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I. General Agreement on Tariffs and Trade 1994 back to top
A. Text of the General Agreement on Tariffs and Trade 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
1994. 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 General Agreement on Tariffs
and Trade 1994
1. Paragraph 1
(a) Paragraph 1(b)
i) Item (iv) — “other
decisions of the
CONTRACTING PARTIES to GATT 1947”
1. In Japan — Alcoholic Beverages
II, the
Appellate Body referred to paragraph 1(b)(iv) in examining the legal
effect of the panel reports adopted by the CONTRACTING PARTIES to GATT
1947. The Appellate Body stated:
“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. This affirms the importance to the Members of the WTO of the
experience acquired by the CONTRACTING PARTIES to the GATT 1947 — and
acknowledges the continuing relevance of that experience to the new
trading system served by the WTO. 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.(2) 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.”(3)
2. 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). In the words of the Appellate Body:
“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.(4) As such, the Oilseeds Agreement is not a
‘covered agreement’ within the meaning of Articles 1 and
2 of the
DSU. Nor is the Oilseeds Agreement part of the multilateral obligations
accepted by Brazil and the European Communities pursuant to the WTO
Agreement, which came into effect on 1 January 1995. The Oilseeds
Agreement is not cited in any Annex to the WTO Agreement. 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(5), the
Oilseeds Agreement is not one of those legal instruments.”(6)
3. In Argentina — Footwear
(EC), the
Appellate Body explained with precision that the GATT 1947 is an
integral part of GATT 1994. The Appellate Body held:
“We note that the GATT 1994 is the first
agreement that appears in Annex 1A to the WTO Agreement, and that it
consists of: the provisions of the GATT 1947, as rectified, amended or
modified by the terms of legal instruments that entered into force
before the entry into force of the WTO Agreement; the provisions of
certain legal instruments, such as protocols and certifications,
decisions on waivers and other decisions of the CONTRACTING PARTIES to
the GATT 1947, that entered into force under the GATT 1947 before the
entry into force of the WTO Agreement; certain Uruguay Round
Understandings relating to specific GATT articles; and the Marrakesh
Protocol to the GATT 1994 containing Members’ Schedules of
Concessions.”(7)
4. In Korea —
Dairy, the same conclusion was
reiterated with regard to the incorporation of GATT 1947 in the GATT
1994. The Appellate Body stated:
“The GATT 1994 consists of: (a) the
provisions of the GATT 1947, as rectified, amended or modified before
the entry into force of the WTO Agreement; (b) provisions of certain
other legal instruments which entered into force under the GATT 1947 and
before the date of entry into force of the WTO Agreement; (c) a
number of Uruguay Round Understandings on the interpretation of certain
GATT articles; and (d) the Marrakesh Protocol to GATT 1994.”(8)
5. In US — FSC, the Appellate Body, in
examining whether a certain decision of the GATT 1947 Council to adopt
panel reports constituted “other decision” within the meaning of paragraph 1(b)(iv), agreed on the Panel’s decision to examine not only
the text of the decision but also “the circumstances surrounding the
[decision].”(9)
6. 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.”(10)
|
Agreement |
Date of entry into force |
Date of notification |
WTO document series |
|
Treaty Establishing the Common Market
for Eastern and Southern Africa (COMESA) |
8-Dec-94 |
29-Jun-95 |
WT/COMTD/N/3 |
|
Trade Agreement among the Melanesian
Spearhead Group (MSG) countries |
22-Jul-93 |
7-Oct-99 |
WT/COMTD/N/9 WT/COMTD/21 |
|
Treaty of West African Economic and
Monetary Union (WAEMU) |
1-Jan-00 |
3-Feb-00 |
WT/COMTD/N/11 WT/COMTD/23 |
|
Treaty Establishing the Economic and
Monetary Community of Central Africa (CEMAC) |
24-Jun-99 |
29-Sep-00 |
WT/COMTD/N/13 WT/COMTD/24 |
|
Treaty for the Establishment of the East
African Community (EAC) |
7-Jul-00 |
11-Oct-00 |
WT/COMTD/N/14 WT/COMTD/25 |
|
Free Trade Agreement between the
Republic of India and the Democratic Socialist Republic of Sri
Lanka |
15-Dec-01 |
27-Jun-02 |
WT/COMTD/N/16 |
|
Framework Agreement on comprehensive
economic co-operation |
1-Jul-03 |
21-12-04 |
WT/COMTD/N/20 |
(b) Relationship with
Article XVI:1 of the WTO
Agreement
7. With respect to the relationship between
Article XVI:1 of the WTO Agreement and
paragraph 1(b), see Chapter on
the WTO Agreement, Section XVII.
B.1(g)(i).
PART I
II. Article I
back to top
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 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
8. In Canada —
Autos, in support of its
interpretation of Article I:1, the Appellate Body explained the object
and purpose of Article I:1 as follows:
“Th[e] object and purpose [of Article
I] 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.”(11)
9. 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 in past
practice, GATT Article I applied to de facto discrimination. See Chapter
on the GATS, Section
III.B.3(a).
(ii) Scope of application
10. 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:
“In approaching this question, we observe
first that the 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. Neither the words
‘de jure’ nor ‘de facto’ appear in Article I:1. Nevertheless, we
observe that 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.(12) Like the
Panel, we cannot accept Canada’s argument that Article
I:1 does not
apply to measures which, on their face, are ‘originneutral’.”(13)
(iii) Order of examination
11. 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.”(14)
(b) “any advantage, favour, privilege or
immunity granted by any Member”
(i) General
12. In
Canada — Autos, the Appellate Body
came to the conclusion 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 touched on the term “any advantage …
granted by any Member to any product”:
“We note next that 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.”(15)
(ii) Allocation of tariff quotas
13. In
EC — Bananas III, the European
Communities appealed the Panel’s finding on the ground that the Panel
erred in concluding that the European Communities violated Article
I:1 by maintaining the so called activity function rules. Under these rules,
importers of bananas from certain countries qualified for allocation of
the tariff quota only if they fulfilled requirements which differed from
those imposed on importers of bananas from other countries. The
Appellate Body stated:
“On the first issue, the 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.”(16)
(iii) Reference to GATT practice
14. With respect to the practice under GATT
1947 concerning the term “any advantage, favour, privilege or immunity
granted by any contracting party”, see GATT Analytical Index, page 31.
(c) “like products”
15. 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.”(17)
16. For the treatment of this subject-matter
under GATT 1947, see GATT Analytical Index, pages 35-40.
(d) “any product originating in or destined
for an other country”
17. 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 nondiscrimination
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.”(18) 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 non-discrimination 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.”(19)
(e) “shall be accorded immediately and
unconditionally”
(i) General
18. In
Indonesia — Autos, the Panel found
that the exemption of import duties and sales taxes to those 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.(20) 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’.(21)
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.”(22)
19. In
Canada — Autos, the Canadian measure
at issue was an exemption of import duties granted on certain motor
vehicles. The exemption was granted only where an exporter of motor
vehicles was affiliated with a manufacturer/importer in Canada that had
been designated, contingent on compliance with other requirements which
were also claimed to be inconsistent with WTO law, 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 had found
the Canadian measure to be inconsistent with 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 10 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.(23)
20. The Appellate Body on
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.(24)
The very existence of these other clauses demonstrates the pervasive
character of the MFN principle of non-discrimination.”(25).
21. In the
Canada — Autos dispute, the Panel
further clarified the meaning of the term “unconditionally”. With
respect to this term, Japan argued that, by making the import duty
exemption conditional upon criteria 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. By
“criteria unrelated to the imported products themselves,” Japan was
referring to the various conditions which confined the eligibility for
the exemption to certain motor vehicle manufacturers in Canada. The
Panel, in a finding subsequently not reviewed by the Appellate Body,
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.”(26)
22. The Panel on
Canada — Autos rejected
Canada’s defence that the Canadian import duty exemption, as described
in paragraph 19 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.(27) 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.(28)
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.”(29)
23. 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 on
Indonesia — Autos referenced in paragraph 18 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 requirements. 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.(30)”(31)
24. 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’.(32)
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.”(33)
(ii) Reference to GATT practice
25. With respect to the practice concerning
the term “shall be accorded immediately and unconditionally” under
GATT 1947, see GATT Analytical Index, pages 33-35.
D. Exceptions to the
MFN Principle
1. Anti-dumping and countervailing duties
(a) Article VI of GATT 1994
(i) Reference to GATT practice
26. With respect to GATT practice concerning
antidumping and countervailing duties, see GATT Analytical Index, page
47.
2. Frontier traffic and customs unions
(a)
Article XXIV of GATT 1994
27. 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.(34) Since Canada did
not appeal this finding of the Panel, the Appellate Body did not address
the issue.
(b) Reference to GATT practice
28. With respect to GATT practice concerning
frontier traffic and customs unions, see GATT Analytical Index, page 47.
3. Enabling Clause
(a) Text and adoption of the Enabling Clause
29. 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”).(35) 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(36), without
according such treatment to other contracting parties.
2. The provisions of
paragraph 1 apply to the
following:(37)
(a)
Preferential
tariff treatment accorded by
developed contracting parties to products originating in developing
countries in accordance with the Generalized System of Preferences,(38)
(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:(39)
(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.”
(b) Generalized System of Preferences
30. Pursuant to the Enabling Clause,
notifications on the Generalized System of Preferences (GSP) schemes of
developed country Members in favour of least-developed countries are to
be sent to the Committee on Trade and Development. In contrast, under
the Waiver on Preferential Tariff Treatment for Least-Developed
Countries, which is referred to in paragraph 59 below, notifications on
steps taken by developing country Members in favour of least-developed
countries are to be sent to the Council on Trade in Goods. In order to
allow for a unified consideration of both types of measures in one
forum, at its meeting of 16 February 2001, the Committee on Trade and
Development agreed ad referendum that any market access measures taken
specifically in favour of the least-developed countries under the
Enabling Clause and notified to the Committee be transmitted to the
Sub-Committee on Least-developed Countries, for substantive
consideration, and that the Sub-Committee report back to the Committee
on its discussions.(40) A similar procedure was agreed to in the Council
for Trade in Goods with respect to the treatment of notifications under
the Waiver on Preferential Tariff Treatment for LDCs, see paragraph 59
below.
31. From the establishment of the WTO until 31
December 2004 the following Members have filed notifications with the
Committee on Trade and Development on their GSP schemes:
(a) Canada(41);
(b) European Communities(42);
(c) Japan(43);
(d) New Zealand(44);
(e) Norway(45);
(f) Switzerland(46);
(g) United States(47);
(h) Iceland(48); and
(i) Australia.(49)
32. With respect to the GSP schemes notified
to the GATT, see GATT Analytical Index, page 50.
(c) Regional trade arrangements among
developing country Members
33. To date, the Committee on Trade and
Development has received notifications or communications of seven
regional trade arrangements among developing country Members:(50)
34. The Committee on Trade and Development has
also received notifications with respect to four other regional trade
arrangements which were previously notified to the GATT Committee on
Trade and Development:
(a) Southern Common Market Agreement
(MERCOSUR)(51), and the Memorandum of Understanding on Closer Relations
between Bolivia and MERCOSUR;(52)
(b) Agreement on SAARC(53) Preferential Trading
Arrangement (SAPTA)(54);
(c) Latin American Integration Association
(LAIA) the Membership of Cuba(55); and
(d) Common Effective Preferential Tariffs
(CEPT) scheme for the ASEAN(56) Free Trade Area
(AFTA).(57)
35. On 30 April 2004, the Committee on Trade
and Development received notification of China’s accession to the
Bangkok Agreement.(58)
36. Under
paragraph 4(a) of the Enabling Clause, Members are required to notify arrangements taken under the
Enabling Clause, and the modification or withdrawal thereof, to the
Committee on Trade and Development. In this regard, in fulfilment of its
mandate under item 1(b) of its terms of reference(59), at its meeting on
20 February 1998, the Committee on Regional Trade Agreements (Committee
on RTAs) adopted recommendations to the Committee on Trade and
Development with respect to how the required reporting on the operation
of regional trade agreements, including those under the Enabling Clause,
should be carried out.(60) At its meeting of 2 November 1998, the
Committee on Trade and Development adopted the recommended procedures,
as general guidelines with respect to information on regional trade
agreements submitted to it.(61)
37. When an agreement is notified under the
Enabling Clause, it is inscribed on the agenda of the Committee on Trade
and Development. Subsequent actions of the Committee may include “noting”
the agreement, requesting additional information, trans ferring it to
the Committee on RTAs for examination, and reviewing reports made by
members on changes to their agreements.
38. At its meeting of 14 September 1995, the
Committee on Trade and Development adopted the following terms of
reference for the Working Party on MERCOSUR(62):
“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.”(63)
39. The review of MERCOSUR was later taken
over by the Committee on RTAs.(64)
(d) Special treatment of the least-developed
countries
40. As of 31 December 2004 the Committee on
Trade and Development has 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:
(a) Canada(65);
(b) European Communities(66);
(c) Japan(67);
(d) Republic of Korea(68);
(e) Norway(69);
(f) New Zealand(70);
(g) Switzerland(71);
(h) United States(72);
(i) Iceland(73); and
(j) Australia.(74)
(e) Interpretation
(i) The relationship between the Enabling
Clause and Article I:1 of the GATT 1994
The Enabling Clause as an exception to Article
I:1 of the GATT 1994
41. 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’.(75)
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’).(76) 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.”(77)
Order of analysis
42. The Appellate Body stated in
EC — Tariff
Preferences that the Enabling Clause does not exclude the applicability
of Article I:1. Rather, it is a more 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 …”.(78)
(ii) Footnote 3 to paragraph 2
“generalized”
43. 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’.(79) 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.(80) 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”.(81)
“non-discriminatory”
44. 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.(82) While rejecting the Panel’s findings, the
Appellate Body interpreted the ordinary meaning of the term “non-discriminatory”
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 ‘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. 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.”(83)
45. After taking into account the stated
objectives of the Preamble to the WTO Agreement, 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 sub-categories 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.”(84)
46. 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.”(85)
47. 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 ‘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.”(86)
48. 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 paragraph 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 paragraph 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.”(87)
(iii) Paragraph 2: “developing countries”
49. 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.”(88)
(iv) Relationship between paragraph 2(a) and
2(d)
50. 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 subcategory of developing
countries with ‘special economic difficulties and … particular
development, financial and trade needs’.(89) 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
‘non-discriminatory’ does not require the granting of ‘identical
tariff preferences ‘to all GSP beneficiaries.”(90)
(v) Paragraph 3(a)
51. The Appellate Body found in
EC — Tariff
Preferences although there was a requirement of nondiscrimination, 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 ‘non-discriminatory’ 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’.(91) To us, this conclusion is
unwarranted. We observe that the term ‘generalized’ requires that
the GSP schemes of preference-granting countries remain generally
applicable.(92) 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(93), 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.”(94)
52. 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.(95) Thus,
although paragraph 2(a) does not prohibit per se the granting of
different tariff preferences to different GSP beneficiaries(96), and
paragraph 3(c) even contemplates such differentiation under certain
circumstances(97), 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.”(98)
(vi) Paragraph 3(c) “to respond positively
to the development, financial and trade needs of developing countries”
53. 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.”(99)
54. The Appellate Body on
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).”(100)
(vii) Burden of proof under the Enabling
Clause
55. 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 party:
“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’.(101) 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.”(102)
56. 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.”(103)
(f) Reference to GATT practice
57. With respect to GATT practice concerning
the Enabling Clause, see GATT Analytical Index, Article
I.
4. Waiver on Preferential Tariff Treatment for
Least-Developed Countries
58. At its meeting of 15 June 1999, the
General Council adopted a decision concerning the Preferential Tariff
Treatment for Least-Developed Countries. This decision waives the
provisions of GATT Article I:1(104) 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.”(105)
59. Under the Decision on Waiver on
Preferential Tariff Treatment for LDCs, which is referred to in
paragraph 58 above, notifications on steps taken by developing country
Members are to be sent to the Council on Trade in Goods. In contrast,
pursuant to the Enabling Clause, which is referred to in paragraph 30
above, notifications on the GSP schemes of developed country Members in
favour of LDCs are to be sent to the Committee on Trade and Development.
In order to allow for a unified consideration of both types of measures
in one forum, at its meeting of 14 March 2001, the Council for Trade in
Goods agreed ad referendum that any market access measures taken
specifically in favour of the least-developed countries under the Waiver
on Preferential Tariff Treatment for LDCs and notified to the Council be
transmitted to the Sub-Committee on Least-developed Countries, for
substantive consideration, and that the Sub-Committee report back to the
Council on its discussions.(106) A similar procedure was agreed in the
Committee on Trade and Development with respect to the treatment of
notifications under the Enabling Clause, see paragraph 30
above.
60. To
date, only Morocco has notified its
preferential tariff treatment for the least-developed countries to the
Council for Trade in Goods.(107) In this regard, the following developing
country Members notified their own tariff reduction or duty-free
treatment for the least-developed countries to the Committee on Trade
and Development, prior to the adoption of the Waiver on Preferential
Tariff Treatment for LDCs: (i) Turkey(108); (ii)
Egypt(109); and (iii)
Mauritius.(110)
E. Relationship with other Articles
1. Article III
61. 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 percent rule under Article I:1.”(111)
(a) Reference to GATT practice
62. With respect to GATT practice regarding
the relationship between Article I and Article
III.
2. Article VI
63. The Panel on
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.(112)
The Appellate Body on Brazil — Desiccated Coconut confirmed this
finding.(113)
3. Article XI
64. 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(114) and
WTO(115) 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’.(116)
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.”(117)
4. Article XIII
65. 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.(118) See Chapter on the
WTO Agreement, Section
X.3(a)(i).
5. Article XXIV
66. In
Canada — Autos, Canada invoked an
Article XXIV exception with respect to a certain import duty exemption,
found to be inconsistent with Article I of the GATT 1994. 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.(119) 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.(120) 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.”(121)
6. Article XXVIII
67. 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 quota 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.(122) 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.”(123)
F. Relationship with other WTO Agreements
1. SCM Agreement
68. 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.(124) 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.”(125)
Footnotes:
1. By Procés-Verbal of rectification the
correct date of document MTN/FA/Corr.6 was noted as 18 March 1994. back to text
2. (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
3. Appellate Body Report on
Japan — Alcoholic
Beverages II, p. 14. In India — Patents (US), the Appellate Body
acknowledged the first of the paragraphs cited above. Appellate Body
Report on India — Patents (US), para. 50. Also, in US — FSC, the
Appellate Body endorsed the second paragraph. Appellate Body Report on
US — FSC, para. 108. back to text
4.
(footnote original) Adopted 25 January
1990, BISD 37S/86; and DS28/R, 31 March 1992. back to text
5.
(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
6. Appellate Body Report on
EC — Poultry, para
79. back to text
7. Appellate Body Report on
Argentina — Footwear (EC), para. 80. back to text
8. Appellate Body
Report on Korea — Dairy,
para 75. back to text
9. Appellate Body Report on
US — FSC, para.
111. back to text
10. Appellate Body Report on
EC — Tariff
Preferences, para 90. back to text
11. Appellate Body Report on
Canada — Autos,
para. 84. back to text
12. (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 on Spain — Unroasted Coffee; Panel Report on 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 on Belgium — Family
Allowances; Panel Report on EEC — Imports of Beef. In this case, motor
vehicles imported into Canada are not disadvantaged in that same sense. back to text
13. Appellate Body Report on
Canada — Autos,
para. 78. back to text
14. Panel Report on
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 on
EC
— Bananas III, para. 206. back to text
15. Appellate Body Report on
Canada — Autos,
para. 79. back to text
16. Appellate Body Report on
EC
— Bananas III, para. 206. back to text
17. Panel Report on
Indonesia — Autos,
para.
14.141. back to text
18. Appellate Body Report on
EC
— Bananas III, para. 189. back to text
19. Appellate Body Report on
EC
— Bananas III, para. 190. back to text
20. (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 on Canada — FIRA, para. 5.6. back to text
21. (footnote original) See Working Party
Report on the Accession of Hungary, BISD 20S/34. back to text
22. Panel Report on
Indonesia — Autos,
paras.
14.145-14.147. Preceding the cited paragraphs, the Panel refers to the
GATT Panel Report on Belgium — Family Allowances. back to text
23. Appellate Body Report on
Canada — Autos,
para. 81. back to text
24. (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
25. Appellate Body Report on
Canada — Autos,
para. 82. back to text
26. Panel Report on
Canada — Autos, paras
10.22-10.25. back to text
27. Panel Report on
Canada — Autos,
paras.
10.55-10.56, which is referenced in para. 696 of this
Chapter. back to
top
28. (footnote original) Such as in Articles XX
(general exceptions), XXI (security exceptions) and
XXIV (customs unions
and free trade areas). back to text
29. Appellate Body Report on
Canada — Autos,
paras. 83-84. back to text
30. (footnote original) Panel Report on
Indonesia — Autos,
para. 14.147. back to text
31. Panel Report on
US — Certain EC Products,
para. 6.54. back to text
32. (footnote original) The New Shorter Oxford
English Dictionary, 4th Edition, p. 3465. back to text
33. Panel Report on
EC — Tariff Preferences,
paras. 7.59-7.60. back to text
34. Panel Report on
Canada — Autos,
paras.
10.55-10.56, which is referenced in para. 696 of this
Chapter. back to
top
35. BISD 26S/203. back to text
36. (footnote original) The words “developing
countries” as used in this text are to be understood to refer also to
developing territories. back to text
37. (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
38. (footnote original) As described in the
Decision of the CONTRACTING PARTIES of 25 June 1971, relating to the
establishment of “generalized, non-reciprocal and non discriminatory
preferences beneficial to the developing countries” (BISD 18S/24). back to text
39. (footnote original) Nothing in these
provisions shall affect the rights of contracting parties under the
General Agreement. back to text
40. WT/COMTD/M/32, section J. back to text
41. WT/COMTD/N/15 and addenda. back to text
42. WT/COMTD/N/4 and addenda. back to text
43. WT/COMTD/N/2 and addenda. back to text
44. WT/COMTD/N/5 and addenda. back to text
45. WT/COMTD/N/6 and addenda. back to text
46. WT/COMTD/N/7. back to text
47. WT/COMTD/N/1 and addenda. back to text
48. WT/COMTD/N/17 and Corr.1. back to text
49. WT/COMTD/N/18. back to text
50. With respect to the regional trade
arrangements notified under the Enabling Clause within the GATT
framework, see GATT Analytical Index, Article I, pp. 56-58. Also, with
respect to the role of the GATT Committee on Trade and Development in
the operation of the Enabling Clause, see GATT Analytical Index, pp.
1048-1049. back to text
51. The request for circulation of the updated
text of this Agreement was given in WT/COMTD/1. The parties to this
Agreement are: Argentina, Brazil, Paraguay and Uruguay. back to text
52. The Memorandum was notified in WT/COMTD/4.
back to text
53. “SAARC” is the abbreviation of “South
Asian Association for Regional Cooperation”. back to text
54. This Agreement was notified in WT/COMTD/10.
The parties to the Agreement are: Bangladesh, Bhutan, India, Maldives,
Nepal, Pakistan and Sri Lanka. back to text
55. The status of this arrangement was notified
in WT/COMTD/7 and WT/COMTD/11. The membership of Cuba was notified in
WT/COMTD/N/10. back to text
56. “ASEAN” is the abbreviation of
Association of South-East Asian Nations, whose members are: Brunei
Darussalam, Indonesia, Malaysia, Philippines, Singapore and Thailand.
back to text
57. The information on this scheme was given in
WT/COMTD/3. back to text
58. The notification is contained in
WT/COMTD/N/19. The Bangkok Agreement entered into force in 1976 as a
preferential trading arrangement between developing countries in the
Asia-Pacific region and was notified to GATT/WTO pursuant to the
Enabling Clause. The five original participating states of the Agreement
are Bangladesh, India, the Lao People’s Democratic Republic, the
Republic of Korea and Sri Lanka. back to text
59. WT/L/127, para. 1(b).
back to text
60. WT/REG/M/16, Section B. The text of the
recommendation can be found in WT/REG/6. See also
para. 682 of this Chapter. back to text
61. WT/COMTD/M/22, section H. The text of the
adopted procedures can be found in WT/COMTD/16. back to text
62. This is the only regional trade agreement
among developing countries that the Committee on RTAs has dealt with. back to text
63. WT/COMTD/M/3, section A. The text of the
adopted terms of reference can be found in WT/COMTD/5. With respect to
the Working Party on the MERCOSUR, see also GATT Analytical Index,
Article I, p. 58. See also WT/L/127, fn. 2. back to text
64. The tasks of those working parties which the
Council for Trade in Goods had established for examination of regional
trade arrangements entered into under
Article XXIV of GATT 1947 and 1994
were taken over by the Committee on RTAs after its establishment on 6
February 1996. WT/GC/M/10, subsection 11. Also, WT/L/127, fn. 2. In this
regard, see also Section XXV of this
Chapter. back to text
65. WT/COMTD/N/15. back to text
66. WT/COMTD/N/4/Add.2. back to text
67. WT/COMTD/N/2/Add.10. See also WT/COMTD/29
and WT/LDC/SWG/IF/12. back to text
68. WT/COMTD/N/12. back to text
69. WT/COMTD/N/6. back to text
70. WT/COMTD/N/5/Add.2. See also WT/GC/36 and
WT/COMTD/27. back to text
71. WT/COMTD/N/7. back to text
72. WT/COMTD/N/1/Add.2. back to text
73. WT/COMTD/N/17
and Corr. back to text
74. WT/COMTD/N/18. back to text
75. (footnote original) GATT 1994, Art.
I:1.
back to text
76. (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
77. Appellate Body Report on
EC — Tariff
Preferences, paras. 90 and 98. back to text
78. Appellate Body Report on
EC — Tariff Preferences, paras. 101-102. back to text
79. (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
80. (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
81. Appellate Body Report on
EC — Tariff
Preferences, para. 155. back to text
82. Panel Report on
EC — Tariff Preferences,
paras. 7.126-7.161. back to text
83. Appellate Body Report on
EC — Tariff
Preferences, paras. 152-154. back to text
84. Appellate Body Report on
EC — Tariff
Preferences, para. 169. back to text
85. Appellate Body Report on
EC — Tariff
Preferences, para. 173. back to text
86. Appellate Body Report on
EC — Tariff
Preferences, paras. 187-188. back to text
87. Appellate Body Report on
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 on
EC — Tariff
Preferences, para. 178. back to text
88. Appellate Body Report on
EC — Tariff
Preferences, para. 175. back to text
89.
(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
90. Appellate Body Report on
EC — Tariff
Preferences, para. 172. back to text
91. (footnote original) Panel Report, para. 7.102. back to text
92.
(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
93. (footnote original) Infra, paras. 157-168. back to text
94. Appellate Body Report on
EC — Tariff
Preferences, para. 156. back to text
95. (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
96. (footnote original) Supra, paras. 153-154. back to text
97. (footnote original) Supra, paras. 162-165. back to text
98. Appellate Body Report on
EC — Tariff
Preferences, para. 167. back to text
99. Appellate Body Report on
EC — Tariff
Preferences, paras. 161-162. back to text
100. Appellate Body Report on
EC — Tariff
Preferences, paras. 158, 163
and 164. back to text
101.
(footnote original) Appellate Body Report, p. 14, DSR 1997: I, at 335. (See also, Appellate Body Report, US — FSC (Article 21.5
— EC), para. 133; and Appellate Body Report, India — Quantitative
Restrictions, para. 136) back to text
102. Appellate Body Report on
EC — Tariff
Preferences, paras. 104-105. back to text
103. Appellate Body Report on
EC — Tariff
Preferences, paras. 110 and
115. back to text
104. WT/GC/M/40/Add.3, section
4(d)(i). The text of the adopted decision
can be found in WT/L/304. The decision refers to the Comprehensive and
Integrated WTO Plan of Action for the Least-Developed Countries. WT/L/304, para. 2. In this regard, see further Chapter on WTO
Agreement,
Section V.B(7)(iv). back to text
105.
WT/L/304. back to text
106. G/C/M/47,
Section VII. back to text
107. G/C/6 and WT/LDC/SWG/IF/18. See further Chapter on
WTO Agreement,
Section V.B.7(a) with respect to preferential tariff treatment for the
least-developed countries in general. back to text
108.
WT/COMTD/W/39. back to text
109.
WT/COMTD/W/47. back to text
110.
WT/COMTD/W/53. back to text
111. Panel Report on
US — Gasoline, para. 6.19. With respect to
judicial economy in general, see Chapter on DSU, Section
XXXVI.F. back to text
112. Panel Report on
Brazil — Desiccated Coconut, para. 281. back to text
113. Appellate Body Report on
Brazil — Desiccated Coconut, p. 21. back to text
114.
(footnote original) See, e.g., Panel Report on Canada — FIRA,
para. 5.16. back to text
115.
(footnote original) See, e.g.,
Panel Report on
Brazil — Desiccated Coconut,
para. 293. back to text
116.
(footnote original)
Appellate Body Report
on US — Wool Shirts and Blouses, p. 19. back to text
117. Panel Report on
US — Shrimp, paras. 7.22-7.23. back to text
118. Appellate Body Report on
EC
— Bananas III, paras. 183-187. back to text
119. Panel Report on
Canada — Autos,
paras. 10.55-10.56, which is
referenced in para. 696 of this Chapter. back to text
120.
(footnote original) Such as in Articles XX (general exceptions),
XXI (security exceptions) and XXIV (customs unions and free trade
areas). back to text
121. Appellate Body Report on
Canada — Autos,
para. 83. back to text
122. Appellate Body Report on
EC — Poultry,
para. 98, citing Appellate Body Report on
EC
— Bananas III, para. 154, which is referenced in
para. 85 of this Chapter. back to text
123. Appellate Body Report on
EC — Poultry,
para. 99. back to text
124. See
para. 303 of this Chapter. back to text
125. Panel Report on
Indonesia — Autos,
para. 14.139. back to text
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