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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 |
A. Text of the General Agreement on Tariffs and Trade 1994 1. The General Agreement on Tariffs and Trade 1994 ("GATT 1994") shall consist of:
(a) the provisions in the General Agreement on Tariffs and Trade, dated 30 October 1947, annexed to the Final Act Adopted at the Conclusion of the Second Session of the Preparatory Committee of the United Nations Conference on Trade and Employment (excluding the Protocol of Provisional Application), as rectified, amended or modified by the terms of legal instruments which have entered into force before the date of entry into force of the WTO Agreement;
(b) the provisions of the legal instruments set forth below that have entered into force under the GATT 1947 before the date of entry into force of the WTO Agreement:
(i) protocols and certifications relating to tariff concessions;
(ii) protocols of accession (excluding the provisions (a) concerning provisional application and withdrawal of provisional application and (b) providing that Part II of GATT 1947 shall be applied provisionally to the fullest extent not inconsistent with legislation existing on the date of the Protocol);
(iii) decisions on waivers granted under Article XXV of GATT 1947 and still in force on the date of entry into force of the WTO Agreement(1);
(footnote original) 1 The waivers covered by this provision are listed in footnote 7 on pages 11 and 12 in Part II of document MTN/FA of 15 December 1993 and in MTN/FA/Corr.6 of 21 March 1994. The Ministerial Conference shall establish at its first session a revised list of waivers covered by this provision that adds any waivers granted under GATT 1947 after 15 December 1993 and before the date of entry into force of the WTO Agreement, and deletes the waivers which will have expired by that time.
(iv) other decisions of the CONTRACTING PARTIES to GATT 1947;
(c) the Understandings set forth below:
(i) Understanding on the Interpretation of Article II:1(b) of the General Agreement on Tariffs and Trade 1994;
(ii) Understanding on the Interpretation of Article XVII of the General Agreement on Tariffs and Trade 1994;
(iii) Understanding on Balance-of-Payments Provisions of the General Agreement on Tariffs and Trade 1994;
(iv) Understanding on the Interpretation of Article XXIV of the General Agreement on Tariffs and Trade 1994;
(v) Understanding in Respect of Waivers of Obligations under the General Agreement on Tariffs and Trade 1994;
(vi) Understanding on the Interpretation of Article XXVIII of the General Agreement on Tariffs and Trade 1994; and
(d) the Marrakesh Protocol to GATT 1994.
2. Explanatory Notes
(a) The references to "contracting party" in the provisions of GATT 1994 shall be deemed to read "Member". The references to "less-developed contracting party" and "developed contracting party" shall be deemed to read "developing country Member" and "developed country Member". The references to "Executive Secretary" shall be deemed to read "Director-General of the WTO".
(b) The references to the CONTRACTING PARTIES acting jointly in Articles XV:1, XV:2, XV:8, XXXVIII and the Notes Ad Article XII and XVIII; and in the provisions on special exchange agreements in Articles XV:2, XV:3, XV:6, XV:7 and XV:9 of GATT 1994 shall be deemed to be references to the WTO. The other functions that the provisions of GATT 1994 assign to the CONTRACTING PARTIES acting jointly shall be allocated by the Ministerial Conference.
(c) (i) The text of GATT 1994 shall be authentic in English, French and Spanish.
(ii) The text of GATT 1994 in the French language shall be subject to the rectifications of terms indicated in Annex A to document MTN.TNC/41.
(iii) The authentic text of GATT 1994 in the Spanish language shall be the text in Volume IV of the Basic Instruments and Selected Documents series, subject to the rectifications of terms indicated in Annex B to document MTN.TNC/41.
3. (a) The provisions of Part II of GATT 1994 shall not apply to measures taken by a Member under specific mandatory legislation, enacted by that Member before it became a contracting party to GATT 1947, that prohibits the use, sale or lease of foreign-built or foreign-reconstructed vessels in commercial applications between points in national waters or the waters of an exclusive economic zone. This exemption applies to: (a) the continuation or prompt renewal of a non-conforming provision of such legislation; and (b) the amendment to a non-conforming provision of such legislation to the extent that the amendment does not decrease the conformity of the provision with Part II of GATT 1947. This exemption is limited to measures taken under legislation described above that is notified and specified prior to the date of entry into force of the WTO Agreement. If such legislation is subsequently modified to decrease its conformity with Part II of GATT 1994, it will no longer qualify for coverage under this paragraph.
(b) The Ministerial Conference shall review this exemption not later than five years after the date of entry into force of the WTO Agreement and thereafter every two years for as long as the exemption is in force for the purpose of examining whether the conditions which created the need for the exemption still prevail.
(c) A Member whose measures are covered by this exemption shall annually submit a detailed statistical notification consisting of a five-year moving average of actual and expected deliveries of relevant vessels as well as additional information on the use, sale, lease or repair of relevant vessels covered by this exemption.
(d) A Member that considers that this exemption operates in such a manner as to justify a reciprocal and proportionate limitation on the use, sale, lease or repair of vessels constructed in the territory of the Member invoking the exemption shall be free to introduce such a limitation subject to prior notification to the Ministerial Conference.
(e) This exemption is without prejudice to solutions concerning specific aspects of the legislation covered by this exemption negotiated in sectoral agreements or in other fora. (i) Item (iv) - "other decisions of the CONTRACTING PARTIES to GATT 1947" 1. In Japan - Alcoholic Beverages II, the Appellate Body referred to paragraph 1(b)(iv) in examining the legal effect of the panel reports adopted by the CONTRACTING PARTIES to GATT 1947. The Appellate Body stated: "Article XVI:1 of the WTO Agreement and paragraph 1(b)(iv) of the language of Annex 1A incorporating the GATT 1994 into the WTO Agreement bring the legal history and experience under the GATT 1947 into the new realm of the WTO in a way that ensures continuity and consistency in a smooth transition from the GATT 1947 system. This affirms the importance to the Members of the WTO of the experience acquired by the CONTRACTING PARTIES to the GATT 1947 - and acknowledges the continuing relevance of that experience to the new trading system served by the WTO. Adopted panel reports are an important part of the GATT acquis. They are often considered by subsequent panels. They create legitimate expectations among WTO Members, and, therefore, should be taken into account where they are relevant to any dispute.(1) However, they are not binding, except with respect to resolving the particular dispute between the parties to that dispute.(1) In short, their character and their legal status have not been changed by the coming into force of the WTO Agreement.
[W]e do not agree with the Panel's conclusion in the same paragraph of the Panel Report that adopted panel reports in themselves constitute 'other decisions of the CONTRACTING PARTIES to GATT 1947' for the purposes of paragraph 1(b)(iv) of the language of Annex 1A incorporating the GATT 1994 into the WTO Agreement."(2) 2. In US - FSC, the Appellate Body, in examining whether a certain decision of the GATT 1947 Council to adopt panel reports constituted "other decision" within the meaning of paragraph 1(b)(iv), agreed on the Panel's decision to examine not only the text of the decision but also "the circumstances surrounding the [decision]."(3) (b) Relationship with Article XVI:1 of the WTO Agreement 3. With respect to the relationship between Article XVI:1 of the WTO Agreement and paragraph 1(b), see Chapter on WTO Agreement, paragraphs 341 and 343.
Part I II. Article I back to top Article I: General Most-Favoured-Nation Treatment 1. With respect to customs duties and charges of any kind imposed on or in connection with importation or exportation or imposed on the international transfer of payments for imports or exports, and with respect to the method of levying such duties and charges, and with respect to all rules and formalities in connection with importation and exportation, and with respect to all matters referred to in paragraphs 2 and 4 of Article III,* any advantage, favour, privilege or immunity granted by any contracting party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties.
2. The provisions of paragraph 1 of this Article shall not require the elimination of any preferences in respect of import duties or charges which do not exceed the levels provided for in paragraph 4 of this Article and which fall within the following descriptions:
(a) Preferences in force exclusively between two or more of the territories listed in Annex A, subject to the conditions set forth therein;
(b) Preferences in force exclusively between two or more territories which on July 1, 1939, were connected by common sovereignty or relations of protection or suzerainty and which are listed in Annexes B, C and D, subject to the conditions set forth therein;
(c) Preferences in force exclusively between the United States of America and the Republic of Cuba;
(d) Preferences in force exclusively between neighbouring countries listed in Annexes E and F.
3. The provisions of paragraph 1 shall not apply to preferences between the countries formerly a part of the Ottoman Empire and detached from it on July 24, 1923, provided such preferences are approved under paragraph 5(1), of Article XXV which shall be applied in this respect in the light of paragraph 1 of Article XXIX.
(footnote original) 1 The authentic text erroneously reads "subparagraph 5 (a)".
4. The margin of preference* on any product in respect of which a preference is permitted under paragraph 2 of this Article but is not specifically set forth as a maximum margin of preference in the appropriate Schedule annexed to this Agreement shall not exceed:
(a) in respect of duties or charges on any product described in such Schedule, the difference between the most-favoured-nation and preferential rates provided for therein; if no preferential rate is provided for, the preferential rate shall for the purposes of this paragraph be taken to be that in force on April 10, 1947, and, if no most-favoured-nation rate is provided for, the margin shall not exceed the difference between the most-favoured-nation and preferential rates existing on April 10, 1947;
(b) in respect of duties or charges on any product not described in the appropriate Schedule, the difference between the most-favoured-nation and preferential rates existing on April 10, 1947.
In the case of the contracting parties named in Annex G, the date of April 10, 1947, referred to in subparagraph (a) and (b) of this paragraph shall be replaced by the respective dates set forth in that Annex. Ad Article I: Paragraph 1 The obligations incorporated in paragraph 1 of Article I by reference to paragraphs 2 and 4 of Article III and those incorporated in paragraph 2 (b) of Article II by reference to Article VI shall be considered as falling within Part II for the purposes of the Protocol of Provisional Application.
The cross-references, in the paragraph immediately above and in paragraph 1 of Article I, to paragraphs 2 and 4 of Article III shall only apply after Article III has been modified by the entry into force of the amendment provided for in the Protocol Modifying Part II and Article XXVI of the General Agreement on Tariffs and Trade, dated September 14, 1948.(1)
(footnote original) 1 This Protocol entered into force on 14 December 1948. Paragraph 4 The term "margin of preference" means the absolute difference between the most-favoured-nation rate of duty and the preferential rate of duty for the like product, and not the proportionate relation between those rates. As examples:
(1) If the most-favoured-nation rate were 36 per cent ad valorem and the preferential rate were 24 per cent ad valorem, the margin of preference would be 12 per cent ad valorem, and not one-third of the most-favoured-nation rate;
(2) If the most-favoured-nation rate were 36 per cent ad valorem and the preferential rate were expressed as two-thirds of the most-favoured-nation rate, the margin of preference would be 12 per cent ad valorem;
(3) If the most-favoured-nation rate were 2 francs per kilogramme and the preferential rate were 1.50 francs per kilogramme, the margin of preference would be 0.50 franc per kilogramme.
The following kinds of customs action, taken in accordance with established uniform procedures, would not be contrary to a general binding of margins of preference:
(i) The re-application to an imported product of a tariff classification or rate of duty, properly applicable to such product, in cases in which the application of such classification or rate to such product was temporarily suspended or inoperative on April 10, 1947; and
(ii) The classification of a particular product under a tariff item other than that under which importations of that product were classified on April 10, 1947, in cases in which the tariff law clearly contemplates that such product may be classified under more than one tariff item. 4. In Canada - Autos, in support of its interpretation of Article I:1, the Appellate Body explained the object and purpose of Article I:1 as follows: "Th[e] object and purpose [of Article I] is to prohibit discrimination among like products originating in or destined for different countries. The prohibition of discrimination in Article I:1 also serves as an incentive for concessions, negotiated reciprocally, to be extended to all other Members on an MFN basis."(4) 5. In EC - Bananas III, in support of the proposition that Article II of GATS prohibits de facto discrimination as well as de jure discrimination, the Appellate Body noted that in past practice, GATT Article I applied to de facto discrimination. See Chapter on GATS, paragraph 17. 6. In Canada - Autos, the Appellate Body reviewed the Panel's finding that the Canadian import duty exemptions granted to motor vehicles originating in certain countries were inconsistent with Article I:1. The Appellate Body found the prohibition of discrimination under Article I:1 to include both de jure and de facto discrimination: "In approaching this question, we observe first that the words of Article I:1 do not restrict its scope only to cases in which the failure to accord an 'advantage' to like products of all other Members appears on the face of the measure, or can be demonstrated on the basis of the words of the measure. Neither the words 'de jure' nor 'de facto' appear in Article I:1. Nevertheless, we observe that Article I:1 does not cover only 'in law', or de jure, discrimination. As several GATT panel reports confirmed, Article I:1 covers also 'in fact', or de facto, discrimination.(5) Like the Panel, we cannot accept Canada's argument that Article I:1 does not apply to measures which, on their face, are 'origin-neutral'."(6) 7. In Indonesia - Autos, the Panel explained how to carry out the examination of a measure under Article I:1: "The Appellate Body, in Bananas III, confirmed that to establish a violation of Article I, there must be an advantage, of the type covered by Article I and which is not accorded unconditionally to all 'like products' of all WTO Members. Following this analysis, we shall first examine whether the tax and customs duty benefits are advantages of the types covered by Article I. Second, we shall decide whether the advantages are offered (i) to all like products and (ii) unconditionally."(7) (b) "any advantage, favour, privilege or immunity granted by any Member" 8. In Canada - Autos, the Appellate Body came to the conclusion that Canada's import duty exemption accorded to motor vehicles originating in some countries in which affiliates of certain designated manufacturers were present, was inconsistent with Article I:1. The Appellate Body touched on the term "any advantage ... granted by any Member to any product" as follows: "We note next that Article I:1 requires that 'any advantage, favour, privilege or immunity granted by any Member to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other Members.' (emphasis added) The words of Article I:1 refer not to some advantages granted 'with respect to' the subjects that fall within the defined scope of the Article, but to 'any advantage'; not to some products, but to 'any product'; and not to like products from some other Members, but to like products originating in or destined for 'all other ' Members."(8) (ii) Allocation of tariff quotas 9. In EC - Bananas III, the European Communities appealed the Panel's finding on the ground that the Panel erred in concluding that the European Communities violated Article I:1 by maintaining the so-called activity function rules. Under these rules, importers of bananas from certain countries qualified for allocation of the tariff quota only if they fulfilled requirements which differed from those imposed on importers of bananas from other countries. The Appellate Body stated: "On the first issue, the Panel found that the procedural and administrative requirements of the activity function rules for importing third-country and non-traditional ACP bananas differ from, and go significantly beyond, those required for importing traditional ACP bananas. This is a factual finding. Also, a broad definition has been given to the term 'advantage' in Article I:1 of the GATT 1994 by the panel in United States - Non-Rubber Footwear. It may well be that there are considerations of EC competition policy at the basis of the activity function rules. This, however, does not legitimize the activity function rules to the extent that these rules discriminate among like products originating from different Members. For these reasons, we agree with the Panel that the activity function rules are an 'advantage' granted to bananas imported from traditional ACP States, and not to bananas imported from other Members, within the meaning of Article I:1. Therefore, we uphold the Panel's finding that the activity function rules are inconsistent with Article I:1 of the GATT 1994."(9) (iii) Reference to GATT practice 10. With respect to the practice under GATT 1947 concerning the term "any advantage, favour, privilege or immunity granted by any contracting party", see GATT Analytical Index, page 31. 11. In Indonesia - Autos, examining the consistency of the Indonesian National Car Programme with Article I:1, the Panel compared the concepts of "like products" under Articles I and III as follows: "We have found in our discussion of like products under Article III:2 that certain imported motor vehicles are like the National Car. The same considerations justify a finding that such imported vehicles can be considered like National Cars imported from Korea for the purpose of Article I."(10) 12. For the treatment of this subject-matter under GATT 1947, see GATT Analytical Index, pages 35-40. (d) "any product originating in or destined for another country" 13. In EC - Bananas III, the Appellate Body reviewed the Panel's finding that the EC import regime for bananas was inconsistent with Article XIII in that the European Communities allocated tariff quota shares to some Members without allocating such shares to other Members. Pointing out that "there [were] two separate EC import regimes for bananas, the preferential regime for traditional ACP bananas and the erga omnes regime for all other imports of bananas", the European Communities appealed that "the non-discrimination obligations of Article I:1, X:3(a) and XIII of GATT 1994 and Article 1.3 of the Licensing Agreement apply only within each of these separate regimes."(11) The Appellate Body responded as follows: "The essence of the non-discrimination obligations is that like products should be treated equally, irrespective of their origin. As no participant disputes that all bananas are like products, the non-discrimination provisions apply to all imports of bananas, irrespective of whether and how a Member categorizes or subdivides these imports for administrative or other reasons. If, by choosing a different legal basis for imposing import restrictions, or by applying different tariff rates, a Member could avoid the application of the non-discrimination provisions to the imports of like products from different Members, the object and purpose of the non-discrimination provisions would be defeated. It would be very easy for a Member to circumvent the non-discrimination provisions of the GATT 1994 and the other Annex 1A agreements, if these provisions apply only within regulatory regimes established by that Member."(12) (e) "shall be accorded immediately and unconditionally" 14. In Indonesia - Autos, the Panel found that the exemption of import duties and sales taxes to those automobiles which met certain origin-neutral requirements was inconsistent with Article I:1, for the following reasons: "Indeed, it appears that the design and structure of the June 1996 car programme is such as to allow situations where another Member's like product to a National Car imported by PT PTN from Korea will be subject to much higher duties and sales taxes than those imposed on such National Cars. ... The distinction as to whether one product is subject to 0% duty and the other one is subject to 200% duty or whether one product is subject to 0% sales tax and the other one is subject to a 35% sales tax, depends on whether or not PT TPN had made a 'deal' with that exporting company to produce that National Car, and is covered by the authorization of June 1996 with specifications that correspond to those of the Kia car produced only in Korea. In the GATT/WTO, the right of Members cannot be made dependent upon, conditional on or even affected by, any private contractual obligations in place.(13) The existence of these conditions is inconsistent with the provisions of Article I:1 which provides that tax and customs duty benefits accorded to products of one Member (here on Korean products) be accorded to imported like products from other Members 'immediately and unconditionally'.(14)
We note also that under the February 1996 car programme the granting of customs duty benefits to parts and components is conditional to their being used in the assembly in Indonesia of a National Car. The granting of tax benefits is conditional and limited to the only Pioneer company producing National Cars. And there is also a third condition for these benefits: the meeting of certain local content targets. Indeed under all these car programmes, customs duty and tax benefits are conditional on achieving a certain local content value for the finished car. The existence of these conditions is inconsistent with the provisions of Article I:1 which provides that tax and customs duty advantages accorded to products of one Member (here on Korean products) be accorded to imported like products from other Members 'immediately and unconditionally'.
For the reasons discussed above, we consider that the June 1996 car programme which introduced discrimination between imports in the allocation of tax and customs duty benefits based on various conditions and other criteria not related to the imports themselves and the February 1996 car programme which also introduce discrimination between imports in the allocation of customs duty benefits based on various conditions and other criteria not related to the imports themselves, are inconsistent with the provisions of Article I of GATT."(15) 15. In Canada - Autos, the Canadian measure at issue was an exemption of import duties granted on certain motor vehicles. The exemption was granted only where an exporter of motor vehicles was affiliated with a manufacturer/importer in Canada that had been designated, contingent on compliance with other requirements which were also claimed to be inconsistent with WTO law, as eligible to import motor vehicles duty-free under the Motor Vehicle Tariff Order (MVTO) 1998 or under a so-called Special Remission Order (SRO). In practice, exporters of motor vehicles affiliated with a manufacturer/importer in Canada were located in a small number of countries. The Panel had found the Canadian measure to be inconsistent with Article I:1. On appeal, the Appellate Body first discussed the concepts of de jure and de facto discrimination under Article I:1 (see paragraph 6 above) and then held, turning to the terms "immediately and unconditionally": "The measure maintained by Canada accords the import duty exemption to certain motor vehicles entering Canada from certain countries. These privileged motor vehicles are imported by a limited number of designated manufacturers who are required to meet certain performance conditions. In practice, this measure does not accord the same import duty exemption immediately and unconditionally to like motor vehicles of all other Members, as required under Article I:1 of the GATT 1994. The advantage of the import duty exemption is accorded to some motor vehicles originating in certain countries without being accorded to like motor vehicles from all other Members."(16) 16. The Appellate Body drew the conclusion that: "[F]rom both the text of the measure and the Panel's conclusions about the practical operation of the measure, it is apparent to us that '[w]ith respect to customs duties...imposed on or in connection with importation...,' Canada has granted an 'advantage' to some products from some Members that Canada has not 'accorded immediately and unconditionally' to 'like' products 'originating in or destined for the territories of all other Members.' (emphasis added) And this, we conclude, is not consistent with Canada's obligations under Article I:1 of the GATT 1994."(17) 17. The Appellate Body added that the context and the "pervasive character" of the MFN principle supported its finding: "The context of Article I:1 within the GATT 1994 supports this conclusion. Apart from Article I:1, several 'MFN-type' clauses dealing with varied matters are contained in the GATT 1994(18). The very existence of these other clauses demonstrates the pervasive character of the MFN principle of non-discrimination."(19) 18. In the Canada - Autos dispute, the Panel further clarified the meaning of the term "unconditionally". With respect to this term, Japan argued that, by making the import duty exemption conditional upon criteria unrelated to the imported product itself, Canada failed to accord the import duty exemption immediately and unconditionally to like products originating in all WTO Members. By "criteria unrelated to the imported products themselves," Japan was referring to the various conditions which confined the eligibility for the exemption to certain motor vehicle manufacturers in Canada. The Panel, in a finding subsequently not reviewed by the Appellate Body, held that the term "unconditionally" could not be "determined independently of an examination of whether it involves discrimination between like products of different countries". The Panel emphasized the "important distinction to be made between, on the one hand, the issue of whether an advantage within the meaning of Article I:1 is subject to conditions, and, on the other, whether an advantage, once it has been granted to the product of any country, is accorded 'unconditionally' to the like product of all other Members": "[W]e believe that this interpretation of Japan does not accord with the ordinary meaning of the term 'unconditionally' in Article I:1 in its context and in light of the object and purpose of Article I:1. In our view, whether an advantage within the meaning of Article I:1 is accorded 'unconditionally' cannot be determined independently of an examination of whether it involves discrimination between like products of different countries.
Article I:1 requires that, if a Member grants any advantage to any product originating in the territory of any other country, such advantage must be accorded 'immediately and unconditionally' to the like product originating in the territories of all other Members. We agree with Japan that the ordinary meaning of 'unconditionally' is 'not subject to conditions'. However, in our view Japan misinterprets the meaning of the word 'unconditionally' in the context in which it appears in Article I:1. The word 'unconditionally' in Article I:1 does not pertain to the granting of an advantage per se, but to the obligation to accord to the like products of all Members an advantage which has been granted to any product originating in any country. The purpose of Article I:1 is to ensure unconditional MFN treatment. In this context, we consider that the obligation to accord 'unconditionally' to third countries which are WTO Members an advantage which has been granted to any other country means that the extension of that advantage may not be made subject to conditions with respect to the situation or conduct of those countries. This means that an advantage granted to the product of any country must be accorded to the like product of all WTO Members without discrimination as to origin.
In this respect, it appears to us that there is an important distinction to be made between, on the one hand, the issue of whether an advantage within the meaning of Article I:1 is subject to conditions, and, on the other, whether an advantage, once it has been granted to the product of any country, is accorded "unconditionally" to the like product of all other Members. An advantage can be granted subject to conditions without necessarily implying that it is not accorded "unconditionally" to the like product of other Members. More specifically, the fact that conditions attached to such an advantage are not related to the imported product itself does not necessarily imply that such conditions are discriminatory with respect to the origin of imported products. We therefore do not believe that, as argued by Japan, the word "unconditionally" in Article I:1 must be interpreted to mean that making an advantage conditional on criteria not related to the imported product itself is per se inconsistent with Article I:1, irrespective of whether and how such criteria relate to the origin of the imported products.
We thus find that Japan's argument is unsupported by the text of Article I:1."(20) 19. The Panel on Canada - Autos rejected Canada's defence that the Canadian import duty exemption, as described in paragraph 15 above, was a permitted exception under Article XXIV because, on the one hand, Canada was not granting the import duty exemption to all NAFTA manufacturers and because, on the other hand, manufacturers from countries other than the United States and Mexico were being provided duty-free treatment.(21) As this finding of the Panel was not appealed, the Appellate Body concluded: "The drafters also wrote various exceptions to the MFN principle into the GATT 1947 which remain in the GATT 1994.(22) Canada invoked one such exception before the Panel, relating to customs unions and free trade areas under Article XXIV. This justification was rejected by the Panel, and the Panel's findings on Article XXIV were not appealed by Canada. Canada has invoked no other provision of the GATT 1994, or of any other covered agreement, that would justify the inconsistency of the import duty exemption with Article I:1 of the GATT 1994.
The object and purpose of Article I:1 supports our interpretation. That object and purpose is to prohibit discrimination among like products originating in or destined for different countries. The prohibition of discrimination in Article I:1 also serves as an incentive for concessions, negotiated reciprocally, to be extended to all other Members on an MFN basis."(23) 20. In US - Certain EC Products, the United States increased the bonding requirements on imports from the European Communities in order to secure the payment of additional import duties to be imposed in retaliation for certain EC measures. Examining the consistency of the increased bonding requirements with GATT Article I, the Panel stated, with reference to the finding of the Panel in Indonesia - Autos referenced in paragraph 14 above: "We find that the 3 March additional bonding requirements violated the most-favoured-nation clause of Article I of GATT, as it was applicable only to imports from the European Communities, although identical products from other WTO Members were not the subject of such an additional bonding requirements. The regulatory distinction (whether an additional bonding requirement is needed) was not based on any characteristic of the product but depended exclusively on the origin of the product and targeted exclusively some imports from the European Communities.(24)"(25) (ii) Reference to GATT practice 21. With respect to the practice concerning the term "shall be accorded immediately and unconditionally" under GATT 1947, see GATT Analytical Index, pages 33-35.
22. In US - Gasoline, with respect to the relationship between Articles I and III, the Panel considered as follows: "[The Panel's] findings on treatment under the baseline establishment methods under Articles III:4 and XX (b), (d) and (g) would in any case have made unnecessary the examination of the 75 percent rule under Article I:1."(26) (a) Reference to GATT practice 23. With respect to GATT practice regarding the relationship between Article I and Article III, see GATT Analytical Index, page 44. 24. The Panel in Brazil - Desiccated Coconut found that because Article VI of GATT 1994 did not constitute applicable law for the purposes of the dispute, the claims made under Articles I and II of GATT 1994, which were derived from claims of inconsistency with Article VI of GATT 1994, could not succeed.(27) The Appellate Body in Brazil - Desiccated Coconut confirmed this finding.(28) 25. In US - Shrimp, with respect to the relationship between Articles I and XI, the Panel stated as follows: "Given our conclusion in paragraph 7.17 above that Section 609 violates Article XI:1, we consider that it is not necessary for us to review the other claims of the complainants with respect to Articles I:1 and XIII:1. This is consistent with GATT(29) and WTO(30) panel practice and has been confirmed by the Appellate Body in its report in the Wool Shirts case, where the Appellate Body mentioned that 'A panel need only address those claims which must be addressed in order to resolve the matter in issue in the dispute'.(31)
Therefore we do not find it necessary to review the allegations of the complainants with respect to Articles I:1 and XIII:1. On the basis of our finding of violation of Article XI:1, we move to address the defence of the United States under Article XX."(32) 26. In EC - Bananas III, the European Communities argued that a violation of Article XIII in respect of its tariff regime for bananas was covered by the Lomé waiver, whereby GATT Article I:1 was waived in respect of the allocation of country-specific tariff quotas for bananas to certain countries. The Panel agreed, but the Appellate Body disagreed with this argument.(33) See Chapter on the WTO Agreement, paragraphs 284-285. 27. In Canada - Autos, Canada invoked an Article XXIV exception with respect to a certain import duty exemption, found to be inconsistent with GATT Article I. The Panel rejected this defence, because, on the one hand, Canada was not granting the import duty exemption to all NAFTA manufacturers and because, on the other hand, manufacturers from countries other than the United States and Mexico were being provided duty-free treatment.(34) Canada did not appeal this finding of the Panel. In this regard, the Appellate Body noted: "The drafters also wrote various exceptions to the MFN principle into the GATT 1947 which remain in the GATT 1994.(35) Canada invoked one such exception before the Panel, relating to customs unions and free trade areas under Article XXIV. This justification was rejected by the Panel, and the Panel's findings on Article XXIV were not appealed by Canada. Canada has invoked no other provision of the GATT 1994, or of any other covered agreement, that would justify the inconsistency of the import duty exemption with Article I:1 of the GATT 1994."(36) 28. In EC - Poultry, the Appellate Body addressed a complaint against the allocation of tariff quotas for certain poultry products by the European Communities, and rejected Brazil's appeal that Articles I and XIII of GATT were not applicable to the allocation of tariff quota resulting from negotiations under GATT Article XXVIII. The Appellate Body first confirmed its finding in EC - Bananas III according to which Members may, in their concessions and commitments set out in their schedules annexed to the GATT 1994, yield rights but may not diminish their obligations.(37) The Appellate Body then held that: "[t]herefore, the concessions contained in Schedule LXXX pertaining to the tariff-rate quota for frozen poultry meat must be consistent with Article I and XIII of the GATT 1994."(38) 29. In Indonesia - Autos, the Panel rejected Indonesia's argument that the SCM Agreement was exclusively applicable to measures involving subsidies and referred to its finding on the relationship between the SCM Agreement and Article III of GATT 1994.(39) With respect to the exemption of customs duties and domestic taxes, the Panel indicated as follows: "The customs duty benefits of the various Indonesian car programmes are explicitly covered by the wording of Article I. As to the tax benefits of these programmes, we note that Article I:1 refers explicitly to 'all matters referred to in paragraphs 2 and 4 of Article III'. We have already decided that the tax discrimination aspects of the National Car programme were matters covered by Article III:2 of GATT. Therefore, the customs duty and tax advantages of the February and June 1996 car programmes are of the type covered by Article I of GATT."(40) 1. Anti-dumping and countervailing duties (i) Reference to GATT practice 30. With respect to GATT practice concerning anti-dumping and countervailing duties, see GATT Analytical Index, page 47. 2. Frontier traffic and customs unions 31. In Canada - Autos, Canada invoked an Article XXIV exception with respect to a certain import duty exemption which had been found inconsistent with GATT Article I. The Panel rejected this defence, because, on the one hand, Canada was not granting the import duty exemption to all NAFTA manufacturers and because, on the other hand, manufacturers from countries other than the United States and Mexico were being provided duty-free treatment.(41) Since Canada did not appeal this finding of the Panel, the Appellate Body did not address the issue. (b) Reference to GATT practice 32. With respect to GATT practice concerning frontier traffic and customs unions, see GATT Analytical Index, page 47. (a) Adoption of Enabling Clause 33. On 28 November 1979, the GATT Council adopted the Decision on Differential and More Favourable Treatment Reciprocity and Fuller Participation of Developing Countries (the "Enabling Clause").(42) The text of the Enabling Clause is set out below: "Following negotiations within the framework of the Multilateral Trade Negotiations, the CONTRACTING PARTIES decide as follows:
1. Notwithstanding the provisions of Article I of the General Agreement, contracting parties may accord differential and more favourable treatment to developing countries(43), without according such treatment to other contracting parties.
2. The provisions of paragraph 1 apply to the following:(44)
(a) Preferential tariff treatment accorded by developed contracting parties to products originating in developing countries in accordance with the Generalized System of Preferences,(45)
(b) Differential and more favourable treatment with respect to the provisions of the General Agreement concerning non-tariff measures governed by the provisions of instruments multilaterally negotiated under the auspices of the GATT;
(c) Regional or global arrangements entered into amongst less-developed contracting parties for the mutual reduction or elimination of tariffs and, in accordance with criteria or conditions which may be prescribed by the CONTRACTING PARTIES, for the mutual reduction or elimination of non-tariff measures, on products imported from one another;
(d) Special treatment on the least developed among the developing countries in the context of any general or specific measures in favour of developing countries.
3. Any differential and more favourable treatment provided under this clause:
(a) shall be designed to facilitate and promote the trade of developing countries and not to raise barriers to or create undue difficulties for the trade of any other contracting parties;
(b) shall not constitute an impediment to the reduction or elimination of tariffs and other restrictions to trade on a most-favoured-nation basis;
(c) shall in the case of such treatment accorded by developed contracting parties to developing countries be designed and, if necessary, modified, to respond positively to the development, financial and trade needs of developing countries.
4. Any contracting party taking action to introduce an arrangement pursuant to paragraphs 1, 2 and 3 above or subsequently taking action to introduce modification or withdrawal of the differential and more favourable treatment so provided shall:(46)
(a) notify the CONTRACTING PARTIES and furnish them with all the information they may deem appropriate relating to such action;
(b) afford adequate opportunity for prompt consultations at the request of any interested contracting party with respect to any difficulty or matter that may arise. The CONTRACTING PARTIES shall, if requested to do so by such contracting party, consult with all contracting parties concerned with respect to the matter with a view to reaching solutions satisfactory to all such contracting parties.
5. The developed countries do not expect reciprocity for commitments made by them in trade negotiations to reduce or remove tariffs and other barriers to the trade of developing countries, i.e., the developed countries do not expect the developing countries, in the course of trade negotiations, to make contributions which are inconsistent with their individual development, financial and trade needs. Developed contracting parties shall therefore not seek, neither shall less-developed contracting parties be required to make, concessions that are inconsistent with the latter's development, financial and trade needs.
6. Having regard to the special economic difficulties and the particular development, financial and trade needs of the least-developed countries, the developed countries shall exercise the utmost restraint in seeking any concessions or contributions for commitments made by them to reduce or remove tariffs and other barriers to the trade of such countries, and the least-developed countries shall not be expected to make concessions or contributions that are inconsistent with the recognition of their particular situation and problems.
7. The concessions and contributions made and the obligations assumed by developed and less-developed contracting parties under the provisions of the General Agreement should promote the basic objectives of the Agreement, including those embodied in the Preamble and in Article XXXVI. Less-developed contracting parties expect that their capacity to make contributions or negotiated concessions or take other mutually agreed action under the provisions and procedures of the General Agreement would improve with the progressive development of their economies and improvement in their trade situation and they would accordingly expect to participate more fully in the framework of rights and obligations under the General Agreement.
8. Particular account shall be taken of the serious difficulty of the least-developed countries in making concessions and contributions in view of their special economic situation and their development, financial and trade needs.
9. The contracting parties will collaborate in arrangements for review of the operation of these provisions, bearing in mind the need for individual and joint efforts by contracting parties to meet the development needs of developing countries and the objectives of the General Agreement." (b) Generalized System of Preferences 34. Pursuant to the Enabling Clause, notifications on the Generalized System of Preferences (GSP) schemes of developed country Members in favour of least-developed countries are to be sent to the Committee on Trade and Development. In contrast, under the Waiver on Preferential Tariff Treatment for Least-Developed Countries, which is referred to in paragraph 46 below, notifications on steps taken by developing country Members in favour of least-developed countries are to be sent to the Council on Trade in Goods. In order to allow for a unified consideration of both types of measures in one forum, at its meeting of 16 February 2001, the Committee on Trade and Development agreed ad referendum that any market access measures taken specifically in favour of the least-developed countries under the Enabling Clause and notified to the Committee be transmitted to the Sub-Committee on Least-developed Countries, for substantive consideration, and that the Sub-Committee report back to the Committee on its discussions.(47) A similar procedure was agreed to in the Council for Trade in Goods with respect to the treatment of notifications under the Waiver on Preferential Tariff Treatment for LDCs, see paragraph 46 below. 35. From the establishment of the WTO to date, the following Members have filed notifications with the Committee on Trade and Development on their GSP schemes: (a) Canada(48);
(b) European Communities(49);
(c) Japan(50);
(d) New Zealand(51);
(e) Norway(52);
(f) Switzerland(53); and
(g) United States.(54) 36. With respect to the GSP schemes notified to the GATT, see GATT Analytical Index, page 50. (c) Regional trade arrangements among developing country Members 37. To date, the Committee on Trade and Development has received notifications or communications of six regional trade arrangements developing country Members:(55) (a) Treaty Establishing the Common Market for Eastern and Southern Africa (COMESA)(56);
(b) Trade Agreement among the Melanesian Spearhead Group (MSG) countries(57);
(c) Treaty of West African Economic and Monetary Union (WAEMU)(58);
(d) Treaty Establishing the Economic and Monetary Community of Central Africa (CEMAC)(59),
(e) Treaty for the Establishment of the East African Community (EAC); and(60)
(f) Free Trade Agreement between the Republic of India and the Democratic Socialist Republic of Sri Lanka.(61) 38. The Committee on Trade and Development has also received notifications with respect to four other regional trade arrangements which were previously notified to the GATT Committee on Trade and Development: (a) Southern Common Market Agreement (MERCOSUR)(62), and the Memorandum of Understanding on Closer Relations between Bolivia and MERCOSUR;(63)
(b) Agreement on SAARC(64) Preferential Trading Arrangement (SAPTA);(65)
(c) Latin American Integration Association (LAIA) - the Membership of Cuba(66); and
(d) Common Effective Preferential Tariffs (CEPT) scheme for the ASEAN(67) Free Trade Area (AFTA).(68) 39. Under paragraph 4(a) of the Enabling Clause, Members are required to notify arrangements taken under the Enabling Clause, and the modification or withdrawal thereof, to the Committee on Trade and Development. In this regard, in fulfilment of its mandate under item 1(b) of its terms of reference(69), at its meeting on 20 February 1998, the Committee on Regional Trade Agreements (CRTA) adopted recommendations to the Committee on Trade and Development with respect to how the required reporting on the operation of regional trade agreements, including those under the Enabling Clause, should be carried out.(70) At its meeting of 2 November 1998, the Committee on Trade and Development adopted the recommended procedures, as general guidelines with respect to information on regional trade agreements submitted to it.(71) 40. When an agreement is notified under the Enabling Clause, it is inscribed on the agenda of the Committee on Trade and Development. Subsequent actions of the Committee may include "noting" the agreement, requesting additional information, transferring it to the Committee on Regional Trade Agreements for examination, and reviewing reports made by members on changes to their agreements. 41. At its meeting of 14 September 1995, the Committee on Trade and Development adopted the following terms of reference for the Working Party on MERCOSUR(72): "To examine the Southern Common Market Agreement (MERCOSUR) in the light of the relevant provisions of the Enabling Clause and of the GATT 1994, including Article XXIV, and to transmit a report and recommendations to the Committee on Trade and Development for submission to the General Council, with a copy of the report transmitted as well to the Council for Trade in Goods. The examination in the Working Party will be based on a complete notification and on written questions and answers."(73) 42. The review of MERCOSUR was later taken over by the CRTA.(74) (d) Special treatment of the least-developed countries 43. The Committee on Trade and Development has received notifications under the Enabling Clause from the following Members of their special treatment in respect of the least-developed countries in the context of any general or specific measures in favour of developing countries: (a) Canada(75);
(b) European Communities(76);
(c) Japan(77);
(d) Republic of Korea(78);
(e) Norway(79);
(f) New Zealand(80);
(g) Switzerland(81); and
(h) United States.(82) (e) Reference to GATT practice 44. With respect to GATT practice concerning the Enabling Clause, see GATT Analytical Index, Article I, pages 53-59. 4. Waiver on Preferential Tariff Treatment for Least-Developed Countries 45. At its meeting of 15 June 1999, the General Council adopted a decision concerning the Preferential Tariff Treatment for Least-Developed Countries. This decision waives the provisions of GATT Article I:1(83) in order to provide a means for developing-country Members to offer preferential tariff treatment to products of least-developed countries. The decision sets forth: "1. Subject to the terms and conditions set out hereunder, the provisions of paragraph 1 of Article I of the GATT 1994 shall be waived until 30 June 2009, to the extent necessary to allow developing country Members to provide preferential tariff treatment to products of least-developed countries, designated as such by the United Nations, without being required to extend the same tariff rates to like products of any other Member.
2. Developing country Members wishing to take actions pursuant to the provisions of this Waiver shall notify to the Council on Trade in Goods the list of all products of least-developed countries for which preferential tariff treatment is to be provided on a generalized, non-reciprocal and non-discriminatory basis and the preference margins to be accorded. Subsequent modifications to the preferences shall similarly be notified.
3. Any preferential tariff treatment implemented pursuant to this Waiver shall be designed to facilitate and promote the trade of least-developed countries and not to raise barriers or create undue difficulties for the trade of any other Member. Such preferential tariff treatment shall not constitute an impediment to the reduction or elimination of tariffs on a most-favoured-nation basis.
4. In accordance with the provisions of paragraph 4 of Article IX of the WTO Agreement, the General Council shall review annually whether the exceptional circumstances justifying the Waiver still exist and whether the terms and conditions attached to the Waiver have been met.
5. The government of any Member providing preferential tariff treatment pursuant to this Waiver shall, upon request, promptly enter into consultations with any interested Member with respect to any difficulty or any matter that may arise as a result of the implementation of programmes authorized by this Waiver. Where a Member considers that any benefit accruing to it under GATT 1994 may be or is being impaired unduly as a result of such implementation, such consultation shall examine the possibility of action for a satisfactory adjustment of the matter. This Waiver does not affect Members' rights as set forth in the Understanding in Respect of Waivers of Obligations under GATT 1994.
6. This waiver does not affect in any way and is without prejudice to rights of Members in their actions pursuant to the provisions of the 1979 Decision on Differential and More Favourable Treatment, Reciprocity and Fuller Participation of Developing Countries."(84) 46. Under the Decision on Waiver on Preferential Tariff Treatment for LDCs, which is referred to in paragraph 45 above, notifications on steps taken by developing country Members are to be sent to the Council on Trade in Goods. In contrast, pursuant to the Enabling Clause, which is referred to in paragraph 34 above, notifications on the GSP schemes of developed country Members in favour of LDCs are to be sent to the Committee on Trade and Development. In order to allow for a unified consideration of both types of measures in one forum, at its meeting of 14 March 2001, the Council for Trade in Goods agreed ad referendum that any market access measures taken specifically in favour of the least-developed countries under the Waiver on Preferential Tariff Treatment for LDCs and notified to the Council be transmitted to the Sub-Committee on Least-developed Countries, for substantive consideration, and that the Sub-Committee report back to the Council on its discussions.(85) A similar procedure was agreed in the Committee on Trade and Development with respect to the treatment of notifications under the Enabling Clause, see paragraph 34 above. 47. To date, only Morocco has notified its preferential tariff treatment for the least-developed countries to the Council for Trade in Goods.(86) In this regard, the following developing country Members notified their own tariff reduction or duty-free treatment for the least-developed countries to the Committee on Trade and Development, prior to the adoption of the Waiver on Preferential Tariff Treatment for LDCs: (i) Turkey(87); (ii) Egypt(88); and (iii) Mauritius.(89)
Footnotes: 1. (footnote original) It is
worth noting that the Statute of the International Court of Justice has
an explicit provision, Article 59, to the same effect. This has not
inhibited the development by that Court (and its predecessor) of a body
of case law in which considerable reliance on the value of previous
decisions is readily discernible.. back to text |
