De Mestral, Armand CM - Dispute Settlement Unde the WTO and RTA - An Uneasy Relationship (2013)

Dispute Settlement Under theWTO and RTAs:

An Uneasy RelationshipArmand C. M. de Mestral*

Emeritus Professor, Jean Monnet Professor of Law, McGill University

*Corresponding author. E-mail: [email protected]

ABSTRACT

The proliferation of RTAs is a recognized feature of our time. While such agreementsare permitted under Article XXIV of the GATT, this has not been without controversyand one aspect which remains unclear concerns the role decisions rendered by RTAdispute settlement bodies play in WTO cases. Are RTA dispute settlement systems incompetition with and possibly even in contradiction to the WTO DSU or are theycomplementary? Can they co-exist or are they cast in eternal opposition? Are theyequal or are they inherently subordinate to the WTO DSU? The article considers theWTOs treatment of RTAs in GATT and WTO case law, and weighs arguments forand against the consideration of RTA decisions by the DSB. The article submits thatthe DSB should not be blind to the equities of a situation where two states havereached an agreement in an RTA selecting dispute settlement under that body. This ismore than a theoretical argument, it has happened, and the increasingly complex co-ex-istence of the WTO with some 400 RTAs suggests that similar problems can arise inthe future. Furthermore, these issues deserve a much more open and careful analysisthan they have had to date.

I . INTRODUCTIONThe proliferation of international dispute settlement procedures is a recognizedfeature of our time.1 Some have viewed this phenomenon with alarm fearing the

1 International Law Commission, Fragmentation of International Law: Difficulties Arising from the Diversifica-tion and Expansion of International LawReport of the Study Group of the International Law Commission,UNGAOR, 58th Sess, A/CN.4/L.682 (2006) (Fragmentation of International Law). For a recent analysisof regional trade agreement dispute settlement mechanisms, see Clause Chase et al., Mapping of DisputeSettlement Mechanisms in Regional Trade AgreementsInnovative or Variations on a Theme? (2013)World Trade Organization: Economic Research and Statistics Division, http://www.wto.org/english/res_e/reser_e/ersd201307_e.pdf (working paper) (Chase et al.).

VC The Author 2013. Published by Oxford University Press. All rights reserved.

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disintegration and fragmentation of international law.2 Others have taken a morerelaxed position, based on the assumption that additional dispute settlement proced-ures should on balance promote greater variety and sophistication in the rules ofinternational law.3 Nowhere is this phenomenon more pronounced than in the fieldof international economic law. We have witnessed the astonishing emergence of theWorld Trade Organizations (WTO) Dispute Settlement Body4 (DSB) since 1994as one of the most successful forms of compulsory international dispute settlementof all time.5 Investor-state arbitration, under bilateral investment treaties, hasemerged as a significant form of international arbitration focusing on both publicand private interests. Modern treaties in fields as diverse as environmental protec-tion,6 communications,7 intellectual property,8 air transportation,9 and internationalhealth protection10 all contain some form of dispute settlement mechanism. Majornew tribunals have been created to deal with international criminal law11 and the lawof the sea.12

2 Judge Stephen M. Schwebel, Address to the Plenary Session of the General Assembly of the UnitedNations, (26 October 1999), http://www.icj-cij.org/court/index.php?pr87&pt3&p11&p23&p31 (visited 20 September 2013); Judge Gilbert Guillaume, The Proliferation of International JudicialBodies: The Outlook for the International Legal Order, (27 October 2000), http://www.icj-cij.org/court/index.php?pr85&pt3&p11&p23&p31 (visited 20 September 2013).

3 Jonathan I. Charney, The Impact on the International Legal System of the Growth of InternationalCourts and Tribunals, 31 New York University Journal of International Law and Politics (1999), at 679;Thomas Buergenthal, Proliferation of International Courts and Tribunals: Is it Good or Bad? 14 (2) Lei-den Journal of International Law (2001) 267.

4 The DSB is governed by the Understanding on Rules and Procedures Governing the Settlement of Disputes(DSU), Marrakesh Agreement Establishing the World Trade Organization, Annex 2, The Legal Texts:The Results of the Uruguay Round of Multilateral Trade Negotiations, 33 ILM 1226 (1994).

5 Carlos M. Vasquez and John H. Jackson, Some Reflections on Compliance with WTO Dispute Settle-ment Decisions, 33 (4) Law and Policy in International Business (2002) 555; Bruce Wilson, Compli-ance by WTO Members with Adverse WTO Dispute Settlement Rulings: The Record to Date, 10 (2)Journal of International Economic Law (2007) 397; David Palmeter and Petros C. Mavroidis, Dispute Set-tlement in the World Trade Organization (Cambridge: Cambridge University Press, 2004) 305 (Mavroi-dis). Palmeter and Mavroidis note that the addition of the DSU, and its important thickening of legality,has resulted in the most active and most advanced legal system in the larger field of public internationallaw.

6 For example, see United Nations Convention on the Law of the Sea, 10 December 1982, 1833 UNTS 3 397,21 ILM 1261 (entered into force 16 November 1994); Montreal Protocol on Substances that Deplete theOzone Layer, 16 September 1987, 1522 UNTS 3, 26 ILM 1550 (entered into force 1 November 1989);Kyoto Protocol to the United Nations Framework Convention on Climate Change, 11 December 1997, UNDoc FCCC/CP/1997/7/Add.1, 37 ILM 22 (entered into force 16 February 2005).

7 International Telecommunications Union, Final Acts of the World Administrative Telegraph and TelephoneConference, 1988, WATTC-88.

8 Agreement on Trade-Related Aspects of Intellectual Property Rights, 15 April 1994, 1869 UNTS 299, 33 ILM1197 (entered into force 1 January 1995).

9 Convention on International Civil Aviation, 7 December 1994, 61 Stat. 1180, 15 UNTS 295 (entered intoforce 4 April 1947).

10 WTO Agreement on the Application of Sanitary and Phytosanitary Measures, 15 April 1994, 1867 UNTS493 (entered into force 1 January 1995).

11 Rome Statute of the International Criminal Court, 17 July 1998, 2187 UNTS 90, 37 ILM 1002 (enteredinto force 1 July 2002).

12 Statute of the International Tribunal for the Law of the Sea (Annex VI), 10 December 1982, 1833 UNTS 3,21 IL 1261 (entered into force 16 November 1994).

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Recourse to dispute settlement plays a significant part in the law governing re-gional trade agreements (RTAs). Some 393 such agreements have been notified tothe WTO13 since the inception of the transparency procedure;14 at least one hun-dred more are known to exist.15 Almost without exception these agreements includesome form of dispute settlement. In the majority of cases, these agreements16 adopta panel procedure based on the WTO Dispute Settlement Understanding (DSU)model.17 In most cases, the process is weaker than the WTO DSU since the outcomeis generally weaker than the compulsory and binding process of the WTO DSB. Thismay happen in several ways. RTA dispute settlement provisions often leave it up tothe two state parties to determine how the panel decision is to be implemented. Itmay be possible for one party to frustrate the dispute settlement process by not nam-ing their panelist. In some cases, the actual commitment to enter into dispute settle-ment may not be compulsory. Even where the decision is binding, as with Chapter19 of NAFTA, there may be ways of challenging or prolonging the process.18

The last decade has witnessed the emergence of a number of major regionalagreements made by significant groups of states. These range from the fourMERCOSUR states19 to the ten ASEAN states.20 Other examples are the Andean

13 World Trade Organization, Regional Trade Agreements: Facts and Figures, http://www.wto.org/eng-lish/tratop_e/region_e/regfac_e.htm (visited 20 September 2013).

14 World Trade Organization, Transparency Mechanism for RTAs, http://www.wto.org/english/tratop_e/region_e/trans_mecha_e.htm (visited 20 September 2013).

15 World Trade Organization, Historical Background and Current Trends, in World Trade Report 2011The WTO and Preferential Trade Agreements: From Co-Existence to Coherence (Washington, DC: WorldBank, 2011) at 54 (World Trade Report).

16 Examples include the Association of Southeast Asian Nations (ASEAN) Free Trade Area Agreement, theNorth American Free Trade Agreement (NAFTA), and the Southern Common Market (MERCOSUR)Agreement. See David Morgan, Dispute Settlement under PTAs: Political or Legal? (2008) Universityof Melbourne Legal Studies Research Paper No. 341.

17 See DSU, above n 4.18 For example, decisions by the NAFTA Chapter 20 Panels are non-binding in the sense that they have no

direct effect on United States law, and neither federal or state governments are bound by findings or rec-ommendations. See David A. Gantz, Dispute Settlement under the NAFTA and the WTO: Choice ofForum Opportunities and Risks for the NAFTA Parties, 14 (4) American University International LawReview 1025 (1999) at 10421043. Similar concerns arise under dispute resolution for AD/CVDNAFTA Chapter 19. As noted in the Senate Report on the North American Free Trade AgreementImplementation Act: a US court is not bound by (but may take into consideration) a final decision of abinational panel or extraordinary challenge committee. S. Rep. No. 103189 at 45 (1993). Also see Don-ald McRae and John Siwiec, NAFTA Dispute Settlement: Success or Failure?, in Arturo Oropeza Garcia(ed.), America del Norte en el siglo XXI (Mexico City: Corporacion Industrial Grafica, 2010) 363. On theother hand, a report adopted by the DSB requires State action and accompanied by the threat of compen-sation/retaliation, if required. See John H. Jackson, The WTO Dispute Settlement UnderstandingMis-understandings on the Nature of Legal Obligation, 91 (1) American Journal of International Law (1997)6064. That being said, the North American Agreement on Environmental Cooperation (NACEC) pro-vides a dispute resolution system allowing the suspension of benefits where a Party fails to pay a monet-ary enforcement assessment. See North American Agreement on Environmental Cooperation Between theGovernment of the United States of America, the Government of Canada, and the Government of the UnitedMexican States, 13 September 1993, 28 ILM 1480 (entered into force 1 January 1994).

19 Additional Protocol to the Treaty of Asuncion on the Institutional Structure of Mercosur, 26 March 1991, 34ILM 1244 (entered into force 29 November 1991) (MERCOSUR).

20 ASEAN Free Trade Agreements, 28 January 1992, S/C/N/463 (1992), http://www.worldtradelaw.net/fta/agreements/afta.pdf (visited 20 September 2013).

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Community of Nations,21 the various African RTAs,22 and the ASEAN-India FreeTrade Area.23 Still larger and more ambitious agreements are under negotiation inthe form of a Trans-Pacific Partnership24 or an eventual EUUSA FTA.25 Themost ambitious RTA, the European Union, has been profoundly influenced by thework of its Court of Justice,26 a true court composed of 28 independent judges whohave broad exclusive and compulsory jurisdiction to rule on a host of trade andrelated non-trade matters arising under European Union law.27

What are we to make of the existence of these many dispute settlement proced-ures existing under various RTAs? Do they stand alone, relevant to their parties only,or are they part of a larger pattern of dispute settlement, which is emerging at thepresent time? In particular, what is the relationship of these agreements to the WTODSU?

At first blush, there is an extraordinary paradox in the fact that we have witnessedthe development of many procedures in the same timeframe that has seen the emer-gence and consolidation of a considerable body of new substantive and procedurallaw under the WTO DSU, one of the few compulsory and binding procedures toexist in the world today. This is all the more extraordinary in that many of the legalissues arising under RTAs are similar in principle to those arising under the law ofthe WTO. Most RTAs affirm their fidelity to the law of the WTO or explicitly state

21 Codification of the Andean Subregional Integration Agreement (Cartagena Agreement), 25 June 2003, L/6737(2003), http://www.worldtradelaw.net/fta/agreements/cartagenafta.pdf (visited 20 September 2013).

22 South African Development Community (SADC) Free Trade Agreement, 17 August 1992, WT/REG176(entered into force 5 October 1992), http://www.worldtradelaw.net/fta/agreements/sadcfta.pdf (visited20 September 2013); Common Market for Eastern and Southern Africa (COMESA), 5 November 1993,WT/COMTD/N/3 (1994), http://www.worldtradelaw.net/fta/agreements/comesafta.pdf (visited 20September 2013); East African Community Free Trade Agreement, WT/COMTD/N/14 (2000), http://www.worldtradelaw.net/fta/agreements/eacfta.pdf (visited 20 September 2013); Economic Community ofWest African States (ECOWAS) Revised Treaty, WT/COMTD/N/21 (2005), http://www.worldtradelaw.net/fta/agreements/ecowasfta.pdf (visited 20 September 2013); Economic and Monetary Community ofCentral Africa (CEMAC), WT/COMTD/N/13 (1999), http://www.worldtradelaw.net/fta/agreements/cemacfta.pdf (visited 20 September 2013).

23 Framework Agreement on Comprehensive Economic Cooperation between the Republic of India and the Associ-ation of Southeast Asian Nations (2003), http://wtocenter.vn/sites/wtocenter.vn/files/1-Framewor-k%20Agreement%20on%20Comprehensive%20Economic%20Cooperation%20ASEAN-India.pdf (visited20 September 2013).

24 The original Trans-Pacific free trade agreement is between Brunei, Chile, New Zealand, and Singapore:Trans-Pacific Strategic Economic Partnership, 18 July 2005, WT/REG229 S/C/N/294 (entered into force28 May 2006), http://www.worldtradelaw.net/fta/agreements/TransPac_SEP_FTA.pdf (visited 20 Sep-tember 2013). The Trans-Pacific Partnership proposes to expand this treaty to include Brunei, Chile,New Zealand, Australia, Canada, Malaysia, Mexico, Peru, the United States, Vietnam, and potentiallyJapan.

25 BBC News, EU and US free-trade talks launched, BBC News, 13 February 2013, http://www.bbc.co.uk/news/business-21439945 (visited 20 September 2013).

26 Consolidated Version of the Treaty on the Functioning of the European Union, 2008/C 115/01 (2007),http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uriOJ:C:2010:083:0047:0200:en:PDF (visited 20September 2013) (TFEU).

27 Ibid, at art 344.




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that they should be interpreted in a manner conformable to that law.28 This is trueto the point that one can affirm that most RTAs, even the European Union in thetrade sphere, have the same deep structure and are based on the same fundamentalprinciples as the WTO. Yet, each agreement has its own system of dispute settlementand no effort has ever been made to establish or even envisage the establishment ofa general world trade court, which might receive complaints arising under all formsof trade law disputes.29 This being the case, are the dispute settlement systems estab-lished under RTAs in competition with and possibly even in contradiction to theWTO DSU, are they complementary to the WTO DSU, or do they regulate essen-tially the same disputes? Can they co-exist or are they cast in eternal opposition? Arethey equal or are they inherently subordinate to the WTO DSU?30 As is illustratedbelow by the cases reviewed, the questions posed by the co-existence of RTA disputesettlement systems and the WTO DSU arise in a variety of contexts and reflect arange of different legal issues. But the overriding question is whether WTO panelsand the Appellate Body have the authority to consider other dispute settlement sys-tems and then act in consequence, or whether they must give precedence to WTOlaw in all cases.

These questions are part of a broader debate that was opened by the adoption ofArticle XXIV of the GATT in 1947. Without Article XXIV, preferential agreementsviolate the fundamental tenets of non-discrimination, which are at the core of theGATT and were carried forward into the WTO in 1994. A decision was made in1947 to permit the continuation and future formation of customs unions. This wasnot surprising, given the fact that customs unions were well understood by politiciansand economists as a significant form of regional integration31 and had even playedan important role in the emergence of several European states.32 But the founders ofthe GATT did not limit themselves to customs unions. Under quiet pressure fromthe USA and Canada and several other countries,33 it was decided also to allow the

28 North American Free Trade Agreement, 17 December 1992, 32 ILM 289 (entered into force 1 January1994) at Preamble, art 103, art 301, art 2005.1 (NAFTA); Free Trade Agreement between the Governmentof New Zealand and the Government of the Peoples Republic of China (2008), http://www.chinafta.govt.nz/1-The-agreement/2-Text-of-the-agreement/0-downloads/NZ-ChinaFTA-Agreement-text.pdf (visited 20September 2013) at Preamble, art 1, art 3 (NZChina FTA).

29 The only area where there has been a call to establish a general court is in the area of international in-vestor-state arbitration. So far these efforts have proven fruitless. There have recently been calls for acomprehensive South American trade dispute tribunal.

30 This article focuses specifically on one aspect of RTAs and the WTO. In particular, it considers the im-pact of a decision rendered by an RTA dispute resolution body on a subsequent WTO dispute. In doingso, this article largely sets aside other issues that could arise under RTAs.

31 The original treating founding the Benelux Customs Union was signed on 5th September 1944. See Cus-toms Convention between the Netherlands, Belgium and Luxembourg, 5 September 1944, Jaargang 1944-77,1954-117, 1958-21, 1947-282 (entered into force 1 January 1948).

32 For example, the German Zollverein, formed in 1834, was a step towards the political unification of Ger-many. See Soamiely Andriamananjara, Customs Unions, in Jean-Pierre Chauggour and Jean-ChristopherMaur (eds), Preferential Trade Agreement Policies for Development: A Handbook (Washington, DC: WorldBank, 2011) at 111.

33 See World Trade Report 2011, above n 15, at 51. For a general history of the evolution of RTAs underthe GATT, see John H. Jackson, World Trade Law and the Law of GATT (Indianapolis, IN: Bobbs-Mer-rill, 1969) (Jackson); Kerry Chase, Multilateralism Compromised: The Mysterious Origins of GATTArticle XXIV, 5 (1) World Trade Review 1 (2006) at 2 (Chase).




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formation of free trade areas (FTAs), a new and undefined form of economic inte-gration, the essence of which involves states reducing trade barriers with one ormore countries, but maintaining the freedom to deal directly with third countries.34

Both forms of trade association were made subject to the conditions that they benotified to the GATT Contracting Parties, that they cover substantially all trade andthat they lead to trade creation rather than trade diversion.35 Article XXIV also cre-ated the general obligation of parties to notify their customs unions and FTAs to theGATT Contracting Parties.36

The substantive and procedural ambiguities of Article XXIV soon became evi-dent:37 so much so that, for many years, commentators and GATT diplomats con-sidered that the article was essentially political and hortatory in nature.38 As theGATT customary dispute settlement procedure evolved, many continued to considerthat Article XXIV was inherently non-justiciable.39 However, this did not stop a smallnumber of disputes involving complaints against customs unions or FTAs beingtaken to GATT panels.40 Further complexity was added in 1979 when the Contract-ing Parties to the GATT adopted the Enabling Clause, which relaxed the require-ments for customs unions and FTAs for developing countries with a view tofostering their more rapid economic development.41 The increasing numbers ofFTAs in the 1980s focused the attention of GATT negotiators engaged in the Uru-guay Round of Multilateral Trade Negotiations on the failure of the Contracting Par-ties or dispute settlement panels to clarify the meaning of the substantive conditionspermitting the formation of customs unions and FTAs. Equally troubling was thefailure to clarify the procedural requirements inherent in the obligation to notify theContracting Parties to the GATT of the formation and entry into force of suchagreements. Indeed, it appeared at the time that the obligation was being respectedmore in the breach than in the observance. The result was that among the decisionsemerging from the Uruguay Round in 1994 was the Understanding on the

34 See Jackson, above n 33, at 575580.35 General Agreement on Tariffs and Trade 1994, 15 April 1994, 1867 UNTS 187, 33 ILM 1153 (1994) at art

XXIV, paras 5 and 8 (GATT 1994). Kenneth Dam discusses RTAs and trade diversion versus trade cre-ation in light of US economic interests in Kenneth Dam, The Rules of the Global Game: A New Look atUS International Economic Policymaking (Chicago: University of Chicago Press, 2001) at 134. For a criti-cism of the standard set by Article XXIV, see Kenneth W. Dam, Regional Economic Arrangements andthe GATT: The Legacy of a Misconception, 30 (4) University of Chicago Law Review (1963) 615(Dam).

36 See GATT 1994, above n 35, at XXIV, para 7(a).37 See Jackson, above n 33, at 575623 (specifically 588 and 621). Jackson describes the criteria for estab-

lishing permissible regional arrangements under the GATT as ambiguous and difficult to apply.38 See Dam, above n 35; see Chase, above n 33, at 2.39 See Dam, above n 35.40 GATT Panel Report, European CommunityTariff Treatment on Imports of Citrus Products from Certain

Countries in the Mediterranean Region (ECCitrus), L/5776, 7 February 1985, unadopted; GATT PanelReport, European Economic CommunityPayments and Subsidies Paid to Processors and Procedures of Oil-seeds and Related Animal-Feed Proteins (EECOilseeds), L/6627-37S/86, adopted 25 January 1990.

41 Differential and More Favourable Treatment Reciprocity and Fuller Participation of Developing Countries,L/4903 (1979), http://www.wto.org/English/docs_e/legal_e/enabling_e.pdf (visited 20 September2013) at art 2(c). The Enabling Clause has only once been the subject of dispute settlement: WTOAppellate Body Report, European CommunitiesConditions for the Granting of Tariff Preferences to Devel-oping Countries (ECTariff Preferences), WT/DS246/AB/R, adopted 7 April 2004.




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Interpretation of Article XXIV of the GATT 1994 (1994 Understanding), which con-tains various interpretative provisions designed to clarify substantive and proceduralobligations of WTO Members.42 The Interpretation also removes one central uncer-tainty by affirming that disputes under Article XXIV are justiciable and subject to theprocedures of the DSU.43

In the years immediately after 1994, it became clear that the number of RTAs wasincreasing rapidly. It also became clear that the procedural requirements of ArticleXXIV and the 1994 Understanding needed careful administration in order to ensurethat they were respected. To bring greater discipline to the review of RTAs oncenotified, the WTO created the standing Committee on Regional Trade Agreements(CRTA) in 1996.44 Despite the good intentions of WTO Members, the CRTA didnot prove equal to the task of providing a disciplined review process of the manyRTAs notified to the WTO in the subsequent years. By 2006, it was clear that theCRTA had failed those who expected that there might be a substantive review ofRTAs leading to a principled evaluation of the fidelity of each agreement to the re-quirements of Article XXIV, the Enabling Clause and the 1994 Understanding. Bythat point, only one agreement had actually been formally approved,45 the factual de-scription had been prepared for 19 agreements,46 but no agreement could be reachedon systemic issues.47 In other words, despite the good intentions of many, WTOMembers present in the CRTA could not bring themselves to act as judges of eachothers conduct, for fear of being the object of condemnation of their own agree-ments at a later date. The only way out was to agree to separate the process of judg-ment upon substantive and procedural issues. To achieve this objective, WTOMembers adopted the Transparency Mechanism for Regional Trade Agreements in2006, which sets out in much greater detail than previous documents the proceduralduties of WTO Members to notify the WTO Secretariat of the agreements they planto negotiate, of the conclusion of the negotiations and of the working of the RTAs.48

42 Understanding on the Interpretation of Article XXIV of the General Agreement on Tariffs and Trade 1994,LT/UR/A-1A/1/GATT/U/4 (1994), http://www.wto.org/english/docs_e/legal_e/10-24_e.htm (vis-ited 20 September 2013) (1994 Understanding).

43 See 1994 Understanding, above n 42, at para 12. The 1994 Understanding provides that Article XXII andXXIII of the GATT may be invoked with respect to any matters arising from the application of thoseprovisions of Article XXIV relating to customs unions, free-trade areas or interim agreements leading tothe formation of a customs union or free-trade areas.

44 World Trade Organization, Work of the Committee on Regional Trade Agreements (CRTA), http://www.wto.org/english/tratop_e/region_e/regcom_e.htm (visited 20 September 2013).

45 Petros Mavroidis, Trade in Goods (Oxford: Oxford University Press, 2007) at 167. He notes, Schott(1989) identifies four cases where PTAs were judged broadly consistent with the GATT. Since his studythere has been one case where there has been a definitive and unambiguous acceptance, at the CRTAlevel, that the notified PTA was GATT consistent: the CU between the Czech and the Slovak republics.We are simply in the dark as to the consistency of the remaining 99% of all PTAs currently in place.

46 World Trade Organization, Factual Abstracts, http://www.wto.org/english/tratop_e/region_e/factua-l_abstracts_e.htm (visited 20 September 2013).

47 Jo-Ann Crawford, New Transparency Mechanism for Regional Trade, 11 Singapore Year Book of Inter-national Law 133 (2007) at 135.

48 Transparency Mechanism for Regional Trade Agreements, WT/L/671 (2006), http://www.wto.org/eng-lish/tratop_e/region_e/trans_mecha_e.htm (visited 20 September 2013) (2006 Transparency Mecha-nism). The WTOs RTA Database is accessible here: http://rtais.wto.org/UI/PublicMaintainRTAHome.aspx (visited 20 September 2013).




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The Secretariat is required to set up a major database of RTAs and is even em-powered to make inquiries into the existence of agreements, which have not beennotified to the WTO.49 Adoption of reports is now limited to a one day meetingwhere the factual report prepared by the Secretariat is studied and questions asked ofthe parties in the CRTA.50 No judgment is passed on potential conflict with the lawof the WTO.51 This is now clearly left to complaint procedures under the DSU.

The 2006 Transparency Mechanism applied to all RTAs, but, to ensure that prefer-ential agreements made under the Enabling Clause or otherwise by the WTO col-lective membership were not neglected, the WTO also adopted the TransparencyMechanism for Preferential Trade Agreements in 2010.52 Publicity requirements forpreferential trade agreements are similar but review is before the WTO Committeeon Trade and Development.

The result of these developments is that the ball has been sent squarely into thedispute settlement court. The process of review of regional and preferential tradeagreements in the WTO now functions, but does not produce reasoned judgmentsof different agreements, still less does it produce answers to potential disputes be-tween parties. This is deferred entirely to the procedures established under the DSUafter a WTO Member has referred a complaint to the DSB. This has advantages anddisadvantages. The principal advantage is that the DSU creates a compulsory and abinding procedure, which is open to all WTO Members and can be invoked regard-less of economic or political strength. The disadvantage is that it may have placedthe attention of dispute settlement panels and the Appellate Body too much on thestrict terms of the DSU rather than on the broader framework of the totality ofWTO law. What follows is a plea to panellists and the Appellate Body to considerthe problems posed by the troubled relationship of RTAs and the WTO from thebroader perspective of the unity of international trade law rather than forcing allthrough the prism of the DSU.

To complete this introduction, it is important to remember that this debate onthe relationship between dispute settlement procedures of RTAs and the WTO DSUis part of a broader debate on the legitimacy of recourse to bilateral and regionalpreferential arrangements. Many commentators see these agreements as a threat tothe integrity of the WTO, while others see RTAs as a means of promoting trade lib-eralization as well as experimenting with forms of economic integration not envis-aged in WTO law. The literature on the issue is vast; it encompasses analysis by

49 Ibid, at paras 20 and 21.50 Ibid, at para 11.51 Lorand Bartels disagrees with this position. He distinguishes between full and interim agreements. While

the degree of control by WTO Members over full agreements is rather vague, this is not the case for in-terim agreements. He argues that Article XXIV:7(b) allows WTO Members to recommend that an in-terim agreement not be considered reasonable. Consequently, there is an obligation on the parties to thatagreement not to maintain the agreement unless modifications are made. See Lorand Bartels, Interimagreements under Article XXIV GATT, 8 (2) World Trade Review 339 (2009) at 342.

52 Transparency Mechanism for Preferential Trade Arrangements, WT/L/806 (2010), http://www.wto.org/english/news_e/news12_e/rta_13mar12_e.htm (visited 20 September 2013) (2010 TransparencyMechanism).




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economists,53 political scientists,54 and lawyers.55 The 2011 Report of the WTO ablyreviews many aspects of the question.56 The general consensus is probably bestsummed up in a report by the World Bank suggesting that trade liberalization is al-ways more efficient for the global economy if it results from multilateral agreementbut that, in many circumstances, RTAs may offer an attractive second best solutionfrom the economic and political perspectives.57 Suffice it to say that these agree-ments are permitted by the GATT Article XXIV and the law and practice of theWTO and that the great majority of WTO Members have had, and continue to have,recourse to RTAs. For the time being, the WTO has to deal with the problems posedby RTAs and cannot ignore them.

I I . THE DISPUTES

A. GATT casesWhile questions had been raised concerning the legal implications of the GATTArticle XXIV process and the possibility of submitting disputes arising out of RTAsto GATT panel reviews in the years following 1947,58 few GATT Contracting Par-ties were eager to put these questions to the test. There appeared to be a general re-luctance to put such disputes before GATT panels. Thus the 1962-63 Chicken War,which arose between the USA and the EEC, was fought by retaliation and ultimatelysolved by negotiation.59 For over twenty years, GATT diplomats used their skills tokeep disputes potentially involving Article XXIV from dispute settlement panels. Inthe 1976 case arising out of Canadas dissatisfaction at the allegedly inadequate ad-justments made by the European Economic Community (EEC) to its tariff, resultingfrom its enlargement, the panel refused to hear Canadas complaint under GATTArticle XXIV.6 on the grounds that the complexity of the issues involved made apanel procedure inappropriate.60 A similar dispute, mentioned above, between Can-ada and the EEC on the issue of Canadas ordinary and quality wheat rights datingfrom the Article XXIV.6 negotiations on 29 March 1962 was submitted to an Arbi-trator and resolved in 1990.61

53 Viet D. Do and William Watson, Economic Analysis of Regional Trade Agreements, in Lorand Bartelsand Frederico Ortino (eds), Regional Trade Agreement and the WTO Legal System (Oxford: Oxford Uni-versity Press, 2006) 7.

54 Andrew Moravcsik, The Choice for Europe: Social Purpose and State Power from Messina to Maastricht (Ith-aca, NY: Cornell University Press, 1998).

55 Leon Trakman, The Proliferation of Free Trade Agreements: Bane or Beauty? 42 Journal of WorldTrade Law (2008).

56 See World Trade Report 2011, above n 15.57 Ibid, at 198.58 In USMargins of Preference, the Contracting parties decided the determination of rights and obligations

between governments arising under a bilateral agreement is not a matter within the competence of theCONTRACTING PARTIES. USMargins of Preference (1949), BISD 11/11, http://www.worldtrade-law.net/reports/gattpanels/marginspreference.pdf (visited 20 September 2013).

59 Herman Walker, Dispute Settlement: The Chicken War, 58 American Journal of International Law(1964) 671 (Walker).

60 Ibid, at 673677.61 Award by the Arbitrator, Canada/European CommunitiesArticle XXVIII Rights (Article XXVIII Rights),

DS12/R-37S/80, published 26 October 1990.




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By the 1980s, the EEC had granted a range of tariff preferences to different cate-gories of countries under a variety of trade agreements; furthermore, the success ofthe Common Agricultural Policy (CAP) in encouraging the production of crops inthe EC, which subsequently supplanted imports from other GATT Contracting Par-ties, gave rise to several major disputes in which the EEC sought to defend its legalposition, in part, by invoking Article XXIV.

The EEC/EC was the object of several other complaints by the USA and otherGATT Contracting Parties. Some involved so-called non-violation complaints inwhich the EC did not invoke Article XXIV as a defence. But, in others, it did invokeArticle XXIV. In the 1985 EECProduction Aids Granted on Canned Peaches pro-ceeding, the USA alleged that subsidies under the CAP resulted in nullification andimpairment of exports to the EEC.62 The panel issued a non-binding recommenda-tion that the EEC take steps to restore the competitive relationship between EECproduce and the imported goods in question.

In the ECCitrus litigation, the USA alleged that its exporters of citrus fruits hadsuffered nullification and impairment of their rights as a result of the grant of prefer-ential tariff treatment of citrus fruit imports by the EU under its trade agreements.63

The agreements involved association agreements with future EU members such asSpain and Greece, former members of the French Customs Territory, Algeria, Mo-rocco and Tunisia and Mediterranean partner countries such as Malta, Cyprus, Tur-key, Israel, and Lebanon. Objection was also taken to the change in tariff treatmentof citrus products in the UK, Ireland, and Denmark after their adhesion to the EC in1973. The USA argued that the tariff preferences constituted violations of GATTArticle I, which required compensatory adjustment. The USA also argued that thevarious agreements did not meet the requirements of Article XXIV in that none ap-peared to involve a binding commitment to form a customs union or an FTA andfurther that such agreements being exceptions from Article 1 required a restrictive in-terpretation.64 The EC responded that the preferences were contemplated by variousparagraphs of Article XXIV as being interim agreements leading to FTAs or customsunions and, in the case of the UK, Ireland, and Denmark, as part of the process ofenlargement of the EC itself. The EC also argued that Article XXIV should not beseen as derogating from Article I, but that the two articles constituted principles ofequal validity under the GATT.65 The EC argued that since all these agreementshad been notified to the GATT and that since the process of review by working par-ties established by the Contracting Parties had led to no recommendations eitherpositive or negative, the issue of compatibility with Article XXIV could not be beforethe panel thus implying that the EC was free to grant these preferences.66 Finally,

62 GATT Panel Report, European Economic CommunityProduction Aids Granted on Canned Peaches,Canned Pears, Canned Fruit Cocktail and Dried Grapes (Complaint by the United States) (EECCannedFruit), L/5778, 20 February 1985, unadopted.

63 Panel Report, ECCitrus, above n 40, para 3.3.64 Ibid, at para 3.8.65 Ibid, at para 3.4.66 Panel Report, ECCitrus, above n 40, paras 3.93.10. Also see para 3.11: To examine the consistency of

the agreements with Article XXIV in the context of a violation complaint under Article XXIII would runcounter to the highly pragmatic attitude the CONTRACTING PARTIES had taken towards interimagreements.




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the EC argued that American citrus exporters could not in fact prove that preferenceswere the cause of any of the adverse commercial effects that they claimed to havesuffered. The USA maintained its point that nothing stopped it from arguing a viola-tion of Article XXIV, but concentrated on adducing evidence that its citrus exportshad suffered nullification and impairment under Article I.67

The five panel members appeared to accept that the issue of compatibility withArticle XXIV was not before them, partly because of the drafting of the terms of ref-erence, and because there had been no consensus during the process of review ofeach agreement and no direction had been given to the EC to withdraw its measures;in consequence, the panel considered that there was no issue of prima facie violationof the GATT but only an issue of factual nullification and impairment. Whether thereasoning of the panel in this case was legal or diplomatic, readers must judge forthemselves. At the end of a very lengthy and complex report, the panel held that, onthe basis of the evidence available to it, the USA had suffered nullification and im-pairment of its rights in respect of potential exports of fresh oranges and lemons as aresult of the ECs granting of preferences under various agreements. The evidenceadduced respecting many other categories of citrus fruit and juices was not deemedsufficient to warrant a similar finding. This being the case, the USA was entitled tocompensatory adjustment in proportion to the nullification and impairmentsuffered.68

The Citrus report displayed the reluctance of panels to make firm recommenda-tions on alleged violations of Article XXIV. This reluctance was displayed in severalsubsequent GATT proceedings. The Citrus report was not adopted.

EECOilseeds was the major non-violation case in which the USA alleged thatsubsidies to the production of oilseeds by the EEC under the CAP compromised thetariff bindings previously agreed to between the two Contracting Parties underArticle II.69 This case was vigorously argued and the EECs subsequent implementingaction was subject to a second proceeding.70 The panel held that the result of CAPsubsidies had in fact compromised the original expectations of producers in the USAthat they would be able to export oilseeds to the EEC market when tariffs had firstbeen bound. The panel thus found that there had been non-violation nullificationand impairment resulting from the EEC agricultural subsidies. The complaint of theUSA in this case was based on the failure of consultations under Article XXIV.6.However, the EC did not base its defence on Article XXIV but rather suggested thatthe original commitments had been superseded by other commitments made in laterenlargement negotiations.71

Interestingly, in the case of a dispute between Canada and the EC on the issue ofCanadas ordinary and quality wheat rights, which originated in Article XXIV.6 nego-tiations, Canada based its complaint against the EC on bilateral agreements

67 Ibid, at para 3.12.68 Ibid, at para 5.1.69 Panel Report, EECOilseeds, above n 40.70 GATT Panel Report, Follow-up on the Panel Report European Economic CommunityPayments and Subsi-

dies Paid to Processors and Producers of Oilseeds and Related Animal-Feed Proteins, DS28/R-39S/91,adopted 31 March 1992.

71 Panel Report, EECOilseeds, above n 40, paras 54, 71, 75.




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concluded on 29 March 1962.72 In response to the argument as to the propriety ofraising this bilateral agreement, the Arbitrator agreed to consider it appropriate inthe circumstances.73 The Contracting Parties adopted this report.

The EECBananas case was the final, and ultimately unadopted, litigation underthe GATTbefore the creation of the WTO and the entry into force of the DSUin which Article XXIV issues were argued between the USA, with support of otherstates, and the EEC.74 In these cases, the EEC sought to justify its system of importquotas and other measures governing the importation and marketing of bananasfrom all sources around the world, including both former EU Members colonies andthe major Central American producing countries. The USA argued that the EECquotas were a violation of Article I, tariff bindings under Article II, as well as ArticleXI. Among the many arguments advanced by the EEC was the position that the quo-tas were justified under Article XXIV. In particular, the EEC argued that the LomeConvention trade and aid agreement with the ACP countries was an FTA justifiedunder article XXIV75 and that it was also a commodity agreement equally justifiedunder the GATT.76 The panel rejected both arguments. The panel noted that theLome Convention was not a trade agreement based on reciprocity, but rather an es-sentially unilateral agreement offered by the EU to ACP countries. Hence, it couldnot be justified under the Article XXIV as a customs union or a FTA.77 The sameposition was taken by the panel with respect to the argument that the Bananas Pro-tocol of the Lome Convention was a commodity agreement.78 In the opinion of thepanel, the protocol did not meet the requirements of the GATT for commodityagreements.79

72 A 1990 complaint by Canada under Article XXIV.6, but not raising article XXIV issues, was dismissed byan Arbitrator. Award by the Arbitrator, Article XXVIII Rights, above n 61.

73 The Arbitrator noted: In principle a claim based on a bilateral agreement cannot be brought under themultilateral dispute settlement procedures of the GATT. An exception is warranted in this case given theclose connection of this particular bilateral agreement with the GATT, the fact that the Agreement is con-sistent with the objectives of the GATT, and that both parties joined in requesting recourse to the GATTArbitration procedures. Article XXVIII Rights, above n 61, at 5.

74 GATT Panel Report, EECMember States Import Regimes for Bananas (ECBananas I), DS32/R, 3June 1993, unadopted; GATT Panel Report, EECImport Regime for Bananas (EECBananas II),DS38/R, 11 February 1994, unadopted.

75 Panel Report, ECBananas I, ibid, at para 217.76 Panel Report, ECBananas II, above n 74, para 165.77 Panel Report, ECBananas I, above n 74, paras 358, 372; Panel Report, ECBananas II, above n 74,

paras 156164. The Panel also rejected the EECs argument that Article XXIV was subject to non-reciprocity under Article XXXVI:8. The Panel concluded that Article XXIV was not specifically men-tioned in the Note to Article XXXVI:8 and that the participants in the negotiations of a free trade area inthe sense of Article XXIV, although involved in a process of tariff reduction, did not derive their negotiat-ing status from the General Agreement, nor were they bound to follow procedures set out under the Gen-eral Agreement for the conclusion of the agreement. The Panel concluded that the wording andunderlying rationale of the note to Article XXXVI:8 thus suggested to the Panel that Article XXXVI:8and its Note were not intended to apply to negotiations outside the procedural framework of the GeneralAgreement, such as negotiations of a free trade area. Panel Report, ECBananas II, above n 74,para 161.

78 Panel Report, ECBananas II, above n 74, paras 165166.79 The Panel held that in order to benefit from the exception in Article XX(h), such criteria or agreements

had to be submitted to the CONTRACTING PARTIES with an explicit invocation of that provision.Ibid, at para 166.




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The significance of this litigation was not easy to establish on the eve of the estab-lishment of the WTO. Most reports, except the EECOilseeds panel reports, hadbeen too controversial to adopt. There was also an obvious reluctance of GATTContracting Parties to submit the issue of compatibility of particular RTAs, or meas-ures taken pursuant to RTAs to a clear legal test under Article XXIV. The view waswidely held that review of customs unions and FTAs was essentially a policy exerciseor that the criteria of Article XXIV were too imprecise to apply and that their imple-mentation was best left to negotiation between Contracting Parties. But the fact re-mains that on several occasions these issues were pleaded and argued before GATTpanels, so that the matter was certainly not tabula rasa when it was put to the newlyformed WTO. The affirmation of the 1994 Understanding that Article XXIV was sub-ject to dispute settlement rested on solid, but hotly contested ground.

B. WTO casesSince 1994, the DSU has dealt with at least 13 cases in which the existence of anRTA has been pleaded or argued in one way or another.80 As the following discus-sion of these cases demonstrates, arguments have been raised in many different con-texts: GATT Article XXIV,81 the corresponding Article V of the GATS,82 the

80 WTO Appellate Body Report, TurkeyRestrictions on Imports of Textile and Clothing Products (TurkeyTextiles), WT/DS34/AB/R, adopted 22 October 1999; WTO Appellate Body Report, ArgentinaSafe-guard Measures on Imports of Footwear (Complaint by the EC) (ArgentinaFootwear), WT/DS121/AB/R,adopted 14 December 1999; WTO Appellate Body Report, United StatesDefinitive Safeguards Measuresof Wheat Gluten Products from European Communities (Complaint by the EC) (USWheat Gluten), WT/DS166/AB/R, adopted 22 December 2000; WTO Appellate Body Report, CanadaCertain measures af-fecting the Automotive Industry (Complaint by the United States) (CanadaAutos), WT/DS139/AB/R &WT/DS142/AB/R, adopted 22 December 2000; WTO Appellate Body Report, United StatesDefinitiveSafeguard Measures on Imports of Circular Welded Carbon Quality Line Pipe from Korea (Complaint byKorea) (USLine Pipe), WT/DS202/AB/R, adopted 15 February 2002; WTO Panel Report, Argen-tinaDefinitive Anti-Dumping Duties on Poultry from Brazil (ArgentinaPoultry), WT/DS241/R, adopted22 April 2003; WTO Appellate Body Report, United StatesDefinitive Safeguard Measures on Imports ofCertain Steel Products (Complaint by Brazil) (USSteel Safeguards), WT/DS259/R, adopted 10 Novem-ber 2003; Appellate Body Report, ECTariff Preferences, above n 41; WTO Panel Report, UnitedStatesInvestigation of the International Trade Commission in Softwood Lumber from CanadaRecourse toArticle 21.5 of the DSU (Complaint by Canada) (USSoftwood Lumber), WT/DS277/R, adopted 22March 2004; WTO Panel Report, MexicoTax Measures on Soft Drinks and Other Beverages (Complaintby the United States) (MexicoSoft Drinks), WT/DS308/R, adopted 7 October 2005; WTO AppellateBody Report, BrazilMeasures Affecting Imports of Retreaded Tyres (BrazilRetreaded Tyres), WT/DS332/AB/R, adopted 3 December 2007; WTO Consultations, European CommunitiesMeasures Affect-ing the Tariff Quota for Fresh or Chilled Garlic (EUTariff Garlic), DS/349 (this dispute is still in consult-ations phase see http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds349_e.htm (visited 20September 2013)); WTO Panel Report, Dominican RepublicSafeguard Measures on Imports of Polypropy-lene Bags and Tubular Fabric (Dominican RepublicPolypropylene Bags), WT/DS415/R, adopted 31 Janu-ary 2012; In WTO Appellate Body Report, United StatesMeasures Concerning the Importation, Marketingand Sale of Tuna and Tuna Products (USTuna II), WT/DS381/AB/R, adopted 16 May 2012, the USAhad originally requested consultations under NAFTA with Mexico on the basis that Mexico should movethe case from the WTO to NAFTA. Ultimately, the existence of an RTA was not pleaded.

81 Appellate Body Report, TurkeyTextiles, ibid.82 General Agreement on Trade in Services, Marrakesh Agreement Establishing the World Trade Organization,

Annex 1B, The Legal Texts: The Results of the Uruguay Round of Multilateral Trade Negotiations, 15April 1994, 1869 UTS 183, 33 IM 1167 (1 January 1995) at art 7 (GATS).




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Enabling Clause,83 safeguards under an FTA,84 seeking justification of a special tariffregime under an FTA,85 attempts to preclude review of a measure under the DSU,86

invocation of GATT Article XX to justify decisions by dispute settlement bodies ofRTAs allegedly not in conformity with other provisions of the GATT,87 argumentsof forum non conveniens that the dispute before the DSB in fact involves a disputeunder an RTA,88 as well as the invocation of Article XXIV.6 to challenge the grant ofnew tariff-rate quotas to a third party resulting from EU enlargement.89 The invoca-tions of RTAs have been used as both a shield and a sword,90 in justification and de-fence. There are some relatively straightforward cases where RTAs were used toargue exemptions from general safeguard measures granted under many FTAs or tohalt WTO proceedings in favour of proceedings under an FTA. The most complexand controversial cases are those in which the State Parties to an RTA have soughtto plead decisions taken pursuant to their agreements before panels establishedunder the DSU.91 Most of these decisions have dealt with substantive legal argu-ments and few have clarified the procedural rights and duties arising under ArticleXXIV, Article V, or the Enabling Clause. The result is a body of decisions that haveclarified some of the relevant law, but which leave many questions unresolved.

The most tantalizing issue emerging from these cases is clearly the matter of theright to plead RTA decisions before the DSB. Does the DSU create a monopoly andgive absolute priority to the DSB? Or is it possible to imagine a dialogue betweenthe WTO and RTAs? The BrazilRetreaded Tyres decision may lead to some clarifi-cations, but many significant issues remain unresolved.

1. Turkey TextilesTrue to its mission to bring greater order to GATT law, the AB took on the chal-lenge posed by RTAs as soon as it was offered. The TurkeyTextiles decision re-mains the most important single decision rendered by the AB in this area.92 In thislitigation, Turkey argued that it was justified in reintroducing quotas on textile im-ports from India, despite having bound commitments to India to the contrary, onthe grounds that the subsequent establishment of a customs union with the EC pro-vided justification under GATT Article XXIV. The panel, like the AB, accepted that

83 WTO Appellate Body Report, IndiaPatent Protection for Pharmaceutical and Agricultural Chemical Prod-ucts (IndiaPatents (US)), WT/DS50/AB/R, adopted 19 December 1997.

84 Appellate Body Report, USWheat Gluten, above n 80; Appellate Body Report, USLine Pipe, above n80; Appellate Body Report, USSteel Safeguards, above n 80.

85 Appellate Body Report, CanadaAutos, above n 80.86 Panel Report, ArgentinaPoultry, above n 80; Panel Report, MexicoSoft Drinks, above n 80.87 Panel Report, USSoftwood Lumber, above n 80; Appellate Body Report, BrazilRetreaded Tyres, above

n 80.88 Panel Report, MexicoSoft Drinks, above n 80; Panel Report, Dominican RepublicPolypropylene Bags,

above n 80.89 Consultations, EUTariff Garlic, above n 80.90 If seen as a pure exception Article XXIV can only be a shield. However, it has also been seen and argued

as a justification. This reflects the tension between those who construe Article XXIV as only an exceptionand those who hold it to be equal to the opening articles of the GATT.

91 Panel Report, USSoftwood Lumber, above n 80; Appellate Body Report, BrazilRetreaded Tyres, aboven 80.

92 Appellate Body Report, TurkeyTextiles, above n 80.




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Article XXIV allowed a plea that the introduction of a customs union might permitthe parties to take measures which were normally contrary to the GATT. However,in rejecting Turkeys arguments, the panel held that Article XXIV only justified meas-ures contrary to GATT Article I.93 The AB took a broader approach in principle andheld that Article XXIV contemplated measures covered by a wide range of theGATT beyond the mere scope of the Most Favoured Nation (MFN) provisions ofArticle I.94 To do this, the AB gave weight to the general provisions of ArticleXXIV.4 as well as the preamble to paragraph 5 and the requirements of paragraph 8.According to the AB, a party invoking the benefit of Article XXIV had the burden ofshowing that the contravening measures have been introduced on the formation ofthe customs union and that it respects the substantive requirements of paragraphs 5and 8.95 The AB also stressed the requirement of paragraph 2 of the 1994 Under-standing that the measures must avoid creating adverse effects upon the commerceof other Members.96 Most significantly, the AB read into Article XXIV a conditionthat to be justified any measure must be necessary for the formation of the customsunion. In effect, according to the AB, for the measure to be justified the party invok-ing it must demonstrate that it meets the tests of paragraphs 5a and 8a of ArticleXXIV and the party must demonstrate that the formation of the customs unionwould be prevented if it were not allowed to introduce the measure.97

As Trebilcock and Howse note, the approach taken by the AB with respect to thescope of Article XXIV is in principle a broad one, but at the same time the AB imposeda severe burden of justification in the form of the necessity test.98 Clearly, the TurkeyTextiles decision was not designed to open the floodgates. Furthermore, this case dealswith a customs union; there has yet to be a fully comparable case dealing with an FTA.

2. Safeguards and Article XXIVSeveral cases have dealt with the relationship between the application or exemptionof safeguards under RTAs and Article XXIV.99 A genuine customs union like the EU

93 WTO Panel Report, TurkeyRestrictions on Imports of Textile and Clothing Products (TurkeyTextiles),WT/DS43/R, adopted 31 May 1999, para 9.208.

94 Even so, the AB concluded that Turkey was not required to apply the quantitative restrictions at issue inthe appeal in order to form the customs union and therefore it failed to satisfy the necessity requirementof Article XXIV. Appellate Body Report, TurkeyTextiles, above n 80.

95 Ibid, para 46.96 Ibid, at para 57.97 Ibid, at para 58.98 Michael Trebilcock, Robert Howse and Antonia Eliason, The Regulation of International Trade, 4th ed.

(New York: Routledge, 2012) at 117 (Trebilcock, Howse, and Eliason). Joost Pauwelyn is particularlycritical of the necessity requirement in the context of safeguards. He argues that the Appellate Bodys re-quirements for Article XXIV justification, spelled out in TurkeyTextiles, are supported by neither thetext nor the spirit of Article XXIV and that they ought to be overturned. He argues that that the neces-sity requirement should be replaced with the requirement that (the exclusion of regional imports) is partof the formation of a regional arrangement in line with Article XXIV. This would allow for the exclusionof imports from a safeguard measure under Article XXIV. See Joost Pauwelyn, The Puzzle of WTO Safe-guards and Regional Trade Agreements, 7 (1) Journal of International Economic Law 109 (2004) at 141(Pauwelyn, Puzzle of WTO Safeguards).

99 Appellate Body Report, ArgentinaFootwear, above n 80; Appellate Body Report, USWheat Gluten,above n 80; Appellate Body Report, USLine Pipe, above n 80; Appellate Body Report, USSteel Safe-guards, above n 80.




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formally prohibits safeguards and similar measures between member states,100 and asurprising number of FTAs, like NAFTA101 provide for the exclusion of other mem-ber states of an FTA from the application of general safeguard measures adopted byany one of them. The first complaint arising out of safeguards involved a plea by Ar-gentina invoking MERCOSUR in justification of a safeguard measure that it hadtaken.102 Other cases involved complaints against the USA in circumstances where ithad exempted Canada and Mexico from general safeguards measures pursuant toChapter 8 of NAFTA.103 Interestingly, the panels in the ArgentinaFootwear104 andthe USWheat Gluten105 cases considered arguments based on Article XXIV exten-sively, while the Appellate Body showed much greater reserve on the same issues.The basis of the safeguards exemption was the same in the USLine Pipe and theUSSteel Safeguards cases, the Article XXIV justification was argued at some lengthin the former and briefly in the latter case before the panels, but was given littleweight by the AB in either case.106

In the ArgentinaFootwear case, Argentina, after investigating imports and find-ing injury resulting from imports from all sources, imposed safeguard duties only onimports from non-MERCOSUR countries. The panel concluded that GATT ArticleXIX and Articles 2 and 4 of the Safeguards Agreement required that the assessment ofthe sources of injury and the imposition of duties must be done in parallel and, forthis reason, found that Argentina had violated its commitments by considering allsources of injury but then excluding its MERCOSUR partners. Argentina argued infurther justification of its measures that Article XXIV.8 had the effect of prohibitingthe imposition of safeguards against partners in a customs union because Article XIXwas not listed among the duties and other regulations of commerce that might bemaintained under Article XXIV.8(a)(i) or (b). The panel noted that the footnote toArticle 2.1107 of the Safeguards Agreement did not appear to be an absolute ban on re-taining safeguards and, in any case such a restriction might be maintained during thetransitional period of establishment of the customs union, or might be acceptedunder the substantially all trade requirement.108 The panel also speculated on thepossible difference between the treatment of a customs union and an FTA, particu-larly if the customs union chose to impose safeguards as a single unit.109 But, in thecircumstances, where Argentina had found injury arising out of sources in and

100 Treaty on European Union, Treaty of Maastricht, 7 February 1992, C 325/5 (entered into force on 1 No-vember 1993).

101 See NAFTA, above n 28, at art 802.102 Appellate Body Report, ArgentinaFootwear, above n 80.103 Appellate Body Report, USWheat Gluten, above n 80; Appellate Body Report, USLine Pipe, above

n 80; Appellate Body Report, USSteel Safeguards, above n 80.104 WTO Panel Report, ArgentinaSafeguards Measures on Imports of Footwear (ArgentinaFootwear),

WT/DS121/R, adopted 25 June 1999.105 WTO Panel Report, United StatesDefinitive Safeguard Measures on Imports of Wheat Gluten from the

European Communities (USWheat Gluten), WT/DS166/R, adopted 31 July 2000, paras 8.1788.181.106 See generally Trebilcock, Howse, and Eliason, above n 98.107 Panel Report, ArgentinaFootwear, above n 104, at para 8.95: Nothing in the (Safeguards) Agreement

prejudges the interpretation of the relationship between Article XIX and paragraph 8 of the ArticleXXIV of GATT 1994.

108 Ibid, at paras 8.938.98.109 Panel Report, ArgentinaFootwear, above n 104, paras 8.998.100.




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outside the MERCOSUR, it could not then apply the safeguard measures only to theexternal sources and exempt its MERCOSUR partners.110

The AB took issue with much of the panels analysis of the application of ArticleXXIV. In particular, the AB considered that footnote to Article 2.1 of the SafeguardsAgreement only applied to safeguard measures applied by a customs union itself,which had not happened in this case. Secondly, the AB stated that any measures tobe justified under Article XXIV must be introduced upon the formation of the cus-toms union and were subject to the necessity test declared in the TurkeyTextilesdecision.111 Since these issues had not been properly raised, the AB reversed thepanel on these matters. However, the AB strongly affirmed that the parallelism testderived from Article 2 of the Safeguards Agreement was applicable and led the AB,like the panel, to conclude that Argentina had violated the Agreement.112

In the USWheat Gluten case, the USITC investigated the complaint that im-ports of wheat gluten from all sources were causing serious injury in the USA, butsubsequently concluded that imports from Mexico and Canada, both NAFTA par-ties, were not contributing importantly to the serious injury and therefore excludedCanadian and Mexican imports from the application of safeguards measures.113 Thisexclusion was challenged by the EC. In response, the USA questioned whether theAB had established a broad requirement of parallelism in ArgentinaFootwear, butasserted that in following Chapter 8 of NAFTA it had done everything necessary torespect the concept of parallelism set out in that decision.114 The USA asserted itsinterpretation of parallelism to require that it consider injury from all sources butallowing it to exempt from safeguard measures NAFTA partners whose exports hadnot contributed to the injury.115 The panel found this approach unsupportable underthe Safeguards Agreement, which in its view required symmetry of treatment so thatall sources be considered or excluded at the start of the investigation.116 The panelalso noted that since the USA interpreted Article XXIV as giving a defence only toArticle XIX measures, but not to the Safeguards Agreement,117 the requirements ofsymmetry and parallelism must stand and had been violated.118 The panel furtherstated: We do not believe that we have been asked to rule, and consequently makeno ruling, on whether or not, as a general principle, a member of a free trade areacan exclude imports from other members of that free trade area from the applicationof a safeguard measure.119 Before the AB, the USA challenged this approach, but theAB, upholding the panels findings in para 8.182 of the panel report, stated: We seeno error in this approach, and make no findings on these arguments.120

110 Appellate Body Report, ArgentinaFootwear, above n 80, para 102.111 Ibid, at paras 99109.112 Ibid, at paras 111114.113 Panel Report, USWheat Gluten, above n 105, para 8.162.114 Ibid, at paras 8.1588.159.115 Ibid, at paras 8.1748.175.116 Ibid, at paras 8.1768.179.117 Ibid, at para 8.181.118 Ibid, at para 8.182.119 Ibid, at para 8.183.120 Appellate Body Report, USWheat Gluten, above n 80, para 99.




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In the two subsequent cases involving safeguards taken by the USA pursuant toNAFTA, USLine Pipe and USSteel Safeguards turn largely on complex argu-ments pertaining to the application of the principle of parallelism in the particularfacts of the investigations, and the methodologies and findings of the customsauthorities of the USA. But, in both cases Article XXIV was raised. In the USLinePipe case, Korea advanced a procedural argument that the USA could not raise theArticle XXIV defence, as the CRTA had not yet issued a final decision that NAFTAwas in compliance with Article XXIV.8.121 The panel rejected this argument out ofhand122 and concluded that the United States is entitled to rely on an ArticleXXIV defence against Koreas claims under Articles I, XIII and XIX regarding theexclusion of imports from Canada and Mexico from the scope of the line pipemeasure.123 The AB did not find it necessary to deal with the issue extensively asthe panel had found that the conditions for the application of the Article XXIV de-fence had not been met and therefore declared the findings of the panel on thesematters to be moot.124 Article XXIV is briefly discussed by the panel in the USSteel Safeguards case but dismissed because the panel made a finding that the prin-ciple of parallelism had been violated; thus the AB did not have to take up thematter.125

The result is that there are four decisions in which the method of evaluating justi-fications for excluding imports from RTA partners from safeguard measures hasbeen challenged by other WTO Members and fairly extensively considered at thepanel level. Panels have assumed that exclusion from safeguards is legitimate if theprinciple of parallelism is followed, but there is no ruling by the AB that the advan-tage given to FTA partners126 by excluding them from safeguard measures is eitherjustified or unacceptable under WTO law. Thus, the four cases deal with ArticleXXIV but in a partial and fragmentary fashion leaving many questions concerningthe application of an Article XXIV defence open.

121 WTO Panel Report, United StatesDefinitive Safeguards Measures on Imports of Circular Welded CarbonQuality Line Pipe From Korea (USLine Pipe), WT/DS202/R, adopted 29 October 2001, para 7.143.

122 Ibid, at para 7.144.123 Ibid, at para 7.146.124 Appellate Body Report, USLine Pipe, above n 80, para 199: Given these conclusions, we need not ad-

dress the question whether an Article XXIV defence is available to the United States. Nor are werequired to make a determination on the question of the relationship between Article 2.2 of the Agree-ment on Safeguards and Article XXIV of the GATT 1994. We, therefore, modify the findings and conclu-sions of the Panel relating to these two questions contained in paragraphs 7.135 to 7.163 and inparagraph 8.2(10) of the Panel Report by declaring them moot and as having no legal effect.

125 WTO Panel Report, United StatesDefinitive Safeguard Measures on Imports of Certain Steel Products(Complaint by Brazil) (USSteel Safeguards), WT/DS259/R, adopted 11 June 2003, para 10.711:Finally, since the Panel has found that the exemption of imports from Canada, Mexico, Israel and Jor-dan in this case was inconsistent with the requirement of parallelism, there was no need to address thequestion whether this exemption in departure of Article I of GATT 1994 and Article 2.2 of the Agree-ment on Safeguards was justified by Article XXIV of GATT 1994. As the Appellate Body has stated, thequestion of whether Article XXIV of GATT 1994 can serve as an exception to Article 2.2 of the Agree-ment on Safeguards becomes relevant only when the requirement of parallelism has been compliedwith.

126 As opposed to partners in a customs union.




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3. Exemption from customs dutiesWhen the NAFTA negotiations were completed, Canada maintained a system of ex-emptions from customs duties on automobiles directed to companies, which wereboth importers and producers of automobiles in Canada. This had the effect ofimposing duties on some, mainly Japanese, automobiles, while exempting those ofcompanies with production facilities in Canada. Japan objected to the measures andcomplained to the DSB.127 This was part of an allegedly non-discriminatory scheme,originating in the 1965 CanadaUnited States Automotive Products Agreement(Autopact),128 by which all manufacturers of automobiles who maintained a certainlevel of Canadian value added were exempted from duties both across NAFTA bor-ders, but also into Canada from third countries. Canadas defence was that the meas-ures were non-discriminatory, but it also raised Article XXIV as a defence to theJapanese critique.129 The EC, as intervener, responded that the measures failed tomeet the test of necessity and there was not even a true FTA since the Autopact, ascarried forward into NAFTA Annex 300A, was really a sectoral agreement.130 Thepanel summarily dismissed the Article XXIV argument on the ground that it did notcontemplate the granting of preferences to third states.131

In a 2006 complaint, that has not gone beyond the consultations stage, Argentinacomplained that the EU by increasing Chinas tariff-rate quota by 20,500 tonnes toimport garlic, acting pursuant to Article XXIV, as a result of its most recent expan-sion, had failed to respect the conditions set by XXIV.6 by not taking into accountArgentinas initial negotiating rights.132

4. Status of measures under the enabling clauseUntil the proceedings in Indias complaint against the EU concerning treatment ofcertain intellectual property rights under the EUs implementation of the GeneralizedSystem of Preferences (GSP), there had been no interpretation of the scope and ap-plication of the Enabling Clause, adopted as part of the Tokyo Round of MultilateralTrade Agreements in 1979, as it applied to other measures taken by WTO Members.The EU not only implemented preferences under the GSP but also added additionalcategories of preferences: in particular, the EU offered preferential treatment to 12states that agreed to implement special measures to combat production and traffick-ing in drugs, the Drug Arrangements. India, not being one of the 12, complained

127 Appellate Body Report, CanadaAutos, above n 80.128 Agreement Concerning Automotive Products between the Government of Canada and the Government of the

United States of America, January 1965, http://www.lexum.com/ca_us/en/cts.1966.14.en.html (visited20 September 2013).

129 WTO Panel Report, CanadaCertain Measures Affecting the Automotive Industry (CanadaAutos),WT/DS139/R, adopted 11 February 2000, para 6.132: Canada, the United States and Mexico haveformed a free-trade area and, therefore, any advantage that may be accorded by Canada to its free tradepartners is exempt from Article I:1 obligations by virtue of Article XXIV of the GATT. See also paras6.183 and 6.227.

130 Ibid, at paras 6.1836.188.131 Ibid, at para 10.55: Article XXIV clearly cannot justify a measure which grants WTO-inconsistent duty-

free treatment to products originating in third countries not parties to a customs union or free tradeagreement.

132 Consultations, EUTariff Garlic, above n 80.




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that the EU had violated GATT Article I and that the measures were not justifiedunder the Enabling Clausethe legal basis for the GSP and part of the WTOacquis.133 The panel held that India had shown that the measures violated Article Iand that the EU had failed to show that the Drug Arrangements were justified underthe Enabling Clause or under Article XX(b).134 The AB agreed with the panel thatthe Enabling Clause constituted an exception from Article I,135 but held that it wasincumbent on India to raise the violation of the Enabling Clause and for the EU tomake the case that the conditions of the Enabling Clause had been respected. Thisthe EU had failed to do, as the AB held that the principle of non-discrimination inthe Enabling Clause did not necessarily mean exactly the same treatment of allGeneralized System of Preferences beneficiaries but, as a minimum, did require thesame treatment of all similarly situated beneficiaries.136

The Enabling Clause is thus shown to operate in a manner similar to ArticleXXIV or Article XX with respect to the collective right to development of least de-veloped countries. It sets conditions, which must be respected if it is to be invokedto justify tariff treatment that deviates from that required by GATT Article I.

5. Invocation of RTA disputes before the WTO dispute settlement proceduresPerhaps the most important WTO decisions for the purposes of this article deal withthe arguments made by WTO Members in various cases that the WTO DSB is notthe appropriate forum to hear the case or that the DSB should take note of and giveeffect to decisions taken under the aegis of dispute settlement provisions of variousRTAs.137 These cases most starkly demonstrate the potential consequences of thesame states being parties to multiple trade treaties with different dispute settlementprocedures. This is particularly acute in the many situations when the provisions ofthe WTO and the RTA are identical,138 are based on the same principles139 or whenit is affirmed that the RTA should be interpreted in accordance with WTO law.140

The nature of the WTO as the basic matrix of international trade law becomes veryclear in these cases as does the issue of whether this implies that the WTO DSB hasprimacy over any RTA dispute settlement procedure or whether the DSB is pre-cluded from considering the very existence, let alone the results, of any suchprocedure.

133 Appellate Body Report, ECTariff Preferences, above n 41, paras 13.134 Ibid, at para 6.135 For further discussion on the legal status of the Enabling Clause, see Lorand Bartels, The WTO Ena-

bling Clause and Positive Conditionality in the European Communitys GSP Program, 6 (2) Journal ofInternational Economic Law 507 (2003) at 515516. Bartels notes that the legal status of the EnablingClause is not entirely clear. However, he concludes that the Enabling Clause was intended to affect therights and obligations of all of the Contracting Parties and was designed as a legal basis for future (vol-untary) measures affecting all Contracting Parties.

136 Appellate Body Report, ECTariff Preferences, above n 41, paras 173 and 190.137 Panel Report, ArgentinaPoultry, above n 80; Panel Report, USSoftwood Lumber, above n 80, fn 12;

Panel Report, MexicoSoft Drinks, above n 80; Appellate Body Report, BrazilRetreaded Tyres, aboven 80.

138 For example, see NAFTA, above n 28, at ch 301.139 Ibid.140 NAFTA, above n 28; NZChina FTA, above n 28.




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The first case to raise these issues is ArgentinaPoultry141 in which Argentinasought to prevent Brazil from proceeding with a complaint against Argentinas anti-dumping measures, on the ground that Brazil had already pursued its recoursesunder the MERCOSUR Protocol of Brasilia for the Solution of Controversies (Protocolof Brasilia) and had obtained a judgment. Argentina argued as a preliminary issuethat Brazil should not be allowed to bring the case before the DSB because it hadnot respected the principle of good faith and was therefore estopped from proceed-ing.142 According to Argentina, for Brazil to have pursued the procedure under theProtocol of Brasilia and then, when dissatisfied with the outcome, to seek to pursuethe same case under the DSU was evidence of bad faith, a general principle of inter-national law which should prevent Brazil from proceeding.143 Alternatively, underArticle 31.3(c) of the Vienna Convention on the Law of Treaties, interpretation musttake into account all treaty obligations existing between the parties, in particular an-other trade agreement dealing with the same issues.144 Brazil responded that therequisite legal and factual elements of the plea of estoppel were not present and thatthe Protocol of Brasilia (unlike the signed but not yet in force Olivos Protocol for theSettlement of Disputes or Olivos Protocol) contained no express fork in the road pro-vision. Furthermore, Brazil denied abusing its rights and asserted that it was simplyexercising its rights under the DSU.145 Chile, the EU, and the USA made various ar-guments in support of Argentina.146 Only Paraguay, a MERCOSUR partner, calledfor the full recognition of the existence of the RTA.147

The panel found for Brazil on the grounds that to violate the principle of goodfaith there must be violation of an explicit provision of WTO law and more thanmere violation.148 Similarly, the panel found no room for the plea of estoppel, layingconsiderable emphasis on the fact the Olivos Protocol was much more explicit thanthe Protocol of Brasilia and was not yet in force between the parties.149 The panelalso held that Argentina was not calling on it to interpret the MERCOSUR ruling in

141 Panel Report, ArgentinaPoultry, above n 80, paras 7.177.41.142 Ibid, at para 7.18.143 Ibid, at para 7.20.144 Ibid, at para 7.21.145 Ibid, at paras 7.227.24.146 Ibid, at paras 7.257.27 and 7.307.31. The arguments included: the claims are based on different issues;

the interpretation of MERCOSUR could not be relevant to interpreting a WTO dispute; there was noexpress commitment by Brazil not to proceed before the DSB thus no estoppel; Brazil had never expli-citly renounced its rights under the DSU; MERCOSUR dispute settlement rules are not within theterms of reference of the panel; the panel is restricted to interpreting the GATT and covered agree-ments; any plea of estoppel only relevant to MERCOSUR proceedings; DSU art 3.2 only refers to theinterpretation of WTO law.

147 Ibid, at paras 7.28, 7.29. Paraguay argued that the case was res judicata because it had already beenbrought under the dispute settlement procedure established under MERCOSUR and that Article 21 ofthe Brasilia Protocol clearly established the unappealable and binding nature of awards rendered by theAd Hoc Arbitral Tribunal, which are deemed to be res judicata, a principle they believed should prevail.Paraguay also referred to the Protocol of Olivos (which was not in force at the time), which allows mem-ber to choose a forum in which to pursue their disputes to the exclusion of all other possible forums pro-vided under the Protocol.

148 Ibid, at para 7.36.149 Ibid, at paras 7.377.39.




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a particular way but actually to apply that ruling as a matter of WTO lawsome-thing which the panel considered it was not permitted to do.150

The second case in this series involved the attempt by the Government of Canadato place evidence before a WTO panel hearing in support of its complaint againstthe conduct of anti-dumping and countervailing duty measures in the USA. The evi-dence consisted in the decisions of various CanadaUnited States bi-national panelsunder Chapter 19 of NAFTA dealing with essentially the same issues. Canada soughtto use these decisions as evidence that its claims against the USA in the WTO pro-ceeding were well founded. The panel declined to rule on the weight to be given tothe decisions but agreed to include them in a footnote of its decision.151 In the foot-note, the Panel noted that references to these decisions were inappropriate because:(i) the proceeding in the NAFTA fell outside the terms of reference of the WTODSU Article 21.5 Panel since a determination or decision in a NAFTA proceeding isnot a measure taken to comply with a DSB ruling, (ii) the panels decision in theNAFTA proceedings were the subject of a pending review, and (iii) that Canada hadfailed to point out that the Commission was erroneously precluded by the NAFTApanel from reopening the record and that, accordingly, the Section 129 Determina-tion is based on a different record than that in the NAFTA proceedings.152 The AB,since it decided the case on other grounds, did not consider the decisions at all.

The MexicoSoft Drinks decision,153 like the ArgentinaPoultry, represented adetermined attempt by Mexico to resist having to respond before the DSB to a com-plaint by the USA against allegedly discriminatory taxes on imported high fructosecorn syrup (HFCS) and products containing HFCS. Mexico considered that it hadacted in the context of a dispute with the USA resulting from the failure of the USAto give effect to an agreement to allow the importation of Mexican sugar after theconclusion of NAFTA in 1994. Considering that the dispute was properly to be con-ducted under NAFTA, Mexico made a plea of forum non conveniens before the DSB,in answer to the complaint of the USA, noting that its efforts to institute a disputesettlement panel under NAFTA Chapter 20 had been frustrated by the USA.

Mexico advanced three central arguments. First, that it had an agreement with theUnited StatesNAFTA, which was allowed by WTO law, and that NAFTAincluded a dispute settlement procedure under Chapter 20, which it sought touse.154 Due to the refusal of the USA to refer the dispute to NAFTA Chapter 20, themeasures which Mexico had adopted were proportional and necessary under GATTArticle XX(d) in order to ensure respect for Mexican laws and regulations and to en-courage the USA to respect NAFTA. This being the case Mexico asked that thepanel refrain from ruling on the case. Mexico also asked that the panel recommend

150 Ibid, at paras 7.407.41.151 Panel Report, USSoftwood Lumber, above n 80, fn 12.152 Ibid.153 Panel Report, MexicoSoft Drinks, above n 80. For an analysis of this case, see William J Davey and

Andre Sapir, The Soft Drinks Case: The WTO and Regional Agreements, 8 (1) World Trade Review(2009) 5 (Davey).

154 As discussed, NAFTA Chapter 20 has not been interpreted as creating a binding dispute settlement pro-cedure. See above n 18.




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that the parties take up their dispute under NAFTA Chapter 20.155 The USA focusedforemost on the argument that the taxes in question were discriminatory and thusmanifestly violated GATT Article III. Beyond this, the USA argued that Mexicosplea of forum non conveniens was beyond the mandate of the panel and that the taxescould not be justified as necessary to ensure respect for Mexicos laws and regula-tions.156 Fundamentally, the USA argued that the only issues before the panel wereMexicos obligations under WTO law and that the request to refuse to make findingsand refer the parties to NAFTA was quite outside the bounds of the panels legal au-thority under the DSU and the Memorandum between the parties.157 The USA dis-tinguished ArgentinaPoultry as being a totally different and distinct case.158 TheEU, as intervener, indicated that in principle it is not excluded that other treatiesform part of public international law, relevant to a case.159

The panel report deals extensively with Mexicos arguments, but the panel wasclearly more impressed by the assertions of the USA that the Mexican measures dealtwith similar products and taxed a similar product (HFCS) in a discriminatory man-ner in violation of Article III. In response to Mexicos position that its measures werenecessary to ensure respect for its laws and regulations under Article XX(d) and thatthe panel had discretion to refuse to rule and to refer the parties to their NAFTA ob-ligations, the panel displayed great scepticism. The panel would not accept the char-acterization of laws and regulations as referring to international obligations.160 Thepanel held that it had no discretion under Article XXIII, the DSU, or the standardterms of reference of the dispute to refuse to make findings.161 On the contrary, thepanel found that there existed a separate dispute between the parties under NAFTAover which it had no right to rule. The AB was in fundamental agreement with thepanel162 holding that a panel under the DSU, while it had certain inherent jurisdic-tion over procedure and the right to determine its jurisdiction, certainly did notenjoy the kind of broad discretion to refuse to hear a case as claimed by Mexico.163

Indeed, the AB seems to have held that for a panel to refuse to hear a case would betantamount to denying a WTO Members right to having a dispute heard under the

155 Panel Report, MexicoSoft Drinks, above n 80, paras 4.1204.138.156 Ibid, at paras 4.1404.144.157 Ibid, at paras 4.1544.155.158 Ibid, at para 4.193.159 Ibid, at para 4.203.160 Ibid, at paras 8.1718.172.161 Ibid, at paras 8.2188.230.162 WTO Appellate Body Report, MexicoTax Measures on Soft Drinks and Other Beverages (MexicoSoft

Drinks), WT/DS308/AB/R, adopted 6 March 2006, para 79. The AB held that it agreed with the Panelsconclusions, but several aspects of its reasoning differed. The AB concluded that the terms laws or regu-lations covered rules forming part of the domestic legal system of a WTO Member, including rulesderiving from international agreements that have been incorporated into the domestic legal system of aWTO Member or have direct effect. The AB also found that Article XX(d) did not require the use ofcoercion nor that the measure sought to be justified results in securing compliance with absolute cer-tainty. Rather, Article XX(d) requires that the measures be designed to secure compliance with laws orregulations which are not inconsistent with the provisions of the GATT 1994. And, finally, the AB didnot endorse the Panels reliance on the Appellate Bodys interpretation in USGambling of the termnecessary to interpret the terms to secure compliance in Article XX(d).

163 Ibid, at paras 4557.




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DSU.164 One of the interesting features of this case is the manner in which a disputeoriginating in the exercise of exceptional rights under an RTA, allegedly permitted byArticle XXIV which allows preferential arrangements, was largely adjudicated underArticle XX(d), which allows exceptions from the basic provisions of the GATT.Whether there is any link between these exceptions and in particular the necessityanalysis under both articles will be dealt with below.

The major case dealing with Article XXIV is the BrazilRetreaded Tyres case.165

This is a remarkable case from a number of perspectives, not the least because themeasures defended by Brazil were adopted for purposes of environmental protection,but also because Brazil pleaded the necessity of giving effect to MERCOSUR cus-toms union rules as determined by a MERCOSUR arbitral tribunal.166 For reasonsof public health and environmental protection, Brazil had, in 2000, adopted rulesbanning the importation of retreaded and used automobile and truck tyres from allsources. As a result of a legal challeng

Documents

De Mestral, Armand CM - Dispute Settlement Unde the WTO and RTA - An Uneasy Relationship (2013)