Guiyab IEL 2 Midterm Reviewer

IEL 2 Midterm Reviewer - Guiyab
International Economic Law IIL Legal, Economic, and Politcal-Economic Aspects of

Regional Economic Integartion
Week 1
Pelkmans-Balaoing Article Summary:
The rapid growth of intra-Asian trade, especially in the last couple of decades, represents both a
marked shift in export orientation and an increasing integration of regional markets. In 2005, half
of total Asian exports were destined for regional consumption, and a further rise can only be
expected given the high growth rates of intraregional trade, peaking at 25% in 2004 (World Trade
Organization [WTO] 2006). Against such a backdrop, the surge of regionalism in Asia today
comes as no surprise. Nowhere in the world is the proliferation of regional integration
arrangements (RIAs) more evident than in Asia today. As of September 2006, the individual East
and South Asian countries considered in this study were involved in 301 free trade negotiations or
signed agreements. While political and security motives are also influential, the economic
imperative to further feed the markets appetite for more regional trade is clearly driving policy
agents along the track toward free trade agreements (FTAs).
Previous studies on the impacts of free trade agreements (FTAs) in East Asia have assumed full
utilization of preferences. The evidence suggests that this assumption is seriously in error, with the
estimated uptake particularly low in East Asia. In this paper, we assume a more realistic utilization
rate in estimating impacts. We find that actual utilization rates significantly diminish the benefits
from preferential liberalization, but in a non-linear way. Reciprocity is an important motivation
for pursuing FTAs over unilateral actions, although the Doha Round could deliver the same
outcome if only it could be concluded. We isolate the impact of reciprocity, but find that the
additional benefits also depend on utilization rates. Furthermore, the potential for trade deflection
combined with possible retaliatory actions could negatively affect members and non-members. In
the absence of Doha, the multilateralization of preferences, even without reciprocity, is the
practical route that is most likely to deliver the greatest benefits to members. Global liberalization,
while difficult to attain, would maximize world welfare while posing no risk in its realization.
Part I
Article I: General Most-Favoured-Nation Treatment
1.
With respect to customs duties and charges of any kind imposed on or in connection with
importation or exportation or imposed on the international transfer of payments for imports or
exports, and with respect to the method of levying such duties and charges, and with respect to all
rules and formalities in connection with importation and exportation, and with respect to all matters
referred to in paragraphs 2 and 4 of Article III,* any advantage, favour, privilege or immunity
granted by any contracting party to any product originating in or destined for any other country
shall be accorded immediately and unconditionally to the like product originating in or destined
for the territories of all other contracting parties.
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 inparagraph 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 ofparagraph 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 ofparagraphs 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
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 ofparagraphs 5, 6, 7 and 8 of that Article.
Summary of WTO, Regionalism and the World Trading System Article, 1995.
An analysis of the growth in trade between participating countries in regional agreements and
their trade with other regions does not support the conclusion of an increasing regionalization
of world trade, nor does it confirm the notion of the emergence of trading blocs centred in
North America, Western Europe and the Asia-Pacific region.In fact, trade with partners in the
same region and with partners in other regions have both become increasingly important in
national economies throughout the postwar period.
The legal foundations for more open trade have been laid by the multilateral trading system
- global in its coverage - with regional integration agreements serving to deepen relations
with neighbouring countries. Thus, the regional and multilateral integration initiatives are
complements rather than alternatives in the pursuit of open trade.
These are among the main conclusions of a study, Regionalism and the World Trading
System, published today, by the World Trade Organization Secretariat, in Geneva. However,
commenting on the WTO rules and procedures governing regional integration agreements,
the study says, ...it may be that governments will consider that reforms are necessary in
order to put the mutually supportive relationship between multilateralism and regionalism
on a more solid foundation.
The share of world merchandise trade which is intra-regional (ie. conducted within a
geographic region) has risen from 40.6 per cent in 1958 to 50.4 per cent in 1993. This
increase is mainly accounted for by the development of Western Europe, whose internal trade
grew from 53 to 70 per cent of its overall trade during this period. While this is the only
region to exhibit a clear policy-induced increase in the relative importance of intra-regional
trade, the importance of Western Europe's trade with other regions in relation to its output
has largely been maintained.
Between 1947 and the end of 1994, a total of 108 regional agreements were notified to the
GATT. In looking at the complementarity between regional integration agreements and the
multilateral trading system - first the GATT and now the WTO - the study makes a number
of points:
- the scope for achieving tariff advantages at the regional level is much reduced since, once
the Uruguay Round commitments are fully implemented, 43 per cent of developed countries'
imports of industrial products from partners receiving MFN (Most-Favoured Nation)
treatment will be duty-free, with an average of only 6.6 per cent on the remainder;
- with the importance of tariffs reduced, attention has shifted to the issue of non-tariff trade
measures, which are seldom administered preferentially, and domestic policies (such as
production subsidies), which cannot be administered preferentially;
- few regional agreements cover services, agriculture and the protection of intellectual
property rights whereas the World Trade Organization has provided an integrated system of
rights and obligations at the multilateral level in all these areas as well as merchandise trade
in general;
- at the same time, it is recognized that steps taken in certain regional integration agreements
helped lay the foundations for progress in the Uruguay Round.
The report concludes that the co-existence of regional integration agreements and the world
trading system has been at least satisfactory, if not broadly positive. However, the
Secretariat finds some reasons for concern in the manner in which the GATT rules and
procedures on customs unions and free-trade areas have operated. In particular, Article XXIV
of GATT - now subsumed within the WTO rules - requires that such agreements cover
substantially all trade between members and that the level of trade barriers facing those
outside be not on the whole higher or more restrictive. It is noted that among the 69
working parties called on to examine the conformity of customs unions and free-trade
agreements with Article XXIV, only six have been able to reach a consensus.
The report examines various proposals that might arise in any attempt to improve the
functioning of the rules and procedures on regional integration agreements; among these are:
- allowing the working parties to review regional agreements before signature and domestic
approval begins, in other words while there is still scope for changing them;
- clarifying the criteria laid down in Article XXIV and perhaps introducing new provisions
to increase the protection of third country interests; and
- improving transparency through an enhanced system of WTO surveillance of the
performance and effects of regional integration agreements.
Differential and More Favorable Treatment, Reciprocity and Fuller Participation of Developing
Countries.
Decision of 28 November 1979 (L/4903)
Following negotiations within the framework of the Multilateral Trade Negotiations, the
CONTRACTING PARTIES decide as follows:
1.
Notwithstanding the provisions of Article I of the General Agreement, contracting parties
may accord differential and more favourable treatment to developing countries(1), without
according such treatment to other contracting parties.
2.
The provisions of paragraph 1 apply to the following(2):

a)
Preferential tariff treatment accorded by developed contracting parties to products
originating in developing countries in accordance with the Generalized System of
Preferences(3),
b)
Differential and more favourable treatment with respect to the provisions of the
General Agreement concerning non-tariff measures governed by the provisions of
instruments multilaterally negotiated under the auspices of the GATT;
c)
Regional or global arrangements entered into amongst less-developed contracting
parties for the mutual reduction or elimination of tariffs and, in accordance with criteria or
conditions which may be prescribed by the CONTRACTING PARTIES, for the mutual
reduction or elimination of non-tariff measures, on products imported from one another;
d)
Special treatment on the least developed among the developing countries in the
context of any general or specific measures in favour of developing countries.
3.
Any differential and more favourable treatment provided under this clause:
a)
shall be designed to facilitate and promote the trade of developing countries and not
to raise barriers to or create undue difficulties for the trade of any other contracting parties;
b)
shall not constitute an impediment to the reduction or elimination of tariffs and other
restrictions
to
trade
on
a
most-favoured-nation
basis;
c)
shall in the case of such treatment accorded by developed contracting parties to
developing countries be designed and, if necessary, modified, to respond positively to the
development, financial and trade needs of developing countries.
4.
Any contracting party taking action to introduce an arrangement pursuant to paragraphs 1,
2 and 3 above or subsequently taking action to introduce modification or withdrawal of the
differential and more favourable treatment so provided shall:(4)
a)
they
notify the CONTRACTING PARTIES and furnish them with all the information
may
deem
appropriate
relating
to
such
action;
b)
afford adequate opportunity for prompt consultations at the request of any interested
contracting party with respect to any difficulty or matter that may arise. The
CONTRACTING PARTIES shall, if requested to do so by such contracting party, consult
with all contracting parties concerned with respect to the matter with a view to reaching
solutions satisfactory to all such contracting parties.
5.
The developed countries do not expect reciprocity for commitments made by them in trade
negotiations to reduce or remove tariffs and other barriers to the trade of developing countries, i.e.,
the developed countries do not expect the developing countries, in the course of trade negotiations,
to make contributions which are inconsistent with their individual development, financial and trade
needs. Developed contracting parties shall therefore not seek, neither shall less-developed
contracting parties be required to make, concessions that are inconsistent with the latters
development, financial and trade needs.
6.
Having regard to the special economic difficulties and the particular development, financial
and trade needs of the least-developed countries, the developed countries shall exercise the utmost
restraint in seeking any concessions or contributions for commitments made by them to reduce or
remove tariffs and other barriers to the trade of such countries, and the least-developed countries
shall not be expected to make concessions or contributions that are inconsistent with the
recognition of their particular situation and problems.
7.
The concessions and contributions made and the obligations assumed by developed and
less-developed contracting parties under the provisions of the General Agreement should promote
the basic objectives of the Agreement, including those embodied in the Preamble and in Article
XXXVI. Less-developed contracting parties expect that their capacity to make contributions or
negotiated concessions or take other mutually agreed action under the provisions and procedures
of the General Agreement would improve with the progressive development of their economies
and improvement in their trade situation and they would accordingly expect to participate more
fully in the framework of rights and obligations under the General Agreement.
8.
Particular account shall be taken of the serious difficulty of the least-developed countries
in making concessions and contributions in view of their special economic situation and their
development, financial and trade needs.
9.
The contracting parties will collaborate in arrangements for review of the operation of these
provisions, bearing in mind the need for individual and joint efforts by contracting parties to meet
the development needs of developing countries and the objectives of the General Agreement.
Doha Declaration Summary
The November 2001 declaration of the Fourth Ministerial Conference in Doha, Qatar, provides
the mandate for negotiations on a range of subjects, and other work including issues concerning
the implementation of the present agreements.
The negotiations take place in the Trade Negotiations Committee and its subsidiaries. Other work
under the work programme takes place in other WTO councils and committees.
This is an unofficial explanation of what the declaration mandates.
The work programme
The 21 subjects listed in the Doha Declaration (and the paragraphs that refer to them). Most
of these involve negotiations; other work includes actions under implementation, analysis
and monitoring:
Implementation-related
(par 12)
issues
and
concerns
Implementation is short-hand for problems raised particularly by developing countries

about the implementation of the current WTO Agreements, i.e. the agreements arising from
the Uruguay Round negotiations.
In Doha this important question was handled in two ways. First, ministers agreed to adopt
around 50 decisions clarifying the obligations of developing country member governments
with respect to issues including agriculture, subsidies, textiles and clothing, technical barriers
to trade, trade-related investment measures and rules of origin.
Agreement on these points required hard bargaining between negotiators over the course of
nearly three years.
Many other implementation issues of concern to developing countries have not been settled,
however. For these issues, Ministers agreed in Doha on a future work programme for
addressing these matters.
In paragraph 12 of the Ministerial Declaration, ministers underscored that they had taken a
decision on the 50 or so measures in a separate ministerial document (the 14 November 2001
decision on Implementation-Related Issues and Concerns) and pointed out that
negotiations on outstanding implementation issues shall be an integral part of the Work
Programme in the coming years.
The ministers established a two-track approach. Those issues for which there was an agreed
negotiating mandate in the declaration would be dealt with under the terms of that mandate.
Those implementation issues where there is no mandate to negotiate, would be the taken up
as a matter of priority by relevant WTO councils and committees. These bodies are to
report on their progress to the Trade Negotiations Committee by the end of 2002 for
appropriate action.
Weeks Two and Three

Customs Union
GATT Article XXIV 5(a) and 8(a)(i)
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;
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,
Turkey Textiles Case:

PARTIES AGREEMENT TIMELINE OF THE DISPUTE Complainant India GATT Arts. XI,
XIII and XXIV ATC Art. 2.4 Establishment of Panel 13 March 1998 Circulation of Panel Report
31 May 1999 Respondent Turkey Circulation of AB Report 22 October 1999 Adoption 19
November 1999
1. MEASURE AND PRODUCT AT ISSUE Measure at issue: Turkey's quantitative import
restrictions pursuant to the Turkey-EC customs union.
2. Product at issue: Textiles and clothing from India.
3. SUMMARY OF KEY PANEL/AB FINDINGS GATT Arts. XI (prohibition on

quantitative restrictions) and XIII (non-discriminatory administration of quantitative
restrictions): The Panel found that the quantitative restrictions at issue were inconsistent
with Arts. XI and XIII. (Turkey did not deny this.) ATC Art. 2.4 (prohibition on new
restrictions): The Panel found that Turkey's measures were new restrictions, that did not
exist at the time of the entry into force of the ATC, and, thus, were prohibited by Art. 2.4.
GATT Art. XXIV (regional trade agreements): The Appellate Body agreed with the
Panel's ultimate conclusion that Turkey's measures were not justified under Art. XXIV
because there were alternatives available to Turkey that would have met the requirements
of Art. XXIV:8(a), which were necessary to form the customs union, other than the
adoption of the quantitative restrictions. The Appellate Body, therefore, modified the
Panel's legal reasoning and concluded that to determine whether a measure found
inconsistent with certain other GATT provisions can be justified under Art. XXIV, a panel
should examine two conditions: (i) whether a customs union, as defined in Art. XXIV:8
exists (compatibility of a customs union with the provisions of Art. XXIV); and (ii) whether
the formation of a customs union would be prevented without the inconsistent measure (i.e.
whether the measure is necessary for the formation of a customs union). (The Panel had
assumed the existence of the customs union and moved on to examine the necessity of the
measure.)
4. 3. OTHER ISSUES
Burden of proof (GATT Art. XXIV): The Appellate Body agreed with the Panel that
Art. XXIV may be considered as a defence or exception to a violation. The Panel also
held that the burden of proof under Art. XXIV was on the party invoking it. Information
from non-party Member (DSU Art. 13.2): Despite the fact that the European Communities
was not a party or a third party to the dispute, the Panel asked the European Communities,
pursuant to Art. 13.2, for relevant factual and legal information so as to to have the fullest
possible understanding of this case. The European Communities provided answers to the
Panel's questions.
Difference Between Customs Union and Free Trade Area
Trade in Services
GATS Article II
Part II: General Obligations and Disciplines
Article II: Most-Favoured-Nation Treatment
1.
With respect to any measure covered by this Agreement, each Member shall accord
immediately and unconditionally to services and service suppliers of any other Member treatment
no less favourable than that it accords to like services and service suppliers of any other country.
2.
A Member may maintain a measure inconsistent with paragraph 1 provided that such a
measure is listed in, and meets the conditions of, the Annex on Article II Exemptions.
3.
The provisions of this Agreement shall not be so construed as to prevent any Member from
conferring or according advantages to adjacent countries in order to facilitate exchanges limited to
contiguous frontier zones of services that are both locally produced and consumed.
GATS Article V
Article V: Economic Integration
1.
This Agreement shall not prevent any of its Members from being a party to or entering into
an agreement liberalizing trade in services between or among the parties to such an agreement,
provided that such an agreement:
(a)
has substantial sectoral coverage(1), and
(b) provides for the absence or elimination of substantially all discrimination, in the
sense of Article XVII, between or among the parties, in the sectors covered under
subparagraph (a), through:
(i)
elimination of existing discriminatory measures, and/or
(ii)
prohibition of new or more discriminatory measures,
either at the entry into force of that agreement or on the basis of a reasonable timeframe, except for measures permitted under Articles XI, XII, XIV and XIV bis.
2.
In evaluating whether the conditions under paragraph 1(b) are met, consideration may be
given to the relationship of the agreement to a wider process of economic integration or trade
liberalization among the countries concerned.
3.
(a) Where developing countries are parties to an agreement of the type referred to in
paragraph 1, flexibility shall be provided for regarding the conditions set out in paragraph 1,
particularly with reference to subparagraph (b) thereof, in accordance with the level of
development of the countries concerned, both overall and in individual sectors and subsectors.
(b) Notwithstanding paragraph 6, in the case of an agreement of the type referred to in

paragraph 1 involving only developing countries, more favourable treatment may be granted
to juridical persons owned or controlled by natural persons of the parties to such an
agreement.
4.
Any agreement referred to in paragraph 1 shall be designed to facilitate trade between the
parties to the agreement and shall not in respect of any Member outside the agreement raise the
overall level of barriers to trade in services within the respective sectors or subsectors compared
to the level applicable prior to such an agreement.
5.
If, in the conclusion, enlargement or any significant modification of any agreement under
paragraph 1, a Member intends to withdraw or modify a specific commitment inconsistently with
the terms and conditions set out in its Schedule, it shall provide at least 90 days advance notice of
such modification or withdrawal and the procedure set forth in paragraphs 2, 3 and 4 of
Article XXI shall apply.
6.
A service supplier of any other Member that is a juridical person constituted under the laws
of a party to an agreement referred to in paragraph 1 shall be entitled to treatment granted under
such agreement, provided that it engages in substantive business operations in the territory of the
parties to such agreement.
7.
(a) Members which are parties to any agreement referred to in paragraph 1 shall promptly
notify any such agreement and any enlargement or any significant modification of that agreement
to the Council for Trade in Services. They shall also make available to the Council such relevant
information as may be requested by it. The Council may establish a working party to examine such
an agreement or enlargement or modification of that agreement and to report to the Council on its
consistency with this Article.
(b) Members which are parties to any agreement referred to in paragraph 1 which is
implemented on the basis of a time-frame shall report periodically to the Council for Trade
in Services on its implementation. The Council may establish a working party to examine
such
reports
if
it
deems
such
a
working
party
necessary.
(c)
Based on the reports of the working parties referred to in subparagraphs (a) and (b),
the Council may make recommendations to the parties as it deems appropriate.
8.
A Member which is a party to any agreement referred to in paragraph 1 may not seek
compensation for trade benefits that may accrue to any other Member from such agreement.
Article V bis: Labour Markets Integration Agreements

This Agreement shall not prevent any of its Members from being a party to an agreement
establishing full integration(2) of the labour markets between or among the parties to such an
agreement, provided that such an agreement:
(a)
and
exempts citizens of parties to the agreement from requirements concerning residency

work
permits;
(b)
is notified to the Council for Trade in Services.
Canada Certain Measures Affecting the Automotive Industry

Complaint by Japan.
On 3 July 1998, Japan requested consultations with Canada in respect of measures being taken by
Canada in the automotive industry. Japan contended that under Canadian legislation implementing
an automotive products agreement (Auto Pact) between the US and Canada, only a limited number
of motor vehicle manufacturers are eligible to import vehicles into Canada duty free and to
distribute the motor vehicles in Canada at the wholesale and retail distribution levels. Japan further
contended that this duty-free treatment is contingent on two requirements:
i.
a Canadian value-added (CVA) content requirement that applies to both goods and
services;
and
ii.
a manufacturing and sales requirement. Japan alleges that these measures are inconsistent
with Articles I:1, III:4 and XXIV of GATT 1994, Article 2 of the TRIMs Agreement,
Article 3 of the SCM Agreement, and Articles II, VI and XVII of GATS.
On 17 August 1998, the EC requested consultations with Canada in respect of the same measures
raised by Japan in WT/DS139 and cites the same provisions alleged to be in violation, except for
Article XXIV of GATT 1994, which was cited by Japan but is not cited by the EC.
On 12 November 1998, Japan requested the establishment of a panel in respect of WT/DS139. At
its meeting on 25 November 1998, the DSB deferred the establishment of a panel.
Panel and Appellate Body proceedings
Further to requests to establish a panel by Japan and the EC, at its meeting on 1 February 1999,
the DSB established a single panel, pursuant to Article 9.1 of the DSU, to examine the complaints
WT/DS139 and WT/DS142. India, Korea, and the US reserved their third-party rights. On 15
March 1999, the EC and Japan requested the Director-General to determine the composition of the
Panel. On 25 March 1999, the Panel was composed. The report of the panel was circulated to
Members on 11 February 2000. The panel found that:
the conditions under which Canada granted its import duty exemption were inconsistent
with Article I of GATT 1994 and not justified under Article XXIV of GATT 1994.
the application of the CVA requirements to be inconsistent with Article III:4 of GATT
1994.
the import duty exemption constitutes a prohibited export subsidy in violation of Article
3.1(a)
of
the
SCM
Agreement.
the manner in which Canada conditioned access to the import duty exemption is
inconsistent with Article II of GATS and could not justified under Article V of GATS.
the application of the CVA requirements constitutes a violation of Article XVII of the
GATS.
On 2 March 2000, Canada notified its intention to appeal certain issues of law and legal
interpretations developed by the panel. The Appellate Body report was circulated to Members on
31 May 2000. The Appellate Body:
Reversed the panels conclusion that Article 3.1(b) of the Subsidies Agreement did not
extend
to
contingency
in
fact.
Considered that the panel had failed to examine whether the measure at issue affected trade
in
services
as
required
under
Article
I:1
of
the
GATS.
Reversed the panels conclusion that the import duty exemption was inconsistent with the
requirements of Article II:1 of the GATS as well as the panels findings leading to that
conclusion.
The DSB adopted the Appellate Body report and the Panel report, as modified by the Appellate
Body report, on 19 June 2000.
Implementation of adopted reports

Pursuant to Article 21.3 of the DSU, Canada informed the DSB on 19 July 2000 that it would
comply with the recommendations of the DSB. One of the recommendations made by the DSB
was that Canada withdraw within 90 days the export subsidy found to be inconsistent with Article
3.1(a) of the Subsidies Agreement. On 4 August 2000, Japan and the European Communities
requested, pursuant to Article 21.3(c) of the DSU, that the reasonable period of time be determined
by arbitration. The arbitrator determined that the reasonable period of time was 8 months from
the date of adoption of the Appellate Body and Panel Reports, as modified by the Appellate Body
Report. The reasonable period of time was thus to expire on 19 February 2001.
At the DSB meeting of 12 March 2001, Canada stated that, as of 18 February 2001, it had complied
with the DSBs recommendations.
Week Four
Commentaries
Kenneth Dam, Regional Economic Agreements and the GATT: the Legacy of a Misconception
Abstract:
The last dozen years have seen a proliferation of customs unions and free-trade areas of unforeseen
proportions. Such regional arrangements, far from being halfway houses on the road to
nondiscriminatory and freer trade, may be in direct conflict with those goals. The General
Agreement on Tariffs and Trade has been charged with the duty to regulate the formation of
customs unions and free-trade areas in order to reconcile that conflict. The two principal
conclusions of this discussion are that GATT has failed to discharge that responsibility and that its
failure may be traced to a fundamental misconception of the nature and consequences of the
conflict between regional arrangements and nondiscriminatory freer trade.
V. CONCLUSION We have reviewed article XXIV from three general points of reference. First,
we have examined the meaning of the article as presently drafted and have found it ambiguous at
best. Second, we have attempted to assess the soundness of the standards announced in the light
of the underlying conflict between the most-favored-nation principle of article I and the
discrimination inherent in customs unions and free-trade areas. Here the conclusion has been that
article XXIV makes very little sense and that quite different standards should be adopted. Third,
we have reviewed the experience of the Contracting Parties in applying article XXIV.131 In
attempting to reach general conclusions concerning article XXIV, it would be appropriate to
determine what generalizations may be made concerning this historic record. On first impression
the historical record is a sorry one indeed. Not a single customs union or free-trade area agreement
which has been submitted to the Contracting Parties has conformed fully to the requirements of
article XXIV.
Yet the Contracting Parties have felt compelled to grant waivers of one kind or another for every
one of the proposed agreements. It cannot necessarily be concluded, however, that article XXIV
has been of no consequence whatever. The desire to avoid unnecessary friction with other
contracting parties may have been a marginal influence on the structure of new customs unions
and free-trade areas. It is impossible, of course, to know what form those regional groupings would
have taken in the absence of article XXIV. Only in the case of the Latin American Free Trade
Association do we have concrete evidence available. Since most of the early planning was done
under the auspices of the United Nations Economic Commission for Latin America, we have
available a public record which suggests that a desire to comply with article XXIV, or at least to
come respectably close to complying, was widely held among those who attended the planning
sessions. 132 It may be that, but for article XXIV, a preferential trading arrangement with partial
reduction of internal tariffs would have been chosen in preference to a freetrade area with complete
elimination of internal tariffs.
Even assuming that article XXIV has had a significant influence on the structure of recent customs
unions and free-trade areas, it does not necessarily follow that that influence has been uniformly
beneficent. If, for example, as appears to this writer, the overseas territories provisions of the
Treaty of Rome and the Latin American Free Trade Association as a whole will have, on balance,
unfavorable production effects, it may well be that the requirement of article XXIV that internal
restrictions on substantially all trade among member countries be eliminated has had an
unfortunate influence. Partial reduction of internal barriers might well have been preferable to
complete elimination from the viewpoint of the world as a whole for the reasons examined
above.133
The foregoing analysis suggests that, however feeble article XXIV may have been as a juridical
rule in outlawing nonconforming regional economic agreements, the errors in policy underlying
the article's formulation have had unfortunate consequences for the world as a whole. Quite aside
from any influence on structural planning, article XXIV, by proving in practice to be a barrier to
summary GATT approval, has forced the members of some nascent regional groupings to discuss
their plans at length within the GATT framework and to report yearly on the implementation of
such plans. These consultations have not only been an important dispute settlement mechanism
but also, by making available detailed information concerning the successes and difficulties of the
various regional organizations, have dissipated ignorance and jealousy which might have led to
serious disputes.
n reviewing the historical record, one is inclined to dismiss GATT as even a potentially effective
force in regulating the formation of customs unions and free-trade areas. GATT, as an international
organization, is indeed very weak. There are no judicial, arbitral or other formal dispute settlement
mechanisms built into it. Nor does GATT have power to impose sanctions for violation of the
General Agreement. History makes one dubious of the possibility of strengthening the organization.
The General Agreement was not intended, of course, to be the charter of an international
organization. It was in conception a multilateral trade agreement designed to preserve the fruits of
a general tariff reduction pending the creation of the International Trade Organization. When ITO
proved stillborn, the General Agreement was seized upon as the most convenient existing
framework in which to pursue the objectives of the ITO.134 Since the institutional structure
planned for ITO did not exist in the GATT, it was only with some ingenuity that a modest
Secretariat could be organized and intersessional procedures devised to provide some continuity
between the periodic meetings of the Contracting Parties. Amendments to the General Agreement
intended to provide more administrative centralization were decisively rejected by the United
States Senate in 1955, even though no provision for sanctions or for arbitral or quasi-judicial
sanctions was included. Given this history, any attempt to reform article XXIV must surely accept
the severe institutional restraints under which GATT functions as the point of departure. Even if
one is so pessimistic as to hold that GATT is hopelessly ineffective and that any restraints on the
structure of new customs unions and free-trade areas must operate within the context of traditional
diplomacy, the revision of the standards of article XXIV and extension of GATT consultation
procedures would be a useful step forward. If the only effect of such changes were to raise the
level of public discourse concerning the impact of regional economic arrangements on the world
as a whole, the changes would be worth the making.
An improvement in both the objectives and the efficacy of traditional diplomacy in assessing and
dealing with economic regionalism might follow. It must be recognized therefore that if disputes
are to be settled within the GATT framework, it must be by consultation. In any revision of article
XXIV it would be preferable to make the best of these unfortunate circumstances by requiring
formal consultation among interested Contracting Parties prior to the entry into force of any
customs union or free-trade area agree-required, such consultations to be based on annual reports
concerning progress and future plans by the customs union or free-trade area. In order to assure
that these consultations, unlike the consultations we have reviewed above, are directed to the
questions which are most relevant from the point of view of all Contracting Parties, the revised
article XXIV should set forth in some detail the criteria for judging whether a proposed customs
union or freetrade area is a movement toward or away from free trade.
We have tried to suggest some appropriate standards in Part III above. All consultations would be
held within the GATT framework with the Secretariat perhaps acting as a mediating body. Such
an institutionalized consultative procedure, conducted in the light of previously agreed-upon
standards, would be to consult in good faith on the basis of the specified standards, but there would,
of course, be no obligation to reach any particular agreement. Perhaps revision of article XXIV is
impossible at this time, particularly in view of the large number of contracting parties which are
members of existing customs unions or free-trade areas and which therefore have a vested interest
in the legal status quo. In that event, some progress might be made within the context of the existing
formulation of article XXIV by a reinterpretation of its provisions by the Working Parties assigned
to review new regional arrangements.
The very ambiguity of article XXIV provides an opportunity if primary emphasis can be placed
on the statement in paragraph 4 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."'135 It has been the burden of the analysis undertaken here that a regional
arrangement with negative production and consumption effects tends "to raise barriers to the trade
of other contracting parties" whether or not it meets the tests laid down in the remaining paragraphs
of article XXIV while a regional arrangement with positive production and consumption effects
facilitates intermember trade without raising such barriers. Barring revision, the best approach may
thus be a creative reinterpretation of article XXIV.
Handbook of International Economic Law Chapter on International Trade: Regionalism

Joel P. Trachtman
Regional integration agreements (RIAs), like other forms of international economic
institutionalization or law, are generally aimed at economic integration: the reduction of barriers
to movement of economic factors across borders. However, there can be other aims: the original
European Economic Community and European Coal and Steel Community were famously
motivated by a desire to make war between Germany and France impossible. Monetary union in
the European Union has been criticized by financial economists, but may play a broader role in
political or social aspects of integration. Regionalism is an accelerating phenomenon, as shown in
the table below, although in 1963, Kenneth Dam was able to say that the last dozen years had seen
a proliferation of customs unions and free-trade areas of unforeseen proportions.
The great majority of these RIAs are free trade areas (FTAs), rather than customs unions (CUs).
A FTA provides zero tariffs among its members, but each member maintains its own tariff schedule
for application to the products of other states, whereas a CU is a free trade area with a common
external tariff. Among the best known regional RIAs are the European Communities (EC),1 the
North American Free Trade Agreement (NAFTA), the Southern Common Market (MERCOSUR),
the Association of Southeast Asian Nations Free Trade Area (AFTA) and the 2004 Central
American Free Trade Area (CAFTA). Regionalism presents many faces to the international
economic law system. Regional integration creates international economic law subsystems.2
These subsystems are rather diverse in structure and scope. These subsystems have a complex
economic relationship with the multilateral system, represented by the WTO: they may both
undermine and support multilateral economic integration. Regionalism, as applied to third
countries, is broadly inconsistent with the principle of most favored nation trade: the principle of
non-discrimination among trading partners. This is because it applies a different tariff on goods
depending on their origin. Therefore, vis--vis the global setting (as opposed to internally),
regionalism will often be inconsistent with the operation of comparative advantage, since it applies
tariffs to goods sourced outside the RIA, but not to goods sourced within the RIA. On the other
hand, regional arrangements generally reduce internal barriers to trade and therefore are consistent
with comparative advantage internally. The comparison between internal trade creation, and
diversion of external trade, initially analyzed by Jacob Viner, has been a central, but disputed, part
of the analysis of the static welfare effects of regionalism. Regional arrangements may also have
dynamic effects by inducing economic restructuring that paves the way for deeper multilateral
integration, or serving as comparative laboratories to develop institutional tools for deeper
multilateral integration. Furthermore, regionalism may implicate any or all of the four freedoms:
trade in goods, trade in services, free movement of investment and free movement of labor.
Regional subsystems also have a complex legal relationship with the multilateral system.
Regionalism is regulated under WTO law. The relationship between regional agreements and
WTO law is important both in the application of the law of the regional agreements and in the
application of the law of the WTO.
a. Traditional Categories
Since its founding in 1957, the EC has been the leading example and the gold standard. of
regionalism. Not only has it established in large measure the .four freedoms.,3 but it has also
developed a high level of policy coordination, international relations coordination, and
redistribution. Furthermore, the EC has developed a complex federal legal system, covering a
broad spectrum of subject areas and dealing in a highly sophisticated way with issues of legal
relations between the RIA governance and the member states. There are many examples of
circumstances in which other regional and multilateral integration bodies have learned lessons
from, or emulated, the EC. Of course, customs unions can be precursors of states, as in the
formation of Germany and
Italy.
Balassa (1962) developed a system of categorizing regional integration.4 We begin with a FTA,
in which tariffs and quotas are abolished for imports from within the area, but each member
maintains its own external trade barriers. The next step is to a CU, which in addition to establishing
a FTA, establishes a common external tariff. A common market includes additional removal of
barriers to movement of factors of production, and may include further coordination of external
commercial policy. An economic union includes some degree of harmonization of economic
policy. Total economic integration includes unification of monetary, fiscal, social and countercyclical policies, plus a supranational authority that can bind member states.
Thus, the EC may be understood as an example of a common market with some features of total
economic integration, while NAFTA is essentially a FTA with a few additional features. These
additional features include coverage of investment, intellectual property and services. However,
as the multilateral system since 1994 has included intellectual property and services, the
additionality offered by NAFTA is largely in the area of the intra-regional zero tariff treatment,
plus investment. More recent FTAs have provided greater additionality, with more intense
coverage of intellectual property and services than may be found in the multilateral system: socalled .WTO plus..
Conclusion:
While in 1947, Article XXIV may not have been very important, and while at that time, the rise of
FTAs could not be anticipated, Article XXIV has taken on great importance. One of the most
important questions in international economic policy today is the relationship between regional
integration and multilateral integration. For better or worse, Article XXIV (and its cognates in
services and elsewhere) provides the framework for articulation of this relationship. Article XXIV
of GATT presents a facially compelling case to seek to align international trade law with the
dictates of welfare economics. It would be useful to redesign or reinterpret Article XXIV so as to
increase global welfare: permitting only those RIAs that result in an increase in global welfare.
However, there are two potential obstacles. First, it is not clear that the goal of governments is to
increase global welfare. Second, it is not clear that an Article XXIV rule oriented more directly to
global welfare would be possible or administrable. Article XXIV is not well developed, and
contains many uncertainties, perhaps reflecting in part the ambivalence in states attitudes towards
RIAs. This ambivalence, for example, makes it difficult to know how Article XXIV will deal with
safeguards and with certain SPS or TBT measures in RIAs. Yet, RIAs may serve as laboratories
of institutional development, assisting our understanding of the potential institutional solutions to
international economic integration problems. The question of whether RIAs may indeed serve as
building blocks toward greater integration is still open.
REGIONAL TRADE AGREEMENTS V. THE WTO: A PROPOSAL FOR REFORM OF
ARTICLE XXIV TO COUNTER THIS INSTITUTIONAL THREAT COLIN B. PICKER
Issue: RTAs, ARTICLE XXIV AND THE WTO RTAs include all arrangements between states
concerning their trade relations. Sometimes RTAs are called Free Trade Agreements ("FTAs"),
Preferential Trade Agreements, or, in some circumstances, Customs Unions.1 These agreements
may be bilateral, trilateral, or multilateral. Their sectoral and substantive coverage may be
significant, minimal, or illusory.12 For purposes of this Article, the term "RTA" includes all
regional trade arrangements except customs unions, for customs unions are significantly different.
However, much of the critique of RTAs presented in this Article could also apply to customs
unions.13 The term "RTA" will also be used interchangeably with the term "FTA" in this
examination of the benefits and harms of RTAs in their relationship with the WTO. 3.1. The
Benefits of RTAs The multilateral trade system has witnessed phenomenal growth in the number,
coverage, and scope of RTAs.14 While it has been asserted that the present "fever" of activity in
developing regional arrangements is due to globalization,15 there have been other periods of
regionalism before this present burst of activity,16 albeit none so frenetic as the period since the
birth of the WTO.' 7
There are many reasons for this growth, though in the early period of the multilateral trade systemthe post-war years-much of the growth in RTAs was related to continuing colonial associations.' 8
Additionally, in those post-war years, RTA formation was encouraged as another mechanism to
help increase security in Europe.19 Geopolitics aside, however, there has been no shortage of
reasons, historically and in modem times, for countries to enter into RTAs. Understanding those
reasons allows a greater understanding of the feasibility of any proposal to regulate RTAs so as to
reduce their negative impact. Such a proposal, like the one offered in this Article, must be able to
achieve its regulatory goal, yet not detract from the many positive reasons for utilizing RTAs.
Hence the importance of first identifying the reasons that states enter into RTAs and why the
system allows RTAs to exist. States enter into RTAs for a whole host of reasons, including
furthering economic, security, and foreign policy goals. The conventional wisdom is that states
enter into RTAs to secure economic or welfare gains from exclusive access to the other RTA states'
markets. 20 States may also join RTAs to ensure continued access to a market already covered by
an RTA. For example, the purpose of Canada's involvement in the North American Free Trade
Agreement ("NAFTA") was, in part, to ensure it retained the access to the U.S. market that it had
obtained from a previous RTA - the Canada-U.S. FTA ("CUSFTA").21 Similarly, when all other
countries are perceived to be entering into such arrangements, a country will not want to be left
behind.22 This is called "domino regionalism."23 In this way, involvement in RTAs ensures that
a state is not "taken advantage of" through multilateralism.24 All these reasons speak to the
underlying idea that a state will seek to establish positive preferences from other countries for the
state's industries and interests - sometimes non-economic interests.
In addition to providing individual states with economic and welfare benefits, RTAs also provide
benefits for individual states and the global economy through their interaction with the multilateral
system and trade policy as a whole.26 As an initial matter, regionalism may serve as an inducement
for the development of multilateralism. 27 The United States' response to European regionalism
was initially to push ever harder for multilateral trade development-with some success. That policy
led to some of the more important rounds of the General Agreement on Tariffs and Trade
("GATT") - the Dillon, Kennedy, and Tokyo Rounds.28 The threat of regionalism, and the trade
diversion that goes with it, may thus encourage the conclusion and acceptance of multilateral
agreements.29 Regional arrangements can also increase the bargaining power of an RTA's
constituent members within multilateral arrangements.30 Additionally, with the recent increase in
regionalism due to globalization, combined with the opening of economies in the post-tariff era,
economic actors suddenly have become aware of Non-Tariff Barriers ("NTBs") and the need to
deal with them.
Accordingly, many consider that it is the non-economic benefits that serve as the primary rationale
for RTAs.38 In particular, foreign policy and national security continue to be significant reasons
for entering into RTAs.39 Indeed, as mentioned above, trade agreements have played a role in the
Middle East peace process.40 RTAs can also be employed to realign external relations, as in the
cases of Turkey with Europe, and Mexico with North America.41 RTAs may also serve as a
foreign policy reward for allies. For example, entering into an RTA with an economic power can
serve to reward countries and convince them to adopt more market oriented domestic policies.42
RTAs may even be thought to assist in domestic political affairs.43
CONCLUSION While there is no shortage of factors to blame for the slow development of the
WTO, this Article has suggested one additional factor: the institutional conflict between RTAs and
the WTO. This Article offers a Proposal to respond to this institutional threat. The Proposal
suggests substantive harmonization and institutional centralization of RTAs with the WTO.
Certainly the likelihood of the adoption of a formal amendment, this one in particular, to the WTO
is unlikely, especially one that would require states to act selflessly. Nonetheless, this Proposal
and the reasoning behind it may serve to remind WTO members of their obligations to the WTO,
and that the WTO is not immortal. The Proposal and the issues raised in this Article should serve
as a wake-up call to WTO members. The United States, Europe, Canada, Brazil, China, Japan,
Australia, and the other big players should take a stand as parties with the largest global trade and
the ones most likely to suffer from the harms caused to the WTO by these RTAs. Additionally, as
some of the most significant users of RTAs, they should also take responsibility for their role in
this problem and seek to rectify the damage and avert the potential disaster their RTA's may
produce. Of course, there is another route to resolve this battle between RTAs and the WTO. That
route would be through the WTO taking into account the reasons for the growth and strength of
these RTAs: simply put, its failure to give its members what they want. Unfortunately, the desires
of its members are far from uniform and are often mutually exclusive. Broadly speaking, for the
developing world, those demands include reform of agriculture policies, intellectual property
protections that take into account the realities of developing countries' needs, and so on. But then,
and also broadly speaking, the demands of the developed world include a faster pace of
liberalization, reduction of NTBs, expansion into new and related areas such as competition law,
and so on. Although progress on these issues is almost as unrealistic as the Proposal itself, perhaps
the Proposal, when compared to the alternatives, is the least harmful way to resolve the issue, and
as such may not appear so unrealistic after all.
Week Five
SANITARY AND PHYTOSANITARY MEASURES:
INTRODUCTION
Understanding the WTO Agreement on Sanitary and Phytosanitary Measures
May 1998
The Agreement on the Application of Sanitary and Phytosanitary Measures (the "SPS
Agreement") entered into force with the establishment of the World Trade Organization on 1
January 1995. It concerns the application of food safety and animal and plant health regulations.
This introduction discusses the text of the SPS Agreement as it appears in the Final Act of the
Uruguay Round of Multilateral Trade Negotiations, signed in Marrakesh on 15 April 1994. This
agreement and others contained in the Final Act, along with the General Agreement on Tariffs and
Trade as amended (GATT 1994), are part of the treaty which established the World Trade
Organization (WTO). The WTO superseded the GATT as the umbrella organization for
international trade.
The WTO Secretariat has prepared this text to assist public understanding of the SPS Agreement.
It is not intended to provide legal interpretation of the agreement.
INTRODUCTION
The Sanitary and Phytosanitary Measures Agreement
Problem: How do you ensure that your countrys consumers are being supplied with food that is
safe to eat "safe" by the standards you consider appropriate? And at the same time, how can
you ensure that strict health and safety regulations are not being used as an excuse for protecting
domestic producers?
The Agreement on the Application of Sanitary and Phytosanitary Measures sets out the basic
rules for food safety and animal and plant health standards.
It allows countries to set their own standards. But it also says regulations must be based on science.
They should be applied only to the extent necessary to protect human, animal or plant life or health.
And they should not arbitrarily or unjustifiably discriminate between countries where identical or
similar conditions prevail.
Member countries are encouraged to use international standards, guidelines and
recommendations where they exist. However, members may use measures which result in higher
standards if there is scientific justification. They can also set higher standards based on
appropriate assessment of risks so long as the approach is consistent, not arbitrary.
The agreement still allows countries to use different standards and different methods of inspecting
products.
Key Features
All countries maintain measures to ensure that food is safe for consumers, and to prevent the spread
of pests or diseases among animals and plants. These sanitary and phytosanitary measures can take
many forms, such as requiring products to come from a disease-free area, inspection of products,
specific treatment or processing of products, setting of allowable maximum levels of pesticide
residues or permitted use of only certain additives in food. Sanitary (human and animal health)
and phytosanitary (plant health) measures apply to domestically produced food or local animal and
plant diseases, as well as to products coming from other countries.
Protection or protectionism?
Sanitary and phytosanitary measures, by their very nature, may result in restrictions on trade. All
governments accept the fact that some trade restrictions may be necessary to ensure food safety
and animal and plant health protection. However, governments are sometimes pressured to go
beyond what is needed for health protection and to use sanitary and phytosanitary restrictions to
shield domestic producers from economic competition. Such pressure is likely to increase as other
trade barriers are reduced as a result of the Uruguay Round agreements. A sanitary or phytosanitary
restriction which is not actually required for health reasons can be a very effective protectionist
device, and because of its technical complexity, a particularly deceptive and difficult barrier to
challenge.
The Agreement on Sanitary and Phytosanitary Measures (SPS) builds on previous GATT rules to
restrict the use of unjustified sanitary and phytosanitary measures for the purpose of trade
protection. The basic aim of the SPS Agreement is to maintain the sovereign right of any
government to provide the level of health protection it deems appropriate, but to ensure that these
sovereign rights are not misused for protectionist purposes and do not result in unnecessary barriers
to international trade.
Justification of measures
The SPS Agreement, while permitting governments to maintain appropriate sanitary and
phytosanitary protection, reduces possible arbitrariness of decisions and encourages consistent
decision-making. It requires that sanitary and phytosanitary measures be applied for no other
purpose than that of ensuring food safety and animal and plant health. In particular, the agreement
clarifies which factors should be taken into account in the assessment of the risk involved.
Measures to ensure food safety and to protect the health of animals and plants should be based as
far as possible on the analysis and assessment of objective and accurate scientific data.
International standards
The SPS Agreement encourages governments to establish national SPS measures consistent with
international standards, guidelines and recommendations. This process is often referred to as
"harmonization". The WTO itself does not and will not develop such standards. However, most of
the WTOs member governments (132 at the date of drafting) participate in the development of
these standards in other international bodies. The standards are developed by leading scientists in
the field and governmental experts on health protection and are subject to international scrutiny
and review.
International standards are often higher than the national requirements of many countries,
including developed countries, but the SPS Agreement explicitly permits governments to choose
not to use the international standards. However, if the national requirement results in a greater
restriction of trade, a country may be asked to provide scientific justification, demonstrating that
the relevant international standard would not result in the level of health protection the country
considered appropriate.
Adapting to conditions
Due to differences in climate, existing pests or diseases, or food safety conditions, it is not always
appropriate to impose the same sanitary and phytosanitary requirements on food, animal or plant
products coming from different countries. Therefore, sanitary and phytosanitary measures
sometimes vary, depending on the country of origin of the food, animal or plant product concerned.
This is taken into account in the SPS Agreement. Governments should also recognize disease-free
areas which may not correspond to political boundaries, and appropriately adapt their requirements
to products from these areas. The agreement, however, checks unjustified discrimination in the use
of sanitary and phytosanitary measures, whether in favour of domestic producers or among foreign
suppliers.
Alternative measures
An acceptable level of risk can often be achieved in alternative ways. Among the alternatives
and on the assumption that they are technically and economically feasible and provide the same
level of food safety or animal and plant health governments should select those which are not
more trade restrictive than required to meet their health objective. Furthermore, if another country
can show that the measures it applies provide the same level of health protection, these should be
accepted as equivalent. This helps ensure that protection is maintained while providing the greatest
quantity and variety of safe foodstuffs for consumers, the best availability of safe inputs for
producers, and healthy economic competition.
Risk Assessment
The SPS Agreement increases the transparency of sanitary and phytosanitary measures. Countries
must establish SPS measures on the basis of an appropriate assessment of the actual risks involved,
and, if requested, make known what factors they took into consideration, the assessment
procedures they used and the level of risk they determined to be acceptable. Although many
governments already use risk assessment in their management of food safety and animal and plant
health, the SPS Agreement encourages the wider use of systematic risk assessment among all WTO
member governments and for all relevant products.
Transparency
Governments are required to notify other countries of any new or changed sanitary and
phytosanitary requirements which affect trade, and to set up offices (called "Enquiry Points") to
respond to requests for more information on new or existing measures. They also must open to
scrutiny how they apply their food safety and animal and plant health regulations. The systematic
communication of information and exchange of experiences among the WTOs member
governments provides a better basis for national standards. Such increased transparency also
protects the interests of consumers, as well as of trading partners, from hidden protectionism
through unnecessary technical requirements.
A special Committee has been established within the WTO as a forum for the exchange of
information among member governments on all aspects related to the implementation of the SPS
Agreement. The SPS Committee reviews compliance with the agreement, discusses matters with
potential trade impacts, and maintains close co-operation with the appropriate technical
organizations. In a trade dispute regarding a sanitary or phytosanitary measure, the normal WTO
dispute settlement procedures are used, and advice from appropriate scientific experts can be
sought.
QUESTIONS AND ANSWERS Back to top

What are sanitary and phytosanitary measures? Does the SPS Agreement cover countries
measures to protect the environment? Consumer interests? Animal welfare?
For the purposes of the SPS Agreement, sanitary and phytosanitary measures are defined as any
measures applied:
to protect human or animal life from risks arising from additives, contaminants, toxins or
disease-causing organisms in their food;
to protect human life from plant- or animal-carried diseases;
to protect animal or plant life from pests, diseases, or disease-causing organisms;
to prevent or limit other damage to a country from the entry, establishment or spread of
pests.
These include sanitary and phytosanitary measures taken to protect the health of fish and wild
fauna, as well as of forests and wild flora.
Measures for environmental protection (other than as defined above), to protect consumer interests,
or for the welfare of animals are not covered by the SPS Agreement. These concerns, however,
are addressed by other WTO agreements (i.e., the TBT Agreement or Article XX of GATT 1994).
Werent a nations food safety and animal and plant health regulations previously covered by
GATT rules?
Yes, since 1948 national food safety, animal and plant health measures which affect trade were
subject to GATT rules. Article I of the GATT (see note 1), the most-favoured nation clause,
required non-discriminatory treatment of imported products from different foreign suppliers, and
Article III required that such products be treated no less favourably than domestically produced
goods with respect to any laws or requirements affecting their sale. These rules applied, for
instance, to pesticide residue and food additive limits, as well as to restrictions for animal or plant
health purposes.
The GATT rules also contained an exception (Article XX:b) which permitted countries to take
measures "necessary to protect human, animal or plant life or health," as long as these did not
unjustifiably discriminate between countries where the same conditions prevailed, nor were a
disguised restriction to trade. In other words, where necessary, for purposes of protecting human,
animal or plant health, governments could impose more stringent requirements on imported
products than they required of domestic goods.
In the Tokyo Round of multilateral trade negotiations (1974-79) an Agreement on Technical
Barriers to Trade was negotiated (the 1979 TBT Agreement or "Standards Code") (see note 2).
Although this agreement was not developed primarily for the purpose of regulating sanitary and
phytosanitary measures, it covered technical requirements resulting from food safety and animal
and plant health measures, including pesticide residue limits, inspection requirements and labelling.
Governments which were members of the 1979 TBT Agreement agreed to use relevant
international standards (such as those for food safety developed by the Codex) except when they
considered that these standards would not adequately protect health. They also agreed to notify
other governments, through the GATT Secretariat, of any technical regulations which were not
based on international standards. The 1979 TBT Agreement included provisions for settling trade
disputes arising from the use of food safety and other technical restrictions.
What is new in the SPS Agreement?
Because sanitary and phytosanitary measures can so effectively restrict trade, GATT member
governments were concerned about the need for clear rules regarding their use. The Uruguay
Round objective to reduce other possible barriers to trade increased fears that sanitary and
phytosanitary measures might be used for protectionist purposes.
The SPS Agreement was intended to close this potential loophole. It sets clearer, more detailed
rights and obligations for food safety and animal and plant health measures which affect trade.
Countries are permitted to impose only those requirements needed to protect health which are
based on scientific principles. A government can challenge another countrys food safety or animal
and plant health requirements on the grounds that they are not justified by scientific evidence. The
procedures and decisions used by a country in assessing the risk to food safety or animal or plant
health must be made available to other countries upon request. Governments have to be consistent
in their decisions on what is safe food, and in responses to animal and plant health concerns.
How do you know if a measure is SPS or TBT? Does it make any difference?
The scope of the two agreements is different. The SPS Agreement covers all measures whose
purpose is to protect:
human or animal health from food-borne risks;
human health from animal- or plant-carried diseases;
animals and plants from pests or diseases;
whether or not these are technical requirements.

The TBT (Technical Barriers to Trade) Agreement covers all technical regulations, voluntary
standards and the procedures to ensure that these are met, except when these are sanitary or
phytosanitary measures as defined by the SPS Agreement. It is thus the type of measure which
determines whether it is covered by the TBT Agreement, but the purpose of the measure which is
relevant in determining whether a measure is subject to the SPS Agreement.
TBT measures could cover any subject, from car safety to energy-saving devices, to the shape of
food cartons. To give some examples pertaining to human health, TBT measures could include
pharmaceutical restrictions, or the labelling of cigarettes. Most measures related to human disease
control are under the TBT Agreement, unless they concern diseases which are carried by plants or
animals (such as rabies). In terms of food, labelling requirements, nutrition claims and concerns,
quality and packaging regulations are generally not considered to be sanitary or phytosanitary
measures and hence are normally subject to the TBT Agreement.
On the other hand, by definition, regulations which address microbiological contamination of food,
or set allowable levels of pesticide or veterinary drug residues, or identify permitted food additives,
fall under the SPS Agreement. Some packaging and labelling requirements, if directly related to
the safety of the food, are also subject to the SPS Agreement.
The two agreements have some common elements, including basic obligations for nondiscrimination and similar requirements for the advance notification of proposed measures and the
creation of information offices ("Enquiry Points"). However, many of the substantive rules are
different. For example, both agreements encourage the use of international standards. However,
under the SPS Agreement the only justification for not using such standards for food safety and
animal/plant health protection are scientific arguments resulting from an assessment of the
potential health risks. In contrast, under the TBT Agreement governments may decide that
international standards are not appropriate for other reasons, including fundamental technological
problems or geographical factors.
Also, sanitary and phytosanitary measures may be imposed only to the extent necessary to protect
human, animal or plant health, on the basis of scientific information. Governments may, however,
introduce TBT regulations when necessary to meet a number of objectives, such as national
security or the prevention of deceptive practices. Because the obligations that governments have
accepted are different under the two agreements, it is important to know whether a measure is a
sanitary or phytosanitary measure, or a measure subject to the TBT Agreement.
How do governments and the interested public know who is doing what?
The transparency provisions of the SPS Agreement are designed to ensure that measures taken to
protect human, animal and plant health are made known to the interested public and to trading
partners. The agreement requires governments to promptly publish all sanitary and phytosanitary
regulations, and, upon request from another government, to provide an explanation of the reasons
for any particular food safety or animal or plant health requirement.
All WTO Member governments must maintain an Enquiry Point, an office designated to receive
and respond to any requests for information regarding that countrys sanitary and phytosanitary
measures. Such requests may be for copies of new or existing regulations, information on relevant
agreements between two countries, or information about risk assessment decisions. The addresses
of the Enquiry Points can be consulted here.
Whenever a government is proposing a new regulation (or modifying an existing one) which
differs from an international standard and may affect trade, they must notify the WTO Secretariat,
who then circulates the notification to other WTO Member governments (over 700 such
notifications were circulated during the first three years of implementation of the SPS Agreement).
The notifications are also available to the interested public and can be consulted here. Alternatively,
notifications can be requested from the Enquiry Point of the country which is proposing the
measure.
Governments are required to submit the notification in advance of the implementation of a
proposed new regulation, so as to provide trading partners an opportunity to comment. The SPS
Committee has developed recommendations on how the comments must be dealt with.
In cases of emergency, governments may act without delay, but must immediately notify other
Members, through the WTO Secretariat, and also still consider any comments submitted by other
WTO Member governments.
Does the SPS Agreement restrict a governments ability to establish food safety and plant and
animal health laws? Will food safety or animal and plant health levels be determined by the
WTO or some other international institution?
The SPS Agreement explicitly recognizes the right of governments to take measures to protect
human, animal and plant health, as long as these are based on science, are necessary for the
protection of health, and do not unjustifiably discriminate among foreign sources of supply.
Likewise, governments will continue to determine the food safety levels and animal and plant
health protection in their countries. Neither the WTO nor any other international body will do this.
The SPS Agreement does, however, encourage governments to "harmonize" or base their national
measures on the international standards, guidelines and recommendations developed by WTO
member governments in other international organizations. These organizations include, for food
safety, the joint FAO/WHO Codex Alimentarius Commission; for animal health, the Office
International des Epizooties; and for plant health, the FAO International Plant Protection
Convention. WTO member governments have long participated in the work of these organizations
including work on risk assessment and the scientific determination of the effects on human
health of pesticides, contaminants or additives in food; or the effects of pests and diseases on
animal and plant health. The work of these technical organizations is subject to international
scrutiny and review.
One problem is that international standards are often so stringent that many countries have
difficulties implementing them nationally. But the encouragement to use international standards
does not mean that these constitute a floor on national standards, nor a ceiling. National standards
do not violate the SPS Agreement simply because they differ from international norms. In fact, the
SPS Agreement explicitly permits governments to impose more stringent requirements than the
international standards. However, governments which do not base their national requirements on
international standards may be required to justify their higher standard if this difference gives rise
to a trade dispute. Such justification must be based on an analysis of scientific evidence and the
risks involved.
What does harmonization with international food safety standards mean? Will this result in a
lowering of health protection, i.e., downward harmonization?
Harmonization with international food safety standards means basing national requirements on the
standards developed by the FAO/WHO Joint Codex Alimentarius Commission (see note 3). Codex
standards are not "lowest common denominator" standards. They are based on the input of leading
scientists in the field and national experts on food safety. These are the same government experts
who are responsible for the development of national food safety standards. For example, the
recommendations for pesticide residues and food additives are developed for Codex by
international groups of scientists who use conservative, safety-oriented assumptions and who
operate without political interference. In many cases, the standards developed by Codex are higher
than those of individual countries, including countries such as the United States. As noted in the
reply to the previous question, governments may nonetheless choose to use higher standards than
the international ones, if the international standards do not meet their health protection needs.
Can governments take adequate precautions in setting food safety and animal and plant health
requirements? What about when there may not be sufficient scientific evidence for a definitive
decision on safety, or in emergency situations? Can unsafe products be banned?
Three different types of precautions are provided for in the SPS Agreement. First, the process of
risk assessment and determination of acceptable levels of risk implies the routine use of safety
margins to ensure adequate precautions are taken to protect health. Second, as each country
determines its own level of acceptable risk, it can respond to national concerns regarding what are
necessary health precautions. Third, the SPS Agreement clearly permits the precautionary taking
of measures when a government considers that sufficient scientific evidence does not exist to
permit a final decision on the safety of a product or process. This also permits immediate measures
to be taken in emergency situations.
There are many examples of bans on the production, sale and import of products based on scientific
evidence that they pose an unacceptable risk to human, animal or plant health. The SPS Agreement
does not affect a governments ability to ban products under these conditions.
Can food safety and animal and plant health requirements be set by local or regional
governments? Can there be differences in requirements within a country?
It is accepted in the SPS Agreement that food safety and animal and plant health regulations do
not necessarily have to be set by the highest governmental authority and that they may not be the
same throughout a country. Where such regulations affect international trade, however, they
should meet the same requirements as if they were established by the national government. The
national government remains responsible for implementation of the SPS Agreement, and should
support its observance by other levels of government. Governments should use the service of nongovernmental institutions only if these comply with the SPS Agreement.
Does the SPS Agreement require countries to give priority to trade over food safety, or animal
and plant health?
No, the SPS Agreement allows countries to give food safety, animal and plant health priority over
trade, provided there is a demonstrable scientific basis for their food safety and health requirement.
Each country has the right to determine what level of food safety and animal and plant health it
considers appropriate, based on an assessment of the risks involved.
Once a country has decided on its acceptable level of risk, there are often a number of alternative
measures which may be used to achieve this protection (such as treatment, quarantine or increased
inspection). In choosing among such alternatives, the SPS Agreement requires that a government
use those measures which are no more trade restrictive than required to achieve its health
protection objectives, if these measures are technically and economically feasible. For example,
although a ban on imports could be one way to reduce the risk of entry of an exotic pest, if requiring
treatment of the products could also reduce the risk to the level considered acceptable by the
government, this would normally be a less trade restrictive requirement.
Can national food safety and animal and plant health legislation be challenged by other
countries? Can private entities bring trade disputes to the WTO? How are disputes settled in the
WTO?
Since the GATT began in 1948, it has been possible for a government to challenge another
countrys food safety and plant and animal health laws as artificial barriers to trade. The 1979 TBT
Agreement also had procedures for challenging another signatorys technical regulations,
including food safety standards and animal and plant health requirements. The SPS Agreement
makes more explicit not only the basis for food safety and animal and plant health requirements
that affect trade but also the basis for challenges to those requirements. While a nations ability to
establish legislation is not restricted, a specific food safety or animal or plant health requirement
can be challenged by another country on the grounds that there is not sufficient scientific evidence
supporting the need for the trade restriction. The SPS Agreement provides greater certainty for
regulators and traders alike, enabling them to avoid potential conflicts.
The WTO is an inter-governmental organization and only governments, not private entities or nongovernmental organizations, can submit trade disputes to the WTOs dispute settlement procedures.
Non-governmental entities can, of course, make trade problems known to their government and
encourage the government to seek redress, if appropriate, through the WTO.
By accepting the WTO Agreement, governments have agreed to be bound by the rules in all of the
multilateral trade agreements attached to it, including the SPS Agreement. In the case of a trade
dispute, the WTOs dispute settlement procedures (click here for an introduction, click here for
details) encourage the governments involved to find a mutually acceptable bilateral solution
through formal consultations. If the governments cannot resolve their dispute, they can choose to
follow any of several means of dispute settlement, including good offices, conciliation, mediation
and arbitration. Alternatively, a government can request that an impartial panel of trade experts be
established to hear all sides of the dispute and to make recommendations.
In a dispute on SPS measures, the panel can seek scientific advice, including by convening a
technical experts group. If the panel concludes that a country is violating its obligations under any
WTO agreement, it will normally recommend that the country bring its measure into conformity
with its obligations. This could, for example, involve procedural changes in the way a measure is
applied, modification or elimination of the measure altogether, or simply elimination of
discriminatory elements.
The panel submits its recommendations for consideration by the WTO Dispute Settlement Body
(DSB), where all WTO Member countries are represented. Unless the DSB decides by consensus
not to adopt the panels report, or unless one of the parties appeals the decision, the defending
party is obliged to implement the panels recommendations and to report on how it has complied.
Appeals are limited to issues of law and legal interpretations by the panel.
Although only one panel was asked to consider sanitary or phytosanitary trade disputes during the
47 years of the former GATT dispute settlement procedures, during the first three years of the SPS
Agreement ten complaints were formally lodged with reference to the new obligations. This is not
surprising as the agreement clarifies, for the first time, the basis for challenging sanitary or
phytosanitary measures which restrict trade and may not be scientifically justified. The challenges
have concerned issues as varied as inspection and quarantine procedures, animal diseases, "useby" dates, the use of veterinary drugs in animal rearing, and disinfection treatments for beverages.
Dispute settlement panels have been requested to examine four of the complaints; the other
complaints have been or are likely to be settled following the obligatory process of bilateral
consultations.
Who was responsible for developing the SPS Agreement? Did developing countries participate
in the negotiation of the SPS Agreement?
The decision to start the Uruguay Round trade negotiations was made after years of public debate,
including debate in national governments. The decision to negotiate an agreement on the
application of sanitary and phytosanitary measures was made in 1986 when the Round was
launched. The SPS negotiations were open to all of the 124 governments which participated in the
Uruguay Round. Many governments were represented by their food safety or animal and plant
health protection officials. The negotiators also drew on the expertise of technical international
organizations such as the FAO, the Codex and the OIE.
Developing countries participated in all aspects of the Uruguay Round negotiations to an
unprecedented extent. In the negotiations on sanitary and phytosanitary measures, developing
countries were active participants, often represented by their national food safety or animal and
plant health experts. Both before and during the Uruguay Round negotiations, the GATT
Secretariat assisted developing countries to establish effective negotiating positions. The SPS
Agreement calls for assistance to developing countries to enable them to strengthen their food
safety and animal and plant health protection systems. FAO and other international organizations
already operate programmes for developing countries in these areas.
Was there public participation in the Uruguay Round negotiations? Were private sector interests
or consumer interests excluded?
GATT was an intergovernmental organization and it was governments which participated in
GATT trade negotiations; neither private business nor non-governmental organizations
participated directly. But as the scope of the Uruguay Round was unprecedented, so was the public
debate. Many governments consulted with both their public and private sectors on various aspects
of the negotiations, including the SPS Agreement. Some governments established formal channels
for public consultation and debate while others did so on a more ad hoc basis. The GATT
Secretariat also had considerable contact with international non-governmental organizations as
well as with the public and private sectors of many countries involved in the negotiations. The
final Uruguay Round results were subject to national ratification and implementation processes in
most GATT member countries.
The WTO is, likewise, an intergovernmental organization. Private business and non-governmental
organizations do not directly participate in its work, but can influence the work of the WTO
through their contacts with their own governments. In addition, the WTO Secretariat regularly has
contacts with many non-governmental organizations.
What is the SPS Committee and who is on it? What does it do?
The SPS Agreement established a Committee on Sanitary and Phytosanitary Measures (the "SPS
Committee") to provide a forum for consultations about food safety or animal and plant health
measures which affect trade, and to ensure the implementation of the SPS Agreement. The SPS
Committee, like other WTO committees, is open to all WTO Member countries. Governments
which have an observer status in the higher level WTO bodies (such as the Council for Trade in
Goods) are also eligible to be observers in the SPS Committee. The Committee has agreed to invite
representatives of several international intergovernmental organizations as observers,
including Codex, OIE, IPPC, WHO, UNCTAD and theInternational Standards Organization
(ISO). Governments may send whichever officials they believe appropriate to participate in the
meetings of the SPS Committee, and many send their food safety authorities or veterinary or plant
health officials.
The SPS Committee usually holds three regular meetings each year. It also holds occasional joint
meetings with the TBT Committee on notification and transparency procedures. Informal or
special meetings may be scheduled as needed.
During its first year, the SPS Committee developed recommended procedures and a standardized
format for governments to use for the required advance notification of new regulations. Over 700
notifications of sanitary and phytosanitary measures were submitted and circulated by the end of
1997. The Committee considered information provided by governments regarding their national
regulatory procedures, their use of risk assessment in the development of sanitary and
phytosanitary measures and their disease-status, notably with respect to foot-and-mouth disease
and fruit-fly. In addition, a considerable number of trade issues were discussed by the SPS
Committee, in particular with regard to bovine spongiform encephalopathy (BSE). As required by
the SPS Agreement, the SPS Committee developed a provisional procedure to monitor the use of
international standards. The SPS Committee is continuing to work on guidelines to ensure
consistency in risk management decisions, in order to reduce possible arbitrariness in the actions
taken by governments. In 1998, the SPS Committee will review the operation of the SPS
Agreement.
Who benefits from the implementation of the SPS Agreement? Is the agreement in the interest
of developing countries?
Consumers in all countries benefit. The SPS Agreement helps ensure, and in many cases enhances,
the safety of their food as it encourages the systematic use of scientific information in this regard,
thus reducing the scope for arbitrary and unjustified decisions. More information will increasingly
become available to consumers as a result of greater transparency in governmental procedures and
on the basis for their food safety, animal and plant health decisions. The elimination of unnecessary
trade barriers allows consumers to benefit from a greater choice of safe foods and from healthy
international competition among producers.
Specific sanitary and phytosanitary requirements are most frequently applied on a bilateral basis
between trading countries. Developing countries benefit from the SPS Agreement as it provides
an international framework for sanitary and phytosanitary arrangements among countries,
irrespective of their political and economic strength or technological capacity. Without such an
agreement, developing countries could be at a disadvantage when challenging unjustified trade
restrictions. Furthermore, under the SPS Agreement, governments must accept imported products
that meet their safety requirements, whether these products are the result of simpler, less
sophisticated methods or the most modern technology. Increased technical assistance to help
developing countries in the area of food safety and animal and plant health, whether bilateral or
through international organizations, is also an element of the SPS Agreement.
Exporters of agricultural products in all countries benefit from the elimination of unjustified
barriers to their products. The SPS Agreement reduces uncertainty about the conditions for selling
to a specific market. Efforts to produce safe food for another market should not be thwarted by
regulations imposed for protectionist purposes under the guise of health measures.
Importers of food and other agricultural products also benefit from the greater certainty regarding
border measures. The basis for sanitary and phytosanitary measures which restrict trade are made
clearer by the SPS Agreement, as well as the basis for challenging requirements which may be
unjustified. This also benefits the many processors and commercial users of imported food, animal
or plant products.
What difficulties do developing countries face in implementing the SPS Agreement? Will they
receive any assistance in this regard? Are there special provisions for developing countries?
Although a number of developing countries have excellent food safety and veterinary and plant
health services, others do not. For these, the requirements of the SPS Agreement present a
challenge to improve the health situation of their people, livestock and crops which may be difficult
for some to meet. Because of this difficulty, the SPS Agreement delayed all requirements, other
than those dealing with transparency (notification and the establishment of Enquiry Points), until
1997 for developing countries, and until 2000 for the least developed countries. This means that
these countries are not required to provide a scientific justification for their sanitary or
phytosanitary requirements before that time. Countries which need longer time periods, for
example for the improvement of their veterinary services or for the implementation of specific
obligations of the agreement, can request the SPS Committee to grant them further delays.
Many developing countries have already adopted international standards (including those of Codex,
OIE and the IPPC) as the basis for their national requirements, thus avoiding the need to devote
their scarce resources to duplicate work already done by international experts. The SPS Agreement
encourages them to participate as actively as possible in these organizations, in order to contribute
to and ensure the development of further international standards which address their needs.
One provision of the SPS Agreement is the commitment by members to facilitate the provision of
technical assistance to developing countries, either through the relevant international organizations
or bilaterally. FAO, OIE and WHO have considerable programmes to assist developing countries
with regard to food safety, animal and plant health concerns. A number of countries also have
extensive bilateral programmes with other WTO Members in these areas. The WTO Secretariat
has undertaken a programme of regional seminars to provide developing countries (and those of
Central and Eastern Europe) with detailed information regarding their rights and obligations
stemming from this agreement. These seminars are provided in cooperation with the Codex, OIE
and IPPC, to ensure that governments are fully aware of the role these organizations can play in
assisting countries to meet their requirements and fully enjoy the benefits resulting from the SPS
Agreement. The seminars are open to participation by interested private business associations and
consumer organizations. The WTO Secretariat also provides technical assistance through national
workshops and to governments through their representatives in Geneva.
TECHNICAL BARRIERS TO TRADE: TECHNICAL EXPLANATION
Technical Information on Technical barriers to trade
The problem
Why an Agreement?
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High number of technical regulations and standards

In recent years, the number of technical regulations and standards adopted by countries has grown
significantly. Increased regulatory policy can be seen as the result of higher standards of living
worldwide, which have boosted consumers' demand for safe and high-quality products, and of
growing problems of water, air and soil pollution which have encouraged modern societies to
explore environmentally-friendly products.
Impact on international trade
Although it is difficult to give a precise estimate of the impact on international trade of the need
to comply with different foreign technical regulations and standards, it certainly involves
significant costs for producers and exporters. In general, these costs arise from the translation of
foreign regulations, hiring of technical experts to explain foreign regulations, and adjustment of
production facilities to comply with the requirements. In addition, there is the need to prove that
the exported product meets the foreign regulations. The high costs involved may discourage
manufacturers from trying to sell abroad. In the absence of international disciplines, a risk exists
that technical regulations and standards could be adopted and applied solely to protect domestic
industries.
From the Tokyo Round Standards Code to the WTO TBT Agreement
The provisions of the GATT 1947 contained only a general reference to technical regulations and
standards in Articles III, XI and XX. A GATT working group, set up to evaluate the impact of
non-tariff barriers in international trade, concluded that technical barriers were the largest category
of non-tariff measures faced by exporters. After years of negotiations at the end of the Tokyo
Round in 1979, 32 GATT Contracting Parties signed the plurilateral Agreement on Technical
Barriers to Trade (TBT). The Standards Code, as the Agreement was called, laid down the rules
for preparation, adoption and application of technical regulations, standards and conformity
assessment procedures. The new WTO Agreement on Technical Barriers to Trade, or TBT
Agreement, has strengthened and clarified the provisions of the Tokyo Round Standards Code.
The TBT Agreement, negotiated during the Uruguay Round is an integral part of the WTO
Agreement. Before examining the Agreement in detail, it is necessary to define the meaning of
technical regulations, standards and conformity assessment procedures.
Definitions
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Technical regulations and standards in the TBT Agreement

Technical regulations and standards set out specific characteristics of a product such as its size,
shape, design, functions and performance, or the way it is labelled or packaged before it is put on
sale. In certain cases, the way a product is produced can affect these characteristics, and it may
then prove more appropriate to draft technical regulations and standards in terms of a product's
process and production methods rather than its characteristics per se. The TBT Agreement makes
allowance for both approaches in the way it defines technical regulations and standards (Annex 1).
Difference between a technical regulation and a standard
The difference between a standard and a technical regulation lies in compliance. While conformity
with standards is voluntary, technical regulations are by nature mandatory. They have different
implications for international trade. If an imported product does not fulfil the requirements of a
technical regulation, it will not be allowed to be put on sale. In case of standards, non-complying
imported products will be allowed on the market, but then their market share may be affected if
consumers' prefer products that meet local standards such as quality or colour standards for textiles
and clothing.
Conformity assessment procedures
Conformity assessment procedures are technical procedures such as testing, verification,
inspection and certification which confirm that products fulfil the requirements laid down in
regulations and standards. Generally, exporters bear the cost, if any, of these procedures. Nontransparent and discriminatory conformity assessment procedures can become effective
protectionist tools.
Objectives
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Protection of human safety or health

The largest number of technical regulations and standards are adopted to aim at protecting human
safety or health. Numerous examples can be given. National regulations that require that motor
vehicles be equipped with seat belts to minimise injury in the event of road accidents, or that
sockets be manufactured in a way to protect users from electric shocks, fall under the first category.
A common example of regulations whose objective is the protection of human health is labelling
of cigarettes to indicate that they are harmful to health.
Protection of animal and plant life or health
Regulations that protect animal and plant life or health are very common. They include regulations
intended to ensure that animal or plant species endangered by water, air and soil pollution do not
become extinct. Some countries, for example require that endangered species of fish reach a certain
length before they can be caught.
Protection of the environment
Increased environmental concerns among consumers, due to rising levels of air, water and soil
pollution, have led many governments to adopt regulations aimed at protecting the environment.
Regulations of this type cover for example, the re-cycling of paper and plastic products, and levels
of motor vehicle emissions
Prevention of deceptive practices
Most of these regulations aim to protect consumers through information, mainly in the form of
labelling requirements. Other regulations include classification and definition, packaging
requirements, and measurements (size, weight etc.), so as to avoid deceptive practices.
Other objectives
Other objectives of regulations are quality, technical harmonization, or simply trade facilitation.
Quality regulations e.g. those requiring that vegetables and fruits reach a certain size to be
marketable are very common in certain developed countries. Regulations aimed at harmonizing
certain sectors, for example that of telecommunications and terminal equipment, are widespread
in economically integrated areas such as the European Union and EFTA.
Divergent regulations costs for exporters back to top
Loss of economies of scale
If a firm must adjust its production facilities to comply with diverse technical requirements in
individual markets, production costs per unit are likely to increase. This imposes handicap
particularly on small and medium enterprises.
Conformity assessment costs
Compliance with technical regulations generally needs to be confirmed. This may be done through
testing, certification or inspection by laboratories or certification bodies, usually at the company's
expense.
Information costs
These include the costs of evaluating the technical impact of foreign regulations, translating and
disseminating product information, training of experts, etc.
Surprise costs
Exporters are normally at a disadvantage vis--vis domestic firms, in terms of adjustments costs,
if confronted with new regulations.
The Agreement (1)
Principles
Avoidance of unnecessary obstacles to trade
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What are the sources of technical barriers to trade?

Technical barriers to trade generally result from the preparation, adoption and application of
different technical regulations and conformity assessment procedures. If a producer in country A
wants to export to country B, he will be obliged to satisfy the technical requirements that apply in
country B, with all the financial consequences this entails. Differences between one country and
another in their technical regulations and conformity assessment procedures may have legitimate
origins such as differences in local tastes or levels of income, as well as geographical or other
factors. For example, countries with areas prone to earthquakes might have stricter requirements
for building products; others, facing serious air-pollution problems might want to impose lower
tolerable levels of automobile emissions. High levels of per capita income in relatively rich
countries
result
in
higher
demand
for
high-quality
and
safe
products.
TBT provisions on technical regulations

The TBT Agreement takes into account the existence of legitimate divergences of taste, income,
geographical and other factors between countries. For these reasons, the Agreement accords to
Members a high degree of flexibility in the preparation, adoption and application of their national
technical regulations. The Preamble to the Agreement states that no country should be prevented
from taking measures necessary to ensure the quality of its exports, or for the protection of human,
animal, and plant life or health, of the environment, or for the prevention of deceptive practices, at
the levels it considers appropriate. However, Members' regulatory flexibility is limited by the
requirement that technical regulations are not prepared, adopted or applied with a view to, or with
the
effect
of,
creating
unnecessary
obstacles
to
trade.
(Article 2.2).
Avoidance of unnecessary obstacles to trade

For a government, avoiding unnecessary obstacles to trade means that when it is preparing a
technical regulation to achieve a certain policy objective - whether protection of human health,
safety, the environment, etc - the negotiations shall not be more trade-restrictive than necessary to
fulfil the legitimate objective. According to the TBT Agreement, specifying, whenever appropriate,
product regulations in terms of performance rather than design or descriptive characteristics will
also help in avoiding unnecessary obstacles to international trade (Article 2.8). For example, a
technical regulation on fire-resistant doors should require that the door passes successfully all the
necessary tests on fire resistance. Thus it could specify that the door must be fire resistant with a
30-minute burn through time; it should not specify how the product must be made, e.g., that the
door must be made of steel, one inch thick. Avoidance of trade obstacles means also that if the
circumstances that led a country to adopt technical regulations no longer exist or have changed, or
the policy objective pursued can be achieved by an alternative less trade-restrictive measure, they
should
not
be
maintained.
When is a technical regulation an unnecessary obstacle to trade?

Unnecessary obstacles to trade can result when (i) a regulation is more restrictive than necessary
to achieve a given policy objective, or (ii) when it does not fulfil a legitimate objective. A
regulation is more restrictive than necessary when the objective pursued can be achieved through
alternative measures which have less trade-restricting effects, taking account of the risks nonfulfilment of the objective would create. Elements that Members can use for risk assessment are:
available technical and scientific information, technology or end-uses of the products. Article 2.2
of the Agreement specifies that legitimate objectives include inter alia: national security
requirements, prevention of deceptive practices, protection of human health or safety, protection
of
animal
and
plant
life
or
health
or
the
environment.
TBT provisions on conformity assessment procedures

The obligation to avoid unnecessary obstacles to trade applies also to conformity assessment
procedures. An unnecessary obstacle to trade could result from stricter or more time-consuming
procedures than are necessary to assess that a product complies with the domestic laws and
regulations of the importing country. For instance, information requirements should be no greater
than needed, and the siting of facilities to carry out conformity assessment, and the selection of
samples should not create unnecessary inconvenience to the agents (Articles 5.2.3 and 5.2.6).
Non-discrimination and national treatment
back to top
Technical regulations
Like many other WTO Agreements, the TBT Agreement includes the GATT's Most Favoured
Nation (MFN) and national treatment obligations. Article 2.1 of the Agreement states that in
respect of their technical regulations, products imported from the territory of any Member be
accorded treatment no less favourable than that accorded to like products of national origin and to
like
products
originating
in
any
other
country.
Conformity Assessment Procedures

The MFN and national treatment provisions also apply to conformity assessment procedures.
Procedures for conformity assessment shall be applied to products imported from other WTO
Members in a manner no less favourable then that accorded to like products of national origin
and to like products originating in any other country (Article 5.1.1). This means that imported
products must be treated equally with respect to any fees charged to assess their conformity with
regulations. Similarly, Members must respect the confidentiality of information about the results
of conformity assessment procedures for imported products in the same way as for domestic
products so that commercial interests are protected (Articles 5.2.4 and 5.2.5).
Harmonization (1) back to top
Producers' benefits
The arguments for harmonization of technical regulations are well-known. Harmonization is
necessary for the connection and compatibility of parts of products, i.e. telecommunications
equipment or car parts. Lack of technical compatibility might otherwise generate barriers to
international trade. For example, television sets suitable for the US market would be unsaleable in
Europe due to divergences in colour broadcasting formats (NTSC vs PAL or SECAM). Similarly,
in order to be marketable in the United Kingdom, French or German motor vehicles need to be
adjusted to right-hand drive. The costs of designing, manufacturing, and delivering the same
product in various configurations may be high.
Consumers' benefits
Technical harmonization may increase consumer welfare. Within a harmonized regulatory
environment, competition ensures that consumers have a wide and economically attractive choice
of products. This presupposes, however, that harmonized standards do not go beyond fulfilling
their legitimate regulatory objective, i.e. that they do not stifle innovation or otherwise discourage
producers from introducing new products or product variants.
Harmonization (2) back to top
Introduction
For many years, technical experts have worked towards the international harmonization of
standards. An important role in these efforts is played by the International Standardization
Organization (ISO), the International Electrotechnical Commission (IEC) and the International
Telecommunication Union (ITU). Their activities have had major impact on trade, especially in
industrial products. For example, ISO has developed more than 9,600 international standards
covering almost all technical fields.
Harmonization and the TBT Agreement
The Agreement encourages Members to use existing international standards for their national
regulations, or for parts of them, unless their use would be ineffective or inappropriate to fulfil
a given policy objective. This may be the case, for example, because of fundamental climatic and
geographical factors or fundamental technological problems (Article 2.4). As explained
previously, technical regulations in accordance with relevant international standards are rebuttably
presumed not to create an unnecessary obstacle to international trade. Similar provisions apply
to conformity assessment procedures: international guides or recommendations issued by
international standardizing bodies, or the relevant parts of them, are to be used for national
procedures for conformity assessment unless they are inappropriate for the Members concerned
for, inter alia, such reasons as national security requirements, prevention of deceptive practices,
protection of human health or safety, animal or plant life or health, or protection of the
environment; fundamental climatic or other geographical factors; fundamental technological or
infrastructural
problems
(Article 5.4).
Participation in international standardizing bodies

Widespread participation in international standardizing bodies can ensure that international
standards reflect country-specific production and trade interests. The TBT Agreement encourages
Members to participate, within the limits of their resources, in the work of international bodies for
the preparation of standards (Article 2.6) and guides or recommendations for conformity
assessment procedures (Article 5.5).
Special and differential treatment
Implementing and enforcing international standards may require technical and financial resources
beyond the capabilities of developing countries. The TBT Agreement eases the impact of certain
provisions whose full application would not be compatible with developing country Members'
development, financial and trade needs. Moreover, in view of their particular technological and
socio-economic conditions, developing country Members may adopt technical regulations,
standards or test methods aimed at preserving indigenous technologies and production methods
and processes compatible with their development needs (Article 12.4). Finally, developing country
Members may request international standardizing bodies to examine the possibility of, and if
practicable, prepare international standards for products of special trade interest to them.
Equivalence back to top
What is equivalence?
The process leading to the preparation of an international standard can be lengthy and costly.
Reaching consensus on technical details can take several years. The time gap between the adoption
of an international standard and its implementation by national regulators can also be significant.
For these reasons, negotiators introduced in the TBT Agreement a complementary approach to
technical harmonization, known as equivalence. Technical barriers to international trade could be
eliminated if Members accept that technical regulations different from their own fulfil the same
policy objectives even if through different means. This approach, based on the European
Community's 1985new approach to standardization, is contained in Article 2.7 of the TBT
Agreement.
How does equivalence work?

Let us assume that country A, wishing to protect its environment from high auto emission levels,
requires that cars be equipped with a catalytic converter. In country B, the same objective is
achieved through the use of diesel engines in motor vehicles. Since environmental concerns are
identical in the two countries to reduce the levels of pollutants in the air A and B can agree
that their technical regulations are essentially equivalent. Thus, if car manufacturers in country A
want to export to B, they will not be obliged to satisfy country B's requirement to fit diesel engines,
and vice versa. This will eliminate the costs of adjusting production facilities to fulfil foreign
regulations.
The
Agreement
(2)
Mutual recognition back to top

Costs of multiple testing
As explained in the previous section, demonstrating compliance with technical regulations may
impede international trade. In particular, if products are to be exported to multiple markets,
multiple testing may be required. Manufacturers can have difficulties in securing approval for their
products on foreign markets, for instance because testing experts disagree on optimal testing
procedures, from bureaucratic inertia, or even from manipulation of the testing process by
protectionist groups. Whatever the reason might be, such diversity of procedures and methods
significantly increases the costs of producers who sell in multiple markets.
What is mutual recognition of conformity assessment procedures?

One of the main difficulties exporters face is costly multiple testing or certification of products.
These costs would be drastically reduced if a product could be tested once and the testing results
be
accepted
in
all
markets.
How does mutual recognition work?

In practice, countries would agree to accept the results of one another's conformity assessment
procedures,
although
these
procedures
might
be
different.
Mutual recognition and the TBT Agreement

Article 6.3 of the TBT Agreement strongly encourages WTO Members to enter into negotiations
with other Members for the mutual acceptance of conformity assessment results. The presence of
a high degree of confidence in testing and certification bodies is, in fact, a prerequisite for the good
functioning of an MRA. For this reason, Article 6.1 of the TBT Agreement recognizes that prior
consultations may be necessary to arrive at a mutually satisfactory understanding regarding the
competence of the conformity assessment bodies. It also points out that compliance by conformity
assessment bodies with relevant guides or recommendations issued by international standardizing
bodies can be regarded as an indication of adequate technical competence.
Transparency (1) back to top
Notifications
Technical regulations and conformity assessment procedures
Members must notify when two conditions apply: (1) whenever a relevant international standard
or guide or recommendation does not exist, or the technical content of a proposed or adopted
technical regulation or procedure is not in accordance with the technical content of relevant
international standards or guides of recommendations; and (2) if the technical regulation or
conformity assessment procedure may have a significant effect on the trade of other Members
(Articles 2.9 and 5.6). Draft regulations should be notified to the WTO Secretariat, if possible sixty
days prior to their formal adoption so as to allow time for other Members to make comments.
Regulations can also be notified ex-post whenever urgent problems of safety, health, environment
protection arise (Articles 2.10 and 5.7). Local Governments at the level directly below central
government are required to notify technical regulations and conformity assessment procedures
which have not been previously notified by their central government authorities (Article 3.2
and 7.2).
Statements on the implementation and administration of the Agreement

Each WTO Member must, promptly after the Agreement enters into force for it, notify Members
of the measures in existence or taken to ensure the implementation and administration of the
Agreement and of any subsequent changes to them (Article 15.2). This written statement has to
include, inter alia, all relevant laws, regulations, administrative orders, etc., to ensure that the
provisions of the Agreement are applied; the names of the publications where draft and final
technical regulations, standards and conformity assessment procedures are published; the expected
length of time for the presentation of written comments on technical regulations, standards or
conformity assessment procedures; and the name and address of the enquiry points established
under
Article 10.
Bilateral or plurilateral agreements

Under Article 10.7, a Member who has reached an agreement with any other country or countries
on issues related to technical regulations, standards or conformity assessment procedures which
may have a significant effect on trade must notify other Members through the WTO Secretariat of
the products to be covered by the agreement, and provide a brief description of the agreement.
Code of good practice

The Code of Good Practice for the Preparation, Adoption and Application of Standards lays down
disciplines in respect of central government, local government, non-governmental and regional
standardizing bodies developing voluntary standards. The Code is open for acceptance by any of
these standardizing bodies. Central government standardizing bodies must accept and comply with
the provisions of the Code. A standardizing body wishing to adhere to, or withdraw from, the Code
has to notify its acceptance of, or withdrawal from, the Code using the appropriate notification
format (paragraph C of the Code). Standardizing bodies which have accepted the Code must notify
at least twice a year the existence of their work programme, and where details of this programme
can be obtained (paragraph J). Notifications have to be sent either directly to the ISO/IEC
Information Centre in Geneva, or to the national member of ISO/IEC or, preferably, to the relevant
national member or international affiliate of ISONET.
Transparency (2) back to top
Enquiry points
As a complement to the obligation to notify, each WTO Member must set up a national enquiry
point. This acts as a focal point where other WTO Members can request and obtain information
and documentation on a Member's technical regulations, standards and test procedures, whether
impending or adopted, as well as on participation in bilateral or plurilateral standard-related

agreements, regional standardizing bodies and conformity assessment systems (Article 10).
Enquiry points are generally governmental agencies, but the relevant functions can also be
assigned to private agencies. The obligation to set up enquiry points is particularly important for
developing countries. On the one hand, it is the first step by a developing country Member towards
implementation of the TBT Agreement. On the other, developing countries can acquire
information from other Members' enquiry points on foreign regulations and standards affecting
products in which they have a trade interest.
The Committee on Technical Barriers to Trade
Finally, transparency is also ensured through the existence of a TBT Committee. This allows WTO
Members the possibility of consulting on any matters relating to the operation of the Agreement
or the furtherance of its objectives. The Committee holds on average two to three meetings a year
and, if necessary, can establish working parties to carry out specific functions.
The Code of Good Practice back to top
Why a Code of Good Practice?
Product standards can be prepared by governmental or non-governmental standardizing bodies.
Over the years there has been a proliferation of private standardizing bodies. The Code of Good
Practice, contained in Annex 3 of the WTO TBT Agreement provides disciplines, including those
related to transparency, for the preparation, adoption and application of standards by all central
governmental, local government, non-governmental and regional standardizing bodies.
Who can accept the Code?

The Code is open for acceptance to any standardizing bodies, whether central government, local
government or non-governmental and regional standardizing bodies. The Code of Good Practice
contained in Annex 3 of the WTO TBT Agreement seeks to bring all standards within its purview
and provides for [and gives] transparency in the preparation, adoption and application of standards.
What does membership entail?
Members of the TBT Agreement are responsible for the acceptance and compliance with the Code
of Good Practice by their central government standardizing bodies. Furthermore, they are required
to take such reasonable measures as may be available to them to ensure also that local government
and non-governmental standardizing bodies within their territories, and regional standardizing
bodies of which they are members, accept and comply with the Code.
Technical assistance
Who has the right to technical assistance?
Any Member, and especially developing country Members, can request technical assistance from
other Members or from the WTO Secretariat, on terms and conditions to be agreed by the Members
concerned (Article 11). Requests for technical assistance received from least-developed Members
have priority.
What type of assistance?
The coverage of technical assistance ranges from the preparation of technical regulations and the
establishment of national standardizing bodies to the participation in international standardizing
bodies and the steps to be taken by developing country Members to gain access to regional
international conformity assessment systems. Technical assistance can help firms in developing
country Members to manufacture products in accordance with the technical requirements existing
in an importing country, thus ensuring that the products are accepted on the importing Member's
market.
WTO Secretariat's technical assistance activities
The WTO Secretariat's assistance to developing and least-developing countries on TBT matters
often takes the form of regional or sub-regional seminars. Recently, technical assistance
Toward Open Recognition? Standardization and Regional Integration Under Article XXIV
of GATT
Abstract
This paper provides a legal analysis of the significance of standards, technical regulations and SPS
provisions (collectively, TBTSPS provisions) in regional trade agreements (RTAs) in relation
to the multilateral trading system. It first examines the ways in which RTA regulation of national
TBTSPS measures may contribute to or detract from liberalization goals. It then describes how
GATT Article XXIV and the Understanding on the Interpretation of Article XXIV (the
Understanding), as presently understood, regulate RTA regulation of national TBTSPS
measures. Based on its analysis, this paper makes the following recommendations: 1. Interpret
Article XXIV:5 of GATT to provide an exception from obligations contained in the TBT
Agreement and SPS Agreement, principally the MFN obligation, in accordance with the TurkeyTextiles necessity test. This avoids imposing an inappropriate barrier to formation of RTAs. 2.
Interpret other restrictive regulations of commerce and other regulations of commerce in
Articles XXIV:5 and 8 to include only discriminatory and unnecessary TBT or SPS measures. This
avoids requirements to eliminate or harmonize non-protectionist TBT or SPS measures. It avoids
imposing an inappropriate barrier to formation of RTAs. 3. Interpret Article I:1 of GATT and the
MFN provisions of the TBT Agreement and SPS Agreement to clarify authorization for only open
mutual recognition agreements, similar to the permission contained in Article VII of GATS. This
ensures that recognition arrangements will not provide an avenue of discrimination or other
defection from WTO multilateral free trade principles. Today, it is not clear that any mutual
recognition agreements are authorized.
This paper provides a legal analysis of the significance of standards, technical regulations and SPS
provisions (collectively, TBTSPS provisions) in regional trade agreements (RTAs) in relation
to the multilateral trading system. It first examines the ways in which RTA regulation of national
TBTSPS measures may contribute to or detract from liberalization goals. It then describes how
GATT Article XXIV and the Understanding on the Interpretation of Article XXIV (the
Understanding),2 as presently understood, regulate RTA regulation of national TBTSPS
measures. This paper concludes by suggesting how Article XXIV and the Understanding might be
reinterpreted or revised to conform more closely with the normative goal, expressed in Article
XXIV:4, of balancing regional integration goals with multilateral liberalization goals. This paper
finds that most of the fortress RTA types of concerns, as they relate to TBTSPS measures, are
addressed if not precluded by WTO law as presently understood, and that the remaining potential
fortress RTA concerns relating to TBTSPS measures are of uncertain significance. However,
policymakers continue to express concern.
Conclusion
The requirements of Article XXIV of GATT and the Understanding with respect to RTA
regulation of national TBTSPS measures are somewhat unclear, in large measure due to the
imprecision of the definitions of other restrictive regulations of commerce in Article XXIV:8,
and other regulations of commerce in Article XXIV:5 and 8. This paper suggests that the WTO
law be read to require RTAs internally to impose a rule of national treatment-type
nondiscrimination and necessity. However, it must be recognized that the WTO system already
provides this anti-protectionism discipline, and so this requirement has little traction. On the other
hand, Article XXIV:8 does not appear to require harmonization or mutual recognition
arrangements. To the extent that RTAs engage in harmonization, their harmonized TBTSPS
measures must conform to the requirements of WTO law, namely the GATT, the TBT Agreement
and the SPS Agreement. The regulation of RTA rules of mutual recognition, under the MFN
obligation of Article I:1 of GATT, and under Article XXIV, is unclear, and rules of mutual
recognition may present some opportunities for RTA protectionism. It would be useful to clarify
the meaning of other restrictive regulations of commerce in Article XXIV:8, and other
regulations of commerce in Article XXIV:5 and 8 in order to clarify what Article XXIV requires
and what it prohibits. The core question raised by this paper has to do with the treatment of
recognition arrangements. Should RTAs be permitted to maintain exclusive recognition
arrangements, effectively discriminating against similarly-situated third states and like third
state products? Or should they be required, as under Article VII of the GATS, to practice what
might be termed open recognition? Open recognition would establish RTA conditions for
recognition, but permit third states to meet those conditions. This paper has suggested that,
although the legal requirements are not clear, open recognition may be required under Article I:1
and XXIV of GATT. It might be useful to clarify these requirements. In order to ensure that RTA
TBTSPS measures do not unnecessarily inhibit trade with outside parties, and in order to ensure
that WTO requirements for MFN and Article XXIV requirements do not unnecessarily inhibit
regional integration, the following three initiatives are recommended: 1. Interpret Article XXIV:5
to provide an exception from obligations contained in the TBT Agreement and SPS Agreement,
principally the MFN obligation, in accordance with the Turkey-Textiles necessity test. This avoids
imposing an inappropriate barrier to formation of RTAs.
2. Interpret other restrictive regulations of commerce and other regulations of commerce in
Articles XXIV:5 and 8 to include only discriminatory and unnecessary TBT or SPS measures. This
avoids requirements to eliminate or harmonize nonprotectionist TBT or SPS measures. It avoids
imposing an inappropriate barrier to formation of RTAs. 3. Interpret Article I:1 of GATT and the
MFN provisions of the TBT Agreement and SPS Agreement to clarify authorization for only open
mutual recognition agreements, similar to the permission contained in Article VII of GATS. Today,
it is not clear that any mutual recognition agreements are authorized. This ensures that recognition
arrangements will not provide an avenue of discrimination or other defection from WTO
multilateral free trade principles. These initiatives could be effected by the dispute settlement
process, or by action of the member states of the WTO. These initiatives would assist in ensuring
that RTA TBTSPS integration contributes to global welfare, and that WTO rules do not
inappropriately inhibit the formation of RTAs. However, this papers analysis does not purport to
answer the question of building blocks or stumbling blocks in connection with regional integration
in the TBTSPS field. This paper has also not addressed the dynamic time path issue: whether RTA
integration of TBTSPS issues will help to achieve greater welfare through institutional growth.
One problem with this question is that it is not clear that either RTA or multilateral standardization
would increase welfare in any particular circumstance. While Kindleberger suggests that world
standards are a public good,86 Sykes,87 Stephan88 and others point out that harmonization may
diminish welfare through suppression of efficient variation and regulatory competition. In a sense,
both perspectives are correct, but depend on the particular type of product, and the preferences of
individuals and states.
Week Six
UNDERSTANDING
THE
WTO: THE
Anti-dumping, subsidies, safeguards: contingencies,
AGREEMENTS
Binding tariffs, and applying them equally to all trading partners (most-favoured-nation
treatment, or MFN) are key to the smooth flow of trade in goods. The WTO agreements uphold
the principles, but they also allow exceptions in some circumstances. Three of these issues
are:
- actions
taken
against
dumping
(selling
at
an
unfairly
low
price)
- subsidies
and
special
countervailing
duties
to
offset
the
subsidies
- emergency measures to limit imports temporarily, designed to safeguard domestic
industries.
Anti-dumping actions
If a company exports a product at a price lower than the price it normally charges
on its own home market, it is said to be dumping the product. Is this unfair
competition? Opinions differ, but many governments take action against dumping
in order to defend their domestic industries. The WTO agreement does not pass
judgement. Its focus is on how governments can or cannot react to dumping it
disciplines anti-dumping actions, and it is often called the Anti-Dumping
Agreement. (This focus only on the reaction to dumping contrasts with the
approach of the Subsidies and Countervailing Measures Agreement.)
The legal definitions are more precise, but broadly speaking the WTO agreement
allows governments to act against dumping where there is genuine (material)
injury to the competing domestic industry. In order to do that the government has
to be able to show that dumping is taking place, calculate the extent of dumping
(how much lower the export price is compared to the exporters home market
price), and show that the dumping is causing injury or threatening to do so.
GATT (Article 6) allows countries to take action against dumping. The AntiDumping Agreement clarifies and expands Article 6, and the two operate together.
They allow countries to act in a way that would normally break the GATT
principles of binding a tariff and not discriminating between trading partners
typically anti-dumping action means charging extra import duty on the particular
product from the particular exporting country in order to bring its price closer to
the normal value or to remove the injury to domestic industry in the importing
country.
There are many different ways of calculating whether a particular product is being
dumped heavily or only lightly. The agreement narrows down the range of possible
options. It provides three methods to calculate a products normal value. The
main one is based on the price in the exporters domestic market. When this cannot
be used, two alternatives are available the price charged by the exporter in
another country, or a calculation based on the combination of the exporters
production costs, other expenses and normal profit margins. And the agreement
also specifies how a fair comparison can be made between the export price and
what would be a normal price.
Calculating the extent of dumping on a product is not enough. Anti-dumping
measures can only be applied if the dumping is hurting the industry in the
importing country. Therefore, a detailed investigation has to be conducted
according to specified rules first. The investigation must evaluate all relevant
economic factors that have a bearing on the state of the industry in question. If the
investigation shows dumping is taking place and domestic industry is being hurt,
the exporting company can undertake to raise its price to an agreed level in order
to avoid anti-dumping import duty.
Detailed procedures are set out on how anti-dumping cases are to be initiated, how
the investigations are to be conducted, and the conditions for ensuring that all
interested parties are given an opportunity to present evidence. Anti-dumping
measures must expire five years after the date of imposition, unless an
investigation shows that ending the measure would lead to injury.
Anti-dumping investigations are to end immediately in cases where the authorities
determine that the margin of dumping is insignificantly small (defined as less than
2% of the export price of the product). Other conditions are also set. For example,
the investigations also have to end if the volume of dumped imports is negligible
(i.e. if the volume from one country is less than 3% of total imports of that product
although investigations can proceed if several countries, each supplying less
than 3% of the imports, together account for 7% or more of total imports).
The agreement says member countries must inform the Committee on AntiDumping Practices about all preliminary and final anti-dumping actions, promptly
and in detail. They must also report on all investigations twice a year. When
differences arise, members are encouraged to consult each other. They can also
use the WTOs dispute settlement procedure.
Subsidies and countervailing measures back to top
This agreement does two things: it disciplines the use of subsidies, and it regulates
the actions countries can take to counter the effects of subsidies. It says a country
can use the WTOs dispute settlement procedure to seek the withdrawal of the
subsidy or the removal of its adverse effects. Or the country can launch its own
investigation and ultimately charge extra duty (known as countervailing duty)
on subsidized imports that are found to be hurting domestic producers.
The agreement contains a definition of subsidy. It also introduces the concept of
a specific subsidy i.e. a subsidy available only to an enterprise, industry,
group of enterprises, or group of industries in the country (or state, etc) that gives
the subsidy. The disciplines set out in the agreement only apply to specific
subsidies. They can be domestic or export subsidies.
The agreement defines two categories of subsidies: prohibited and actionable. It
originally contained a third category: non-actionable subsidies. This category
existed for five years, ending on 31 December 1999, and was not extended. The
agreement applies to agricultural goods as well as industrial products, except
when the subsidies are exempt under the Agriculture Agreements peace clause,
due to expire at the end of 2003.
Prohibited subsidies: subsidies that require recipients to meet certain export
targets, or to use domestic goods instead of imported goods. They are prohibited
because they are specifically designed to distort international trade, and are
therefore likely to hurt other countries trade. They can be challenged in the WTO
dispute settlement procedure where they are handled under an accelerated
timetable. If the dispute settlement procedure confirms that the subsidy is
prohibited, it must be withdrawn immediately. Otherwise, the complaining
country can take counter measures. If domestic producers are hurt by imports of
subsidized products, countervailing duty can be imposed.
Actionable subsidies: in this category the complaining country has to show that
the subsidy has an adverse effect on its interests. Otherwise the subsidy is
permitted. The agreement defines three types of damage they can cause. One
countrys subsidies can hurt a domestic industry in an importing country. They
can hurt rival exporters from another country when the two compete in third
markets. And domestic subsidies in one country can hurt exporters trying to
compete in the subsidizing countrys domestic market. If the Dispute Settlement
Body rules that the subsidy does have an adverse effect, the subsidy must be
withdrawn or its adverse effect must be removed. Again, if domestic producers
are hurt by imports of subsidized products, countervailing duty can be imposed.
Some of the disciplines are similar to those of the Anti-Dumping Agreement.
Countervailing duty (the parallel of anti-dumping duty) can only be charged after
the importing country has conducted a detailed investigation similar to that
required for anti-dumping action. There are detailed rules for deciding whether a
product is being subsidized (not always an easy calculation), criteria for
determining whether imports of subsidized products are hurting (causing injury
to) domestic industry, procedures for initiating and conducting investigations,
and rules on the implementation and duration (normally five years) of
countervailing measures. The subsidized exporter can also agree to raise its export
prices as an alternative to its exports being charged countervailing duty.
Subsidies may play an important role in developing countries and in the
transformation of centrally-planned economies to market economies. Leastdeveloped countries and developing countries with less than $1,000 per capita
GNP are exempted from disciplines on prohibited export subsidies. Other
developing countries are given until 2003 to get rid of their export subsidies.
Least-developed countries must eliminate import-substitution subsidies (i.e.
subsidies designed to help domestic production and avoid importing) by 2003
for other developing countries the deadline was 2000. Developing countries also
receive preferential treatment if their exports are subject to countervailing duty
investigations. For transition economies, prohibited subsidies had to be phased
out by 2002.
> more on subsidies and countervailing measures
> See also Doha Agenda negotiations
Safeguards: emergency protection from imports back to top

A WTO member may restrict imports of a product temporarily (take safeguard
actions) if its domestic industry is injured or threatened with injury caused by a
surge in imports. Here, the injury has to be serious. Safeguard measures were
always available under GATT (Article 19). However, they were infrequently
used, some governments preferring to protect their domestic industries through
grey area measures using bilateral negotiations outside GATTs auspices,
they persuaded exporting countries to restrain exports voluntarily or to agree to
other means of sharing markets. Agreements of this kind were reached for a wide
range of products: automobiles, steel, and semiconductors, for example.
The WTO agreement broke new ground. It prohibits grey-area measures, and it
sets time limits (a sunset clause) on all safeguard actions. The agreement says
members must not seek, take or maintain any voluntary export restraints, orderly
marketing arrangements or any other similar measures on the export or the import
side. The bilateral measures that were not modified to conform with the agreement
were phased out at the end of 1998. Countries were allowed to keep one of these
measures an extra year (until the end of 1999), but only the European Union
for restrictions on imports of cars from Japan made use of this provision.
An import surge justifying safeguard action can be a real increase in imports
(an absolute increase); or it can be an increase in the imports share of a shrinking
market, even if the import quantity has not increased (relative increase).
Industries or companies may request safeguard action by their government. The
WTO agreement sets out requirements for safeguard investigations by national
authorities. The emphasis is on transparency and on following established rules
and practices avoiding arbitrary methods. The authorities conducting
investigations have to announce publicly when hearings are to take place and
provide other appropriate means for interested parties to present evidence. The
evidence must include arguments on whether a measure is in the public interest.
The agreement sets out criteria for assessing whether serious injury is being
caused or threatened, and the factors which must be considered in determining the
impact of imports on the domestic industry. When imposed, a safeguard measure
should be applied only to the extent necessary to prevent or remedy serious injury
and to help the industry concerned to adjust. Where quantitative restrictions
(quotas) are imposed, they normally should not reduce the quantities of imports
below the annual average for the last three representative years for which statistics
are available, unless clear justification is given that a different level is necessary
to prevent or remedy serious injury.
In principle, safeguard measures cannot be targeted at imports from a particular

country. However, the agreement does describe how quotas can be allocated
among supplying countries, including in the exceptional circumstance where
imports from certain countries have increased disproportionately quickly. A
safeguard measure should not last more than four years, although this can be
extended up to eight years, subject to a determination by competent national
authorities that the measure is needed and that there is evidence the industry is
adjusting. Measures imposed for more than a year must be progressively
liberalized.
When a country restricts imports in order to safeguard its domestic producers, in
principle it must give something in return. The agreement says the exporting
country (or exporting countries) can seek compensation through consultations. If
no agreement is reached the exporting country can retaliate by taking equivalent
action for instance, it can raise tariffs on exports from the country that is
enforcing the safeguard measure. In some circumstances, the exporting country
has to wait for three years after the safeguard measure was introduced before it
can retaliate in this way i.e. if the measure conforms with the provisions of the
agreement and if it is taken as a result of an increase in the quantity of imports
from the exporting country.
To some extent developing countries exports are shielded from safeguard
actions. An importing country can only apply a safeguard measure to a product
from a developing country if the developing country is supplying more than 3%
of the imports of that product, or if developing country members with less than
3% import share collectively account for more than 9% of total imports of the
product concerned.
The WTOs Safeguards Committee oversees the operation of the agreement and
is responsible for the surveillance of members commitments. Governments have
to report each phase of a safeguard investigation and related decision-making, and
the committee reviews these reports.
THE PUZZLE OF WTO SAFEGUARDS AND REGIONAL TRADE AGREEMENTS
Joost Pauwelyn
Abstract
So far WTO jurisprudence has not resolved the puzzle of how WTO Members that are part also of
a regional trade agreement (such as NAFTA or MERCOSUR) should conduct safeguard
investigations and apply eventual safeguards in line with WTO rules. Can or must they exclude
regional imports from the injury determination? Can or must they apply the eventual safeguard
only to third parties, or are they under an obligation rather to apply all safeguards on a nondiscriminatory basis? Those are the questions examined in this paper. The paper refocuses some
of the attention to GATT Article XIX and criticizes the Appellate Bodys requirement of
parallelism as well as its jurisprudence under GATT Article XXIV. It also offers an alternative
way forward and ends with a list of options for WTO safeguards by members of customs unions
or free trade areas.
What are the safeguard options, under WTO rules, for a WTO Member that is part also of a preferential
trade arrangement? For example, when the United States decides to impose import restrictions on steel to
safeguard the US steel industry from serious injury, can it exclude Mexican and Canadian steel? Or rather,
must it exclude these NAFTA imports to ensure the very qualification of NAFTA as a free trade area? Or
conversely, is the United States prohibited from favoring its NAFTA partners given the blunt statement in
the WTO Agreement on Safeguards that [s]afeguard measures shall be applied to a product being imported
irrespective of its source?1
Those are the questions that this paper tries to answer. They were raised in all five Appellate Body
proceedings under the Agreement on Safeguards so far 2 , but each time skillfully (though not always
convincingly) avoided in the final Appellate Body ruling.
The analysis begins with a reminder of why the WTO permits safeguards in the first place, focusing on
GATT Article XIX, unforeseen developments and the existence of prior GATT concessions (Section I).
I next examine Articles 2, 4 and 5 of the Agreement on Safeguards and the requirements and limits they
impose on the origin of imports to be (1) examined in a safeguards investigation (Section II) and (2) made
subject to any eventual safeguard measure (Section III). Section IV sets out and criticizes the in case law
developed requirement of parallelism between the imports investigated, on the one hand, and the imports
eventually made subject to the safeguard, on the other. Finally, Section V analyses how GATT Article
XXIV on regional trade agreements3 affects the possibility for WTO Members to impose safeguards. In
conclusion, I summarize the different safeguard options available to WTO Members that are part also of a
preferential trade arrangement.
Importantly, this paper is limited to safeguard measures permitted under WTO rules. Many regional trade
agreements include their own safeguard mechanism limited to intra-regional trade only and focused quite
Article 2.2 of the Agreement on Safeguards, emphasis added.
These five cases are: (1) Appellate Body Report, Argentina Safeguard Measures on Imports of Footwear,
WT/DS121/AB/R, adopted 12 January 2000 ("Argentina Footwear (EC) "); (2) Appellate Body Report, Korea
Definitive Safeguard Measure on Imports of Certain Dairy Products ("Korea Dairy "), WT/DS98/AB/R, adopted
12 January 2000; (3) Appellate Body Report, United States Definitive Safeguard Measures on Imports of Wheat
Gluten from the European Communities, WT/DS166/AB/R, adopted 19 January 2001 (US Wheat Gluten); (4)
Appellate Body Report, United States Safeguard Measures on Imports of Fresh, Chilled or Frozen Lamb Meat from
New Zealand and Australia, WT/DS177/AB/R, WT/DS178/AB/R, adopted 16 May 2001 (US Lamb); and (5)
Appellate Body Report, United States Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality
Line Pipe from Korea, WT/DS202/AB/R, adopted 8 March 2002 (US Line Pipe). At the time of writing, the Panel
on United States Definitive Safeguard Measures on Imports of Certain Steel Products, WT/DS248/R, circulated on
11 July 2003, was still under appeal.
3
In this Article, I use the terms preferential trade arrangements, regional trade agreements and
regional deals interchangeably. These terms, as they are used here, cover both customs unions and free
trade areas, as defined in GATT Article XXIV:8.

often on safeguard measures during a transitional period.4 Additional safeguard options under such intraregional mechanisms are not covered in this paper. Nonetheless, their consistency with WTO rules is
addressed in Section IV.A.
Conclusion
What are the safeguard options for a WTO Member that is part also of a preferential trade
arrangement? The different pieces of this rather complex puzzle analyzed above can now be put
together in the following eight points:
1.
Based on requirements in GATT Article XIX itself -- in particular the effect of the
obligations incurred under GATT requirement and possibly also that of unforeseen
developments -- WTO Members part also of a regional arrangement must exclude imports from
within the region as a basis for WTO safeguards if such imports are covered also by the preferential
trade deal and made subject there to liberalization commitments equal to or exceeding GATT
concessions. This should normally lead to less WTO safeguards (since, as a consequence of
regional free trade, regional imports may have increased most and may cause most injury,
excluding those regional imports may make it more difficult to meet WTO requirements). At the
same time, safeguard mechanisms under regional deals may still permit regional safeguards (see
below point 5).
2.
The Agreement on Safeguards, in contrast, is silent on the source of imports that must be
taken into account in a safeguards injury determination. All imports can be considered, but one
can also exclude regional imports (as advocated under point 1) or take account only of imports
from one source. Crucially, however, even if only third-party imports are considered in the
determination itself, the injurious effects of other imports (in casu, regional imports) must still be
evaluated so as not to attribute them to third-party imports. Moreover, if only third-party imports
are considered in the injury determination, they alone must meet the causal link requirement with
serious injury or threat thereof (that is, it must be demonstrated that third-party imports played a
part in, or contributed to, bringing about serious injury so that there is a causal connection or
nexus 5).
3.
In principle, the eventual safeguard measure itself must be applied to all imports, on a nondiscriminatory basis (pursuant to Article 2.2 of the Agreement on Safeguards, subject, of course,
to GATT Article XXIV discussed in point 8 below). At the same time, if the injury determination
considered only third-party imports, the ensuing safeguard measure itself can only offset the injury
caused by third party imports (not injury caused by regional imports).
4.
The Appellate Bodys requirement of parallelism that is, equivalence between the
imports considered in the injury determination and those made subject to the safeguard measure
is an unnecessary complication to deal with a problem better resolved under either GATT Article
XIX itself (and the obligation there to exclude regional imports in certain circumstances) or Article
4
See, for example, Article 801 of NAFTA (Bilateral Actions) and Article 29 of the Europe
Agreement establishing an association between the European Communities and their member States, of
the one part, and the Czech Republic, of the other part, O.J. L 360 (1994).
5
Appellate Body report on US Wheat Gluten, above n. 2, at para. 67.
2.2 of the Agreement on Safeguards in combination with GATT Article XXIV. Parallelism has
not avoided, let alone resolved, the problem of selective safeguards and the relationship between
the Agreement on Safeguards and Article XXIV. Parallelism may lead to absurd situations and
complicates the problem more than it resolves it. The requirement of parallelism should be
abandoned.
5.
GATT Article XXIV does not prohibit safeguards on trade within a regional trade
arrangement. In particular, Article XXIV:8 permits some internal restrictions (including intraregional safeguards) as long as substantially all the trade is liberalized.
6.
In addition, GATT Article XXIV may operate as a justification not only for violations of
GATT Article XIX but also of the Agreement on Safeguards.
7.
Examining the conditions for justification under GATT Article XXIV, the current
Appellate Body requirements expressed in its report on Turkey Textiles (the measure must be (i)
introduced upon the formation and (ii) necessary for the formation, of a customs union or free
trade area in line with Article XXIV) would not permit safeguards that exclude regional imports.
Such exclusion is neither (i) introduced upon the formation of the regional arrangement; nor (ii)
necessary for such formation.
8.
However, the Appellate Body requirements for Article XXIV justification are supported by
neither the text nor the spirit of Article XXIV. They ought to be overturned. In particular, the
requirement that exclusion of regional imports must be necessary for the formation of a regional
arrangement in line with Article XXIV, ought to be replaced with the requirement that such
exclusion is part of the formation of a regional arrangement in line with Article XXIV. On that
basis, excluding regional imports from a safeguard measure can be justified under Article XXIV
(the quota on Indian textiles in the Turkey Textiles dispute cannot; nor can the violation of
parallelism or GATT Article XIX in the event an injury determination takes account of all imports,
but the safeguard measure excludes regional imports). An Appellate Body finding that Article
XXIV can, indeed, justify safeguards that exclude regional imports would keep regional trade free
from WTO safeguards and provide an important incentive for WTO members to sign regional
trade deals especially with members that are heavy users of safeguards. At the same time, a close
eye should be kept on possible trade diversion so as to ensure that the exclusion of regional imports
from WTO safeguards does not run counter the objective in GATT Article XXIV:4. 6 Finally, it
should be recalled that the absence of WTO safeguards on regional trade does not preclude the
imposition of regional safeguards under a safeguard mechanism provided for in the regional deal
itself.
See above n. Error! Bookmark not defined..
The above conclusions lead to the following options for WTO Members7, part also of a customs
union (CU) or free trade area (FTA), wanting to impose a WTO8 safeguard (SG). Note that in
most cases only Option 2 will be available (since the product in question is most likely to be
covered also under the CU/FTA) and that between Option 2.a and Option 2.b, the most obvious
choice will be Option 2.a, that is, to exclude regional imports from the actual safeguard (since
regional imports will be excluded also from the injury determination and hence be better tackled
under a regional safeguard mechanism, if such mechanism exists):
The table sets out the options for a WTO Member itself to impose a safeguard. Remember,
however, that pursuant to footnote 1 of the Agreement on Safeguards, a customs union can also impose
a safeguard, either as a whole or on behalf of one or more of its member states. See above text at n.
Error! Bookmark not defined. and Error! Bookmark not defined..
8
Remember, however, that even if GATT Art. XIX excludes regional imports as a basis for a
safeguard under GATT, such regional imports may still count towards an intra-regional safeguard under
the CU/FTA (as long as the regional safeguard mechanism respects the rights of other WTO Members and
is in line with Article 11 of the Agreement on Safeguards, see above n. 4 and Error! Bookmark not
defined.).
INJURY DETERMINATION
(during the safeguard investigation)
SAFEGUARD MEASURE
(as eventually applied)9
(Option 1)
Determination based on
ALL IMPORTS
(Option 1.a)
ALL IMPORTS
are subject to the safeguard
* If the investigated product is covered also by the

CU/FTA, there is a violation of GATT Art. XIX
(regional imports must then be excluded) (if not so
covered, consistent with Art. XIX)
* Consistent with parallelism requirement

* Consistent with SG Article 2.2 (nondiscrimination)
* Intra-regional safeguards are not per se
prohibited by GATT Art. XXIV
* The violation of Art. XIX cannot be justified under

Art. XXIV
(Option 2)
REGIONAL IMPORTS
EXCLUDED
(Option 1.b)
REGIONAL IMPORTS EXCLUDED
* Violation of parallelism requirement, not
justified under Art. XXIV
* Violation of SG Article 2.2 but justified
under Art. XXIV (though violation of
parallelism and Art. XIX remain)
(Option 2.a)
REGIONAL IMPORTS EXCLUDED
* If the investigated product is covered also by the * Consistent with parallelism requirement
CU/FTA, then regional imports must be excluded * Violation of SG Article 2.2 (nonunder Art. XIX
discrimination) but justified under
Art. XXIV
* Agreement on Safeguards (Arts. 2.1 and 4) does
not prohibit exclusion of regional imports
(Option 2.b)
ALL IMPORTS
subject to the safeguard
* Violation of parallelism requirement but
justified under Article 2.2
* Consistent with SG Article 2.2 (nondiscrimination)
* Intra-regional safeguards are not per se
prohibited by GATT Art. XXIV
* Potentially in violation of rules in the
CU/FTA itself (prohibiting regional
safeguards, albeit under certain conditions)
9
The option of applying a WTO safeguard only to regional imports is not included in this table. As
noted above in n. Error! Bookmark not defined. such safeguard would run counter to Article 2.2 of the
Agreement on Safeguards and not be justified under GATT Article XXIV. A safeguard exclusively imposed
on regional imports may, however, be possible under the regional trade deal itself.
Week Seven
Anti-Dumping Actions, Subsidies, and Countervailing Measures (see previous sections)
Agreement on implementation of Article VI of the General Agreement on Tariffs and
Trade 1994
(The Anti-dumping Agreement)
The Agreement on Implementation of Article VI of the General Agreement on Tariffs and
Trade 1994 (the AD Agreement) governs the application of anti-dumping measures by
Members of the WTO. Anti-dumping measures are unilateral remedies which may be applied
by a Member after an investigation and determination by that Member, in accordance with
the provisions of the AD Agreement, that an imported product is dumped and that the
dumped imports are causing material injury to a domestic industry producing the like
product.
The AD Agreement sets forth certain substantive requirements that must be fulfilled in order
to impose an anti-dumping measure, as well as detailed procedural requirements regarding
the conduct of anti-dumping investigations and the imposition and maintenance in place of
anti-dumping measures. A failure to respect either the substantive or procedural requirements
can be taken to dispute settlement and may be the basis for invalidation of the measure.
Unlike the Agreement on Subsidies and Countervailing Measures, the AD Agreement does
not establish any disciplines on dumping itself, primarily because dumping is a pricing
practice engaged in by business enterprises, and thus not within the direct reach of
multilateral disciplines.
Substantive rules
Article 1 of the AD Agreement establishes the basic principle that a Member may not
impose an anti-dumping measure unless it determines, pursuant to an investigation
conducted in conformity with the provisions of the AD Agreement, that there are dumped
imports, material injury to a domestic industry, and a causal link between the dumped
imports
and
the
injury.
Determination of dumping
Article 2 contains substantive rules for the determination of dumping. Dumping is
calculated on the basis of a fair comparison between normal value (the price of the
imported product in the ordinary course of trade in the country of origin or export)
and export price (the price of the product in the country of import). Article 2 contains
detailed provisions governing the calculation of normal value and export price, and elements
of
the
fair
comparison
that
must
be
made.
Determination of injury
Article 3 of the AD Agreement contains rules regarding the determination ofmaterial
injury caused by dumped imports. Material injury is defined as material injury itself, threat
of material injury, or material retardation of the establishment of a domestic industry.
The basic requirement for determinations of injury, is that there be an objective
examination, based on positive evidence of the volume and price effects of dumped imports
andthe consequent impact of dumped imports on the domestic industry. Article 3
contains specific rules regarding factors to be considered in making determinations of
material injury, while specifying that no one or several of the factors which must be
considered is determinative. Article 3.5 requires, in establishing the causal link between
dumped imports and material injury, known factors other than dumped imports which may
be causing injury must be examined, and that injury caused by these factors must not be
attributed to dumped imports.
A significant new provision, Article 3.3, establishes the conditions in which acumulative
evaluation of the effects of dumped imports from more than one country may be undertaken.
Under the rules, authorities must determine that the margin of dumping from each country is
not de minimis, that the volume of imports from each country is not negligible, and that a
cumulative assessment is appropriate in light of the conditions of competition among the
imports and between the imports and the domestic like product.
Definition of industry
Article 4 of the AD Agreement sets forth a definition of the domestic industry to be
considered for purposes of assessing injury and causation. The domestic industry is defined
as producers of a like product, which term is defined in Article 2.6 as a product that is
identical to, or in the absence of such a product, one that has characteristics closely
resembling those of, the imported dumped product under consideration. Article 4 contains
special rules for defining a regional domestic industry in exceptional circumstances where
production and consumption in the importing country are geographically isolated, and for
the evaluation of injury and assessment of duties in such cases. Article 4 also establishes that
domestic producers may be excluded from consideration as part of the domestic industry if
they are related (defined as a situation of legal or effective control) to exporters or
importers
of
the
dumped
product.
Procedural requirements
Overview
A principal objective of the procedural requirements of the AD Agreement is to ensure
transparency of proceedings, a full opportunity for parties to defend their interests, and
adequate explanations by investigating authorities of their determinations. The extensive and
detailed procedural requirements relating to investigations focus on the sufficiency of
petitions (through minimum information and standing requirements) to ensure that

meritless investigations are not initiated, on the establishment of time periods for the
completion of investigations, and on the provision of access to information to all interested
parties, along with reasonable opportunities to present their views and arguments. Additional
procedural requirements relate to the offering, acceptance, and administration of price
undertakings by exporters in lieu of the imposition of anti-dumping measures.
The AD Agreement requires investigating authorities to give public notice of
and explain their determinations at various stages of the investigative process in substantial
detail. It also establishes rules for the timing of the imposition of anti-dumping duties,
the duration of such duties, and obliges Members to periodically review the continuing
need for anti-dumping duties and price undertakings. There are detailed provisions guiding
the imposition and collection of duties under various duty assessment systems, intended to
ensure that anti-dumping duties in excess of the margin of dumping are not collected, and
that individual exporters are not subjected to anti-dumping duties in excess of their individual
margin of dumping. Article 13 of the AD Agreement requires Members to provide
forjudicial review of final determinations in anti-dumping investigations and reviews. Other
provisions establish that Members may, at their discretion, take anti-dumping actions on
behalf of and at the request of a third country, and recognise that special regard must be
given by developed country Members to the situation of developing country
Members when
considering
the
application
of
anti-dumping
duties.
Specific Provisions
Initiation and conduct of investigations
Article 5 establishes the requirements for the initiation of investigations. The AD
Agreement specifies that investigations should generally be initiated based on a written
request submitted by or on behalf of a domestic industry. This standing requirement is
supported by numeric limits for determining whether there is sufficient support by domestic
producers to conclude that the request is made by or on behalf of the domestic industry, and
thereby warrants initiation. The AD Agreement establishes requirements for evidence of
dumping, injury, and causality, as well as other information regarding the product, industry,
importers, exporters, and other matters, in written applications for anti-dumping relief, and
specifies that, in special circumstances when authorities initiate without a written application
from a domestic industry, they shall proceed only if they have sufficient evidence of
dumping, injury, and causality. In order to ensure that meritless investigations are not
continued, potentially disrupting legitimate trade, Article 5.8 provides for immediate
termination of investigations in the event the volume of imports is negligible or the margin
of dumping is de minimis, and establishes numeric thresholds for these determinations. In
order to minimize the trade disruptive effect of investigations, Article 5.10 specifies that
investigations shall be completed within one year, and in no case more than 18 months, after
initiation.
Article 6 sets forth detailed rules on the process of investigation, including the collection of
evidence and the use of sampling techniques. It requires authorities to guarantee the
confidentiality of sensitive information and verify the information on which determinations
are based. In addition, to ensure the transparency of proceedings, authorities are required to
disclose the information on which determinations are to be based to interested parties and
provide them with adequate opportunity to comment, and establishes the rights of parties to
participate in the investigation, including the right to meet with parties with adverse interests,
for
instance
in
a
public
hearing.
Imposition of provisional measures

Article 7 relates to the imposition of provisional measures. Article 7 includes the
requirement that authorities make a preliminary affirmative determination of dumping,
injury, and causality before applying provisional measures, and the requirement that no
provisional measures may be applied sooner than 60 days after initiation of an investigation.
Price undertakings
Article 8 establishes the principle that undertakings to revise prices or cease exports at
dumped prices may be entered into to settle an investigation, but only after a preliminary
affirmative determination of dumping, injury, and causality has been made. It also establishes
that undertakings are voluntary on the part of both exporters and investigating authorities. In
addition, an exporter may request that the investigation be continued after an undertaking
has been accepted, and if a final determination of no dumping, no injury, or no causality
results,
the
undertaking
shall
automatically
lapse.
Imposition and collection of duties

Article 9 establishes the general principle that imposition of anti-dumping duties is optional,
even if all the requirements for imposition have been met, and establishes the desirability of
application a lesser duty rule. Under a lesser duty rule, authorities impose duties at a level
lower than the margin of dumping but adequate to remove injury. Article 9.3 establishes that
anti-dumping duties may not exceed the dumping margin calculated during the investigation.
In order to ensure that anti-dumping duties in excess of the margin of dumping are not
collected, Article 9.3 requires procedures for determination of the actual amount of duty
owed, or refund of excess duties paid, depending on the duty assessment system of a
Member, normally within 12 months of a request, and in no case more than 18 months.
Article 9.4 establishes rules for calculating the amount of duties to be imposed on exporters
not individually examined during the investigation. Article 9.5 provides for expedited
reviews to calculate individual margins of dumping for exporters or producers newly entering
the market of the importing Member.
Article 10 establishes the general principle that both provisional and final anti-dumping
duties may be applied only as of the date on which the determinations of dumping, injury,
and causality have been made. However, recognizing that injury may have occurred during
the period of investigation, or that exporters may have taken actions to avoid the imposition
of an anti-dumping duty, Article 10 contains rules for the retroactive imposition of
dumping duties in specified circumstances. If the imposition of anti-dumping duties is based
on a finding of material injury, as opposed to threat of material injury or material retardation
of the establishment of a domestic industry, anti-dumping duties may be collected as of the
date provisional measures were imposed. If provisional duties were collected in an amount
greater than the amount of the final duty, or if the imposition of duties is based on a finding
of threat of material injury or material retardation, a refund of provisional duties is required.
Article 10.6 provides for retroactive application of final duties to a date not more than
90 days prior to the application of provisional measures in certain exceptional circumstances
involving a history of dumping, massive dumped imports, and potential undermining of the
remedial
effects
of
the
final
duty.
Duration, termination, and review of anti-dumping measures

Article 11 establishes rules for the duration of anti-dumping duties, and requirements for
periodic review of the continuing need, if any, for the imposition of anti-dumping duties or
price undertakings. These requirements respond to the concern raised by the practice of some
countries of leaving anti-dumping duties in place indefinitely. The sunset requirement
establishes that dumping duties shall normally terminate no later than five years after first
being applied, unless a review investigation prior to that date establishes that expiry of the
duty would be likely to lead to continuation or recurrence of dumping and injury. This five
year sunset provision also applies to price undertakings. The AD Agreement requires
authorities to review the need for the continued imposition of a duty upon request of an
interested
party.
Public notice
Article 12 sets forth detailed requirements for public notice by investigating authorities of
the initiation of investigations, preliminary and final determinations, and undertakings. The
public notice must disclose non-confidential information concerning the parties, the product,
the margins of dumping, the facts revealed during the investigation, and the reasons for the
determinations made by the authorities, including the reasons for accepting and rejecting
relevant arguments or claims made by exporters or importers. These public notice
requirements are intended to increase the transparency of determinations, with the hope that
this will increase the extent to which determinations are based on fact and solid reasoning.
The committee and dispute settlement

Article 16 establishes the Committee on Anti-dumping Practices, and sets forth requirements
for Members to notify without delay all preliminary and final actions taken in antidumping investigations, and notify semi-annually all actions taken during the relevant
reporting period.
Article 17 establishes that the Dispute Settlement Understanding is applicable to disputes
under the AD Agreement. However, Article 17.6 establishes a special standard of review to
be applied by panels in examining disputes in anti-dumping cases with regard both to matters
of fact and questions of interpretation of the Agreement. This standard gives a degree of
deference to the factual decisions and legal interpretations of national authorities, and is
intended to prevent dispute settlement panels from making decisions based purely on their
own views. A Ministerial Decision, which is not part of the AD Agreement, regarding this
provision establishes that its operation will be reviewed after three years with a view to
consideration
whether
it
is
capable
of
general
application.
Final provisions
Article 18.3 establishes the effective date of the AD Agreement, providing that it is
applicable to investigations and reviews of existing measures initiated pursuant to
applications made on or after the entry into force of the AD Agreement. Article 18.4 requires
Members to bring their laws into conformity with the AD Agreement by the date of entry
into force of the AD Agreement. Under Article 18.5, Members are required to notify their
anti-dumping laws and regulations to the Committee.
Annex I to the AD Agreement establishes procedures for on-the-spot investigations, which
are generally undertaken in the territory of an exporting Member to verify information
provided by foreign producers or exporters. Annex II to the AD Agreement sets forth
provisions on the use of best information available in investigations, specifying the
conditions under which investigating authorities may rely on information from a source other
than the person concerned.
The Ministerial Decision on Anti-Circumvention, which is not part of the AD Agreement,
noted that the negotiators had been unable to agree on a specific text dealing with the problem
of anti-circumvention, recognized the desirability of applying uniform rules in this area as
soon as possible, and referred the matter to the Committee for resolution. The Committee
has established an Informal Group on Anti-Circumvention, which is open to participation
by all Members, to carry out the task assigned by the Ministers.
Antidumping and Countervailing Duties in Regional Trade Agreements: CanadaU.S. FTA, NAFTA
and Beyond* Gilbert R. Winham** Heather A. Grant***

The use of antidumping (AD) and countervailing duties (CVDs) to prevent or remedy unfair trade practices
has been an important issue during recent multilateral and regional trade negotiations. It is a particularly
difficult issue because parties differ on the role unfair trade remedies should play in trade policy. One
approach is to view these measures as an attempt to remedy or offset unfair trade practices by foreign
governments or exporters. Alternatively, exporters may view these measures as politically motivated
contingency protection, or as "measures of 'stand-by protection' or techniques of administered trade."'
Unfair trade remedies are provided on the initiative of specific industries on the basis of a complicated body
of trade regulation. The system is discrete and highly legalistic, and is an alternative to a more general
approach to trade policy based on multilateral tariff reductions or codes of conduct. Because parties differ
on the role unfair trade remedies should play in trade policy, these remedies have been applied unevenly
among the Contracting Parties (CPs) to the General Agreement on Tariffs and Trade (GATT). 2 The result
is an "uneven playing field" among trading partners, 3 and it has become evident that more standardized
rules and procedures governing the application of these remedies are required. A considerable step in the
direction of greater standardization has been achieved in the Antidumping and Subsidies Codes negotiated
in the Uruguay Round. Elsewhere, other measures have been considered in regional agreements to achieve
the desired security of access to a trading partner's market in order to foster economic growth in a
competitive environment. The application of AD and CVDs by the United States was one of the major
Canadian grievances that surfaced during the negotiation of the Canada-U.S. Free Trade Agreement (FTA).
Initially, Canada tried unsuccessfully to gain a blanket exemption from U.S. trade remedy laws. As an
alternative, Canada placed considerable emphasis on negotiating a dispute settlement mechanism into the
FTA that would reduce Canada's exposure to the use of AD and CVDs by the United States. The dispute
settlement mechanism ultimately incorporated into Chapter 19 of the FTA provides for judicial-like review
of AD and CVD actions by binational panels. 5 More specifically, it provides exporters and importers the
option of taking a disputed AD or CVD action to a binational panel with binding powers in lieu of seeking
judicial review by a domestic court.6 Because individuals from both the United States and Canada sit on
the panels, it is generally assumed that binational panels promote greater consistency and objectivity in AD
and CVD practices. Although the panels are not authorized to create substantive law, the review mechanism
helps to ensure that each nation is applying its own laws fairly and consistently. Determinations of dumping
and subsidization can be different in each country, but will be upheld as long as the administrative agency
made its determination in accordance with domestic law.7 Owing to these various characteristics, Chapter
19 has been one of the most unique dispute settlement mechanisms developed in recent years.
HISTORY AND DEVELOPMENT OF AD AND CVDs A. AD AND CVDs UNDER THE GATT
One of the primary objectives of the GATT is to promote secure access to foreign markets so that businesses
will feel confident that they can export their products to other countries without encountering any unfair or
unforeseen impediments in competing for a portion of the consumer market.9 Dumping and unrestricted
subsidization have long been recognized as serious obstacles to this objective. Dumping is generally
understood as the sale of goods on a foreign market at a price which is less than that at which the product
is sold on the seller's domestic market. A subsidy is the granting of a non-commercial benefit, usually by
the government, at any stage of a good's manufacture, production or export. A general concern about the
harmful effects of dumping and subsidization resulted in their inclusion in the GATT negotiations in 1947.
These negotiations concluded with the insertion of a remedy under Article VI of the final Agreement, which
allows CPs to the GATT to take unilateral action to offset the effects of dumping or subsidies on their
domestic industries through the use of AD and CVDs. 10 GATT Article VI allows the application of an AD
duty against an imported good where it is being dumped on the foreign market and is causing or threatening
to cause "material injury to an established industry . . . or materially retards the establishment of a domestic

industry."1 A CVD may be applied to an imported good to offset the effects of a foreign subsidy where the
subsidy causes, or threatens to cause, injury to the domestic industry or the potential development of such
industry. 12 The GATT provisions for AD and CVDs represented minimal commitment to any real control
over these practices.
CONCLUSION
The similarities in how Canada and Mexico approached AD and CVDs in a regional trade
agreement may provide clues as to how this issue might play out in a broader context, such as
a hemispheric or multilateral trade agreement. First, both Canada and Mexico recognized that
resort to unfair trade remedies by the larger trade partner - the United States - could threaten
security of access to the U.S. market, and therefore undercut the value of a trade agreement.
Second, both Canada and Mexico sought an exception from U.S. unfair trade legislation, and
failed. Third, both Canada and Mexico tried to negotiate a broader understanding over the use
of AD and CVDs, but also failed.
Finally, both countries settled on a binding dispute settlement mechanism, built around an
internationalized form of judicial review of domestic agency actions, as a surrogate for a more
permanent solution to the problem of AD and CVDs between close trading partners.
If other hemispheric nations were to accede to NAFTA or negotiate a new hemispheric trade
agreement, it is likely that a Chapter 19-like mechanism would appeal to them for the same
reason it appealed to Canada or Mexico. Trade remedy actions like AD and CVDs arguably
amount to increased protectionism, and they are on the increase in international trade. It is in
the interest of most nations to have AD and CVD actions conform to high standards of due
process, even more so if the substance of these actions may have a harmful impact on
international trade relations. Given the widespread use of AD and CVDs, in particular by the
United States, and the difficulties in establishing standardized substantive rules in this area, it
seems probable that other countries will consider negotiating a Chapter 19-like mechanism.
The Canada-U.S. FTA negotiation demonstrated that it is easier to adopt a Chapter 19
mechanism for AD and CVDs where legal systems are similar, while the NAFTA negotiation
illustrated how accommodation can be made where systems are different.
Any attempt by hemispheric nations to accede to NAFTA would raise some of the same issues
faced in the NAFTA Chapter 19 negotiation, such as the role of amparo (which has been widely
adopted in South America from the Mexican legal system), as well as the nature and procedural
standards of AD and CVD investigations and their consequent impact on the standards of
judicial review and due process under a Chapter 19-like mechanism. Given the Mexican
example, it seems likely that sufficient accommodation could be made for other countries to
accede to a Chapter 19 mechanism, especially if new accessions were negotiated on a serial
basis. Owing to the greater diversity of legal systems and the greater complication of
negotiating detailed matters of administrative law on a multilateral basis, it is less likely that a
Chapter 19 mechanism would be amenable to multilateral negotiation in the GATT. However,
the pressures to establish due process in trade remedy practices are undeniable. The conditions
for the rise of Chapter 19 initially in Canadian-U.S. relations, which then extended to Mexico,
were an increase in domestic trade regulatory actions coupled with an increase in international
economic interdependence. These conditions are not abating in the international system. To the
extent that foreigners can be affected by the domestic administrative regulations of their

neighbors, it is possible that they will seek forums like Chapter 19 which are intended to ensure
as much as possible that their due process rights will be protected.
Tariff and Customs Code (From PM Reyes)

Special duties: a) Dumping duties b) Countervailing duties c) Marking duties d) Retaliatory/discriminatory
duties e)Safeguard duties
Q: What are special duties? These are additional import duties imposed on specific kinds of imported
articles under certain conditions. It cannot be applied without the regular customs duties. It can only be
applied in the presence of a special order from government officers.
Q: What are the kinds of special duties?
The following are special duties: 1. Anti-Dumping (Section 301, TCC)
2. Countervailing (Section 302, TCC)
3. Marking (Section 303, TCC)
4. Discriminatory (section 304, TCC)
5. Safeguard Duties (RA 8800) Read Section 301, TCC
Q: What is an anti-dumping duty? It is a special duty imposed on the importation of a product, commodity
or article of commerce into the Philippines at less than its normal value when destined for domestic
consumption in the exporting country which is the difference between the export price and the normal
value39 of such product, commodity or article. (see Section 301(s)(1), TCC)
Q: What are the requisites for the imposition of anti-dumping duty?
The requisites are the following: a. Where the product, commodity or article of commerce i. Is exported
into the Philippines 39 Normal value for purposes of imposing the anti-dumping duty is the comparable
price at the date of sale of like product, commodity or article in the ordinary course of trade when destined
for consumption in the country of export (see Section 301(s)(3), TCC, as amended by RA 8752) ii. At a
price less than its normal value iii. When destined for domestic consumption b. And such exportation i. Is
causing or ii. Is threatening to cause material injury to a domestic industry iii. Materially retards the
establishment of a domestic industry producing like product (see Section 301(a), TCC, as amended by RA
8752)
Note: (1) The imposing authority for the anti-dumping duty is the DTI Secretary in the case of nonagricultural product, commodity, or article or the DA Secretary in the case of agricultural product,
commodity or article. (2) Even when all the requirements for the imposition have been fulfilled, the decision
on whether or not to impose a definitive anti-dumping duty remains the prerogative of the Tariff
Commission (3) In the determination of whether to impose the antidumping duty, the Tariff Commission
may consider among others, the effect of imposing an anti-dumping duty on the welfare of the consumers
and/or the general public, and other related local industries (4) The amount of anti-dumping duty that may
be imposed is the difference between the export price and the normal value of such product, commodity, or
article. Read Section 302, TCC
Q: What is a countervailing duty?

It is a special duty imposed on the importation of a product, commodity or article of commerce into the
Philippines when the same is granted directly or indirectly by the government in the country of origin or
exportation any kind or form of specific subsidy upon the production, manufacture or exportation of such
product, commodity or article, and the importation of such subsidized product, commodity or article has
caused or threatens to cause material injury to a domestic industry or has materially retarded the growth or
prevents the establishment of a domestic industry as determined by the Tariff Commission. (see Section
302, TCC, as amended by RA 8751)
Note: (1) The countervailing duty shall be in addition to any ordinary duties, taxes, and charges imposed
by law on such imported product or article (2) The countervailing duty is equivalent to the bounty (cash
award paid to an exporter), subsidy (fiscal incentives, not in the form of cash award, to encourage
manufacturers or exporters) or subvention (any assistance other than bounty or subsidy). (3) The imposing
authority for the countervailing duties is the DTI Secretary in the case of non-agricultural product,
commodity, or article or the DA Secretary in the case of agricultural product, commodity or article. Read
Section 303, TCC Q: What is a marking duty? A marking duty are the additional customs duties imposed
on foreign articles (or its containers if the article itself cannot be marked) not marked in any official
language in the Philippines in a conspicuous place as legibly, indelibly and permanently in such manner as
to indicate to an ultimate purchaser in the Philippines the name of the country of origin. (See Section 303,
TCC)
Q: What are the exceptions to marking of articles?
1. The article is incapable of being marked
2. The article cannot be marked prior to importation to the Philippines without injury
3. The article cannot be marked prior to importation to the Philippines except at an expense economically
prohibitive of its importation
4. The marking of the container of such article will reasonably indicate the origin of such article
5. The article is of a crude substance
6. Such article is for the use of the importer and not intended for sale in its imported or other form
7. Such article is to be processed in the Philippines by the importer or for his own account and not for the
purpose of concealing the origin of such article
8. The ultimate purchaser by the Character of the article necessarily know the country of origin of such
article
9. Such article was produced more than 20 years prior to its importation into the Philippines 10.Such article
cannot be marked after importation except at an expense economically prohibitive and the failure to mark
the article before importation was not due to any purpose of the importer, producer, seller or shipper to
avoid compliance.
Note: (1) Only the CoC may impose marking duties
(2) The marking duty is equivalent to 5% ad valorem Read Section 304, TCC Q: What is a discriminatory
duty? It is an additional customs duty imposed upon articles wholly or in part, the growth or product of, or
imported in a vessel of any foreign country whenever the President shall find as a fact that such country: a.
Directly or indirectly upon any Philippine product unreasonable charge, exaction, regulation or limitation

which is not equally enforced upon like articles of other foreign countries b. Discriminates in fact against
the commerce of the Philippines as o place the Philippines at a disadvantage compared with the commerce
of any foreign country (See Section 304, TCC) Note: It is the President who imposes the discriminatory
duties.
Q: What are safeguard measures?
Safeguard measures are emergency measures including tariffs to protect domestic industries and producers
from increased imports which inflict or could inflict serious injury on them.
Note: (1) The CTA is vested with jurisdiction to review decisions of the DTI Secretary imposing safeguard
measures as provided under RA 8800, the Safeguard Measures Act (see Southern Cross Cement
Corporation v. Philippine Cement Manufacturers Corp [July 8, 2004]) (2) The imposing authority for the
safeguard measures is the DTI Secretary in the case of non-agricultural product, commodity, or article or
the DA Secretary in the case of agricultural product, commodity or article. (3) The DTI Secretary cannot
impose the safeguard measures if the Tariff Commission does not favorably recommend its imposition.

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International Economic Law IIL Legal, Economic, and Politcal-Economic Aspects of

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The provisions of this Agreement shall not be construed to prevent:

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(b) with respect to a free-trade area, or an interim agreement leading to the

For the purposes of this Agreement:

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B. Text of ad Article XXIV

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C. Understanding on the Interpretation of Article XXIV of the General Agreement on Tariffs

Hereby agree as follows:

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The provisions of paragraph 1 apply to the following(2):

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Implementation is short-hand for problems raised particularly by developing countries

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Weeks Two and Three

For the purposes of this Agreement:

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Turkey Textiles Case:

3. SUMMARY OF KEY PANEL/AB FINDINGS GATT Arts. XI (prohibition on

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Difference Between Customs Union and Free Trade Area

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has substantial sectoral coverage(1), and

elimination of existing discriminatory measures, and/or

prohibition of new or more discriminatory measures,

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(b) Notwithstanding paragraph 6, in the case of an agreement of the type referred to in

Article V bis: Labour Markets Integration Agreements

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exempts citizens of parties to the agreement from requirements concerning residency

is notified to the Council for Trade in Services.

Canada Certain Measures Affecting the Automotive Industry

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Implementation of adopted reports

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IEL 2 Midterm Reviewer - Guiyab

Handbook of International Economic Law Chapter on International Trade: Regionalism

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QUESTIONS AND ANSWERS Back to top

to protect human life from plant- or animal-carried diseases;

to protect animal or plant life from pests, diseases, or disease-causing organisms;

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human or animal health from food-borne risks;

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human health from animal- or plant-carried diseases;

animals and plants from pests or diseases;

whether or not these are technical requirements.

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