Preferential trade agreements and the scope of Gatt article xxiv, gats article v and the enabling clause: An appraisal of Gatt/Wto jurisprudence

Netherlands International Law Review

Volumn 56, Issue 1, 2009, Pages 1-34

  Islam, Md Rizwanul ^a,b   Alam, Shawkat ^a  

^a MACQUARIE UNIVERSITY   (Australia)

^b Northern University Bangladesh   (Bangladesh)

Author keywords

[No Author keywords available]

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EID: 78650559900     PISSN: 0165070X     EISSN: 17416191     Source Type: Journal    
DOI: 10.1017/S0165070X09000011     Document Type: Article

References (142)

1. Throughout the whole paper the term PTA has been used in a generic sense to refer to all forms of regional and sub-regional trade agreements - Monetary Unions (MUs), Common Markets (CMs), Customs Unions (CUs), Free Trade Areas (FTAs) and Preferential Trade Agreements (PTAs). However, it is important to note that there are significant differences among these five forms of PTAs. The term PTA is being used as all forms of regional and sub-regional arrangement involves some degree of preference being accorded to its members without extending such preference to others.
2. Generally accepted to be contained in Arts. 31 and 32 of the Vienna Convention on the Law of Treaties (Vienna Convention), opened for signature 23 May 1969, 1155 UNTS p. 331 (entered into force on 27 January 1980); see United States - Standards for Reformulated and Conventional Gasoline, WTO Doc. WT/DS2/AB/R, AB-1996-1, pp. 16-17; see also Japan - Taxes on Alcoholic Beverages, WTO Doc. WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, AB-1996-2, Report of the Appellate Body, p. 13.
3. Marrakesh Agreement Establishing the World Trade Organization, opened for signature 15 April 1994 (entered into force 1 January 1995), 1867 UNTS p. 3. Art. IX:2 reads: 'The Ministerial Conference and the General Council shall have the exclusive authority to adopt interpretations of this Agreement and of the Multilateral Trade Agreements.' For an in-depth analysis of the role of Panel and Appellate Body rulings in WTO's jurisprudence, see a trilogy of essays by Raj Bhala: R. Bhala, 'The Myth about Stare Decisis and International Trade Law (Part One of a Trilogy)', 14 American University International Law Review (1999) p. 845; R. Bhala, 'The Precedent Settlers: De Facto Stare Decisis in WTO Adjudication (Part Two of a Trilogy)', 9 Florida State University Journal of Transnational Law and Policy (1999) p. 1 and R. Bhala, 'Power of the Past: Towards De Jure Stare Decisis in WTO Adjudication (Part Three of a Trilogy)', 33 George Washington International Law Review (2001) p. 873.
4. Understanding on Rules and Procedures Governing the Settlement of Disputes, 1869 UNTS p. 401, Annex 2 of Agreement Establishing the World Trade Organization, opened for signature 15 April 1994, 1867 UNTS p. 3 (entered into force 1 January 1995).
5. Japan - Taxes on Alcoholic Beverages, supra n. 3, Report of the Appellate Body, p. 13.
6. United States - Import Prohibition of Certain Shrimp and Shrimp Products: Recourse to Article 21.5 of the DSU by Malaysia, WTO Doc. WT/DS58/AB/RW, AB-2001-4, Report of the Appellate Body, paras. 108 and 109.
7. See Art. 103 of the Charter of the United Nations and Art. 30 of the Vienna Convention on the Law of Treaties.
8. T. Cottier and M. Foltea, 'Constitutional Functions of the WTO and Regional Trade Agreements', in L. Bartels and F. Ortino, eds., Regional Trade Agreements and the WTO Legal System (Oxford, Oxford University Press 2006) p. 43 at p. 56. Art. 41(1) of the Convention runs as follows: 'Two or more of the parties to a multilateral treaty may conclude an agreement to modify the treaty as between themselves alone if: (a) the possibility of such a modification is provided for by the treaty; or (b) the modification in question is not prohibited by the treaty and: (i) does not affect the enjoyment by the other parties of their rights under the treaty or the performance of their obligations; (ii) does not relate to a provision, derogation from which is incompatible with the effective execution of the object and purpose of the treaty as a whole.'
9. F. Ortino, eds., Regional Trade Agreements and the WTO Legal System (Oxford, Oxford University Press 2006) p. 56 Cottier and Foltea, supra n. 10.
10. F. Ortino, eds., Regional Trade Agreements and the WTO Legal System (Oxford, Oxford University Press 2006) p. 57 Ibid.
11. K. Chase, 'Multilateralism Compromised: The Mysterious Origins of GATT Article XXIV', 5 World Trade Rev. (2006) p. 1.
12. The sole exceptional case is Czech Republic-Slovak Republic Customs Union regarding which the GATT Working Party was able to conclude that the PTA was consistent with the provisions of Art. XXIV. See World Trade Organization, World Trade Report 2007, Six Decades of Multilateral Cooperation: What Have We Learnt?' (Geneva, WTO 2007) p. 306.
13. This is so because the CRTA like its predecessor ad hoc working parties of GATT era has not been able to arrive at consensus on the conformity of notified PTAs with the rules of the WTO. 16. Article XXIV, Submission by Japan, GATT Doc. MTN.GNG/NG7/W/66 (22 December 1989).
14. Proposal for Review of Article XXIV, Communication from the Delegation of India, GATT Doc. MTN.GNG/NG7/W/38 (20 November 1987), p. 1.
15. MTN.GNG/NG7/W/66, supra n. 16, p. 3.
16. Negotiating Group on GATT Articles, Note on Meeting of 20 and 23 September 1988, GATT Doc. MTN.GNG/NG7/9 (28 October 1988), para. 22.
17. Negotiating Group on GATT Articles, Note by the Secretariat, GATT Doc. MTN/GNG/NG7/4 (5 November 1987), para. 6.
18. Negotiating Group on GATT Articles, Note on Meeting of 25-27 May 1988, GATT Doc. MTN.GNG/NG7/7 (20 June 1988), para. 23.
19. Negotiating Group on GATT Articles, Meeting of 3-4 May 1990, GATT Doc. MTN/GNG/NG7/17 (15 May 1990), para. 13.
20. Understanding on the Interpretation of Article XXIV of the General Agreement on Tariffs and Trade 1994.
21. Sungjoon Cho, 'Defragmenting World Trade', 27 Northwestern Journal of International Law & Business (2006) p. 39 at p. 85.
22. Sung-Hoon Park, 'Regionalism, Open Regionalism and Article XXIV GATT: Conflicts and Harmony', in F.G. Snyder, ed., Regional and Global Regulation of International Trade (Oxford, Hart Publishing 2002) p. 263 at p. 276.
23. Brazil - Measures affecting Imports of Retreaded Tyres, WTO Doc. WT/DS332/R (2007), Report of the Panel, para. 7.273.
24. European Community - Tariff Treatment on Imports of Citrus Products from Certain Countries in the Mediterranean Region, GATT Doc. L/5776 (1985), Report of the Panel (unadopted).
25. EEC - Import Regime for Bananas, GATT Doc. DS38/R (1994), Report of the Panel (unadopted).
26. Committee on Regional Trade Agreements, Synopsis of 'Systemic' Issues related to Regional Trade Agreements: Note by the Secretariat, WTO Doc. WT/REG/W/37 (2 March 2000), para. 27(a).
27. Turkey - Restrictions on Imports of Textile and Clothing Products, WTO Doc. WT/DS34/AB/R, AB-1999-5, Report of the Appellate Body, para. 58.
28. D. Ahn, 'Foe or Friend of GATT Article XXIV: Diversity in Trade Remedy Rules', 11 Journal of International Economic Law (2008) p. 107 at p. 122.
29. In this case the Appellate Body was ruling on a CU and not an FTA.
30. Turkey - Textiles, Report of the Appellate Body, supra n. 42, para. 46.
31. United States - Measures Affecting the Cross-Border Supply of Gambling and Betting Services, WTO Doc. WT/DS285/AB/R (2005), Report of the Appellate Body, para. 309.
32. United States - Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality Line Pipe from Korea, WTO Doc. WT/DS202/R (2001), Report of the Panel.
33. United States - Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality Line Pipe from Korea, WTO Doc. WT/DS202/AB/R, AB-2001-9, Report of the Appellate Body, paras. 198 and 199.
34. N.J.S. Lockhart and A.D. Mitchell, 'Regional Trade Agreements under GATT 1994: An Exception and Its Limits', in A.D. Mitchell, ed., Challenges and Prospects for the WTO (London, Cameron May 2005) p. 217 at p. 228.
35. Turkey - Textiles, Report of the Appellate Body, supra n. 42, fn. 13.
36. Agreement on Textiles and Clothing, 1868 UNTS p. 14; Annex 1A of the Marrakesh Agreement Establishing the World Trade Organization, supra n. 4. NILR
37. Lockhart and Mitchell, supra n. 54.
38. Ibid. N.J.S. Lockhart and A.D. Mitchell, 'Regional Trade Agreements under GATT 1994: An Exception and Its Limits', in A.D. Mitchell, ed., Challenges and Prospects for the WTO (London, Cameron May 2005)
39. Ibid. N.J.S. Lockhart and A.D. Mitchell, 'Regional Trade Agreements under GATT 1994: An Exception and Its Limits', in A.D. Mitchell, ed., Challenges and Prospects for the WTO (London, Cameron May 2005)
40. Ibid. N.J.S. Lockhart and A.D. Mitchell, 'Regional Trade Agreements under GATT 1994: An Exception and Its Limits', in A.D. Mitchell, ed., Challenges and Prospects for the WTO (London, Cameron May 2005)
41. Understanding on Article XXIV, supra n. 26, para. 2.
42. Agreement on Rules of Origin, Annex II, para. II.
43. See for example, A.O. Krueger, Free Trade Agreements as Protectionist Devices: Rules of Origin (Cambridge, MA, National Bureau of Economic Research 1993) pp. 8-12.
44. Ibid. See for example, A.O. Krueger, Free Trade Agreements as Protectionist Devices: Rules of Origin (Cambridge, MA, National Bureau of Economic Research 1993) pp. 8-12
45. Committee on Regional Trade Agreements, Note on the Meetings of 27 November and 4-5 December 1997, WTO Doc. WT/REG/M/15 (13 January 1998), para. 59.
46. See, Korea's Argument, Committee on Regional Trade Agreements, Note on the Meetings of 6-7 and 10 July 1998, WTO Doc. WT/REG/M/18 (22 July 1998), para. 23.
47. Turkey - Restrictions on Imports of Textile and Clothing Products, WTO Doc. WT/DS34/R (1999), Report of the Panel, para. 9.120.
48. WT/REG/W/37, supra n. 39, para. 31(b). The links are as follows: the preamble to the Agreement identifies that transparent and predictable ROOs and their application will facilitate the flow of international trade, and further states the desirability that ROOs do not create any unnecessary barriers to trade. Para. 3(c) of the Common Declaration annexed to the Agreement requires that laws and regulations relating to preferential ROOs be published 'as if they were subject to, and in accordance with, the provisions of Article X of GATT 1994'.
49. Taking into account compensation already afforded by the reduction brought about in the corresponding duty of the other constituents of the CU.
50. Understanding on Article XXIV, supra n. 26, para. 6.
51. WT/REG/W/37, supra n. 39, para. 6(d).
52. Committee on Regional Trade Agreements: Examination of the Enlargement of the European Communities: Accession of Austria, Finland and Sweden, Note on the Meeting of 19 February 1997, WTO Doc. WT/REG3/M/3 (23 April 1997), para. 10.
53. K.W. Dam, 'Regional Economic Arrangements and the GATT: The Legacy of a Misconception', 30 University of Chicago Law Review (1963) p. 615 at pp. 632-633.
54. Ibid. K.W. Dam, 'Regional Economic Arrangements and the GATT: The Legacy of a Misconception', 30 University of Chicago Law Review (1963) p. 615
55. F. Ortino, eds., Regional Trade Agreements and the WTO Legal System (Oxford, Oxford University Press 2006) p. 48 Cottier and Foltea, supra n. 10.
56. F. Ortino, eds., Regional Trade Agreements and the WTO Legal System (Oxford, Oxford University Press 2006) p. 48 Ibid.
57. Turkey - Textiles, supra n. 71, Report of the Panel, para. 9.120.
58. There is a suggestion in M. Matsushita, T.J. Schoenbaum and P.C. Mavroidis, The World Trade Organization: Law, Practice, and Policy (Oxford, Oxford University Press 2002) pp. 360-361 that the Appellate Body has ruled that PTA parties can impose safeguard measures against their partners. However, this seems to be erroneous as the Appellate Body has repeatedly declined to rule on the issue of invoking Art. XXIV in safeguard measures until the requirement of parallelism is met and decided the cases based on the provisions of the WTO Agreement on Safeguards.
59. See Australia's argument in WT/REG/M/15, supra n. 69 and WT/REG/W/37, supra n. 39.
60. See Australia's and Canada's arguments in Committee on Regional Trade Agreements, Communication from Australia, WTO Doc. WT/REG/W/18 (17 November 1997); WTO Doc. WT/REG/M/15, supra n. 69; and WT/REG/W/37, supra n. 39.
61. J. Pauwelyn, 'The Puzzle of WTO Safeguards and Regional Trade Agreements', 7 Journal of International Economic Law (2004) p. 109 at pp. 126-127.
62. Matsushita, Schoenbaum and Mavroidis, supra n. 84.
63. See Japan's and Hong Kong's arguments in Committee on Regional Trade Agreements, Note on the Meeting of 3-5 November 1997, WTO Doc. WT/REG/M/14 (24 November 1997); WT/REG/M/15, supra n. 69; and WT/REG/W/37, supra n. 39.
64. See Israel's and Canada's arguments in Committee on Regional Trade Agreements, Examination of the Free Trade Agreement between Canada and Israel, Note on the Meeting of 20 June 1997, WTO Doc. WT/REG31/M/1 (29 July 1997); Committee on Regional Trade Agreements, Examination of the Free Trade Agreement Between Canada and Chile, Note on the Meeting of 7 May 1998, WT/REG38/M/1 (11 June 1998) and WT/REG/W/37, supra n. 39.
65. The Doctrine of parallelism has been discussed further in the following paragraphs.
66. Argentina - Safeguard Measures on Imports of Footwear, WTO Doc. WT/DS121/R (1999), Report of the Panel.
67. Argentina - Footwear Safeguards Measures on Imports of Footwear, WT/DS121/AB/R (1999), Report of the Appellate Body, paras. 111-113.
68. US - Line Pipe Safeguards, Report of the Panel, supra n. 49, paras. 7.144-7.146.
69. US - Line Pipe Safeguards, Report of the Appellate Body, supra n. 53, para. 198.
70. Canada, in WT/REG/M/15, supra n. 69, para. 26.
71. See Japan's argument in Committee on Regional Trade Agreements, Communication from Japan, WTO Doc. WT/REG/W/28 (28 July 1998).
72. M. Matsushita, 'Legal Aspects of Free Trade Agreements: In the Context of Article XXIV of the GATT 1994', in M. Matsushita and D. Ahn, eds., WTO and East Asia: New Perspectives (London, Cameron May 2004) p. 497 at p. 504.
73. D. Ahn, eds., WTO and East Asia: New Perspectives (London, Cameron May 2004) p. 497 Ibid.
74. Turkey - Textiles, Report of the Appellate Body, supra n. 42, para. 49.
75. Committee on Regional Trade Agreements, Systemic Issues related to 'Substantially all the Trade', Background Note by the Secretariat, Addendum, WT/REG/W/21/Add.1 (2 December 1997).
76. Committee on Regional Trade Agreements, Communication from Australia, Addendum, WTO Doc. WT/REG/W/22/Add.1 (24 April 1998), paras. 9-10.
77. Committee on Regional Trade Agreements, Statement by the Delegation of Hong Kong, China, WTO Doc. WT/REG/W/27 (8 July 1998).
78. Turkey - Textiles, Report of the Appellate Body, supra n. 42, para. 48.
79. Understanding on Article XXIV, supra n. 26, para. 3.
80. Chase, supra n. 13.
81. A. Yusuf, Legal Aspects of Trade-Preferences for Developing States: A Study in the Influence of Development Needs on the Evolution of International Law (The Hague, Martinus Nijhofff 1982) p. 56.
82. GATT, Trends in International Trade (Geneva 1958) (also known as the Haberler Report, named after the chairman of the Panel), Terms of Reference.
83. Ibid., see generally chapter I.
84. R.E. Hudec, Developing Countries in the GATT Legal System (Aldershot, Gower 1987) pp. 46-47.
85. Matsushita, Schoenbaum and Mavroidis, supra n. 84.
86. World Trade Report 2007, supra n. 14.
87. European Communities - Conditions for the Granting of Tariff Preferences to Developing Countries, WTO Doc. WT/DS246/AB/R, AB-2004-1, Report of the Appellate Body, para. 90.
88. See Group of Negotiation on Services, Report to the Trade Negotiations Committee meeting at Ministerial level, GATT Doc. MTN.GNS/21 (25 November 1988), p. 6.
89. Group of Negotiation on Services, Elements for a Draft which Would Permit Negotiations to Take Place for the Completion of all Parts of the Multilateral Framework, GATT Doc. MTN.GNS/28 (18 December 1989).
90. See Group of Negotiation on Services, Draft Multilateral Framework for Trade in Services: Introductory Note by the Chairman on the GNS Negotiations on a Framework Agreement, GATT Doc. MTN.GNS/35 (23 July 1990); Trade Negotiations Committee, Draft Final act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations, GATT Doc. MTN. TNC/W/35/Rev.1 (3 December 1990) (also known as the Brussels Draft); and Trade Negotiations Committee, Draft Final act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations, GATT Doc. MTN.TNC/W/FA (20 December 1991) (also known as the Dunkel Draft).
91. Committee on Regional Trade Agreement, Systemic Issues related to 'Substantially all the Trade': Background Note by the Secretariat, Revision, WT/REG/W/21/Rev.1 (5 February 1998).
92. Group of Negotiation on Services, Note on the Meeting of 18-22 July 1988, GATT Doc. MTN.GNS/16 (8 August 1988), para. 79. It should be noted that this paragraph erroneously contains the following words, 'the need for such arrangements should be admonished as one way of reducing the current asymmetry in flows of trade services between the developed and developing countries'. However, it was later clarified in the word 'admonished' should be replaced by 'recognised', see Group of Negotiations on Services, Note on the Meeting of 31 October-3 November 1988, GATT Doc. MTN.GNS/16 (29 November 1988), para. 55.
93. Group of Negotiations on Services, Note on the Meeting of 19-23 September 1988, GATT Doc. MTN.GNS/17 (18 October 1988), para. 39.
94. World Trade Organization, Regionalism and the World Trading System (Geneva, WTO 1995) p. 22.
95. Matsushita, Schoenbaum and Mavroidis, supra n. 84.
96. GATS Art. V, fn. 1.
97. WT/REG/W/37, supra n. 39, para. 72(b). See also Committee on Regional Trade Agreements, Note on the Meetings of 29-30 April and 3 May 1999, WTO Doc. WT/REG/M/22 (4 June 1999), paras. 18 and 20.
98. GATS Art. V:2.
99. GATS Art. V:1(b).
100. International payment and transfers (Art. XI); short-run balance of payments difficulties (Art. XII); general exceptions on grounds of protection of public morals, human, animal or plant life or health etc. (Art. XIV); and security exceptions (Art. XIV bis).
101. GATS Art. V:6.
102. GATS Art. V:3(a).
103. GATS Art. V:3(b).
104. GATS Art. V:5.
105. GATS Art. V:7(a). Further procedural requirements are discussed below.
106. Canada - Certain Measures Affecting the Automotive Industry, WTO Doc. WT/DS139/R, WT/DS142/R (2000), Report of the Panel.
107. Art. XXIV:7 of the GATT 1994 and para. 7 of the Understanding on the Interpretation of Article XXIV, supra n. 26. Similar obligations also exist in Art. V:7 of the GATS and para. 4 of the Enabling Clause.
108. For a review of the GATT working party practice, see J. Huber, 'The Practice of GATT in Examining Regional Arrangements under Article XXIV', 19 Journal of Common Market Studies (1981) p. 281.
109. Committee on Regional Trade Agreements, Decision of 6 February 1996, WTO Doc. WT/L/127 (7 February 1996) (Decision Establishing the CRTA).
110. Work of the Committee on Regional Trade Agreements (CRTA), available at the WTO's website, < http://www.wto.org/english/tratop-e/region-e/regcom-e.htm > (visited on 24 July 2008).
111. WTO, Ministerial Declaration, adopted on 14 November 2001, WTO Doc. WT/MIN(01)/DEC/1 (20 November 2001) (Doha Ministerial Declaration).
112. Ibid., para. 29.
113. WTO, Transparency Mechanism for Regional Trade Agreements, Decision of 14 December 2006, WTO Doc. WT/L/671 (18 December 2006) (Decision on Transparency Mechanism).
114. Ibid., para. 3.
115. Ibid., para. 6.
116. Ibid., paras. 7 and 8.
117. Ibid., para. 7(b).
118. Y. Devuyst and A. Serdarevic, 'The World Trade Organization and Regional Trade Agreements: Bridging the Constitutional Credibility Gap', 18 Duke Journal of International & Comparative Law (2007) p. 1 at p. 48. For an analysis of the Trade Policy Review Mechanism, see V. Curzon Price, 'GATT's New Trade Policy Review Mechanism', 14 World Economy (1991) p. 227; P.C. Mavroidis, 'Surveillance Schemes: The GATT's New Trade Policy Review Mechanism', 13 Michigan JIL (1992) p. 374 and S. Laird and P. Messerlin, 'Institutional Reform for Trade Liberalization', 13 World Economy (1990) p. 230.
119. A. Serdarevic, 'The World Trade Organization and Regional Trade Agreements: Bridging the Constitutional Credibility Gap', 18 Duke Journal of International & Comparative Law (2007) p. 49 Devuyst and Serdarevic, supra n. 167.
120. Transparency Mechanism, supra n. 162, para. 10.
121. Ibid., para. 14.
122. Ibid., para. 20.
123. Ibid., para. 22.
124. For an in-depth analysis of this question, see Won-Mog Choi, 'Legal Problems of Making Regional Trade Agreements with Non-WTO-Member States', 8 Journal of International Economic Law (2005) p. 825. Much of the following paragraphs in this section owes to this work.
125. EC - Citrus Products, Report of the Panel, supra n. 32, para. 3.14.
126. EEC - Import Regime for Bananas, Report of the Panel, supra n. 36.
127. Won-Mog Choi, supra n. 173.
128. Ibid. Won-Mog Choi, supra n. 173
129. Ibid. Won-Mog Choi, supra n. 173
130. Ibid. Won-Mog Choi, supra n. 173
131. Ibid. Won-Mog Choi, supra n. 173
132. Ibid. Won-Mog Choi, supra n. 173
133. Ibid. Won-Mog Choi, supra n. 173
134. Ibid. Won-Mog Choi, supra n. 173
135. Ibid. Won-Mog Choi, supra n. 173
136. A. Chayes, The New Sovereignty: Compliance with International Regulatory Agreements (Cambridge, MA, Harvard University Press 1995) chapter 1.
137. Ibid., at p. 7.
138. J. McMillan, 'Does Regional Integration Foster Open Trade? Economic Theory and GATT's Article XXIV', in K. Anderson and R. Blackhurst, eds., Regional Integration and Global Trading System (New York, Harvester Wheatsheaf 1993) p. 292 at p. 301.
139. R. Blackhurst, eds., Regional Integration and Global Trading System (New York, Harvester Wheatsheaf 1993) p. 292 Ibid.
140. Argentina - Footwear Safeguards, Report of the Panel, supra n. 92, para. 8.99.
141. Devuyst and Serdarevic, supra n. 167.
142. M. Rafiqul Islam, 'The Australian Policy and Practice of Preferential Bilateral Trade: A Benign or Malign Alternative to the WTO Multilateral Free Trading System?', 2(2) Journal of International Trade and Policy (2003) p. 43 at pp. 59-61. Although the paper talks in Australian context, the same observation applies to other states too.