.5 Paragraph 3(c) back to top
E.1.5.1 EC — Tariff Preferences, para. 161
(WT/DS246/AB/R)
… the 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.
E.1.5.2 EC — Tariff Preferences,
paras. 162-164
(WT/DS246/AB/R)
… 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.
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).
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