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WTO ANALYTICAL INDEX: GATT 1994 General Agreement on Tariffs and Trade 1994 |
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> General
Agreement On Tariffs And Trade 1994
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Article XIX: Emergency Action on Imports of Particular Products 1. (a) If, as a result of unforeseen developments and of the effect of the obligations incurred by a contracting party under this Agreement, including tariff concessions, any product is being imported into the territory of that contracting party in such increased quantities and under such conditions as to cause or threaten serious injury to domestic producers in that territory of like or directly competitive products, the contracting party shall be free, in respect of such product, and to the extent and for such time as may be necessary to prevent or remedy such injury, to suspend the obligation in whole or in part or to withdraw or modify the concession.
(b) If any product, which is the subject of a concession with respect to a preference, is being imported into the territory of a contracting party in the circumstances set forth in subparagraph (a) of this paragraph, so as to cause or threaten serious injury to domestic producers of like or directly competitive products in the territory of a contracting party which receives or received such preference, the importing contracting party shall be free, if that other contracting party so requests, to suspend the relevant obligation in whole or in part or to withdraw or modify the concession in respect of the product, to the extent and for such time as may be necessary to prevent or remedy such injury.
2. Before any contracting party shall take action pursuant to the provisions of paragraph 1 of this Article, it shall give notice in writing to the CONTRACTING PARTIES as far in advance as may be practicable and shall afford the CONTRACTING PARTIES and those contracting parties having a substantial interest as exporters of the product concerned an opportunity to consult with it in respect of the proposed action. When such notice is given in relation to a concession with respect to a preference, the notice shall name the contracting party which has requested the action. In critical circumstances, where delay would cause damage which it would be difficult to repair, action under paragraph 1 of this Article may be taken provisionally without prior consultation, on the condition that consultation shall be effected immediately after taking such action.
3. (a) If agreement among the interested contracting parties with respect to the action is not reached, the contracting party which proposes to take or continue the action shall, nevertheless, be free to do so, and if such action is taken or continued, the affected contracting parties shall then be free, not later than ninety days after such action is taken, to suspend, upon the expiration of thirty days from the day on which written notice of such suspension is received by the CONTRACTING PARTIES, the application to the trade of the contracting party taking such action, or, in the case envisaged in paragraph 1 (b) of this Article, to the trade of the contracting party requesting such action, of such substantially equivalent concessions or other obligations under this Agreement the suspension of which the CONTRACTING PARTIES do not disapprove.
(b) Notwithstanding the provisions of subparagraph (a) of this paragraph, where action is taken under paragraph 2 of this Article without prior consultation and causes or threatens serious injury in the territory of a contracting party to the domestic producers of products affected by the action, that contracting party shall, where delay would cause damage difficult to repair, be free to suspend, upon the taking of the action and throughout the period of consultation, such concessions or other obligations as may be necessary to prevent or remedy the injury.
(a) Application of Article XIX 521. In Argentina — Footwear (EC) and Korea — Dairy(715), the Appellate Body held that “any safeguard measure(716) imposed after the entry into force of the WTO Agreement must comply with the provisions of both the Agreement on Safeguards and Article XIX of the GATT 1994”.(717) As regards the relationship between Article XIX and the Agreement on Safeguards, see paragraphs 566–572 below. 522. In Korea — Dairy, the Appellate Body concluded that safeguard measures were “intended by the drafters of the GATT to be matters out of the ordinary, and to be matters of urgency, to be, in short, ‘emergency actions’”(718). 523. The Appellate Body on Argentina — Footwear (EC) noted that the remedy provided by Article XIX is of an emergency character and is to be “invoked only in situations when, as a result of obligations incurred under the GATT 1994, a Member finds itself confronted with developments it had not “foreseen” or “expected” when it incurred that obligation”: “As part of the context of paragraph 1(a) of Article XIX, we note that the title of Article XIX is: ‘Emergency Action on Imports of Particular Products’. The words ‘emergency action’ also appear in Article 11.1(a) of the Agreement on Safeguards. We note once again, that Article XIX:1(a) requires that a product be imported ‘in such increased quantities and under such conditions as to cause or threaten serious injury to domestic producers’. (emphasis added) Clearly, this is not the language of ordinary events in routine commerce. In our view, the text of Article XIX:1(a) of the GATT 1994, read in its ordinary meaning and in its context, demonstrates that safeguard measures were intended by the drafters of the GATT to be matters out of the ordinary, to be matters of urgency, to be, in short, ‘emergency actions.’ And, such ‘emergency actions’ are to be invoked only in situations when, as a result of obligations incurred under the GATT 1994, a Member finds itself confronted with developments it had not ‘foreseen’ or ‘expected’ when it incurred that obligation. The remedy that Article XIX:1(a) allows in this situation is temporarily to ‘suspend the obligation in whole or in part or to withdraw or modify the concession’. Thus, Article XIX is clearly, and in every way, an extraordinary remedy.”(719) 524. After finding support for its approach in the context of the relevant provisions, the Appellate Body in Argentina — Footwear (EC) held that the object and purpose of Article XIX also confirmed its interpretation: “This reading of these phrases is also confirmed by the object and purpose of Article XIX of the GATT 1994. The object and purpose of Article XIX is, quite simply, to allow a Member to re-adjust temporarily the balance in the level of concessions between that Member and other exporting Members when it is faced with ‘unexpected’ and, thus, ‘unforeseen’ circumstances which lead to the product ‘being imported’ in ‘such increased quantities and under such conditions as to cause or threaten serious injury to domestic producers of like or directly competitive products’. In perceiving and applying this object and purpose to the interpretation of this provision of the WTO Agreement, it is essential to keep in mind that a safeguard action is a ‘fair’ trade remedy. The application of a safeguard measure does not depend upon ‘unfair’ trade actions, as is the case with anti-dumping or countervailing measures. Thus, the import restrictions that are imposed on products of exporting Members when a safeguard action is taken must be seen, as we have said, as extraordinary. And, when construing the prerequisites for taking such actions, their extraordinary nature must be taken into account.”(720) 525. In US — Line Pipe, the Appellate Body emphasized that the balance struck by WTO Members in reconciling the natural tension relating to safeguard measures is found in the provisions of the Agreement on Safeguards. The Appellate Body further articulated on this tension: “[P]art of the raison d’être of Article XIX of the GATT 1994 and the Agreement on Safeguards is, unquestionably, that of giving a WTO Member the possibility, as trade is liberalized, of resorting to an effective remedy in an extraordinary emergency situation that, in the judgement of that Member, makes it necessary to protect a domestic industry temporarily.(721) (emphasis added)
There is, therefore, a natural tension between, on the one hand, defining the appropriate and legitimate scope of the right to apply safeguard measures and, on the other hand, ensuring that safeguard measures are not applied against ‘fair trade’ beyond what is necessary to provide extraordinary and temporary relief. A WTO Member seeking to apply a safeguard measure will argue, correctly, that the right to apply such measures must be respected in order to maintain the domestic momentum and motivation for ongoing trade liberalization. In turn, a WTO Member whose trade is affected by a safeguard measure will argue, correctly, that the application of such measures must be limited in order to maintain the multilateral integrity of ongoing trade concessions. The balance struck by the WTO Members in reconciling this natural tension relating to safeguard measures is found in the provisions of the Agreement on Safeguards.” (emphasis added)(722) 526. In US — Steel Safeguards, the Panel, in a finding upheld by the Appellate Body(723), recalled the standard of review for claims of violation of the unforeseen developments requirement of Article XIX of the GATT 1994 was that provided for in Article 11 of the DSU. The Panel articulated the standard in the following terms: “[T]he role of this Panel in the present dispute is not to conduct a de novo review of the USITC’s determination. Rather, the Panel must examine whether the United States respected the provisions of Article XIX of GATT 1994 and of the Agreement on Safeguards, including Article 3.1. As further developed below, the Panel must examine whether the United States demonstrated in its published report, through a reasoned and adequate explanation, that unforeseen developments and the effects of tariff concessions resulted in increased imports causing or threatening to cause serious injury to the relevant domestic producers.”(724) 527. The Appellate Body on US — Steel Safeguards rejected the United States argument that Article 11 of the DSU was not applicable to claims of violation of Article XIX of the GATT 1994 and added: “We explained in US — Lamb, in the context of a claim under Article 4.2(a) of the Agreement on Safeguards, that the competent authorities must provide a ‘reasoned and adequate explanation of how the facts support their determination’.(725) More recently, in US — Line Pipe, in the context of a claim under Article 4.2(b) of the Agreement on Safeguards, we said that the competent authorities must, similarly, provide a ‘reasoned and adequate explanation, that injury caused by factors other than increased imports is not attributed to increased imports’.(726) Our findings in those cases did not purport to address solely the standard of review that is appropriate for claims arising under Article 4.2 of the Agreement on Safeguards. We see no reason not to apply the same standard generally to the obligations under the Agreement on Safeguards as well as to the obligations in Article XIX of the GATT 1994.”(727) 528. The Appellate Body on US — Steel Safeguards emphasized that “to the extent that the Panel looked for a ‘reasoned and adequate explanation’ that was ‘explicit’ in the sense that it was ‘clear and unambiguous’ and ‘did not merely imply or suggest an explanation’, the Panel was, in our view, correctly articulating the appropriate standard of review to be applied in assessing compliance with Article XIX of the GATT 1994 and the Agreement on Safeguards.”(728) (a) Article XIX:1(a): as a result of unforeseen developments (i) Concept of unforeseen developments 529. In Argentina — Footwear (EC), the Appellate Body pronounced on the meaning of the phrase “as a result of unforeseen developments” which, although not contained in the Agreement on Safeguards, is set forth in Article XIX:1(a). The Appellate Body held that “the developments which led to a product being imported in such increased quantities and under such conditions as to cause or threaten to cause serious injury to domestic producers must have been ‘unexpected’”: “To determine the meaning of the clause — ‘as a result of unforeseen developments and of the effect of the obligations incurred by a Member under this Agreement, including tariff concessions …’ — in sub-paragraph (a) of Article XIX:1, we must examine these words in their ordinary meaning, in their context and in light of the object and purpose of Article XIX.(729) We look first to the ordinary meaning of these words. As to the meaning of ‘unforeseen developments’, we note that the dictionary definition of ‘unforeseen’, particularly as it relates to the word ‘developments’, is synonymous with ‘unexpected’.(730) ‘Unforeseeable’, on the other hand, is defined in the dictionaries as meaning ‘unpredictable’ or ‘incapable of being foreseen, foretold or anticipated’.(731) Thus, it seems to us that the ordinary meaning of the phrase ‘as a result of unforeseen developments’ requires that the developments which led to a product being imported in such increased quantities and under such conditions as to cause or threaten to cause serious injury to domestic producers must have been ‘unexpected’”.(732) 530. The Panel on Argentina — Preserved Peaches emphasized that increased quantities of imports should not be equated with unforeseen developments.(733) The Panel considered that the competent authority had indicated that “the entry of the imports, or the way in which they were being imported, was unforeseen, but there is no mention that the alleged developments themselves were unforeseen.” Therefore the Panel concluded that “a statement that the increase in imports, or the way in which they were being imported, was unforeseen, does not constitute a demonstration as a matter of fact of the existence of unforeseen developments.”(734) (ii) Requirement to demonstrate “unforeseen developments” 531. In Argentina — Footwear (EC) and Korea — Dairy, one of the issues considered by the Panel was the omission of the criterion of “unforeseen developments”, contained in Article XIX:1(a) of GATT 1994, from the Agreement on Safeguards, most notably from Article 2.1. The Panel on Argentina — Footwear (EC) found that “the express omission of the criterion of unforeseen developments in the [Agreement on Safeguards], (which otherwise transposes, reflects and refines in great detail the essential conditions for the imposition of safeguard measures provided for in Article XIX of GATT), must … have meaning”.(735) The Panel, in a finding rejected by the Appellate Body, concluded that “safeguard investigations conducted and safeguard measures imposed after the entry into force of the WTO agreements which meet the requirements of the new Safeguards Agreement satisfy the requirements of Article XIX of GATT.”(736) The Panel on Korea — Dairy reached the same conclusion.(737) The Appellate Body held that the Panel’s view was inconsistent with the principles of effective treaty interpretation(738) and with the ordinary meaning of Articles 1 and 11.1(a) of the Agreement on Safeguards. See paragraph 569 below. 532. In US — Lamb, the Appellate Body ruled that the existence of “unforeseen developments” is a “pertinent issue of fact and law” under Article 3.1 of the Agreement on Safeguards, and “it follows that the published report of the competent authorities, under that Article, must contain a ‘finding’ or ‘reasoned conclusion’ on unforeseen developments”(739): “[W]e observe that Article 3.1 requires competent authorities to set forth findings and reasoned conclusions on ‘all pertinent issues of fact and law’ in their published report. As Article XIX:1(a) of the GATT 1994 requires that ‘unforeseen developments’ must be demonstrated as a matter of fact for a safeguard measure to be applied the existence of ‘unforeseen developments’ is, in our view, a ‘pertinent issue[] of fact and law’, under Article 3.1, for the application of a safeguard measure, and it follows that the published report of the competent authorities, under that Article, must contain a ‘finding’ or ‘reasoned conclusion’ on ‘unforeseen developments.’”(740) 533. In Chile — Price Band System, the Panel referred to the Appellate Body’s conclusions in US — Lamb that “unforeseen developments” is a circumstance whose existence must be demonstrated as a matter of fact and must feature in the published report of the investigating authorities.(741) The Panel also ruled that an ex post facto explanation cannot cure the importing Member’s failure to meet the requirement of demonstrating “unforeseen development”.(742) 534. In Argentina — Preserved Peaches, the Panel concluded that in order to satisfy the requirement to demonstrate “unforeseen developments”, “as a minimum, some discussion should be done by the competent authorities as to why they were unforeseen at the appropriate time, and why conditions in the second clause of Article XIX:1(a) occurred ‘as a result’ of circumstances in the first clause.”(743) 535. In Argentina — Preserved Peaches, the competent investigating authority had referred to unforeseen developments only in its final conclusion, the Panel held that this was insufficient: “A mere phrase in a conclusion, without supporting analysis of the existence of unforeseen developments, is not a substitute for a demonstration of fact. The failure of the competent authorities to demonstrate that certain alleged developments were unforeseen in the foregoing section of their report is not cured by the concluding phrase.”(744) 536. The Panel on US — Steel Safeguards, in a finding not reviewed by the Appellate Body, reiterated that unforeseen developments must be demonstrated in a report before the measure is actually applied: “Given that the demonstration of unforeseen developments is a prerequisite for the application of a safeguard measure(745), it cannot take place after the date as of which the safeguard measure is applied. This has been confirmed by the Appellate Body, which noted, in US — Lamb, that although Article XIX provides no express guidance on where and when the demonstration of unforeseen developments is to be made, it is nonetheless a prerequisite, and ‘it follows that this demonstration must be made before the safeguard measure is applied. Otherwise, the legal basis for the measure is flawed.’(746) Any demonstration made after the start of the application of a safeguard measure would have to be disregarded automatically as it cannot afford legal justification for that measure.”(747)
“[S]uch a reasoned and adequate explanation of how unforeseen developments resulted in increased imports causing serious injury must form part of the overall reported explanation by the competent authority that it has satisfied all the WTO prerequisites for the imposition of a safeguard measure. Since the demonstration of unforeseen developments must be included in the published report of the competent authorities it is necessary to look for the demonstration of unforeseen developments in the ‘report of the competent authority’, completed and published prior to the application of the safeguard measures.”(748) 537. The Appellate Body on US — Steel Safeguards pointed out that the competent authority must provide a “reasoned and adequate explanation” of how the facts support its determination for those prerequisites, including “unforeseen developments” under Article XIX:1(a) of the GATT 1994: “We do not see how a panel could examine objectively the consistency of a determination with Article XIX of the GATT 1994 if the competent authority had not set out an explanation supporting its conclusions on ‘unforeseen developments’. Indeed, to enable a panel to determine whether there was compliance with the prerequisites that must be demonstrated before the application of a safeguard measure, the competent authority must provide a ‘reasoned and adequate explanation’ of how the facts support its determination for those prerequisites, including ‘unforeseen developments’ under Article XIX:1(a) of the GATT 1994.”(749) 538. The Appellate Body on US — Steel Safeguards, upheld the Panel’s finding that each challenged measure must have been the object of a specific unforeseen development demonstration and also that the factual demonstration of unforeseen developments must also relate to the specific product(s) covered by the specific measure(s) at issue: “To trigger the right to apply a safeguard measure, the development must be such as to result in increased imports of the product (‘such product’) that is subject to the safeguard measure. Moreover, any product, as Article XIX:1(a) provides, may, potentially, be subject to that safeguard measure, provided that the alleged ‘unforeseen developments’ result in increased imports of that specific product (‘such product’). We, therefore, agree with the Panel that, with respect to the specific products subject to the respective determinations, the competent authorities are required by Article XIX:1(a) of the GATT 1994 to demonstrate that the ‘unforeseen developments identified … have resulted in increased imports [of the specific products subject to] … each safeguard measure at issue.’(750)”(751)
“For this reason, when an importing Member wishes to apply safeguard measures on imports of several products, it is not sufficient merely to demonstrate that ‘unforeseen developments’ resulted in increased imports of a broad category of products that included the specific products subject to the respective deter minations by the competent authority. If that could be done, a Member could make a determination and apply a safeguard measure to a broad category of products even if imports of one or more of those products did not increase and did not result from the ‘unforeseen developments’ at issue. Accordingly, we agree with the Panel that such an approach does not meet the requirements of Article XIX:1(a), and that the demonstration of ‘unforeseen developments’ must be performed for each product subject to a safeguard measure.(752)”(753) 539. In US — Steel Safeguards, the Appellate Body agreed with the Panel that “with respect to the specific products subject to the respective determinations, the competent authorities are required by Article XIX:1(a) of the GATT 1994 to demonstrate that the ‘unforeseen developments identified … have resulted in increased imports [of the specific products subject to] … each safeguard measure at issue.’(754)”(755) The Appellate Body further concluded: “[W]hen an importing Member wishes to apply safeguard measures on imports of several products, it is not sufficient merely to demonstrate that ‘unforeseen developments’ resulted in increased imports of a broad category of products that included the specific products subject to the respective determinations by the competent authority. If that could be done, a Member could make a determination and apply a safeguard measure to a broad category of products even if imports of one or more of those products did not increase and did not result from the ‘unforeseen developments’ at issue. Accordingly, we agree with the Panel that such an approach does not meet the requirements of Article XIX:1(a), and that the demonstration of ‘unforeseen developments’ must be performed for each product subject to a safeguard measure. (Emphasis original)”(756) 540. In US — Steel Safeguards, the Appellate Body was of view that it was for competent authorities not for panels to provide a “reasoned conclusion” on “unforeseen developments”: “A ‘reasoned conclusion’ is not one where the conclusion does not even refer to the facts that may support that conclusion. As the United States itself acknowledges, ‘Article 3.1 thus assigns the competent authorities — not the panel — the obligation to “publish a report setting forth their findings and reasoned conclusions reached on all pertinent issues of fact and law”.’ A competent authority has an obligation under Article 3.1 to provide reasoned conclusions; it is not for panels to find support for such conclusions by cobbling together disjointed references scattered throughout a competent authority’s report.”(757) Unforeseen developments as describing a set of circumstances 541. The Appellate Body, in Argentina — Footwear (EC), then held that the requirement of “unforeseen developments” did not establish a separate “condition” for the imposition of safeguard measures, but described a certain set of “circumstances”: “When we examine this clause — ‘as a result of unforeseen developments and of the effect of the obligations incurred by a Member under this Agreement, including tariff concessions …’ — in its immediate context in Article XIX:1(a), we see that it relates directly to the second clause in that paragraph — ‘If, …, any product is being imported into the territory of that Member in such increased quantities and under such conditions as to cause or threaten serious injury to domestic producers in that territory of like or directly competitive products …’. The latter, or second, clause in Article XIX:1(a) contains the three conditions for the application of safeguard measures. These conditions, which are reiterated in Article 2.1 of the Agreement on Safeguards(758), are that: (1) a product is being imported ‘in such quantities and under such conditions’; (2) ‘as to cause’; (3) serious injury or the threat of serious injury to domestic producers. The first clause in Article XIX:1(a) — ‘as a result of unforeseen developments and of the obligations incurred by a Member under the Agreement, including tariff concessions …’— is a dependent clause which, in our view, is linked grammatically to the verb phrase ‘is being imported’ in the second clause of that paragraph. Although we do not view the first clause in Article XIX:1(a) as establishing independent conditions for the application of a safeguard measure, additional to the conditions set forth in the second clause of that paragraph, we do believe that the first clause describes certain circumstances which must be demonstrated as a matter of fact in order for a safeguard measure to be applied consistently with the provisions of Article XIX of the GATT 1994. In this sense, we believe that there is a logical connection between the circumstances described in the first clause — ‘as a result of unforeseen developments and of the effect of the obligations incurred by a Member under this Agreement, including tariff concessions …’ — and the conditions set forth in the second clause of Article XIX:1(a) for the imposition of a safeguard measure.”(759) 542. The Panel on US — Steel Safeguards, in a finding not reviewed by the Appellate Body, concluded that the legal standard used to determine what constitutes an unforeseen development may be both subjective and objective: “The legal standard that is used to determine what constitutes an unforeseen development is, as agreed by the parties, at least in part, subjective. This is supported by the Appellate Body, who stated in Korea — Dairy that safeguard measures “are to be invoked only in situations when … an importing Member finds itself confronted with developments it had not ‘foreseen’ or ‘expected’ when it incurred [its] obligation [under GATT 1994]. (emphasis added)(760)
What was ‘unforeseen’ when the contracting parties negotiated their first tariff concessions in all likelihood differs from what can be considered to be unforeseen today. The Panel notes that after 50 years of GATT, tariffs have, for many products, disappeared or reached very low levels. Further, what constitutes ‘unforeseen developments’ for an importing Member will vary depending on the context and the circumstances. Nevertheless, the subjectivity of the standard does not take away from the fact that the unexpectedness of a development(761) for an importing Member is something that must be demonstrated through a reasoned and adequate explanation.
In addition, the standard for unforeseen developments may also be said to have an objective element. The appropriate focus is on what should or could have been foreseen in light of the circumstances. The standard is not what the specific negotiators had in mind but rather what they could (reasonably) have had in mind. This was recognized early in GATT by the US — Fur Felt Hats decision, which characterized unforeseen developments as ‘developments […] which it would not be reasonable to expect that the negotiators of the country making the concession could and should have foreseen at the time when the concession was negotiated’.(762)”(763) Confluence of developments to form the basis of an unforeseen development 543. The Panel on US — Steel Safeguards, in a finding not reviewed by the Appellate Body, concluded that the confluence of several events can unite to form the basis of an unforeseen development: “The United States argues that the robustness of the US dollar was a development which combined with the other developments, namely, the currency crises in Asia and the former USSR and the continued growth in steel demand in the United States’ market as other markets declined, lead to increased imports.
The Panel has already accepted that the Russian and the Southeast Asian financial crises, at least conceptually, could be considered unforeseen developments that did not exist at the end of the Uruguay Round. We have also found that the USITC did not consider the strength of the United States’ economy and the appreciation of the US dollar as unforeseen developments per se; it had referred to these factors in relation to other unforeseen developments, which together had resulted in increased imports causing or threatening to cause injury.
Article XIX does not preclude consideration of the confluence of a number of developments as ‘unforeseen developments’. Accordingly, the Panel believes that confluence of developments can form the basis of ‘unforeseen developments’ for the purposes of Article XIX of GATT 1994. The Panel is of the view, therefore, that it is for each Member to demonstrate that a confluence of circumstances that it considers were unforeseen at the time it concluded its tariff negotiations resulted in increased imports causing serious injury.
To the complainants’ argument that the changes in steel markets were much more pronounced in 1991 following the dissolution of the former Soviet Union than later on and could not, therefore, be unforeseen after 1994, the Panel notes that the fact that the dissolution of the USSR and its overall effects may have constituted an unforeseen development in 1991 does not mean that a subsequent financial crisis also resulting somehow from the dissolution of the USSR, cannot, with other developments, be considered part of a ‘confluence of unforeseen developments’ in 1997 for the purpose of Article XIX of GATT 1994.”(764) (iii) Logical connection between “unforeseen developments” and “the condition for imposition of a safeguard measure” 544. The Panel on US — Steel Safeguards, in a finding upheld by the Appellate Body, held that the phrase “as a result of” implies a “logical connection” between “unforeseen developments and the effects of tariffs concessions and obligations” and “the condition for imposition of a safeguard measure”: “The Appellate Body has interpreted the phrase ‘as a result of’ in Article XIX:1(a) of GATT 1994 as a logical connection that exists between the first two clauses of that Article. In other words, a logical connection must be demonstrated to have existed between the elements of the first clause of Article XIX:1(a) — ‘as a result of unforeseen developments and of the effect of the obligations incurred by a Member under this Agreement, including tariff concessions’ — and the conditions set forth in the second clause of that Article–‘increased imports causing serious injury’— for the imposition of a safeguard measure.(765) … The Panel agrees with New Zealand that it would be improper to reduce to a nullity the obligation to explain how ‘unforeseen developments’ resulted in increased imports causing or threatening to cause serious injury. In some cases, the explanation may be as simple as bringing two sets of facts together. However, in other situations, it may require much more detailed analysis in order to make clear the relationship that exists between the unforeseen developments and the increased imports that are causing or threatening to cause serious injury. The nature of the facts, including their complexity, will dictate the extent to which the relationship between the unforeseen developments and increased imports causing injury needs to be explained. The timing of the explanation, its extent and its quality are all factors that can affect whether a explanation is reasoned and adequate.”(766) 545. The Appellate Body on US — Steel Safeguards confirmed that the “unforeseen developments” must result in increased imports of the product that is subject to a safeguard measure: “Turning to the term ‘as a result of’ that is also found in Article XIX:1(a), we note that the ordinary meaning of ‘result’ is, as defined in the dictionary, ‘an effect, issue, or outcome from some action, process or design’.(767) The increased imports to which this provision refers must therefore be an ‘effect, or outcome’ of the ‘unforeseen developments’. Put differently, the ‘unforeseen developments’ must ‘result’ in increased imports of the product (‘such product’) that is subject to a safeguard measure.”(768) 546. In US — Steel Safeguards, the Appellate Body clarified the relationship between unforeseen developments and increased imports and concluded that in situations of unforeseen developments, the increased imports must also be unforeseen: “In a similar vein, we said in Argentina — Footwear (EC) that ‘the increased quantities of imports should have been ‘unforeseen’ or ‘unexpected’.’(769) In doing so, we were referring to the fact that the increased imports must, under Article XIX:1(a), result from ‘unforeseen developments’ in order to justify the application of a safeguard measure. Because the ‘increased imports’ must be ‘as a result’ of an event that was ‘unforeseen’ or ‘unexpected’, it follows that the increased imports must also be ‘unforeseen’ or ‘unexpected’. Thus, the ‘extraordinary nature’ of the domestic response to increased imports does not depend on the absolute or relative quantities of the product being imported. Rather, it depends on the fact that the increased imports were unforeseen or unexpected.”(770) Point in time where the developments were unforeseen 547. The Appellate Body on Argentina — Footwear (EC) noted a GATT Panel Report, which confirmed that the development must have been unforeseen at the time of the tariff negotiation: “In addition, we note that our reading of the clause — ‘as a result of unforeseen developments and of the effect of the obligations incurred by a Member under this Agreement, including tariff concessions …’ — in Article XIX:1(a) is also consistent with the one GATT 1947 case that involved Article XIX, the so-called ‘Hatters’ Fur’ case.(771) Members of the Working Party in that case, in 1951, stated:
… ‘unforeseen developments’ should be interpreted to mean developments occurring after the negotiation of the relevant tariff concession which it would not be reasonable to expect that the negotiators of the country making the concession could and should have foreseen at the time when the concession was negotiated.(772)”(773) 548. In Korea — Dairy, the Appellate Body held that unforeseen developments are developments not foreseen or expected when Members incurred that obligation: “[S]uch ‘emergency actions’ [safeguard measures] are to be invoked only in situations when, as a result of obligations incurred under the GATT 1994, an importing Member finds itself confronted with developments it had not ‘foreseen’ or ‘expected’ when it incurred that obligation.”(774) 549. In Argentina — Preserved Peaches, the Panel agreed with the approach advanced by both parties that the developments should have been unforeseen by the negotiators at the time they granted the relevant concession: “There is the issue of the point in time at which Article XIX:1(a) requires that developments should have been unforeseen. Chile stated that the developments should have been unforeseen by a Member at the time it incurred the relevant obligation.(775) In response to questions posed by the Panel, both parties submitted basically that developments should have been unforeseen by the negotiators at the time at which they granted the relevant concession.(776) … We will apply this interpretation and determine whether the competent authorities assessed whether the developments which they identified were unforeseen as at the time the relevant obligation was negotiated. We emphasize that we are not now discussing the time at which the competent authorities must demonstrate the existence of unforeseen developments in order to adopt a safeguard measure.”(777) 550. In Argentina — Footwear (EC), the European Communities appealed the Panel’s finding on judicial economy as regards the absence of findings by the Panel on the European Communities claim on unforeseen developments. The Appellate Body upheld the Panel’s findings that the safeguards investigation at issue was inconsistent with the requirements of Articles 2 and 4 of the Agreement on Safeguards and concluded that, since such an inconsistency deprived the measure of legal basis, “there was no need to go further and examine whether, in addition, the measure was also inconsistent with Article XIX:1(a) of GATT 1994”.(778) As regards the obligation to apply Article 2.1 of the Agreement on Safeguards and Article XIX:1(a) of GATT 1994 cumulatively, including the requirement to demonstrate “unforeseen developments”, see paragraph 531 above. 551. In US — Wheat Gluten, the Appellate Body reiterated the above conclusion, stating that, given the lack of legal basis of the safeguard measure at issue, the Panel was entitled to decline to examine the claim regarding unforeseen developments.(779) (iv) “as a result … of the effect of the obligations incurred by a Member” 552. With respect to the clause “of the effect of the obligations incurred by a Member under this Agreement, including tariff concessions …” the Appellate Body held in Argentina — Footwear (EC): “[W]e believe that this phrase simply means that it must be demonstrated, as a matter of fact, that the importing Member has incurred obligations under the GATT 1994, including tariff concessions. Here, we note that the Schedules annexed to the GATT 1994 are made an integral part of Part I of that Agreement, pursuant to paragraph 7 of Article II of the GATT 1994. Therefore, any concession or commitment in a Member’s Schedule is subject to the obligations contained in Article II of the GATT 1994.”(780) 553. [In Argentina — Footwear (EC), the Appellate Body described the requirement “as a result … of the effect of the obligations incurred by a Member” as setting forth “certain circumstances which must be demonstrated as a matter of fact in order for a safeguard measure to be applied consistently with the provisions of Article XIX of the GATT 1994”. See paragraph 541 above. 554. The Panel on US — Steel Safeguards, in a finding not reviewed by the Appellate Body, held that “the logical connection between tariff concessions and increased imports causing serious injury is proven once there is evidence that the importing Member has tariff concessions for the relevant product.”(781) 555. With respect to the significance of the context and object and purpose of Article XIX for the interpretation of the term “as a result … of the effect of the obligations incurred by a Member”, see paragraph 541. With respect to a GATT Panel Report on this issue, see paragraph 547 above. 556. As regards the interpretation of the element “unforeseen developments” under Article XIX and the Agreement on Safeguards, see the Chapter on the Agreement on Safeguards, Section II.B.1(b). (v) “being imported in such increased quantities …” 557. Concerning the interpretation of the phrase “in such increased quantities” under Article 2.1 of the Agreement on Safeguards, see the Chapter on the Agreement on Safeguards, Section III.B.2(c). 558. As to the interpretation of the phrase “under such conditions” under Article 2.1 of the Agreement on Safeguards, see Chapter on the Agreement on Safeguards, Section III.B.2(d). (vii) “as to cause or threaten serious injury to domestic producers” 559. As regards the interpretation of the phrase “serious injury” under Article 2.1 of the Agreement on Safeguards, see Chapter on the Agreement on Safeguards, Section III.B.2(h). 560. With respect to the interpretation of the element of “serious injury” under Article 4.1 of the Agreement on Safeguards, see Chapter on the Agreement on Safeguards, Sections V.B.1–V.B.2. 561. Concerning the interpretation of the element “serious injury” under Article 4.2(a) of the Agreement on Safeguards, see Chapter on the Agreement on Safeguards, Section V.B.4. 562. As to the causation test to be applied in relating “increased imports” to “serious injury”, see Chapter on the Agreement on Safeguards, Section V.B.5(a). (a) “shall give notice in writing to the Contracting Parties as far as in advance as may be practicable” 563. With regard to the notification requirements and particularly to the interpretation of the phrase “shall immediately notify” under Article 12.1 of the Agreement on Safeguards, see the Chapter on the Agreement on Safeguards, Section XIII.B.1–2. (b) “an opportunity to consult” 564. With respect to the interpretation of “opportunity for prior consultations” under Article 12.3 of the Agreement on Safeguards, see the Chapter on the Agreement on Safeguards, XIII.B.4(a) 565. Regarding GATT practice on Article XIX.
566. In Korea — Dairy, the Appellate Body examined the relationship between Article XIX of GATT 1994 and the Agreement on Safeguards in light of, on the one hand, Article II of the WTO Agreement(782), and, on the other hand, Articles 1 and 11.1(a) of the Agreement on Safeguards.(783) The Appellate Body concluded that any safeguard measure imposed after the entry into force of the WTO Agreement must comply with the provisions of both Article XIX and the Agreement on Safeguards: “The specific relationship between Article XIX of the GATT 1994 and the Agreement on Safeguards within the WTO Agreement is set forth in Articles 1 and 11.1(a) of the Agreement on Safeguards: … Article 1 states that the purpose of the Agreement on Safeguards is to establish ‘rules for the application of safeguard measures which shall be understood to mean those measures provided for in Article XIX of GATT 1994.’ … The ordinary meaning of the language in Article 11.1(a) — ‘unless such action conforms with the provisions of that Article applied in accordance with this Agreement’ — is that any safeguard action must conform with the provisions of Article XIX of the GATT 1994 as well as with the provisions of the Agreement on Safeguards. Thus, any safeguard measure(784) imposed after the entry into force of the WTO Agreement must comply with the provisions of both the Agreement on Safeguards and Article XIX of the GATT 1994.”(785) 567. In US — Line Pipe, the Panel, in a finding not reviewed by the Appellate Body, did not examine whether Korea’s claim under Article XIX:1(a) was justified on the basis that it had already rejected Korea’s claims under the Agreement on Safeguards: “In the context of its claims under Articles 5.1 (first sentence) and 7.1 concerning the extent and duration of the line pipe measure, Korea also alleged an infringement of Article XIX:1(a). This provision authorizes the imposition of safeguard measures “to the extent and for such time as may be necessary to prevent or remedy” injury caused by increased imports. Korea’s Article XIX:1(a) claim is based on the same arguments advanced in support of its Article 5.1 (first sentence) and 7.1 claims. Since we have already rejected those claims, we also reject Korea’s Article XIX:1(a) claim regarding the duration and extent of the line pipe measure.”(786) 568. In Argentina — Footwear (EC),the Appellate Body reversed a conclusion by the Panel that “safeguard investigations and safeguard measures imposed after the entry into force of the WTO agreements which meet the requirements of the new Safeguards Agreement satisfy the requirements of Article XIX of GATT.”(787) The Appellate Body noted that Articles 1 and 11.1(a) of the Agreement on Safeguards described the precise nature of the relationship between Article XIX of GATT 1994 and the Agreement on Safeguards within the WTO Agreement(788), and then observed: “We see nothing in the language of either Article 1 or Article 11.1(a) of the Agreement on Safeguards that suggests an intention by the Uruguay Round negotiators to subsume the requirements of Article XIX of the GATT 1994 within the Agreement on Safeguards and thus to render those requirements no longer applicable. Article 1 states that the purpose of the Agreement on Safeguards is to establish ‘rules for the application of safeguard measures which shall be understood to mean those measures provided for in Article XIX of GATT 1994.’ … This suggests that Article XIX continues in full force and effect, and, in fact, establishes certain prerequisites for the imposition of safeguard measures. Furthermore, in Article 11.1(a), the ordinary meaning of the language ‘unless such action conforms with the provisions of that Article applied in accordance with this Agreement’… clearly is that any safeguard action must conform with the provisions of Article XIX of the GATT 1994 as well as with the provisions of the Agreement on Safeguards. Neither of these provisions states that any safeguard action taken after the entry into force of the WTO Agreement need only conform with the provisions of the Agreement on Safeguards.(789)”(790) 569. The Appellate Body on Argentina — Footwear (EC) further rejected the conclusion of the Panel that because the clause “[i]f, as a result of unforeseen developments … concessions”(791) in Article XIX:1(a) had been expressly omitted from Article 2.1 of the Agreement on Safeguards, safeguard measures that meet the requirements of the Agreement on Safeguards will automatically also satisfy the requirements of Article XIX. The Appellate Body considered this conclusion of the Panel as inconsistent with the principles of effective treaty interpretation(792) and with the ordinary meaning of Articles 1 and 11.1(a) of the Agreement on Safeguards: “[I]t is clear from Articles 1 and 11.1(a) of the Agreement on Safeguards that the Uruguay Round negotiators did not intend that the Agreement on Safeguards would entirely replace Article XIX. Instead, the ordinary meaning of Articles 1 and 11.1(a) of the Agreement on Safeguards confirms that the intention of the negotiators was that the provisions of Article XIX of the GATT 1994 and of the Agreement on Safeguards would apply cumulatively, except to the extent of a conflict between specific provisions … We do not see this as an issue involving a conflict between specific provisions of two Multilateral Agreements on Trade in Goods. Thus, we are obliged to apply the provisions of Article 2.1 of the Agreement on Safeguards and Article XIX:1(a) of the GATT 1994 cumulatively, in order to give meaning, by giving legal effect, to all the applicable provisions relating to safeguard measures.”(793) 570. The Panel on US — Lamb, referring to the statements by the Appellate Body in Argentina — Footwear (EC) and Korea — Dairy, on the relationship between the Agreement on Safeguards and Article XIX of the GATT 1994, observed: “Thus the Appellate Body explicitly rejected the idea that those requirements of GATT Article XIX which are not reflected in the Safeguards Agreement could have been superseded by the requirements of the latter and stressed that all of the relevant provisions of the Safeguards Agreement and GATT Article XIX must be given meaning and effect.”(794) 571. The Appellate Body Report in US — Lamb reiterated the conclusions drawn by the Appellate Body in Argentina — Footwear (EC) and in Korea — Dairy on the relationship between the Agreement on Safeguards and Article XIX of the GATT 1994 and observed: “[A]rticles 1 and 11.1(a) of the Agreement on Safeguards express the full and continuing applicability of Article XIX of the GATT 1994, which no longer stands in isolation, but has been clarified and reinforced by the Agreement on Safeguards.”(795) 572. Concerning the possibility of resorting to judicial economy as regards claims of unforeseen developments in cases where it has found that the requirements of Article 2 and 4 of the Agreement on Safeguards have not been met, see paragraphs 550–551 above.
XXI. Article XX back to top Article XX: General Exceptions Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures:
(a) necessary to protect public morals;
(b) necessary to protect human, animal or plant life or health;
(c) relating to the importations or exportations of gold or silver;
(d) necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of this Agreement, including those relating to customs enforcement, the enforcement of monopolies operated under paragraph 4 of Article II and Article XVII, the protection of patents, trade marks and copyrights, and the prevention of deceptive practices;
(e) relating to the products of prison labour;
(f) imposed for the protection of national treasures of artistic, historic or archaeological value;
(g) relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption;
(h) undertaken in pursuance of obligations under any intergovernmental commodity agreement which conforms to criteria submitted to the CONTRACTING PARTIES and not disapproved by them or which is itself so submitted and not so disapproved;
(i) involving restrictions on exports of domestic materials necessary to ensure essential quantities of such materials to a domestic processing industry during periods when the domestic price of such materials is held below the world price as part of a governmental stabilization plan; Provided that such restrictions shall not operate to increase the exports of or the protection afforded to such domestic industry, and shall not depart from the provisions of this Agreement relating to non-discrimination;
(j) essential to the acquisition or distribution of products in general or local short supply; Provided that any such measures shall be consistent with the principle that all contracting parties are entitled to an equitable share of the international supply of such products, and that any such measures, which are inconsistent with the other provisions of the Agreement shall be discontinued as soon as the conditions giving rise to them have ceased to exist. The CONTRACTING PARTIES shall review the need for this sub-paragraph not later than 30 June 1960. Ad Article XX: Subparagraph (h) The exception provided for in this subparagraph extends to any commodity agreement which conforms to the principles approved by the Economic and Social Council in its resolution 30 (IV) of 28 March 1947. (a) Nature and purpose of Article XX 573. In US — Gasoline, in discussing the preambular language (the “chapeau”) of Article XX, the Appellate Body stated: “[T]he chapeau says that ‘nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures …’The exceptions listed in Article XX thus relate to all of the obligations under the General Agreement: the national treatment obligation and the most-favoured-nation obligation, of course, but others as well.”(796) 574. In US — Shrimp, the Appellate Body examined the GATT-consistency of the import ban on shrimp and shrimp products from exporting nations not certified by United States authorities. Such certification could be obtained, inter alia, where the foreign country could demonstrate that shrimp or shrimp products were being caught using methods which did not lead to incidental killing of turtles beyond a certain level. The Panel had found that the measure at issue could not be justified under Article XX, because Article XX could not serve to justify “measures conditioning access to its market for a given product upon the adoption by the exporting Members of certain policies”. The Appellate Body disagreed with this interpretation of the scope of Article XX and stated: “[C]onditioning access to a Member’s domestic market on whether exporting Members comply with, or adopt, a policy or policies unilaterally prescribed by the importing Member may, to some degree, be a common aspect of measures falling within the scope of one or another of the exceptions (a) to (j) of Article XX. paragraphs (a) to (j) comprise measures that are recognized as exceptions to substantive obligations established in the GATT 1994, because the domestic policies embodied in such measures have been recognized as important and legitimate in character. It is not necessary to assume that requiring from exporting countries compliance with, or adoption of, certain policies (although covered in principle by one or another of the exceptions) prescribed by the importing country, renders a measure a priori incapable of justification under Article XX. Such an interpretation renders most, if not all, of the specific exceptions of Article XX inutile, a result abhorrent to the principles of interpretation we are bound to apply.”(797) 575. In US — Shrimp, interpreting the chapeau of Article XX, the Appellate Body described the nature and purpose of Article XX as a balance of rights and duties: “[A] balance must be struck between the right of a Member to invoke an exception under Article XX and the duty of that same Member to respect the treaty rights of the other Members.
The task of interpreting and applying the chapeau is, hence, essentially the delicate one of locating and marking out a line of equilibrium between the right of a Member to invoke an exception under Article XX and the rights of the other Members under varying substantive provisions (e.g., Article XI) of the GATT 1994, so that neither of the competing rights will cancel out the other and thereby distort and nullify or impair the balance of rights and obligations constructed by the Members themselves in that Agreement. The location of the line of equilibrium, as expressed in the chapeau, is not fixed and unchanging; the line moves as the kind and the shape of the measures at stake vary and as the facts making up specific cases differ.”(798) 576. In US — Gasoline, the Appellate Body concluded its analysis by emphasizing the function of Article XX with respect to national measures taken for environmental protection: “It is of some importance that the Appellate Body point out what this does not mean. It does not mean, or imply, that the ability of any WTO Member to take measures to control air pollution or, more generally, to protect the environment, is at issue. That would be to ignore the fact that Article XX of the General Agreement contains provisions designed to permit important state interests — including the protection of human health, as well as the conservation of exhaustible natural resources — to find expression. The provisions of Article XX were not changed as a result of the Uruguay Round of Multilateral Trade Negotiations. Indeed, in the preamble to the WTO Agreement and in the Decision on Trade and Environment,(799) there is specific acknowledgement to be found about the importance of coordinating policies on trade and the environment. WTO Members have a large measure of autonomy to determine their own policies on the environment (including its relationship with trade), their environmental objectives and the environmental legislation they enact and implement. So far as concerns the WTO, that autonomy is circumscribed only by the need to respect the requirements of the General Agreement and the other covered agreements.”(800) 577. In US — Gasoline, the Appellate Body examined the Panel’s findings that the United States regulation concerning the quality of gasoline was inconsistent with GATT Article III:4 and not justified under either paragraph (b), (d) or (g) of Article XX. The Appellate Body presented a two-tiered test under Article XX: “In order that the justifying protection of Article XX may be extended to it, the measure at issue must not only come under one or another of the particular exceptions — paragraphs (a) to (j) — listed under Article XX; it must also satisfy the requirements imposed by the opening clauses of Article XX. The analysis is, in other words, two-tiered: first, provisional justification by reason of characterization of the measure under XX(g); second, further appraisal of the same measure under the introductory clauses of Article XX.”(801) 578. In US — Shrimp, the Appellate Body reviewed the Panel’s finding concerning an import ban on shrimp and shrimp products harvested by foreign vessels. The ban applied to shrimp and shrimp products where the exporting country had not been certified by United States authorities as using methods not leading to incidental killing of sea turtles above a certain level. The Panel found a violation of Article III and held that the United States measure was not within the scope of measures permitted under the chapeau of Article XX. As a result of its finding that the United States measure could not be justified under the terms of the chapeau, the Panel did not examine the import ban in the light of Articles XX (b) and XX(g). The Appellate Body referred to its finding in US — Gasoline, cited in paragraph 577 above, and emphasized the need to follow the sequence of steps as set out in that Report: “The sequence of steps indicated above in the analysis of a claim of justification under Article XX reflects, not inadvertence or random choice, but rather the fundamental structure and logic of Article XX. The Panel appears to suggest, albeit indirectly, that following the indicated sequence of steps, or the inverse thereof, does not make any difference. To the Panel, reversing the sequence set out in United States — Gasoline ‘seems equally appropriate.’(802) We do not agree.
The task of interpreting the chapeau so as to prevent the abuse or misuse of the specific exemptions provided for in Article XX is rendered very difficult, if indeed it remains possible at all, where the interpreter (like the Panel in this case) has not first identified and examined the specific exception threatened with abuse. The standards established in the chapeau are, moreover, necessarily broad in scope and reach: the prohibition of the application of a measure ‘in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail’ or ‘a disguised restriction on international trade.’(emphasis added) When applied in a particular case, the actual contours and contents of these standards will vary as the kind of measure under examination varies.”(803) (iii) Language of paragraphs (a) to (i) 579. In US — Gasoline, the Appellate Body compared the terms used in paragraphs (a) to (i) of Article XX, emphasizing that different terms are used in respect of the different categories of measures described in paragraphs (a) to (i): “Applying the basic principle of interpretation that the words of a treaty, like the General Agreement, are to be given their ordinary meaning, in their context and in the light of the treaty’s object and purpose, the Appellate Body observes that the Panel Report failed to take adequate account of the words actually used by Article XX in its several paragraphs. In enumerating the various categories of governmental acts, laws or regulations which WTO Members may carry out or promulgate in pursuit of differing legitimate state policies or interests outside the realm of trade liberalization, Article XX uses different terms in respect of different categories:
‘necessary’ — in paragraphs (a), (b) and (d); ‘essential’ — in paragraph (j); ‘relating to’ — in paragraphs (c), (e) and (g); ‘for the protection of’ — in paragraph (f); ‘in pursuance of’ — in paragraph (h); and ‘involving’ — in paragraph (i).
It does not seem reasonable to suppose that the WTO Members intended to require, in respect of each and every category, the same kind or degree of connection or relationship between the measure under appraisal and the state interest or policy sought to be promoted or realized.”(804) 580. In US — Gasoline, the Appellate Body differentiated between the burden of proof under the individual paragraphs of Article XX on the one hand, and under the chapeau of Article XX on the other: “The burden of demonstrating that a measure provisionally justified as being within one of the exceptions set out in the individual paragraphs of Article XX does not, in its application, constitute abuse of such exception under the chapeau, rests on the party invoking the exception. That is, of necessity, a heavier task than that involved in showing that an exception, such as Article XX(g), encompasses the measure at issue.”(805) 581. The Panel on EC — Asbestos, in a statement not reviewed by the Appellate Body, elaborated on the burden of proof under Article XX in the context of a defence based on Article XX(b): “We consider that the reasoning of the Appellate Body in United States — Shirts and Blouses from India(806) is applicable to Article XX, inasmuch as the invocation of that Article constitutes a ‘defence’ in the sense in which that word is used in the above-mentioned report. It is therefore for the European Communities to submit in respect of this defence a prima facie case showing that the measure is justified. Of course, as the Appellate Body pointed out in United States — Gasoline, the burden on the European Communities could vary according to what has to be proved. It will then be for Canada to rebut that prima facie case, if established.
If we mention this working rule at this stage, it is because it could play a part in our assessment of the evidence submitted by the parties. Thus, the fact that a party invokes Article XX does not mean that it does not need to supply the evidence necessary to support its allegation. Similarly, it does not release the complaining party from having to supply sufficient arguments and evidence in response to the claims of the defending party. Moreover, we are of the opinion that it is not for the party invoking Article XX to prove that the arguments put forward in rebuttal by the complaining party are incorrect until the latter has backed them up with sufficient evidence.(807)”(808) 582. The Panel on EC — Asbestos, in a finding not addressed by the Appellate Body, further discussed the burden of proof specifically regarding the scientific aspect of the measure at issue. The Panel chose to confine itself to the provisions of the GATT 1994 and to the criteria defined by the practice relating to the application of GATT Article XX rather than to extend the principles of the SPS Agreement to examination under Article XX:(809) “[I]n relation to the scientific information submitted by the parties and the experts, the Panel feels bound to point out that it is not its function to settle a scientific debate, not being composed of experts in the field of the possible human health risks posed by asbestos. Consequently, the Panel does not intend to set itself up as an arbiter of the opinions expressed by the scientific community.
Its role, taking into account the burden of proof, is to determine whether there is sufficient scientific evidence to conclude that there exists a risk for human life or health and that the measures taken by France are necessary in relation to the objectives pursued. The Panel therefore considers that it should base its conclusions with respect to the existence of a public health risk on the scientific evidence put forward by the parties and the comments of the experts consulted within the context of the present case. The opinions expressed by the experts we have consulted will help us to understand and evaluate the evidence submitted and the arguments advanced by the parties.(810) The same approach will be adopted with respect to the necessity of the measure concerned.”(811) 2. Preamble of Article XX (the “chapeau”) 583. In US — Gasoline, the Appellate Body held that the chapeau has been worded so to prevent the abuse of the exceptions under Article XX: “The chapeau by its express terms addresses, not so much the questioned measure or its specific contents as such, but rather the manner in which that measure is applied.(812) It is, accordingly, important to underscore that the purpose and object of the introductory clauses of Article XX is generally the prevention of ‘abuse of the exceptions of [what was later to become] Article [XX].’(813) This insight drawn from the drafting history of Article XX is a valuable one. The chapeau is animated by the principle that while the exceptions of Article XX may be invoked as a matter of legal right, they should not be so applied as to frustrate or defeat the legal obligations of the holder of the right under the substantive rules of the General Agreement. If those exceptions are not to be abused or misused, in other words, the measures falling within the particular exceptions must be applied reasonably, with due regard both to the legal duties of the party claiming the exception and the legal rights of the other parties concerned.”(814) 584. In US — Shrimp, the Appellate Body elaborated on the notion of preventing abuse or misuse of the exceptions under Article XX. The Appellate Body found that “a balance must be struck between the right of a Member to invoke an exception under Article XX and the duty of that same Member to respect the treaty rights of the other Members”(815), as referenced in paragraph 575 above, and went on to state: “In our view, the language of the chapeau makes clear that each of the exceptions in paragraphs (a) to (j) of Article XX is a limited and conditional exception from the substantive obligations contained in the other provisions of the GATT 1994, that is to say, the ultimate availability of the exception is subject to the compliance by the invoking Member with the requirements of the chapeau.(816) This interpretation of the chapeau is confirmed by its negotiating history.(817) The language initially proposed by the United States in 1946 for the chapeau of what would later become Article XX was unqualified and unconditional.(818) Several proposals were made during the First Session of the Preparatory Committee of the United Nations Conference on Trade and Employment in 1946 suggesting modifications.(819) In November 1946, the United Kingdom proposed that “in order to prevent abuse of the exceptions of Article 32 [which would subsequently become Article XX]”, the chapeau of this provision should be qualified.(820) This proposal was generally accepted, subject to later review of its precise wording. Thus, the negotiating history of Article XX confirms that the paragraphs of Article XX set forth limited and conditional exceptions from the obligations of the substantive provisions of the GATT. Any measure, to qualify finally for exception, must also satisfy the requirements of the chapeau. This is a fundamental part of the balance of rights and obligations struck by the original framers of the GATT 1947.”(821) 585. The Appellate Body then linked the balance of rights and obligations under the chapeau of Article XX to the general principle of good faith: “The chapeau of Article XX is, in fact, but one expression of the principle of good faith. This principle, at once a general principle of law and a general principle of international law, controls the exercise of rights by states. One application of this general principle, the application widely known as the doctrine of abus de droit, prohibits the abusive exercise of a state’s rights and enjoins that whenever the assertion of a right “impinges on the field covered by [a] treaty obligation, it must be exercised bona fide, that is to say, reasonably.”(822) An abusive exercise by a Member of its own treaty right thus results in a breach of the treaty rights of the other Members and, as well, a violation of the treaty obligation of the Member so acting. Having said this, our task here is to interpret the language of the chapeau, seeking additional interpretative guidance, as appropriate, from the general principles of international law.
The task of interpreting and applying the chapeau is, hence, essentially the delicate one of locating and marking out a line of equilibrium between the right of a Member to invoke an exception under Article XX and the rights of the other Members under varying substantive provisions (e.g., Article XI) of the GATT 1994, so that neither of the competing rights will cancel out the other and thereby distort and nullify or impair the balance of rights and obligations constructed by the Members themselves in that Agreement. The location of the line of equilibrium, as expressed in the chapeau, is not fixed and unchanging; the line moves as the kind and the shape of the measures at stake vary and as the facts making up specific cases differ.”(823) 586. In US — Shrimp, before elaborating on the general significance of the chapeau of Article XX, as quoted in paragraphs 584–585 above, the Appellate Body discussed the significance of the Preamble of the WTO Agreement for its interpretative approach to the chapeau: “[The language of the WTO Preamble] demonstrates a recognition by WTO negotiators that optimal use of the world’s resources should be made in accordance with the objective of sustainable development. As this preambular language reflects the intentions of negotiators of the WTO Agreement, we believe it must add colour, texture and shading to our interpretation of the agreements annexed to the WTO Agreement, in this case, the GATT 1994. We have already observed that Article XX(g) of the GATT 1994 is appropriately read with the perspective embodied in the above preamble.
We also note that since this preambular language was negotiated, certain other developments have occurred which help to elucidate the objectives of WTO Members with respect to the relationship between trade and the environment. The most significant, in our view, was the Decision of Ministers at Marrakesh to establish a permanent Committee on Trade and Environment (the ‘CTE’). … [W]e must fulfill our responsibility in this specific case, which is to interpret the existing language of the chapeau of Article XX by examining its ordinary meaning, in light of its context and object and purpose in order to determine whether the United States measure at issue qualifies for justification under Article XX. It is proper for us to take into account, as part of the context of the chapeau, the specific language of the preamble to the WTO Agreement, which, we have said, gives colour, texture and shading to the rights and obligations of Members under the WTO Agreement, generally, and under the GATT 1994, in particular.”(824) (b) “arbitrary or unjustifiable discrimination between countries where the same conditions prevail” 587. The Appellate Body on US — Shrimp provided an overview regarding the three constitutive elements of the concept of “arbitrary or unjustifiable discrimination between countries where the same conditions prevail”: “In order for a measure to be applied in a manner which would constitute ‘arbitrary or unjustifiable discrimination between countries where the same conditions prevail’, three elements must exist. First, the application of the measure must result in discrimination. As we stated in United States — Gasoline, the nature and quality of this discrimination is different from the discrimination in the treatment of products which was already found to be inconsistent with one of the substantive obligations of the GATT 1994, such as Articles I, III or XI.(825) Second, the discrimination must be arbitrary or unjustifiable in character. We will examine this element of arbitrariness or unjustifiability in detail below. Third, this discrimination must occur between countries where the same conditions prevail. In United States — Gasoline, we accepted the assumption of the participants in that appeal that such discrimination could occur not only between different exporting Members, but also between exporting Members and the importing Member concerned.(826)”(827) (ii) Type of discrimination covered by the chapeau 588. With respect to the phrase “between countries where the same conditions prevail”, the question arose whether the notion of discrimination under the chapeau of Article XX referred to conditions in importing or exporting countries (i.e. discrimination between a foreign country or foreign countries on the one hand and the home country on the other) or only to conditions in various exporting countries. The Appellate Body on US — Gasoline indicated that it considered both types of discrimination covered by the chapeau: “[The United States] was asked whether the words incorporated into the first two standards ‘between countries where the same conditions prevail’ refer to conditions in importing and exporting countries, or only to conditions in exporting countries. The reply of the United States was to the effect that it interpreted that phrase as referring to both the exporting countries and importing countries and as between exporting countries. … At no point in the appeal was that assumption challenged by Venezuela or Brazil. …
The assumption on which all the participants proceeded is buttressed by the fact that the chapeau says that ‘nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures …’ The exceptions listed in Article XX thus relate to all of the obligations under the General Agreement: the national treatment obligation and the most-favoured-nation obligation, of course, but others as well. Effect is more easily given to the words ‘nothing in this Agreement’, and Article XX as a whole including its chapeau more easily integrated into the remainder of the General Agreement, if the chapeau is taken to mean that the standards it sets forth are applicable to all of the situations in which an allegation of a violation of a substantive obligation has been made and one of the exceptions contained in Article XX has in turn been claimed.
[W]e see no need to decide the matter of the field of application of the standards set forth in the chapeau nor to make a ruling at variance with the common understanding of the participants.(828)”(829) 589. In US — Shrimp, the Appellate Body confirmed its finding in US — Gasoline on the type of discrimination covered by the chapeau Article XX: “In United States — Gasoline, we accepted the assumption of the participants in that appeal that such discrimination could occur not only between different exporting Members, but also between exporting Members and the importing Member concerned.”(830) (iii) Standard of discrimination 590. The Appellate Body on US — Gasoline considered the appropriate discrimination standard relevant under the chapeau Article XX and held that this standard must be different from the standard applied under Article III:4: “The enterprise of applying Article XX would clearly be an unprofitable one if it involved no more than applying the standard used in finding that the baseline establishment rules were inconsistent with Article III:4. That would also be true if the finding were one of inconsistency with some other substantive rule of the General Agreement. The provisions of the chapeau cannot logically refer to the same standard(s) by which a violation of a substantive rule has been determined to have occurred. To proceed down that path would be both to empty the chapeau of its contents and to deprive the exceptions in paragraphs (a) to (j) of meaning. Such recourse would also confuse the question of whether inconsistency with a substantive rule existed, with the further and separate question arising under the chapeau of Article XX as to whether that inconsistency was nevertheless justified. One of the corollaries of the ‘general rule of interpretation’ in the Vienna Convention is that interpretation must give meaning and effect to all the terms of a treaty. An interpreter is not free to adopt a reading that would result in reducing whole clauses or paragraphs of a treaty to redundancy or inutility.
The chapeau, it will be seen, prohibits such application of a measure at issue (otherwise falling within the scope of Article XX(g)) as would constitute
(a) ‘arbitrary discrimination’ (between countries where the same conditions prevail);
(b) ‘unjustifiable discrimination’ (with the same qualifier); or
(c) ‘disguised restriction’ on international trade.
The text of the chapeau is not without ambiguity, including one relating to the field of application of the standards its contains: the arbitrary or unjustifiable discrimination standards and the disguised restriction on international trade standard. It may be asked whether these standards do not have different fields of application.”(831) 591. After noting that “[t]he enterprise of applying Article XX would clearly be an unprofitable one if it involved no more than applying the standard used in finding that the baseline establishment rules were inconsistent with Article III:4” as referenced in paragraph 590 above, the Appellate Body on US — Gasoline examined the United States conduct with respect to other Members’ governments and its failure to consider the costs imposed by its measures upon foreign refiners. The Appellate Body then held that these “two omissions go well beyond what was necessary for the Panel to determine that a violation of Article III:4 had occurred in the first place”: “We have above located two omissions on the part of the United States: to explore adequately means, including in particular cooperation with the governments of Venezuela and Brazil, of mitigating the administrative problems relied on as justification by the United States for rejecting individual baselines for foreign refiners; and to count the costs for foreign refiners that would result from the imposition of statutory baselines. In our view, these two omissions go well beyond what was necessary for the Panel to determine that a violation of Article III:4 had occurred in the first place. The resulting discrimination must have been foreseen, and was not merely inadvertent or unavoidable. In the light of the foregoing, our conclusion is that the baseline establishment rules in the Gasoline Rule, in their application, constitute ‘unjustifiable discrimination’ and a ‘disguised restriction on international trade.’ We hold, in sum, that the baseline establishment rules, although within the terms of Article XX(g), are not entitled to the justifying protection afforded by Article XX as a whole.”(832) 592. In US — Shrimp, the Appellate Body listed three elements of “arbitrary or unjustifiable discrimination” within the meaning of the chapeau of Article XX. See also paragraph 587 above. In respect of the first element, it reiterated its findings from US — Gasoline concerning the difference in discrimination under the chapeau of Article XX and other GATT provisions: “As we stated in United States — Gasoline, the nature and quality of this discrimination is different from the discrimination in the treatment of products which was already found to be inconsistent with one of the substantive obligations of the GATT 1994, such as Articles I, III or XI.(833)”(834) (iv) Examples of arbitrary and unjustifiable discrimination 593. In US — Shrimp, in analysing the United States measure at issue in the light of the chapeau of Article XX, the Appellate Body noted the “intended and actual coercive effect on other governments” to “adopt essentially the same policy” as the United States: “Perhaps the most conspicuous flaw in this measure’s application relates to its intended and actual coercive effect on the specific policy decisions made by foreign governments, Members of the WTO. Section 609, in its application, is, in effect, an economic embargo which requires all other exporting Members, if they wish to exercise their GATT rights, to adopt essentially the same policy (together with an approved enforcement program) as that applied to, and enforced on, United States domestic shrimp trawlers.”(835) 594. The Appellate Body on US — Shrimp acknowledged that “the United States … applie[d] a uniform standard throughout its territories regardless of the particular conditions existing in certain parts of the country”(836), but held that such a uniform standard cannot be permissible in international trade relations. The Appellate Body held that “discrimination exists”, inter alia, “when the application of the measure at issue does not allow for any inquiry into the appropriateness of the regulatory programme for the conditions prevailing in those exporting countries”: “It may be quite acceptable for a government, in adopting and implementing a domestic policy, to adopt a single standard applicable to all its citizens throughout that country. However, it is not acceptable, in international trade relations, for one WTO Member to use an economic embargo to require other Members to adopt essentially the same comprehensive regulatory program, to achieve a certain policy goal, as that in force within that Member’s territory, without taking into consideration different conditions which may occur in the territories of those other Members.
Furthermore, when this dispute was before the Panel and before us, the United States did not permit imports of shrimp harvested by commercial shrimp trawl vessels using TEDs comparable in effectiveness to those required in the United States if those shrimp originated in waters of countries not certified under Section 609. In other words, shrimp caught using methods identical to those employed in the United States have been excluded from the United States market solely because they have been caught in waters of countries that have not been certified by the United States. The resulting situation is difficult to reconcile with the declared policy objective of protecting and conserving sea turtles. This suggests to us that this measure, in its application, is more concerned with effectively influencing WTO Members to adopt essentially the same comprehensive regulatory regime as that applied by the United States to its domestic shrimp trawlers, even though many of those Members may be differently situated. We believe that discrimination results not only when countries in which the same conditions prevail are differently treated, but also when the application of the measure at issue does not allow for any inquiry into the appropriateness of the regulatory program for the conditions prevailing in those exporting countries.”(837) 595. The Appellate Body on US — Shrimp further criticised the “single, rigid and unbending requirement” that countries applying for certification — required under the United States measure at issue in order to import shrimps into the United States — were faced with. The Appellate Body also noted a lack of flexibility in how officials were making the determination for certification: “Section 609, in its application, imposes a single, rigid and unbending requirement that countries applying for certification under Section 609(b)(2)(A) and (B) adopt a comprehensive regulatory program that is essentially the same as the United States program, without inquiring into the appropriateness of that program for the conditions prevailing in the exporting countries. Furthermore, there is little or no flexibility in how officials make the determination for certification pursuant to these provisions. In our view, this rigidity and inflexibility also constitute ‘arbitrary discrimination’ within the meaning of the chapeau.”(838) 596. Another aspect which the Appellate Body on US — Shrimp considered in determining whether the United States measure at issue constituted “arbitrary or unjustifiable discrimination between countries where the same conditions prevail” was the concept of “due process”. The Appellate Body found that the procedures under which United States authorities were granting the certification which foreign countries were required to obtain in order for their nationals to import shrimps into the United States were “informal” and “casual” and not “transparent” and “predictable: “[W]ith respect to neither type of certification under [the measure at issue requiring certification] is there a transparent, predictable certification process that is followed by the competent United States government officials. The certification processes under Section 609 consist principally of administrative ex parte inquiry or verification by staff of the Office of Marine Conservation in the Department of State with staff of the United States National Marine Fisheries Service. With respect to both types of certification, there is no formal opportunity for an applicant country to be heard, or to respond to any arguments that may be made against it, in the course of the certification process before a decision to grant or to deny certification is made. Moreover, no formal written, reasoned decision, whether of acceptance or rejection, is rendered on applications for either type of certification, whether under Section 609(b)(2)(A) and (B) or under Section 609(b)(2)(C). Countries which are granted certification are included in a list of approved applications published in the Federal Register; however, they are not notified specifically. Countries whose applications are denied also do not receive notice of such denial (other than by omission from the list of approved applications) or of the reasons for the denial. No procedure for review of, or appeal from, a denial of an application is provided.
The certification processes followed by the United States thus appear to be singularly informal and casual, and to be conducted in a manner such that these processes could result in the negation of rights of Members. There appears to be no way that exporting Members can be certain whether the terms of Section 609, in particular, the 1996 Guidelines, are being applied in a fair and just manner by the appropriate governmental agencies of the United States. It appears to us that, effectively, exporting Members applying for certification whose applications are rejected are denied basic fairness and due process, and are discriminated against, vis-à-vis those Members which are granted certification.”(839) 597. The Panel on EC — Tariff Preferences analysed whether the European Communities’ Drug Arrangements were justified under Article XX(b). As one of the steps in assessing this, the Panel examined whether the measure was applied in a manner consistent with the chapeau of Article XX. Specifically, the Panel looked at the inclusion of Pakistan, as of 2002, as a beneficiary of the Drug Arrangements preference scheme and the exclusion of Iran, and found that no objective criteria could be discerned in the selection process. Consequently, the Panel was not satisfied that conditions in the 12 beneficiary countries were the same or similar and that they were not the same with those prevailing in other countries: “First, the Panel notes the European Communities’ argument that the assessment of the gravity of the drug issue is based on available statistics on the production and/or trafficking of drugs in each country. The Panel notes, however, from the statistics provided by the European Communities itself in support of its argument that the 12 beneficiaries are the most seriously drug-affected countries, that the seizures of opium and of heroin in Iran are substantially higher than, for example, the seizures of these drugs in Pakistan throughout the period 1994–2000.(840) Iran is not covered as a beneficiary under the Drug Arrangements. Such treatment of Iran, and possibly of other countries, in the view of the Panel, is discriminatory. Bearing in mind the well-established rule that it is for the party invoking Article XX to demonstrate the consistency of its measure with the chapeau, the Panel notes that the European Communities has not provided any justification for such discriminatory treatment vis-à-vis Iran. Moreover, the European Communities has not shown that such discrimination is not arbitrary and not unjustifiable as between countries where the same conditions prevail.
Second, the Panel also notes, based upon statistics provided by the European Communities, that seizures of opium in Pakistan were 14,663 kilograms in 1994, as compared to 8,867 kilograms in 2000. Seizures of heroin in Pakistan were 6,444 kilograms in 1994 and 9,492 kilograms in 2000. The overall drug problem in Pakistan in 1994 and thereafter was no less serious than in 2000. The Panel considers that the conditions in terms of the seriousness of the drug problem prevailing in Pakistan in 1994 and thereafter were very similar to those prevailing in Pakistan in the year 2000. Accordingly, the Panel fails to see how the application of the same claimed objective criteria justified the exclusion of Pakistan prior to 2002 and, at the same time, its inclusion as of that year. And, given that the Panel cannot discern any change in the criteria used for the selection of beneficiaries under the Drug Arrangements since 1990, the Panel cannot conclude that the criteria applied for the inclusion of Pakistan are objective or non-discriminatory. Moreover, the European Communities has provided no evidence on the existence of any such criteria. … Given the European Communities’ unconvincing explanations as to why it included Pakistan in the Drug Arrangements in 2002 and the fact that Iran was not included as a beneficiary, the Panel is unable to identify the specific criteria and the objectivity of such criteria the European Communities has applied in its selection of beneficiaries under the Drug Arrangements. … The Panel finds no evidence to conclude that the conditions in respect of drug problems prevailing in the 12 beneficiary countries are the same or similar, while the conditions prevailing in other drug-affected developing countries not covered by any other preferential tariff schemes are not the same as, or sufficiently similar to, the prevailing conditions in the 12 beneficiary countries.”(841) (c) “disguised restriction on international trade” 598. In US — Gasoline, the Appellate Body held that the concepts of “arbitrary or unjustifiable discrimination” and “disguised restriction on international trade” were related concepts which “imparted meaning to one another”: “‘Arbitrary discrimination’, ‘unjustifiable discrimination’ and ‘disguised restriction’ on international trade may, accordingly, be read side-by-side; they impart meaning to one another. It is clear to us that ‘disguised restriction’ includes disguised discrimination in international trade. It is equally clear that concealed or unannounced restriction or discrimination in international trade does not exhaust the meaning of ‘disguised restriction.’ We consider that ‘disguised restriction’, whatever else it covers, may properly be read as embracing restrictions amounting to arbitrary or unjustifiable discrimination in international trade taken under the guise of a measure formally within the terms of an exception listed in Article XX. Put in a somewhat different manner, the kinds of considerations pertinent in deciding whether the application of a particular measure amounts to ‘arbitrary or unjustifiable discrimination’, may also be taken into account in determining the presence of a ‘disguised restriction’ on international trade. The fundamental theme is to be found in the purpose and object of avoiding abuse or illegitimate use of the exceptions to substantive rules available in Article XX.”(842) 599. See also the excerpt from the report of the Appellate Body in US — Gasoline referenced in paragraph 591 above. (d) Reference to GATT practice 600. With respect to GATT practice on the Preamble of Article XX. 601. The Panel on US — Gasoline, in a finding not reviewed by the Appellate Body, presented the following three-tier test in respect of Article XX(b): “[A]s the party invoking an exception the United States bore the burden of proof in demonstrating that the inconsistent measures came within its scope. The Panel observed that the United States therefore had to establish the following elements:
(1) that the policy in respect of the measures for which the provision was invoked fell within the range of policies designed to protect human, animal or plant life or health;
(2) that the inconsistent measures for which the exception was being invoked were necessary to fulfil the policy objective; and
(3) that the measures were applied in conformity with the requirements of the introductory clause of Article XX.
In order to justify the application of Article XX(b), all the above elements had to be satisfied.”(843) 602. In EC — Asbestos, the Panel followed the approach used by the Panel on US — Gasoline and indicated that it “must first establish whether the policy in respect of the measure for which the provisions of Article XX(b) were invoked falls within the range of policies designed to protect human life or health”.(844) 603. The Panel on EC — Tariff Preferences also followed the same approach as the Panels on US — Gasoline and EC — Asbestos: “In EC — Asbestos, the panel followed the same approach as used in US — Gasoline: ‘We must first establish whether the policy in respect of the measure for which the provisions of Article XX(b) were invoked falls within the range of policies designed to protect human life or health’.(845)
Following this jurisprudence, the Panel considers that, in order to determine whether the Drug Arrangements are justified under Article XX(b), the Panel needs to examine: (i) whether the policy reflected in the measure falls within the range of policies designed to achieve the objective of or, put differently, or whether the policy objective is for the purpose of, ‘protect[ing] human … life or health’. In other words, whether the measure is one designed to achieve that health policy objective; (ii) whether the measure is ‘necessary’ to achieve said objective; and (iii) whether the measure is applied in a manner consistent with the chapeau of Article XX.”(846) (ii) Policy objective of the measure at issue 604. In determining whether the policy objective of the European Communities’ Drug Arrangements was the protection of human life or health, the Panel on EC — Tariff Preferences analysed the design and the structure of the GSP Regulation. However, it found no references to the alleged policy objective of protection of human life and health: “Examining the design and structure of Council Regulation 2501/2001 and the Explanatory Memorandum of the Commission, the Panel finds nothing in either of these documents relating to a policy objective of protecting the health of European Communities citizens. The only objectives set out in the Council Regulation (in the second preambular paragraph) are ‘the objectives of development policy, in particular the eradication of poverty and the promotion of sustainable development in the developing countries’. The Explanatory Memorandum states that ‘[t]hese objectives are to favour sustainable development, so as to improve the conditions under which the beneficiary countries are combatting drug production and trafficking’.(847)
Examining the structure of the Regulation, the Panel notes that Title I provides definitions of ‘beneficiary countries’ and the scope of product coverage for various categories of beneficiaries. Title II then specifies the methods and levels of tariff cuts for the various preference schemes set out in the Regulation, including for the General Arrangements, Special Incentive Arrangements, Special Arrangements for Least Developed Countries and Special Arrangements to Combat Drug Production and Trafficking. Title II also provides Common Provisions on graduation. Title III deals with conditions for eligibility for special arrangements on labour rights and the environment. Title IV provides only that the European Communities should monitor and evaluate the effects of the Drug Arrangements on drug production and trafficking in the beneficiary countries. There are other titles dealing with temporary withdrawal and safeguard provisions, as well as procedural requirements. From an examination of the whole design and structure of this Regulation, the Panel finds nothing linking the preferences to the protection of human life or health in the European Communities.”(848) 605. In addressing European Communities’ argument that providing market access is a necessary component of the United Nations’ comprehensive international strategy to fight drug problem by promoting alternative development, the Panel on EC — Tariff Preferences stated that while alternative development is one component of that strategy, providing market access is not itself a significant component of the comprehensive strategy. The Panel went on to state that even if it were assumed that market access was an important component of the international strategy, the European Communities had not established a link between the market access improvement and the protection of human health in the European Communities: “From its examination of these international instruments, including the 1988 Convention and the 1998 Action Plan, the Panel understands that alternative development is one component of the comprehensive strategy of the UN to combat drugs. The Panel has no doubt that market access plays a supportive role in relation to alternative development, but considers that market access is not itself a significant component of this comprehensive strategy. As the Panel understands it, the alternative development set out in the Action Plan depends more on the long-term political and financial commitment of both the governments of the affected countries and the international community to supporting integrated rural development, than on improvements in market access.
Even assuming that market access is an important component of the international strategy to combat the drug problem, there was no evidence presented before the Panel to suggest that providing improved market access is aimed at protecting human life or health in drug importing countries. Rather, all the relevant international conventions and resolutions suggest that alternative development, including improved market access, is aimed at helping the countries seriously affected by drug production and trafficking to move to sustainable development alternatives.”(849) Aspect of measure to be justified as “necessary” 606. In US — Gasoline, the Panel addressed the question of which specific aspect of a measure under scrutiny should be justified as “necessary” within the meaning of paragraph (b) of Article XX. The Panel held that “it was not the necessity of the policy goal that was to be examined, but whether or not it was necessary that imported gasoline be effectively prevented from benefiting from as favourable sales conditions as were afforded by an individual baseline tied to the producer of a product”. The Appellate Body did not address the Panel’s findings on paragraph (b). However, in addressing the Panel’s findings on paragraph (g), more specifically the Panel’s statements concerning the terms “relating to” and “primarily aimed at”, the Appellate Body was critical that “the Panel [had] asked itself whether the ‘less favourable treatment’ of imported gasoline was ‘primarily aimed at’ the conservation of natural resources, rather than whether the ‘measure’, i.e. the baseline establishment rules, were ‘primarily aimed at’ conservation of clean air.” The Appellate Body found that “the Panel … was in error in referring to its legal conclusion on Article III:4 instead of the measure in issue.”(850) 607. In EC — Tariff Preferences, the Panel, in considering the extent to which the European Communities’ Drug Arrangements were necessary in achieving the European Communities’ stated health objective, referred to the approach used by the Appellate Body on Korea — Various Measures on Beef. The Panel found that the GSP benefits decreased during the period 1 July 1999 to 31 December 2001 and that the continuing contribution of the Drug Arrangements to the EC’s health objective was therefore doubtful: “The Panel recalls the Appellate Body ruling in Korea — Various Measures on Beef that ‘the term “necessary” refers, in our view, to a range of degrees of necessity. At one end of this continuum lies ‘necessary’ understood as ‘indispensable’; at the other end, is ‘necessary’ taken to mean as ‘making a contribution to’. We consider that a ‘necessary’ measure is, in this continuum, located significantly closer to the pole of ‘indispensable’ than to the opposite pole of simply ‘making a contribution to’.(851) In order to determine where the Drug Arrangements are situated along this continuum between ‘contribution to’ and ‘indispensable’, the Panel is of the view that it should determine the extent to which the Drug Arrangements contribute to the European Communities’ health objective. This requires the Panel to assess the benefits of the Drug Arrangements in achieving the objective of protecting life or health in the European Communities.
The Panel notes the Report of the Commission pursuant to Article 31 of Council Regulation No. 2820/98 of 21 December 1998 applying a multi annual scheme of generalized tariff preferences for the period 1 July 1999 to 31 December 2001. The assessment of the effects of the Drug Arrangements in this report reveals that the product coverage under the Drug Arrangements decreased by 31 per cent from 1999 through 2001. It also shows that the volume of imports from the beneficiary countries under the Drug Arrangements decreased during the same period. As the Panel understands it, this decrease in product coverage and in imports from the beneficiaries is due to the reduction to zero — or close to zero — of the MFN bound duty rates on certain products, including coffee products.
The Panel considers that the above-referenced decreases in product coverage and depth of tariff cuts reflect a long-term trend of GSP benefits decreasing as Members reduce their import tariffs towards zero in the multilateral negotiations. Given this decreasing trend of GSP benefits, the contribution of the Drug Arrangements to the realization of the European Communities’ claimed health objective is insecure for the future. To the Panel, it is difficult to deem such measure as ‘necessary’ in the sense of Article XX(b). Moreover, given that the benefits under the Drug Arrangements themselves are decreasing, the Panel cannot come out to the conclusion that the ‘necessity’ of the Drug Arrangements is closer to the pole of ‘indispensable’ than to that of ‘contributing to’ in achieving the objective of protecting human life or health in the European Communities.”(852) 608. The Panel on EC — Tariff Preferences also considered the temporary suspension mechanism in the EC’s GSP Regulation as well as its application to Myanmar and found that with one or more drug- producing or trafficking countries outside of the scheme, the Drug Arrangements are not contributing sufficiently to the reduction of drug supply to the EC’s market: “Assuming a beneficiary country under the Drug Arrangements was not ensuring sufficient customs controls on export of drugs, or was infringing the objectives of an international fisheries conservation convention, the European Communities could then suspend the tariff preferences under the Drug Arrangements to this country, for reasons unrelated to protecting human life or health. Given that this beneficiary would be a seriously drug-affected country, the suspension of the tariff preferences would arrest the European Communities’ support to alternative development in that beneficiary and therefore also stop efforts to reduce the supply of illicit drugs into the European Communities. The whole design of the EC Regulation does not support the European Communities’ contention that it is ‘necessary’ to the protection of human life and health in the European Communities, because such design of the measure does not contribute sufficiently to the achievement of the health objective.
The European Communities confirms that while Myanmar is one of the world’s leading producers of opium, it is not necessary to separately include this country under the Drug Arrangements since it is already accorded preferential tariff treatment as a least-developed country. The Panel notes that the European Communities has suspended tariff preferences for Myanmar. …
Recalling that the European Communities confirms that it is required to continue its suspension of tariff preferences for Myanmar through the expiration of the EC Regulation on 31 December 2004, the Panel notes that any of the 12 beneficiaries is also potentially subject to similar suspension under the same Regulation, regardless of the seriousness of the drug problems in that country. With one or more of the main drug-producing or trafficking countries outside the scheme, it is difficult to see how the Drug Arrangements are in fact contributing sufficiently to the reduction of drug supply into the European Communities’ market to qualify as a measure necessary to achieving the European Communities’ health objective.“(853) Treatment of scientific data and risk assessment 609. In EC — Asbestos, the Panel found that the measure at issue, a French ban on the manufacture, importation and exportation, and domestic sale and transfer of certain asbestos products including products containing chrysotile fibres, was inconsistent with GATT Article III:4, but justified under Article XX(b) in light of the underlying policy of prohibiting chrysotile asbestos in order to protect human life and health. The Appellate Body rejected Canada’s argument under Article XX(b) that the Panel erred in law by deducing that chrysotile-cement products pose a risk to human life or health. The Appellate Body referred to Article 11 of the DSU and its reports on US — Wheat Gluten(854) and Korea — Alcoholic Beverages(855), and stated: “The Panel enjoyed a margin of discretion in assessing the value of the evidence, and the weight to be ascribed to that evidence. The Panel was entitled, in the exercise of its discretion, to determine that certain elements of evidence should be accorded more weight than other elements — that is the essence of the task of appreciating the evidence.”(856) 610. Further, in EC — Asbestos, Canada argued that Article 11 of the DSU requires that the scientific data must be assessed in accordance with the principle of the balance of probabilities, and that in particular where the evidence is divergent or contradictory, a Panel must take a position as to the respective weight of the evidence by virtue of the principle of the preponderance of the evidence. The Appellate Body rejected this argument, pointing out: “As we have already noted, ‘[w]e cannot second-guess the Panel in appreciating either the evidentiary value of … studies or the consequences, if any, of alleged defects in [the evidence]’.(857) And, as we have already said, in this case, the Panel’s appreciation of the evidence remained well within the bounds of its discretion as the trier of facts.
In addition, in the context of the SPS Agreement, we have said previously, in European Communities — Hormones, that ‘responsible and representative governments may act in good faith on the basis of what, at a given time, may be a divergent opinion coming from qualified and respected sources.’(858) (emphasis added) In justifying a measure under Article XX(b) of the GATT 1994, a Member may also rely, in good faith, on scientific sources which, at that time, may represent a divergent, but qualified and respected, opinion. A Member is not obliged, in setting health policy, automatically to follow what, at a given time, may constitute a majority scientific opinion. Therefore, a panel need not, necessarily, reach a decision under Article XX(b) of the GATT 1994 on the basis of the ‘preponderant’ weight of the evidence.”(859) 611. In EC — Asbestos, the Appellate Body also rejected Canada’s argument that in examining whether the French ban on manufacture, sale and imports of certain asbestos products including chrysotile-cement products was justified under GATT Article XX(b), the Panel should have quantified the risk associated with chrysotile-cement products: “As for Canada’s second argument, relating to ‘quantification’ of the risk, we consider that, as with the SPS Agreement, there is no requirement under Article XX(b) of the GATT 1994 to quantify, as such, the risk to human life or health.(860) A risk may be evaluated either in quantitative or qualitative terms. In this case, contrary to what is suggested by Canada, the Panel assessed the nature and the character of the risk posed by chrysotile-cement products. The Panel found, on the basis of the scientific evidence, that ‘no minimum threshold of level of exposure or duration of exposure has been identified with regard to the risk of pathologies associated with chrysotile, except for asbestosis.’ The pathologies which the Panel identified as being associated with chrysotile are of a very serious nature, namely lung cancer and mesothelioma, which is also a form of cancer. Therefore, we do not agree with Canada that the Panel merely relied on the French authorities’ ‘hypotheses’ of the risk.”(861) 612. The Appellate Body also rejected Canada’s argument that the Panel erroneously postulated that the level of health protection inherent in the measure was a halt to the spread of asbestos-related health risks, because it did not take into consideration the risk associated with the use of substitute products without a framework for controlled use. The Appellate Body stated: “[W]e note that it is undisputed that WTO Members have the right to determine the level of protection of health that they consider appropriate in a given situation. France has determined, and the Panel accepted, that the chosen level of health protection by France is a ‘halt’ to the spread of asbestos-related health risks. By prohibiting all forms of amphibole asbestos, and by severely restricting the use of chrysotile asbestos, the measure at issue is clearly designed and apt to achieve that level of health protection. Our conclusion is not altered by the fact that PCG fibres might pose a risk to health. The scientific evidence before the Panel indicated that the risk posed by the PCG fibres is, in any case, less than the risk posed by chrysotile asbestos fibres, although that evidence did not indicate that the risk posed by PCG fibres is non-existent. Accordingly, it seems to us perfectly legitimate for a Member to seek to halt the spread of a highly risky product while allowing the use of a less risky product in its place.”(862) “Reasonably available” alternatives 613. In EC — Asbestos, the Appellate Body confirmed that a measure is “necessary” within the meaning of GATT Article XX(b) “if an alternative measure which [a Member] could reasonably be expected to employ and which is not inconsistent with other GATT provisions is [not] available to it.” The Appellate Body on EC — Asbestos then considered Canada’s claim that the Panel had erroneously found that “controlled use” was not a reasonably available alternative to the measure at issue. In this connection, Canada argued that the Appellate Body itself had held in US — Gasoline that an alternative measure can only be ruled out if it is shown to be impossible to implement. The Appellate Body rejected Canada’s argument, but began its analysis by acknowledging that “administrative difficulties” did not render a measure not “reasonably available”: “We certainly agree with Canada that an alternative measure which is impossible to implement is not ‘reasonably available’. But we do not agree with Canada’s reading of either the panel report or our report in United States — Gasoline. In United States — Gasoline, the panel held, in essence, that an alternative measure did not cease to be ‘reasonably’ available simply because the alternative measure involved administrative difficulties for a Member.(863) The panel’s findings on this point were not appealed, and, thus, we did not address this issue in that case.” 614. The Appellate Body then found that “several factors must be taken into account” in ascertaining whether a suggested alternative measure is “reasonably available”. In this context, the Appellate Body mentioned, inter alia, the importance of the value pursued by the measure at issue: “Looking at this issue now, we believe that, in determining whether a suggested alternative measure is ‘reasonably available’, several factors must be taken into account, besides the difficulty of implementation. In Thailand — Restrictions on Importation of and Internal Taxes on Cigarettes, the panel made the following observations on the applicable standard for evaluating whether a measure is ‘necessary’ under Article XX(b):
‘The import restrictions imposed by Thailand could be considered to be “necessary” in terms of Article XX(b) only if there were no alternative measure consistent with the General Agreement, or less inconsistent with it, which Thailand could reasonably be expected to employ to achieve its health policy objectives.’(864) (emphasis added)
In our Report in Korea — Beef, we addressed the issue of ‘necessity’ under Article XX(d) of the GATT 1994.(865) In that appeal, we found that the panel was correct in following the standard set forth by the panel in United States — Section 337 of the Tariff Act of 1930:
‘It was clear to the Panel that a contracting party cannot justify a measure inconsistent with another GATT provision as ‘necessary’ in terms of Article XX(d) if an alternative measure which it could reasonably be expected to employ and which is not inconsistent with other GATT provisions is available to it. By the same token, in cases where a measure consistent with other GATT provisions is not reasonably available, a contracting party is bound to use, among the measures reasonably available to it, that which entails the least degree of inconsistency with other GATT provisions.’(866)
We indicated in Korea — Beef that one aspect of the ‘weighing and balancing process … comprehended in the determination of whether a WTO-consistent alternative measure’ is reasonably available is the extent to which the alternative measure ‘contributes to the realization of the end pursued’.(867) In addition, we observed, in that case, that ‘[t]he more vital or important [the] common interests or values’ pursued, the easier it would be to accept as ‘necessary’ measures designed to achieve those ends.(868) In this case, the objective pursued by the measure is the preservation of human life and health through the elimination, or reduction, of the well-known, and life-threatening, health risks posed by asbestos fibres. The value pursued is both vital and important in the highest degree.”(869) 615. The Appellate Body then examined the remaining question of “whether there is an alternative measure that would achieve the same end and that is less restrictive of trade than a prohibition,”(870) i.e. “whether France could reasonably be expected to employ ‘controlled use’ practices to achieve its chosen level of health protection — a halt in the spread of asbestos-related health risks”:(871) “In our view, France could not reasonably be expected to employ any alternative measure if that measure would involve a continuation of the very risk that the Decree seeks to ‘halt’. Such an alternative measure would, in effect, prevent France from achieving its chosen level of health protection. On the basis of the scientific evidence before it, the Panel found that, in general, the efficacy of ‘controlled use’ remains to be demonstrated. Moreover, even in cases where ‘controlled use’ practices are applied ‘with greater certainty’, the scientific evidence suggests that the level of exposure can, in some circumstances, still be high enough for there to be a ‘significant residual risk of developing asbestos-related diseases.’ The Panel found too that the efficacy of ‘controlled use’ is particularly doubtful for the building industry and for DIY enthusiasts, which are the most important users of cement-based products containing chrysotile asbestos.(872) Given these factual findings by the Panel, we believe that ‘controlled use’ would not allow France to achieve its chosen level of health protection by halting the spread of asbestos-related health risks. ‘Controlled use’ would, thus, not be an alternative measure that would achieve the end sought by France.”(873) (b) Reference to GATT practice 616. With respect to GATT practice under Article XX(b). 617. In Korea — Various Measures on Beef, the Appellate Body examined Korea’s argument that the prohibition of retail sales of both domestic and imported beef products (the dual retail system) was designed to secure compliance with a consumer protection law, and thus, although in violation of Article III:4, nevertheless justified by Article XX(d). Referring to its Report on US — Gasoline, the Appellate Body set forth the following two elements for paragraph (d): “For a measure, otherwise inconsistent with GATT 1994, to be justified provisionally under paragraph (d) of Article XX, two elements must be shown. First, the measure must be one designed to ‘secure compliance’ with laws or regulations that are not themselves inconsistent with some provision of the GATT 1994. Second, the measure must be ‘necessary’ to secure such compliance. A Member who invokes Article XX(d) as a justification has the burden of demonstrating that these two requirements are met.”(874) 618. In Argentina — Hides and Leather, the disputed measures were certain collection and withholding mechanisms that Argentina had adopted to secure compliance with certain tax laws and to combat tax evasion. The disputing parties, Argentina and the European Communities had different views with regard to how the provision “necessary” in Article XX(d) should be interpreted. The European Communities claimed that a measure can only be “necessary” if there is no alternative, whereas Argentina argued that the Member claiming the “necessity” of a measure should be entitled a certain degree of discretion in that determination. The Panel refused to resolve this interpretative dispute(875), but taking into account inter alia the “general design and structure” of the measures, the Panel found that the arguments advanced by Argentina raised a presumption, not rebutted by the European Communities and accordingly held that the measures were “necessary”: “[W]e are satisfied that Argentina has adduced argument and evidence sufficient to raise a presumption that the contested measures, in their general design and structure, are ‘necessary’ even on the European Communities’ reading of that term. Argentina stresses the fact that tax evasion is common in its territory and that, against this background of low levels of tax compliance, tax authorities cannot expect to improve tax collection primarily through the pursuit of repressive enforcement strategies (e.g. aggressive criminal prosecution of tax offenders). In those circumstances, Argentina maintains, tax authorities must direct their efforts towards preventing tax evasion from occurring in the first place. According to Argentina, this is precisely what RG 3431 and RG 3543 are designed to accomplish.(876)
The European Communities does not dispute that, in the circumstances of the present case, collection and withholding mechanisms are necessary to combat tax evasion.(877) Nor has the European Communities submitted other arguments or evidence which would rebut the presumption raised by Argentina in respect of the ‘necessity’ of RG 3431 and RG 3543.(878)
In light of the foregoing, we conclude that, in view of their general design and structure, RG 3431 and RG 3543 are ‘necessary’ measures within the meaning of Article XX(d).
Since it has thus been established that RG 3431 and RG 3543 satisfy all of the requirements set forth in Article XX(d), we further conclude that they enjoy provisional justification under the terms of Article XX(d).”(879) 619. In Korea — Various Measures on Beef, the Appellate Body attempted to situate the meaning of the term “necessary” within the context of Article XX(d) on a “continuum” stretching from “indispensable/of absolute necessity” to “making a contribution to”. Furthermore, the Appellate Body emphasized the context in which the term “necessary” is found in Article XX(d) and held that in “assessing a measure claimed to be necessary to secure compliance of a WTO-consistent law or regulation [a treaty interpreter] may, in appropriate cases, take into account the relative importance of the common interests or values that the law or regulation to be enforced is intended to protect”: “We believe that, as used in the context of Article XX(d), the reach of the word ‘necessary’ is not limited to that which is ‘indispensable’ or ‘of absolute necessity’ or ‘inevitable’. Measures which are indispensable or of absolute necessity or inevitable to secure compliance certainly fulfil the requirements of Article XX(d). But other measures, too, may fall within the ambit of this exception. As used in Article XX(d), the term ‘necessary’ refers, in our view, to a range of degrees of necessity. At one end of this continuum lies ‘necessary’ understood as ‘indispensable’; at the other end, is ‘necessary’ taken to mean as ‘making a contribution to’. We consider that a ‘necessary’ measure is, in this continuum, located significantly closer to the pole of ‘indispensable’ than to the opposite pole of simply ‘making a contribution to’.(880)
In appraising the ‘necessity’ of a measure in these terms, it is useful to bear in mind the context in which ‘necessary’ is found in Article XX(d). The measure at stake has to be ‘necessary to ensure compliance with laws and regulations …, including those relating to customs enforcement, the enforcement of [lawful] monopolies …, the protection of patents, trade marks and copyrights, and the prevention of deceptive practices’. (emphasis added) Clearly, Article XX(d) is susceptible of application in respect of a wide variety of ‘laws and regulations’ to be enforced. It seems to us that a treaty interpreter assessing a measure claimed to be necessary to secure compliance of a WTO-consistent law or regulation may, in appropriate cases, take into account the relative importance of the common interests or values that the law or regulation to be enforced is intended to protect. The more vital or important those common interests or values are, the easier it would be to accept as ‘necessary’ a measure designed as an enforcement instrument. … In sum, determination of whether a measure, which is not ‘indispensable’, may nevertheless be ‘necessary’ within the contemplation of Article XX(d), involves in every case a process of weighing and balancing a series of factors which prominently include the contribution made by the compliance measure to the enforcement of the law or regulation at issue, the importance of the common interests or values protected by that law or regulation, and the accompanying impact of the law or regulation on imports or exports.”(881) 620. In Korea — Various Measures on Beef, the Panel, in a finding upheld by the Appellate Body, did not accept Korea’s argument for invoking an exception under Article XX(d) to justify a violation of Article III:4. Korea argued that it was “necessary to have domestic and imported beef sold through separate stores in order to counteract fraudulent practices prohibited by the Unfair Competition Act”, the dual retail system.(882) Korea argued that due to the fact that imported beef was cheaper than domestic beef, “traders have a strong incentive to sell imported beef as domestic beef since by doing so they can profit from the higher sales price.”(883) Korea adopted and implemented the dual retail system in 1990 and decided to abrogate the previous simultaneous sales system which had been in place since 1988 when imports of beef first resumed. Korea claimed further that, in view of the substantial costs to the government, it was not sustainable from an economic aspect to maintain continuous policing of the shops. When evaluating whether the adoption of the Unfair Competition Act fulfilled the “necessity” criterion in Article XX(d) the Panel stated the following: “To demonstrate that the dual retail system is ‘necessary’, Korea has to convince the Panel that, contrary to what was alleged by Australia and the United States, no alternative measure consistent with the WTO Agreement is reasonably available at present in order to deal with misrepresentation in the retail beef market as to the origin of beef. The Panel considers that Korea has not discharged this burden for two inter-related reasons. First, Korea has not found it ‘necessary’ to establish ‘dual retail systems’ in order to prevent similar cases of misrepresentation of origin from occurring in other sectors of its domestic economy. Second, Korea has not shown to the satisfaction of the Panel that measures, other than a dual retail system, compatible with the WTO Agreement, are not sufficient to deal with cases of misrepresentation of origin involving imported beef.”(884) 621. The Appellate Body on Korea — Various Measures on Beef further stated that a determination of whether a measure is necessary under Article XX(d), when that measure is not actually indispensable in achieving compliance with the law or regulation at issue, involves weighing and balancing different factors: “In sum, determination of whether a measure, which is not ‘indispensable’, may nevertheless be ‘necessary’ within the contemplation of Article XX(d), involves in every case a process of weighing and balancing a series of factors which prominently include the contribution made by the compliance measure to the enforcement of the law or regulation at issue, the importance of the common interests or values protected by that law or regulation, and the accompanying impact of the law or regulation on imports or exports.”(885) 622. In keeping with this interpretation, the Panel on Canada — Wheat Exports and Grain Imports undertook the weighing and balancing of various factors in the following manner: “In applying the ‘weighing and balancing’ test, the Appellate Body in Korea — Various Measures on Beef and, subsequently, in EC Asbestos considered the importance of the value or interest pursued by the laws with which the challenged measure sought to secure compliance, whether the objective pursued by the challenged measure contributed to the end that was sought to be realized and whether a reasonably available alternative measure existed. We apply the same approach here in determining whether Section 57(c) of the Canada Grain Act is ‘necessary’ for the purposes of Article XX(d) of the GATT 1994.
With respect to the importance of the interests or values that the statutory and other provisions with which, according to Canada, Section 57(c) secures compliance are intended to protect, Canada has indicated that those objectives are to ensure the quality of Canadian grain, maintain the integrity of the Canadian grading system, protect consumers against misrepresentation and preserve and enforce the CWB monopoly. In other words, the relevant provisions are said to essentially help maintain the integrity of Canada’s grading and quality assurance system and of the CWB’s exclusive right to sell Western Canadian grain for domestic sale or export and, thereby, to preserve the reputation of Canadian grain notably in export markets. It is clear that these interests, which appear to be essentially commercial in nature, are important. It seems equally clear, however, that these interests are not as important as, for instance, the protection of human life and health against a life threatening health risk, an interest which the Appellate Body in EC — Asbestos characterized as ‘vital and important in the highest degree.’”(886) (c) Aspect of measure to be justified as “necessary” 623. The Panel on US — Gasoline held that “maintenance of discrimination between imported and domestic gasoline contrary to Article III:4 under the baseline establishment methods did not ‘secure compliance’ with the baseline system. These methods were not an enforcement mechanism.” While the Appellate Body did not address the Panel’s findings on Article XX(d), it criticised that, in the context of Article XX(g), “the Panel asked itself whether the ‘less favourable treatment’ of imported gasoline was ‘primarily aimed at’ the conservation of natural resources, rather than whether the ‘measure’, i.e. the baseline establishment rules, were ‘primarily aimed at’ conservation of clean air.” The Appellate Body found that “the Panel … was in error in referring to its legal conclusion on Article III:4 instead of the measure in issue.”(887) See also paragraphs 606 above and 629 below. (d) “Reasonably available” alternatives 624. In Canada — Wheat Exports and Grain Imports, the Panel made reference to the Appellate Body report on EC — Asbestos regarding “reasonably available” alternatives in the context of Article XX(b) (see paragraph 613 above) and to the Appellate Body report on Korea — Various Measures on Beef (see paragraph 618 above) in addressing “reasonably available” alternatives in the context of Article XX(d): “Therefore, the question remains as to whether there is an alternative measure to Section 57(c) that is reasonably available. The Appellate Body has indicated that relevant factors for determining whether an alternative measure is ‘reasonably available’ are: (i) the extent to which the alternative measure ‘contributes to the realization of the end pursued’; (ii) the difficulty of implementation311; and (iii) the trade impact of the alternative measure compared to that of the measure for which justification is claimed under Article XX. The Appellate Body has also stated that, in addition to being ‘reasonably available’, the alternative measure must also achieve the level of compliance sought. In this regard, the Appellate Body has recognized that ‘Members of the WTO have the right to determine for themselves the level of enforcement of their WTO-consistent laws and regulations’.”(888) (e) Reference to GATT practice 625. With respect to GATT practice under Article XX(d). 5. Paragraph (g): “relating to the conservation of exhaustible natural resources” (a) “the conservation of exhaustible natural resources” (i) Jurisdictional limitations 626. In US — Shrimp, the Appellate Body reviewed the Panel’s finding concerning a United States measure which banned imports of shrimps and shrimp products harvested by vessels of foreign nations, where such exporting country had not been certified by United States authorities as using methods not leading to the incidental killing of sea turtles above certain levels. The Panel had found that the United States could not justify its measure under Article XX(g). Noting that sea turtles migrate to, or traverse waters subject to the jurisdiction of the United States, the Appellate Body indicated as follows: “We do not pass upon the question of whether there is an implied jurisdictional limitation in Article XX(g), and if so, the nature or extent of that limitation. We note only that in the specific circumstances of the case before us, there is a sufficient nexus between the migratory and endangered marine populations involved and the United States for purposes of Article XX(g).”(889) (ii) meaning of “exhaustible natural resources” 627. In US — Shrimp, the Appellate Body addressed the meaning of the term “exhaustible natural resources” contained in Article XX(g). The Appellate Body emphasized the need for a dynamic rather than a static interpretation of the term “exhaustible”, noting the need to interpret this term “in the light of contemporary concerns of the community of nations about the protection and conservation of the environment”. In its interpretative approach, the Appellate Body also took into consideration non-WTO law: “Textually, Article XX(g) is not limited to the conservation of ‘mineral’ or ‘non-living’ natural resources. The complainants’ principal argument is rooted in the notion that ‘living’ natural resources are ‘renewable’ and therefore cannot be ‘exhaustible’ natural resources. We do not believe that ‘exhaustible’ natural resources and ‘renewable’ natural resources are mutually exclusive. One lesson that modern biological sciences teach us is that living species, though in principle, capable of reproduction and, in that sense, ‘renewable’, are in certain circumstances indeed susceptible of depletion, exhaustion and extinction, frequently because of human activities. Living resources are just as ‘finite’ as petroleum, iron ore and other non-living resources.(890)
The words of Article XX(g), ‘exhaustible natural resources’, were actually crafted more than 50 years ago. They must be read by a treaty interpreter in the light of contemporary concerns of the community of nations about the protection and conservation of the environment. While Article XX was not modified in the Uruguay Round, the preamble attached to the WTO Agreement shows that the signatories to that Agreement were, in 1994, fully aware of the importance and legitimacy of environmental protection as a goal of national and international policy. The preamble of the WTO Agreement — which informs not only the GATT 1994, but also the other covered agreements — explicitly acknowledges ‘the objective of sustainable development …’: … From the perspective embodied in the preamble of the WTO Agreement, we note that the generic term ‘natural resources’ in Article XX(g) is not ‘static’ in its content or reference but is rather ‘by definition, evolutionary’.(891) It is, therefore, pertinent to note that modern international conventions and declarations make frequent references to natural resources as embracing both living and nonliving resources.(892) … … Given the recent acknowledgement by the international community of the importance of concerted bilateral or multilateral action to protect living natural resources, and recalling the explicit recognition by WTO Members of the objective of sustainable development in the preamble of the WTO Agreement, we believe it is too late in the day to suppose that Article XX(g) of the GATT 1994 may be read as referring only to the conservation of exhaustible mineral or other non-living natural resources.(893) Moreover, two adopted GATT 1947 panel reports previously found fish to be an ‘exhaustible natural resource’ within the meaning of Article XX(g).(894) We hold that, in line with the principle of effectiveness in treaty interpretation, measures to conserve exhaustible natural resources, whether living or non-living, may fall within Article XX(g).”(895) (iii) Reference to GATT practice 628. With respect to GATT practice on the term “exhaustible natural resources” under Article XX(g). (i) Aspect of the measure to be justified as “relating to” 629. The Panel on US — Gasoline held that the United States measure at issue could not be justified in the light of Article XX(g) as a measure “relating to the conservation of exhaustible natural resources”. More specifically, the Panel held that it “saw no direct connection between less favourable treatment of imported gasoline that was chemically identical to domestic gasoline, and the United States objective of improving air quality in the United States” and that “the less favourable baseline establishments methods at issue in this case were not primarily aimed at the conservation of natural resources”.(896) The Appellate Body reversed the Panel’s finding and held that the United States measure was justified under Article XX(g), although it ultimately found that the measure was inconsistent with the chapeau of Article XX. See also paragraph 591 above. The Appellate Body held that the Panel was in error in searching for a link between the discriminatory aspect of the United States measure (rather than the measure itself) and the policy goal embodied in Article XX(g): “[The] problem with the reasoning in that paragraph is that the Panel asked itself whether the ‘less favourable treatment’ of imported gasoline was ‘primarily aimed at’ the conservation of natural resources, rather than whether the ‘measure’, i.e. the baseline establishment rules, were ‘primarily aimed at’ conservation of clean air. In our view, the Panel here was in error in referring to its legal conclusion on Article III:4 instead of the measure in issue. The result of this analysis is to turn Article XX on its head. Obviously, there had to be a finding that the measure provided ‘less favourable treatment’ under Article III:4 before the Panel examined the ‘General Exceptions’ contained in Article XX. That, however, is a conclusion of law. The chapeau of Article XX makes it clear that it is the ‘measures’ which are to be examined under Article XX(g), and not the legal finding of ‘less favourable treatment.’”(897) (ii) Meaning of “relating to” and “primarily aimed at” 630. In interpreting the term “relating to” under Article XX(g), the Appellate Body noted that all the parties and participants to the appeal agreed that the term “relating to” was equivalent to “primarily aimed at”: “All the participants and the third participants in this appeal accept the propriety and applicability of the view of the Herring and Salmon report and the Panel Report that a measure must be ‘primarily aimed at’ the conservation of exhaustible natural resources in order to fall within the scope of Article XX(g).(898) Accordingly, we see no need to examine this point further, save, perhaps, to note that the phrase ‘primarily aimed at’ is not itself treaty language and was not designed as a simple litmus test for inclusion or exclusion from Article XX(g).”(899) 631. The Panel on US — Gasoline found that “being consistent with the obligation to provide no less favourable treatment would not prevent the attainment of the desired level of conservation of natural resources under the Gasoline Rule. Accordingly, it could not be said that the baseline establishment methods that afforded less favourable treatment to imported gasoline were primarily aimed at the conservation of natural resources.” The Appellate Body criticised the Panel analysis which had focused on whether the discriminatory aspect of the United States measure was related to the stated policy goal. See paragraph 629 above. The Appellate Body then opined that the Panel had transposed the concept of “necessary” from Article XX(b) into its analysis under Article XX(g): “[T]he Panel Report appears to have utilized a conclusion it had reached earlier in holding that the baseline establishment rules did not fall within the justifying terms of Articles XX(b); i.e. that the baseline establishment rules were not ‘necessary’ for the protection of human, animal or plant life. The Panel Report, it will be recalled, found that the baseline establishment rules had not been shown by the United States to be ‘necessary’ under Article XX(b) since alternative measures either consistent or less inconsistent with the General Agreement were reasonably available to the United States for achieving its aim of protecting human, animal or plant life.(900) In other words, the Panel Report appears to have applied the ‘necessary’ test not only in examining the baseline establishment rules under Article XX(b), but also in the course of applying Article XX(g).”(901) 632. In reversing the Panel’s findings on Article XX(g), the Appellate Body began by recalling the principles of treaty interpretation and comparing the terms used in each paragraph of Article XX. See the quote referenced in paragraph 579 above. The Appellate Body subsequently considered the relationship between Article III:4 and Article XX: “Article XX(g) and its phrase, ‘relating to the conservation of exhaustible natural resources,’ need to be read in context and in such a manner as to give effect to the purposes and objects of the General Agreement. The context of Article XX(g) includes the provisions of the rest of the General Agreement, including in particular Articles I, III and XI; conversely, the context of Articles I and III and XI includes Article XX. Accordingly, the phrase ‘relating to the conservation of exhaustible natural resources’ may not be read so expansively as seriously to subvert the purpose and object of Article III:4. Nor may Article III:4 be given so broad a reach as effectively to emasculate Article XX(g) and the policies and interests it embodies. The relationship between the affirmative commitments set out in, e.g., Articles I, III and XI, and the policies and interests embodied in the ‘General Exceptions’ listed in Article XX, can be given meaning within the framework of the General Agreement and its object and purpose by a treaty interpreter only on a case-to-case basis, by careful scrutiny of the factual and legal context in a given dispute, without disregarding the words actually used by the WTO Members themselves to express their intent and purpose.”(902) 633. The Appellate Body on US — Gasoline finally examined whether the United States baseline establishment rules were appropriately regarded as “primarily aimed at” the conservation of natural resources within the meaning of Article XX(g). The Appellate Body answered this question in the affirmative: “The baseline establishment rules, taken as a whole (that is, the provisions relating to establishment of baselines for domestic refiners, along with the provisions relating to baselines for blenders and importers of gasoline), need to be related to the ‘non-degradation’ requirements set out elsewhere in the Gasoline Rule. Those provisions can scarcely be understood if scrutinized strictly by themselves, totally divorced from other sections of the Gasoline Rule which certainly constitute part of the context of these provisions. The baseline establishment rules whether individual or statutory, were designed to permit scrutiny and monitoring of the level of compliance of refiners, importers and blenders with the ‘non-degradation’ requirements. Without baselines of some kind, such scrutiny would not be possible and the Gasoline Rule’s objective of stabilizing and preventing further deterioration of the level of air pollution prevailing in 1990, would be substantially frustrated. The relationship between the baseline establishment rules and the ‘non-degradation’ requirements of the Gasoline Rule is not negated by the inconsistency, found by the Panel, of the baseline establishment rules with the terms of Article III:4. We consider that, given that substantial relationship, the baseline establishment rules cannot be regarded as merely incidentally or inadvertently aimed at the conservation of clean air in the United States for the purposes of Article XX(g).”(903) 634. In US — Shrimp, in holding that the United States measure was “primarily aimed at” the conservation of natural resources, the Appellate Body opined that the measure was not a “simple, blanket prohibition” and that a reasonable “means and ends relationship” existed between the measure and the policy of natural resource conservation: “In its general design and structure, therefore, Section 609 is not a simple, blanket prohibition of the importation of shrimp imposed without regard to the consequences (or lack thereof ) of the mode of harvesting employed upon the incidental capture and mortality of sea turtles. Focusing on the design of the measure here at stake, it appears to us that Section 609, cum implementing guidelines, is not disproportionately wide in its scope and reach in relation to the policy objective of protection and conservation of sea turtle species. The means are, in principle, reasonably related to the ends. The means and ends relationship between Section 609 and the legitimate policy of conserving an exhaustible, and, in fact, endangered species, is observably a close and real one.
In our view, therefore, Section 609 is a measure ‘relating to’ the conservation of an exhaustible natural resource within the meaning of Article XX(g) of the GATT 1994.”(904) 635. With respect to GATT practice on the term “relating to” under Article XX(g). (c) “measures made effective in conjunction with” 636. In US — Gasoline, the Appellate Body described the term “measures made effective in conjunction with” as a “requirement of even-handedness in the imposition of restrictions”: “Viewed in this light, the ordinary or natural meaning of ‘made effective’ when used in connection with a measure — a governmental act or regulation may be seen to refer to such measure being ‘operative’, as ‘in force’, or as having ‘come into effect.’ Similarly, the phrase ‘in conjunction with’ may be read quite plainly as ‘together with’ or ‘jointly with.’ Taken together, the second clause of Article XX(g) appears to us to refer to governmental measures like the baseline establishment rules being promulgated or brought into effect together with restrictions on domestic production or consumption of natural resources. Put in a slightly different manner, we believe that the clause ‘if such measures are made effective in conjunction with restrictions on domestic product or consumption’ is appropriately read as a requirement that the measures concerned impose restrictions, not just in respect of imported gasoline but also with respect to domestic gasoline. The clause is a requirement of evenhandedness in the imposition of restrictions, in the name of conservation, upon the production or consumption of exhaustible natural resources.”(905) 637. The Appellate Body made clear that the “requirement of even-handedness” embodied in Article XX(g) did not amount to a requirement of “identity of treatment”: “There is, of course, no textual basis for requiring identical treatment of domestic and imported products. Indeed, where there is identity of treatment — constituting real, not merely formal, equality of treatment — it is difficult to see how inconsistency with Article III:4 would have arisen in the first place. On the other hand, if no restrictions on domestically-produced like products are imposed at all, and all limitations are placed upon imported products alone, the measure cannot be accepted as primarily or even substantially designed for implementing conservationist goals. The measure would simply be naked discrimination for protecting locally-produced goods.
In the present appeal, the baseline establishment rules affect both domestic gasoline and imported gasoline, providing for — generally speaking — individual baselines for domestic refiners and blenders and statutory baselines for importers. Thus, restrictions on the consumption or depletion of clean air by regulating the domestic production of ‘dirty’ gasoline are established jointly with corresponding restrictions with respect to imported gasoline. That imported gasoline has been determined to have been accorded ‘less favourable treatment’ than the domestic gasoline in terms of Article III:4, is not material for purposes of analysis under Article XX(g). It might also be noted that the second clause of Article XX(g) speaks disjunctively of ‘domestic production or consumption.’”(906) 638. The Appellate Body further rejected the argument that the term “made effective” was designed to require an “empirical effects test” and that the measure at issue had to produce some measurable “positive effects”: “We do not believe … that the clause ‘if made effective in conjunction with restrictions on domestic production or consumption’ was intended to establish an empirical ‘effects test’ for the availability of the Article XX(g) exception. In the first place, the problem of determining causation, well-known in both domestic and international law, is always a difficult one. In the second place, in the field of conservation of exhaustible natural resources, a substantial period of time, perhaps years, may have to elapse before the effects attributable to implementation of a given measure may be observable. The legal characterization of such a measure is not reasonably made contingent upon occurrence of subsequent events. We are not, however, suggesting that consideration of the predictable effects of a measure is never relevant. In a particular case, should it become clear that realistically, a specific measure cannot in any possible situation have any positive effect on conservation goals, it would very probably be because that measure was not designed as a conservation regulation to begin with. In other words, it would not have been ‘primarily aimed at’ conservation of natural resources at all.”(907) 639. Citing its own finding in US — Gasoline that the phrase “if such measures are made effective in conjunction with restrictions on domestic product or consumption” in Article XX(g) was a “requirement of even-handedness” (see paragraph 636 above), the Appellate Body in US — Shrimp held that the United States measure at issue was justified under Article XX(g): “We earlier noted that Section 609, enacted in 1989, addresses the mode of harvesting of imported shrimp only. However, two years earlier, in 1987, the United States issued regulations pursuant to the Endangered Species Act requiring all United States shrimp trawl vessels to use approved TEDs, or to restrict the duration of tow-times, in specified areas where there was significant incidental mortality of sea turtles in shrimp trawls. These regulations became fully effective in 1990 and were later modified. They now require United States shrimp trawlers to use approved TEDs ‘in areas and at times when there is a likelihood of intercepting sea turtles’, with certain limited exceptions. Penalties for violation of the Endangered Species Act, or the regulations issued thereunder, include civil and criminal sanctions. The United States government currently relies on monetary sanctions and civil penalties for enforcement. The government has the ability to seize shrimp catch from trawl vessels fishing in United States waters and has done so in cases of egregious violations. We believe that, in principle, Section 609 is an evenhanded measure.
Accordingly, we hold that Section 609 is a measure made effective in conjunction with the restrictions on domestic harvesting of shrimp, as required by Article XX(g).”(908) (d) Reference to GATT practice 640. With respect to GATT practice on the term “measures made effective in conjunction with” under Article XX(g).
Footnotes:
715. Both Reports were adopted on the same
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