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PART III
XXVI. Article XXIV
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A. Text of
Article XXIV
Article XXIV: Territorial Application —
Frontier Traffic — Customs Unions and Free-trade Areas
1.
The provisions of this Agreement shall apply to the metropolitan
customs territories of the contracting parties and to any other customs
territories in respect of which this Agreement has been accepted under
Article XXVI or is being applied under Article XXXIII or pursuant to the
Protocol of Provisional Application. Each such customs territory shall,
exclusively for the purposes of the territorial application of this
Agreement, be treated as though it were a contracting party; Provided
that the provisions of this paragraph shall not be construed to create
any rights or obligations as between two or more customs territories in
respect of which this Agreement has been accepted under
Article XXVI or
is being applied under Article XXXIII
or pursuant to the Protocol of
Provisional Application by a single contracting party.
2.
For the purposes of this Agreement a customs territory shall be
understood to mean any territory with respect to which separate tariffs
or other regulations of commerce are maintained for a substantial part
of the trade of such territory with other territories.
3.
The provisions of this Agreement shall not be construed to
prevent:
(a) Advantages accorded by any contracting party to adjacent
countries in order to facilitate frontier traffic;
(b) Advantages accorded to the trade with the Free Territory
of Trieste by countries contiguous to that territory, provided that such
advantages are not in conflict with the Treaties of Peace arising out of
the Second World War.
4.
The contracting parties recognize the desirability of increasing
freedom of trade by the development, through voluntary agreements, of
closer integration between the economies of the countries parties to
such agreements. They also recognize that the purpose of a customs union
or of a free-trade area should be to facilitate trade between the
constituent territories and not to raise barriers to the trade of other
contracting parties with such territories.
5.
Accordingly, the provisions of this Agreement shall not prevent,
as between the territories of contracting parties, the formation of a
customs union or of a free-trade area or the adoption of an interim
agreement necessary for the formation of a customs union or of a
free-trade area; Provided that:
(a)
with respect to a customs union, or an interim agreement
leading to a formation of a customs union, the duties and other
regulations of commerce imposed at the institution of any such union or
interim agreement in respect of trade with contracting parties not
parties to such union or agreement shall not on the whole be higher or
more restrictive than the general incidence of the duties and
regulations of commerce applicable in the constituent territories prior
to the formation of such union or the adoption of such interim
agreement, as the case may be;
(b)
with respect to a free-trade area, or an interim agreement
leading to the formation of a freetrade area, the duties and other
regulations of commerce maintained in each of the constituent
territories and applicable at the formation of such free-trade area or
the adoption of such interim agreement to the trade of contracting
parties not included in such area or not parties to such agreement shall
not be higher or more restrictive than the corresponding duties and
other regulations of commerce existing in the same constituent
territories prior to the formation of the free-trade area, or interim
agreement as the case may be; and
(c)
any interim agreement referred to in subparagraphs (a) and
(b) shall include a plan and schedule for the formation of such a
customs union or of such a free-trade area within a reasonable length of
time.
6.
If, in fulfilling the requirements of subparagraph 5
(a), a
contracting party proposes to increase any rate of duty inconsistently
with the provisions of Article II, the procedure set forth in
Article
XXVIII shall apply. In providing for compensatory adjustment, due
account shall be taken of the compensation already afforded by the
reduction brought about in the corresponding duty of the other
constituents of the union.
7.
(a) Any contracting party deciding to enter into a customs
union or free-trade area, or an interim agreement leading to the
formation of such a union or area, shall promptly notify the CONTRACTING
PARTIES and shall make available to them such information regarding the
proposed union or area as will enable them to make such reports and
recommendations to contracting parties as they may deem appropriate.
(b)
If, after having studied the plan and schedule included in
an interim agreement referred to in paragraph 5 in consultation with the
parties to that agreement and taking due account of the information made
available in accordance with the provisions of subparagraph
(a), the
CONTRACTING PARTIES find that such agreement is not likely to result in
the formation of a customs union or of a free-trade area within the
period contemplated by the parties to the agreement or that such period
is not a reasonable one, the CONTRACTING PARTIES shall make
recommendations to the parties to the agreement. The parties shall not
maintain or put into force, as the case may be, such agreement if they
are not prepared to modify it in accordance with these recommendations.
(c)
Any substantial change in the plan or schedule referred to
in paragraph 5 (c) shall be communicated to the CONTRACTING PARTIES,
which may request the contracting parties concerned to consult with them
if the change seems likely to jeopardize or delay unduly the formation
of the customs union or of the free-trade area.
8.
For the purposes of this Agreement:
(a)
A customs union shall be understood to mean the
substitution of a single customs territory for two or more customs
territories, so that
(i)
duties and other restrictive regulations of commerce (except,
where necessary, those permitted under Articles
XI, XII, XIII,
XIV, XV
and XX) are eliminated with respect to substantially all the trade
between the constituent territories of the union or at least with
respect to substantially all the trade in products originating in such
territories, and,
(ii)
subject to the provisions of paragraph 9, substantially the same
duties and other regulations of commerce are applied by each of the
members of the union to the trade of territories not included in the
union;
(b)
A free-trade area shall be understood to mean a group of
two or more customs territories in which the duties and other
restrictive regulations of commerce (except, where necessary, those
permitted under Articles XI, XII,
XIII, XIV,
XV and XX) are eliminated
on substantially all the trade between the constituent territories in
products originating in such territories.
9.
The preferences referred to in paragraph 2 of Article I shall not
be affected by the formation of a customs union or of a free-trade area
but may be eliminated or adjusted by means of negotiations with
contracting parties affected.* This procedure of negotiations with
affected contracting parties shall, in particular, apply to the
elimination of preferences required to conform with the provisions of
paragraph 8 (a)(i) and paragraph 8 (b).
10.
The CONTRACTING PARTIES may by a two-thirds majority approve
proposals which do not fully comply with the requirements of paragraphs
5 to 9 inclusive, provided that such proposals lead to the formation of
a customs union or a free-trade area in the sense of this Article.
11.
Taking into account the exceptional circumstances arising out of
the establishment of India and Pakistan as independent States and
recognizing the fact that they have long constituted an economic unit,
the contracting parties agree that the provisions of this Agreement
shall not prevent the two countries from entering into special
arrangements with respect to the trade between them, pending the
establishment of their mutual trade relations on a definitive basis.*
12.
Each contracting party shall take such reasonable measures as may
be available to it to ensure observance of the provisions of this
Agreement by the regional and local governments and authorities within
its territories.
B. Text of ad Article XXIV
Ad Article XXIV: Paragraph 9
It is understood that the provisions of
Article I would require that,
when a product which has been imported into the territory of a member of
a customs union or free-trade area at a preferential rate of duty is
re-exported to the territory of another member of such union or area,
the latter member should collect a duty equal to the difference between
the duty already paid and any higher duty that would be payable if the
product were being imported directly into its territory.
Paragraph 11
Measures adopted by India and Pakistan in order to carry out
definitive trade arrangements between them, once they have been agreed
upon, might depart from particular provisions of this Agreement, but
these measures would in general be consistent with the objectives of the
Agreement.
C. Understanding on the Interpretation of Article XXIV of the General
Agreement on Tariffs and Trade 1994
Members,
Having
regard to the provisions of Article XXIV of GATT 1994;
Recognizing that customs unions and free trade areas have greatly
increased in number and importance since the establishment of GATT 1947
and today cover a significant proportion of world trade;
Recognizing the contribution to the expansion of world trade that
may be made by closer integration between the economies of the parties
to such agreements;
Recognizing also that such contribution is increased if the
elimination between the constituent territories of duties and other
restrictive regulations of commerce extends to all trade, and diminished
if any major sector of trade is excluded;
Reaffirming that the purpose of such agreements should be to
facilitate trade between the constituent territories and not to raise
barriers to the trade of other Members with such territories; and that
in their formation or enlargement the parties to them should to the
greatest possible extent avoid creating adverse effects on the trade of
other Members;
Convinced also of the need to reinforce the effectiveness of the
role of the Council for Trade in Goods in reviewing agreements notified
under Article XXIV, by clarifying the criteria and procedures for the
assessment of new or enlarged agreements, and improving the transparency
of all Article XXIV agreements;
Recognizing the need for a common understanding of the
obligations of Members under paragraph 12 of Article XXIV;
Hereby agree as follows:
1.
Customs unions, free-trade areas, and interim agreements leading
to the formation of a customs union or free-trade area, to be consistent
with Article XXIV, must satisfy, inter alia, the provisions of
paragraphs 5, 6, 7 and
8 of that Article.
Article XXIV:5
2.
The evaluation under paragraph 5(a) of Article XXIV
of the general
incidence of the duties and other regulations of commerce applicable
before and after the formation of a customs union shall in respect of
duties and charges be based upon an overall assessment of weighted
average tariff rates and of customs duties collected. This assessment
shall be based on import statistics for a previous representative period
to be supplied by the customs union, on a tariff-line basis and in
values and quantities, broken down by WTO country of origin. The
Secretariat shall compute the weighted average tariff rates and customs
duties collected in accordance with the methodology used in the
assessment of tariff offers in the Uruguay Round of Multilateral Trade
Negotiations. For this purpose, the duties and charges to be taken into
consideration shall be the applied rates of duty. It is recognized that
for the purpose of the overall assessment of the incidence of other
regulations of commerce for which quantification and aggregation are
difficult, the examination of individual measures, regulations, products
covered and trade flows affected may be required.
3. The “reasonable length of time” referred to in
paragraph 5(c)
of Article XXIV should exceed 10 years only in exceptional cases. In
cases where Members parties to an interim agreement believe that 10
years would be insufficient they shall provide a full explanation to the
Council for Trade in Goods of the need for a longer period.
Article XXIV:6
4. Paragraph 6 of Article XXIV establishes the procedure to be
followed when a Member forming a customs union proposes to increase a
bound rate of duty. In this regard Members reaffirm that the procedure
set forth in Article XXVIII, as elaborated in the guidelines adopted on
10 November 1980 (BISD 27S/26–28) and in the Understanding on the
Interpretation of Article XXVIII of GATT
1994, must be commenced before
tariff concessions are modified or withdrawn upon the formation of a
customs union or an interim agreement leading to the formation of a
customs union.
5. These negotiations will be entered into in good faith with a view
to achieving mutually satisfactory compensatory adjustment. In such
negotiations, as required by paragraph 6 of Article XXIV, due account
shall be taken of reductions of duties on the same tariff line made by
other constituents of the customs union upon its formation. Should such
reductions not be sufficient to provide the necessary compensatory
adjustment, the customs union would offer compensation, which may take
the form of reductions of duties on other tariff lines. Such an offer
shall be taken into consideration by the Members having negotiating
rights in the binding being modified or withdrawn. Should the
compensatory adjustment remain unacceptable, negotiations should be
continued. Where, despite such efforts, agreement in negotiations on
compensatory adjustment under Article XXVIII as elaborated by the
Understanding on the Interpretation of Article XXVIII of GATT 1994
cannot be reached within a reasonable period from the initiation of
negotiations, the customs union shall, nevertheless, be free to modify
or withdraw the concessions; affected Members shall then be free to
withdraw substantially equivalent concessions in accordance with Article
XXVIII.
6. GATT 1994 imposes no obligation on Members benefiting from a
reduction of duties consequent upon the formation of a customs union, or
an interim agreement leading to the formation of a customs union, to
provide compensatory adjustment to its constituents.
Review of Customs Unions and Free-Trade Areas
7. All notifications made under
paragraph 7(a) of Article XXIV shall
be examined by a working party in the light of the relevant provisions
of GATT 1994 and of paragraph 1 of this
Understanding. The working party
shall submit a report to the Council for Trade in Goods on its findings
in this regard. The Council for Trade in Goods may make such
recommendations to Members as it deems appropriate.
8. In regard to interim agreements, the working party may in its
report make appropriate recommendations on the proposed time-frame and
on measures required to complete the formation of the customs union or
free-trade area. It may if necessary provide for further review of the
agreement.
9. Members parties to an interim agreement shall notify substantial
changes in the plan and schedule included in that agreement to the
Council for Trade in Goods and, if so requested, the Council shall
examine the changes.
10. Should an interim agreement notified under paragraph 7(a) of
Article XXIV not include a plan and schedule, contrary to paragraph 5(c)
of Article XXIV, the working party shall in its report recommend such a
plan and schedule. The parties shall not maintain or put into force, as
the case may be, such agreement if they are not prepared to modify it in
accordance with these recommendations. Provision shall be made for
subsequent review of the implementation of the recommendations.
11. Customs unions and constituents of free-trade areas shall report
periodically to the Council for Trade in Goods, as envisaged by the
CONTRACTING PARTIES to GATT 1947 in their instruction to the GATT 1947
Council concerning reports on regional agreements (BISD 18S/ 38), on the
operation of the relevant agreement. Any significant changes and/or
developments in the agreements should be reported as they occur.
Dispute Settlement
12. The provisions of Articles XXII and
XXIII of GATT 1994 as
elaborated and applied by the Dispute Settlement Understanding may be
invoked with respect to any matters arising from the application of
those provisions of Article XXIV relating to customs unions, free-trade
areas or interim agreements leading to the formation of a customs union
or free-trade area.
Article XXIV:12
13. Each Member is fully responsible under GATT 1994 for the
observance of all provisions of GATT 1994, and shall take such
reasonable measures as may be available to it to ensure such observance
by regional and local governments and authorities within its territory.
14. The provisions of Articles XXII and
XXIII of GATT 1994 as
elaborated and applied by the Dispute Settlement Understanding may be
invoked in respect of measures affecting its observance taken by
regional or local governments or authorities within the territory of a
Member. When the Dispute Settlement Body has ruled that a provision of
GATT 1994 has not been observed, the responsible Member shall take such
reasonable measures as may be available to it to ensure its observance.
The provisions relating to compensation and suspension of concessions or
other obligations apply in cases where it has not been possible to
secure such observance.
15. Each Member undertakes to accord sympathetic consideration to and
afford adequate opportunity for consultation regarding any
representations made by another Member concerning measures affecting the
operation of GATT 1994 taken within the territory of the former.
D. Transparency Mechanism for Regional Trade
Agreements(1412)
The General Council,
Having regard to paragraph 1 of Article IX of the Marrakesh
Agreement Establishing the World Trade Organization (“WTO Agreement”);
Conducting the functions of the Ministerial Conference in the
interval between meetings pursuant to paragraph 2 of Article IV of the
WTO Agreement;
Noting that trade agreements of a mutually preferential
nature (“regional trade agreements” or “RTAs”) have greatly
increased in number and have become an important element in Members’
trade policies and developmental strategies;
Convinced that enhancing transparency in, and understanding
of, RTAs and their effects is of systemic interest and will be of
benefit to all Members;
Having regard also to the transparency provisions of
Article XXIV of GATT 1994, the Understanding on the Interpretation of
Article
XXIV of GATT 1994 (“GATT Understanding”), Article V of GATS and the
1979 Decision on Differential and More Favourable Treatment, Reciprocity
and Fuller Participation of Developing Countries (“Enabling Clause”);
Recognizing the resource and technical constraints of
developing country Members;
Recalling that in the negotiations pursued under the terms of
the Doha Ministerial Declaration(1), in accordance with paragraph 47 of
that Declaration, agreements reached at an early stage may be
implemented on a provisional basis;
(footnote original) 1 WT/MIN(01)/DEC/1.
Decides:
A. Early Announcement
1. Without prejudging the substance and the timing of the
notification required under Article XXIV of GATT
1994, Article V of GATS or the Enabling Clause, nor affecting Members’ rights and
obligations under the WTO agreements in any way:
(a) Members participating in new negotiations aimed at the conclusion
of an RTA shall endeavour to so inform the WTO.
(b) Members parties to a newly signed RTA shall convey to the WTO, in
so far as and when it is publicly available, information on the RTA,
including its official name, scope and date of signature, any foreseen
timetable for its entry into force or provisional application, relevant
contact points and/or website addresses, and any other relevant
unrestricted information.
2. The information referred to in
paragraph 1 above is to be
forwarded to the WTO Secretariat, which will post it on the WTO website
and will periodically provide Members with a synopsis of the
communications received.
B. Notification
3. The required notification of an RTA by Members that are party to
it shall take place as early as possible. As a rule, it will occur no
later than directly following the parties’ ratification of the RTA or
any party’s decision on application of the relevant parts of an
agreement, and before the application of preferential treatment between
the parties.
4. In notifying their RTA, the parties shall specify under which
provision(s) of the WTO agreements it is notified. They will also
provide the full text of the RTA (or those parts they have decided to
apply) and any related schedules, annexes and protocols, in one of the
WTO official languages; if available, these shall also be submitted in
an electronically exploitable format. Reference to related official
Internet links shall also be supplied.
C. Procedures to Enhance Transparency
5. Upon notification, and without affecting Members’ rights and
obligations under the WTO agreements under which it has been notified,
the RTA shall be considered by Members under the procedures established
in paragraphs 6 to 13 below.
6. The consideration by Members of a notified RTA shall be normally
concluded in a period not exceeding one year after the date of
notification. A precise timetable for the consideration of the RTA shall
be drawn by the WTO Secretariat in consultation with the parties at the
time of the notification.
7. To assist Members in their consideration of a notified
RTA:
(a) the parties shall make available to the WTO Secretariat data as
specified in the Annex, if possible in an electronically exploitable
format; and
(b) the WTO Secretariat, on its own responsibility and in full
consultation with the parties, shall prepare a factual presentation of
the RTA.
8. The data referred to in
paragraph 7(a) shall be made available as
soon as possible. Normally, the timing of the data submission shall not
exceed ten weeks — or 20 weeks in the case of RTAs involving only
developing countries — after the date of notification of the
agreement.
9. The factual presentation provided for in
paragraph 7(b) shall be
primarily based on the information provided by the parties; if
necessary, the WTO Secretariat may also use data available from other
sources, taking into account the views of the parties in furtherance of
factual accuracy. In preparing the factual presentation, the WTO
Secretariat shall refrain from any value judgement.
10. The WTO Secretariat’s factual presentation shall not be used as
a basis for dispute settlement procedures or to create new rights and
obligations for Members.
11. As a rule, a single formal meeting will be devoted to consider
each notified RTA; any additional exchange of information should take
place in written form.
12. The WTO Secretariat’s factual presentation, as well as any
additional information submitted by the parties, shall be circulated in
all WTO official languages not less than eight weeks in advance of the
meeting devoted to the consideration of the RTA. Members’ written
questions or comments on the RTA under consideration shall be
transmitted to the parties through the WTO Secretariat at least four
weeks before the corresponding meeting; they shall be distributed,
together with replies, to all Members at least three working days before
the corresponding meeting.
13. All written material submitted, as well as the minutes of the
meeting devoted to the consideration of a notified agreement will be
promptly circulated in all WTO official languages and made available on
the WTO website.
D. Subsequent Notification and Reporting
14. The required notification of changes affecting the implementation
of an RTA, or the operation of an already implemented RTA, shall take
place as soon as possible after the changes occur. Changes to be
notified include, inter alia, modifications to the preferential
treatment between the parties and to the RTA’s disciplines. The
parties shall provide a summary of the changes made, as well as any
related texts, schedules, annexes and protocols, in one of the WTO
official languages and, if available, in electronically exploitable
format.(2)
(footnote original) 2 In their notification, Members may refer
to official Internet links related to the agreement where the relevant
information can be consulted in full, in one of the WTO official
languages.
15. At the end of the RTA’s implementation period, the parties
shall submit to the WTO a short written report on the realization of the
liberalization commitments in the RTA as originally notified.
16. Upon request, the relevant WTO body shall provide an adequate
opportunity for an exchange of views on the communications submitted
under paragraphs 14 and 15.
17. The communications submitted under paragraphs 14 and 15 will be
promptly made available on the WTO website and a synopsis will be
periodically circulated by the WTO Secretariat to Members.
E. Bodies Entrusted with the Implementation of the Mechanism
18. The Committee on Regional Trade Agreements (“CRTA”) and the
Committee on Trade and Development (“CTD”) are instructed to
implement this Transparency Mechanism.(3) The CRTA shall do so for RTAs
falling under Article XXIV of GATT 1994 and Article V of GATS, while the
CTD shall do so for RTAs falling under paragraph 2(c) of the Enabling
Clause. For purposes of performing the functions established under this
Mechanism, the CTD shall convene in dedicated session.
(footnote original) 3 The Director-General is invited to
ensure consistency in the preparation of the WTO Secretariat factual
presentations for the different types of RTAs, taking into account the
variations in data provided by different Members.
F. Technical Support for Developing Countries
19. Upon request, the WTO Secretariat shall provide technical support
to developing country Members, and especially least-developed countries,
in the implementation of this Transparency Mechanism, in particular —
but not limited to — with respect to the preparation of RTA-related
data and other information to be submitted to the WTO Secretariat.
G. Other Provisions
20. Any Member may, at any time, bring to the attention of the
relevant WTO body information on any RTA that it considers ought to have
been submitted to Members in the framework of this Transparency
Mechanism.
21. The WTO Secretariat shall establish and maintain an updated
electronic database on individual RTAs. This database shall include
relevant tariff and trade-related information, and give access to all
written material related to announced or notified RTAs available at the
WTO. The RTA database should be structured so as to be easily accessible
to the public.
H. Provisional Application of the Transparency Mechanism
22. This Decision shall apply, on a provisional basis, to all RTAs.
With respect to RTAs already notified under the relevant WTO
transparency provisions and in force, this Decision shall apply as
follows:
(a) RTAs for which a working party report has been adopted by the
GATT Council and those RTAs notified to the GATT under the Enabling
Clause will be subject to the procedures under Sections D to G above.
(b) RTAs for which the CRTA has concluded the “factual examination”
prior to the adoption of this Decision and those for which the “factual
examination” will have been concluded by 31 December 2006, and RTAs
notified to the WTO under the Enabling Clause will be subject to the
procedures under Sections D to G above. In addition, for each of these
RTAs, the WTO Secretariat shall prepare a factual abstract presenting
the features of the agreement.
(c) Any RTA notified prior to the adoption of this Decision and not
referred to in subparagraphs (a) or (b) will be subject to the
procedures under Sections C to G above.
I. Reappraisal of the Mechanism
23. Members will review, and if necessary modify, this Decision, in
light of the experience gained from its provisional operation, and
replace it by a permanent mechanism adopted as part of the overall
results of the Round, in accordance with paragraph 47 of the Doha
Declaration. Members will also review the legal relationship between
this Mechanism and relevant WTO provisions related to RTAs.
Annex: Submission of Data by RTA Parties
1. RTA parties shall not be expected to make available the
information required below if the corresponding data has already been
submitted to the Integrated Data Base (IDB),(4) or has otherwise been
provided to the Secretariat in an adequate format.(5)
(footnote original) 4 Trade and tariff data submissions in the
context of an RTA notification can subsequently be included in the IDB,
provided that their key features are appropriate. In this respect, see
document G/MA/IDB/W/6 (dated 15 June 2000) for the Guidelines for
Supplying PC IDB Submissions and documents G/MA/115 (dated 17 June 2002)
and G/MA/115/Add.5 (dated 13 January 2005) for WTO Policy regarding the
dissemination of IDB data.
(footnote original) 5 Data submissions can be furnished in PC
database formats, spreadsheet formats, or text-delimited formats; the
use of word-processing formats should be avoided, if possible.
2. For the goods aspects in RTAs, the parties shall submit the
following data, at the tariff-line level:(6)
(footnote original) 6 References to “tariff-line level”
shall be understood to mean the detailed breakdown of the national
customs nomenclature (HS codes with, for example, 8, 10 or more digits).
It is crucial that all data elements supplied use the same national
customs nomenclature or are associated with corresponding conversion
tables.
(a) Tariff concessions under the agreement:
(i) a full listing of each party’s preferential duties applied in
the year of entry into force of the agreement; and
(ii) when the agreement is to be implemented by stages, a full
listing of each party’s preferential duties to be applied over the
transition period.
(b) MFN duty rates:
(i) a full tariff listing of each RTA party’s MFN duties applied on
the year of entry into force of the agreement;(7) and
(footnote original) 7 In the case of a customs union, the MFN
applied common external tariff.
(ii) a full tariff listing of each RTA party’s MFN duties applied
on the year preceding the entry into force of the agreement.
(c) Where applicable, other data (e.g., preferential margins,
tariff-rate quotas, seasonal restrictions, special safeguards and, if
available, ad valorem equivalents for non-ad valorem
duties).
(d) Product-specific preferential rules of origin as defined in the
agreement.
(e) Import statistics, for the most recent three years preceding the
notification for which they are available:
(i) each party’s imports from each of the other parties, in value;
and
(ii) each party’s imports from the rest of the world, broken down
by country of origin, in value.
3. For the services aspects in RTAs, the parties shall submit the
following data, if available, for the three most recent years preceding
the notification: trade or balance of payments statistics (by services
sector/subsector and partner), gross domestic product data or production
statistics (by services sector/subsector), and relevant statistics on
foreign direct investment and on movement of natural persons (by country
and, if possible, by services sector/ subsector).
4. For RTAs involving only developing countries, in particular when
these comprise least-developed countries, the data requirements
specified above will take into account the technical constraints of the
parties to the agreement.
E. Interpretation and Application of Article XXIV
1. Territorial application
996.
On GATT practice in respect of territorial application, customs
territories and frontier traffic.
2. Regional trade agreements
(a) Committee on Regional Trade Agreements
997.
Pursuant to Article IV:7 of the WTO
Agreement, on 6 February
1996, the General Council decided to establish the Committee on Regional
Trade Agreements.(1413) With respect to the establishment of the
Committee, its rules of procedure and activities, including reports to
the General Council, see the Chapter on the WTO Agreement.(1414)
(b) Enabling Clause
998.
In 1979, the GATT Council adopted the Decision on Differential
and More Favourable Treatment, Reciprocity and Fuller Participation of
Developing Countries (the “Enabling Clause”) to waive Article I of
the GATT for certain arrangements, with respect to, inter alia,
“[r]egional or global arrangements entered into amongst less-developed
contracting parties for the mutual reduction or elimination of tariffs”.
Regarding the Enabling Clause and regional trade agreements notified
under the Enabling Clause, see the material on this subject under
Article I.
3. Article XXIV:4
(a) “not to raise barriers to the trade of other contracting
parties”
999.
In Turkey — Textiles, the dispute concerned
quantitative restrictions applied by Turkey on textile and clothing
products from India. Turkey argued that these restrictions were
justified by Article XXIV because they had been instituted in order to
align Turkey’s import policy with that of the EC within the EC–Turkey customs union. On the issue of whether parties to a regional
trade agreement are required not to raise barriers to trade with other
Members overall, or rather not to raise any barrier, the
Appellate Body identified paragraph 4 as an important element in the
context of interpreting the text of the chapeau of paragraph
5, and it
stated:
“According to paragraph
4, the purpose of a customs union is ‘to
facilitate trade’ between the constituent members and ‘not to raise
barriers to the trade’ with third countries. This objective demands
that a balance be struck by the constituent members of a customs union.
A customs union should facilitate trade within the customs union, but it
should not do so in a way that raises barriers to trade with
third countries.”(1415)
(b) Relationship between paragraph 4 and paragraphs 5 to 9
1000.
Paragraph 1 of the Understanding on the Interpretation of
Article XXIV of the GATT 1994 provides that “Customs unions,
free-trade areas, and interim agreements leading to the formation of a
customs union or free-trade area, to be consistent with Article XXIV,
must satisfy, inter alia, the provisions of paragraphs
5, 6, 7,
and 8 of that Article.”
1001.
In Turkey — Textiles, although the key
provision in this dispute was paragraph 5 of Article XXIV, the Appellate
Body held that “paragraph 4 of Article XXIV constitutes an important
element of the context of the chapeau of paragraph 5”
(1416):
“ … We note that [the preamble of] the Understanding on
Article XXIV explicitly reaffirms this purpose of a customs union,
and states that in the formation or enlargement of a customs union, the
constituent members should ‘to the greatest possible extent avoid
creating adverse effects on the trade of other Members’. Paragraph 4
contains purposive, and not operative, language. It does not set forth a
separate obligation itself but, rather, sets forth the overriding and
pervasive purpose for Article XXIV which is manifested in operative
language in the specific obligations that are found elsewhere in Article XXIV. Thus, the purpose set forth in
paragraph 4 informs the other
relevant paragraphs of Article XXIV, including the chapeau of
paragraph 5.”(1417)
(c) Reference to GATT practice
1002.
On GATT practice regarding Article XXIV:4.
4. Article XXIV:5
(a) Chapeau
(i) “the provisions of this Agreement shall not prevent
… the formation of a customs union or of a free-trade area”: the
“necessity test”
1003.
The Panel in Turkey — Textiles examined Turkey’s
argument that its import quotas on textiles and clothing, which were
inconsistent with Article XI, could be justified under Article
XXIV:5.
The Appellate Body agreed with the Panel that Turkey’s measures could
not be justified under Article XXIV, but for different reasons. The
Appellate Body began by identifying the chapeau of paragraph 5 as “the
key provision” for resolving this issue, and examined it in context
with paragraph 4:
“ … in examining the text of the chapeau to establish its
ordinary meaning, we note that the chapeau states that the provisions of
the GATT 1994 ‘shall not prevent’ the formation of a customs
union. We read this to mean that the provisions of the GATT 1994 shall
not make impossible the formation of a customs union. Thus, the
chapeau makes it clear that Article XXIV may, under certain conditions,
justify the adoption of a measure which is inconsistent with certain
other GATT provisions, and may be invoked as a possible ‘defence’ to
a finding of inconsistency.(1418)
Second, in examining the text of the chapeau, we observe also that it
states that the provisions of the GATT 1994 shall not prevent ‘the
formation of a customs union’. This wording indicates that Article XXIV
can justify the adoption of a measure which is inconsistent with
certain other GATT provisions only if the measure is introduced upon the
formation of a customs union, and only to the extent that the formation
of the customs union would be prevented if the introduction of the
measure were not allowed.”(1419)
1004.
The Appellate Body then indicated the two conditions that a
measure otherwise incompatible with WTO law must satisfy in order to be
justified by virtue of Article XXIV:
“[I]n a case involving the formation of a customs union, this ‘defence’
is available only when two conditions are fulfilled. First, the party
claiming the benefit of this defence must demonstrate that the measure
at issue is introduced upon the formation of a customs union that fully
meets the requirements of sub-paragraphs 8(a) and
5(a) of Article XXIV.
And, second, that party must demonstrate that the formation of that
customs union would be prevented if it were not allowed to introduce the
measure at issue. Again, both these conditions must be met to
have the benefit of the defence under Article XXIV.
We would expect a panel, when examining such a measure, to require a
party to establish that both of these conditions have been fulfilled. It
may not always be possible to determine whether the second of the two
conditions has been fulfilled without initially determining whether the
first condition has been fulfilled. In other words, it may not always be
possible to determine whether not applying a measure would prevent the
formation of a customs union without first determining whether there is
a customs union.”(1420)
1005.
The Appellate Body reiterated its findings from Turkey — Textiles, referenced in
paragraphs 1003–1004 above, in its
Report on Argentina — Footwear (EC), when it examined
the Panel’s finding that Argentina had violated Article 2 of the
Agreement on Safeguards by including imports from all sources in its
investigation of “increased imports” of footwear products into its
territory but excluding other MERCOSUR member States from the
application of the safeguard measures.(1421)
(ii) Reference to GATT practice
1006.
On GATT practice in respect of the chapeau to Article
XXIV:5.
(b) Paragraph 5(a): “the duties and other regulations of commerce
… shall not on the whole be higher or more restrictive”
(i) Link with the chapeau
1007.
In Turkey — Textiles, the Appellate Body held
that “Article XXIV can … only be invoked as a defence … to the
extent that the measure [at issue] is introduced upon the formation of a
customs union which meets the requirement in sub-paragraph 5(a)”:
“[I]n examining the text of the chapeau of Article
XXIV:5, we note
that the chapeau states that the provisions of the GATT 1994 shall not
prevent the formation of a customs union ‘Provided that’. The
phrase ‘provided that’ is an essential element of the text of
the chapeau. In this respect, for purposes of a ‘customs union’, the
relevant proviso is set out immediately following the chapeau, in
Article XXIV:5(a) …
Given this proviso, Article XXIV
can, in our view, only be invoked as
a defence to a finding that a measure is inconsistent with certain GATT
provisions to the extent that the measure is introduced upon the
formation of a customs union which meets the requirement in subparagraph
5(a) of Article XXIV relating to the ‘duties and other regulations of
commerce’ applied by the constituent members of the customs union to
trade with third countries.”(1422)
1008.
In Turkey — Textiles, the Panel did not agree
with the argument that a WTO right pertaining to a constituent member
prior to the formation of a customs union could be extended to other
constituent members, and cautioned that the right to form a customs
union must be exercised in a manner that respects the rights of Members
that are not parties to the customs union:
“[E]ven if the formation of a customs union may be the occasion for
the constituent member(s) to adopt, to the greatest extent possible,
similar policies, the specific circumstances which serve as the legal
basis for one Member’s exercise of such a specific right cannot
suddenly be considered to exist for the other constituent members. We
also consider that the right of Members to form a customs union is to be
exercised in such a way so as to ensure that the WTO rights and
obligations of third country Members (and the constituent Members) are
respected, consistent with the primacy of the WTO, as reiterated in the
Singapore Declaration.”(1423)
(ii) “The general incidence of duties”
1009.
With respect to the requirement in paragraph 5(a) regarding the
“general incidence” of duties applied before and after formation of
a customs union, the Appellate Body in Turkey — Textiles
noted that the term “general incidence” refers to applied duty
rates:
“ … Paragraph 2 of the Understanding on Article XXIV
requires that the evaluation under Article XXIV:5(a) of the general
incidence of the duties applied before and after the formation of a
customs union ‘shall … be based upon an overall assessment of
weighted average tariff rates and of customs duties collected.’ Before
the agreement on this Understanding, there were different views among
the GATT Contracting Parties as to whether one should consider, when
applying the test of Article XXIV:5(a), the bound rates of duty
or the applied rates of duty. This issue has been resolved by
paragraph 2 of the Understanding on Article XXIV, which clearly
states that the applied rate of duty must be used.”(1424)
(iii) “Other regulations of commerce”
1010.
With respect to the term “other regulations of commerce”,
the Appellate Body held in Turkey — Textiles:
“With respect to ‘other regulations of commerce’,
Article
XXIV:5(a) requires that those applied by the constituent members after
the formation of the customs union ‘shall not on the whole be
… more restrictive than the general incidence’ of the
regulations of commerce that were applied by each of the constituent
members before the formation of the customs union. Paragraph 2 of
the Understanding on Article XXIV explicitly recognizes that the
quantification and aggregation of regulations of commerce other than
duties may be difficult, and, therefore, states that ‘for the purpose
of the overall assessment of the incidence of other regulations of
commerce for which quantification and aggregation are difficult, the
examination of individual measures, regulations, products covered and
trade flows affected may be required.’(1425)”(1426)
(c) Evaluation of trade-restrictiveness under paragraph 5
1011.
On the issue of increase of barriers vis-à-vis third parties,
the Panel in the Turkey — Textiles case found
that:
“What paragraph 5(a) provides, in short, is that the effects of the
resulting trade measures and policies of the new regional agreement
shall not be more trade restrictive, overall, than were the constituent
countries’ previous trade policies and that paragraph 5(a) provided
for an ‘”economic” test’ for assessing compatibility.”(1427)
1012.
The Appellate Body in Turkey — Textiles agreed
with the Panel that the test for assessing trade-restrictiveness under paragraph 5(a)
is an economic one:
“We agree with the Panel that the terms of Article
XXIV:5(a), as
elaborated and clarified by paragraph 2 of the Understanding on Article XXIV, provide:
‘ … that the effects of the resulting trade measures and policies
of the new regional agreement shall not be more trade restrictive,
overall, than were the constituent countries’ previous trade policies.’
and we also agree that this is:
‘an “economic” test for assessing whether a specific customs
union is compatible with Article XXIV.’”(1428)
1013.
In Canada — Autos, Canada invoked an Article XXIV
exception with respect to a certain import duty exemption, which
was found inconsistent with GATT Article
I. The Panel, in a finding not
reviewed by the Appellate Body, rejected this defence, noting that the
import duty exemption was not granted to all products imported from the
United States and Mexico and that it was also granted to products from
countries other than the United States and Mexico:
“We recall that in our analysis of the impact of the conditions
under which the import duty exemption is accorded, we have found that
these conditions entail a distinction between countries depending upon
whether there are capital relationships of producers in those countries
with eligible importers in Canada. Thus, the measure not only grants
duty-free treatment in respect of products imported from the United
States and Mexico by manufacturer-beneficiaries; it also grants
duty-free treatment in respect of products imported from third countries
not parties to a customs union or free-trade area with Canada. The
notion that the import duty exemption involves the granting of duty-free
treatment of imports from the United States and Mexico does not capture
this aspect of the measure. In our view, Article XXIV
clearly cannot
justify a measure which grants WTO-inconsistent duty-free treatment to
products originating in third countries not parties to a customs union
or free trade agreement.
We further note that the import duty exemption does not provide for
duty-free importation of all like products originating in the United
States or Mexico and that whether such products benefit from the
exemption depends upon whether they are imported by certain motor
vehicle manufacturers in Canada who are eligible for the exemption.
While in view of the particular foreign affiliation of these
manufacturers, the exemption will mainly benefit products of the United
States and Mexico, products of certain producers in these countries who
have no relationship with such manufacturers are unlikely to benefit
from the exemption. Thus, in practice the import duty exemption does not
apply to some products that would be entitled to duty-free treatment if
such treatment were dependent solely on the fact that the products
originated in the United States or Mexico. We thus do not believe that
the import duty exemption is properly characterized as a measure which
provides for duty-free treatment of imports of products of parties to a
free-trade area.”(1429)
(d) Reference to GATT practice
1014.
Regarding GATT practice under Article XXIV:5.
5. Article XXIV:7
(a) “Any contracting party … shall promptly notify the
CONTRACTING PARTIES”
1015.
At its 44th Session on 13 October 2006, the Committee on RTAs
adopted a common and simplified notification format for regional trade
agreements, and agreed to recommend it to the relevant bodies. The
Council for Trade in Goods adopted such format at its meeting of 19
March 2007.(1430)
1016.
As of 30 September 2011, 502 regional trade agreements (RTAs),
counting goods and services notifications separately, had been notified
to the GATT/WTO(1431), 310 of which were in force by that same
date. These figures correspond to 388 integrated RTAs (goods and
services together), of which 209 remained in force by that same date. Of
the RTAs in force, 184 were notified under Article XXIV of the GATT 1947
or GATT 1994; 35 under the Enabling Clause(1432) (see
paragraph
998 above); and 91 under Article V of the
GATS.(1433) For a
complete list of RTAs notified to the GATT/WTO, see the table at the end
of this Chapter.
(b) Examination and consideration of agreements
(i) Working parties
1017.
Up to the establishment of the Committee on Regional Trade
Agreements in February 1996, the examination of RTAs in accordance with
paragraph 7 of
Article XXIV of the GATT 1994 and of the Understanding on
the Interpretation of
Article XXIV of the GATT 1994 was carried out by
individual working parties.
1018.
As of the entry into force of the WTO, there were 14 GATT 1947
working parties examining regional trade agreements.(1434) The
Decision on Avoidance of Procedural and Institutional Duplication,
adopted by the General Council on 31 January 1995, required these GATT
1947 working parties to coordinate their activities and meetings with
WTO working parties that examined the same regional agreement or
arrangement. (1435) At its meeting on 11 July 1995, the General
Council modified the terms of reference for the working parties
established under the GATT 1947 so that agreements would be examined in
the light of the relevant provisions of the GATT 1994, and that
examination reports would be submitted to the Council for Trade in
Goods.(1436) Similarly, the Committee on Trade and Development
modified the terms of reference for the examination of MERCOSUR at its
meeting on 14 September 1995, so that the examination would be carried
out in the light of the relevant provisions of the Enabling Clause and
the GATT 1994, including Article XXIV. That decision stated that the
examination report would be transmitted 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.(1437)
1019.
From January 1995 up to February 1996, 12 additional working
parties were established by either the Council for Trade in Goods or the
Council for Trade in Services.(1438)
1020.
The first such working party, on Enlargement of the European
Communities (Accession of Austria, Finland and Sweden), was established
by the Council for Trade in Goods on 20 February 1995, along with an
understanding read out by the Chairman at that meeting, as follows:
“According to the Understanding on the Interpretation of
Article XXIV of the GATT 1994 ‘all notifications under paragraph 7(a) of Article XXIV
shall be examined by a working party in the light of the
relevant provisions of the GATT 1994 and of paragraph 1 of this
Understanding’. Paragraph 1 of the Understanding confirms that
agreements leading to a customs union must satisfy, inter alia,
the provisions of paragraphs 5, 6,
7 and 8 of Article
XXIV. Similarly,
the entire Schedules of concessions and commitments attached to the
Marrakesh Protocol will be examined by the Working Party.
According to paragraph 5(a) of Article XXIV, the duties and other
regulations of commerce affecting trade with WTO Members not
participating in the customs union ‘shall not on the whole be higher
or more restrictive than the general incidence of the duties and
regulations of commerce’ applicable prior to the formation of the
union. This implies that a working party established to examine a
notification under paragraph 7(a) of Article XXIV has the mandate to
examine the incidence and restrictiveness of all duties and regulations
of commerce, in particular those governed by the provisions of the
Agreements contained in Annex 1A of the WTO Agreement.
However, it should be kept in mind that the purpose of an examination
in the light of paragraph 5(a) of Article XXIV
would not be to determine
whether each individual duty or regulation existing or introduced on the
occasion of the formation of a customs union is consistent with all
provisions of the WTO Agreement; it would be to ascertain whether on the
whole the general incidence of the duties and other regulations of
commerce has increased or become more restrictive. Accordingly, although
the Working Party would conduct its examination in light of the relevant
provisions of the Agreements contained in Annex 1A of the WTO Agreement,
the conclusions of the Report of the Working Party would be confined to
reporting on consistency with the provisions of Article XXIV.
On the occasion of the formation of a customs union a measure might
be taken whose legal status under the WTO Agreement is not directly
related to or does not depend on the consistency of the formation of the
customs union with Article XXIV as such. The examination of incidence
and restrictiveness of such a measure by a working party established
under Article XXIV would not prevent any WTO Member from raising the
question of the consistency of that measure in another WTO body
competent to examine that issue, nor does the present arrangement
prejudice the rights and obligations of any WTO Member under the WTO
agreements.
I understand that it is expected that the Working Party should
coordinate its working schedule with that of any other working party
that may be established to examine the enlargement according to the
relevant procedures of the WTO Agreement.”(1439)
1021.
Up to the adoption of the Transparency Mechanism for RTAs in
December 2006, the terms of reference agreed in 1995(1440) and
the Chairman’s understanding have been standard for the examination of
all regional trade agreements notified under
Article XXIV of the GATT 1994. Since that time, a regional trade agreement is “considered” by
Members; examination on the basis of “terms of reference” is not
performed anymore.
(ii) Committee on Regional Trade Agreements
1022.
On 6 February 1996, the General Council established the
Committee on RTAs.(1441) Under its terms of reference, the
Committee is mandated, inter alia, to carry out the examination
of agreements in accordance with the procedures and terms of reference
adopted by the Council for Trade in Goods, the Council for Trade in
Services and the Committee on Trade and Development, as the case may be,
including of those agreements for which the examination was being
carried out in working parties established prior to its establishment. (1442)
Regarding the establishment, terms of reference and rules of procedure
of the Committee on RTAs, see the Chapter on the WTO Agreement.
1023.
For the period between the Committee’s establishment and the
adoption in December 2006 of the Transparency Mechanism for Regional
Trade Agreements, the Committee had completed the factual examination of
a total of 66 agreements, of which 45 in the area of trade in goods and
21 in trade in services.(1443) No report on the examination of
any of these agreements has ever been agreed upon in the Committee, for
subsequent transmission to the Council for Trade in Goods. The
Transparency Mechanism makes no reference to examination reports.
1024.
During 2004, the Committee on RTAs was notified that 65 RTAs
previously in force and notified to the GATT/WTO had been terminated as
a consequence of the enlargement of the European Union to include ten
new member States on 1 May 2004(1444), and that the ten acceding
countries had become, or were in the process of becoming, parties to
European Communities’ free trade agreements and customs unions with
third parties. On 11 November 2004, the Committee agreed to terminate
the examination process for these agreements. (1445) Similarly,
the Committee was notified in 2007 that 20 RTAs previously in force and
notified to the GATT/WTO had been terminated as a consequence of the
enlargement of the European Union to include two new member States on 1
January 2007.(1446) Also during 2007, the Committee on RTAs was
notified that 13 bilateral free trade agreements previously in force and
notified to the WTO had been terminated upon entry into force of the
Agreement on Amendment of and Accession to the CEFTA.(1447)
1025.
In the period 2004–2009, the Committee on RTAs conducted a
series of informal consultations regarding the examination of regional
trade agreements concluded by WTO Members with non-Members. As from
2005, in practical terms, the examination of these RTAs had been put on
hold, pending a solution to whether the examination of RTAs involving
non-Members should be deferred until these countries become a WTO
Member. These consultations were reopened in late 2008, and on 4 March
2009 the Committee on Regional Trade Agreements agreed to begin
considering RTAs involving non-Members under the Transparency Mechanism’s
procedures.(1448) RTAs notified since 14 December 2006, including
future notifications, were to be taken up before the others — taking
into account practical considerations such as the availability of data
and the Secretariat’s established work programme. The Committee
clarified that the consideration of such agreements did not have any
implication for the views or positions of any Member with respect to the
consistency of that RTA with the WTO rules and was without prejudice to
the rights and obligations of Members under the WTO Agreements, as
clearly stated in paragraphs 1 and 5 of the Transparency Mechanism
Decision.(1449)
1026.
Procedures for the examination of RTAs were significantly
modified with the adoption of the December 2006 Transparency Mechanism
for RTAs; in particular, the WTO Secretariat is to prepare a factual
presentation of each notified RTA to assist Members in their
consideration of an RTA. Concerning the operation of the Transparency
Mechanism, see paragraphs 1045–1051
below. Regarding the procedures
for the examination and consideration of RTAs, see the Section on the
Committee on Regional Trade Agreements in the Chapter on the WTO
Agreement.
(iii) Reference to GATT practice
1027.
Regarding GATT practice on the examination of agreements, see GATT
Analytical Index, Article XXIV.
(c) Legal status of agreements in the absence of recommendations
pursuant to Article XXIV:7
1028.
In Turkey — Textiles, Turkey argued before the
Panel that as no Article XXIV:7 recommendation had ever been made to
parties to a customs union to change or abolish any import restrictions
and, in particular, no such recommendation had ever been made in respect
of previous Turkey/EC trade agreements, this indicated that its measures
were WTO-compatible. The Panel cited approvingly the findings of the
GATT Panel in EEC — Import Restrictions in response to a
similar argument:
“[I]t would be erroneous to interpret the fact that a measure had
not been subject to Article XXIII over a number of years, as tantamount
to its tacit acceptance by contracting parties.”(1450)
1029.
On GATT practice in respect of this issue.
6. Article XXIV:8
(a) “substantially all the trade”
1030.
In Turkey — Textiles, the Appellate Body
addressed the definition in Article XXIV:8(a) for a GATT-consistent
customs union:
“Sub-paragraph 8(a)(i) of Article XXIV establishes the standard for
the internal trade between constituent members in order to
satisfy the definition of a ‘customs union’. It requires the
constituent members of a customs union to eliminate ‘duties and other
restrictive regulations of commerce’ with respect to ‘substantially
all the trade’ between them. Neither the GATT CONTRACTING PARTIES nor
the WTO Members have ever reached an agreement on the interpretation of
the term ‘substantially’ in this provision. It is clear, though,
that ‘substantially all the trade’ is not the same as all the
trade, and also that ‘substantially all the trade’ is something
considerably more than merely some of the trade. We note also
that the terms of sub-paragraph 8(a)(i) provide that members of a
customs union may maintain, where necessary, in their internal trade,
certain restrictive regulations of commerce that are otherwise permitted
under Articles XI through XV and under
Article XX of the GATT 1994.
Thus, we agree with the Panel that the terms of sub-paragraph 8(a)(i)
offer ‘some flexibility’ to the constituent members of a customs
union when liberalizing their internal trade in accordance with this
subparagraph. Yet we caution that the degree of ‘flexibility’ that sub-paragraph 8(a)(i) allows is limited by the requirement that ‘duties
and other restrictive regulations of commerce’ be ‘eliminated with
respect to substantially all’ internal trade.”(1451)
1031.
Applying the second step of the test set out in paragraph 1003
above, the Appellate Body in Turkey — Textiles examined
whether the formation of an EC–Turkey customs union meeting the
requirements of Article XXIV:8(a)(i) would have been prevented if Turkey
were not permitted to impose the textile restrictions at issue. Turkey
argued that without these restrictions, “the European Communities
would have ‘exclud[ed] these products from free trade within the
Turkey/EC customs union’“; since the goods at issue amounted to 40
per cent of Turkey’s exports to the EC, Turkey expressed concern that
in that event, the customs union might not cover “substantially all
the trade.”(1452) However, the Appellate Body found that the
restrictions were not necessary because there were alternatives
available for this purpose:
“As the Panel observed, there are other alternatives available to
Turkey and the European Communities to prevent any possible diversion of
trade, while at the same time meeting the requirements of sub-paragraph
8(a)(i). For example, Turkey could adopt rules of origin for textile and
clothing products that would allow the European Communities to
distinguish between those textile and clothing products originating in
Turkey, which would enjoy free access to the European Communities under
the terms of the customs union, and those textile and clothing
products originating in third countries, including India … A system of
certificates of origin would have been a reasonable alternative until
the quantitative restrictions applied by the European Communities are
required to be terminated under the provisions of the ATC. Yet no
use was made of this possibility to avoid trade diversion. Turkey
preferred instead to introduce the quantitative restrictions at issue.
For this reason, we conclude that Turkey was not, in fact, required
to apply the quantitative restrictions at issue in this appeal in order
to form a customs union with the European Communities … .”(1453)
1032.
In Canada — Autos, Canada argued that under
Article XXIV, it was permitted to grant a selective import duty
exemption in the automotive sector to products of its partners in the
North American Free Trade Agreement (NAFTA). In a finding not reviewed
by the Appellate Body, the Panel rejected this defence. It found that
the measure was not properly characterized as a RTA measure, because the
exemption applied to products of non-parties to the NAFTA, and was
denied to some products of NAFTA parties:
“We recall that in our analysis of the impact of the conditions
under which the import duty exemption is accorded, we have found that
these conditions entail a distinction between countries depending upon
whether there are capital relationships of producers in those countries
with eligible importers in Canada. Thus, the measure not only grants
duty-free treatment in respect of products imported from the United
States and Mexico by manufacturer-beneficiaries; it also grants
duty-free treatment in respect of products imported from third countries
not parties to a customs union or free-trade area with Canada. The
notion that the import duty exemption involves the granting of duty-free
treatment of imports from the United States and Mexico does not capture
this aspect of the measure. In our view, Article XXIV
clearly cannot
justify a measure which grants WTO-inconsistent duty-free treatment to
products originating in third countries not parties to a customs union
or free trade agreement.
We further note that the import duty exemption does not provide for
duty-free importation of all like products originating in the United
States or Mexico and that whether such products benefit from the
exemption depends upon whether they are imported by certain motor
vehicle manufacturers in Canada who are eligible for the exemption.
While in view of the particular foreign affiliation of these
manufacturers, the exemption will mainly benefit products of the United
States and Mexico, products of certain producers in these countries who
have no relationship with such manufacturers are unlikely to benefit
from the exemption. Thus, in practice the import duty exemption does not
apply to some products that would be entitled to duty-free treatment if
such treatment were dependent solely on the fact that the products
originated in the United States or Mexico. We thus do not believe that
the import duty exemption is properly characterized as a measure which
provides for duty-free treatment of imports of products of parties to a
free-trade area.”(1454)
(b) Reference to GATT practice
1033.
On GATT practice on “substantially all trade” under Article
XXIV:8.
(c) Article XXIV:8(a)(ii): “substantially the same duties and other
regulations of commerce”
(i) Interpretation
1034.
In Turkey — Textiles, the Appellate Body
addressed the requirement contained in Article XXIV:8(a)(ii) that
constituent members of a customs union apply “substantially the same”
duties and other regulations of commerce to their external trade with
third countries. The Appellate Body agreed with the Panel that the term
“substantially the same” has both “qualitative and quantitative
components”:
“Sub-paragraph 8(a)(ii) establishes the standard for the trade of
constituent members with third countries in order to satisfy the
definition of a ‘customs union’. It requires the constituent members
of a customs union to apply ‘substantially the same’ duties and
other regulations of commerce to external trade with third countries.
The constituent members of a customs union are thus required to apply a
common external trade regime, relating to both duties and other
regulations of commerce. However, sub-paragraph 8(a)(ii) does not
require each constituent member of a customs union to apply the same
duties and other regulations of commerce as other constituent members
with respect to trade with third countries; instead, it requires that substantially
the same duties and other regulations of commerce shall be applied.
We agree with the Panel that:
‘[t]he ordinary meaning of the term ‘substantially’ in the
context of sub-paragraph 8(a) appears to provide for both qualitative
and quantitative components. The expression ‘substantially the same
duties and other regulations of commerce are applied by each of the
Members of the [customs] union’ would appear to encompass both
quantitative and qualitative elements, the quantitative aspect more
emphasized in relation to duties.’(1455)”(1456)
1035.
The Appellate Body in Turkey — Textiles further
agreed with the Panel that the phrase “substantially the same” in
Article XXIV:8(a)(ii) offered a “certain degree of flexibility”.
However, the Appellate Body objected to the standard of “comparable
trade regulations having similar effects” developed by the Panel and
held that this standard did not rise to the required standard of “sameness”:
“We also believe that the Panel was correct in its statement that
the terms of sub-paragraph 8(a)(ii), and, in particular, the phrase ‘substantially
the same’ offer a certain degree of ‘flexibility’ to the
constituent members of a customs union in ‘the creation of a common
commercial policy.’(1457) Here too we would caution that this
‘flexibility’ is limited. It must not be forgotten that the word ‘substantially’
qualifies the words ‘the same’. Therefore, in our view, something
closely approximating ‘sameness’ is required by Article
XXIV:8(a)(ii).(1458) We do not agree with the Panel that:
… as a general rule, a situation where constituent members have ‘comparable’
trade regulations having similar effects with respect to the trade with
third countries, would generally meet the qualitative dimension of the
requirements of sub-paragraph 8(a)(ii).(1459)
Sub-paragraph 8(a)(ii) requires the constituent members of a customs
union to adopt ‘substantially the same’ trade regulations. In our
view, ‘comparable trade regulations having similar effects’ do not
meet this standard. A higher degree of ‘sameness’ is required by the
terms of subparagraph 8(a)(ii).”(1460)
1036.
In Turkey — Textiles, see also the Panel
finding referred to in paragraph 1008 above.
(ii) Reference to GATT practice
1037.
On GATT practice under Article XXIV:8(a)(ii).
7. Article XXIV:12
1038.
In the dispute on EC — Customs Matters, the
Panel rejected the argument that Article XXIV:12 has the effect of
limiting the European Communities’ obligations under Article X:3(a) so
that it is only required to take “reasonable measures” to ensure
uniform administration by the customs authorities of the EC member
States: any interpretation of Article X:3(a) that would affect the
internal distribution of competence within a Member is incompatible with
Article XXIV:12:
“The Panel notes that Article XXIV:12 of the GATT 1994 is drafted
as a positive obligation rather than as a defence. More specifically,
the use of the word ‘shall’ in Article XXIV:12 of the GATT 1994
indicates that that Article imposes an obligation on Members to take all
reasonable measures to ensure that local authorities comply with WTO
obligations. This would tend to indicate that Article XXIV:12 of the
GATT 1994 cannot be relied upon to attenuate nor to derogate from the
provisions of the GATT 1994 (including Article X:3(a) of the GATT
1994),
to which Article XXIV:12 of the GATT 1994 refers. The Understanding
supports the view that Article XXIV:12 of the GATT 1994 imposes a
positive obligation rather than attenuating or derogating from the
provisions of the GATT 1994. Specifically, it states that ‘[e]ach
Member is fully responsible under GATT 1994 for the observance of all
provisions of GATT 1994’, suggesting that Article XXIV:12 of the GATT
1994 does not protect Members from being found in violation of their WTO
obligations.(1461) In addition, we note that the Understanding
clearly states that, when the DSB has ruled that a provision of GATT
1994 has not been observed by regional or local governments or
authorities of a WTO Member, ‘the provisions relating to compensation
and suspension of concessions or other obligations apply in cases where
it has not been possible to secure such observance’.
In the light of the foregoing, it is the Panel’s view that,
irrespective of whether or not Article XXIV:12 of the GATT 1994 is
applicable in the context of this dispute, that Article does not
constitute an exception nor a derogation from the obligation of uniform
administration in Article X:3(a) of the GATT
1994.”(1462)
8. Understanding on the Interpretation of Article XXIV of the GATT
1994
(a) Reporting requirements in accordance with paragraphs 9 and 11 of
the Understanding
1039.
In November 1998, the Council for Trade in Goods approved
recommendations adopted by the Committee on RTAs with respect to the
required reporting on the operation of regional trade agreements,
significant changes and/or developments in the agreements, and
substantial changes in the plan and schedule of interim agreements.(1463)
1040.
Schedules for the submission of biennial reports were presented
to the Committee on RTAs in December 1998, February 2001 and December
2003.(1464) The Committee on RTAs agreed to postpone the 2006
schedule for submission of biennial reports pending the outcome of the
discussions that led to the Transparency Mechanism.(1465) Since
2006, biennial reports have been de facto superseded by relevant
reporting requirements provided for in the Transparency Mechanism.
(b) Dispute settlement under paragraph 12 of the Understanding
1041.
With reference to the question of a panel’s jurisdiction to
assess the compatibility of regional trade agreements with WTO rules,
the Appellate Body, in Turkey — Textiles, stated:
“More specifically, with respect to the first condition, the Panel,
in this case, did not address the question of whether the regional trade
arrangement between Turkey and the European Communities is, in fact, a
‘customs union’ which meets the requirements of paragraphs 8(a) and
5(a) of Article XXIV. The Panel maintained that ‘it is arguable’
that panels do not have jurisdiction to assess the overall compatibility
of a customs union with the requirements of Article XXIV. We are not
called upon in this appeal to address this issue, but we note in this
respect our ruling in India — Quantitative Restrictions on
Imports of Agricultural, Textile and Industrial Products on the
jurisdiction of panels to review the justification of
balance-of-payments restrictions under Article XVIII:B of the GATT
1994.
The Panel also considered that, on the basis of the principle of
judicial economy, it was not necessary to assess the compatibility of
the regional trade arrangement between Turkey and the European
Communities with Article XXIV in order to address the claims of India.
Based on this reasoning, the Panel assumed arguendo that the
arrangement between Turkey and the European Communities is compatible
with the requirements of Article XXIV:8(a) and
5(a) and limited its
examination to the question of whether Turkey was permitted to introduce
the quantitative restrictions at issue. The assumption by the Panel that
the agreement between Turkey and the European Communities is a ‘customs
union’ within the meaning of Article XXIV was not appealed. Therefore,
the issue of whether this arrangement meets the requirements of
paragraphs 8(a) and 5(a) of Article XXIV
is not before us.”(1466)
1042.
In Turkey — Textiles, the Panel recalled the
well-established WTO rules on burden of proof, whereby “ … (b) it is
for the party invoking an exception or an affirmative defence to prove
that the conditions contained therein are met and … (c) it is for the
party asserting a fact to prove it”, noting a third party’s argument
that “since Article XXIV was an exception invoked by Turkey, it was
for Turkey to bear the burden of proof”.(1467) In the same
case, the Appellate Body stated:
“[W]e would expect a panel, when examining such a measure [taken by
a party to a customs union], to require a party to establish that both
of these conditions [the customs union fully meets the requirements of
XXIV:8(a) and 5(a) and that without such measure that customs union
could not be formed] have been fulfilled” (emphasis added) (1468)
1043.
With respect to a case where an impediment found in another
agreement might give rise to a panel’s declining jurisdiction, the
panel in Argentina — Poultry Anti-Dumping Duties
referred to Article 1 of the Protocol of Olivos, which provides that,
once a party decides to bring a case under either the MERCOSUR or WTO
dispute settlement forum, that party may not bring a subsequent case
regarding the same subject-matter in the other forum, and went on to
state:
“The Protocol of Olivos … does not change our assessment, since
that Protocol has not yet entered into force, and in any event it does
not apply in respect of disputes already decided in accordance with the
MERCOSUR Protocol of Brasilia. Indeed, the fact that parties to MERCOSUR
saw the need to introduce the Protocol of Olivos suggests to us that
they recognised that (in the absence of such Protocol) a MERCOSUR
dispute settlement proceeding could be followed by a WTO dispute
settlement proceeding in respect of the same measure.”(1469)
1044.
Also with reference to a panel’s declining jurisdiction, the
Panel in Mexico — Tax on Soft Drinks rejected, in a
preliminary ruling, Mexico’s request “to decline to exercise its
jurisdiction in the case in favour of an Arbitral Panel under chapter
Twenty of the North American Free Trade Agreement (NAFTA)” and found
instead that, “under the DSU, it had no discretion to decide whether
or not to exercise its jurisdiction in a case properly before it.”(1470)
The Panel added that even if it had such discretion, it “did not
consider that there were facts on record that would justify the Panel
declining to exercise its jurisdiction in the present case.”(1471)
Upon Mexico’s appeal, the Appellate Body upheld the Panel’s
decision:
“Mindful of the precise scope of Mexico’s appeal, we express no
view as to whether there may be other circumstances in which legal
impediments could exist that would preclude a panel from ruling on the
merits of the claims that are before it. In the present case, Mexico
argues that the United States’ claims under Article III of the GATT
1994 are inextricably linked to a broader dispute, and that only a NAFTA
panel could resolve the dispute as a whole. Nevertheless, Mexico does
not take issue with the Panel’s finding that ‘neither the subject
matter nor the respective positions of the parties are identical in the
dispute under the NAFTA … and the dispute before us.’ Mexico also
stated that it could not identify a legal basis that would allow it to
raise, in a WTO dispute settlement proceeding, the market access claims
it is pursuing under the NAFTA. It is furthermore undisputed that no
NAFTA panel as yet has decided the ‘broader dispute’ to which Mexico
has alluded. Finally, we note that Mexico has expressly stated that the
so-called ‘exclusion clause’ of Article 2005.6 of the NAFTA had not
been ‘exercised’.(1472)
9. Transparency Mechanism for Regional Trade Agreements
1045.
On 14 December 2006, the General Council established on a
provisional basis a new Transparency Mechanism for RTAs. This mechanism
applies to agreements notified under Article XXIV of the
GATT, Article V
of the GATS and paragraph 2(c) of the Enabling Clause.
1046.
As of 30 September 2011, a total of 111 RTAs had been
considered under the Transparency Mechanism since its adoption in
December 2006, on the basis of Factual Presentations prepared by the WTO
Secretariat.(1473) At that same date, there was a remaining
backlog of 97 RTAs (62 RTAs under Article XXIV of the
GATT, 24 under
Article V of the GATS and 11 under the Enabling Clause), including four
RTAs for which the factual presentation was temporarily on hold.(1474)
1047.
Paragraphs 1 and 2 of the Transparency Mechanism provide for
Members participating in new negotiations and parties to a newly signed
RTA to provide “early announcement” information to the Secretariat
“[w]ithout prejudging the substance and the timing of the notification
required under
Article XXIV of the GATT 1994, Article V of the GATS or
the Enabling Clause, nor affecting Members’ rights and obligations
under the WTO agreements in any way”. As of 30 September 2011, a total
of 70 early announcements had been received from Members, 26 for newly
signed RTAs and 44 for RTAs under negotiation. Out of these 70 early
announced RTAs, 30 have been subsequently notified under
Article XXIV of the GATT 1994.
1048.
Paragraph 14 of the Transparency Mechanism provides for parties
to an RTA to notify changes affecting the implementation of an RTA or
the operation of an already implemented RTA. As of 30 September 2011,
notifications of changes for 15 RTAs under
Article XXIV of the GATT 1994 had been received and posted on the RTA database.
1049.
Paragraph 15 of the Transparency Mechanism provides for parties
to an RTA to present a short report at the end of the RTA’s
implementation period. As of 30 September 2011, no such report had been
submitted to the WTO.
1050.
Paragraph 21 of the Transparency Mechanism provides for the
Secretariat to establish and maintain an updated electronic database on
individual RTAs. The database includes all of the notifications, links
to the content of the notified RTAs, and legal provisions of the RTAs.
It provides information on tariff reduction; data on trade in goods and
services as of the RTA’s date of entry into force; key provisions in
the RTA; and links to descriptions of these provisions in the factual
presentation or factual abstract. In addition, in the case of RTAs for
which the Secretariat has prepared a Factual Presentation, the agreed
timetable for the reduction of tariffs, on a yearly basis, is also made
available. Since January 2009, the database has been publicly available
on the WTO website at http:// rtais.wto.org.
1051.
Paragraph 22(d) of the Transparency Mechanism provides that the
Secretariat is to prepare factual abstracts for RTAs that had their
factual examination completed prior to 31 December 2006; these are to be
placed on the WTO website.(1475) As of 30 September 2011, factual
abstracts of all but three RTAs had been made available in the RTA
Database on the WTO website. By that same date, factual abstracts of the
remaining three agreements had been sent to parties but were awaiting
comments from them.
10. Relationship with other GATT provisions
(a) Article I
1052.
On the question of whether Article XXIV should be considered as
a derogation from the MFN obligation under Article I of the GATT 1994
only, or from other GATT 1994 provisions as well, the Appellate Body in Turkey — Textiles stated:
“Article XXIV may justify a measure which is inconsistent with
certain other GATT provisions. However, in a case involving the
formation of a customs union, this ‘defence’ is available only when
two conditions are fulfilled. First, the party claiming the benefit of
this defence must demonstrate that the measure at issue is introduced
upon the formation of a customs union that fully meets the requirements
of sub-paragraphs 8(a) and 5(a) of Article XXIV. And, second, that party
must demonstrate that the formation of that customs union would be
prevented if it were not allowed to introduce the measure at issue.
Again, both these conditions must be met to have the benefit of
the defence under Article XXIV.”(1476)
(b) Article XI
1053.
In Turkey — Textiles, the Panel found that the
quantitative restrictions imposed by Turkey on imports from India of a
number of textile and clothing products were inconsistent with Articles
XI and XIII of GATT 1994 (and consequently with
Article 2.4 of the
Agreement on Textiles and Clothing). The Panel rejected Turkey’s
defence that Article XXIV:5(a) of GATT 1994 authorizes Members forming a
customs union to deviate from the prohibitions contained in Articles XI
and XIII of the GATT 1994 (and
Article 2.4 of the Agreement on Textiles
and Clothing).(1477) The Appellate Body upheld the Panel’s
conclusion that “Article XXIV does not allow Turkey to adopt, upon the
formation of a customs union with the European Communities, quantitative
restrictions … which were found inconsistent with Articles XI
and XIII of the GATT 1994
and Article 2.4 of the ATC”.(1478) However,
the Appellate Body stressed that it was only finding that Turkey’s
quantitative restrictions at issue were not justified by Article XXIV
but that it was not making a “finding on the issue of whether
quantitative restrictions will ever be justified by Article XXIV”.(1479)
See paragraphs 1030–1031 above.
(c) Article XIII
1054.
See paragraph 1053 above.
11. Relationship with other WTO Agreements
(a) Agreement on Safeguards
(i) Footnote 1 to Article 2.1
1055.
In Argentina — Footwear (EC), the Panel found
that Argentina violated Article 2 of the Agreement on Safeguards by
including imports from all sources in its investigation of “increased
imports” of footwear products into its territory but excluding other
MERCOSUR member States from the application of the safeguard measures.
The Appellate Body reversed the Panel’s finding, holding that footnote
1 to Article 2.1 of the Agreement on Safeguards applied to the facts of
the case before it. The Appellate Body opined that “the footnote only
applies when a customs union applies a safeguard measure ‘as a single
unit or on behalf of a member State’”; in the case before it, the
Appellate Body found, MERCOSUR had not applied the safeguards measures
at issue (the measures had been imposed by the Argentine authorities).(1480)
1056.
In US — Wheat Gluten, the Panel found that the
United States had acted inconsistently with Articles 2.1 and 4.2 of the
Agreement on Safeguards by including imports from all sources in
its investigation, but excluding imports from Canada from
the application of the safeguard measure. On appeal, the United
States argued, inter alia, that the Panel erred in failing to
assess the legal relevance of footnote 1 to the Agreement on
Safeguards,
and
Article XXIV of the GATT 1994 to this issue. The Appellate Body
held:
“In this case, the Panel determined that this dispute does not
raise the issue of whether, as a general principle, a member of a
free-trade area can exclude imports from other members of that
free-trade area from the application of a safeguard measure. The Panel
also found that it could rule on the claim of the European Communities
without having recourse to Article XXIV or footnote 1 to the Agreement
on Safeguards. We see no error in this approach, and make no
findings on these arguments.”(1481)
(ii) Article 2.2
1057.
The Appellate Body in US — Line Pipe avoided
ruling on whether Article 2.2 of the Agreement on Safeguards “permits
a Member to exclude imports originating in member states of a free-trade
area from the scope of a safeguard measure”. Nevertheless, the
Appellate Body asserted that the latter question becomes relevant in two
circumstances:
“The question of whether
Article XXIV of the GATT 1994 serves as an
exception to Article 2.2 of the Agreement on Safeguards becomes
relevant in only two possible circumstances. One is when, in the
investigation by the competent authorities of a WTO Member, the imports
that are exempted from the safeguard measure are not considered
in the determination of serious injury. The other is when, in such an
investigation, the imports that are exempted from the safeguard measure are
considered in the determination of serious injury, and the
competent authorities have also established explicitly, through a
reasoned and adequate explanation, that imports from sources outside the
free-trade area, alone, satisfied the conditions for the application of
a safeguard measure, as set out in Article 2.1 and elaborated in
Article 4.2.”(1482)
(b) Agreement on Textiles and Clothing
1058.
In Turkey — Textiles, the Panel found that the
quantitative restrictions imposed by Turkey on imports from India of a
number of textile and clothing products were inconsistent with Articles
XI and XIII of the GATT 1994 and consequently with
Article 2.4 of the
Agreement on Textiles and Clothing. The Panel rejected Turkey’s
defence that Article XXIV:5(a) of the GATT 1994 authorizes Members
forming a customs union to deviate from the prohibitions contained in
Article 2.4 of the Agreement on Textiles and Clothing (and Articles XI
and XIII of the GATT 1994).(1483) The Appellate Body upheld the
Panel’s conclusion that “Article XXIV does not allow Turkey to
adopt, upon the formation of a customs union with the European
Communities, quantitative restrictions … which were found inconsistent
with Articles XI and XIII of the GATT 1994 and
Article 2.4 of the
ATC”.(1484) However, the Appellate Body stressed that it was
only finding that Turkey’s quantitative restrictions at issue were not
justified by Article XXIV but that it was not making a “finding on the
issue of whether quantitative restrictions will ever be justified
by Article XXIV”.(1485) In this regard, the Appellate Body
recalled that Article 2.4 of the Agreement on Textiles and Clothing
refers to the “relevant GATT 1994 provisions” as an exception
to the prohibition of new restrictions to trade and that, therefore, “Article XXIV of
GATT 1994 is incorporated in the ATC and may be
invoked as a defence to a claim of inconsistency of Article 2.4 of the ATC,
provided that the conditions set forth in Article XXIV
for the
availability of this defence are met.” (1486)
XXVII. Article XXV
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A. Text of Article XXV
Article XXV Joint Action by the Contracting Parties
1.
Representatives of the contracting parties shall meet from time to
time for the purpose of giving effect to those provisions of this
Agreement which involve joint action and, generally, with a view to
facilitating the operation and furthering the objectives of this
Agreement. Wherever reference is made in this Agreement to the
contracting parties acting jointly they are designated as the
CONTRACTING PARTIES.
2.
The Secretary-General of the United Nations is requested to
convene the first meeting of the CONTRACTING PARTIES, which shall take
place not later than March 1, 1948.
3.
Each contracting party shall be entitled to have one vote at all
meetings of the CONTRACTING PARTIES.
4.
Except as otherwise provided for in this Agreement, decisions of
the CONTRACTING PARTIES shall be taken by a majority of the votes cast.
5.
In exceptional circumstances not elsewhere provided for in this
Agreement, the CONTRACTING PARTIES may waive an obligation imposed upon
a contracting party by this Agreement; Provided that any such
decision shall be approved by a two-thirds majority of the votes cast
and that such majority shall comprise more than half of the contracting
parties. The CONTRACTING PARTIES may also by such a vote
(i) define certain categories of exceptional circumstances to which
other voting requirements shall apply for the waiver of obligations, and
(ii) prescribe such criteria as may be necessary for the application
of this paragraph(1).
(footnote original)
1 The authentic text erroneously reads “subparagraph”.
B. Interpretation and Application of Article XXV
1. Decision-making
1059.
With respect to decision-making by the WTO, see Chapter on the
WTO Agreement, under Articles IV and
IX
2. Waivers under the GATT
(a) Understanding In Respect of Waivers of Obligations Under the GATT
1994
(i) Text
Members hereby agree as follows:
1. A request for a waiver or for an extension of an existing waiver
shall describe the measures which the Member proposes to take, the
specific policy objectives which the Member seeks to pursue and the
reasons which prevent the Member from achieving its policy objectives by
measures consistent with its obligations under GATT 1994.
2. Any waiver in effect on the date of entry into force of the WTO
Agreement shall terminate, unless extended in accordance with the
procedures above and those of Article IX of the WTO
Agreement, on the
date of its expiry or two years from the date of entry into force of the
WTO Agreement, whichever is earlier.
3. Any Member considering that a benefit accruing to it under GATT
1994 is being nullified or impaired as a result of:
(a) the failure of the Member to whom a waiver was granted to observe
the terms or conditions of the waiver, or
(b) the application of a measure consistent with the terms and
conditions of the waiver
may invoke the provisions of Article XXIII of GATT 1994 as elaborated
and applied by the Dispute Settlement Understanding.”
(ii) Interpretation and Application
1060.
With respect to the WTO practice on waivers, see under Article
IX:3–5 of the WTO
Agreement.
1061.
Regarding the invocation of the provisions of Article XXIII in
this connection, see Article XXIII:1(b)
above.
3. Reference to GATT practice
1062.
With respect to GATT practice on this subject-matter, see GATT
Analytical Index, Article XXV.
Footnotes:
1412.
WT/L/671.
back to text
1413. WT/GC/M/10, para. 11. The decision can be found in
WT/L/127.
back to text
1414. WT/REG/M/2, para. 11. The text of the rules of procedures
can be found in
WT/REG/1. See also WT/REG/M/2, para. 12.
back to text
1415. Appellate Body Report, Turkey — Textiles,
para. 57. back to text
1416. Appellate Body Report, Turkey — Textiles,
para. 56. back to text
1417. Appellate Body Report, Turkey — Textiles,
para. 57. back to text
1418. (footnote original) We note that legal scholars have
long considered Article XXIV to be an “exception” or a possible “defence”
to claims of violation of GATT provisions. An early treatise on GATT law
stated: “[Article XXIV] establishes an exception to GATT
obligations for regional arrangements that meet a series of detailed
and complex criteria.” (emphasis added) J. Jackson, World Trade and
the Law of GATT (The Bobbs-Merrill Company, 1969), p. 576. See also
J. Allen, The European Common Market and the GATT (The University
Press of Washington, D.C., 1960), p. 2; K. Dam, “Regional Economic
Arrangements and the GATT: The Legacy of Misconception”, University
of Chicago Law Review, 1963, p. 616; and J. Huber, “The Practice
of GATT in Examining Regional Arrangements under Article XXIV”, Journal
of Common Market Studies, 1981, p. 281. We note also the following
statement in the unadopted panel report in EEC — Member
States’ Import Regimes for Bananas, DS32/R, 3 June 1993,
para. 358: “The Panel noted that Article XXIV:5 to 8 permitted the
contracting parties to deviate from their obligations under other
provisions of the General Agreement for the purpose of forming a
customs union …”. (emphasis added)
The chapeau of paragraph 5 refers only to the provisions of the GATT
1994. It does not refer to the provisions of the ATC. However,
Article 2.4 of the ATC provides that “[n]o new restrictions …
shall be introduced except under the provisions of this Agreement
or relevant GATT 1994 provisions.” (emphasis added) In this
way,
Article XXIV of the GATT 1994 is incorporated in the ATC and
may be invoked as a defence to a claim of inconsistency with Article 2.4
of the ATC, provided that the conditions set forth in Article XXIV
for the availability of this defence are met. back to text
1419. Appellate Body Report, Turkey — Textiles,
paras. 45–46. back to text
1420. Appellate Body Report, Turkey — Textiles,
paras. 58–59. back to text
1421. Appellate Body Report, Argentina — Footwear (EC),
para. 109. back to text
1422. Appellate Body Report, Turkey — Textiles,
paras. 51–52. back to text
1423. Panel Report, Turkey — Textiles, paras.
9.183–184. back to text
1424. Appellate Body Report, Turkey — Textiles,
para. 53. Regarding the
GATT 1947 discussions on this issue,
pp. 803–807. back to text
1425. (footnote original) In paragraph 43 of its appellant’s
submission, Turkey argues that this provision must be interpreted as
allowing the constituent members of a customs union to introduce GATT/
WTO inconsistent quantitative restrictions upon the formation of the
customs union. We see no basis for such an interpretation.
back to text
1426. Appellate Body Report, Turkey — Textiles,
para. 54. back to text
1427. WT/DS34/R, para. 9.121.
back to text
1428. Appellate Body Report, Turkey — Textiles,
para. 55. back to text
1429.
Panel Report on Canada — Autos, paras. 10.55–10.56.
back to text
1430. The notification format is circulated in document
G/L/834.
See also WT/REG/M/44, paras. 17–19 and
G/C/M/88, paras. 1.1–1.3.
back to text
1431. This figure corresponds to notifications of new RTAs, as
well as accessions to existing RTAs. back to text
1432. Differential and More Favourable Treatment, Reciprocity
and Fuller Participation of Developing Countries, Decision of the
GATT 1947 CONTRACTING PARTIES of 28 November 1979.
back to text
1433. Source: RTA Database available on the WTO website at http://rtais.wto.org.
back to text
1434. Working Parties established to examine the following 14
regional trade agreements: Interim Agreements between the European
Communities and the Czech Republic, Slovak Republic, Hungary and Poland
(in one single WP); Free-Trade Agreements between the EFTA States and
Israel, Romania, Bulgaria, Poland and Hungary; Free-Trade Agreements
between Switzerland and Estonia, Latvia and Lithuania; MERCOSUR; the
Central European Free-Trade Agreement; the North American Free-Trade
Agreement; and the Free-Trade Agreements between Slovenia and the Czech
Republic and the Slovak Republic. back to text
1435.
WT/L/29, paras. 2–4.
back to text
1436.
WT/GC/M/5, item 11.
back to text
1437.
WT/COMTD/M/3. back to text
1438. The Council for Trade in Goods established ten Working
Parties to examine the following agreements: European Communities and
Bulgaria, Estonia, Faroe Islands, Latvia, Lithuania, Romania and Turkey;
Enlargement of the European Communities (EC-15); Hungary–Slovenia;
and EFTA–Slovenia. The Council for Trade in Services established two
Working Parties to examine the North American Free-Trade Agreement and
the Enlargement of the European Communities. See
WT/GC/W/125 and G/L/134. back to text
1439. G/C/M/1, paras 7.1–7.12, and
WT/REG3/1.
back to text
1440. Terms of reference: “to examine, in light of the relevant
provisions of the GATT 1994, the [name of RTA] and to submit a report to
the Council for Trade in Goods”. back to text
1441. WT/GC/M/10, Section 11.
back to text
1442.
WT/L/127, para. 1(a) and footnote 2.
back to text
1443. RTAs terminated upon the enlargement of the European Union
on 1 May 2004 and 1 January 2007 are excluded from the figures contained
in this paragraph. back to text
1444. See documents WT/REG/GEN/N/2 and
WT/REG/GEN/N/3.
back to text
1445.
WT/REG/M/38. back to text
1446. See document
WT/REG/GEN/N/4.
back to text
1447. See document WT/REG/GEN/N/5.
back to text
1448. WT/REG/14, para. 9,
WT/REG/19, para. 12,
WT/REG/M/50, paras.
6 and 13 and
WT/REG/M/51, paras. 9, 14, 15 and 24. A list of those RTAs
is included in document
WT/REG/19, attachment 2. back to text
1449. WT/REG/M/52, in particular paragraphs 5 and 6. The Committee
on Trade and Development agreed later on to follow the same procedures
as the CRTA, see paragraph 75. back to text
1450. Panel Report, Turkey — Textiles,
paras.
9.172–9.174, referring to EEC — Import Restrictions,
para. 28. back to text
1451. Appellate Body Report, Turkey — Textiles,
para. 48. back to text
1452. Appellate Body Report, Turkey — Textiles,
para. 61. back to text
1453. Appellate Body Report, Turkey — Textiles,
paras. 62–63. back to text
1454.
Panel Report on Canada — Autos, paras. 10.55–10.56.
back to text
1455. (footnote original) Panel Report, Turkey — Textiles,
para. 9.148. back to text
1456. Appellate Body Report, Turkey — Textiles,
para. 49. back to text
1457. (footnote original) Panel Report, Turkey — Textiles,
para. 9.148. back to text
1458. The Appellate Body rejected the following finding of the
Panel, para. 9.151 of its report:
… as a general rule, a situation where constituent members have “comparable”
trade regulations having similar effects with respect to the trade with
third countries, would generally meet the qualitative dimension of the
requirements of sub-paragraph 8(a)(ii). back to text
1459. (footnote original) Panel Report on Turkey —
Textiles, para. 9.151. back to text
1460. Appellate Body Report, Turkey — Textiles,
para. 50. back to text
1461. (footnote original) Further support for the view that
Article XXIV:12 of the GATT 1994 does not attenuate nor derogate from
the provisions of the GATT 1994, including Article X:3(a) of the GATT
1994 derives from Article XVI:4 of the WTO
Agreement. Article XVI:4 of
the WTO Agreement provides that: “Each Member shall ensure the
conformity of its laws, regulations and administrative procedures with
its obligations as provided in the annexed Agreements.” We understand
that Article XVI:4 of the WTO Agreement establishes a clear obligation
for all WTO Members to ensure the conformity of its laws, regulations
and administrative procedures with their obligations under the covered
Agreements, including the GATT 1994. See Appellate Body Report, EC — Sardines, para. 213. back to text
1462. Panel Report, EC — Customs, paras. 7.144–7.145
(also noting in fn. 288 that the Panel “does not need to take a
position on whether the member States of the European Communities
qualify as ‘regional or local governments or authorities’ within the
meaning of Article XXIV:12”). back to text
1463.
G/L/286; text of adopted recommendation,
WT/REG/6.
back to text
1464.
WT/REG/W/33,
WT/REG/W/42 and WT/REG/W/48, respectively. The
lists of the reports submitted are contained in the Committee’s annual
reports,
WT/REG/9, 11 and
14. At its meeting of 12–13 November 2002,
the Committee on RTAs decided to shift from 2003 to 2004 the next
submission of biennial reports (WT/REG/M/33, para. 9).
back to text
1465.
WT/REG/M/41, para. 7 and WT/REG/M/43, para. 14.
back to text
1466. Appellate Body Report, adopted on 19 November 1999
(
WT/DS34/AB/R), para. 60.
back to text
1467. WT/DS34/R,
paras. 9.57 and 9.58.
back to text
1468. WT/DS34/AB/R, para. 59.
back to text
1469.
Panel Report, Argentina — Definitive
Anti-Dumping Duties on Poultry from Brazil, WT/DS241/R, adopted 19
May 2003, para. 7.38. back to text
1470.
Panel Report, Mexico — Tax Measures on Soft
Drinks and Other Beverages,
WT/DS308/R, 7 October 2005, para. 7.1.
back to text
1471. Ibid. back to text
1472.
Appellate Body Report, Mexico — Tax Measures on
Soft Drinks and Other Beverages,
WT/DS308/AB/R, adopted 24 March
2006, para. 54. back to text
1473. 62 have been considered in the CRTA under
Article XXIV of the GATT 1994, 45 under Article V of the GATS and four in the CTD under
the Enabling Clause. back to text
1474. Source: RTA Database available on the WTO website at http://rtais.wto.org. An RTA is placed “on hold” because it is an agreement
on trade in services for which liberalization commitments have not yet
been agreed by the parties. Once liberalization commitments are agreed
upon, the RTA is automatically scheduled for consideration.
back to text
1475. Factual abstracts are also required for agreements notified
under the Enabling Clause, see paragraph 77. back to text
1476.
WT/DS34/AB/R, para. 58. That reversed the Panel finding that
Article XXIV did not authorize a departure from GATT/WTO obligations
other than Article I of the GATT (WT/DS34/R,
paras. 9.186–9.188).
back to text
1477. Panel Report, Turkey — Textiles,
para. 10.1.
back to text
1478. Appellate Body Report, Turkey — Textiles,
para. 64. back to text
1479. Appellate Body Report, Turkey — Textiles,
para. 65. back to text
1480. Appellate Body Report, Argentina — Footwear (EC),
paras. 106–108. back to text
1481. Appellate Body Report, US — Wheat Gluten,
para. 99. back to text
1482.
Appellate Body Report, US — Line Pipe, para.
198. back to text
1483. Panel Report, Turkey — Textiles,
para. 10.1.
back to text
1484. Appellate Body Report, Turkey — Textiles,
para. 64. back to text
1485. Appellate Body Report, Turkey — Textiles,
para. 65. back to text
1486. Appellate Body Report, Turkey — Textiles,
footnote 13 to para. 45. back to text
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