Preferential Trade Agreements and International Law 2018042784, 9780815366386, 9781351259002

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Preferential Trade Agreements and International Law

The multilateral trade agreements in the Annexes to the Agreement Establishing the World Trade Organization provide a comprehensive structure for international trade. Why would trading partners in different countries feel the need to go outside this framework in order to set up preferential trade arrangements? This book considers the structure of the World Trade Organization’s agreements and the types of preferential trade arrangements, and deliberates the value of the latter in the light of the operation of the former. Preferential Trade Agreements and International Law offers a comprehensive examination of preferential trade agreements and considers the features of specific regional and bilateral trade agreements without drawing upon systematic features and trends. It shows the latest state of knowledge on the topic and will be of value to researchers, academics, policymakers, and students interested in international trade and economic law. Graeme Baber is an independent legal researcher, and has published many articles, comments, briefings and updates. His previous monographs are The Impact of Legislation and Regulation on the Freedom of Movement of Capital in Estonia, Poland and Latvia (Cambridge Scholars Publishing, 2010), The Free Movement of Capital and Financial Services: An Exposition? (Cambridge Scholars Publishing, 2014), The European Union and the Global Financial Crisis: A View from 2016 (Nova Science Publishers, 2016), Essays on International Law (Cambridge Scholars Publishing, 2017), and International Financial Law: Quo Vadis? (Nova Science Publishers, 2017). Graeme has written dissertations and chapters for edited collections, and has presented his work at international conferences. He is an experienced teacher of university students, lecturing on both international law and financial law.

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Preferential Trade Agreements and International Law

Graeme Baber

First published 2019 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 52 Vanderbilt Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2019 Graeme Baber The right of Graeme Baber to be identified as author of this work has been asserted by him in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Names: Baber, Graeme. Title: Preferential trade agreements and international law / Graeme Baber. Description: Abingdon, Oxon ; New York, NY : Routledge, 2019. | Series: Routledge research in international law | Includes index. Identifiers: LCCN 2018042784 | ISBN 9780815366386 (hbk) Subjects: LCSH: Commercial treaties. | Foreign trade regulation. | Reciprocity (Commerce) Classification: LCC K4600 .B33 2019 | DDC 343.08/7—dc23 LC record available at https://lccn.loc.gov/2018042784 ISBN: 978-0-8153-6638-6 (hbk) ISBN: 978-1-351-25900-2 (ebk) Typeset in Galliard by codeMantra

To my Mum for her support, and my Dad for his company, in the endeavour to research and write this monograph.

Contents

Preface Acknowledgements List of abbreviations

ix xi xiii

1 The World Trade Organization’s International Trade Agreements – The General Agreement on Tariffs and Trade: Structure and Commentary 1 2 The World Trade Organization’s International Trade Agreements – A Synopsis of the Other Multilateral and the Plurilateral Agreements 110 3 The Scope for Preferential Trade Agreements within the World Trade Organization’s Framework 145 4 Bilateral Trade Agreements 171 5 Plurilateral Trade Agreements 267 6 The Benefits and Limitations of Preferential Trade Agreements 283 7 An Assessment of the Value-Added of Preferential Trade Agreements to the World Trade Organization’s Framework 289 8 The Future for the Law of International Trade 301 Index

305

Preface

Preferential Trade Agreements and International Law is the interesting title that the Publisher suggested I should use for the work included in this monograph. My suggested name for the book was more routine – although I trust that the nature of its contents is in line with the actual title rather than the proposed one. Chapters 1 and 2 contain a description and commentary of significant provisions of the World Trade Organization’s international treaties, in particular the General Agreement on Tariffs and Trade (GATT), to which the former is dedicated. The case law of the GATT is also considered. This contains detailed conundrums, such as how tightly one might squeeze the ‘accordion of “likeness”’ in respect of the terms ‘like products’ and ‘like conditions’ in different provisions of the GATT. The World Trade Organization’s Appellate Body has worked hard to reason and publish its judgments. They provide compelling reading – at least to a law researcher. Chapter 3 explores the basis upon which, and the procedure under which, the World Trade Organization may authorize Preferential Trade Agreements. These Arrangements put aside the most-favoured nation Rule. This Rule is a significant principle of international trade law. Therefore, its sacrifice should be justified by the quality of each Preferential Trade Agreement. Chapters 4 and 5 provide material for that to be decided, as they review the Comprehensive Economic and Trade Agreement (CETA) between Canada, of the one part, and the European Union and its Member States, of the other part, together with three other bilateral trade agreements, and three plurilateral trade agreements, on a comparative basis. Chapter 6 considers benefits of, and drawbacks to, Preferential Trade Agreements. Chapter 7 assesses the value that those Agreements add to the World Trade Organization’s framework of international treaties, using the CETA as a template. Finally, Chapter 8 investigates the future for the law of international trade – in respect of which both the official multilateral, and the private preferential, approaches to trade negotiations are considered to contribute. I hope that this book is useful and informative. Its comparative sections indicate that there is much legal work to be done in appraising the relative benefits of different Preferential Trade Agreements. Studies on the extent of continuing

x Preface implementation of these Arrangements would be valuable, although data collection and analysis in respect of them would be likely to be difficult and challenging. It is submitted that work of this type would contribute to ordering the broad and complex field of the law of international trade. Graeme Baber, August 2018

Acknowledgements

I would like to acknowledge Mr. Anthony Martin, the Head of Editorial, Internet and Publications at the World Trade Organization, for granting me permission to reproduce in this monograph the extracts from the World Trade Organization’s materials. I would also like to acknowledge Professor Richard Baldwin and Dr. Caroline Freund, who each granted me permission to reproduce in Chapter 6 of this monograph the extracts from their edited book chapter, with the following reference. Baldwin, Richard and Caroline Freund. ‘Preferential Trade Agreements and Multilateral Liberalization’ in Jean-Pierre Chauffour and Jean-Christophe Maur (eds), Preferential Trade Agreement Policies for Development: A Handbook (World Bank 2011).

List of abbreviations

AB AD Agreement

ADR ASEAN ASEAN–Aus–NZ PPTA ATC Aus BTA CAD Chile–Thailand BTA

China–Georgia BTA

Customs Valuation Code DSU

EAEU EAEU Treaty ECOSOC EEA EU EU–Canada BTA

Appellate Body of the World Trade Organization Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (Anti-dumping Agreement) Alternative Dispute Resolution Association of South-East Asian Nations Agreement Establishing the ASEAN–Australia– New Zealand Free Trade Area Agreement on Textiles and Clothing Australia Bilateral Trade Agreement Canadian Dollar(s) Free Trade Agreement between the Government of the Republic of Chile and the Government of the Kingdom of Thailand Free Trade Agreement between the Government of the People’s Republic of China and the Government of Georgia Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 Understanding on Rules and Procedures Governing the Settlement of Disputes (Dispute Settlement Understanding) Eurasian Economic Union Treaty on the Eurasian Economic Union Economic and Social Council of the United Nations European Economic Area European Union Comprehensive Economic and Trade Agreement (CETA) between Canada, of the one part, and the European Union and its Member States, of the other part

xiv  List of abbreviations GATS GATT GATT 1947 GDP Harmonized System ILO IMF IT Japan–Mongolia BTA LDC Marrakesh Protocol MERCOSUR MFN MR A NAFTA NRPTA NZ PCG PPTA PTA RPTA SCM Agreement SDR TPRM Trans-Pacific PPTA TRIM TRIPS UN UNIDROIT UNTS URL USA WCO WIPO WTO

General Agreement on Trade in Services General Agreement on Tariffs and Trade 1994 General Agreement on Tariffs and Trade 1947 Gross Domestic Product Harmonized Commodity Description and Coding System International Labour Organization International Monetary Fund Information technology Agreement between Japan and Mongolia for an Economic Partnership Least Developed Country Marrakesh Protocol to the General Agreement on Tariffs and Trade 1994 Mercado Común del Sur Most-Favoured-Nation Mutual Recognition Agreement North American Free Trade Agreement Non-Reciprocal Preferential Trade Arrangement New Zealand Polyvinyl acetate, Cellulose and Glass Preferential Plurilateral Trade Agreement Preferential Trade Agreement Reciprocal Preferential Trade Arrangement Agreement on Subsidies and Countervailing Measures Special Drawing Rights Trade Policy Review Mechanism Trans-Pacific Strategic Economic Partnership Agreement Trade-Related Investment Measure Agreement on Trade-Related Aspects of Intellectual Property Rights United Nations International Institute for the Unification of Private Law United Nations Treaty Series Uniform Resource Locator United States of America World Customs Organization World Intellectual Property Organization World Trade Organization

1 The World Trade Organization’s International Trade Agreements – The General Agreement on Tariffs and Trade Structure and Commentary On 15 April 1994, the Parties to the Agreement Establishing the World Trade Organization decided to found the WTO1. The Annexes to that Agreement contained 13 Multilateral Agreements on Trade in Goods (including the GATT 2) – one of which expired on 1 January 20053, the GATS 4, the TRIPS5, the DSU6, the TPRM7 and the four Plurilateral Trade Agreements8 – two of which are no longer in force9. On 22 February 2017, a further Multilateral Agreement on Trade in Goods – the Agreement on Trade Facilitation – was added to Annex 1A to the Agreement Establishing the World Trade Organization, and came into force on that date10. 1 Agreement Establishing the World Trade Organization (15 April 1994) LT/UR/A/2 art I and postscript ; 1867 UNTS 154; 33 ILM 1144 (1994). 2 These Multilateral Agreements on Trade in Goods are located in Annex 1A to the Agreement Establishing the World Trade Organization. 3 The Agreement on Textiles and Clothing terminated on 1 January 2005, which brought trade in textiles and clothing within the ambit of the GATT (World Trade Organization, ‘Textiles’ www.wto.org/English/tratop_e/texti_e/texti_e.htm> accessed 26 October 2017). 4 The GATS is found in Annex 1B to the Agreement Establishing the World Trade Organization. 5 The TRIPS is situated in Annex 1C to the Agreement Establishing the World Trade Organization. 6 The DSU is placed in Annex 2 to the Agreement Establishing the World Trade Organization. 7 The TPRM is sited in Annex 3 to the Agreement Establishing the World Trade Organization. 8 These Plurilateral Trade Agreements are positioned in Annex 4 to the Agreement Establishing the World Trade Organization. They comprise the Agreement on Trade in Civil Aircraft, the Agreement on Government Procurement, the International Dairy Agreement and the International Bovine Meat Agreement. 9 The International Dairy Agreement and the International Bovine Meat Agreement were terminated on 30 September 1997 (World Trade Organization, ‘Signatories terminate WTO plurilateral agreements on meat and dairy products’ (1997 Press Releases, Press/78, 30 September 1997) accessed 26 October 2017). 10 The Agreement on Trade Facilitation was to enter into force – and to be added to the Multilateral Trade Agreements in Annex 1A to the Agreement Establishing the World Trade ­Organization – when ⅔ of the Members of the WTO have ratified the Protocol Amending the Marrakesh Agreement Establishing the World Trade Organization, WT/L/940 – to which the Agreement on Trade Facilitation is annexed (Protocol Amending the Marrakesh Agreement Establishing the World Trade Organization (28 November 2014) WT/L/940 arts 1 and 4 ; Agreement Establishing the World Trade Organization (15 April 1994) LT/UR/A/2 art X:3 ; World Trade Organization, ‘Trade facilitation’ accessed 26 October 2017). The Agreement on Trade Facilitation applies only to those Members of the WTO that have accepted it – to the aforementioned ⅔ of the Members from 22 February 2017, and to each other Member from the latter’s date of acceptance of this Agreement (Agreement Establishing the World Trade Organization (15 April 1994) LT/UR/A/2 art X:3 ; 1867 UNTS 154; 33 ILM 1144 (1994); World Trade Organization, ‘Agreement on Trade Facilitation’ accessed 27 March 2018). WTO Members which accepted the Protocol Amending the Marrakesh Agreement Establishing the World Trade Organization, WT/L/940 – and, thereby, the Agreement on Trade Facilitation – earlier this year include Argentina (22 January 2018), Barbados (31 January 2018), Bolivia (30 January 2018), Central African Republic (11 January 2018), Cuba (12 March 2018), Djibouti (5 March 2018), Namibia (9 February 2018) and Papua New Guinea (7 March 2018) (World Trade Organization, ‘Trade Facilitation Agreement: Members accepting the Protocol of Amendment to insert the WTO Trade Facilitation Agreement into Annex 1A of the WTO Agreement’ accessed 27 March 2018). 11 The relevant version of GATT 1947 is that updated by the provisions of legal instruments which have entered into force before the date that the Agreement Establishing the World Trade Organization became effective (General Agreement on Tariffs and Trade (15 April 1994) LT/UR/A-1A/1/ GATT/1 art 1(a) ; 1867 UNTS 187; 33 ILM 1153 (1994)). This date is 1 January 1995, although the Director-General of the WTO did not register the Agreement Establishing the World Trade Organization (to which the GATT is annexed) until 1 June 1995 (Marrakesh Agreement Establishing the World Trade Organization (adopted 15 April 1994, opened for signature 15 April 1994, entered into force 1 January 1995) 1867 UNTS 1, 3 and 154). 12 For instance, the references to ‘contracting party’ within GATT 1947 are deemed to specify ‘Member’ within the GATT (General Agreement on Tariffs and Trade (15 April 1994) LT/UR/ A-1A/1/GATT/1 art 2(a) ; 1867 UNTS 187; 33 ILM 1153 (1994)). 13 This date is 1 January 1995 (n 11). Subject to the date restriction, these items comprise protocols and certificates that concern tariff concessions, protocols of accession – excluding two exceptions relating to specified provisional terms, decisions about waivers granted under Article XXV of GATT which are in force on the date on which the Agreement Establishing the World Trade Organization became effective (1 January 2015 (n 11)), and other decisions that the Contracting Parties to GATT 1947 have taken (General Agreement on Tariffs and Trade (15 April 1994) LT/UR/A-1A/1/ GATT/1 art 1(b) ; 1867 UNTS 187; 33 ILM 1153 (1994)). 14 These Understandings are the Understanding on the Interpretation of Article II:1(b) of the General Agreement on Tariffs and Trade 1994, the Understanding on the Interpretation of Article XVII of the General Agreement on Tariffs and Trade 1994, the Understanding on Balance-ofPayments Provisions of the General Agreement on Tariffs and Trade 1994, the Understanding on the Interpretation of Article XXIV of the General Agreement on Tariffs and Trade 1994, the Understanding in Respect of Waivers of Obligations under the General Agreement on Tariffs and Trade 1994, and the Understanding on the Interpretation of Article XXVIII of the General Agreement on Tariffs and Trade 1994 (General Agreement on Tariffs and Trade (15 April 1994) LT/UR/ A-1A/1/GATT/1 art 1(c) ; 1867 UNTS 187; 33 ILM 1153 (1994)). 15 General Agreement on Tariffs and Trade (15 April 1994) LT/UR/A-1A/1/GATT/1 art 1(d) ; 1867 UNTS 187; 33 ILM 1153 (1994).

WTO’s International Trade Agreements: GATT  3 the GATT in this book are to the updated version of GATT 1947 – although these only refer to ‘GATT’, as they also apply under the 1994 Agreement.

Article I: General Most-Favoured-Nation Treatment Article I:1: The MFN Rule Article I:1 of the GATT provides that, in respect of issues concerning importation, exportation or the cross-border transfer of payments with regard to imports or exports, any favourable treatment that a Member of the WTO provides to another state in respect of any product originating in or in transit to the latter is to be instantly and unconditionally granted to the same product that was produced in or destined for the territory of any other Member16. This is known as the MFN Rule, as it requires MFN treatment to be extended to all Members of the WTO17. Article I:1 of the GATT is intended to prevent discrimination between similar products that originate in, or are destined for, different jurisdictions18. Accordingly, this Article applies to measures that appear to be ‘origin-neutral’ but which make it possible for discrimination to be made in practice19. Furthermore, the application of MFN treatment in part only – to some products but not others and/or with regard to some but not all Members of the WTO, is a breach of Article I:1 of the GATT – which specifies any advantage, product and Member20. Thus, this Article has a broad scope. Notwithstanding this, there are limits to the ambit of the MFN Rule. In Canada – Certain Measures Affecting the Automotive Industry, the WTO Panel found Japan’s interpretation of the word ‘unconditionally’ in the MFN Rule to be too broad. The word must be taken within the context, and according to the purpose, of the Rule; this term, therefore, does not refer to the conferral of an advantage that is unrelated to the product in question 21.

Exceptions to the MFN Rule: (i) The Enabling Clause The Enabling Clause – formally entitled the Decision of 28 November 1979 on Differential and More Favourable Treatment Reciprocity and Fuller Participation of Developing Countries – permits Members of the WTO to grant such 16 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art I:1 ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. 17 The wording of the MFN Rule in GATT 1947 is “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” (ibid). For ‘contracting party’, read ‘Member’ (n 12). 18 Canada – Certain Measures Affecting the Automotive Industry: Report of the Appellate Body (31 May 2000) WT/DS139/AB/R WT/DS142/AB/R para 84 . 19 ibid para 78. 20 ibid para 79. 21 Canada – Certain Measures Affecting the Automotive Industry: Report of the Panel (11 February 2000) WT/DS139/R WT/DS142/R paras X.2012-X.2014 and X.2019 .

4  WTO’s International Trade Agreements: GATT treatment to developing countries whilst withholding it from other Members22, in one or more of the following circumstances: (a) Members that are developed states may accord preferential treatment to developing nations in respect of the tariffs which they impose on products that originate in the latter – the Generalized System of Preferences23; (b) Members may accord differential and more favourable treatment with regard to the provisions of the GATT that concern non-tariff barriers, as long as these measures are contained within multilateral trade agreements which are compatible with the GATT24; (c) Members that are parties to South-South Preferences schemes may mutually reduce or abolish tariffs, and – subject to conditions that the Members of the WTO as a whole may impose – non-tariff measures, on products which they import from one another25; and (d) Members may provide the LDCs with special treatment, in the context of measures that favour developing countries26. The AB has classified the Enabling Clause as an exception to the MFN Rule – using the logic that as Article XX of the GATT provides ‘General Exceptions’ to the GATT, and as the WTO Members’ objective of environmental protection recognized in the Agreement Establishing the World Trade Organization 27 may be applied through

22 Decision of 28 November 1979 on Differential and More Favourable Treatment Reciprocity and Fuller Participation of Developing Countries (L/4903) LT/TR/D/1 para 1 . 23 ibid para 2(a). 24 ibid para 2(b). Paragraph 2(b) of the Enabling Clause uses the words “which are negotiated under the auspices of the GATT”. 25 ibid para 2(c). A ‘South-South Preferences scheme’ is a PTA between two or more developing countries or LDCs. ‘South-South’ succinctly portrays the notion of issues between developing states, as those nations tend to be in the Southern Hemisphere – whilst most advanced economies are located in the Northern Hemisphere (Graeme Baber, Essays on International Law (Cambridge Scholars Publishing 2017) 171). 26 Decision of 28 November 1979 on Differential and More Favourable Treatment Reciprocity and Fuller Participation of Developing Countries (L/4903) LT/TR/D/1 para 2(d) . In June 2017, the UN considered the following 47 states to be LDCs: Afghanistan, Angola, Bangladesh, Benin, Bhutan, Burkina Faso, Burundi, Cambodia, Central African Republic, Chad, Comoros, the Democratic Republic of the Congo, Djibouti, E ­ ritrea, Ethiopia, the Gambia, Guinea, Guinea Bissau, Haiti, Kiribati, Laos, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Myanmar, Nepal, Niger, Rwanda, Sao Tome and Principe, Senegal, Sierra Leone, the Solomon Islands, Somalia, South Sudan, Sudan, Tanzania, Timor-Leste, Togo, Tuvalu, Uganda, Vanuatu, Yemen and Zambia (United Nations Committee for Development Policy, ‘List of Least Developed Countries (as of June 2017)’ accessed 19 November 2017). 27 The first recital of that Agreement states: “The Parties to this Agreement, Recognizing that their relations in the field of trade and economic endeavour should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development;” (Agreement Establishing the World Trade

WTO’s International Trade Agreements: GATT  5 ­ aragraph (g) of Article XX 28, so, by analogy, the WTO Members’ objective of P sustainable development 29 recognized in the latter Agreement may be pursued through the Enabling Clause, which, like Article XX of the GATT, may be considered to be an exception30. The AB stated that, to the extent that a measure introduced under the Enabling Clause is incompatible with the MFN Rule, the Enabling Clause prevails as the more precise law – but the relevant WTO Panel must scrutinize whether the measure is justified by that superior provision31.

Exceptions to the MFN Rule: (ii) Paragraphs 2, 3 and 4 of Article I, and Annexes A-G These provisions of the GATT set out historically based preferences between specified states and their dependent territories and other states with which they have had close relations. For example, Article I:2(c) of the GATT permits the USA and Cuba, and Article I:2(d) of (and Annex E to) the GATT allow Chile on the one hand and Argentina, Bolivia and Peru on the other, to maintain in force preferences that are in accordance with the maximum rate specified in A ­ rticle I:4 of the GATT32. Notwithstanding their continuing presence within the GATT33, these historically based preference arrangements are now redundant34. Organization (15 April 1994) LT/UR/A/2 Preamble ; 1867 UNTS 154; 33 ILM 1144 (1994); emphasis added). 28 Article XX(g) of the GATT provides: “Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures: … (g) relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption” (General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/GATT/2 art XX(g) ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700). For ‘contracting party’, read ‘Member’ (n 12). The subsection entitled ‘Articles XX and XXI: Exceptions to the GATT’, below in the current section, considers Article XX of the GATT – including case law that concerns Paragraph (g) of that Article. 29 See n 27. 30 European Communities – Conditions for the Granting of Tariff Preferences to Developing Countries: Report of the Appellate Body (7 April 2004) WT/DS246/AB/R paras 94 and 95 . 31 ibid para 101. 32 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art I:2(c)-(d) and Annex E ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700). 33 In December 1992, the Legal Drafting Group of the GATT’s Trade Negotiations Committee requested clarification from countries by 31 January 1993 on the extent of tariff preferences listed in Annexes A–F to the GATT, in order for it to evaluate whether to maintain these Annexes and Articles I:2 and I:3 of the GATT in their current form (Historical Tariff Preferences (18 December 1992) MTN.TNC/LD//W/1 1–2 ). No changes have been made to these provisions since that time. 34 Petros Mavroidis, Trade in Goods (2nd edn, Oxford University Press 2012) 151; Mitsuo Matsushita, Thomas Schoenbaum, Petros Mavroidis and Michael Hahn, The World Trade

6  WTO’s International Trade Agreements: GATT Exceptions to the MFN Rule: (iii) Waivers The WTO’s Ministerial Conference may, by a ¾ majority of the Members of the WTO and “[i]n exceptional circumstances”, vote to waive an obligation that a Multilateral Trade Agreement located within the Annexes to the Agreement Establishing the World Trade Organization imposes on any Member35. In the case of duties that the GATT requires36, such as the MFN Rule, the Ministerial Conference is to set a period of up to ninety days to consider the request for a waiver, with a view to making the decision as to whether or not to grant that waiver to the applicant Member(s) by consensus; if no consensus is reached within this period, then the vote decides the matter. If the Ministerial Conference grants the waiver, then it specifies the exceptional conditions which justify its decision, the terms and conditions that regulate the application of the waiver and the date on which the latter is to end37.

Exceptions to the MFN Rule: (iv) PTAs Each PTA is to be notified to the WTO, in accordance with the terms of the Transparency Mechanism for Regional Trade Agreements – specifying, amongst other things, “under which provision(s) of the WTO agreements it is notified”38,

Organization: Law, Practice and Policy (3rd edn, Oxford University Press 2015) 174; Petros Mavroidis, The Regulation of International Trade – Volume 1: GATT (The MIT Press, 2016) 206. Mavroidis considers there to be one exception to this statement: since the recent improvement of diplomatic relations between the USA and Cuba, the latter may be benefiting from its arrangement with the USA in Article I:2(c) of the GATT (Mavroidis, The Regulation of International Trade – Volume 1 206). 35 Agreement Establishing the World Trade Organization (15 April 1994) LT/UR/A/2 art 3 ; 1867 UNTS 154; 33 ILM 1144 (1994). 36 ibid art 3(a). The Council for Trade in Goods, the Council for Trade in Services or the Council for TRIPS determines the time period and the presence or absence of consensus, with regard to WTO Members’ applications for waivers from obligations imposed by the non-GATT Multilateral Agreements on Trade in Goods, the GATS and the TRIPS, respectively, and presents a report to the Ministerial Conference at the end of the period (ibid art 3(b)). 37 ibid art 4. If the waiver is granted for more than one year, then the Ministerial Conference reviews it annually until it ceases – and may on the basis of each reappraisal extended, amend or discontinue it (ibid). 38 Decision of 14 December 2006 on the Transparency Mechanism for Regional Trade Agreements WT/L/671 para 4 . The Decision refers to ‘Regional Trade Agreements’ – a term that it abbreviates to ‘RTAs’, rather than to PTAs. It defines these as “trade agreements of a mutually preferential nature” (ibid Preamble). It is submitted that these agreements are better described as PTAs than as RTAs, as they contain preferences but are not necessarily regional. For example, the Australia-Chile RTA is inappropriately described – the distance from Canberra to Santiago is approximately 7,000 miles (Google, ‘7031 mi Distance from Canberra to Santiago’ accessed 24 November 2017). Notwithstanding this, it is necessary to retain the term ‘Regional Trade Agreements in the Decision of 14 December 2006 on the Transparency Mechanism for Regional Trade Agreements (WT/L/671), so as to avoid confusion

WTO’s International Trade Agreements: GATT  7 i.e., Article XXIV of the GATT, Article V of the GATS and/or the Enabling Clause39. As Members of the WTO whose PTA has fulfilled the requirements of Article XXIV of the GATT are permitted to treat products originating in those Members which are party to the PTA more favourably than those with the same attributes from other Members, that provision is an exception to Article I:1 of the GATT40.

Article II: Schedules of Concessions Article II:7: The status of the Schedules of Concessions The Schedules of Concessions that are annexed to the GATT are “an integral part of Part I of this Agreement”41. Part I of the GATT comprises Articles I and II. In European Communities – Customs Classification of Certain Computer Equipment, the AB held that Article II:7 of the GATT made each Schedule “an integral part of GATT 1994”42. This interpretation is broader than that expressed in the wording that Article II:7 of the GATT uses. Notwithstanding this, the status of the Schedules of Concessions as part of GATT/WTO law necessitates a summary look at their content.

The Schedules of Concessions Detailed reportage and evaluation of the current bound and applied tariff rates43 for each Member of the WTO is possible using the WTO’s Tariff Download with the term ‘Preferential Trade Arrangements’ that General Council Decision of 14 December 2010 on the Transparency Mechanism for Preferential Trade Arrangements (WT/L/806) uses. The latter decision applies only to non-reciprocal preferential trade arrangements (General Council Decision of 14 December 2010 on the Transparency Mechanism for Preferential Trade Arrangements WT/L/806 para 1(c) ; emphasis added). Thus, notwithstanding the terminological difficulties described in this note, Decision WT/L/671 and Decision WT/L/806 are complementary, applying to reciprocal and non-reciprocal PTAs respectively. In the light of this complementarity, it is further submitted that it would improve the accuracy of the descriptors to change the term ‘Regional Trade Agreements’ or ‘RTAs’ in Decision WT/L/671 to ‘Reciprocal Preferential Trade Arrangements’ or ‘RPTAs’, and to alter the term ‘Preferential Trade Arrangements’ or ‘PTAs’ in Decision WT/L/806 to ‘Non-­ Reciprocal Preferential Trade Arrangements’ or ‘NRPTAs’. 39 Decision of 14 December 2006 on the Transparency Mechanism for Regional Trade Agreements WT/L/671 para 1 . 40 Mavroidis, Trade in Goods (n 34) 192–193. Chapter 3 considers the relationship between PTAs and the MFN Rule. 41 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art II:7 ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. 42 European Communities – Customs Classification of Certain Computer Equipment: Report of the Appellate Body (5 June 1998) WT/DS62/AB/R WT/DS67/AB/R WT/DS68/AB/R para 84 . 43 The ‘bound tariff rate’ for a given product is the maximum rate that the WTO Member in question may charge under the MFN Rule. This is stated in the paragraph entitled ‘Exceptions to

8  WTO’s International Trade Agreements: GATT Facility44 and Tariff Analysis Online Facility45, respectively. For the user who does not have specific informational queries concerning the tariffs imposed in the Schedules of Concessions, pro forma 46 tables are available47. These tables include, but are not limited to: (i) the Schedules that accompanied the Agreement Establishing the World Trade Organization – such as Schedule I for Australia and Schedule XX for the USA, which include the ‘Base Rate of Duty’ and the ‘Bound Rate of Duty’ applied to each product48, (ii) a list of bound concessions, taken from the Consolidated Tariffs Schedules Database, and (iii) a list of the MFN-applied tariff for each product, based on notifications to the Integrated Database as at the most recent date of its amendment.

Article II:1: The application of the Schedules of Concessions Each Member of the WTO is to bestow on the commerce of the other Members “treatment no less favourable than that” for which the relevant Part of the applicable Schedule provides49. That Schedule is the one that corresponds to the specific country – for the USA, this would be Schedule XX. These Schedules are divided into four Parts, as follows: Part I: Most-Favoured-Nation Tariff; Part II: Preferential Tariff; Part III: Non-Tariff Concessions; Part IV: Agricultural Products: Commitments Limiting Subsidization. The products that Part I of the Schedule for any WTO Member details – which are those exported from other Members – shall, on their importation into that Member’s territory, and subject to the conditions, terms or qualifications that the Schedule prescribes, “be exempt from ordinary customs duties in excess of those set forth and provided therein”50. These items are also to “be exempt from

the MFN Rule: (iv) PTAs’, in the subsection entitled ‘Article 1: General Most-Favoured-Nation Treatment’, in the current section. The MFN Rule is specified in the paragraph entitled ‘Article I:1: The MFN Rule’, in the subsection entitled ‘Article 1: General Most-Favoured-Nation Treatment’, in the current section. 44 The WTO’s Tariff Download Facility is accessed at http://tariffdata.wto.org/. 45 The WTO’s Tariff Analysis Online Facility is accessed at https://tao.wto.org/welcome. aspx?ReturnUrl=%2f. 46 ‘Pro forma’ means “‘[f]or form’s sake’” (Gavin McFarlane, The Layman’s Dictionary of English Law (Waterlow Publishers Limited 1984) 225) – the tables containing the tariffs for each Member of the WTO are laid out in a standard way. 47 These tables are available from the website of the WTO at www.wto.org/english/tratop_e/ schedules_e/goods_schedules_table_e.htm. 48 The ‘Base Rate of Duty’ was the rate immediately before the tariff reductions – usually the applied rate of duty at the start of the Uruguay Round of Multilateral Trade Negotiations; the ‘Bound Rate of Duty’ is the MFN tariff rate at the end of: (i) the specified implementation period, or (ii) if no dates are stated, the default schedule for implementation (Washington Trade Report, ‘How to Read the WTO Tariff Bindings’ accessed 14 January 2018). 49 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art II:1(a) ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. 50 ibid art II:1(b).

WTO’s International Trade Agreements: GATT  9 all other duties or charges of any kind imposed on or in connection with the importation in excess of those imposed on the date of this Agreement”, and from those that the legislation in force on that date in the importing state requires to be put in place thereafter51. The essence and level of the ‘other duties or charges’ that are levied on items that are subject to a bound tariff are to be recorded in the Schedules of Concessions next to the product to which they apply52. The date on which these ‘other duties or charges’ are bound, with regard to Article II of the GATT, is 15 April 199453. Therefore, ‘other duties or charges’ are to be noted in the Schedules at the levels that apply on that date54. These are to be recorded with regard to all tariff bindings55. If a bound tariff product has heretofore been the focus of a concession, then the level of ‘other duties or charges’ entered in the relevant Schedule is to be no higher than their level at the moment of the first inclusion of that concession in the Schedule56. The WTO Panel in Dominican Republic – Measures Affecting the Importation and Internal Sale of Cigarettes stated that, although neither the GATT nor the Understanding on the Interpretation of Article II:1(b) of the GATT defines what comprises an ‘other duty or charge’, Subparagraph 1(b) and Paragraph 2 of Article II of the GATT “make it clear that any fee or charge that is in connection with importation and that is not an ordinary customs duty, nor a tax or a duty as listed under Article II:2 [of the GATT]57 would qualify”58. The AB in India – Additional and Extra-Additional Duties on Imports from the United States similarly found that: (i) ‘other duties and charges’ in the second sentence of ­A rticle II:1(b) of the GATT59 does not include duties and charges that are ‘ordinary customs duties’ in the first sentence of Article II:1(b) of the GATT60, and (ii)

51 ibid. 52 Understanding on the Interpretation of Article II:1(b) of the General Agreement on Tariffs and Trade 1994 (15 April 1994) LT/UR/A-1A/1/GATT/U/1 para 1 . 53 ibid para 2. 54 ibid. 55 ibid para 3. 56 ibid para 4. 57 Paragraph 2 of Article II the GATT proclaims: “Nothing in this Article shall prevent any contracting party from imposing at any time on the importation of a product: (a) a charge equivalent to an internal tax …: (b) an[] anti-dumping or countervailing duty …; (c) fees or other charges commensurate with the cost of services rendered” (General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/GATT/2 art II:2 ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700). For ‘contracting party’, read ‘Member’ (n 12). 58 Dominican Republic – Measures Affecting the Importation and Internal Sale of Cigarettes: Report of the Panel (26 November 2004) WT/DS302/R para VII.113 . 59 The second sentence of Article II:1(b) of the GATT is the sentence in the text that corresponds to n 51. 60 India – Additional and Extra-Additional Duties on Imports from the United States: Report of the Appellate Body (30 October 2008) WT/DS360/AB/R para 151 . The first sentence of Article II:1(b) of the GATT is the sentence in the text that corresponds to n 50.

10  WTO’s International Trade Agreements: GATT the chapeau to Article II:2 of the GATT specifies “[n]othing in this Article”61, which means “Article II in its entirety … including Article II:1(b), shall prevent a Member from imposing on the importation of a product … a charge equivalent to an internal tax … [,] an anti-dumping or countervailing duty … [,] or … fees or other charges commensurate with the cost of services rendered”62. In defining the meaning of ‘other duties and charges’, the WTO Panel in India – Additional and Extra-Additional Duties on Imports from the United States implied that tariffs inherently discriminated against imports. [C]onsideration of relevant context … leads us to the view that, notwithstanding the broad scope of the phrase “other duties or charges of any kind” in Article II:1(b) [of the GATT], second sentence63, the residual category of “other duties or charges” imposed on the importation of a product … should be considered as encompassing only such duties or charges as are of the same kind as ordinary customs duties, i.e., charges which inherently discriminate against, or disadvantage imports. … [T]hat interpretation does not run counter to the goal, expressed in the preamble to GATT 1994, of substantially reducing “tariffs” with a view to, e.g., raising standards of living … . Under our interpretation, duties and charges other than ordinary customs duties which are imposed on the importation of products described in Part I of a Member’s Schedule of Concessions and which inherently discriminate against, or disadvantage, imports (and hence are like “tariffs”) are subject to the strict disciplines contained in Article II:1(b), second sentence, whereas duties and charges which do not inherently discriminate against, or disadvantage, imports (and hence are unlike “tariffs”) are not subject to those strict disciplines, but to others64. This argument drew a rebuke from the AB, which refuted the use of ‘inherently discriminate’ in connection with Article II:1(b) of the GATT and interpreted the term ‘tariff’ in a different way to that of the Panel. We … disagree with the Panel that duties and charges within the meaning of Article II:1(b) [of the GATT] must always be considered to “inherently discriminate against imports”. We do not see a textual or other basis for the Panel’s conclusion that “inherent discrimination” is a relevant or necessary feature of charges covered by Article II:1(b). … We also have concerns with the Panel’s characterization of duties or charges under ­A rticle II:1(b) as “inherently discriminatory”, insofar as this may suggest

61 n 57 – which contains Article II:2 of the GATT. 62 India – Additional and Extra-Additional Duties on Imports from the United States: Report of the Appellate Body (30 October 2008) WT/DS360/AB/R para 153 . 63 See n 59. 64 India – Additional and Extra-Additional Duties on Imports from the United States: Report of the Panel (9 June 2008) WT/DS360/R paras VII.630 and VII.631 .

WTO’s International Trade Agreements: GATT  11 that the mere application of a tariff by a Member on imports of another Member is somehow unfair or prejudicial. Such a connotation would … be at odds with negotiations by Members of tariff concessions that allow for the imposition of duties up to a bound level. Tariffs are legitimate instruments to accomplish certain trade policy or other objectives such as to generate fiscal revenue. Indeed, under the GATT 1994, they are the preferred trade policy instrument, whereas quantitative restrictions are in principle prohibited. Irrespective of the underlying objective, tariffs are permissible under Article II:1(b) so long as they do not exceed a Member’s bound rates 65. The WTO Panel’s comment is accurate in so far as the application of a new, or a higher level of, tariff on a specific import tends to discriminate against the purchase of the product from that source in relation to like products that are domestically produced or imported from countries upon which an equivalent or higher tariff has not been applied. The AB places this within the context of the bound tariff system, according to which tariffs up to the MFN rate are permissible. As all WTO Members (subject to exceptions that the WTO temporarily grants) are required to abide by the MFN upper limit as to the level of tariffs that they set on imports, the system taken as a whole is non-discriminatory. Thus, whilst both views are technically valid arguments, the AB’s point is politically correct – the ‘discriminatory’ nature of any unilateral charge is contained within the ambit of the WTO’s MFN system. In Argentina – Measures Affecting Imports of Footwear, Textiles, Apparel and Other Items, the AB held that the application of a different type of duty to that for which the WTO Member’s Schedule provides is incompatible with the first sentence of Article II:1(b) of the GATT66 “to the extent that it results in ordinary customs duties being levied in excess of those provided for in that Member’s Schedule”67. It stated, obiter 68, that it was feasible “under certain circumstances” for a country to devise by legislation an upper limit on the level of duty administered such that “the ad valorem 69 equivalents of the duties actually applied would not exceed the ad valorem duties”70 for which that Member’s Schedule

65 India – Additional and Extra-Additional Duties on Imports from the United States: Report of the Appellate Body (30 October 2008) WT/DS360/AB/R paras 158 and 159 ; emphasis added. 66 See the second sentence of n 60. 67 Argentina – Measures Affecting Imports of Footwear, Textiles, Apparel and Other Items: Report of the Appellate Body (27 March 1998) WT/DS56/AB/R para 55 . 68 ‘Obiter’ means “made or said in passing” (Judy Pearsall (ed), The New Oxford Dictionary of English (Oxford University Press 1998) 1277). n 153 in ch 3 defines ‘obiter dicta’. 69 ‘Ad valorem’ means “in proportion to the estimated value of the goods or transaction concerned” (ibid 25). 70 An ‘ad valorem duty’ is “[a] duty payable on goods calculated as a percentage of their value” (McFarlane, The Layman’s Dictionary of English Law (n 46) 9).

12  WTO’s International Trade Agreements: GATT of Concessions provides71. It is submitted that, as the AB found that the level of the duty imposed by Argentina could rise above the ad valorem equivalent72 – i.e., there was no effective upper limit to the duty actually applied73, the WTO Panel or the AB (as appropriate) would need to find that a type of duty which a WTO Member imposes that is different to that for which its Schedule provides is equal to or lower than the latter at all levels of the price of the relevant product(s), in order to declare the former compatible with the first sentence of Article II:1(b) of the GATT.

Article III: National Treatment on Internal Taxation and Regulation Article III of the GATT imposes upon the Members of the WTO the obligation to refrain from taxing imported products more heavily than domestic goods or otherwise acting specifically against the former, in order to equalize competitive conditions within each product market and to limit measures against imports only to the agreed MFN tariff bindings – thereby preserving the effect of the tariff-reduction negotiations amongst those Members74. Paragraph 1 of Article III of the GATT contains this duty in the form of a principle, which is applied through Paragraphs 2, 4 and 5 of that Article75. 71 Argentina – Measures Affecting Imports of Footwear, Textiles, Apparel and Other Items: Report of the Appellate Body (27 March 1998) WT/DS56/AB/R para 54 . 72 ibid para 53. 73 ibid para 54. 74 Mavroidis, Trade in Goods (n 34) 233–234. The AB in Japan – Taxes on Alcoholic Beverages posited the equalization of competitive conditions, whilst clarifying that the obligation in Article III of the GATT to treat imported products at least as well as domestic goods extends not only to items with MFN tariff bindings but also to unbound products: “The broad and fundamental purpose of Article III [of the GATT] is to avoid protectionism in the application of internal tax and regulatory measures. … Toward this end, Article III obliges Members of the WTO to provide equality of competitive conditions for imported products in relation to domestic products … Members of the WTO are free to pursue their own domestic goals through internal taxation or regulation so long as they do not do so in a way that violates Article III or any of the other commitments they have made in the [Agreement Establishing the World Trade Organization] … Although the protection of negotiated tariff concessions is certainly one purpose of Article III, the statement in Paragraph 6.13 of the Panel Report that “one of the main purposes of Article III is to guarantee that WTO Members will not undermine through internal measures their commitments under Article II” [of the GATT] should not be overemphasized. The Article III national treatment obligation is a general prohibition on the use of internal taxes and other internal regulatory measures so as to afford protection to domestic production. This obligation clearly extends also to products not bound under Article II. This is confirmed by the negotiating history of Article III.” (Japan – Taxes on Alcoholic Beverages: Report of the Appellate Body (4 October 1996) WT/DS8/AB/R WT/DS10/AB/R WT/DS11/AB/R 16-17 ). The subsection entitled ‘Article II: Schedules of Concessions’, in the current section, considers aspects of Article II of the GATT. 75 Mavroidis, Trade in Goods (n 34) 232. The next paragraph of the text (entitled ‘Article III:1: A general principle of direction’) describes the relationship between Paragraph 1 of Article III of the GATT and the other Paragraphs of Article III.

WTO’s International Trade Agreements: GATT  13 Article III:1: A general principle of direction WTO Members accept that they should not apply “internal taxes and other internal charges, and laws, regulations and requirements affecting the internal sale, offering for sale, purchase, transportation, distribution or use of products, and internal quantitative regulations requiring the mixture, processing or use of products in specified amounts or proportions” to domestic or imported goods, “so as to afford protection to domestic production”76. In Japan – Taxes on Alcoholic Beverages, the AB described Article III:1 of the GATT as “a general principle that internal measures should not be applied so as to afford protection to domestic protection”, which “informs the rest of Article III” of the GATT 77. Its purpose is to institute this precept “as a guide to understanding the specific obligations contained in Article III:2 [of the GATT] and in the other paragraphs of Article III, while respecting … the meaning of the words actually used in the texts of those other paragraphs”78.

Article III:2: ‘Directly competitive or substitutable’ and ‘like’ products Any WTO Member is not to subject products from the territory of any other Member “to internal taxes or other internal charges of any kind in excess of those applied, directly or indirectly, to like domestic products” 79. No WTO Member is to “otherwise apply internal taxes or other internal charges to imported or domestic products in a manner contrary to the principles set forth in paragraph 1” (i.e., Article III:1 of the GATT)80. A tax that complies with the requirements of the first sentence of Article III:2 of the GATT81 would be held to be incompatible with those of the second sentence of Article III:282, only in instances in which there was competition between the taxed good and “a directly competitive or substitutable product which was not similarly taxed”83. In Japan – Taxes on Alcoholic Beverages, the AB specified that the second sentence of Paragraph 2 of Article III of the GATT “provides for a separate and distinctive consideration of the protective aspect of a measure in examining 76 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art III:1 ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. 77 Japan – Taxes on Alcoholic Beverages: Report of the Appellate Body (4 October 1996) WT/DS8/ AB/R WT/DS10/AB/R WT/DS11/AB/R 18 . 78 ibid. 79 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art III:2 ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. 80 ibid. The text to n 76 states Article III:1 of the GATT. 81 The first sentence of Article III:2 of the GATT is the sentence in the text that corresponds to n 79. 82 The second sentence of Article III:2 of the GATT is the sentence in the text that corresponds to n 80. 83 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 Annex I Ad art III para 2 ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700.

14  WTO’s International Trade Agreements: GATT its application to a broader category of products that are not ‘like products’ as contemplated by the first sentence” of that Paragraph84. In Canada – Certain Measures Concerning Periodicals, the AB restated this declaration85. Then, in Korea – Taxes on Alcoholic Beverages, the AB clarified the relationship between ‘like’ products – which are assessed under the first sentence of Article III:2 – and ‘directly competitive or substitutable products’ – which are appraised under the second sentence of Article III:2. … “Like” products are a subset of directly competitive or substitutable products: all like products are, by definition, directly competitive or substitutable products, whereas not all “directly competitive or substitutable” products are “like”. The notion of like products must be construed narrowly but the category of directly competitive or substitutable products is broader. While perfectly substitutable products fall within Article III:2 [of the GATT], first sentence, imperfectly substitutable products can be assessed under Article III:2, second sentence86.

Article III:2, first sentence: Internal charges ‘in excess of’ those applied ‘directly or indirectly’ to ‘like domestic products’87 Decision-makers and judges at the GATT/WTO have been unable to agree a definition for the descriptor ‘like’ in respect of products. Commenting on “the interpretation of the term ‘… like or similar products’”88, the Working Party on Border Tax Adjustments “concluded that the problems arising from the interpretation of the term should be examined on a case-by-case basis”89. It suggested the following criteria for this individual determination as to “whether a product is ‘similar’: the product’s end-uses in a given market; consumers’ tastes and habits, which change from country to country; the product’s nature and quality” 90.

84 Japan – Taxes on Alcoholic Beverages: Report of the Appellate Body (4 October 1996) WT/DS8/ AB/R WT/DS10/AB/R WT/DS11/AB/R 19 . This quote is included in the long quote in the text from the AB’s Report of Japan – Taxes on Alcoholic Beverages corresponding to n 98. 85 The AB’s words were: “Any measure that indirectly affects the conditions of competition between imported and like domestic products would come within the provisions of Article III:2, first sentence, or by implication, second sentence, given the broader application of the latter.” (Canada – Certain Measures Concerning Periodicals: Report of the Appellate Body (30 June 1997) WT/DS31/AB/R 19 ). 86 Korea – Taxes on Alcoholic Beverages: Report of the Appellate Body (18 January 1999) WT/ DS75/AB/R WT/DS84/AB/R para 118 . 87 The first sentence of Article III:2 of the GATT is the sentence in the text that corresponds to n 79. 88 Report by the Working Party on Border Tax Adjustments (20 November 1970) L/3464 para 18 . 89 ibid. 90 ibid.

WTO’s International Trade Agreements: GATT  15 The AB in Japan – Taxes on Alcoholic Beverages uses these criteria on which to base its case-by-case assessment of whether a domestic good and an imported item are ‘like products’. In the part of the Report quoted below, the AB states that the definition of ‘like’ can be adapted in its breadth according to the provision in which it is placed – thereby opening the way to its comments in European Communities – Measures Affecting Asbestos and Asbestos-Containing Products 91 on the scope of the descriptor ‘like’ in relation to Article III:4 of the GATT. Article III:1 informs Article III:2, first sentence, by establishing that if imported products are taxed in excess of like domestic products, then that tax measure is inconsistent with Article III. Article III:2, first sentence does not specifically refer to Article III:1. … [T]he meaning [of this omission] is simply that the presence of a protective application [which Article III:1 prohibits92] need not be established separately from the specific requirements that are included in the first sentence in order to show that a tax measure is inconsistent with the general principle set out in the first sentence. … [T]he first sentence of Article III:2 is, in effect, an application of th[e] general principle [of Article III:1]. … Read in their context and in the light of the overall object and purpose of the [Agreement Establishing the World Trade Organization], the words of the first sentence require an examination of the conformity of an internal tax measure with Article III by determining, first, whether the taxed imported and domestic products are “like” and, second, whether the taxes applied to the imported products are “in excess of” those applied to the like domestic products. If the imported and domestic products are “like products”, and if the taxes applied to the imported products are “in excess of” those applied to the like domestic products, then the measure is inconsistent with Article III:2, first sentence. … Because the second sentence of Article III:2 provides for a separate and distinctive consideration of the protective aspect of a measure in examining its application to a broader category of products that are not “like products” as contemplated by the first sentence, … the first sentence of Article III:2 must be construed narrowly so as not to condemn measures that its strict terms are not meant to condemn. Consequently, … the definition of “like products” in Article III:2, first sentence, should be construed narrowly. How narrowly is a matter that should be determined separately for each tax measure in each case. … The Report of the Working Party on Border Tax Adjustments 93  … set out the basic approach for interpreting “like or similar products” generally in the various

91 WT/DS135/AB/R . The paragraph entitled ‘Article III:4’, in the current subsection, considers those remarks. 92 The first sentence of paragraph entitled ‘Article III:1: A general principle of direction’, in the current subsection, contains Article III:1 of the GATT. 93 Emphasis original.

16  WTO’s International Trade Agreements: GATT provisions of the GATT 194794[, which] was followed in almost all adopted panel reports after Border Tax Adjustments 95. … [T]his [case-by-case] approach will be most helpful if decision[-]makers keep ever in mind how narrow the range of “like” products in Article III:2, first sentence is meant to be as opposed to the range of “like” products contemplated in some other provisions of the GATT 1994 and other Multilateral Trade Agreements of the [Agreement Establishing the World Trade Organization]. In applying the criteria cited in Border Tax Adjustments 96 to the facts of any particular case, and in considering other criteria that may also be relevant in certain cases, [WTO] panels can only apply their best judgement in determining whether in fact products are “like”. … [D]istinguishing between “like products” and “directly competitive or substitutable products” under Article III:2 is … a discretionary decision that must be made in considering the various characteristics of products in individual cases. … The concept of “likeness” is a relative one that evokes the image of an accordion. The accordion of “likeness” stretches and squeezes in different places as different provisions of the [Agreement Establishing the World Trade Organization] are applied. The width of the accordion in any one of those places must be determined by the particular provision in which the term “like” is encountered as well as by the context and the circumstances that prevail in any given case to which that provision may apply. [I]n Article III:2, first sentence of the GATT 1994, the accordion of “likeness” is meant to be narrowly squeezed. … If sufficiently detailed, tariff classification [of products] can be a helpful sign of product similarity. … However, there … are risks in using tariff bindings 97 that are too broad as a measure of product “likeness”. … [Rather than] indicat[ing] similarity of the products covered by a binding [, the use of] very broad uniform bindings … represents the results of trade concessions negotiated among Members of the WTO. [D]eterminations [as to whether the particular tariff bindings are sufficiently] precise with regard to product description [to] provide significant guidance as to the identification of “like products” … need to be made on a case-by-case basis. However, tariff bindings that include a wide range of products are not a reliable criterion for determining or confirming product “likeness” under Article III:298.

94 At this point in its judgement, the AB quotes a passage from Paragraph 18 of the Report by the Working Party on Border Tax Adjustments that is almost identical to the text corresponding to nn 88–90. 95 Emphasis original. 96 Emphasis original. 97 Emphasis added. 98 Japan – Taxes on Alcoholic Beverages: Report of the Appellate Body (4 October 1996) WT/DS8/ AB/R WT/DS10/AB/R WT/DS11/AB/R 18-22 .

WTO’s International Trade Agreements: GATT  17 Thus, the AB adds a product’s tariff classification, and, when sufficiently precise, the description accompanying its tariff binding, to the criteria which the Report of the Working Party on Border Tax Adjustments laid down, as items that WTO Panels are to consider in determining on a case-by-case basis whether an imported good and a domestic product are ‘like’. In Canada – Certain Measures Concerning Periodicals, the AB acknowledged that the first sentence of Article III:2 of the GATT “normally requires a comparison between imported products and domestic products” 99. However, “as there were no imports” of the relevant product, owing to the relevant tariff code’s prohibition of these, hypothetical imports of that good would need to be considered100. In Indonesia – Certain Measures Affecting the Automobile Industry, the WTO Panel constructed a hypothetical import, using determinants according to which Indonesian cars are distinguished “for tax purposes … such … as the nationality of the producer or the origin of the parts and components contained in the products”101. The Panel concluded thus: An imported motor vehicle alike in all aspects relevant to a likeness determination would be taxed at [a] higher rate simply because of its origin or lack of sufficient local content. … [S]uch an origin-based distinction in respect of internal taxes suffices in itself to violate Article III:2 [of the GATT], without the need to demonstrate the existence of actually[-]traded like products102. Further to the AB’s comments in European Communities – Measures Affecting Asbestos and Asbestos-Containing Products103 concerning the scope of ‘like’ in Article III:4 of the GATT relative to that in Article III:2104, the WTO Panel in Thailand – Customs and Fiscal Measures on Cigarettes from the Philippines held that if imported products and domestic goods are considered to be ‘like’ in the sense of the first sentence of Article III:2, then “they can also be deemed to meet the likeness requirement under Article III:4”105. Thus, the ‘accordion of “likeness”’ that the AB introduces in Japan – Taxes on Alcoholic Beverages is to be squeezed less for Article III:4 than for Article III:2. 99 Canada – Certain Measures Concerning Periodicals: Report of the Appellate Body (30 June 1997) WT/DS31/AB/R 20 . 100 ibid 20–21. 101 Indonesia – Certain Measures Affecting the Automobile Industry: Report of the Panel (2 July 1998) WT/DS54/R WT/DS55/R WT/DS59/R WT/DS64/R para 14.113 . 102 ibid. 103 WT/DS135/AB/R . 104 The paragraph entitled ‘Article III:4’, in the current subsection, considers the AB’s remarks in European Communities – Measures Affecting Asbestos and Asbestos-Containing Products. 105 Thailand – Customs and Fiscal Measures on Cigarettes from the Philippines (15 November 2010) WT/DS371/R para VII.662 .

18  WTO’s International Trade Agreements: GATT If the AB or WTO Panel has found the taxed imported and domestic products to be ‘like’, then it must proceed to determine whether or not the charge on the imported good is ‘in excess of’ that on the domestic item; if so, then the levy on the former is incompatible with the first sentence of Article III:2 of the GATT106. In Japan – Taxes on Alcoholic Beverages, the AB held that “the smallest amount of ‘excess’ is too much”107. Thus, the first sentence of Article III:1 combines a test of ‘likeness’ of imported and domestic products that has a high attainment threshold with a test of ‘excess internal charge’ on the imported good, which has a low achievement threshold. In Argentina – Measures Affecting the Export of Bovine Hides and the Import of Finished Leather, the WTO Panel stated that the first sentence of Article III:2 of the GATT “requires a comparison of actual tax burdens rather than merely of nominal tax burdens”108. In respect of this comparison, “Article III:2, first sentence is applicable to each individual import transaction [, so] favourable tax treatment of imported products in some instances [does not balance] against less favourable tax treatment of imported products in other instances”109. Taken to the limit, this ‘excess internal charge’ test would only require a demonstration of one instance of a minuscule excess of tax on an imported product over that on a ‘like’ domestic good, in order to establish a breach of the first sentence of Article III:2. Furthermore, a tax differential unfavourable to the imported product that is imposed for a limited time – thirty days in the particular case – would be classified as an excess internal charge110. The ‘excess internal charge’ test includes indirect charges. In Mexico – Tax Measures on Soft Drinks and Other Beverages, the WTO Panel held that “[t]axes directly imposed on finished products can indirectly affect the conditions of competition between imported and like domestic products and therefore come within the scope of Article III:2, first sentence”111. The Panel applied this logic not only to the tax on the finished products (the ‘soft drinks tax’) that was held “thereby to fall on the” relevant input goods (‘non-cane sugar sweeteners’)112 but also to the ‘distribution tax’ on the supply of services with the objective of conveying those finished products113.

106 Text to n 98. 107 Japan – Taxes on Alcoholic Beverages: Report of the Appellate Body (4 October 1996) WT/DS8/ AB/R WT/DS10/AB/R WT/DS11/AB/R 23 . 108 Argentina – Measures Affecting the Export of Bovine Hides and the Import of Finished Leather: Report of the Panel (19 December 2000) WT/DS155/R para XI.851 . 109 ibid para XI.928. 110 ibid para XI.913. 111 Mexico – Tax Measures on Soft Drinks and Other Beverages (7 October 2005) WT/DS308/R para VIII.44 ; emphasis original. 112 ibid para VIII.49. 113 ibid paras VIII.47 and VIII.49.

WTO’s International Trade Agreements: GATT  19 Article III:2, second sentence: ‘Directly competitive or substitutable’ products that are ‘not similarly taxed’114 As Article III:2 of the GATT is augmented by Paragraph 2 of Ad Article III of the GATT115, the AB in Japan – Taxes on Alcoholic Beverages clarified the legal standing of the latter. Article III:2, second sentence, and the accompanying Ad Article have equivalent legal status in that both are treaty language which was negotiated and agreed at the same time. … [T]he language of the second sentence and the Ad Article must be read together in order to give them their proper meaning116. The AB then distinguishes the test in the second sentence of Article III:2 of the GATT from that in the first sentence of this Paragraph117, and specifies the former. Unlike that of Article III:2, first sentence, the language of Article III:2, second sentence, specifically invokes Article III:1. The significance of this distinction lies in the fact that whereas Article III:1 acts implicitly in addressing the two issues that must be considered in applying the first sentence, it acts explicitly as an entirely separate issue that must be addressed along with two other issues that are raised in applying the second sentence. … These three issues are whether: (1) the imported products and the domestic products are “directly competitive or substitutable products” which are in competition with each other; (2) the directly competitive or substitutable imported and domestic products are “not similarly taxed”; and (3) the dissimilar taxation of the directly competitive or substitutable imported product is ­“applied … so as to afford protection to domestic production”. … Each issue must be ­established separately by the complainant for a panel to find that a tax measure imposed by a Member of the WTO is inconsistent with Article III:2, second sentence118. 114 The second sentence of Article III:2 of the GATT is the sentence in the text that corresponds to n 80. The next sentence (which corresponds to n 83) is also relevant to that Paragraph – the quote that corresponds to n 116 encapsulates the relationship between them. 115 Text to n 83. 116 Japan – Taxes on Alcoholic Beverages: Report of the Appellate Body (4 October 1996) WT/ DS8/AB/R WT/DS10/AB/R WT/DS11/AB/R 24 ; emphasis original. 117 The quote that corresponds to n 98 includes the AB’s statement, in Japan – Taxes on Alcoholic Beverages, of the test in the first sentence of Article III:2 of the GATT. 118 ibid; emphasis original. Issues (1) and (2) arise from Paragraph 2 of Ad Article III of the GATT. Issue (3) originates in Article III:1 of the GATT. Thus, no part of the test in the second sentence of Article III:2 of the GATT (as specified by the AB in Japan – Taxes on Alcoholic Beverages) emerges directly from that sentence. It is submitted that this unsatisfactory situation

20  WTO’s International Trade Agreements: GATT The AB in Japan – Taxes on Alcoholic Beverages held that each WTO Panel was to determine the suitable extent of ‘directly competitive or substitutable products’ on a case-by-case basis119. Relevant determinants of whether an imported good and a domestic item are ‘directly competitive or substitutable’ include “physical characteristics, common-end uses, … tariff classifications and … competition in the relevant markets”120. Elasticity of substitution may be used as “one means of examining those markets” and of ascertaining whether the two products have common end-uses121. Based on the WTO Panel’s judgement in Korea – Taxes on Alcoholic Beverages122, the AB in the same case placed its comments on ‘directly competitive or substitutable products’ under the following headings: (i) “Potential Competition”123: a WTO Panel may take into account “evidence of latent consumer demand” when examining “the competitive relationship between imported and domestic products under Article III:2, second sentence, of the GATT 1994”124; (ii) “Expectations”125: one must consider the purpose of Article III of the GATT – which is to preserve equal conditions of competition for these products – in interpreting the phrase ‘directly competitive or substitutable product’126; (iii) ‘“Trade Effects” Test’127: the WTO Panel considered logically that, if a certain amount of competition needs to be demonstrated in quantitative terms, then this would be similar to a trade effects test being included in Article III128; (iv) “Nature of Competition”129: the WTO Panel’s frequent use of the term ‘nature of competition’ means ‘quality of competition’ rather than ‘quantity of competition’130 – an approach that only attends to “the quantitative overlap of competition” essentially makes cross-price elasticity of demand the crucial criterion in establishing whether products are ‘directly competitive or substitutable’131; (v) “Evidence from the Japanese Market”132: the WTO Panel was correct to refer to the Japanese market in its judgement133 – if another market has features that are similar to that under consideration, “then

presents a case for the WTO to revisit the wording of the second sentence of Article III:2, in order to include therein at least some of the elements of the test. 119 Japan – Taxes on Alcoholic Beverages: Report of the Appellate Body (4 October 1996) WT/DS8/ AB/R WT/DS10/AB/R WT/DS11/AB/R 25 . 120 ibid. 121 ibid. 122 WT/DS75/R WT/DS84/R . 123 Korea – Taxes on Alcoholic Beverages: Report of the Appellate Body (18 January 1999) WT/ DS75/AB/R WT/DS84/AB/R para 112 ; emphasis original. 124 ibid para 124. 125 ibid para 125; emphasis original. 126 ibid para 127. 127 ibid para 128; emphasis original. 128 ibid paras 128, 130 and 131. 129 ibid para 132; emphasis original. 130 ibid paras 132 and 133. 131 ibid para 134. 132 ibid para 135; emphasis original. 133 ibid para 138.

WTO’s International Trade Agreements: GATT  21 evidence of consumer demand in” the former may be relevant to the latter134; (vi) “Grouping of the Products”135: The AB’s comments include the following. Some grouping is almost always necessary in cases arising under Article III:2, second sentence, since generic categories commonly include products with some variation in composition, quality, function and price, and thus commonly give rise to sub-categories. … “[G]rouping” of products involves at least a preliminary characterization by the treaty interpreter that certain products are sufficiently similar as to, for instance, composition, quality, function and price, to warrant treating them as a group for convenience in analysis. But, the use of such “analytical tools” does not relieve a panel of its duty to make an objective assessment of whether the components of a group of imported products are directly competitive or substitutable with the domestic products. … Whether, and to what extent, products can be grouped is a matter to be decided on a case-by-case basis136. It is submitted that it may be difficult from this guidance to determine whether an imported good and a domestic item are ‘directly competitive or substitutable products which are in competition with each other’. The factors specified above need to be considered and balanced, for the WTO Panel or the AB (as appropriate) to decide this. Following on from its comment in Japan – Taxes on Alcoholic Beverages that even ‘the smallest amount of excess’ of tax on an imported good over that on a ‘like domestic product’ was incompatible with the first sentence of Article III:2 of the GATT137, the AB later in that judgement stated the following. To interpret “in excess of” and “not similarly taxed” identically would deny any distinction between the first and second sentences of Article III:2. Thus, in any given case, there may be some amount of taxation on imported products that may well be “in excess of” the tax on domestic ‘like products’ but may not be so much as to compel a conclusion that “directly competitive or substitutable” imported and domestic products are “not similarly taxed” for the purposes of the Ad Article to Article III:2, second sentence138. … [T]his amount of differential taxation must be more than de minimis139 to be deemed “not similarly taxed” … . [W]hether any particular differential 34 ibid para 137. 1 135 ibid para 139. 136 ibid paras 142 and 143; emphasis original. 137 Text to nn 106 and 107. 138 Text to n 83. 139 ‘De minimis non curat lex’ means “the law does not concern itself with trivialities” (McFarlane, The Layman’s Dictionary of English Law (n 46) 81). ‘Trivial’ means “of little value or importance” (Pearsall (ed), The New Oxford Dictionary of English (n 68) 1983). Hence, ‘de minimis’ in this context – concerning the differential amount of a tax on an imported good over that on a ‘directly competitive or substitutable’ domestic product – means ‘of little value’.

22  WTO’s International Trade Agreements: GATT amount of taxation is de minimis or not de minimis must … be determined on a case-by-case basis. Thus, to be “not similarly taxed”, the tax burden on imported products must be heavier than on “directly competitive or substitutable” domestic products, and that burden must be more than de minimis in any given case140. Having determined how issues (1) and (2) are to be addressed, the AB in ­Japan – Taxes on Alcoholic Beverages considered matter (3)141. This third inquiry under Article III:2, second sentence, must determine whether “directly competitive or substitutable products” are “not similarly taxed” in a way that affords protection. This is not an issue of intent. … If the measure is applied to imported or domestic products so as to afford protection to domestic production, then it does not matter that there may not have been any desire to engage in protectionism in the minds of the legislators or the regulators who imposed the measure. … [A]n examination in any case of whether dissimilar taxation has been applied so as to afford protection requires a comprehensive and objective analysis of the measure in question on domestic as compared to imported products. [I]t is possible to examine objectively the underlying criteria used in a particular tax measure, its structure and its overall application to ascertain whether it is applied in a way that affords protection to domestic products. [I]ts protective application can most often be discerned from the design, the architecture, and the revealing structure of a measure. The very magnitude of the dissimilar taxation in a particular case may be evidence of such a protective application … . Most often, there will be other factors to be considered as well. In conducting this inquiry, panels should give full consideration to all the relevant facts and all the relevant circumstances in any given case142. In Canada – Certain Measures Concerning Periodicals, the AB referred to the later part of this quote (from ‘an examination’ to the end of the passage) and observed “that the magnitude of the dissimilar taxation between [the imported and domestic products] is … prohibitive”143. It found “ample evidence that the very design and structure of the measure is such as to afford protection to domestic

140 Japan – Taxes on Alcoholic Beverages: Report of the Appellate Body (4 October 1996) WT/ DS8/AB/R WT/DS10/AB/R WT/DS11/AB/R 27 ; emphasis original. 141 The quote corresponding to n 118 specifies the three issues that the WTO Panel or the AB (as appropriate) are to consider in determining whether or not there has been a breach of the second sentence of Article III:2 of the GATT. 142 Japan – Taxes on Alcoholic Beverages: Report of the Appellate Body (4 October 1996) WT/DS8/ AB/R WT/DS10/AB/R WT/DS11/AB/R 27-29 ; emphasis added. 143 Canada – Certain Measures Concerning Periodicals: Report of the Appellate Body (30 June 1997) WT/DS31/AB/R 30 .

WTO’s International Trade Agreements: GATT  23 periodicals”144. However, contrary to its statement in Japan – Taxes on Alcoholic Beverages145 the AB in Canada – Certain Measures Concerning Periodicals included in its reasoning the Canadian Government’s legislative intent. [O]n the basis of the above reasons, including the magnitude of the differential taxation, the several statements of the Government of Canada’s explicit policy objectives in introducing the measure and the demonstrated actual protective effect of the measure, … the design and structure of part V.1 of the Excise Tax Act is clearly to afford protection to the production of Canadian periodicals146. Perhaps what the AB meant in Japan – Taxes on Alcoholic Beverages is that a legislative or regulatory intent that purports not to favour the domestic product over the imported good is not an obstacle to the WTO Panel or the AB finding that the measure in question is applied so as to afford protection to domestic production. In Korea – Taxes on Alcoholic Beverages, the Korean Government observed that, before the imposition of the tax at issue, the imported liquors were substantially more expensive than domestic Korean soju147. It contended that, because these price differences are so great, the further divergence ascribed to the tax would not affect consumer behaviour, and, consequently, could not provide “protection to a domestic industry”148. Notwithstanding this, the AB – endorsing the WTO Panel’s view – held the following. [T]he tax operates in such a way that the lower tax brackets cover almost exclusively domestic production, whereas the higher tax brackets embrace almost exclusively imported products. In such circumstances, the reasons given by Korea as to why the tax is structured in a particular way do not call into question the conclusion that the measures are applied “so as to afford protection to domestic production”149. In Chile – Taxes on Alcoholic Beverages, the tax was steeply graded such that 75% of goods from domestic production were located in the lowest tax band, whilst 95% of the directly competitive or substitutable imported products were situated in the highest tax band150. Chile claimed before the WTO Panel that the system’s aims were to continue the collection of revenue, remove “type

44 ibid. 1 145 Text to n 142. 146 ibid 32. 147 Korea – Taxes on Alcoholic Beverages: Report of the Panel (17 September 1998) WT/DS75/ R WT/DS84/R paras VI.659 and VI.660 . 148 ibid para VI.722. 149 Korea – Taxes on Alcoholic Beverages: Report of the Appellate Body (18 January 1999) WT/ DS75/AB/R WT/DS84/AB/R para 150 ; emphasis original. 150 Chile – Taxes on Alcoholic Beverages: Report of the Appellate Body (13 December 1999) WT/ DS87/AB/R WT/DS110/AB/R para 67 .

24  WTO’s International Trade Agreements: GATT ­ escriptions” – such as those noted in Japan and the Republic of Korea, disd courage the consumption of alcohol, and “minimiz[e] the potentially regressive aspects of the reform of the tax system”151. However, the AB refused to accept these objectives as an effective refutation of the allegation that the tax measure was applied in order to give protection to domestic production. [A] measure’s purposes objectively manifested in the design, architecture and structure of the measure, are intensely pertinent to the task of evaluating whether or not that measure is applied so as to afford protection to domestic production. … The conclusion of protective application reached by the Panel becomes very difficult to resist, in the absence of countervailing explanations by Chile. The mere statement of the four objectives pursued by Chile does not constitute effective rebuttal on the part of Chile152. It is submitted that, in every case in which there is no statement by the relevant government that the measure in question is intended to favour domestic production, the AB focuses on its design and architecture – determining with the aid of any comments by that government whether or not the measure affords protection to domestic production. It is common to the Japan, Canada, Republic of Korea and Chile cases quoted above that this approach would have found the relevant national provision to afford such protection. The AB in Japan – Taxes on Alcoholic Beverages attempts to make way for a meaningful analysis of this type by sidelining the intent of the legislators with regard to the measure. In Mexico – Tax Measures on Soft Drinks and Other Beverages, the WTO Panel clarifies that the AB’s approach in Canada – Certain Measures Concerning Periodicals – in which the relevant government made a statement of protective intent – is consistent with that in Japan – Taxes on Alcoholic Beverages, Korea – Taxes on Alcoholic Beverages and Chile – Taxes on Alcoholic Beverages, in which it did not. This reconciliation is as follows. The protective effect of the measure on Mexican domestic production of sugar does not seem to be an unintended effect, but rather an intentional objective. The Appellate Body has cautioned against ascribing too much importance to the subjective legislative intent of legislators and regulators in the drafting of a particular measure, to determine whether the measure is applied so as to afford protection to domestic production, particularly when that declared intent was not an objective. However, the declared intention of legislators and regulators of the Member adopting the measure should not be totally disregarded, particularly when the explicit objective of the measure is that of affording protection to domestic production. Indeed, the Appellate Body has confirmed that statements made by government

151 ibid para 69. 152 ibid para 71; emphasis original.

WTO’s International Trade Agreements: GATT  25 representatives of a Member, admitting to the protective intent of a measure, may be relevant as part of a number of considerations in reaching the conclusion that a measure is applied so as to afford protection to domestic production153. It is submitted that, for the purposes of completing this clarification of the law, the AB should include a similar statement to this quote in the next case that comes before it concerning the application of the second sentence of Article III:2 of the GATT. It missed the opportunity to do this in Philippines – Taxes on Distilled Spirits154 – a case with similar facts to Korea – Taxes on Alcoholic Beverages – even though those comments would have been obiter dicta155 as the Philippine Government did not make a statement of protective intent in respect of the taxes at issue.

Article III:4 Any Member of the WTO is to extend to products imported from the territory of another Member “treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use”156. In Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef, the AB separated this provision into three components. For a violation of Article III:4 [of the GATT] to be established, three elements must be satisfied: that the imported and domestic products at issue are “like products”, that the measure at issue is a “law, regulation, or requirement affecting their internal sale, offering for sale, purchase, transportation, distribution or use”, and that the imported products are accorded “less favourable” treatment than that accorded to like domestic products. …157 In European Communities – Regime for the Importation, Sale and Distribution of Bananas, the AB held that, as Article III:4 of the GATT does not mention Article III:1 of the GATT, the establishment of a breach of Article III:4 does not

153 Mexico – Tax Measures on Soft Drinks and Other Beverages: Report of the Panel (7 October 2005) WT/DS308/R para VIII.91 . 154 WT/DS396/AB/R WT/DS403/AB/R . 155 n 153 in ch 3 defines ‘obiter dicta’. 156 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art III:4 ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. Notwithstanding this, the Member may apply “differential internal transportation charges which are based exclusively on the economic operation of the means of transport and not on the nationality of the product” (ibid). 157 Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef: Report of the Appellate Body (11 December 2000) WT/DS161/AB/R WT/DS169/AB/R para 133 .

26  WTO’s International Trade Agreements: GATT necessitate “a separate consideration of whether a measure ‘afford[s] protection to domestic production’”158. With regard to the second element that must be met in order to demonstrate a contravention of Article III:4, the AB in United States – Tax Treatment for “Foreign Sales Corporations” – Recourse to Article 21.5 of the DSU by the European Communities interpreted the word ‘affecting’ in that rule “as having a ‘broad scope of application’”159. As a result, this is a gentle test which most measures affecting the products in question should satisfy. In the commentary that follows, the first (‘like products’) and third (‘less favourable’) elements are considered. In European Communities – Measures Affecting Asbestos and AsbestosContaining Products, the AB comprehensively considered the criteria for ‘like’ domestic and imported products under Article III:4 of the GATT. After using The New Shorter Oxford English Dictionary to define ‘like’160, and – on the basis of the meaning given therein – equating ‘like products’ with “products that share a number of identical or similar characteristics or qualities”161, the AB stated that the dictionary meaning of the word: (i) “does not indicate which characteristics or qualities are important in assessing the ‘likeness’ of products under Article III:4”162, (ii) “provides no guidance in determining the degree or extent to which products must share qualities or characteristics in order to be ‘like products’ under Article III:4”163, and (iii) “does not indicate from whose perspective ‘likeness’ should be judged”164. To start to solve these matters of interpretation, the AB proceeded to examine the relationship of that Paragraph with Paragraphs 1 and 2 of Article III of the GATT165. [T]he “general principle” articulated in Article III:1166 … is not explicitly invoked in Article III:4, nevertheless, it “informs” that provision. Therefore, the term “like product” in Article III:4 must be interpreted to give

158 European Communities – Regime for the Importation, Sale and Distribution of Bananas: Report of the Appellate Body (9 September 1997) WT/DS27/AB/R para 216 . As the AB acknowledges in Paragraph 216 of European Communities – Regime for the ­Importation, Sale and Distribution of Bananas, it had held similarly in Japan – Taxes on Alcoholic Beverages with regard to the application of Article III:1 of the GATT to the first sentence of Article III:2 of the GATT (text to n 98). 159 United States – Tax Treatment for “Foreign Sales Corporations” – Recourse to Article 21.5 of the DSU by the European Communities: Report of the Appellate Body (14 January 2002) WT/ DS108/AB/RW para 210 . 160 European Communities – Measures Affecting Asbestos and Asbestos-Containing Products: Report of the Appellate Body (12 March 2001) WT/DS135/AB/R para 90 and fn 61 . 161 ibid para 91. 162 ibid para 92; emphasis original. 163 ibid; emphasis original. 164 ibid; emphasis original. 165 ibid paras 92 and 93. 166 Text to n 77. n 74 expresses this general principle, too, as ‘the broad and fundamental purpose of Article III of the GATT’.

WTO’s International Trade Agreements: GATT  27 proper scope and meaning to this principle. [T]here must be consonance between the objective pursued by Article III, as enunciated in the “general principle” articulated in Article III:1, and the interpretation of the specific expression of this principle in the text of Article III:4. This interpretation must, therefore, reflect that, in endeavouring to ensure “equality of competitive conditions [for imported products in relation to domestic products]”167, the “general principle” in Article III seeks to prevent Members [of the WTO] from applying internal taxes and regulations in a manner which affects the competitive relationship, in the marketplace, between the domestic and imported products involved, “so as to provide protection to domestic production”. As products that are in a competitive relationship in the marketplace could be affected through treatment of imports “less favourable” than the treatment accorded to domestic products, it follows that the word “like” in Article III:4 is to be interpreted to apply to products that are in such a competitive relationship. Thus, a determination of “likeness” under Article III:4 is, fundamentally, a determination about the nature and extent of a competitive relationship between and among products168. The AB explains how the scope of the word ‘like’ in Article III:4 of the GATT relates to that of the same word in the first sentence of Article III:2 of the GATT. … [T]he relationship between [Paragraphs 2 and 4 of Article III of the GATT] is important, because there is no sharp distinction between fiscal regulation, covered by Article III:2, and non-fiscal regulation, covered by Article III:4. Both forms of regulation can often be used to achieve the same ends. It would be incongruous if, due to a significant difference in the product scope of these two provisions, Members [of the WTO] were prevented from using one form of regulation – for instance, fiscal – to protect domestic production for certain products, but were able to use another form of regulation – for instance, non-fiscal – to achieve those ends. This would frustrate a consistent application of the “general principle” in Article III:1. For these reasons, [t]he scope of “like” in Article III:4 is broader than the scope of “like” in Article III:2, first sentence. Nonetheless, … Article III:2 extends not only to “like products”, but also to products which are “directly competitive or substitutable”, and … Article III:4 extends only to “like products”. In view of this different language, … the product scope of Article III:4, although broader than the first sentence of Article III:2, is certainly not broader than the combined product scope of the two sentences of Article III:2 of the GATT 1994169. 167 n 74 contains this quote from the Report of the AB in Japan – Taxes on Alcoholic Beverages. 168 European Communities – Measures Affecting Asbestos and Asbestos-Containing Products: Report of the Appellate Body (12 March 2001) WT/DS135/AB/R paras 97-99 ; emphasis original. 169 ibid para 99; emphasis original.

28  WTO’s International Trade Agreements: GATT Later in this judgement, the AB addressed the ‘likeness’ of chrysotile asbestos fibres and PCG fibres, and of cement-based products that contain each type of fibres. Its approach is instructive, especially in the light of its general comments on ‘like products’ under Article III:4 of the GATT – expressed above. [T]he evidence relating to properties indicates that, physically, chrysotile asbestos and PCG fibres are very different. [I]n order to overcome this indication that products are not “like”, a high burden is imposed on a complaining Member [of the WTO] to establish that, despite the pronounced physical differences, there is a competitive relationship between the products such that, all of the evidence, taken together, demonstrates that the products are “like” under Article III:4 of the GATT 1994. … Where products have a wide range of end-uses, only some of which overlap, … it is [not] sufficient to rely solely on evidence regarding the overlapping end-uses, without also examining evidence of the nature and importance of these end-uses in relation to all of the other possible end-uses for the products. In the absence of such evidence, we cannot determine the significance of the fact that chrysotile asbestos and PCG fibres share a small number of similar end-uses. … [As] the physical properties of the fibres are very different, an examination of the evidence relating to consumers’ tastes and habits is an ­indispensable – although not, on its own, sufficient – aspect of any determination that products are “like” under Article III:4 of the GATT 1994. If there is no evidence on this aspect of the nature and extent of the competitive relationship between the fibres, there is no basis for overcoming the inference, drawn from the different physical properties, that the products are not “like”. … [C]hrysotile asbestos fibres and the various PCG fibres all have different tariff classifications. While this element is not, on its own, decisive, it does tend to indicate that chrysotile and PCG fibres are not “like products” under Article III:4 of the GATT 1994. Taken together … this evidence suggest[s] that these products are not “like products” for the purposes of Article III:4 of the GATT 1994170. The basis of the assessment of ‘like products’ under Article III:4 of the GATT uses the three criteria laid down in the Report by the Working Party on Border Tax Adjustments171, together with the tariff classification of each product – which the AB suggested in Japan – Taxes on Alcoholic Beverages as a criterion for ‘like’ products under the first sentence of Article III:2 of the GATT172. However, the scope of ‘like’ in relation to an imported good and a domestic item is broader under Article III:4 than under Article III:2173. The comparison of the cement-based products in European Communities – Measures Affecting Asbestos 170 ibid paras 136 and 138–141; emphasis original. 171 Text to n 90. 172 Text to n 98. 173 Text to n 169.

WTO’s International Trade Agreements: GATT  29 and Asbestos-Containing Products is similar, but not identical, to that of chrysotile asbestos fibres and PCG fibres (quoted above), with a similar conclusion of the cement-based goods not being ‘like products’174. Furthermore, the serious health risk of the chrysotile asbestos fibres put the AB’s conclusion of these not being ‘like’ PCG fibres into the ‘inarguable’ category in the opinion of one of its judges in a concurring statement175. In Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef, the AB addressed the third of the elements which it had stated in earlier in the case needed to be satisfied in order to establish a breach of Article III:4 of the GATT176 – namely that ‘less favourable’ treatment is given to imported goods than to like domestic items. Korean law provided for a ‘dual retail system’ in respect of domestic and imported beef, which included the following features. A small retailer … which is a “Specialized Imported Beef Store” may sell any meat except domestic beef, any other small retailer may sell any meat except imported beef. A large retailer … may sell both imported and domestic beef … . A retailer selling imported beef is required to display a sign reading “Specialized Imported Beef Store”. … When beef was first imported into [the Republic of] Korea in 1988, the new product simply entered into the pre-existing distribution system … . In 1990, Korea promulgated its dual retail system for beef. [T]he existing small retailers had to choose between … continuing to sell domestic beef and renouncing the sale of imported beef or … ceasing to sell domestic beef in order to be allowed to sell the imported product. [T]he vast majority of the small meat retailers chose the first option. The result was the virtual exclusion of imported beef from the retail distribution channels through which … beef … was distributed to … consumers throughout the country. [A] new and separate retail system had to be established and gradually built … up for bringing the imported product to the same … consumers …177. Quoting from page 16 of its judgement in Japan – Taxes on Alcoholic Beverages178, the AB in Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef focused on the competitive conditions between imports and like domestic products.

174 European Communities – Measures Affecting Asbestos and Asbestos-Containing Products: Report of the Appellate Body (12 March 2001) WT/DS135/AB/R para 147 . 175 ibid para 153. 176 Text to n 157. 177 Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef: Report of the Appellate Body (11 December 2000) WT/DS161/AB/R WT/DS169/AB/R paras 143 and 145 ; emphasis original. 178 The essential part of that quote, which concerns “equality of competitive conditions for imported products in relation to domestic products”, is in n 74.

30  WTO’s International Trade Agreements: GATT … Whether or not imported products are treated “less favourably” than like domestic products should be assessed … by examining whether a measure modifies the conditions of competition in the relevant markets to the detriment of imported products179. The AB held the main outcome of the dual retail system for imported beef to be “the imposition of a drastic reduction of commercial opportunity to reach, and hence to generate sales to, the same consumers served by the traditional retail channels for domestic beef”180. As the measure restricted the choice of each small retailer to selling either domestic or imported beef, it caused that outcome – so “the intervention of some element of private choice does not relieve [the ­Republic of] Korea of responsibility under the GATT 1994 for the resulting establishment of competitive conditions less favourable for the imported product than for the domestic product”181. Thus, this treatment of imported beef is incompatible with the requirements of Article III:4 of the GATT182. As the requirement for small retailers selling imported beef to display a sign showing ‘Specialized Imported Beef Store’ was “a detail of the dual retail system, [this] requirement partakes of the legal characterization” of the dual retail system and is, therefore, also at variance with Article III:4183. In Dominican Republic – Measures Affecting the Importation and Internal Sale of Cigarettes, the Dominican Republic’s law required domestic manufacturers and importers of cigarettes into that country “to post a bond”184 as surety for the payment of taxes, which the Government of Honduras argued “creates a disincentive against importing cigarettes”185. Quoting from its judgements in Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef and ­European Communities – Measures Affecting Asbestos and Asbestos-Containing Products, the AB in Dominican Republic – Measures Affecting the Importation and ­Internal Sale of Cigarettes held the following. [T]he question that a panel must answer in an analysis under Article III:4 [of the GATT] is whether the measure at issue modifies the conditions of competition in the relevant market to the detriment of imported products. [A] measure accords less favourable treatment to imported products if it gives domestic like products a competitive advantage in the market over 179 Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef: Report of the Appellate Body (11 December 2000) WT/DS161/AB/R WT/DS169/AB/R para 137 ; emphasis original. 180 ibid para 145. 181 ibid para 146. 182 ibid para 148. 183 ibid para 151. 184 Dominican Republic – Measures Affecting the Importation and Internal Sale of Cigarettes: Report of the Appellate Body (25 April 2005) WT/DS302/AB/R para 87 . 185 ibid.

WTO’s International Trade Agreements: GATT  31 imported like products. [T]he bond requirement applies equally to importers and domestic producers, and is fixed at RD$5 million186 … for both importers and domestic producers187. The AB proceeded to distinguish its judgement in Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef, using the origin of the product as the differentiating factor. … The Appellate Body indicated in Korea – Various Measures on Beef that imported products are treated less favourably than like products if a measure modifies the conditions of competition in the relevant market to the detriment of imported products. However, the existence of a detrimental effect on a given imported product resulting from a measure does not necessarily imply that this measure accords less favourable treatment to imports if the detrimental effect is explained by factors or circumstances unrelated to the foreign origin of the product, such as the market share of the importer in this case. [T]he mere demonstration that the per-unit cost of the bond requirement for imported cigarettes was higher than for some domestic cigarettes during a particular period is not … sufficient to establish “less favourable treatment” under Article III:4 of the GATT 1994. …188 Whilst the elements that must be demonstrated for a contravention of Article III:4 of the GATT do not – in the AB’s case law from Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef189 – refer to the origin of the product, Article III:4 includes the phrase “products of national origin”190. Whilst this observation is persuasive for including the origin of the product as a necessary determinant of the less favourable treatment for the breach to be established, it is not conclusive. Notwithstanding this, it is submitted that the AB would be considered to have arrived at the correct result on the facts of this particular case, if the law of equity was to be applied. If the Honduran importer was selling more cigarettes in the Dominican Republic than any of the domestic manufacturers, then, other things being the same, it and they would each post RD$ 5 million for the bond, and the importer’s costs of that bond per unit would be lower than that of the national producers. On these facts, the importer would be favoured – but the domestic firms would not have standing to challenge this outcome ­before the WTO. As equity in the legal context is a fugacious concept, it is submitted that the AB’s judgement in Dominican Republic – Measures Affecting the Importation and Internal Sale of Cigarettes should be limited to the facts of that specific case. If a similarly inequitable outcome would occur as a result of 186 The currency of the Dominican Republic is the Dominican Peso, with symbol RD$. 187 ibid para 93. 188 ibid para 96; emphasis original. 189 Text to n 157. 190 Text to n 156.

32  WTO’s International Trade Agreements: GATT the strict application of Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef to any future alleged contravention of Article III:4, then the AB might choose to apply its treatment in Dominican Republic – Measures Affecting the Importation and Internal Sale of Cigarettes to the circumstances of the new proceedings.

Article III:5 No Member of the WTO is to “establish or maintain any internal quantitative regulation relating to the mixture, processing or use of products in specified amounts or proportions which requires … that any specified amount or proportion of any product which is the subject of the regulation must be supplied from domestic sources”191. No WTO Member is to “otherwise apply internal quantitative regulations in a manner contrary to the principles set forth in ­paragraph 1” (i.e., Article III:1 of the GATT)192. Whilst the first sentence of Article III:5 of the GATT193 is a total prohibition, the second sentence of Article III:5194 places this Paragraph in line with other provisions of Article III and, in particular, the second sentence of Paragraph 2195 – whose wording is similar to that of the second sentence of Paragraph 5. Ad Article III of the GATT suggests that the breadth of the second sentence of Article III:5 is no greater than the extent of the first sentence196.

Article III:8 Article III of the GATT does not apply to rules or requirements that concern “the procurement by governmental agencies of products that are purchased for governmental purposes”, excluding commercial use197. The provisions of Article III are not to preclude “the payment of subsidies exclusively to domestic producers, including payments to domestic producers derived from the proceeds of 191 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art III:5 ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. 192 ibid. The text corresponding to nn 76 and 77 contains Article III:1 of the GATT and the general principle contained in that provision, respectively. 193 The first sentence of Article III:5 of the GATT is the sentence in the text that corresponds to n 191. 194 The second sentence of Article III:5 of the GATT is the sentence in the text that corresponds to n 192. 195 The second sentence of Article III:2 of the GATT is the sentence in the text that corresponds to n 80. 196 The relevant sentence reads: “Regulations consistent with the provisions of the first sentence of paragraph 5 [of Article III of the GATT] shall not be considered to be contrary to the provisions of the second sentence in any case in which all of the products subject to the regulations are produced domestically in substantial quantities.” (General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/GATT/2 Annex I Ad art III para 5 ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700). 197 ibid art III:8(a).

WTO’s International Trade Agreements: GATT  33 internal taxes and charges applied consistently with the provisions of this Article and subsidies effected through governmental purchases of domestic products”198. In Canada – Certain Measures Affecting the Renewable Energy Generation Sector / Canada – Measures Relating to the Feed-In Tariff Program, the AB provides a lengthy breakdown of the meaning of Article III:8(a) of the GATT199, which it condenses as follows. Article III:8(a) [of the GATT] sets out a derogation from the national treatment obligation contained in Article III of the GATT 1994. … [A] “governmental agency” is an entity performing functions of government and acting for or on behalf of government. … [T]he derogation of Article III:8(a) must be understood in relation to the obligations stipulated in Article III. [T]he product of foreign origin must be in a competitive relationship with the product purchased. Furthermore, Article III:8(a) is limited to products purchased for the use of government, consumed by government, or provided by government to recipients in the discharge of its public functions. … Article III:8(a) does not cover purchases made by governmental agencies with a view to reselling the purchased products in an arm’s-length sale and it does not cover purchases made with a view to using the product previously purchased in the production of goods for sale at arm’s length 200. The WTO Panel in Canada – Certain Measures Concerning Periodicals considered a scheme in which Canadian Heritage made payments to Canada Post, in order for the latter to subsidize the postal rates of certain periodicals produced by Canadian publishers, to be contrary to Article III:4 of the GATT but justified by Article III:8(b) of that Agreement 201. The AB reversed this justification. A proper interpretation of Article III:8(b) [of the GATT] must be made on the basis of a careful examination of the text, context and object and purpose of that provision. [T]he phrase … “including payments to domestic producers derived from the proceeds of internal taxes or charges applied consistently with the provisions of this Article and subsidies effected through governmental purchases of domestic products” … is not an exhaustive list of the kinds of programmes that would qualify as “the payment of subsidies exclusively to domestic producers”, but those words exemplify the kinds of programmes which are exempted from the obligations of

198 ibid art III:8(b); emphasis added. The section entitled ‘The Agreement on Government Procurement’, in Chapter 2, reviews this Plurilateral Trade Agreement on government procurement. 199 Text to n 197. 200 Canada – Certain Measures Affecting the Renewable Energy Generation Sector / Canada – Measures Relating to the Feed-In Tariff Program: Reports of the Appellate Body (6 May 2013) WT/DS412/AB/R WT/DS426/AB/R para 5.74 . 201 Canada – Certain Measures Concerning Periodicals: Report of the Panel (14 March 1997) WT/ DS31/R paras 5.39, 5.40 and 5.44 .

34  WTO’s International Trade Agreements: GATT Articles  III:2 and III:4 of the GATT 1994. Our textual interpretation is supported by the context of Article III:8(b) examined in relation to Articles III:2 and III:4 … . [T]he object and purpose of Article III:8(b) is confirmed by the drafting history of Article III. [Thus,] Article III:8(b) … was intended to exempt from the obligations of Article III only the payment of subsidies which involves the expenditure of revenue by a government 202. In Indonesia – Certain Measures Affecting the Automobile Industry: Report of the Panel, the Panel quoted this last sentence from Canada – Certain Measures Concerning Periodicals 203. It then stated the following. Indonesia’s tax incentives do not involve the expenditure of revenue by Indonesia. For that reason, also, they are not protected by Article III:8(b) [of the GATT]204. This ‘also’ refers to the fact that the Indonesian tax incentives were based upon discriminatory treatment against imported intermediate products in contravention of Article III:4 of the GATT205. It is crucial to distinguish between ­Indonesia – Certain Measures Affecting the Automobile Industry, in which the tax ‘subsidy’ was pursuant to a breach of Article III of the GATT – and therefore was outside the scope of Article III:8(b), and European Communities – Measures Affecting Trade in Commercial Vessels, in which the state aid that Member States of the European Communities paid to producers located therein pursuant to measures passed under the Regulation at issue was within the ambit of Article III:8(b), and was therefore protected from any consequent ‘inconsistency’ with another Paragraph of Article III. … The fact that Article III [of the GATT] “shall not prevent” the payment of subsidies that meet the conditions of Article III:8(b) [of the GATT]206 means that if a measure is covered by Article III:8(b), it cannot be inconsistent with any provision in Article III, including Article III:4. … [T]he TDM Regulation creates the legal basis for the European Commission to authorize the adoption of aid schemes by the member States providing for “direct aid in support of contracts for the building of” container ships, product tankers, chemical tankers and LNG [liquefied natural gas] carriers  … . The availability of the state aid to domestic producers of certain vessels but

202 Canada – Certain Measures Concerning Periodicals: Report of the Appellate Body (30 June 1997) WT/DS31/AB/R 33-34 ; emphasis added. 203 Indonesia – Certain Measures Affecting the Automobile Industry: Report of the Panel (2 July 1998) WT/DS54/R WT/DS55/R WT/DS59/R WT/DS64/R para 5.393 . 204 ibid para 5.394. 205 ibid para 5.392. 206 Text to n 198.

WTO’s International Trade Agreements: GATT  35 not to foreign producers of those vessels is precisely the kind of different treatment that is covered by Article III:8(b) and thus not inconsistent with Article III. … [W]hile … the state aid provided for by the TDM Regulation may adversely affect the conditions of competition between domestic and Korean products, that effect is not relevant to whether Article:8(b) applies to the aid 207. The WTO Panel in European Communities – Measures Affecting Trade in Commercial Vessels concluded that: (i) Article III:8(b) of the GATT covers the state aid for which the Regulation provides, (ii) consequently, the Regulation is compatible with Article III:4 of the GATT, and (iii) therefore, the national state aid schemes of five named Member States, and the European Commission’s Decisions authorizing those programmes, are accordant with Article III:4208.

Comment The principles that the AB has set out in Japan – Taxes on Alcoholic Beverages and refined in its later judgements have provided predominantly clear guidance as to how the rules contained in Article III of the GATT are to be applied. Consequently, the Article works well as a whole – providing legal certainty to Members in spite of the application of its Paragraphs on a case-by-case basis.

Article V: Freedom of Transit The definition of obligations under Article V of the GATT has been honed by the judgement of the WTO Panel in Colombia – Indicative Prices and Restrictions on Ports of Entry 209. It is submitted that this Panel has interpreted Paragraphs 2, 5 and 6 of Article V with consistency and good sense. Some of its legal reasoning is presented – along with the relevant provisions – in the paragraphs that follow.

Article V:1: Traffic in transit Goods and conveyances are considered “to be in transit across the territory of” a WTO Member State – “traffic in transit” – if the passage over these lands is only part of a journey that starts and terminates in other countries210. Unlike Article III:1 of the GATT in respect of the remainder of Article III 211, Article V:1 of

207 European Communities – Measures Affecting Trade in Commercial Vessels: Report of the Panel (22 April 2005) WT/DS301/R paras VII.67, VII.69 and VII.74 . 208 ibid para VII.75. 209 WT/DS366/R . 210 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art V:1 ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. 211 Text to nn 77 and 78.

36  WTO’s International Trade Agreements: GATT the GATT does not have the status of a general principle that informs the other provisions of Article V. [T]he Panel rejects the view that the definition of “traffic in transit” provided in Article V:1 necessarily informs the definition of transit for the entire article, in particular, the reference to “products which have been in transit in Article V:6. … Moreover, Article V:1 does not expressly state that the concept of “traffic in transit” is applicable to all provisions in Article V. …212 Notwithstanding this, the term ‘traffic in transit’ occurs once in Paragraphs 2, 3 and 4 of Article V, and twice in Paragraph 5 of that Article – which would suggest that the definition of that expression in Paragraph 1 is applicable to those other provisions, thereby generating legal certainty for users of the GATT. This result correlates with the second sentence of Article V:1, which states: “Traffic of this nature is termed in this article ‘traffic in transit’”213.

Article V:2, first sentence There shall be freedom of transit through the territory of each contracting party, via the routes most convenient for international transit, for traffic in transit to or from the territory of other contracting parties214. The WTO Panel in Colombia – Indicative Prices and Restrictions on Ports of Entry elaborates on this provision as follows. [T]he provision of “freedom of transit” pursuant to Article V:2, first sentence requires extending unrestricted access via the most convenient routes for the passage of goods in international transit … . Accordingly, goods in international transit from any Member must be allowed entry whenever destined for the territory of a third country. [A] Member is not required to guarantee transport on necessarily any or all routes in its territory, but only on the ones “most convenient” for transport through its territory215. The WTO Panel did not attempt to describe or define ‘most convenient’. It is submitted that this might depend upon the size and nature of the good being transported.

212 Colombia – Indicative Prices and Restrictions on Ports of Entry: Report of the Panel (27 April 2009) WT/DS366/R para VII.457 ; emphasis original. 213 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art V:1 ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. 214 ibid art V:2. For ‘contracting party’, read ‘Member’ (n 12). 215 Colombia – Indicative Prices and Restrictions on Ports of Entry: Report of the Panel (27 April 2009) WT/DS366/R para VII.401 ; emphasis original.

WTO’s International Trade Agreements: GATT  37 Article V:2: second sentence No distinction shall be made which is based on the flag of vessels, the place of origin, departure, entry, exit or destination, or on any circumstances relating to the ownership of goods, of vessels or of other means of transport 216. This provision necessitates that goods from all Members of the WTO are to be ensured the same conditions and degree of access during international transit 217. This is an MFN obligation, which is closely aligned with the duty to provide freedom of transit, contained in the first sentence of Article V:2 of the GATT218.

Paragraphs 4 and 5 of Article V: Charges and regulations on traffic in transit Every charge and regulation that each Member of the WTO places on its traffic in transit must be reasonable, taking into account the state of this traffic219. With regard “to all charges, regulations and formalities in connection with transit,” every WTO Member is to grant to traffic in transit to or from the domain of any other Member “treatment no less favourable than” that given to traffic in transit to or from any non-Member220. This MFN221 obligation concerns “like products being transported on the same route under like conditions”222. Using the ‘accordion of “likeness”’ metaphor that the AB introduced in ­Japan – Taxes on Alcoholic Beverages 223, the WTO Panel in Colombia – I­ ndicative Prices and Restrictions on Ports of Entry did not suggest how narrowly the accordion needed to be squeezed in respect of ‘like products’ and ‘like conditions’. Given the absence of an additional broader category than ‘like’ from the Ad Article accompanying Article V:5 of the GATT – such as ‘directly competitive or substitutable’ in the second sentence of Article III:2 of the GATT, it is submitted that the width of the ‘accordion of “likeness”’ for products is more aligned with that in Article III:4 of the GATT than that in the first sentence of Article III:2224. Notwithstanding this, whilst Article III:1 of the GATT informs the

216 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art V:2 ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. 217 Colombia – Indicative Prices and Restrictions on Ports of Entry: Report of the Panel (27 April 2009) WT/DS366/R para VII.402 . 218 ibid para VII.397. 219 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art V:4 ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. 220 ibid art V:5. 221 Colombia – Indicative Prices and Restrictions on Ports of Entry: Report of the Panel (27 April 2009) WT/DS366/R para VII.468 . 222 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 Annex I Ad art V para 5 ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. 223 Text to n 98. 224 Text to nn 105 and 169.

38  WTO’s International Trade Agreements: GATT other provisions of Article III 225, it does not inform Article V of the Agreement – so the ‘competitive relationship’ criterion for ‘like products’ may not apply as strongly to Paragraph 5 of Article V as it does to Paragraph 4 of Article III 226.

Article V:6: Products which have been in transit Subject to the exception that the second sentence of Article V:6 of the GATT contains227, the first sentence of that Paragraph requires each Member of the WTO to give “products which have been in transit through the territory of” any other WTO Member “treatment no less favourable than that which would have been accorded to such products” if they had been transported to their destination without entering the domain of that latter Member228. In Colombia – ­Indicative Prices and Restrictions on Ports of Entry, the WTO Panel held that: “Article V:2 [of the GATT] extends MFN protection to goods in transit through Member countries, while Article V:6 extends MFN protection from discrimination based on the geographic course of goods in transit upon reaching their final destination”229. It established that Article V:6 does not require an evaluation of ‘like products’. … As … the passage [of] a good that was shipped from its origin via its actual route through one or more Member countries prior to arrival at its final destination is compared to the hypothetical passage of that good directly from its place of origin to its final destination, no like product analysis is required 230. The WTO Panel specified that, as the MFN obligations under Article I:1 of the GATT231 and Article V:6 of that Agreement differ, these should not be considered to be redundant. … Article I:1 ensures MFN treatment to the like products of all origins, whereas Article V:6 ensures MFN treatment based on [the product’s] transit trajectory regardless of the existence of a like product of a different origin. [T]he obligations in these two provisions are not the same and should not be treated as redundant 232. 225 Text to nn 77 and 78. 226 Text to n 168. 227 Any Member of the WTO may “maintain its requirements of direct consignment existing on the date of this Agreement, in respect of any goods in regard to which such direct consignment is a requisite condition of eligibility for entry of the goods at preferential rates of duty or has relation to [that Member’s] prescribed method of valuation for duty purposes” (ibid art V:6). 228 ibid. 229 Colombia – Indicative Prices and Restrictions on Ports of Entry: Report of the Panel (27 April 2009) WT/DS366/R para VII.467 . 230 ibid para VII.477. 231 The MFN Rule is specified in the paragraph entitled ‘Article I:1: The MFN Rule’, in the subsection entitled ‘Article 1: General Most-Favoured-Nation Treatment’, in the current section. 232 ibid fn 783 to para VII.477.

WTO’s International Trade Agreements: GATT  39 Article VI: Anti-dumping and Countervailing Duties, the AD Agreement and the SCM Agreement The paragraphs in this subsection consider selected provisions from Article VI of the GATT, the AD Agreement, and the SCM Agreement. Article VI and the AD Agreement are to be taken together. An anti-dumping measure shall be applied only under the circumstances provided for in Article VI of the GATT 1994 and pursuant to investigations initiated and conducted in accordance with the provisions of this Agreement. …233 No specific action against dumping of exports from another Member [of the WTO] can be taken except in accordance with the provisions of GATT 1994, as interpreted by this Agreement 234. In United States – Anti-Dumping Act of 1916, the AB clarified the scope of these sources. … Since the only provisions of the GATT 1994 “interpreted” by the ­Anti-Dumping Agreement are those provisions of Article VI concerning dumping, Article 18.1 [of the AD Agreement] should be read as requiring that any “specific action against dumping” of exports from another Member [of the WTO] be in accordance with the relevant provisions of Article VI of the GATT 1994, as interpreted by the Anti-Dumping Agreement. … It follows that Article VI is applicable to any “specific action against dumping” of exports, i.e., action that is taken in response to situations presenting the constituent elements of “dumping”235. The SCM Agreement is also associated with Article VI of the GATT – in particular Paragraph 3 of the latter. Article VI:3 of the GATT and the SCM Agreement are considered in this subsection under the title ‘Article VI:3 of the GATT and the SCM Agreement’.

Article VI:1 of the GATT and Article 2 of the AD Agreement: Determination of Dumping ‘Dumping’ is the process by which a product is “introduced into the commerce of another country”, at a price that is below its normal value236. This is the case 233 Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (15 April 1994) LT/UR/A-1A/3 art 1 ; 33 ILM 1154 (1994). 234 ibid art 18.1. 235 United States – Anti-Dumping Act of 1916: Report of the Appellate Body (28 August 2000) WT/ DS136/AB/R WT/DS162/AB/R paras 124 and 126 ; emphasis original. 236 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art VI:1 ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700; Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade

40  WTO’s International Trade Agreements: GATT if that product’s price “is less than the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country”237. If there is no domestic price for this product, then its normal value is either: “(i) the highest comparable price for the like product for export to any third country in the ordinary course of trade, or (ii) the cost of production of the product in the country of origin plus a reasonable addition for selling cost and profit”238. The accompanying Ad Article recognizes that “a strict comparison with domestic prices … may not always be appropriate” in cases in which the exporting country monopolizes trade in a product and fixes those prices239. [D]umping … is to be condemned if it causes or threatens material injury to an established industry in the territory of a contracting party or materially retards the establishment of a domestic industry240. Thus, anti-dumping duties may be imposed if: (i) there is dumping, i.e., the price of the import is below that of its normal value, and (ii) the dumping is injurious to, or slows the foundation of, a domestic industry241. Article 2 of the AD Agreement and its case law regulate point (i), the essence of which is as follows. When there are no sales of the like product in the ordinary course of trade in the domestic market of the exporting country or when, because of the particular market situation or the low volume of sales in the domestic market of the exporting country, such sales do not permit a proper comparison, the margin of dumping shall be determined by comparison with a comparable

237 238 239 2 40 2 41

1994 (15 April 1994) LT/UR/A-1A/3 art 2.1 ; 33 ILM 1154 (1994). General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art VI:1(a) ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. ibid art VI:1(b). ibid Annex I Ad art VI para 1(2). ibid art VI:1. For ‘contracting party’, read ‘Member’ (n 12). In view of the fact that this test does not consider the effect of the dumping, or of the imposition of anti-dumping duties, upon consumers, it is submitted that there should be a third element for anti-dumping duties to be imposed – which is that the damage to the domestic industry from the dumping is to be in excess of that to consumers in the importing country from the imposition of anti-dumping duties. Alternatively, the domestic authority imposing the anti-dumping duties could be prohibited from setting those duties at a level which is higher than that at which the damage to consumers from imposing the duties exceeds that to the domestic industry from the dumping. A test along these lines may improve the welfare effects of the WTO’s anti-dumping laws. It is further submitted that consumers have marginal relevance to the setting of anti-dumping duties in international law – the AD Agreement merely states: “The authorities shall provide opportunities for industrial users of the product under investigation, and for representative consumer organizations in cases where the product is commonly sold at the retail level, to provide information which is relevant to the investigation regarding dumping, injury and causality.” (Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (15 April 1994) LT/UR/A-1A/3 art 6.12 ; 33 ILM 1154 (1994)).

WTO’s International Trade Agreements: GATT  41 price of the like product when exported to an appropriate third country, provided that this price is representative, or with the cost of production of the country of origin plus a reasonable amount for administrative, selling and general costs and for profits242. The definition of ‘like product’ is a narrow one – with the reference to an ‘identical’ item. However, the use of the phrase ‘characteristics closely resembling’ leaves interpretative discretion as to goods which qualify. Throughout this Agreement the term “like product” (“produit similaire”) shall be interpreted to mean a product which is identical, i.e., alike in all respects to the product under consideration, or in the absence of such a product, another product which, although not alike in all respects, has characteristics closely resembling those of the product under consideration 243. The AD Agreement provides guidance as to the computation of costs. [C]osts shall normally be calculated on the basis of records kept by the exporter or producer under investigation, provided that such records are in accordance with the generally accepted accounting principles of the exporting country and reasonably reflect the costs associated with the production and sale of the product under consideration. …244 2 42 ibid art 2.2. 2 43 ibid art 2.6. The interpretation of the term ‘like product’ has arisen in respect of the SCM Agreement. This is relevant to the AD Agreement, because the definition of ‘like product’ in fn 46 to Article 15.1 of the SCM Agreement is identical to the definition of ‘like product’ in Article 2.6 of the AD Agreement. In European Communities and Certain Member States – Measures Affecting Trade in Large Civil Aircraft, the AB described ‘like product’ as used in Subparagraphs 3(a) and 3(b) of Article 6 of the SCM Agreement – together with the word ‘market’ which is also there: “The word “market” in Article 6.3 must be read together with the concept of “like product”. Articles 6.3(a) and 6.3(b) both refer to imports and exports of a “like product”. This reference indicates the need to identify a “subsidized product” that is “like” the product the importation or exportation of which is being displaced or impeded in a particular market … [A] “market”, within the meaning of Articles 6.3(a) and 6.3(b) of the SCM Agreement, is a set of products in a particular geographical area that are in actual or potential competition with each other. An assessment of the competitive relationship between products in the market is required in order to determine whether and to what extent one product may displace another. Thus, while a complaining Member [of the WTO] may identify a subsidized product and the like product by reference to footnote 46 [to Article 15.1 of the SCM Agreement], the products thereby identified must be analysed under the discipline of the product market so as to be able to determine whether displacement is occurring. Ordinarily, the subsidized product and the like product will form part of a larger product market. But it may be the case that a complainant chooses to define the subsidized and like products so broadly that it is necessary to analyse these products in different product markets.” (European Communities and Certain Member States – Measures Affecting Trade in Large Civil Aircraft: Report of the Appellate Body (18 May 2011) WT/DS316/AB/R paras 1118 and 1119 ). 244 Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (15 April 1994) LT/UR/A-1A/3 art 2.2.1.1 ; 33 ILM 1154 (1994).

42  WTO’s International Trade Agreements: GATT If administrative, selling and general costs are unable to be ascertained on the basis of “actual data pertaining to production and sales in the ordinary course of trade of the like product by the exporter or producer under investigation”245, then one of the following is used. the actual amounts incurred and realized by the exporter or producer in question in respect of production and sales in the domestic market of the country of origin of the same general category of products246; the weighted average of the actual amounts incurred and realized by other exporters or producers subject to investigation in respect of production and sales of the like product in the domestic market of the country of origin 247; any other reasonable method, provided that the amount for profit so established shall not exceed the profit normally realized by other exporters or producers on sales of products of the same general category in the domestic market of the country of origin 248. This calculation provides the product’s normal value – which must exceed its export price for dumping to occur249. As the AD Agreement specifies, this export price should be determined on an arm’s-length basis. In cases where there is no export price or where it appears to the authorities concerned that the export price is unreliable because of association or a compensatory arrangement between the exporter and the importer or a third party, the export price may be constructed on the basis of the price at which the imported products are first resold to an independent buyer, or if the products are not resold to an independent buyer, or not resold in the condition as imported, on such reasonable basis as the authorities may determine250. The domestic authority must make a fair comparison between the normal value and the export price, “at the same level of trade … and in respect of sales made at as nearly as possible the same time”251. Differences which affect the comparison between these prices – such as taxation and the levels of trade – are to be allowed for in that comparison 252. The WTO Panel in United States – Final Dumping Determination on Softwood Lumber from Canada explains. … [A]n investigating authority must, based on the facts before it, on a case-by-case basis decide whether a certain factor is demonstrated to affect price comparability. … [T]he obligation on an investigating authority is to 2 45 2 46 2 47 2 48 2 49 250 251 252

ibid art 2.2.2. ibid art 2.2.2(i). ibid art 2.2.2(ii). ibid art 2.2.2(iii). Text to n 236. ibid art 2.3. ibid art 2.4. ibid.

WTO’s International Trade Agreements: GATT  43 examine the merits of each claimed adjustment and to determine whether the difference affects price comparability between the allegedly dumped product and the like product sold on the domestic market of the exporting country253. In European Communities – Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China, the WTO Panel commented on the comparison between the normal value and the export price. There is no methodological guidance in Article 2.4 [of the AD Agreement] as to how due allowance for differences affecting price comparability is to be made. … [M]ost investigating authorities either make comparisons of transaction prices for groups of goods within the like product that share common characteristics, or … mak[e] an adjustment[] for each difference affecting price comparability to either the normal value or the export price of each transaction to be compared. … [T]he investigating authorities … must ensure a fair comparison between the normal value and the export price. … [I]t is for the exporters … to make substantiated requests for adjustments in order to ensure such comparison. … The authorities “must take steps to achieve clarity as to the adjustment claimed and then determine whether and to what extent that adjustment is merited”. …254 Once the adjustments have been made, then the product’s normal value is compared to its export price. Subject to the provisions governing fair comparison in paragraph 4 [of Article 2 of the AD], the existence of margins of dumping during the investigation phase shall normally be established on the basis of a comparison of a weighted average normal value with a weighted average of prices of all comparable export transactions or by a comparison of normal value and export prices on a transaction-to-transaction basis. …255

253 United States – Final Dumping Determination on Softwood Lumber from Canada: Report of the Panel (13 April 2004) WT/DS264/R paras VII.789 and VII.790 . 254 European Communities – Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China: Report of the Panel (3 December 2010) WT/DS397/R paras VII.297 and VII.298 ; emphasis original. The quoted clause within the quoted passage is from Paragraph VII.214 of European Communities – Anti-Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil: Report of the Panel (7 March 2003) WT/DS219/R , but without that emphasis. The AB reiterated that quoted clause, but without adding emphasis to it (European Communities – Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China: Report of the Appellate Body (15 July 2011) WT/ DS397/AB/R para 488 ). 255 Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (15 April 1994) LT/UR/A-1A/3 art 2.4.2 ; 33 ILM 1154 (1994). Article 2.4.2 of the AD Agreement also proposes a composite method, which may be used as a backup under circumstances specified therein.

44  WTO’s International Trade Agreements: GATT In United States – Final Dumping Determination on Softwood Lumber from Canada – Recourse to Article 21.5 of the DSU by Canada, the AB held that the weighted-average-to-weighted-average and transaction-to-transaction methods for establishing the margins of dumping are alternatives with equal standing. … Although the transaction-to-transaction and weighted average-toweighted average comparison methodologies are distinct, they fulfil the same function. They are also equivalent in the sense that Article 2.4.2 [of the AD Agreement] does not establish a hierarchy between the two. An investigating authority may choose between the two depending on which is most suitable for the particular investigation 256. Article 5.8 of the AD Agreement sets a minimum level for a product’s margin of dumping of 2% of its export price257.

Article 3 of the AD Agreement: Determination of Injury258 Article 3.1 of the AD Agreement specifies the determination of injury as follows. A determination of injury for purposes of Article VI of GATT 1994 259 shall be based on positive evidence and involve an objective examination of both (a) the volume of the dumped imports and the effect of the dumped imports on prices in the domestic market for like products, and (b) the consequent impact of these imports on domestic producers of such products260. In Egypt – Definitive Anti-Dumping Measures on Steel Rebar from Turkey, the WTO Panel stated: “Article 3.1 provides overarching general guidance as to

256 United States – Final Dumping Determination on Softwood Lumber from Canada – Recourse to Article 21.5 of the DSU by Canada: Report of the Appellate Body (15 August 2006) WT/DS264/ AB/RW para 93 . 257 Text to n 341. 258 Under the AD Agreement and the SCM Agreement, ‘injury’ “unless otherwise specified … mean[s] material injury to a domestic industry, threat of material injury to a domestic industry or material retardation of the establishment of such an industry” (Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (15 April 1994) LT/ UR/A-1A/3 fn 9 to art 3 ; 33 ILM 1154 (1994); Agreement on Subsidies and Countervailing Measures (15 April 1994) LT/UR/A-1A/9 fn 45 to art 15 ; 1867 UNTS 14). 259 Text to n 240. 260 Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (15 April 1994) LT/UR/A-1A/3 art 3.1 ; 33 ILM 1154 (1994); emphasis original. Article 15.1 of the SCM Agreement differs from Article 3.1 of the AD Agreement in only two respects: (i) it refers to ‘subsidized imports’ instead of ‘dumped imports’; (ii) it removes the comma after ‘like products’. The definition of ‘like product’ in fn 46 to Article 15.1 of the SCM Agreement is identical to the definition of ‘like product’ in Article 2.6 of the AD Agreement (text to n 243).

WTO’s International Trade Agreements: GATT  45 the nature of the injury investigation and analysis that must be conducted by an investigating authority”261. In Thailand – Anti-Dumping Duties on Angles, Shapes and Sections of Iron or Non-Alloy Steel and H-Beams from Poland, the AB declared: “Article 3.1 informs the more detailed obligations in succeeding paragraphs [of Article 3 of the AD Agreement]”262. In United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan, the AB explained the terms ‘positive evidence’ and ‘objective examination’ in Article 3.1 of the AD Agreement. … The thrust of the investigating authorities’ obligation, in Article 3.1 [of the AD Agreement], lies in the requirement that they base their determination on “positive evidence” and conduct an “objective examination”. The term “positive evidence” relates … to the quality of the evidence that authorities may rely upon in making a determination [of injury]. The word “positive” means … that the evidence must be of an affirmative, objective and verifiable character, and that it must be credible. … [A]n “objective examination” requires that the domestic industry, and the effects of dumped imports, be investigated in an unbiased manner …263. Accordingly, any assumptions upon which the investigating authority’s determination of injury is based “should be derived as reasonable inferences from a credible basis of facts, and should be sufficiently explained so that their objectivity and credibility can be verified”264. The definitions of ‘positive’ and ‘objective’ are compatible with a wide evidential basis for that determination – i.e., it must be founded on all the evidence, including confidential information 265. Furthermore, the ‘objective examination’ must include the whole of the domestic industry, i.e., not just a part of it, unless the investigating authority gives a reasonable explanation as to why this is unnecessary266.

261 Egypt – Definitive Anti-Dumping Measures on Steel Rebar from Turkey: Report of the Panel (8 August 2002) WT/DS211/R para VII.125 . 262 Thailand – Anti-Dumping Duties on Angles, Shapes and Sections of Iron or Non-Alloy Steel and H-Beams from Poland: Report of the Appellate Body (12 March 2001) WT/DS122/AB/R para 106 . 263 United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan: Report of the Appellate Body (24 July 2001) WT/DS184/AB/R paras 192 and 193 . 264 Mexico – Definitive Anti-Dumping Measures on Beef and Rice: Report of the Appellate Body (29 November 2005) WT/DS295/AB/R para 204 . 265 Thailand – Anti-Dumping Duties on Angles, Shapes and Sections of Iron or Non-Alloy Steel and H-Beams from Poland: Report of the Appellate Body (12 March 2001) WT/DS122/AB/R para 107 . 266 United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan: Report of the Appellate Body (24 July 2001) WT/DS184/AB/R paras 204 and 206 .

46  WTO’s International Trade Agreements: GATT Article 3.2 of the AD Agreement expands upon point (a) of Article 3.1 of that treaty267. With regard to the volume of the dumped imports, the investigating authorities shall consider whether there has been a significant increase in dumped imports, either in absolute terms or relative to production or consumption in the importing Member [of the WTO]. With regard to the effect of the dumped imports on prices, the investigating authorities shall consider whether there has been a significant price undercutting by the dumped imports as compared with the price of a like product of the importing Member, or whether the effect of such imports is otherwise to depress prices to a significant degree or prevent price increases, which otherwise would have occurred, to a significant degree. No one or several of these factors can necessarily give decisive guidance268. In Thailand – Anti-Dumping Duties on Angles, Shapes and Sections of Iron or Non-Alloy Steel and H-Beams from Poland, the WTO Panel did not require the word ‘significant’ to appear in the investigating authority’s report with regard to any rise in the volume of dumped imports269. … Nevertheless, … it must be apparent in the relevant document … that the investigating authorities have given attention to and taken into account whether there has been a significant increase in dumped imports, in absolute or relative terms270. The AB endorsed this approach in European Communities – Anti-Dumping ­Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil, pushing the law on a little in the form of a double negative – although the comment is in a footnote to the judgement and is therefore obiter 271. … [S]ignificant increases in imports have to be “consider[ed]” by investigating authorities under Article 3.2 [of the AD Agreement], but the text [of Article 3.2] does not indicate that in the absence of such a significant increase, these imports could not be found to be causing injury272.

67 Text to n 260. 2 268 Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (15 April 1994) LT/UR/A-1A/3 art 3.2 ; 33 ILM 1154 (1994). Article 15.2 of the SCM Agreement refers to ‘subsidized imports’ instead of ‘dumped imports’, but is otherwise identical to Article 3.2 of the AD Agreement. 269 Thailand – Anti-Dumping Duties on Angles, Shapes and Sections of Iron or Non-Alloy Steel and H-Beams from Poland: Report of the Panel (28 September 2000) WT/DS122/R para VII.196 . 270 ibid. 271 n 68 defines ‘obiter’. 272 European Communities – Anti-Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil: Report of the Appellate Body (22 July 2003) WT/DS219/AB/R fn 114 to para 111

WTO’s International Trade Agreements: GATT  47 Article 5.8 of the AD Agreement sets a lower limit for the volume of dumped imports of 3% of the like product in the country into which it is imported, subject to one exception 273. As regards the impact of the dumped imports on prices, the WTO Panel in European Communities – Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China stated that price undercutting may be shown by comparing the prices of the dumped imports with the prices of the domestic industry’s like product 274. In United States – Subsidies on Upland Cotton, the WTO Panel describes the term ‘price depression’ as used in Subparagraph 3(c) of Article 6 of the SCM Agreement as “the situation where “prices” are pressed down, or reduced”275. This definition is associated with the same WTO Panel’s definition of the term ‘price suppression’276, to which Article 6.3(c) of the SCM Agreement also refers; this contrasts with Article 3.2 of the AD Agreement, in which ‘price suppression’ is not mentioned. Notwithstanding this, the WTO Panel’s definition of ‘price suppression’ in United States – Subsidies on Upland Cotton is similar to the phrase ‘prevent price increases’ in Article 3.2 of the AD Agreement. “[P]rice suppression” refers to the situation where “prices” … either are prevented or inhibited from rising (i.e. they do not increase when they otherwise would have) or they do actually increase, but the increase is less than it otherwise would have been 277. Therefore, it is submitted that the definition of ‘price depression’ in United States – Subsidies on Upland Cotton may be relevant to its meaning in Article 3.2 of the AD Agreement 278. Article 3.4 of the AD Agreement enlarges on point (b) of Article 3.1 of that accord 279. . 273 Text to n 341. 274 European Communities – Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China: Report of the Panel (3 December 2010) WT/DS397/R para VII.328 . 275 United States – Subsidies on Upland Cotton: Report of the Panel (8 September 2004) WT/ DS267/R para VII.1277 . 276 Text to n 277. 277 ibid. 278 The AB in United States – Subsidies on Upland Cotton was only partly happy with the WTO Panel’s approach to defining ‘price suppression’: “[I]t would have been preferable … for the Panel to avoid using the term “price suppression” as short-hand for both price suppression and price depression, given that Article 6.3(c) of the SCM Agreement refers to “price suppression” and “price depression” as distinct concepts. We agree, however, that the Panel’s description of the term “price suppression” in paragraph 7.1277 of the Panel Report reflects the ordinary meaning of that term, particularly when read in conjunction with the French and Spanish versions of Article 6.3(c) …” (United States – Subsidies on Upland Cotton: Report of the Appellate Body (3 March 2005) WT/DS267/AB/R para 424 ; emphasis original). 279 Text to n 260.

48  WTO’s International Trade Agreements: GATT The examination of the impact of the dumped imports on the domestic industry concerned shall include an evaluation of all relevant economic factors and indices having a bearing on the state of the industry, including … . This list is not exhaustive, nor can one or several of these factors necessarily give decisive guidance280. The factors are: “actual and potential decline in sales, profits, output, market share, productivity, return on investments, or utilization of capacity; factors affecting domestic prices; the magnitude of the margin of dumping; actual and potential negative effects on cash flow, inventories, employment, wages, growth, ability to raise capital or investments”281. In Thailand – Anti-Dumping ­Duties on Angles, Shapes and Sections of Iron or Non-Alloy Steel and H-Beams from ­Poland, the WTO Panel held that this list comprises 15 factors in spite of the presence of semicolons and the use of the word ‘or’282. [T]he language in Article 3.4 [of the AD Agreement] makes it clear that all of the listed factors in Article 3.4 must be considered in all cases. The provision is specific and mandatory in this regard. … [E]ach of the fifteen individual factors listed in the mandatory list of factors in Article 3.4 must be evaluated by the investigating authorities283. The AB fully supported this position. … We agree with the Panel’s analysis in its entirety, and with the Panel’s interpretation of the mandatory nature of the factors mentioned in Article 3.4 of the Anti-Dumping Agreement 284. In European Communities – Anti-Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil, the AB noted that Article 3.4 of the AD Agreement, with regard to the evaluation that it requires, “does not address the manner in which the results of this evaluation are to be set out, nor the type of evidence 280 Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (15 April 1994) LT/UR/A-1A/3 art 3.4 ; 33 ILM 1154 (1994). Article 15.4 of the SCM Agreement refers to ‘subsidized imports’ instead of ‘dumped imports’ and specifies one additional economic factor, but is otherwise identical to Article 3.4 of the AD Agreement. 281 ibid. 282 Thailand – Anti-Dumping Duties on Angles, Shapes and Sections of Iron or Non-Alloy Steel and H-Beams from Poland: Report of the Panel (28 September 2000) WT/DS122/R paras VII.264 and VII.266 . 283 ibid. 284 Thailand – Anti-Dumping Duties on Angles, Shapes and Sections of Iron or Non-Alloy Steel and H-Beams from Poland: Report of the Appellate Body (12 March 2001) WT/DS122/AB/R para 125 ; emphasis original.

WTO’s International Trade Agreements: GATT  49 that may be produced before a panel for the purpose of demonstrating that this evaluation was indeed conducted”285. [B]ecause Articles 3.1286 and 3.4 [of the AD Agreement] do not regulate the manner in which the results of the analysis of each injury factor are to be set out in the published documents, … in every anti-dumping investigation a separate record [need not] be made of the evaluation of each of the injury factors listed in Article 3.4. …287 It “will depend on the particular facts of each case” whether the relevant WTO Panel is satisfied that there is “sufficient and credible evidence … that a factor has been evaluated”288. What should the WTO Panel do? The AB provides guidance on a similar matter in a different context – that of Article 4.2(a) of the Agreement on Safeguards, which is as follows. In the investigation to determine whether increased imports have caused or are threatening to cause serious injury to a domestic industry under the terms of this Agreement, the competent authorities shall evaluate all relevant factors of an objective and quantifiable nature having a bearing on the situation of that industry, in particular, the rate and amount of the increase in imports of the product concerned in absolute and relative terms, the share of the ­domestic market taken by increased imports, changes in the level of sales, production, productivity, capacity utilization, profits and losses, and employment 289. In United States – Safeguard Measures on Imports of Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia, the AB gives direction to WTO Panels on how they should approach this evaluation. The list of these factors resembles the series of factors that Article 3.4 of the AD Agreement specifies290. … [I]n examining a claim under Article 4.2(a) [of the Agreement on Safeguards], a panel can assess whether the competent authorities’ explanation for its determination is reasoned and adequate only if the panel critically examines that explanation, in depth, and in the light of the facts before

285 European Communities – Anti-Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil: Report of the Appellate Body (22 July 2003) WT/DS219/AB/R para 131 . 286 Text to n 260. 287 ibid para 161; emphasis original. 288 ibid. 289 Agreement on Safeguards (15 April 1994) LT/UR/A-1A/8 art 4.2(a) ; 33 ILM 1154 (1994). The section entitled ‘The Agreement on Safeguards’ summarizes the Agreement on Safeguards. 290 Text to n 281.

50  WTO’s International Trade Agreements: GATT the panel. Panels must, therefore, review whether the competent authorities’ explanation fully addresses the nature, and, especially, the complexities, of the data, and responds to other plausible interpretations of that data. A panel must find, in particular, that an explanation is not reasoned, or is not adequate, if some alternative explanation of the facts is plausible, and if the competent authorities’ explanation does not seem adequate in the light of that alternative explanation. …291 Thus, the focus of WTO Panels is to be on how the relevant authority has analysed the data, in the light of all relevant factors, including those listed in Article 4.2(a) of the Agreement on Safeguards. It is submitted that, whilst this guidance is applicable to an evaluation under Article 3.4 of the AD Agreement, it is highlevel, i.e., it does not consider how the data should be analysed in respect of each of the factors listed in Article 4.2(a) of the Agreement on Safeguards. Thus, it is useful – but gaps in ascertaining the approach to be followed remain 292. Article 3.5 of the AD Agreement requires that the dumped imports, through the effects as set out in Paragraphs 2 and 4 of Article 3 of the AD Agreement, cause injury – as defined in this treaty293. … The demonstration of a causal relationship between the dumped imports and the injury to the domestic industry shall be based on an examination of all relevant evidence before the authorities. The authorities shall also examine any known factors other than the dumped imports which at the same time are injuring the domestic industry, and the injuries caused by these other factors must not be attributed to the dumped imports. …294 Article 3.5 of the AD Agreement provides a list of known factors295, which is indicative296 (rather than exhaustive). In United States – Anti-Dumping Measures

291 United States – Safeguard Measures on Imports of Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia: Report of the Appellate Body (1 May 2001) WT/DS177/AB/R WT/ DS178/AB/R para 106 ; emphasis original. 292 As the factors listed in Article 4.2(a) of the Agreement on Safeguards are not identical to those listed in Article 3.4 of the AD Agreement, more specific guidance from the AB on how the data should be analysed with regard to each factor listed in the former would be of limited value to WTO Panels providing an evaluation under the latter. 293 See n 258, for this definition of the term ‘injury’. 294 Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (15 April 1994) LT/UR/A-1A/3 art 3.5 ; 33 ILM 1154 (1994). This quoted passage is also found in Article 15.5 of the SCM Agreement – with ‘subsidized imports’ in place of ‘dumped imports’ (text to n 394). 295 This list of known factors – with a difference in the first listed item only – is also found in Article 15.5 of the SCM Agreement. 296 In respect of Article 3.5 of the AD Agreement, a WTO Panel stated: “The phrase [in Article 3.5] ‘factors which may be relevant in this respect include, inter alia’ (emphasis added) … makes it clear that the list contained in the provision is indicative” (European Communities – Anti-Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil: Report of the

WTO’s International Trade Agreements: GATT  51 on Certain Hot-Rolled Steel Products from Japan, the AB referred to the second sentence of this quote from Article 3.5 as “non-attribution language”297, and followed this reference with a comment on that sentence. The non-attribution language in Article 3.5 of the Anti-Dumping Agreement applies solely in situations where dumped imports and other known factors are causing injury to the domestic industry at the same time. In order that investigating authorities, applying Article 3.5, are able to ensure that the injurious effects of the other known factors are not “attributed” to dumped imports, they must appropriately assess the injurious effects of those other factors. [S]uch an assessment must involve separating and distinguishing the injurious effects of the other factors from the injurious effects of the dumped imports. …298 The AB stresses that the AD Agreement does not prescribe “the particular methods and approaches by which WTO Members choose to carry out the process of separating and distinguishing the injurious effects of dumped imports from the injurious effects of the other known causal factors”299. It is submitted that the drafters of the Agreement had not reached that level of detail – it could be left to WTO Committees or the AB to suggest these procedures. The AB addressed this matter in European Communities – Anti-Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil – but did not recommend any methods or approaches. Quoting from its judgement in United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan300, it then stated the following. Thus, provided that an investigating authority does not attribute the injuries of other causal factors to dumped imports, it is free to choose the methodology it will use in examining the “causal relationship” between dumped imports and injury301.

297

298 299 300 301

Panel (7 March 2003) WT/DS219/R para VII.415 ; emphasis original). ‘Inter alia’ means ‘[a]mong other things’ (McFarlane, The Layman’s Dictionary of English Law (n 46) 145). United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan: ­Report of the Appellate Body (24 July 2001) WT/DS184/AB/R para 223 . ibid; emphasis original. ibid para 224. Text to n 299, plus the next sentence: “What the [AD] Agreement requires is simply that the obligation in Article 3.5 be respected when a determination of injury is made.” (ibid). European Communities – Anti-Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil: Report of the Appellate Body (22 July 2003) WT/DS219/AB/R para 189 .

52  WTO’s International Trade Agreements: GATT Having determined this, the AB rejected the argument for an investigating authority to always undertake an analysis of the collective effects of those other causal factors302. The authority need only perform this examination in cases in which the failure to do so “would result in the investigating authority improperly attributing the [injurious] effects of other causal factors to dumped imports”303. ‘Injury’ in the AD Agreement includes ‘threat of material injury to a domestic industry’304. This threat must “be based on facts”305. The circumstantial alteration that would bring about “a situation in which the dumping would cause injury must be clearly foreseen and imminent”306. Article 3.7 of the AD Agreement specifies four factors which the investigating authority is to consider – amongst other (unidentified) determinants. … No one of these factors by itself can necessarily give decisive guidance but the totality of the factors considered must lead to the conclusion that further dumped exports are imminent and that, unless protective action is taken, material injury would occur307. In Mexico – Anti-Dumping Investigation of High-Fructose Corn Syrup (HFCS) from the United States, the WTO Panel focused on the phrase ‘material injury would occur’. … A determination that material injury would occur cannot … be made solely on the basis of consideration of the Article 3.7 factors. [I]t must include consideration of the likely impact of further dumped imports on the domestic industry. While an examination of the Article 3.7 factors is required in a threat of injury case, that analysis alone is not a sufficient basis for a determination of threat of injury, because the Article 3.7 factors … relate specifically to the questions of the likelihood of increased imports …, the effects of imports on future prices and likely future demand for imports, and inventories. They are not, in themselves, relevant to a decision concerning what the “consequent impact” of continued dumped imports on the domestic industry is likely to be. [I]t is [the following] question – whether the “consequent impact” of continued dumped imports is likely to be material

302 303 304 305

ibid para 191. ibid para 192. n 258. Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (15 April 1994) LT/UR/A-1A/3 art 3.7 ; 33 ILM 1154 (1994). 306 ibid. 07 ibid. This quoted sentence is the same as the final sentence of Article 15.7 of the SCM 3 Agreement – except that the latter provision substitutes ‘subsidized’ for ‘dumped’. Article 15.7 identifies five factors that the investigating authority is to consider – two of which are identical to two of the factors in Article 3.7 of the AD Agreement, and two each of which differ from the other two determinants in Article 3.7 by one word (i.e., ‘subsidized’ instead of ‘dumped’).

WTO’s International Trade Agreements: GATT  53 injury to the domestic injury – which must be answered in a threat of material injury analysis. …308 Article 3.4 of the AD Agreement309 may be used for this ‘analysis of the consequential impact of imports’, as “[n]othing in the text or context of Article 3.4 limits consideration of the Article 3.4 factors310 to cases involving material injury”311. … Article 3.1 [of the AD Agreement]312 requires that a determination of “injury”, which includes threat of material injury, involve an examination of the impact of imports, while Article 3.4 [of the AD Agreement] sets forth factors relevant to that examination. Article 3.7 [of the AD Agreement] requires that the investigating authorities determine whether, in the absence of protective action, material injury would occur. [C]onsideration of the Article 3.4 factors in examining the consequent impact of imports is required in a case involving threat of injury in order to make a determination consistent with the requirements of Articles 3.1 and 3.7313. The Panel concluded thus: … Article 3.7 [of the AD Agreement] sets out additional factors that must be considered in a threat [of injury] case, but does not eliminate the obligation to consider the impact of dumped imports on the domestic industry in accordance with the requirements of Article 3.4 [of the AD Agreement]314. In United States – Investigation of the International Trade Commission in Softwood Lumber from Canada, the WTO Panel held that, if the investigating authority has fulfilled this obligation, then there is no need for it to assess the probable impact of future dumped imports by “a consideration of projections” with regard to each of the factors listed in Article 3.4 of the AD Agreement315. The Panel discerned “even less basis” for considering that the factors contained

308 Mexico – Anti-Dumping Investigation of High-Fructose Corn Syrup (HFCS) from the United States: Report of the Panel (28 January 2000) WT/DS132/R paras VII.808 and VII.809 . 309 Text to n 280. 310 Text to n 281. 311 ibid para VII.810. 312 Text to n 260. 313 ibid. 314 ibid para VII.814. 315 United States – Investigation of the International Trade Commission in Softwood Lumber from Canada: Report of the Panel (22 March 2004) WT/DS277/R para VII.603 . This was also the Panel’s view with regard to the factors listed in Article 15.4 of the SCM Agreement (n 280), in the case of a ‘threat of material injury’ determination under Article 15.7 of the SCM Agreement (ibid).

54  WTO’s International Trade Agreements: GATT in Article 3.2 of the AD Agreement316 “must be directly considered in a ‘predictive’ context in making a threat of injury determination”317. In Mexico – Anti-Dumping Investigation of High-Fructose Corn Syrup (HFCS) from the United States– Recourse to Article 21.5 of the DSU by the United States, the AB provided guidance to WTO Panels in respect of the establishment of facts relating to threat of material injury from dumped imports. … [P]anels must consider, in the light of the claims and arguments of the parties, whether, inter alia318, the “establishment” of the facts by the investigating authorities was “proper”, in accordance with obligations imposed on such investigating authorities under the Anti-Dumping Agreement. [T]he “establishment” of facts by investigating authorities includes both affirmative findings of events that took place during the period of investigation [and] assumptions relating to such events made by those authorities in the course of their analyses. In determining the existence of a threat of material injury, the investigating authorities will necessarily have to make assumptions relating to “the occurrence of future events” since such future events “can never be definitively proven by facts”. [A] “proper establishment” of facts in a determination of threat of material injury must be based on events that … must be “clearly foreseen and imminent”, in accordance with ­A rticle 3.7 of the Anti-Dumping Agreement 319. The relevant provisions of the AD Agreement320 and of the DSU321 do not empower WTO Panels to undertake “a new and independent fact-finding exercise”322.

Article 5 of the AD Agreement: The investigation into alleged dumping Article 5 of the AD Agreement concerns procedural matters with regard to the investigation into alleged dumping. Article 11 of the SCM Agreement regulates these issues in respect of an investigation of an averred subsidy. The contents of these two Articles overlap, but differ in part. 316 Text to n 268. 317 ibid para VII.609. This was also the Panel’s view with regard to the factors listed in Article 15.2 of the SCM Agreement (n 268), in the case of a ‘threat of material injury’ determination under Article 15.7 of the SCM Agreement (ibid). 318 n 296 defines ‘inter alia’. 319 Mexico – Anti-Dumping Investigation of High-Fructose Corn Syrup (HFCS) from the United States – Recourse to Article 21.5 of the DSU by the United States: Report of the Appellate Body (22 October 2001) WT/DS132/AB/RW paras 84 and 85 ; emphasis original. Text to n 306. 320 Paragraph 5 and Subparagraph 6(i) of Article 17 of the AD Agreement, which is entitled ‘Consultation and Dispute Settlement’. 321 Article 11 of the DSU, which is entitled ‘Function of Panels’. The text to n 225 in ch 2 states Article 11 of the DSU. 322 ibid para 84.

WTO’s International Trade Agreements: GATT  55 Except as provided for in paragraph 6 [of Article 5 of the AD Agreement]323, an investigation to determine the existence, degree and effect of any alleged dumping shall be initiated upon a written application by or on behalf of the domestic industry324. An application under paragraph 1 [of Article 5 of the AD Agreement]325 shall include evidence of (a) dumping, (b) injury within the meaning of Article VI of GATT 1994 as interpreted by this Agreement326 and (c) a causal link between the dumped imports and alleged injury. Simple assertion, unsubstantiated by relevant evidence, cannot be considered sufficient to meet the requirements of this paragraph. The application shall contain such information as is reasonably available to the applicant on the following: … .327 In Guatemala – Definitive Anti-Dumping Measures on Grey Portland Cement from Mexico, the WTO Panel held that “statements of conclusion unsubstantiated by facts do not constitute evidence of the type required by Article 5.2 [of the AD Agreement]”328. However, the WTO Panel in Anti-Dumping Duties on Angles, Shapes and Sections of Iron or Non-Alloy Steel and H-Beams from Poland

323 That provision states: “If, in special circumstances, the authorities concerned decide to initiate an investigation without having received a written application by or on behalf of a domestic industry for the initiation of such investigation, they shall proceed only if they have sufficient evidence of dumping, injury and a causal link, as described in paragraph 2 [of Article 5 of the AD Agreement], to justify the initiation of an investigation.” (Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (15 April 1994) LT/UR/ A-1A/3 art 5.6 ; 33 ILM 1154 (1994)). Article 11.6 of the SCM Agreement (n 382) is identical to Article 5.6 of the AD Agreement, other than the following italicized words in the final phrase: ‘sufficient evidence of the existence of a subsidy, injury and causal link, as described in paragraph 2 [of Article 11 of the SCM Agreement], to justify the initiation of an investigation’. 324 ibid art 5.1. Article 11.1 of the SCM Agreement (text to n 383) differs from Article 5.1 of the AD Agreement in only one respect – the latter refers to ‘any alleged subsidy’ instead of ‘any alleged dumping’. 325 Text to n 324. 326 Article VI of the GATT does not give a meaning for the term ‘injury’. See n 258 for the definition of the term ‘injury’ under the AD Agreement and the SCM Agreement. 327 Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (15 April 1994) LT/UR/A-1A/3 art 5.2 ; 33 ILM 1154 (1994); emphasis original. Article 11.2 of the SCM Agreement resembles Article 5.2 of the AD Agreement, and is as follows: “An application under paragraph 1 [of the SCM Agreement] shall include sufficient evidence of the existence of (a) a subsidy and, if possible, its amount, (b) injury within the meaning of Article VI of GATT 1994 as interpreted by this Agreement [(see n 326)], and (c) a causal link between the subsidized imports and the alleged injury. Simple assertion, unsubstantiated by relevant evidence, cannot be considered sufficient to meet the requirements of this paragraph. The application shall contain such information as is reasonably available to the applicant on the following” (Agreement on Subsidies and Countervailing Measures (15 April 1994) LT/UR/A-1A/9 art 11.2 ; 1867 UNTS 14; emphasis original). 328 Guatemala – Definitive Anti-Dumping Measures on Grey Portland Cement from Mexico: Report of the Panel (24 October 2000) WT/DS156/R para VIII.1792 .

56  WTO’s International Trade Agreements: GATT specified that “raw numerical data would constitute ‘relevant evidence’” in Article 5.2329. In United States – Final Dumping Determination on Softwood Lumber from Canada, the WTO Panel expanded upon the last clause in the immediatelypreceding quote. … [T]he “reasonably available” language was intended to avoid putting an undue burden on the applicant to submit information which is not reasonably available to it. It is not … intended to require an applicant to submit all information that is reasonably available to it. [A]n application need only include such reasonably available information on the relevant matters as the applicant deems necessary to substantiate its allegations of dumping, injury and causality. …330 In this paragraph, the WTO Panel also stressed the written application’s function. … As the purpose of the application is to provide an evidentiary basis for the initiation of the investigative process 331, it would seem … unnecessary to require an applicant to submit all332 information reasonably available to it to substantiate its allegations. …333 This is supported by the WTO Panel’s statement in Mexico – Anti-Dumping Investigation of High-Fructose Corn Syrup (HFCS) from the United States that an application for an investigation into alleged dumping must contain information in preference to analysis. … Article 5.2 [of the AD Agreement] does not require an application to contain analysis, but rather to contain information, in the sense of evidence, in support of allegations. While … some analysis linking the information and the allegations would be helpful in assessing the merits of an application, we cannot read the text of Article 5.2 as requiring such an analysis in the application itself 334.

329 Thailand – Anti-Dumping Duties on Angles, Shapes and Sections of Iron or Non-Alloy Steel and H-Beams from Poland: Report of the Panel (28 September 2000) WT/DS122/R para VII.112 . 330 United States – Final Dumping Determination on Softwood Lumber from Canada: Report of the Panel (13 April 2004) WT/DS264/R para VII.486 ; emphasis original. 331 Emphasis added. 332 Emphasis original. 333 ibid. 334 Mexico – Anti-Dumping Investigation of High-Fructose Corn Syrup (HFCS) from the United States: Report of the Panel (28 January 2000) WT/DS132/R para VII.759 .

WTO’s International Trade Agreements: GATT  57 The investigating authority is to “examine the accuracy and adequacy of the evidence provided in the application to determine whether there is sufficient evidence to justify the initiation of an investigation”335. In Guatemala – Definitive Anti-Dumping Measures on Grey Portland Cement from Mexico, the WTO Panel considered the keyword within Article 5.3 of the AD Agreement to be ‘sufficient’. … It is … the sufficiency of the evidence, and not its adequacy and accuracy per se336, which represents the legal standard to be applied in the case of a determination whether to initiate an investigation337. Even if the investigating authority determines that there is sufficient evidence to undertake an investigation into alleged dumping (or a possible subsidy), then Article 5.4 of the AD Agreement (or Article 11.4 of the SCM Agreement) requires it to ascertain that the application into that allegation has been made ‘by or on behalf of the domestic industry’, in order to proceed. For this, the application must be “supported by those domestic producers whose collective output constitutes more than 50 per cent of the total production of the like product338 produced by that portion of the domestic industry expressing either support for or opposition to the application”, unless “domestic producers expressly supporting the application account for less than 25 per cent of total production of the like product produced by the domestic industry”339. Article 5.8 of the AD Agreement provides for minimum limits for the margin of dumping and the volume of imports. In these cases, the investigation into alleged dumping is to be terminated. … There shall be immediate termination in cases where the authorities determine that the margin of dumping is de minimis 340, or that the volume

335 Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (15 April 1994) LT/UR/A-1A/3 art 5.3 ; 33 ILM 1154 (1994); Agreement on Subsidies and Countervailing Measures (15 April 1994) LT/UR/ A-1A/9 art 11.3 ; 1867 UNTS 14. Article 11.3 of the SCM Agreement substitutes the word ‘review’ for the word ‘examine’ in Article 5.3 of the AD Agreement, but is otherwise identical to the latter. 336 ‘Per se’ means “by or in itself or themselves; intrinsically” (Pearsall (ed), The New Oxford Dictionary of English (n 68) 1384). 337 Guatemala – Definitive Anti-Dumping Measures on Grey Portland Cement from Mexico: Report of the Panel (24 October 2000) WT/DS156/R para VIII.1770 ; emphasis original. 338 See n 243 and accompanying text for the definition of the term ‘like product’ under the AD Agreement and the SCM Agreement. 339 Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (15 April 1994) LT/UR/A-1A/3 art 5.4 ; 33 ILM 1154 (1994); Agreement on Subsidies and Countervailing Measures (15 April 1994) LT/UR/ A-1A/9 art 11.4 ; 1867 UNTS 14. 3 40 n 139 defines ‘de minimis’. In this context – i.e., the margin of dumping as a percentage of the price of exports – ‘de minimis’ means ‘of little importance’.

58  WTO’s International Trade Agreements: GATT of dumped imports, actual or potential, or the injury, is negligible. The margin of dumping [is] de minimis if … less than 2 per cent, expressed as a percentage of the export price. The volume of dumped imports [is] negligible if the volume of dumped imports from a particular country is found to account for less than 3 per cent of imports of the like product in the importing Member, unless countries which individually account for less than 3 per cent of the imports of the like product in the importing Member collectively account for more than 7 per cent of imports of the like product in the importing Member341. In Mexico – Definitive Anti-Dumping Measures on Beef and Rice, the WTO Panel held that the phrase ‘margin of dumping’ in Article 5.8 adverts “to the individual margin of dumping of an exporter or producer rather than to a ­country-wide margin of dumping”342. The AB confirmed this interpretation. … For the Panel, the second sentence of Article 5.8 [of the AD Agreement] requires the immediate termination of the investigation in respect of an exporter for which an individual margin of dumping of zero or de minimis is found. This is a proper reading of Article 5.8 because, the Panel reasoned, the term “margin of dumping” in Article 5.8 – as well as in the Anti-­Dumping Agreement in general – refers to the individual margin of dumping of an exporter or producer, rather than to a country-wide margin of dumping343. Pursuant to this statement344, the AB clarified that “there is one investigation and not as many investigations as there are exporters or foreign producers”345. It then proceeded to describe how the investigation into alleged dumping could be immediately terminated for producers and exports whose margin of dumping is less than 2% of the product’s export price. 3 41 Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (15 April 1994) LT/UR/A-1A/3 art 5.8 ; 33 ILM 1154 (1994); emphasis original. Article 11.9 of the SCM Agreement resembles Article 5.8 of the AD Agreement, but there are several differences between these two provisions: “There shall be immediate termination in cases where the amount of a subsidy is de minimis, or where the volume of subsidized imports, actual or potential, or the injury, is negligible. For the purposes of this paragraph, the amount of the subsidy shall be considered to be de minimis if the subsidy is less than 1 per cent ad valorem” (Agreement on Subsidies and Countervailing Measures (15 April 1994) LT/UR/A-1A/9 art 11.9 ; 1867 UNTS 14; emphasis original). n 69 defines ‘ad valorem’. 3 42 Mexico – Definitive Anti-Dumping Measures on Beef and Rice: Report of the Panel (6 June 2005) WT/DS295/R para VII.136 . 3 43 Mexico – Definitive Anti-Dumping Measures on Beef and Rice: Report of the Appellate Body (29 November 2005) WT/DS295/AB/R para 208 ; emphasis original. 3 44 The AB recapitulated the WTO Panel’s view in Paragraph 217 of its Report. 3 45 ibid para 218.

WTO’s International Trade Agreements: GATT  59 … [I]n most cases, an investigation is “terminated” with the issuance of an order [that institutes anti-dumping duties] or a decision not to issue an order. … Given that the issuance of the order establishing anti-dumping duties necessarily occurs after the final determination is made, the only way to terminate immediately an investigation, in respect of producers or exporters for which a de minimis margin of dumping is determined, is to exclude them from the scope of the order. …346 Consequently, exporters so excluded “cannot be subject to administrative and changed circumstances reviews, because such reviews examine, respectively, the ‘duty paid’ and ‘the need for the continued imposition of the duty’”347. Each Member of the WTO should have notified to the WTO’s Committee on Anti-­Dumping Practices which one of the following time periods it is to use for counting imports in order to ascertain whether the volume of dumped imports is negligible: (i) the period over which data are collected for the investigation into alleged dumping, (ii) the latest twelve successive months prior to the initiation of the investigation for which data are available, or (iii) the most recent twelve consecutive months before the date on which the application for the investigation was filed for which data are available – as long as the initiation date is no more than ninety days after the date of filing348.

3 46 ibid para 219; emphasis original. 3 47 ibid para 305; emphasis original. The anti-dumping duty must not be greater than the margin of dumping as determined under Article 2 of the AD Agreement (Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (15 April 1994) LT/ UR/A-1A/3 art 9.3 ). See the paragraph entitled ‘Article VI:1 of the GATT and Article 2 of the AD Agreement: Determination of Dumping’, above in the current subsection, for elements of Article 2 of the AD Agreement and its case law. The administrative review to which the text refers is: “When the amount of the anti-dumping duty is assessed on a prospective basis, provision shall be made for a prompt refund, upon request, of any duty paid in excess of the margin of dumping.” (ibid art 9.3.2). The changed circumstances review is: “The authorities shall review the need for the continued imposition of the duty, where warranted, on their own initiative or … upon request by any interested party which submits positive information substantiating the need for a review. Interested parties shall have the right to request the authorities to examine whether the continued imposition of the duty is necessary to offset dumping, whether the injury would be likely to continue or recur if the duty were removed or varied, or both.” (ibid art 11.2). The AB held that the national law in question was incompatible with Article 5.8 of the AD Agreement and Article 11.2 of the SCM Agreement, because it authorized reviews of exporters that had no margin of dumping or of subsidization (Mexico – Definitive Anti-Dumping Measures on Beef and Rice: Report of the Appellate Body (29 November 2005) WT/DS295/AB/R paras 300 and 306 ). 3 48 Committee on Anti-Dumping Practices – Recommendation of 27 November 2002 Concerning the Time-Period to be Considered in Making a Determination of Negligible Import Volumes for Purposes of Article 5.8 of the Agreement G/ADP/10 .

60  WTO’s International Trade Agreements: GATT Article VI:2 of the GATT: The anti-dumping duty In order to offset or prevent dumping, a contracting party may levy on any dumped product an anti-dumping duty not greater in amount than the margin of dumping in respect of such product. …349 This margin of dumping is the price difference that is determined in conformity with Article VI:1 of the GATT350, i.e., the product’s normal value less the comparable price for the like product351. In United States – Anti-Dumping Act of 1916, the AB described the scope of the word ‘may’ in Article VI:2 of the GATT, as follows. [T]he verb “may” in Article VI:2 of the GATT 1994 [gives] Members a choice between imposing an anti-dumping duty or not, [and] a choice between imposing an anti-dumping duty equal to the dumping margin or imposing a lower duty. …352 The AB held that Article VI:2 of the GATT – read together with the AD ­Agreement – restricts the lawful replies to dumping to “definitive anti-dumping duties, provisional measures and price undertakings”353. In European Communities – Anti-Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil, the AB held that the phrase ‘in order to offset or prevent dumping’ in Article VI:2 of the GATT does not impose upon the investigating authority a commitment to choose a particular methodology for comparing normal value and export prices under Article 2.4.2 of the AD Agreement354, when computing a margin of dumping355. The restriction of 3 49 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art VI:2 ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. The chapeau to Article 9.3 of the AD Agreement contains the same rule (n 347). For ‘contracting party’, read ‘Member’ (n 12). 350 ibid. 351 Text to nn 236–238. 352 United States – Anti-Dumping Act of 1916: Report of the Appellate Body (28 August 2000) WT/ DS136/AB/R WT/DS162/AB/R para 116 ; emphasis original. 353 ibid para 137. Thus, the AB held “civil and criminal proceedings and penalties” for dumping to be incompatible with Article VI:2 of the GATT (ibid). In United States – Continued Dumping and Subsidy Offset Act of 2000, the AB considered payments under the Act to be “inconsistent with Article 18.1 of [the AD] Agreement”, as they were “not definitive anti-dumping duties, provisional measures or price undertakings” (United States – Continued Dumping and Subsidy Offset Act of 2000: Report of the Appellate Body (16 January 2003) WT/DS217/AB/R WT/ DS234/AB/R para 265 ). See the text to n 234, for Article 18.1 of the AD Agreement. The text to nn 233–235 describes the relationship between Article VI of the GATT and the AD Agreement. The text to n 362 gives a similar scope of measures to be within the ambit of lawful countervailing duties. 354 See the text to n 255, for Article 2.4.2 of the AD Agreement. 355 European Communities – Anti-Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil: Report of the Appellate Body (22 July 2003) WT/DS219/AB/R para 76 .

WTO’s International Trade Agreements: GATT  61 anti-dumping duties to that margin is the only requirement that the first sentence of Article VI:2 places on the authority356.

Article VI:3 of the GATT and the SCM Agreement No countervailing duty shall be levied on any product of the territory of any contracting party imported into the territory of another contracting party in excess of an amount equal to the estimated bounty or subsidy determined to have been granted, directly or indirectly, on the manufacture, production or export of such product in the country of origin or exportation … . The term “countervailing duty” … mean[s] a special duty levied for the purpose of offsetting any bounty or subsidy bestowed, directly or indirectly, upon the manufacture, production or export of any merchandise.357 As for Article VI of the GATT and the AD Agreement358, Article VI and the SCM Agreement are to be taken together. Articles 10 and 32.1 of the SCM Agreement are as follows. Members [of the WTO] shall take all necessary steps to ensure that the imposition of a countervailing duty on any product of the territory of any Member imported into the territory of another Member is in accordance with the provisions of Article VI of GATT 1994 and the terms of this Agreement. …359 No specific action against a subsidy of another Member can be taken except in accordance with the provisions of GATT 1994, as interpreted by this Agreement360. In Brazil – Measures Affecting Desiccated Coconut, the AB held thus. … The ordinary meaning of these provisions [i.e., Articles 10 and 32.1 of the SCM Agreement] taken in their context leads us to the conclusion that the negotiators of the SCM Agreement clearly intended that, under the integrated WTO Agreement, countervailing duties may only be imposed in accordance with the provisions of Part V of the SCM Agreement and Article VI of the GATT 1994, taken together. …361

356 ibid. 357 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art VI:3 ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. For ‘contracting party’, read ‘Member’ (n 12). This definition of ‘countervailing duty’ is replicated in fn 36 to art 10 of the SCM Agreement – although that footnote does not refer to ‘bounty’. 358 Text to nn 234 and 235. 359 Agreement on Subsidies and Countervailing Measures (15 April 1994) LT/UR/A-1A/9 art 10 ; 1867 UNTS 14. 360 ibid art 32.1. 361 Brazil – Measures Affecting Desiccated Coconut: Report of the Appellate Body (21 February 1997) WT/DS22/AB/R 16 ; emphasis original.

62  WTO’s International Trade Agreements: GATT In United States – Continued Dumping and Subsidy Offset Act of 2000, the AB considered these combined provisions to have a broad but specific coverage. Article VI:3 of the GATT 1994 and Part V of the SCM Agreement encompass all measures taken against subsidization. To be in accordance with the GATT 1994, as interpreted by the SCM Agreement, a response to subsidization must be either in the form of definitive countervailing duties, provisional measures or price undertakings, or in the form of multilaterally-­ sanctioned countermeasures resulting from resort to the dispute settlement system. …362 In United States – Countervailing Measures Concerning Certain Products from the European Communities, the AB stated that Article VI:3 of the GATT obliges the investigating authority to “ascertain the precise amount of a subsidy attributed to the imported products under investigation” before it introduces countervailing duties363. It held that Article VI:3, jointly with specified provisions of the SCM Agreement364, establishes the duty of Members of the WTO “to limit countervailing duties to the amount and duration of the subsidy found to exist by the investigating authority”365. There is a ‘subsidy’ if: (a)(1) a government or a public body within a WTO Member’s territory makes “a financial contribution”366 or (a)(2) there is “income or price support”367 that “operates directly or indirectly to increase exports of any product from, or to reduce imports of any product into, [a WTO Member’s] territory”368, and (b) “a benefit is thereby conferred”369. In United States – Final Countervailing Duty Determination with Respect to Certain Softwood Lumber from Canada, the AB considered a “wide range of transactions” to be “within the meaning of “financial contribution” in Article

362 United States – Continued Dumping and Subsidy Offset Act of 2000: Report of the Appellate Body (16 January 2003) WT/DS217/AB/R WT/DS234/AB/R para 273 ; emphasis original. The text to n 353 holds a similar range of measures to be within the bounds of lawful responses to dumping. 363 United States – Countervailing Measures Concerning Certain Products from the European Communities: Report of the Appellate Body (9 December 2002) WT/DS212/AB/R para 139 . 364 These provisions are Articles 1.1, 10, 19.4 and 21.1 of the SCM Agreement (ibid). For Articles 1.1, 10, 19.4 and 21.1 of the SCM Agreement, see the text to nn 366–369, 359, 425 and 427, respectively. 365 ibid. 366 Agreement on Subsidies and Countervailing Measures (15 April 1994) LT/UR/A-1A/9 art 1.1(a)(1) ; 1867 UNTS 14. 367 ibid art 1.1(a)(2). 368 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art XVI:1 ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. 369 Agreement on Subsidies and Countervailing Measures (15 April 1994) LT/UR/A-1A/9 art 1.1(b) ; 1867 UNTS 14.

WTO’s International Trade Agreements: GATT  63 1.1(a)(1)” of the SCM Agreement – including those within its four subclauses370. However, it also noted that “not all government measures capable of conferring benefits would necessarily fall within Article 1.1(a)”371; otherwise “there would be no need for Article 1.1(a), because all government measures conferring benefits, per se, would be subsidies”372. In Canada – Measures Affecting the Export of Civilian Aircraft, the AB held that a ‘benefit’ must be “received and enjoyed by a beneficiary or a recipient”, and that “the ordinary meaning of Article 1.1(b) [of the SCM Agreement] focuses on the recipient and not on the government providing the ‘financial contribution’” – especially given the presence of the phrase ‘thereby conferred’373. Thus, Article 1.1(a) is government-focused and Article 1.1(b) recipient-focused. [S]ubparagraphs (a) and (b) of Article 1.1 [of the SCM Agreement] define a “subsidy” by reference, first, to the action of the granting authority and, second, to what was conferred on the recipient. …374 The AB considered that the benefit needs to render “the recipient “better off” than it would otherwise have been, absent [the financial] contribution” – in relation to the market375. ... [T]he marketplace provides an appropriate basis for comparison in ­ etermining whether a “benefit” has been “conferred”, because the trade-­ d distorting potential of a “financial contribution” can be identified by ­determining whether the recipient has received a “financial contribution” on terms more favourable than those available to the recipient in the market376. In Brazil – Export Financing Programme for Aircraft – Second Recourse by ­ anada to Article 21.5 of the DSU, the Panel considered that, as the SCM AgreeC ment was a Multilateral Agreement on Trade in Goods in Annex 1A to the Agreement Establishing the World Trade Organization, and as the case concerned “export subsidies in respect of a particular good”, the ultimate recipients of the benefit must be producers of that good377. Article 3 of the SCM Agree-

370 United States – Final Countervailing Duty Determination with Respect to Certain Softwood Lumber from Canada: Report of the Appellate Body (19 January 2004) WT/DS257/AB/R para 52 . 371 ibid fn 35 to para 52. 372 ibid. 373 Canada – Measures Affecting the Export of Civilian Aircraft: Report of the Appellate Body (2 August 1999) WT/DS70/AB/R para 154 ; emphasis original. 374 ibid para 156. 375 ibid para 157. 376 ibid. 377 Brazil – Export Financing Programme for Aircraft – Second Recourse by Canada to Article 21.5 of the DSU: Report of the Panel (26 July 2001) WT/DS46/RW2 fn 41 to para V.73 .

64  WTO’s International Trade Agreements: GATT ment prohibits subsidies that depend upon either “export performance”378 or “the use of domestic over imported goods”379, and prohibits any Member of the WTO from granting or maintaining these380. Part V of the SCM Agreement regulates the justification for, and introduction of, countervailing duties381. Paragraphs 1 and 2 of Article 11 of the SCM Agreement concern requirements for the application concerning the alleged subsidy to proceed, and are as follows. Except as provided in paragraph 6 [of Article 11 of the SCM Agreement]382, an investigation to determine the existence, degree and effect of any alleged subsidy shall be initiated upon a written application by or on behalf of the domestic industry383. An application under paragraph 1 [of Article 11 of SCM Agreement]384 shall include sufficient evidence of the existence of (a) a subsidy and, if possible, its amount, (b) injury within the meaning of Article VI of the GATT 1994 as interpreted by this Agreement, and (c) a causal link between the subsidized imports and the alleged injury. …385 The term ‘subsidy’ is defined above386. Article 15 of the SCM Agreement considers the determination of injury387, and is similar to its corresponding Article in the AD Agreement – Article 3388. With regard to the causal link, a later passage from Article 11:2 of the SCM Agreement than that quoted above389 is as follows.

378 Agreement on Subsidies and Countervailing Measures (15 April 1994) LT/UR/A-1A/9 art 3.1(a) ; 1867 UNTS 14. 379 ibid art 3.1(b). 380 ibid art 3.2. 381 The second sentence of Article 10 of the SCM Agreement states: “Countervailing duties may only be imposed pursuant to investigations initiated and conducted in accordance with the provisions of this Agreement and the Agreement on Agriculture.” (Agreement on Subsidies and Countervailing Measures (15 April 1994) LT/UR/A-1A/9 art 10 ; 1867 UNTS 14). The relevant ‘provisions of this Agreement’ are those in Part V of the SCM Agreement, which comprises Articles 10–23. 382 That provision declares: “If, in special circumstances, the authorities concerned decide to initiate an investigation without having received a written application by or on behalf of a domestic industry for the initiation of such investigation, they shall proceed only if they have sufficient evidence of the existence of a subsidy, injury and causal link, as described in paragraph 2 [of Article 11 of the SCM Agreement], to justify the initiation of an investigation.” (ibid art 11.6). 383 ibid art 11.1. 384 Text to n 383. 385 ibid art 11.2; emphasis original. 386 Text to nn 366–377, in particular to nn 366–369 – which concerns Article 1.1 of the SCM Agreement. 387 n 258 defines ‘injury’ under the SCM Agreement. 388 nn 260, 268, 280, 294–295 and 307 describe Paragraphs 1, 2, 4, 5 and 7 of Article 15 of the SCM Agreement, respectively. 389 Text to n 385.

WTO’s International Trade Agreements: GATT  65 … The application shall contain such information as is reasonably available to the applicant on the following: … (iv) evidence that the alleged injury to a domestic industry is caused by subsidized imports through the effects of the subsidies; this evidence includes information on the evolution of the volume of the allegedly subsidized imports, the effect of these imports on prices of the like product in the domestic market and the consequent impact of the imports on the domestic industry, as demonstrated by relevant factors and indices having a bearing on the state of the domestic industry, such as those listed in paragraphs 2390 and 4391 of Article 15 [of the SCM Agreement]392. In Japan – Countervailing Duties on Dynamic Random Access Memories from Korea, the AB – in agreement with the WTO Panel – held that Article 11.2 of the SCM Agreement “indicates that information relating to the volume effects, the price effects, and the consequent impact of the subsidized imports on the domestic industry serves as evidence to demonstrate that injury is caused by the ‘subsidized imports through the effect of subsidies’”393. Article 15.5 of the SCM Agreement contains the standard for establishing the causal link in the investigation. It must be demonstrated that the subsidized imports are, through the effects of subsidies, causing injury within the meaning of this Agreement. The demonstration of a causal relationship between the subsidized imports and the injury to the domestic industry shall be based on an examination of all relevant evidence before the authorities. The authorities shall also examine any known factors other than subsidized imports which at the same time are injuring the domestic industry, and the injuries caused by these other factors must not be attributed to the subsidized imports. …394 A footnote after the word ‘subsidies’ states: “As set forth in paragraphs 2 and 4.”395 – which means Paragraphs 2 and 4 of Article 15 of the SCM Agreement396.

390 391 392 393

n 268 and accompanying text. n 380 and text to n 381. ibid. Japan – Countervailing Duties on Dynamic Random Access Memories from Korea: Report of the Appellate Body (28 November 2007) WT/DS336/AB/R para 270 . The WTO Panel stated: “[A]ccording to Article 11.2 [of the SCM Agreement], ­information relating to the volume effects, the price effects, and the consequent impact of the subsidized imports serves as evidence that the injury is caused by the subsidized imports through the effects of subsidies.” (Japan – Countervailing Duties on Dynamic Random Access Memories from Korea: Report of the Panel (13 July 2007) WT/DS336/R para VII.919 ; emphasis original). 394 Agreement on Subsidies and Countervailing Measures (15 April 1994) LT/UR/A-1A/9 art 15.5 ; 1867 UNTS 14. 95 ibid fn 47 to art 15.5. 3 96 nn 268 and 280 describe Paragraphs 2 and 4 of Article 15 of the SCM Agreement, respectively. 3

66  WTO’s International Trade Agreements: GATT In Japan – Countervailing Duties on Dynamic Random Access Memories from Korea, the AB made the following observations. … In both [the first and second] sentences [of Article 15.5 of the SCM Agreement]397, the subject to which the phrase “are causing injury” applies, or in respect of which “a causal relationship” is to be established, is “the subsidized imports”. By virtue of footnote 47 to Article 15.5398, which forms an integral part of the first sentence399, the demonstration of the causal relationship envisaged in the first two sentences of Article 15.5 is to be carried out by following the analysis set forth in Articles 15.2 and 15.4 [of the SCM Agreement] for examining the “effects” of the subsidized imports. According to these paragraphs, such an examination will comprise of: (i) whether there has been a significant increase in subsidized imports, (ii) the effect of the subsidized imports on prices, and (iii) the consequent impact of the subsidized imports on the domestic industry400. The third sentence of Article 15.5 of the SCM Agreement401 is the ‘non-­ attribution requirement’ with regard to subsidized imports, which has the same wording as the ‘non-attribution language’ of Article 3.5 of the AD Agreement in respect of dumped imports402. In United States – Countervailing Duty Investigation on Dynamic Random Access Memory Semiconductors (DRAMS) from ­Korea, the WTO Panel stated that “the [non-attribution] requirement is the same in the context of both anti-dumping and countervailing duty investigations”403, and that “[n]either party has suggested that we should not be guided by the Appellate Body’s interpretation of the non-attribution requirement set forth in Article 3.5 of the AD Agreement”404. Accordingly, the AB’s determinations in United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan 405 and European Communities – Anti-Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil 406 apply to the third sentence of Article 15.5 of the SCM Agreement. In Mexico – Definitive Countervailing Measures

397 398 399 400

401 402 403

404 405 406

Text to n 394. Text to n 395. Text to nn 394 and 395. Japan – Countervailing Duties on Dynamic Random Access Memories from Korea: Report of the Appellate Body (28 November 2007) WT/DS336/AB/R paras 262 and 263 . Text to n 394. Text to nn 294 and 296. United States – Countervailing Duty Investigation on Dynamic Random Access Memory Semiconductors (DRAMS) from Korea: Report of the Panel (21 February 2005) WT/DS296/R para VII.388 . ibid para VII.390; emphasis original. Text to nn 297–299. Text to nn 301–303.

WTO’s International Trade Agreements: GATT  67 on Olive Oil from the European Communities, The WTO Panel’s approach to interpretation of that sentence was in line with such case law. [T]he obligation in the third sentence of Article 15.5 in the SCM Agreement can be synthesized into two basic components. First, Economia407 was required to consider other factors known to it either as a result of its own investigation or because they were raised by the interested parties. Second, Economia was required to analyse each of these factors separately and to explain the nature and extent of the injurious effects of these other factors, separating and distinguishing them from the injurious effects of the subsidized imports. If the facts of the case so warranted, Economic might also have needed to consider the collective impact of the “other known factors”408. As for the AD Agreement409, ‘injury’ in the SCM Agreement includes ‘threat of material injury to a domestic industry’410. Like in Article 3.7 of the AD Agreement411, this threat in Article 15.7 of the SCM Agreement must “be based on facts”, and the circumstantial modification that would bring about “a situation in which the subsidy would cause injury must be clearly foreseen and imminent”412. In United States – Investigation of the International Trade Commission in Softwood Lumber from Canada, the WTO Panel included the analysis for Article 15 of the SCM Agreement with that for Article 3 of the AD Agreement. For instance, it stated the following. … There is certainly nothing in the text of Article 3.7 of the AD Agreement and Article 15.7 of the SCM Agreement, or Article 3.4 of the AD Agreement and Article 15.4 of the SCM Agreement, setting out an obligation to conduct a second analysis of the injury factors in cases involving threat of material injury. …413 407 ‘Economia’ is the Mexican investigating authority, which is Mexico’s Ministry of Economy (Mexico – Definitive Countervailing Measures on Olive Oil from the European Communities: Report of the Panel (4 September 2008) WT/DS341/R para II.7 ). 408 ibid para VII.305; emphasis original. 409 Text to n 304. 410 n 258. 411 Text to nn 305 and 306. 412 Agreement on Subsidies and Countervailing Measures (15 April 1994) LT/UR/A-1A/9 art 15.7 ; 1867 UNTS 14. 413 United States – Investigation of the International Trade Commission in Softwood Lumber from Canada: Report of the Panel (22 March 2004) WT/DS277/R para VII.603 . Paragraphs 2, 4 and 7 of Article 15 of the SCM Agreement correspond to Paragraphs 2, 4 and 7 of Article 3 of the AD Agreement, respectively (nn 268, 280 and 307). nn 315 and 317 and their corresponding text illustrate that the WTO Panel in United States – Investigation of the International Trade Commission in Softwood Lumber from Canada gives similar treatment with respect to Paragraph 2 of each of these Articles, and Paragraph 4 of each of these Articles, respectively.

68  WTO’s International Trade Agreements: GATT Therefore, even though the WTO Panel’s Report of Mexico – Anti-­Dumping Investigation of High-Fructose Corn Syrup (HFCS) from the United States and AB’s Report of Mexico – Anti-Dumping Investigation of High-Fructose Corn Syrup (HFCS) from the United States – Recourse to Article 21.5 of the DSU by the United States do not mention Article 15 of the SCM Agreement, it is appropriate that the case law on Article 3.7 of the AD Agreement414 should also apply to Article 15.7 of the SCM Agreement – in so far as it is relevant to the issues of law and fact in the particular case. If … a Member makes a final determination of the existence and amount of the subsidy and that, through the effects of the subsidy, the subsidized imports are causing injury, it may impose a countervailing duty … unless the subsidy or subsidies are withdrawn415. In Japan – Countervailing Duties on Dynamic Random Access Memories from Korea, the WTO Panel held that the phrase “through the effects of the subsidy” in Article 19.1 of the SCM Agreement – quoted above416 – should be interpreted identically to “through the effects of subsidies” in Article 15.5417 of the SCM Agreement418. … [T]herefore[,] Article 19.1 [of the SCM Agreement] does not require that an investigating authority demonstrate that the volume and price effects of the subsidized imports and consequent impact o[f] these imports on the domestic industry, as set forth in Articles 15.2 and 15.4 [of the SCM Agreement], are “the effects of subsidies”419. The AB upheld this finding. [I]f an investigating authority carries out the examination required under Articles 15.2, 15.4 and 15.5 of the SCM Agreement, such examination suffices to demonstrate that “subsidized imports are, through the effects of subsidies, causing injury” within the meaning of that Agreement. [T]here is no additional requirement to examine the effects of the subsidies as distinguished from the effects of the subsidized imports on a case-by-case basis. [W]e uphold the Panel’s finding … that the JIA [i.e., Japan’s investigating 414 Text to nn 308, 311, 313–315, 317 and 319. 415 Agreement on Subsidies and Countervailing Measures (15 April 1994) LT/UR/A-1A/9 art 19.1 ; 1867 UNTS 14. 416 Text to n 415. 417 Text to n 394. 418 Japan – Countervailing Duties on Dynamic Random Access Memories from Korea: Report of the Panel (13 July 2007) WT/DS336/R para VII.926 . 419 ibid.

WTO’s International Trade Agreements: GATT  69 authorities]420 did not act inconsistently with Articles 15.5 and 19.1 of the SCM Agreement by not demonstrating separately that the allegedly subsidized imports were, “through the effects of subsidies”, causing injury within the meaning of the SCM Agreement 421. In United States – Definitive Anti-Dumping and Countervailing Duties on ­ ertain Products from China, the AB interpreted the first sentence of Article C 19.3 of the SCM Agreement422 and its corresponding provision in Article 9.2 of the AD Agreement423, in a way that cautioned against the imposition of a countervailing duty to counteract a subsidy to which an anti-dumping duty had already been applied. … [T]he requirement that any amounts be “appropriate” means … that investigating authorities may not, in fixing the appropriate amount of countervailing duties, simply ignore that anti-dumping duties have been imposed to offset the same subsidization. … Both the Anti-Dumping Agreement and the SCM Agreement contain provisions requiring that the amounts of anti-dumping and countervailing duties be “appropriate in each case”, as reflected in Articles 9.2 and 19.3 respectively. … [C]onsidering that each agreement sets forth a standard of appropriateness of the amount and establishes a ceiling for the respective duties, it should not be possible to circumvent the rules in each agreement by taking measures under both agreements to counteract the same subsidization. … The object and purpose of the SCM Agreement … reveals that Members [of the WTO] intended to allow for the use of countervailing duties to offset injurious subsidization under certain circumstances and subject to specific limitations … [and] is not inconsistent with an approach that would accept that, in fixing the amount of countervailing duties that will be imposed, it is appropriate to take account of anti-dumping duties that are being levied on the same products and that offset the same subsidization. … [A]n appropriate amount of countervailing duty should be an amount that results in offsetting subsidization, with due

4 20 Japan – Countervailing Duties on Dynamic Random Access Memories from Korea: Report of the Appellate Body (28 November 2007) WT/DS336/AB/R para 2 . 4 21 ibid para 277; emphasis original. 4 22 The first sentence of Article 19.3 states: “When a countervailing duty is imposed in respect of any product, [it] shall be levied, in the appropriate amounts in each case, on a non-­d iscriminatory basis on imports of such product from all sources found to be subsidized and causing injury ….” (Agreement on Subsidies and Countervailing Measures (15 April 1994) LT/UR/A-1A/9 art 19.3 ; 1867 UNTS 14; emphasis added). 4 23 The first sentence of Article 9.2 of the AD Agreement differs from the quoted part of Article 19.3 of the SCM Agreement (n 422) in the following respects: (i) it refers to ‘anti-dumping duty’ instead of ‘countervailing duty’; (ii) this duty is ‘collected’ rather than ‘levied’, and (iii) it refers to ‘dumped’ in place of ‘subsidized’.

70  WTO’s International Trade Agreements: GATT regard being had to the concurrent application of anti-dumping duties on the same product that offset the same subsidization424. Thus, the investigating authority should only impose a countervailing duty whose maximum amount does not exceed, when added to the effect of the existing anti-dumping duty on the subsidy, the size of that subsidy. This would be consistent with Article 19.4 of the SCM Agreement, which is as follows. No countervailing duty shall be levied on any imported product in excess of the amount of the subsidy found to exist, calculated in terms of subsidization per unit of the subsidized and exported product425. In Japan – Countervailing Duties on Dynamic Random Access Memories from Korea, the AB held that the term ‘found to exist’ did not necessitate an updated determination of the subsidy. Article 19.4 [of the SCM Agreement] refers to a subsidy “found to exist”. We see no requirement in Article 19.4 for an investigating authority to conduct a new investigation or to “update” the determination at the time of imposition of a countervailing duty in order to confirm the continued existence of the subsidy. However, in the case of a non-recurring subsidy, a countervailing duty cannot be imposed if the investigating authority has made a finding in the course of its investigation as to the duration of the subsidy and, according to that finding, the subsidy is no longer in existence at the time that the Member [of the WTO] makes a final determination to impose a countervailing duty. This is because … the countervailing duty … would be in excess of the amount of subsidy found to exist, contrary to the provisions of Article 19.4 426. A countervailing duty is to “remain in force only as long as and to the extent necessary to counteract subsidization which is causing injury”427. In United States – Imposition of Countervailing Duties on Certain Hot-Rolled Lead and Bismuth Carbon Steel Products Originating in the United Kingdom, the WTO Panel com-

4 24 United States – Definitive Anti-Dumping and Countervailing Duties on Certain Products from China: Report of the Appellate Body (11 March 2011) WT/DS379/AB/R paras 567-571 ; emphasis original. 4 25 Agreement on Subsidies and Countervailing Measures (15 April 1994) LT/UR/A-1A/9 art 19.4 ; 1867 UNTS 14. 4 26 Japan – Countervailing Duties on Dynamic Random Access Memories from Korea: Report of the Appellate Body (28 November 2007) WT/DS336/AB/R para 210 ; emphasis added. 4 27 Agreement on Subsidies and Countervailing Measures (15 April 1994) LT/UR/A-1A/9 art 21.1 ; 1867 UNTS 14.

WTO’s International Trade Agreements: GATT  71 bines this provision with others in order to equate a subsidy and a countervailing duty with regard to the same imported product. … Article 19.1 [of the SCM Agreement]428 is … based on the premise that no countervailing duties shall be imposed on imported products unless the existence (and amount) of a (countervailable) subsidy is demonstrated in respect of such imports. … [L]ike Article 19.1, Article 19.4 of the SCM Agreement429 establishes a clear nexus between the imposition of a countervailing duty, and the existence of a (countervailable) subsidy. The same nexus … underlies Article VI:3 of the GATT 1994 430 . ... Article 21.1 [of the SCM Agreement]431 establishes a clear link between the (continued) imposition of countervailing duties and the (continued) existence of (countervailable) subsidization. … [T]he above provisions are all based on the premise that no countervailing duty may be imposed absent (countervailable) subsidization. [T]his premise underlies the very purpose of the countervailing measures envisaged by Part V of the SCM Agreement. Footnote 36 to Article 10 432 of the SCM Agreement provides that “[t]he term ‘countervailing duty’ shall be understood to mean a special duty levied for the purpose of offsetting any subsidy bestowed directly or indirectly upon the manufacture, production or export of any merchandise, as provided for in paragraph 3 of ­A rticle VI of GATT 1994” (emphasis supplied). … Thus, consistent with the fundamental premise underlying Articles 19.1, 19.4, and 21.1 of the SCM Agreement, and Article VI:3 of the GATT 1994, and consistent with the object and purpose of countervailing duties envisaged by Part V of the SCM Agreement, … a countervailing duty may only be imposed on an imported product if it is demonstrated that a (countervailable) subsidy was bestowed directly or indirectly on the manufacture, production or export of that merchandise. …433

Comment Article VI of the GATT and the AD and SCM Agreements and their associated judgements comprise a substantial slice of the law of international trade. Given the importance of their contents and the difficulties in determining, measuring 4 28 4 29 430 431 432 433

Text to n 415. Text to n 425. Text to n 357. Text to n 427. Text to n 359. United States – Imposition of Countervailing Duties on Certain Hot-Rolled Lead and Bismuth Carbon Steel Products Originating in the United Kingdom: Report of the Panel (23 December 1999) WT/DS138/R paras VI.207, VI.209-VI.210, and VI.212–VI.214 ; emphasis original.

72  WTO’s International Trade Agreements: GATT or estimating the variables that they regulate, it is unsurprising that there is much for the AB and the WTO Panels to decide. The fact that a part of each of the AD and SCM Agreements has similar content reduces the regulatory burden to some extent – but there remains much for users of this area of the law to assimilate.

Article XI: General Elimination of Quantitative Restrictions Article XI:1: The prohibition on quantitative restrictions No prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licences or other measures, shall be instituted or maintained by any contracting party on the importation of any product of the territory of any other contracting party or on the exportation or sale for export of any product destined for the territory of any other contracting party434. In China – Measures Related to the Exportation of Various Raw Materials, the AB used The Shorter Oxford English Dictionary to define ‘prohibition’435 and ‘restriction’436, and interpreted these in the light of the use of the word ‘quantitative’ in the title to Article XI of the GATT. … Both Article XI.1 and Article XI:2(a) of the GATT 1994 refer to “prohibitions or restrictions”. The term “prohibition” is defined as a “legal ban on the trade or importation of a specified commodity”. [T]he noun “restriction” … is defined as “[a] thing which restricts someone or something, a limitation on action, a limiting condition or regulation”, and thus refers generally to something that has a limiting effect. … [T]he use of the word “quantitative” in the title of the provision informs the interpretation of the words “restriction” and “prohibition” in Articles XI:1 and XI:2. It suggests that Article XI of the GATT 1994 covers those prohibitions and restrictions that have a limiting effect on the quantity or amount of a product being imported or exported437.

434 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art XI:1 ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. For ‘contracting party’, read ‘Member’ (n 12). 435 China – Measures Related to the Exportation of Various Raw Materials: Reports of the Appellate Body (30 January 2012) WT/DS394/AB/R WT/DS395/AB/R WT/DS398/AB/R fn 618 . 436 ibid fn 619. 437 ibid paras 319 and 320.

WTO’s International Trade Agreements: GATT  73 Accordingly, there are de jure 438 and de facto 439 quantitative restrictions on imports and exports. The former sets a maximum limit, whereas the latter does not. In Argentina – Measures Affecting the Export of Bovine Hides and the Import of Finished Leather, the Panel considered that, for a breach of Article XI of the GATT to be established, a causal link must be demonstrated between a de facto quantitative restriction and the paucity of exports (or imports) – which need not be done in the case of a de jure restriction. [T]he disciplines of Article XI:1 [of the GATT] extend to restrictions of a de facto nature. … [T]o establish that Resolution 2235 infringes Article XI:1, the European Communities need not prove actual trade effects. However,  … Resolution 2235 is alleged … to make effective a de facto rather than a de jure restriction. In such circumstances, it is inevitable, as an evidentiary matter, that greater weight attaches to the actual trade impact of a measure. Even if it emerges from trade statistics that the level of exports is unusually low, this does not prove … that that level is attributable … to the measure alleged to constitute an export restriction. Particularly in the context of an alleged de facto restriction and where … there are possibly multiple restrictions, … a complaining party [must] establish a causal link between the contested measure and the low level of exports. [A] demonstration of causation must consist of a persuasive explanation of precisely how the measure at issue causes or contributes to the low level of exports440. In Argentina – Measures Affecting the Importation of Goods, the AB provides further guidance on the scope of Article XI:1 of the GATT. … Article XI:1 [of the GATT] refers to prohibitions or restrictions “on the importation … or on the exportation or sale for export”. Thus … not every condition or burden placed on importation or exportation will be inconsistent with Article XI [of the GATT], but only those that … limit the importation or exportation of products. [T]his limitation … [can] be demonstrated through the design, architecture, and revealing structure of the measure at issue considered in its relevant context. … In Article XI:1, the expression “made effective through” precedes the terms “quotas, import or export licences or other measures”. [Thus,] the scope of Article XI:1 covers measures through which a prohibition or restriction is produced or becomes operative. … [C]ertain provisions of the GATT 1994 … permit a Member [of the

438 ‘De jure’ means ‘[a]s a matter of law’ (McFarlane, The Layman’s Dictionary of English Law (n 46) 80). 439 ‘De facto’ means ‘[a]s a matter of fact’ (McFarlane, The Layman’s Dictionary of English Law (n 46) 79). 4 40 Argentina – Measures Affecting the Export of Bovine Hides and the Import of Finished Leather: Report of the Panel (19 December 2000) WT/DS155/R paras XI.685 and XI.688-XI.689 ; emphasis original.

74  WTO’s International Trade Agreements: GATT WTO], in certain specified circumstances, to be excused from its obligations under Article XI:1 of the GATT 1994. In these provisions, express reference is made to the relationship of each provision with the obligations contained in Article XI:1 or with the obligations under the GATT 1994 more generally. … [E]ven for those measures that are expressly excluded or excused from the obligations contained in Article XI:1 of the GATT 1994, this is only the case to the extent that those measures satisfy all of the conditions specified for such treatment. … When a measure imposes a restriction or prohibition on the importation of goods, and [this] exceeds what is “necessary” for the authorized objective, or departs from the specified conditions, then [it] will violate the obligation contained in Article XI:1441. Specific items that fall within Article XI:1 of the GATT include the following. 1 Import prohibitions: In Brazil – Measures Affecting Imports of Retreaded Tyres, the WTO Panel affirmed: “Members [of the WTO] shall not forbid the importation of any product of any other Member into their markets”442. 2 Punitive fines: In Brazil – Measures Affecting Imports of Retreaded Tyres, the WTO Panel held that fines on imported tyres in excess of the average prices of tyres produced in Brazil “have the effect of penalizing the act of ‘importing’ retreaded tyres by subjecting retreaded tyres already imported and existing in the Brazilian internal market to the prohibitively expensive rate of fines”, and were “a restriction on importation within the meaning of Article XI:1” even though they were not imposed at the border443. 3 Import/export licensing systems: In India – Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products, the WTO Panel stated: “a discretionary or non-automatic import licensing requirement is a restriction prohibited by Article XI.1”444. However, that judgement was distinguished by the WTO Panel in Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef, which reasoned as follows.

… [W]here a quota is in place, the use of a discretionary licensing system need not necessarily result in any additional restriction. Where a discretionary licensing system is implemented in conjunction with other restrictions, such as in the present dispute, the manner in which [this] system is

4 41 Argentina – Measures Affecting the Importation of Goods: Reports of the Appellate Body (15 January 2015) WT/DS438/AB/R WT/DS444/AB/R WT/DS445/AB/R paras 5.217–5.218 and 5.220–5.221 . 4 42 Brazil – Measures Affecting Imports of Retreaded Tyres: Report of the Panel (12 June 2007) WT/ DS332/R para VII.11 . 4 43 ibid para VII.372. 4 44 India – Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products: Report of the Panel (6 April 1999) WT/DS90/R para V.607 .

WTO’s International Trade Agreements: GATT  75 operated may create additional restrictions independent of those imposed by the principal restriction. Since this issue was not considered in the India – Quantitative Restrictions report, that case does not provide authority for the proposition that a discretionary licensing system, used in conjunction with a quantitative restriction, necessarily provides some additional level of restriction over and above the inherent restriction on access created through the imposition of a quantitative restriction445. In China – Measures Related to the Exportation of Various Raw Materials, the WTO Panel provided further detail concerning the legality of licensing regimes. [L]icences that are granted without condition or those that implement an underlying measure that is justified pursuant to another provision of the WTO Agreement … may be consistent with Article XI:1 [of the GATT], so long as the licence does not by its nature have a limiting or restrictive effect. [A] licence requirement that results in a restriction additional to that inherent in a permissible measure would be inconsistent with GATT Article XI:1. Such restriction may arise in cases where licensing agencies have unfettered or undefined discretion to reject a licence application 446.

4 Minimum export prices: In China – Measures Related to the Exportation of Various Raw Materials, the WTO Panel stated: “[A] measure preventing exportation below a minimum price level inherently constitutes a “restriction” that is inconsistent with Article XI:1”447. 5 Restrictions on the circumstances of importation: In India – Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products, the WTO Panel observed that Article XI:1 of the GATT is ‘comprehensive’ in that it precludes import restrictions which are made effective through ‘other measures’, and that earlier cases were in line with the ordinary meaning of the word ‘restriction’ – which, on the present facts, leads to the conclusion that limiting importation to ‘actual users’ of the product “is a restriction on imports because it precludes imports of products for resale by intermediaries”448. In Colombia – Indicative Prices and Restrictions on Ports of Entry, the WTO Panel stated: “the restriction to two ports of entry for subject

4 45 Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef: Report of the Panel (31 July 2000) WT/DS161/R WT/DS169/R para 782 ; emphasis original. 4 46 China – Measures Related to the Exportation of Various Raw Materials: Reports of the Panel (5 July 2011) WT/DS394/R WT/DS395/R WT/DS398/R para VII.957 ; emphasis original. 4 47 ibid para VII.1081. 4 48 India – Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products: Report of the Panel (6 April 1999) WT/DS90/R para V.620 .

76  WTO’s International Trade Agreements: GATT goods arriving from Panama … constitutes a restriction on importation within the meaning of Article XI:1” of the GATT449. 6 Restrictions made effective through state-trading operations: Ad Articles XI, XII, XIII, XIV and XVIII of the GATT specifies that, throughout these provisions, “the terms ‘import restrictions’ or ‘export restrictions’ include restrictions made effective through state-trading operations”450. In India – Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products, the WTO Panel noted: “the mere fact that imports are effected through state trading enterprises would not in itself constitute a restriction … the operation of this state trading entity [must be] such as to result in a restriction”451. In Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef, the WTO Panel held that, as “any restriction it imposes on the distribution of imported products will lead to a restriction on importation of the particular product over which it has a monopoly”, the above Ad Note “prohibits a state-trading enterprise enjoying monopoly right over both importation and distribution from imposing any internal restriction against such imported products”452. 7 Export restrictions: In China – Measures Related to the Exportation of Various Raw Materials, the WTO Panel held that three Chinese measures operating together “has resulted in the imposition of export duties”453, which amounted to “the imposition of a restriction or prohibition on the[] exportation [of] bauxite, coke, fluorspar, silicon carbide and zinc” that was incompatible with China’s responsibilities under Article XI:1 of the GATT454.

Article XI:2: Exceptions to the prohibition in Article XI.1 The rule in Article XI:1 of the GATT does not apply to: (a) “[e]xport prohibitions or restrictions temporarily applied to prevent or relieve critical shortages of

4 49 Colombia – Indicative Prices and Restrictions on Ports of Entry: Report of the Panel (27 April 2009) WT/DS366/R para VII.275 . 450 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 Annex I Ad arts XI, XII, XIII, XIV and XVII ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. 451 India – Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products: Report of the Panel (6 April 1999) WT/DS90/R para V.612 . 452 Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef: Report of the Panel (31 July 2000) WT/DS161/R WT/DS169/R para 751 ; emphasis original. 453 China – Measures Related to the Exportation of Various Raw Materials: Reports of the Panel (5 July 2011) WT/DS394/R WT/DS395/R WT/DS398/R para VII.105 . 454 ibid para VII.224.

WTO’s International Trade Agreements: GATT  77 foodstuffs or other products” that are “essential” to the exporting country455, (b) “[i]mport and export prohibitions or restrictions necessary to the application of standards or regulations for the classification, grading or marketing of commodities in international trade” 456, and (c) “[i]mport restrictions on any agricultural or fisheries product in any form457, necessary to the enforcement of government measures” which function to (i) limit the amount of “the like domestic product” that may be “marketed or produced”, (ii) eliminate “a temporary surplus of the like domestic product”, or (iii) restrict the amount of “any animal product” that may be produced – the manufacture of which directly depends upon the imported material, if the domestic production of that item is “relatively negligible”458. In China – Measures Related to the Exportation of Various Raw Materials, the AB consulted The Shorter Oxford English Dictionary, in order to define terms within Article XI:2(a) of the GATT459. Aspects of its interpretation of this provision read as follows. [T]he words “prohibition” and “restriction” in [Article XI:2(a) of the GATT460] are both qualified by the word “export”. Thus, Article XI:2(a) covers any measure prohibiting or restricting the exportation of certain goods. Accordingly, … the words “prohibitions or restrictions” … refer to the same type of measures in both paragraph 1 and subparagraph 2(a), with the difference that subparagraph 2(a) is limited to prohibitions or restrictions on exportation, while paragraph 1 also covers measures relating to importation461. “[D]uties, taxes, or other charges” are excluded from the scope of Article XI:1 [of the GATT]. Thus, by virtue of the link between Article XI:1 and Article XI:2, the term “restrictions” in Article XI:2(a) also excludes “duties, taxes or other charges”. Hence, if a restriction does not fall within the scope of Article XI:1, then Article XI:2 will also not apply to it. … The word “temporary” is defined as “[l]asting or meant to last for a limited time only; not permanent; made or arranged to supply a passing need”. Thus, when employed in connection with the word “applied”, it describes a measure applied for a limited time, a measure taken to bridge a “passing need”. [T]he definitional element of “supply[ing] a passing need”

455 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art XI:2(a) ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. 456 ibid art XI:2(b). 457 The Ad Note to Article XI:2(c) of the GATT states: “The term ‘in any form’ in this paragraph covers the same products when in an early stage of processing and still perishable, which compete directly with the fresh product and if freely imported would tend to make the restriction on the fresh product ineffective.” (General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/GATT/2 Annex I Ad art XI para 2(c) ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700). 458 ibid art XI:2(c). 459 This succeeds the AB’s analysis in the text to nn 435–437. 4 60 Text to n 455. 4 61 Text to n 434.

78  WTO’s International Trade Agreements: GATT suggests that Article XI:2(a) refers to measures that are applied in the interim. [T]he noun “shortage” is defined as “[d]eficiency in quantity; an amount lacking” and is qualified by the adjective “critical”, which … is defined as “[o]f, pertaining to, or constituting a crisis; of decisive importance, crucial; involving risk or suspense”. The term “crisis” describes “[a] ­turning-point, a vitally important or decisive stage; a time of trouble, danger or suspense in politics, commerce, etc.” Taken together, “critical shortage” thus refers to those deficiencies in quantity that are crucial, that amount to a situation of decisive importance, or that reach a vitally important or decisive stage, or a turning point. … [“]Foodstuff[“] is defined as “an item of food, a substance used as food”. The term “essential” is defined as “[a]bsolutely indispensable or necessary”. Accordingly, Article XI:2(a) refers to critical shortages of foodstuffs or otherwise absolutely indispensable or necessary products. … The word “prevent” is defined as “[p]rovide beforehand against the occurrence of (something); make impracticable or impossible by anticipatory action; stop from happening”. The word “relieve” means “[r]aise out of some trouble, difficulty or danger; bring or provide aid or assistance to”. [T]herefore[,] Article XI:2(a) [supplies] a basis for measures adopted to alleviate or reduce an existing critical shortage, [and] for preventive or anticipatory measures adopted to pre-empt an imminent critical shortage. [Whilst] Article XI:2(a) must be interpreted so as to give meaning to each of the concepts contained in that provision, … these different concepts impart meaning to each other, and thus define the scope of Article XI:2(a). For example, whether a shortage is “critical” may be informed by how “essential” a particular product is. In addition, the characteristics of the product as well as factors pertaining to a critical situation, may inform the duration for which a measure can be maintained in order to bridge a passing need in conformity with Article XI:2(a). … Accordingly, an evaluation of whether a particular measure satisfies the requirements of Article XI:2(a) necessarily requires a case-by-case analysis taking into consideration the nexus between the different elements contained in Article XI:2(a)462. This approach uses a literal interpretation of the words in Article XI:2(a) of the GATT. It follows this with a recommendation to show flexibility in the application of that provision to the facts of the particular case, taking into consideration any interaction between the various elements of Article XI:2(a). Similar precision would be helpful in respect of the application of Subparagraphs 2(b) and 2(c) of Article XI – as soon as the AB is given an opportunity to adjudicate a matter to which either of these relate.

4 62 China – Measures Related to the Exportation of Various Raw Materials: Reports of the Appellate Body (30 January 2012) WT/DS394/AB/R WT/DS395/AB/R WT/DS398/AB/R paras 321, 323-324, and 326-328 .

WTO’s International Trade Agreements: GATT  79 In Canada – Measures Affecting Exports of Unprocessed Herring and Salmon, the GATT Panel held that Canada’s export restrictions on some unprocessed salmon and herring products were not “necessary to the application of standards” under Article XI:2(b) of the GATT463, because these measures applied to items that satisfied the standards which generally applied to exports of fish from Canada464. The Panel also rejected Canada’s claim that these restrictions were “regulations for the … marketing of commodities in international trade” within the meaning of Article XI:2(b)465. In United States – Prohibition of Imports of Tuna and Tuna Products from Canada, the GATT Panel noted that, unlike Subparagraphs 2(a) and 2(b) of Article XI of the GATT, Subparagraph 2(c) 466 did not exempt prohibitions467. Therefore, “the provisions of Article XI:2(c) … could not justify the application of an import prohibition”468. In Canada – Import Restrictions on Ice Cream and Yoghurt, the GATT Panel listed the necessary conditions for a country that had breached Article XI:1 of the GATT to establish a successful defence under Article XI:2(c)(i). These conditions are: - the measure on importation must constitute an import restriction (and not a prohibition); - the import restriction must be on an agricultural or fisheries product; - the import restriction and the domestic marketing or production restriction must apply to ‘like’ products in any form …; - there must be governmental measures which operate to restrict the quantities of the domestic product permitted to be marketed or produced; - the import restriction must be necessary to the enforcement of the domestic supply restriction; - the contracting party applying restrictions on importation must give public notice of the total quantity or value of the product permitted to be imported during a specified future period469; and the restrictions applied must not reduce the proportion of total imports relative to total domestic production, as compared with the proportion which 4 63 Text to n 456. 4 64 Canada – Measures Affecting Exports of Unprocessed Herring and Salmon: Report of the Panel (22 March 1988) L/6268 para 4.2 . 4 65 ibid para 4.3. 4 66 Text to n 458. 4 67 United States – Prohibition of Imports of Tuna and Tuna Products from Canada: Report of the Panel (22 February 1982) L/5198 para 4.6 . 4 68 ibid. 4 69 ‘Contracting party’ means a country that had adopted the GATT 1947. This condition corresponds to the first sentence of the additional paragraph of Article XI:2 of the GATT, which states: “Any contracting party applying restrictions on the importation of any product pursuant to sub-paragraph (c) of this paragraph shall give public notice of the total quantity or value of the product permitted to be imported during a specified future period and of any change in such quantity or value.” (General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/GATT/2 art XI:2 ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700). For ‘contracting party’, read ‘Member’ (n 12).

80  WTO’s International Trade Agreements: GATT might reasonably be expected to rule between the two in the absence of restrictions470. It is submitted that this breakdown of the elements of the exemption in Article XI:2(c)(i) of the GATT is useful to both applicants and WTO Panels, as it provides clarity and may act as a checklist in respect of this provision. Articles XII to XV and XVIII of the GATT are connected to Article XI of that Agreement, but are not discussed here owing to limitations of space.

Articles XX and XXI: Exceptions to the GATT Article XX: General Exceptions – overview and structure In United States – Standards for Reformed and Conventional Gasoline, the AB stated: “Article XX [of the GATT] contains provisions designed to permit important state interests … to find expression”471. In United States – Import Prohibition of Certain Shrimp and Shrimp Products, the AB explained this further. … Paragraphs (a) to (j) [of Article XX of the GATT] comprise measures that are recognized as exceptions to substantive obligations established in the GATT 1994, because the domestic policies embodied in such measures have been recognized as important and legitimate in character. …472 Later in its Report for that case, the AB declared: “[A] balance must be struck between the right of a Member [of the WTO] to invoke an exception under Article XX [of the GATT] and the duty of that same Member to respect the treaty rights of the other Members”473. The AB or the WTO Panel in the particular judgement is required to interpret the chapeau of Article XX in such a way as to optimize this balance.

470 Canada – Import Restrictions on Ice Cream and Yoghurt: Report of the Panel (5 December 1989) L/6568 para 62 . The final condition corresponds to the second sentence of the additional paragraph of Article XI:2 of the GATT, which declares: “[A]ny restrictions applied under (i) above shall not be such as will reduce the total of imports relative to the total of domestic production, as compared with the proportion which might reasonably be expected to rule between the two in the absence of restrictions.” (General Agreement on Tariffs and Trade (30 October 1947) updated LT/ UR/A-1A/1/GATT/2 art XI:2 ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700). 471 United States – Standards for Reformed and Conventional Gasoline: Report of the Appellate Body (29 April 1996) WT/DS2/AB/R 30 . 472 United States – Import Prohibition of Certain Shrimp and Shrimp Products: Report of the Appellate Body (12 October 1998) WT/DS58/AB/R para 121 ; emphasis original. 473 ibid para 156; emphasis original.

WTO’s International Trade Agreements: GATT  81 The task of interpreting and applying the chapeau is … essentially [that] of locating and marking out a line of equilibrium between the right of a Member to invoke an exception under Article XX and the rights of the other Members under varying substantive provisions (e.g., Article XI) of the GATT 1994, so that neither of the competing rights will cancel out the other and thereby distort and nullify or impair the balance of rights and obligations constructed by the Members themselves in that Agreement. …474 Accordingly, Article XX of the GATT comprises a two-tiered test: (i) to establish the existence of a General Exception in the particular case, and (ii) to satisfy the conditions in the chapeau of that Article. [T]he assessment of a claim of justification under Article XX [of the GATT] involves a two-tiered analysis in which a measure must first be provisionally justified under one of the subparagraphs of Article XX, before it is subsequently appraised under the chapeau of Article XX. [P]rovisional justification under one of the subparagraphs [of Article XX] requires that a challenged measure “address the particular interest specified in that paragraph” and that “there be a sufficient nexus between the measure and the interest protected”475. In the context of Article XX(a) [i.e., the measure must be “necessary to protect public morals”476], this means that a Member wishing to justify its measure must demonstrate that it has adopted or enforced a measure “to protect public morals”, and that the measure is “necessary” to protect such public morals. [A] necessity analysis involves a process of “weighing and balancing”477 a series of factors, including the importance of the objective [of the measure], the contribution of the meas-

474 ibid para 159. 475 These quotes are from Paragraph 292 of the AB’s Report of United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services (European Communities – Measures Prohibiting the Importation and Marketing of Seal Products: Reports of the Appellate Body (22 May 2014) WT/DS400/AB/R WT/DS401/AB/R fn 1178 ), which applies the case law for Article XX of the GATT to Article XIV of the GATS – as “[s]imilar language is used in both provisions, notably the term “necessary” and the requirements set out in their respective chapeaux” (United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services: Report of the Appellate Body (7 April 2005) WT/DS285/AB/R para 291 ). nn 149–151 in ch 2 and accompanying text, and the text to nn 147 and 152–155 in ch 2, consider Article XIV of the GATS. 476 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art XX(a) ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. 477 This quote originates in Paragraph 166 of the AB’s Report of Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef, with additional contributions from Paragraph 306 of the AB’s Report of United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services and Paragraph 182 of the AB’s Report of Brazil – Measures Affecting Imports of Retreaded Tyres (European Communities – Measures Prohibiting the Importation and Marketing of Seal Products: Reports of the Appellate Body (22 May 2014) WT/DS400/AB/R WT/DS401/ AB/R fn 1180 ).

82  WTO’s International Trade Agreements: GATT ure to that objective, and the trade-restrictiveness of the measure. [A] comparison between the challenged measure and possible alternatives should then be undertaken. The burden of proving that a measure is “necessary to protect public morals” within the meaning of Article XX(a) resides with the responding party, although a complaining party must identify any alternative measures that, in its view, the responding party should have taken478.

The Paragraphs of Article XX Paragraph (a) – Measures necessary to protect public morals: Establishing that the relevant WTO Member’s measure is “necessary to protect public morals”479 involves a necessity analysis, as described in the immediately preceding quote480. In United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services, the WTO Panel combined The Shorter Oxford English Dictionary’s definitions of ‘public’ and ‘moral’ to create the following definition of ‘public morals’: “standards of right and wrong that can be described as ‘belonging to, affecting or concerning the community or nation’”481. Later in this judgement, the Panel stated: “[T]he term ‘public morals’ denotes standards of right and wrong conduct maintained by or on behalf of a community or nation”482. The AB in that case described the Panel’s definition of ‘public morals’ as follows. In its analysis under Article XIV(a) [of the GATS], the Panel found that “the term ‘public morals’ denotes standards of right and wrong conduct maintained by or on behalf of a community or nation.” …483 The Panel declared that WTO Members “should be given some scope to define and apply for themselves the concepts of ‘public morals’ and ‘public order’ in their respective territories, according to their own systems and scales of values”484. Although these judgements concerned Article XIV(a) of the GATS, 478 European Communities – Measures Prohibiting the Importation and Marketing of Seal Products: Reports of the Appellate Body (22 May 2014) WT/DS400/AB/R WT/DS401/AB/R para 5.169 . 479 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art XX(a) ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. 480 Text to n 478. 481 United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services: Report of the Panel (10 November 2004) WT/DS285/R para III.292 and fn 476 . 482 ibid para VI.851. 483 United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services: Report of the Appellate Body (7 April 2005) WT/DS285/AB/R para 296 . 484 United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services: Report of the Panel (10 November 2004) WT/DS285/R para VI.847 .

WTO’s International Trade Agreements: GATT  83 the WTO Panel in China – Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products saw “no reason to depart from the interpretation of ‘public morals’ developed by the panel in US – Gambling”, and “adopted the same interpretation for purposes of” its evaluation of Article XX(a) of the GATT485. With regard to evaluating the trade-restrictiveness of the national measure in question – as part of the necessity analysis – the AB commented thus: … The less restrictive the effects of the measure, the more likely it is to be characterized as “necessary”. Consequently, if a Member [of the WTO] chooses to adopt a very restrictive measure, it will have to ensure that the measure is carefully designed so that other elements to be taken into account in weighing and balancing the factors relevant to an assessment of the “necessity” of the measure will “outweigh” such restrictive effect. …486 Paragraph (b): Measures necessary to protect human, animal or plant life or health: In United States – Standards for Reformed and Conventional Gasoline, the WTO Panel held that the party claiming that its measure is “necessary to protect human, animal or plant life or health”487 had to establish that: (i) “the policy in respect of the measures for which the provision was invoked fell within the range of policies designed to protect human, animal or plant life or health”488, (ii) “the inconsistent measures for which the exception was being invoked were necessary to fulfil the policy objective”489, and (iii) “the measures were applied in conformity with the requirements of the introductory clause of Article XX [of the GATT]”490 – i.e., the chapeau of Article XX. A necessity analysis is required in respect of point (ii). In Brazil – Measures Affecting Imports of Retreaded Tyres, the AB held that, when assessing the contribution of the measure to its objective (i.e., as part of the necessity analysis), the WTO Panel may select the ­methodology – ­which “can be done either in quantitative or in qualitative terms”491.

485 China – Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products: Report of the Panel (12 August 2009) WT/DS363/R para VII.759 . 486 China – Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products: Report of the Appellate Body (21 December 2009) WT/DS363/AB/R para 310 . 487 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art XX(b) ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. 488 United States – Standards for Reformed and Conventional Gasoline: Report of the Panel (29 January 1996) WT/DS2/R para 6.20 ; emphasis original. 489 ibid; emphasis original. 490 ibid; emphasis original. 491 Brazil – Measures Affecting Imports of Retreaded Tyres: Report of the Appellate Body (3 ­December 2007) WT/DS332/AB/R para 146 .

84  WTO’s International Trade Agreements: GATT … The selection of a methodology to assess a measure’s contribution is a function of the nature of the risk, the objective pursued, and the level of protection sought. It ultimately also depends on the nature, quantity, and quality of evidence existing at the time the analysis is made. Because the Panel, as the trier of facts, is in a position to evaluate these circumstances, it should enjoy a certain latitude in designing the appropriate methodology to use and deciding how to structure or organize the analysis of the contribution of the measure at issue to the realization of the ends pursued by it. …492. Later in the judgement, the AB comments further on the contribution of the measure to its objective, and the relation of that measure to its trade-restrictiveness. … [A] key element of the analysis of the necessity of a measure under Article XX(b) [of the GATT] is the contribution it brings to the achievement of its objective. A contribution exists when there is a genuine relationship of ends and means between the objective pursued and the measure at issue. To be characterized as necessary, a measure does not have to be indispensable. However, its contribution to the achievement of the objective must be material … especially if the measure at issue is as trade restrictive as an import ban. Thus, the contribution of the measure has to be weighed against its trade restrictiveness, taking into account the interests or the values underlying the objective pursued by it. …493 In Brazil – Measures Affecting Imports of Retreaded Tyres, the WTO Panel performed an Article XX(b) necessity analysis for a Brazilian import ban on retreaded tyres. The AB’s judgement in that case contains a useful summary of this process. [T]o determine whether a measure is “necessary” within the meaning of Article XX(b) of the GATT 1994, a panel must consider the relevant factors, particularly the importance of the interests or values at stake, the extent of the contribution to the achievement of the measure’s objective, and its trade restrictiveness. If this analysis yields a preliminary conclusion that the measure is necessary, this result must be confirmed by comparing the measure with possible alternatives, which may be less trade restrictive while providing an equivalent contribution to the achievement of the objective. This comparison should be carried out in the light of the importance of the interests or values at stake. … [T]he Panel identified the objective of the Import Ban as being the reduction of the exposure to risks arising from the accumulation of waste tyres. It assessed the importance of the interests underlying

492 ibid para 145. 493 ibid para 210.

WTO’s International Trade Agreements: GATT  85 this objective. It found that risks of dengue fever and malaria arise from the accumulation of waste tyres and that the objective of protecting human life and health against such diseases “is both vital and important in the highest degree”. The Panel noted that the objective of the Import Ban also relates to the protection of the environment, a value that it considered – correctly, in our view – important. Then, the Panel analyzed the trade restrictiveness of the Import Ban and its contribution to the achievement of its objective. [I]t considered that, in the light of the importance of the interests protected by the objective of the Import Ban, the contribution of the Import Ban to the achievement of its objective outweighs its trade restrictiveness. … The Panel then proceeded to examine the alternatives to the Import Ban proposed by the European Communities. … [It] concluded … that none of the proposed options was a reasonably available alternative to the Import Ban … [:] “none of these, either individually or collectively, would be such that the risks arising from waste tyres in Brazil would be safely eliminated, as intended by the current import ban”. … The weighing and balancing is a holistic operation that involves putting all the variables of the equation together and evaluating them in relation to each other after having examined them individually, in order to reach an overall judgement. …494 Paragraph (c): Measures relating to the importations or exportations of gold or silver: There is no case law on whether a Member of the WTO adopts a measure “relating to the importations or exportations of gold or silver”495. The term ‘relating to’ is considered under Paragraph XX(g) of the GATT496. Paragraph (d): Measures necessary to secure compliance with laws or regulations: Establishing that the relevant WTO Member’s measure is “necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of this Agreement”497 – i.e., the GATT 1994 – involves the conducting of a necessity analysis similar to that used in respect of Paragraphs (a) and (b) of Article XX of the GATT498. In Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef, the AB discussed the word ‘necessary’ as used in Paragraph (d) of Article XX. … Measures which are indispensable or of absolute necessity or inevitable to secure compliance certainly fulfil the requirements of Article XX(d) [of the GATT]. But other measures, too, may fall within the ambit of this exception. As used in Article XX(d), the term “necessary” refers … to a range of degrees of necessity. At one end of this continuum lies “necessary”

494 ibid paras 178-182; emphasis original. 495 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art XX(c) ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. 496 Text to nn 504–508, 510–512 and 515. 497 ibid art XX(d). 498 Text to nn 478, 486 and 491–494.

86  WTO’s International Trade Agreements: GATT understood as “indispensable”; at the other end, is “necessary” taken to mean “making a contribution to.” [A] “necessary” measure is … located significantly closer to the pole of “indispensable” than to the opposite pole of simply “making a contribution to” 499. In Mexico – Tax Measures on Soft Drinks and Other Beverages, the AB ruled on the scope of the phrase ‘secure compliance with laws or regulations’. … Article XX(d) [of the GATT] is not available to justify WTO-inconsistent measures that seek “to secure compliance” by another WTO Member with that other Member’s international obligations. … [T]he terms “laws or regulations” cover rules that form part of the domestic legal system of a WTO Member, including rules deriving from international agreements that have been incorporated into the domestic legal system of a WTO Member or have direct effect according to that WTO Member’s system. … Article XX(d) does not require the “use of coercion” nor that the measure sought to be justified results in securing compliance with absolute certainty. …500 Paragraph (e): Measures relating to the products of prison labour: There is no case law on whether a Member of the WTO adopts a measure “relating to the products of prison labour”501. The term ‘relating to’ is examined under Paragraph XX(g) of the GATT502. Paragraph (f): Measures imposed for the protection of national treasures: There is no case law on whether a Member of the WTO adopts a measure “imposed for the protection of national treasures of artistic, historic or archaeological value”503. The term ‘imposed for’ is unique to Article XX(f) within the GATT. Paragraph (g): Measures relating to the conservation of exhaustible natural resources: Article XX(g) of the GATT concerns national measures “relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption”504. In Canada – Measures Affecting Exports of Unprocessed Herring and Salmon, the GATT Panel stated the following. … [T]he purpose of including Article XX(g) in the General Agreement was … to ensure that the commitments under the General Agreement do not 499 Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef: Report of the Appellate Body (11 December 2000) WT/DS161/AB/R WT/DS169/AB/R para 161 . 500 Mexico – Tax Measures on Soft Drinks and Other Beverages: Report of the Appellate Body (6 March 2006) WT/DS308/AB/R para 79 ; emphasis added. 501 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art XX(e) ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. 502 Text to nn 504–508, 510–512 and 515. 503 ibid art XX(f). 504 ibid art XX(g). n 28 quotes Article XX(g) of the GATT in full.

WTO’s International Trade Agreements: GATT  87 hinder the pursuit of policies aimed at the conservation of exhaustive natural resources. [F]or these reasons … a trade measure … had to be primarily aimed at the conservation of a natural resource to be considered as “relating to” conservation within the meaning of Article XX(g). …505 In United States – Standards for Reformed and Conventional Gasoline, the AB used the above interpretation of ‘relating to’, but did not endorse it. All the participants and the third participants in this appeal accept the propriety and applicability of the view of the Herring and Salmon report and the Panel Report that a measure must be “primarily aimed at” the conservation of exhaustible natural resources in order to fall within the scope of Article XX(g) [of the GATT]. Accordingly, we see no need to examine this point further, save, perhaps, to note that the phrase “primarily aimed at” is not itself treaty language and was not designed as a simple litmus test for inclusion or exclusion from Article XX(g). Against this background, we turn to the specific question of whether the baseline establishment rules are appropriately regarded as “primarily aimed at” the conservation of natural resources for the purposes of Article XX(g). [T]his question must be answered in the affirmative506. In United States – Import Prohibition of Certain Shrimp and Shrimp Products, the AB changed the emphasis of the term ‘relating to’ from ‘primarily aimed at’ to ‘whether the means are related to the ends’, with subtle reasoning. In United States – Gasoline, we inquired into the relationship between the baseline establishment rules of the United States Environmental Protection Agency (the “EPA”) and the conservation of natural resources for the purposes of Article XX(g) [of the GATT]. There, we answered in the affirmative the question … of whether the baseline establishment rules were “primarily aimed at” the conservation of clean air. … The substantial relationship we found there between the EPA baseline establishment rules and the conservation of clean air in the United States was a close and genuine relationship of ends and means507. In the present case, we must examine the relationship between the general structure and the design of the measure here at stake, Section 609, and the policy goal it purports to serve, that is, the conservation of sea turtles508.

505 Canada – Measures Affecting Exports of Unprocessed Herring and Salmon: Report of the Panel (22 March 1988) L/6268 para 4.6 . 506 United States – Standards for Reformed and Conventional Gasoline: Report of the Appellate Body (29 April 1996) WT/DS2/AB/R 18-19 . 507 United States – Import Prohibition of Certain Shrimp and Shrimp Products: Report of the Appellate Body (12 October 1998) WT/DS58/AB/R para 136 . 508 ibid para 137.

88  WTO’s International Trade Agreements: GATT … Section 609, cum 509 implementation guidelines, is not disproportionately wide in its scope and reach in relationship to the policy objective of protection and conservation of sea turtle species. The means are, in principle, reasonably related to the ends. The means and ends relationship between Section 609 and the legitimate policy of conserving an exhaustible and, in fact, endangered species, is observably a close and real one, a relationship that is every bit as substantial as that which we found in United States – ­Gasoline between the EPA baseline establishment rules and the conservation of clean air in the United States510. [T]herefore, Section 609 is a measure “relating to” the conservation of an exhaustible natural resource within the meaning of Article XX(g) of the GATT 1994511. It is submitted that the interpretation ‘whether the means are related to the ends’ is a better test of ‘relating to’ than the interpretation ‘primarily aimed at’ because: (i) the former allows for the measure to have more than one aim, and thus may include relevant measures that the latter excludes, (ii) the latter may permit the inclusion of broad measures with the correct wording (e.g., the aim of this measure is to conserve the population of sea turtles), and (iii) the former is a more practical test than the latter – unless the adjudicating body disregards the wording of the measure’s aim(s) and looks entirely through its detailed wording to the estimated effects. Notwithstanding this, the following sentence of the AB in United States – Standards for Reformed and Conventional Gasoline is pertinent. The relationship between the affirmative commitments set out in, e.g., Articles I, III and XI [of the GATT], and the policies and interests embodied in the “General Exceptions” listed in Article XX [of the GATT], can be given meaning within the framework of the General Agreement and its object and purpose by a treaty interpreter only on a case-to-case basis, by careful scrutiny of the factual and legal context in a given dispute, without disregarding the words actually used by the WTO Members themselves to express their intent and purpose 512. Thus, whether the means of the measure in question are related to its ends should be considered on a case-by-case basis within the context of the GATT’s object, purpose and relevant provisions. In United States – Standards for Reformed and

509 ‘Cum’ means “combined with” (Pearsall (ed), The New Oxford Dictionary of English (n 68) 443). 510 ibid para 141; emphasis original. 511 ibid para 142. 512 United States – Standards for Reformed and Conventional Gasoline: Report of the Appellate Body (29 April 1996) WT/DS2/AB/R 18 ; emphasis original.

WTO’s International Trade Agreements: GATT  89 Conventional Gasoline, Article III:4 of the GATT513 was the most relevant substantive provision514. Article XX(g) [of the GATT] and its phrase, “relating to the conservation of exhaustible natural resources”, need to be read in context and in such a manner as to give effect to the purposes and objects of the General Agreement. The context of Article XX(g) includes the provisions of the rest of the General Agreement, including in particular Articles I, III and XI [of the GATT]; conversely, the context of Articles I, III and XI includes Article XX. Accordingly, the phrase “relating to the conservation of exhaustible natural resources” may not be read so expansively as seriously to subvert the purpose and object of Article III:4. Nor may Article III:4 be given so broad a reach as effectively to emasculate Article XX(g) and the policies and interests it embodies515. In United States – Import Prohibition of Certain Shrimp and Shrimp Products, the AB found that the sea turtles to which Section 609 referred constituted ‘exhaustible natural resources’ within Article XX(g) of the GATT516. Referring to the judgements of the GATT Panel in Prohibition of Imports of Tuna and Tuna Products from Canada517 and Measures Affecting Exports of Unprocessed Herring and Salmon518, the AB declared that organisms may be ‘exhaustible natural resources’. Given the recent acknowledgement by the international community of the importance of concerted bilateral or multilateral action to protect living natural resources, and recalling the explicit recognition by WTO Members of the objective of sustainable development in the preamble of the WTO Agreement 519, … Article XX(g) of the GATT 1994 may [no longer] be read

513 Text to n 156. 514 As the WTO Panel found the baseline establishment rules to be “inconsistent with Article III:4 of the General Agreement”, it did not examine their consistency with other substantial provisions of the GATT (ibid 7–8; emphasis original). 515 ibid 18; emphasis original. 516 United States – Import Prohibition of Certain Shrimp and Shrimp Products: Report of the Appellate Body (12 October 1998) WT/DS58/AB/R para 134 . 517 The GATT Panel stated: “[B]oth parties considered tuna stocks … to be an exhaustible natural resource in need of conservation management and … were participating in international conventions aimed, inter alia, at a better conservation of such stocks” (United States – Prohibition of Imports of Tuna and Tuna Products from Canada: Report of the Panel (22 February 1982) L/5198 para 4.9 ; emphasis original). n 296 defines ‘inter alia’. 518 The GATT Panel declared: “The Panel agreed with the parties that salmon and herring stocks are “exhaustible natural resources”” (Canada – Measures Affecting Exports of Unprocessed Herring and Salmon: Report of the Panel (22 March 1988) L/6268 para 4.4 ). 519 n 27.

90  WTO’s International Trade Agreements: GATT as referring only to the conservation of exhaustible … non-living natural resources. Moreover, two adopted GATT 1947 panel reports previously found fish to be an “exhaustible natural resource” within the meaning of Article XX(g). [I]n line with the principle of effectiveness in treaty interpretation, measures to conserve natural resources, whether living or non-living, may fall within Article XX(g)520. In United States – Standards for Reformed and Conventional Gasoline, the AB interpreted the phrase ‘made effective in conjunction with restrictions on domestic production or consumption’ in Article XX(g) of the GATT, in the following way. [T]he second clause of Article XX(g) [of the GATT] refer[s] to governmental measures … being promulgated or brought into effect together with restrictions on domestic production or consumption of natural resources. [i.e.,] the clause “if such measures are made effective in conjunction with restrictions on domestic product[ion] or consumption” is appropriately read as a requirement that the measures concerned impose restrictions, not just in respect of imported gasoline but also with respect to domestic gasoline. The clause is a requirement of even-handedness in the imposition of restrictions, in the name of conservation, upon the production or consumption of exhaustible natural resources. There is … no textual basis for requiring identical treatment of domestic and imported products. [W]here there is identity of treatment … it is difficult to see how inconsistency with Article III:4 [of the GATT]521 would have arisen … . [But] if no restrictions on ­domestically-produced like products are imposed at all, and all limitations are placed upon imported products alone, the measure cannot be accepted as … designed for implementing conservationist goals522. Thus, to be eligible for justification under Article XX(g) of the GATT, the national measure must limit domestic production or consumption – though not necessarily in the same way or to the same extent that it restricts imports or exports of the relevant product. Paragraph (h): Measures undertaken in pursuance of obligations under an intergovernmental commodity agreement: Article XX(h) of the GATT covers national measures “undertaken in pursuance of obligations under any intergovernmental

520 United States – Import Prohibition of Certain Shrimp and Shrimp Products: Report of the Appellate Body (12 October 1998) WT/DS58/AB/R para 131 ; emphasis original. 521 Text to n 156. 522 United States – Standards for Reformed and Conventional Gasoline: Report of the Appellate Body (29 April 1996) WT/DS2/AB/R 20-21 ; emphasis original.

WTO’s International Trade Agreements: GATT  91 commodity agreement523 which conforms to criteria submitted to the Contracting Parties and not disapproved by them or which is itself so submitted and not so disapproved”524. Ad Article XX of the GATT provides a third alternative to the two in the ‘which’ clause of this exception. Sub-paragraph (h)[:] The exception provided for in this sub-paragraph extends to any commodity agreement which conforms to the principles approved by the Economic and Social Council [of the UN] in its resolution 30 (IV) of 28 March 1947525. With regard to the first two alternatives, the Group on Environmental Measures and International Trade noted in September 1993 that “nor has an international commodity agreement been submitted to the Contracting Parties [to the GATT 1947] for approval under [Article] XX(h) [of the GATT], nor have any criteria for international commodity agreements been established by the Contracting Parties”526. This may not be true today – enquiries would need to be made in respect of the international commodity agreements that had been agreed between September 1993 and the present and which are currently in force, as to whether or not they had been submitted to the WTO Membership for prior approval. Assuming that the September 1993 statement remains true, the focus for Members’ applications under Article XX(h) would be on the third alternative

523 ‘International commodity agreements’ are “agreements between governments of both producing and consuming countries that attempt to raise and stabilize the price of commodities” (United States International Trade Commission, ‘International Commodity Agreements: A Report of the U.S. International Trade Commission to the Subcommittee on International Trade of the Committee on Finance United States Senate’ (November 1975, United States Government Printing Office 1975) 3). As at 1 February 2016, “no existing ICAs [international commodity agreements] contain economic provisions, i.e. they are not attempting to regulate markets by supply or price management mechanisms[ – a]ll current ICAs are of administrative nature serving as fora for producer-consumer cooperation and consultations, market transparency, development projects and as sources of statistics.” (United Nations Conference on Trade and Development, ‘A Brief on International Commodity Bodies (ICBs): Updated on 1 February 2016’ (United Nations Conference on Trade and Development 2016)). International Commodity Agreements include, for example, the International Agreement on Olive Oil and Table Olives, the International Cocoa Agreement, and the International Tropical Timber Agreement (United Nations Conference on Trade and Development, ‘International Commodity Bodies’

accessed 20 March 2018). 524 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art XX(h) ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. For ‘contracting party’, read ‘Member’ (n 12). 525 ibid Annex I Ad art XX; emphasis original. 526 Group on Environmental Measures and International Trade. Agenda Item 1: Trade Provisions Contained in Existing Multilateral Environmental Agreements Vis-à-vis GATT Principles and Provisions – Article XX(h): Note by the Secretariat – Revision (14 October 1993) TRE/W/17/ Rev.1 para 2 .

92  WTO’s International Trade Agreements: GATT – i.e., whether the international commodity agreement observes the principles that ECOSOC Resolution 30(IV) approves. This Resolution “[r]ecommends that, pending the establishment of the International Trade Organization527, Members of the United Nations adopt as a general guide in intergovernmental consultation or action with respect to commodity problems the principles laid down in … the chapter on intergovernmental commodity arrangements of the draft Charter [establishing the International Trade Organization] appended to the Report of the First Session of the Preparatory Committee of the United Nations Conference on Trade and Employment”528. These Principles are contained in Article 51 of the draft Charter. Article 51 General principles of inter-governmental commodity arrangements Members [of the International Trade Organization] undertake to adhere to the following principles governing the operations of all types of inter-­ governmental commodity arrangements: (a) such arrangements shall be open initially to participation by any Member on terms no less favourable than those accorded to any other country and thereafter upon such terms as may be approved by the Organization; (b) non-Members may be invited by the Organization to participate in such arrangements and the provisions of sub-paragraph (a) of this Article applying to Members shall apply to any non-Member so invited; (c) under such arrangements participating countries shall arrange for equitable treatment as between non-participating Members and participating countries affording advantages commensurate with obligations accepted by non-participating Members; (d) participating countries shall, in matters the subject of such arrangements, afford non-­ participating Members treatment no less favourable than that accorded to any non-­Member which does not participate in the arrangement; (e) such arrangements shall include provision for adequate participation of countries substantially interested in the importation or consumption of the commodity 527 The International Trade Organization was not founded. The circumstances are outlined thus: “The International Trade Organization (ITO) – an intellectual precursor of the WTO – never existed. During and after the Second World War, extensive efforts were made to bring it into being, culminating in the multilateral negotiation of a charter for the organization at Havana in 1947–8. [T]he Havana Charter was never ratified, chiefly because domestic opposition within the United States led the Truman administration to drop its efforts to win congressional backing by the end of 1950. … [T]he General Agreement on Tariffs and Trade (GATT) … was designed as an interim measure to regulate international trade in the period before the ITO came into effect [–] the effort to establish the ITO brought the GATT into being, and this in turn had consequences for the eventual creation of the WTO.” (Richard Toye, ‘The International Trade Organization’ in Amrita Narlikar, Martin Daunton and Robert Stern (eds) The Oxford Handbook on the World Trade Organization (Oxford University Press 2012)). 528 Group on Environmental Measures and International Trade. Agenda Item 1: Trade Provisions Contained in Existing Multilateral Environmental Agreements Vis-à-vis GATT Principles and Provisions – Article XX(h): Note by the Secretariat – Revision (14 October 1993) TRE/W/17/ Rev.1 Annex – ECOSOC Resolution 30(IV) (28 March 1947) ; emphasis original.

WTO’s International Trade Agreements: GATT  93 as well as those substantially interested in its exportation or production; (f) such arrangements shall provide, where practicable, for measures designed to expand world consumption of the commodity; (g) full publicity shall be given to any inter-governmental commodity arrangement proposed or concluded, to the statements of considerations and objectives advanced by the proposing Members, to the nature and development of measures adopted to correct the underlying satiation which gave rise to the arrangement and, periodically, to the operation of the arrangement529. Principles (a) to (d) are variants of the MFN Rule. An intergovernmental commodity arrangement’s observance of these is necessary but not sufficient for it to qualify for Article XX(h) of the GATT by virtue of Ad Article XX. Principles (e) and (f) lay down minimum standards for the content of the relevant commodity arrangement. Principle (g) concerns the publicity that is accorded to that arrangement – including to its continuing operation. It is submitted that the WTO should undertake an annual review of the effective international commodity arrangements – in order to determine which of them satisfies all these principles. Paragraph (i): Measures involving restrictions on exports of domestic materials as part of a governmental stabilization plan: There is no case law on whether a Member of the WTO adopts a measure “involving restrictions on exports of domestic materials necessary to ensure essential quantities of such materials to a domestic processing industry during periods when the domestic price of such materials is held below the world price as part of a governmental stabilization plan”530. This exception is not available if these limitations: (i) function to augment the exports of, or the protection given to, that industry, and/or (ii) deviate from the provisions of the GATT which concern non-discrimination531. Paragraph (j): Measures essential to the acquisition or distribution of products in short supply: There is no case law on whether a Member of the WTO adopts a measure that is “essential to the acquisition or distribution of products in general or local short supply”532. This exception may only be invoked if the measure: (i) complies with the principle that all WTO Members are entitled to share equitably the global supply of these products, and (ii) is terminated as soon as the conditions which engendered it have ended533.

529 United Nations Economic and Social Council, ‘Report of the Drafting Committee of the Preparatory Committee of the United Nations Conference on Trade and Employment’ E/ PC/T/34 (5 March 1947) Part II: Draft Charter and Commentary art 51; emphasis original. 530 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art XX(i) ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. 531 ibid. 532 ibid art XX(j). 533 ibid.

94  WTO’s International Trade Agreements: GATT The chapeau of Article XX The adoption or enforcement of national measures that are incompatible with the GATT but which qualify for an exception in Paragraphs (a) to (j) of Article XX of that Agreement is “[s]ubject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade”534. The appraisal of a measure against the conditions in the chapeau of Article XX is the second of two tiers in the analysis that the AB outlined in European Communities – Measures Prohibiting the Importation and Marketing of Seal Products 535. Later in this case, the AB recapitulated some of its comments in earlier judgements concerning the chapeau and brought its views together as follows. The function of the chapeau of Article XX of the GATT 1994 is to prevent the abuse or misuse of a [WTO] Member’s right to invoke the exceptions contained in the subparagraphs of that Article. [Thus], the chapeau operates to preserve the balance between a Member’s right to invoke the exceptions of Article XX, and the rights of other Members to be protected from conduct proscribed under the GATT 1994. … [T]he burden of demonstrating that a measure provisionally justified under one of the exceptions of Article XX does not constitute an abuse of such an exception under the chapeau rests with the party invoking the exception. … [T]he Appellate Body noted in US – Gasoline that “[t]he provisions of the chapeau cannot logically refer to the same standard(s) by which a violation of a substantive rule has been determined to have occurred”. A finding that a measure is inconsistent with one of the non-discrimination obligations of the GATT 1994, such as those contained in Articles I and III, is thus not dispositive of the question of whether the measure gives rise to “arbitrary or unjustifiable discrimination between countries where the same conditions prevail” under the chapeau of Article XX of the GATT 1994. … The examination of whether a measure is applied in a manner that would constitute a means of “arbitrary or unjustifiable discrimination between countries where the same conditions prevail” necessitates an assessment of whether the “conditions” prevailing in the countries between which the measure allegedly discriminates are “the same”. … [O]nly “conditions” that are relevant for the purpose of establishing arbitrary or unjustifiable discrimination in the light of the specific character of the measure at issue and the circumstances of a particular case should be considered under the chapeau. The question is thus whether the conditions prevailing in different countries are relevantly “the same”. [I]n determining which “conditions” prevailing in different countries are relevant in the context of the chapeau, the subparagraphs of Article XX, and in 34 ibid art XX. 5 535 Text to n 478.

WTO’s International Trade Agreements: GATT  95 particular the subparagraph under which a measure has been provisionally justified, provide pertinent context. … [T]he provisions of the GATT 1994 with which a measure has been found to be inconsistent may also provide useful guidance on the question of which “conditions” prevailing in different countries are relevant in the context of the chapeau. In particular, the type or cause of the violation … may inform the determination of which countries should be compared with respect to the conditions that prevail in them. … By its terms, the chapeau of Article XX is concerned with the “manner” in which a measure that falls under one of the subparagraphs of Article XX is “applied”. [T]he Appellate Body has noted that whether a measure is applied in a particular manner “can most often be discerned from the design, the architecture, and the revealing structure of a measure”536. It is thus relevant to consider the design, architecture, and revealing structure of a measure in order to establish whether the measure, in its actual or expected application, constitutes a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail. This involves a consideration of “both substantive and procedural requirements” under the measure at issue. [T]he Appellate body has already observed, in US – Shrimp, that discrimination within the meaning of the chapeau of Article XX “results … when countries in which the same conditions prevail are differently treated”. Where this is the case, a panel should analyse whether the resulting discrimination is “arbitrary or unjustifiable”. The Appellate Body has explained that the analysis of whether discrimination is arbitrary or unjustifiable within the meaning of the chapeau “should focus on the cause of the discrimination, or the rationale put forward to explain its existence”537. … One of the most important factors in the assessment of arbitrary or unjustifiable discrimination is the question of whether the

36 Text to n 142. 5 537 This quote-within-a-quote is from the first sentence of Paragraph 226 of the AB’s Report of Brazil – Measures Affecting Imports of Retreaded Tyres. Later in that judgement, the AB corrects the WTO Panel’s entire focus on the effects of the Brazilian import ban on retreaded tyres: “The Panel considered that the MERCOSUR exemption [from the import ban] resulted in discrimination between MERCOSUR countries and other WTO Members, but that this discrimination would be “unjustifiable” only if imports of retreaded tyres entering into Brazil “were to take place in such amounts that the achievement of the objective of the measure at issue would be significantly undermined”. The Panel’s interpretation implies that the determination of whether discrimination is unjustifiable depends on the quantitative impact of this discrimination on the achievement of the objective of the measure at issue. [A]nalysing whether discrimination is “unjustifiable” will usually involve an analysis that relates primarily to the cause or the rationale of the discrimination. By contrast, the Panel’s interpretation of the term “unjustifiable” … is focused exclusively on the assessment of the effects of the discrimination. The Panel’s approach has no support in the text of Article XX [of the GATT] and appears to us inconsistent with the manner the Appellate Body has interpreted and applied the concept of “arbitrary or unjustifiable discrimination” in previous cases.” (Brazil – Measures Affecting Imports of Retreaded Tyres: Report of the Appellate Body (3 December 2007) WT/DS332/AB/R para 229 ); emphasis original.

96  WTO’s International Trade Agreements: GATT discrimination can be reconciled with, or is rationally related to, the policy objective with respect to which the measure has been provisionally justified under one of the subparagraphs of Article XX …538. Thus, the party that is invoking the Article XX exception – and whose measure the AB or WTO Panel has declared to be provisionally justified under that ­exception – is to determine which conditions are relevantly the same and which countries should be compared in ascertaining this. For countries in which those same conditions prevail, this party must demonstrate by way of considering the design, architecture and structure of the measure that it is not applied in a manner which discriminates – i.e., applies different treatment – arbitrarily or unjustifiably between them. To do so, the invoking party should attempt to reconcile the discrimination with the policy objective in respect of which the measure has been provisionally justified (e.g., by means of a necessity analysis under Paragraph (a), (b) or (d) of Article XX), as part of its argument to show that the cause of the discrimination is rational and defensible. If the party invoking the General Exception successfully undertakes the above arguments, then it satisfies two of the three elements of the chapeau of Article XX of the GATT. The AB set these out in its Report of United States – Import Prohibition of Certain Shrimp and Shrimp Products – Recourse to Article 21.5 of the DSU by Malaysia. The chapeau of Article XX [of the GATT] establishes three standards regarding the application of measures for which justification under Article XX may be sought: first, there must be no “arbitrary” discrimination between countries where the same conditions prevail; second, there must be no “unjustifiable” discrimination between countries where the same conditions prevail; and, third, there must be no “disguised restriction on international trade”. …539 In United States – Standards for Reformed and Conventional Gasoline, the AB connected the third component of the chapeau of Article XX to the first two by including in the former ‘arbitrary or unjustifiable discrimination in international trade’. “Arbitrary discrimination”, “unjustifiable discrimination” and “disguised restriction” on international trade may, accordingly, be read side by side; they impart meaning to one another. “[D]isguised restriction” includes

538 European Communities – Measures Prohibiting the Importation and Marketing of Seal Products: Reports of the Appellate Body (22 May 2014) WT/DS400/AB/R WT/DS401/AB/R paras 5.297–5.300, 5.302, 5.303 and 5.306 ; emphasis original. 539 United States – Import Prohibition of Certain Shrimp and Shrimp Products – Recourse to Article 21.5 of the DSU by Malaysia: Report of the Appellate Body (22 October 2001) WT/DS58/AB/ RW para 118 ; emphasis original.

WTO’s International Trade Agreements: GATT  97 disguised discrimination in international trade. [C]oncealed or unannounced restriction or discrimination in international trade does not exhaust the meaning of “disguised restriction.” “[D]isgused restriction … embrac[es] restrictions amounting to arbitrary or unjustifiable discrimination in international trade taken under the guise of a measure formally within the terms of an exception listed in Article XX [of the GATT]. [i.e.,] the kinds of considerations pertinent in deciding whether the application of a particular measure amounts to “arbitrary or unjustifiable discrimination”, may also be taken into account in determining the presence of a “disguised restriction” on international trade. The fundamental theme is … the purpose and object of avoiding abuse or illegitimate use of the exceptions to substantive rules available in Article XX540. It is submitted that this interpretation of the term ‘disguised restriction on international trade’ in the chapeau of Article XX, influenced the approaches of both the WTO Panel and the AB in their respective application of this phrase in Brazil – Measures Affecting Imports of Retreaded Tyres. … [T]he Panel conditioned a finding of a disguised restriction on international trade on the existence of significant imports of retreaded tyres [from MERCOSUR countries] that would undermine the achievement of the objective of the Import Ban [on retreaded tyres]. [T]he Panel erred in finding that MERCOSUR exemption would result in arbitrary or unjustifiable discrimination only if the imports of retreaded tyres from MERCOSUR countries were to take place in such amounts that the achievement of the objective of the Import Ban would be significantly undermined541. As the Panel’s conclusion that the MERCOSUR exemption has not resulted in a disguised restriction on international trade was based on an interpretation that we have reversed, this finding cannot stand. …542 It is also submitted that, as the law of international trade as interpreted by the AB is at present, the party invoking the Article XX exception needs to establish the following two findings with regard to the third element of the chapeau of Article XX, i.e., that the national measure at issue is not applied in a manner that would constitute a disguised restriction on international trade: (i) on consideration of the measure’s design, structure and architecture, it does not amount to arbitrary or unjustifiable discrimination in international trade – which is an extension of that party’s evidence in respect of the first two elements of the chapeau, and (ii) there is no other way in which, on examining the measure’s 540 United States – Standards for Reformed and Conventional Gasoline: Report of the Appellate Body (29 April 1996) WT/DS2/AB/R 25 ; emphasis original. 541 n 537. 542 Brazil – Measures Affecting Imports of Retreaded Tyres: Report of the Appellate Body (3 December 2007) WT/DS332/AB/R para 239 .

98  WTO’s International Trade Agreements: GATT design, structure and architecture, it may constitute a disguised restriction on international trade. The AB’s Reports of United States – Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products 543 and United States – Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products – Recourse to Article 21.5 of the DSU by Mexico 544, and the WTO Panel’s Report of China – Measures Related to the Exportation of Rare Earths, Tungsten, and Molybdenum 545, discussed this third element of the chapeau of Article XX only in concert with its first two elements. Consequently, the AB’s interpretation as to how much wider the ‘disguised restriction on international trade’ element of the chapeau is than ‘arbitrary or unjustifiable discrimination in international trade’ (i.e., point (i) above) is awaited. Will it transpire that point (ii) is the ‘empty set’, and, therefore, does not need to be established by the party that invokes Article XX of the GATT?

Article XXI: Security Exceptions Nothing in this Agreement shall be construed (a) to require any contracting party to furnish any information the disclosure of which it considers contrary to its essential security interests; or (b) to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests (i) relating to fissionable materials or the materials from which they are derived; (ii) relating to the traffic in arms, ammunition and implements of war and to such traffic in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment; (iii) taken in time of war or other emergency in international relations; or (c) to prevent any contracting party from taking any action in pursuance of its obligations under the United Nations Charter for the maintenance of international peace and security546. The language of this Article is empowering of the WTO Members – ‘to furnish any information the disclosure of which it considers contrary to its essential security interests’, and ‘from taking any action which it considers necessary for the protection of its essential interests’ given the satisfaction of condition (i), (ii) or (iii). As

43 WT/DS381/AB/R . 5 544 WT/DS381/AB/RW . 545 WT/DS431/R WT/DS432/R WT/DS433/R . China did not appeal the WTO’s Panel’s finding that the former “had not demonstrated that its 2012 export quotas on rare earths, tungsten, and molybdenum were applied in a manner consistent with the chapeau of Article XX [of the GATT]” (China – Measures Related to the Exportation of Rare Earths, Tungsten, and Molybdenum: Reports of the Appellate Body (7 August 2014) WT/DS431/ AB/R WT/DS432/AB/R WT/DS433/AB/R para 5.251 ). 546 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art XXI ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. For ‘contracting party’, read ‘Member’ (n 12).

WTO’s International Trade Agreements: GATT  99 the WTO Panel noted obiter 547 in China – Measures Related to the Exportation of Various Raw Materials in respect of the second of these clauses, the “Member may, on its own, determine” what action to take if condition (i), (ii) or (iii) is met548 – or what information to withhold – as long as this concerns the Member’s ‘essential security interests’. A request to explain the term ‘essential security interests’ in Article XXI of the GATT has not come before the AB. The GATT Panel’s Report of United States – Trade Measures Affecting Nicaragua is the only document relating to a GATT or WTO case. As the WTO’s Dispute Settlement Body has not adopted this Report, its contents are not case law – but are guidance549. This case concerns a decision by the USA to invoke Paragraph (b)(iii) of Article XXI in order to justify an embargo that it had imposed on trade to and from Nicaragua, which was at variance with several substantive provisions of the GATT. On 1 May 1985, the President of the United States of America issued an Executive Order prohibiting all trade with Nicaragua and transactions relating to air and sea transportation between Nicaragua and the United States with effect from 7 May 1985. … The Chairman [of the Council] informed the Council at its meeting of 17–19 July 1985 that his consultations had not resulted in a consensus on how to deal with the issue. The representative of Nicaragua said that … his Government now asked for the establishment of a panel to review the case and to report to the Contracting Parties [to the GATT 1947]. The representative of the United States objected to the establishment of a panel. His Government’s actions against Nicaragua were covered by Article XXI:(b)(iii). This provision left it to each contracting party to judge what actions it considered necessary for the protection of its essential security interests. A panel could not therefore address the validity

547 n 68 defines ‘obiter’. 548 China – Measures Related to the Exportation of Various Raw Materials: Reports of the Panel (5 July 2011) WT/DS394/R WT/DS395/R WT/DS398/R para VII.276 . 549 Japan – Taxes on Alcoholic Beverages: Report of the Appellate Body (4 October 1996) WT/DS8/ AB/R WT/DS10/AB/R WT/DS11/AB/R 14–15 . On pages 12–14 of this case, the AB considers the status in WTO law of adopted Panel Reports. It concludes that these Reports are “an important part of the GATT acquis [communautaire]”, but “are not binding, except with respect to resolving the particular dispute between the parties to that dispute” (ibid 14). Notwithstanding this, “[t]he generally-accepted view under GATT 1947 was that the conclusions and recommendations in an adopted panel report bound the parties to the dispute in that particular case” (ibid 13). The ‘GATT acquis communautaire’ is the substantial body of rules that concern the GATT – including this Agreement’s Articles and their Understandings and its Ad Articles, Decisions of the Contracting Parties to the GATT 1947, Decisions of the WTO which relate to the GATT, the adopted Reports of the GATT Panels and the adopted Reports of WTO Panels and the AB in respect of cases whose ratio decidendi includes reference to one or more provisions of the GATT. n 152 in ch 3 defines ‘ratio decidendi’. The text to nn 231–232 in ch 2 provides procedural information on the adoption of reports of WTO Panels.

100  WTO’s International Trade Agreements: GATT of, nor the motivation for, the United States’ invocation of Article XXI:(b) (iii). … At the meeting of the Council on 12 March 1986, the Chairman announced that the following terms of reference of the Panel had been agreed: “To examine, in the light … of the understanding reached at the Council on 10 October 1985 that the Panel cannot examine or judge the validity or motivation for the invocation of Article XXI:(b)(iii) by the United States,  … the measures taken by the United States on 7 May 1985 and their trade effects in order to establish to what extent benefits accruing to Nicaragua under the General Agreement have been nullified or impaired, and to make such findings as will assist the Contracting Parties in further action on this matter.” … The Panel noted that the embargo had brought the trade between two contracting parties to a standstill and that it had a severe impact on the economy of a less-developed contracting party. [E]mbargoes imposed for security reasons create uncertainty in trade relations and, as a consequence, reduce the willingness of governments to engage in open trade policies and of enterprises to make trade-related investments. [T]herefore … embargoes … r[u]n counter to the basic aims of the GATT, namely to foster non-discriminatory and open trade policies, to further the development of the less-developed contracting parties and to reduce uncertainty in trade relations. … [T]he Panel considered that the GATT could not achieve its basic aims unless each contracting party, whenever it made use of its rights under Article XXI, carefully weighed its security needs against the need to maintain stable trade relations550. The embargo was imposed pursuant to the Reagan Administration’s support of the Contras in Nicaragua and, in particular, the possible links between the Government of the Union of Soviet Socialist Republics and the ruling regime within Nicaragua551. It is submitted that, although Nicaragua was not in itself a threat to the essential security interests of the USA, in April/May 1985 the Union of Soviet Socialist Republics was – and could act potentially act against the USA through Nicaragua. As a threat of this type had already occurred in the Cuban Missile Crisis of October 1962, the USA could not take any risks with regard to its security. It is also submitted that the Reagan Administration should have been willing to formally discuss these matters with the Contracting Parties to the GATT – as its trade embargo was in substantial breach of several provisions of the Agreement. The uncertainty over the scope of the terms within Article XXI of the

550 United States – Trade Measures Affecting Nicaragua: Report of the Panel (13 October 1986) L/6053 Paras 1.1, 1.2, 1.4 and 5.16 . 551 Brown University, ‘Understanding the Iran-Contra Affairs: Nicaragua Timeline’ accessed 24 March 2018; Stanford University, ‘Timeline: Nicaragua’ accessed 24 March 2018.

WTO’s International Trade Agreements: GATT  101 GATT necessitates the gathering of the Members of the WTO to determine the meaning of each clause of that Article. They should draft, debate and publish a document entitled ‘Understanding on the Interpretation of Article XXI of the General Agreement on Tariffs and Trade 1994’ at the earliest possible opportunity.

Comment The GATT concerns the balance between non-discrimination against foreign goods and markets, and protection of crucial aspects of national welfare and sensitive areas of countries’ sovereignty. The ‘non-discrimination’ provisions of the GATT come in various forms – the MFN Rule and its applications, the equalization of charges on domestic products and foreign goods with similar characteristics, and the prohibition of quantitative restrictions on imports and exports. Articles XX and XXI of the GATT contain concentrations of ‘protection’ provisions, with other such rules dispersed throughout the Agreement. A key question is: ‘Do the WTO and its Members maintain an optimal balance between “non-discrimination” and “protection” in the current GATT?’ Market research may help to provide a wise answer – what do trade-law practitioners, directors of international businesses, WTO judges, trade-related government officials, legal academics, the general public and other specified populations think? This process can be kick-started by drafting this questionnaire. Question 1: To what extent do you consider the GATT to be focused upon free trade? 1 = Very focused; 2 = Somewhat focused; 3 = Equally focused and unfocused; 4 = Somewhat unfocused; 5 = Very unfocused. Question 2: Do you consider that the GATT should encourage more free trade or more protection for domestic industries and products? 1 = There should be many fewer provisions for protection; 2 = There should be several fewer provisions for protection; 3 = The current balance between non-discrimination and protection is good; 4 = There should be more/stricter provisions for protection; 5 = There should be many more/much stricter provisions for protection. Question 3: Do you consider that the MFN Rule in Article I:1 of the GATT has the correct scope? 1 = The MFN Rule in Article I:1 is much too restricted; 2 = The MFN Rule in Article I:1 is somewhat too restricted; 3 = The MFN Rule in Article I:1 applies to an optimal range of cross-border trade transactions; 4 = The MFN Rule in Article I:1 is applied somewhat too widely; 5 = The MFN Rule in Article I:1 is applied much too widely. Question 4: To what extent do you consider that the GATT’s bound tariff system provides a good balance between cross-border trade and protectionism? 1 = Bound tariff rates are much too high; 2 = Bound tariff rates tend to be too high; 3 = Bound tariff rates tend to be optimal; 4 = Bound tariff rates tend to be too low; 5 = Bound tariff rates are much too low.

102  WTO’s International Trade Agreements: GATT Question 5: To what extent do you consider that Article III of the GATT attains an optimal balance between equalizing charges between domestic products and foreign goods and permitting minimum-cost domestic production? 1 = The scope of Article III is much too narrow; 2 = The scope of Article III is somewhat too narrow; 3 = Article III captures an optimal range of domestic products and similar imports; 4 = The scope of Article III is somewhat too broad; 5 = The scope of Article III is much too broad. Question 6: To what extent does the GATT optimize the range of prohibited quantitative restrictions? 1 = The GATT should prohibit many more quantitative restrictions; 2 = The GATT should prohibit several more quantitative restrictions; 3 = Article XI of the GATT and its exceptions optimize the range of prohibited quantitative restrictions; 4 = The GATT should prohibit several fewer quantitative restrictions; 5 = The GATT should prohibit many fewer quantitative restrictions. Question 7: Do you consider that Article XX of the GATT provides for an optimal range of General Exceptions? 1 = Article XX contains far too many exceptions; 2 = Article XX contains somewhat too many exceptions; 3 = Article XX contains the correct range of exceptions; 4 = Article XX contains somewhat too few exceptions; 5 = Article XX contains far too few exceptions. Question 8: Do you consider that the chapeau to Article XX of the GATT provides an optimal balance between upholding the non-discriminatory provisions of the GATT and permitting access to this Article’s General Exceptions? 1 = The chapeau to Article XX is far too lenient; 2 = The chapeau to Article XX is somewhat too lenient; 3 = The chapeau to Article XX provides an optimum level of gatekeeping with regard to the General Exceptions; 4 = The chapeau to Article XX is somewhat too severe; 5 = The chapeau to Article is much too severe. Question 9: To what extent do you consider that Article XXI of the GATT provides the correct balance between protecting national security and permitting cross-border trade? 1 = Article XXI is far too protective of national security; 2 = Article XXI is somewhat too protective of national security; 3 = Article XXI attains a good balance between protecting national security and permitting cross-border trade; 4 = Article XXI is somewhat too inattentive to national security; 5 = Article XXI is much too inattentive to national security. Question 10: Overall, do you consider that the GATT provides an optimal balance between non-discrimination against foreign products and markets, and protection of national welfare and sovereignty? 1 = Overall, the GATT is much too protective of national interests; 2 = Overall, the GATT is somewhat too protective of national interests; 3 = Overall, the GATT provides a good balance between non-discrimination and protection of national interests; 4 = Overall, the GATT is somewhat too unprotective of national interests; 5 = Overall, the GATT is much too unprotective of national interests.

WTO’s International Trade Agreements: GATT  103 There should follow an Any other comments box – which enables each recipient to remark on the non-discrimination/national protection balance in the GATT. The information provided in the responses to the questionnaire may be followed-up by further market research, as necessary.

Conclusion This chapter considers aspects of the GATT in depth. Case law is emphasized, in order to attain a concentrate of the acquis communautaire 552. This is the basis on which the GATT is to develop. Chapter 2 summarizes the WTO’s other Multilateral, and its in-force Plurilateral, Trade Agreements.

References Agreement Establishing the World Trade Organization (15 April 1994) LT/UR/A/2 ; 1867 UNTS 154; 33 ILM 1144 (1994). Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (15 April 1994) LT/UR/A-1A/3 ; 33 ILM 1154 (1994). Agreement on Safeguards (15 April 1994) LT/UR/A-1A/8 ; 33 ILM 1154 (1994). Agreement on Subsidies and Countervailing Measures (15 April 1994) LT/UR/A-1A/9 ; 1867 UNTS 14. Argentina – Measures Affecting the Export of Bovine Hides and the Import of Finished Leather: Report of the Panel (19 December 2000) WT/DS155/R . Argentina – Measures Affecting the Importation of Goods: Reports of the Appellate Body (15 January 2015) WT/DS438/AB/R WT/DS444/AB/R WT/DS445/AB/R . Argentina – Measures Affecting Imports of Footwear, Textiles, Apparel and Other Items: Report of the Appellate Body (27 March 1998) WT/DS56/AB/R . Baber, Graeme, Essays on International Law (Cambridge Scholars Publishing 2017). Brazil – Export Financing Programme for Aircraft – Second Recourse by Canada to ­Article 21.5 of the DSU: Report of the Panel (26 July 2001) WT/DS46/RW2 . Brazil – Measures Affecting Desiccated Coconut: Report of the Appellate Body (21 February 1997) WT/DS22/AB/R . Brazil – Measures Affecting Imports of Retreaded Tyres: Report of the Appellate Body (3 December 2007) WT/DS332/AB/R . Brazil – Measures Affecting Imports of Retreaded Tyres: Report of the Panel (12 June 2007) WT/DS332/R . Brown University. ‘Understanding the Iran-Contra Affairs: Nicaragua Timeline’ accessed 24 March 2018.

552 n 549 defines the ‘GATT acquis communautaire’.

104  WTO’s International Trade Agreements: GATT Canada – Certain Measures Affecting the Automotive Industry: Report of the Appellate Body (31 May 2000) WT/DS139/AB/R WT/DS142/AB/R . Canada – Certain Measures Affecting the Automotive Industry: Report of the Panel (11 February 2000) WT/DS139/R WT/DS142/R . Canada – Certain Measures Concerning Periodicals: Report of the Appellate Body (30 June 1997) WT/DS31/AB/R . Canada – Certain Measures Concerning Periodicals: Report of the Panel (14 March 1997) WT/DS31/R . Canada – Certain Measures Affecting the Renewable Energy Generation Sector / ­Canada – Measures Relating to the Feed-In Tariff Program: Reports of the Appellate Body (6 May 2013) WT/DS412/AB/R WT/DS426/AB/R . ­ ecember Canada – Import Restrictions on Ice Cream and Yoghurt: Report of the Panel (5 D 1989) L/6568 . Canada – Measures Affecting the Export of Civilian Aircraft: Report of the Appellate Body (2 August 1999) WT/DS70/AB/R . Canada – Measures Affecting Exports of Unprocessed Herring and Salmon: Report of the Panel (22 March 1988) L/6268 . Chile – Taxes on Alcoholic Beverages: Report of the Appellate Body (13 December 1999) WT/DS87/AB/R WT/DS110/AB/R . China – Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products: Report of the Appellate Body (21 December 2009) WT/DS363/AB/R . China – Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products: Report of the Panel (12 August 2009) WT/DS363/R . China – Measures Related to the Exportation of Rare Earths, Tungsten, and Molybdenum: Reports of the Appellate Body (7 August 2014) WT/DS431/AB/R WT/DS432/AB/R WT/DS433/AB/R . China – Measures Related to the Exportation of Rare Earths, Tungsten, and Molybdenum: Reports of the Panel (26 March 2014) WT/DS431/R WT/DS432/R WT/DS433/R . China – Measures Related to the Exportation of Various Raw Materials: Reports of the Appellate Body (30 January 2012) WT/DS394/AB/R WT/DS395/AB/R WT/DS398/ AB/R . China – Measures Related to the Exportation of Various Raw Materials: Reports of the Panel (5 July 2011) WT/DS394/R WT/DS395/R WT/DS398/R . Colombia – Indicative Prices and Restrictions on Ports of Entry: Report of the Panel (27 April 2009) WT/DS366/R . Committee on Anti-Dumping Practices – Recommendation of 27 November 2002 Concerning the Time-Period to be Considered in Making a Determination of Negligible Import Volumes for Purposes of Article 5.8 of the Agreement G/ADP/10 . Decision of 14 December 2006 on the Transparency Mechanism for Regional Trade Agreements WT/L/671 . Decision of 28 November 1979 on Differential and More Favourable Treatment Reciprocity and Fuller Participation of Developing Countries (L/4903) LT/TR/D/1 .

WTO’s International Trade Agreements: GATT  105 Dominican Republic – Measures Affecting the Importation and Internal Sale of Cigarettes: Report of the Appellate Body (25 April 2005) WT/DS302/AB/R . Dominican Republic – Measures Affecting the Importation and Internal Sale of Cigarettes: Report of the Panel (26 November 2004) WT/DS302/R . Egypt – Definitive Anti-Dumping Measures on Steel Rebar from Turkey: Report of the Panel (8 August 2002) WT/DS211/R . European Communities – Anti-Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil: Report of the Appellate Body (22 July 2003) WT/DS219/AB/R . European Communities – Anti-Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil: Report of the Panel (7 March 2003) WT/DS219/R . European Communities – Conditions for the Granting of Tariff Preferences to Developing Countries: Report of the Appellate Body (7 April 2004) WT/DS246/AB/R . European Communities – Customs Classification of Certain Computer Equipment: Report of the Appellate Body (5 June 1998) WT/DS62/AB/R WT/DS67/AB/R WT/DS68/ AB/R . European Communities – Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China: Report of the Appellate Body (15 July 2011) WT/DS397/AB/R . European Communities – Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China: Report of the Panel (3 December 2010) WT/DS397/R . European Communities – Measures Affecting Asbestos and Asbestos-Containing Products: Report of the Appellate Body (12 March 2001) WT/DS135/AB/R . European Communities – Measures Affecting Trade in Commercial Vessels: Report of the Panel (22 April 2005) WT/DS301/R . European Communities – Measures Prohibiting the Importation and Marketing of Seal Products: Reports of the Appellate Body (22 May 2014) WT/DS400/AB/R WT/ DS401/AB/R . European Communities – Regime for the Importation, Sale and Distribution of Bananas: Report of the Appellate Body (9 September 1997) WT/DS27/AB/R . European Communities and Certain Member States – Measures Affecting Trade in Large Civil Aircraft: Report of the Appellate Body (18 May 2011) WT/DS316/AB/R . General Agreement on Tariffs and Trade (15 April 1994) LT/UR/A-1A/1/GATT/1 ; 1867 UNTS 187; 33 ILM 1153 (1994). General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. General Council Decision of 14 December 2010 on the Transparency Mechanism for Preferential Trade Arrangements WT/L/806 . Google. ‘7031 mi Distance from Canberra to Santiago’ accessed 24  November 2017.

106  WTO’s International Trade Agreements: GATT Group on Environmental Measures and International Trade. Agenda Item 1: Trade Provisions Contained in Existing Multilateral Environmental Agreements Vis-à-vis GATT Principles and Provisions – Article XX(h): Note by the Secretariat – Revision (14 ­October 1993) TRE/W/17/Rev.1 . Guatemala – Definitive Anti-Dumping Measures on Grey Portland Cement from ­Mexico: Report of the Panel (24 October 2000) WT/DS156/R . Historical Tariff Preferences (18 December 1992) MTN.TNC/LD//W/1 . India – Additional and Extra-Additional Duties on Imports from the United States: ­Report of the Appellate Body (30 October 2008) WT/DS360/AB/R . India – Additional and Extra-Additional Duties on Imports from the United States: ­Report of the Panel (9 June 2008) WT/DS360/R . India – Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products: Report of the Panel (6 April 1999) WT/DS90/R . Indonesia – Certain Measures Affecting the Automobile Industry: Report of the Panel (2 July 1998) WT/DS54/R WT/DS55/R WT/DS59/R WT/DS64/R . Japan – Countervailing Duties on Dynamic Random Access Memories from Korea: Report of the Appellate Body (28 November 2007) WT/DS336/AB/R . Japan – Countervailing Duties on Dynamic Random Access Memories from Korea: Report of the Panel (13 July 2007) WT/DS336/R . Japan – Taxes on Alcoholic Beverages: Report of the Appellate Body (4 October 1996) WT/ DS8/AB/R WT/DS10/AB/R WT/DS11/AB/R . Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef: Report of the Appellate Body (11 December 2000) WT/DS161/AB/R WT/DS169/AB/R . Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef: Report of the Panel (31 July 2000) WT/DS161/R WT/DS169/R . Korea – Taxes on Alcoholic Beverages: Report of the Appellate Body (18 January 1999) WT/ DS75/AB/R WT/DS84/AB/R . Korea – Taxes on Alcoholic Beverages: Report of the Panel (17 September 1998) WT/ DS75/R WT/DS84/R . Marrakesh Agreement Establishing the World Trade Organization (adopted 15 April 1994, opened for signature 15 April 1994, entered into force 1 January 1995) 1867 UNTS 1. Matsushita, Mitsuo, Thomas Schoenbaum, Petros Mavroidis and Michael Hahn, The World Trade Organization: Law, Practice and Policy (3rd edn, Oxford University Press 2015). Mavroidis, Petros, The Regulation of International Trade – Volume 1: GATT (The MIT Press, 2016). Mavroidis, Petros, Trade in Goods (2nd edn, Oxford University Press 2012). McFarlane, Gavin, The Layman’s Dictionary of English Law (Waterlow Publishers Limited 1984). Mexico – Anti-Dumping Investigation of High-Fructose Corn Syrup (HFCS) from the United States – Recourse to Article 21.5 of the DSU by the United States: Report of the Appellate Body (22 October 2001) WT/DS132/AB/RW .

WTO’s International Trade Agreements: GATT  107 Mexico – Anti-Dumping Investigation of High-Fructose Corn Syrup (HFCS) from the United States: Report of the Panel (28 January 2000) WT/DS132/R . Mexico – Definitive Anti-Dumping Measures on Beef and Rice: Report of the Appellate Body (29 November 2005) WT/DS295/AB/R . Mexico – Definitive Anti-Dumping Measures on Beef and Rice: Report of the Panel (6 June 2005) WT/DS295/R . Mexico – Definitive Countervailing Measures on Olive Oil from the European Communities: Report of the Panel (4 September 2008) WT/DS341/R . Mexico – Tax Measures on Soft Drinks and Other Beverages: Report of the Appellate Body (6 March 2006) WT/DS308/AB/R . Mexico – Tax Measures on Soft Drinks and Other Beverages: Report of the Panel (7 October 2005) WT/DS308/R . Pearsall, Judy (ed), The New Oxford Dictionary of English (Oxford University Press 1998). Philippines – Taxes on Distilled Spirits: Reports of the Appellate Body (21 December 2011) WT/DS396/AB/R WT/DS403/AB/R . Protocol Amending the Marrakesh Agreement Establishing the World Trade Organization (28 November 2014) WT/L/940 . Report by the Working Party on Border Tax Adjustments (20 November 1970) L/3464 . Stanford University, ‘Timeline: Nicaragua’ accessed 24 March 2018. Thailand – Anti-Dumping Duties on Angles, Shapes and Sections of Iron or Non-Alloy Steel and H-Beams from Poland: Report of the Appellate Body (12 March 2001) WT/DS122/ AB/R . Thailand – Anti-Dumping Duties on Angles, Shapes and Sections of Iron or Non-Alloy Steel and H-Beams from Poland: Report of the Panel (28 September 2000) WT/DS122/R . Thailand – Customs and Fiscal Measures on Cigarettes from the Philippines: Report of the Panel (15 November 2010) WT/DS371/R . Toye, Richard, ‘The International Trade Organization’ in Amrita Narlikar, Martin Daunton and Robert Stern (eds) The Oxford Handbook on the World Trade Organization (Oxford University Press 2012). Understanding on the Interpretation of Article II:1(b) of the General Agreement on Tariffs and Trade 1994 (15 April 1994) LT/UR/A-1A/1/GATT/U/1 . United Nations Committee for Development Policy. ‘List of Least Developed Countries (as of June 2017)’ accessed 19 November 2017. United Nations Conference on Trade and Development. ‘A Brief on International Commodity Bodies (ICBs): Updated on 1 February 2016’ (United Nations Conference on Trade and Development 2016). United Nations Conference on Trade and Development. ‘International Commodity B ­ odies’ accessed 20 March 2018. United Nations Economic and Social Council. ‘Report of the Drafting Committee of the Preparatory Committee of the United Nations Conference on Trade and Employment’ E/PC/T/34 (5 March 1947).

108  WTO’s International Trade Agreements: GATT United States – Anti-Dumping Act of 1916: Report of the Appellate Body (28 August 2000) WT/DS136/AB/R WT/DS162/AB/R . United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan: Report of the Appellate Body (24 July 2001) WT/DS184/AB/R . United States – Continued Dumping and Subsidy Offset Act of 2000: Report of the Appellate Body (16 January 2003) WT/DS217/AB/R WT/DS234/AB/R . United States – Countervailing Duty Investigation on Dynamic Random Access Memory Semiconductors (DRAMS) from Korea: Report of the Panel (21 February 2005) WT/ DS296/R . United States – Countervailing Measures Concerning Certain Products from the European Communities: Report of the Appellate Body (9 December 2002) WT/DS212/AB/R . United States – Definitive Anti-Dumping and Countervailing Duties on Certain Products from China: Report of the Appellate Body (11 March 2011) WT/DS379/AB/R . United States – Final Countervailing Duty Determination with Respect to Certain Softwood Lumber from Canada: Report of the Appellate Body (19 January 2004) WT/ DS257/AB/R . United States – Final Dumping Determination on Softwood Lumber from Canada – ­Recourse to Article 21.5 of the DSU by Canada: Report of the Appellate Body (15 August 2006) WT/DS264/AB/RW . United States – Final Dumping Determination on Softwood Lumber from Canada: Report of the Panel (13 April 2004) WT/DS264/R . United States – Import Prohibition of Certain Shrimp and Shrimp Products – Recourse to Article 21.5 of the DSU by Malaysia: Report of the Appellate Body (22 October 2001) WT/DS58/AB/RW . United States – Import Prohibition of Certain Shrimp and Shrimp Products: Report of the Appellate Body (12 October 1998) WT/DS58/AB/R . United States – Imposition of Countervailing Duties on Certain Hot-Rolled Lead and Bismuth Carbon Steel Products Originating in the United Kingdom: Report of the Panel (23 December 1999) WT/DS138/R . United States – Investigation of the International Trade Commission in Softwood Lumber from Canada: Report of the Panel (22 March 2004) WT/DS277/R . United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services: Report of the Appellate Body (7 April 2005) WT/DS285/AB/R . United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services: Report of the Panel (10 November 2004) WT/DS285/R . United States – Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products – Recourse to Article 21.5 of the DSU by Mexico: Report of the Appellate Body (20 November 2015) WT/DS381/AB/RW . United States – Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products: Report of the Appellate Body (16 May 2012) WT/DS381/AB/R .

WTO’s International Trade Agreements: GATT  109 United States – Prohibition of Imports of Tuna and Tuna Products from Canada: Report of the Panel (22 February 1982) L/5198 . United States – Safeguard Measures on Imports of Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia: Report of the Appellate Body (1 May 2001) WT/DS177/ AB/R WT/DS178/AB/R . United States – Standards for Reformed and Conventional Gasoline: Report of the Appellate Body (29 April 1996) WT/DS2/AB/R . United States – Standards for Reformed and Conventional Gasoline: Report of the Panel (29 January 1996) WT/DS2/R . United States – Subsidies on Upland Cotton: Report of the Appellate Body (3 March 2005) WT/DS267/AB/R . United States – Subsidies on Upland Cotton: Report of the Panel (8 September 2004) WT/ DS267/R . United States – Tax Treatment for “Foreign Sales Corporations” – Recourse to Article 21.5 of the DSU by the European Communities: Report of the Appellate Body (14 January 2002) WT/DS108/AB/RW . United States – Trade Measures Affecting Nicaragua: Report of the Panel (13 October 1986) L/6053 . United States International Trade Commission. ‘International Commodity Agreements: A Report of the U.S. International Trade Commission to the Subcommittee on International Trade of the Committee on Finance United States Senate’ (November 1975, United States Government Printing Office 1975). Washington Trade Report. ‘How to Read the WTO Tariff Bindings’ accessed 14 January 2018. World Trade Organization. ‘Agreement on Trade Facilitation’ accessed 27 March 2018. World Trade Organization. ‘Signatories terminate WTO plurilateral agreements on meat and dairy products’ (1997 Press Releases, Press/78, 30 September 1997) accessed 26 October 2017. World Trade Organization. ‘Textiles’ accessed 26 October 2017. World Trade Organization. ‘Trade facilitation’ accessed 26 October 2017. World Trade Organization. ‘Trade Facilitation Agreement: Members accepting the Protocol of Amendment to insert the WTO Trade Facilitation Agreement into Annex 1A of the WTO Agreement’ accessed 27 March 2018.

2 The World Trade Organization’s International Trade Agreements – A Synopsis of the Other Multilateral and the Plurilateral Agreements This chapter summarizes each of the WTO’s Multilateral Trade Agreements, other than the GATT – to which Chapter 1 is dedicated. It also synopsizes the WTO’s two Plurilateral Trade Agreements that are in force – those on Trade in Civil Aircraft and Government Procurement.

The AD Agreement The AD Agreement is considered along with Article VI of the GATT1.

The SCM Agreement Aspects of the SCM Agreement are covered in concurrence with Paragraph 3 of Article VI of the GATT2.

The Agreement on the Application of Sanitary and Phytosanitary Measures Members of the WTO are entitled to take the sanitary and phytosanitary measures that are necessary to protect human, animal or plant life or health, as long as these measures are compatible with the provisions of the Agreement3, proportionate4, founded on scientific principles5and maintained with adequate scientific

1 See the subsection entitled ‘Article VI: Anti-Dumping and Countervailing Duties, the AD Agreement, and the SCM Agreement’, in the section entitled ‘The GATT’, in Chapter 1, for a synopsis of Article VI of the GATT and the AD Agreement. 2 See the paragraph entitled ‘Article VI:3 of the GATT and the SCM Agreement’, in the subsection entitled ‘Article VI: Anti-Dumping and Countervailing Duties, the AD Agreement and the SCM Agreement’ in the section entitled ‘The GATT’, in Chapter 1, for a summary of Article VI:3 of the GATT and the SCM Agreement. 3 Agreement on the Application of Sanitary and Phytosanitary Measures (15 April 1994) LT/ UR/A-1A/12 Annex A para 1 ; GATT Doc. MTN/FA Ii-A1A-4; 33 ILM XXX.art 2.1. 4 ibid art 2.2. 5 ibid.

WTO: Synopsis of Other Trade Agreements  111 evidence6, “do not arbitrarily or unjustifiably discriminate between Members where identical or similar conditions prevail”7, and are not “applied in a manner which would constitute a disguised restriction on international trade”8. WTO Members are to model “their sanitary or phytosanitary measures on international standards, guidelines or recommendations” 9. A Member may introduce higher standards than this either “if there is a scientific justification”10 or if the suitable “assessment … of the risks to human, animal or plant life or health” upon which its sanitary or phytosanitary measures are to be based11 leads it to deem this appropriate12. In addition to providing for harmonization13 through international standards, the Agreement pursues equivalence of the measures among Members of the WTO, both bilaterally and multilaterally. Members shall, upon request, enter into consultations with the aim of achieving bilateral and multilateral agreements on recognition of the equivalence of specified sanitary or phytosanitary measures14. It contains the following principle of equivalence. Members shall accept the sanitary or phytosanitary measures of other Members as equivalent, even if these measures differ from their own or from those used by other Members trading in the same product, if the exporting Member objectively demonstrates to the importing Member that its measures achieve the importing Member’s appropriate level of sanitary or phytosanitary protection. For this purpose, reasonable access shall be given, upon request, to the importing Member for inspection, testing and other relevant procedures15. The Agreement provides concessions to developing countries – especially to LDCs. Members agree to facilitate the provision of technical assistance to other Members, especially developing country Members, either bilaterally or through the appropriate international organizations. …16 6 ibid. 7 ibid art 2.3. 8 ibid. 9 ibid art 3.1. 10 ibid art 3.3. 11 ibid art 5.1. 12 ibid art 3.3. 13 ‘Harmonization’ is “[t]he establishment, recognition and application of common sanitary and phytosanitary measures by different [WTO] Members” (ibid Annex A para 2). 14 ibid art 4.2. 15 ibid art 4.1. 16 ibid art 9.1.

112  WTO: Synopsis of Other Trade Agreements In the preparation and application of sanitary or phytosanitary measures, Members shall take account of the special needs of developing country Members, and in particular of the least-developed country Members17. Annex C to the Agreement contains provisions relating to control, inspection and approval procedures for sanitary and phytosanitary measures. WTO Members are required to observe these18.

The Agreement on Technical Barriers to Trade For the purposes of this Agreement, a ‘technical regulation’ is a “[d]ocument which lays down product characteristics or their related processes and production methods … with which compliance is mandatory”, and “may also include or deal exclusively with terminology, symbols, packaging, marking or labelling requirements as they apply to a production, process or production method”19. Each Member of the WTO is to ensure that, with regard to technical regulations, goods imported from the territory of another Member are to be granted “treatment no less favourable than that accorded to like products of national origin and to like products originating in any other country”20. Members are to make certain “that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade21. Technical regulations are to be withdrawn “if the circumstances or objectives giving rise to their adoption no longer exist or if the changed circumstances or objectives can be addressed in a less trade-restrictive manner”22. Members are to use international standards23 “as a basis for their technical regulations” unless these standards “would be an ineffective or inappropriate means for the fulfilment of the legitimate objective pursued”24. Annex 3 to the Agreement contains a 17-provision Code of Good Practice for the Preparation, Adoption and Application of Standards. Paragraphs E and I are two shorter instances of these rules. 17 ibid art 10.1. 18 ibid art 8. 19 Agreement on Technical Barriers to Trade (15 April 1994) LT/UR/A-1A/10 Annex 1 para 1 ; 33 ILM 1154 (1994). For the purposes of the Agreement, a ‘standard’ is similar to a ‘technical regulation’ – but, whereas compliance with the latter is obligatory, observance of the former is optional (ibid Annex 1 para 2). 20 ibid art 2.1. 21 ibid art 2.2. Technical regulations are not to “be more trade-restrictive than necessary to fulfil a legitimate objective, taking account of the risks non-fulfilment would create” (ibid). The protection of human health or safety, the protection of animal or plant life or health, the protection of the environment, the prevention of deceptive practices, and national security requirements, are legitimate objectives (ibid). 22 ibid art 2.3. 23 n 19 and accompanying text describe a ‘standard’. 24 ibid art 2.4 n 21 lists 5 legitimate objectives.

WTO: Synopsis of Other Trade Agreements  113 The standardizing body shall ensure that standards are not prepared, adopted or applied with a view to, or with the effect of, creating unnecessary obstacles to international trade25. Wherever appropriate, the standardizing body shall specify standards based on product requirements in terms of performance rather than design or descriptive characteristics26. This ‘standardizing body’ may be “a central government body, a local government body, or a non-government body”, within, or inclusive of, a WTO Member27. Each Member must make certain that its central government standardizing body accepts and observes this Code, and “take such reasonable measures as may be available to them to ensure that” the other types of standardizing body do so28. The Agreement tends to favour developing countries, as in the following examples. Members shall, if requested, advise other Members, especially the developing country Members, on the preparation of technical regulations29. In providing advice and technical assistance to other Members …, Members shall give priority to the needs of the least-developed country Members30.

The Agreement on TRIMs The Annex to the Agreement provides examples of TRIMs that are incompatible with Article III:4 or Article XI:1 of the GATT31. No Member of the WTO is to “apply any TRIM that is inconsistent with the provisions of Article III or Article XI of GATT 1994”32.

25 ibid Annex 3 para E. 26 ibid Annex 3 para I. 27 ibid Annex 3 para B. 28 ibid art 4.1. 29 ibid art 11.1. 30 ibid art 11.8. 31 Agreement on Trade-Related Investment Measures (15 April 1994) LT/UR/A-1A/13 art 2.2 ; 1868 UNTS 186. The paragraph entitled ‘Article III:4’, in the subsection entitled ‘Article III: National Treatment on Internal Taxation and Regulation’, in the section entitled ‘The GATT’, in Chapter 1, considers Article III:4 of the GATT. The paragraph entitled ‘Article XI:1: The prohibition on quantitative restrictions’, in the subsection entitled ‘Article XI: General Elimination of Quantitative Restrictions’, in the section entitled ‘The GATT’, in Chapter 1, covers Article XI:1 of the GATT. 32 ibid art 2.1.

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The Customs Valuation Code The Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 – the ‘Customs Valuation Code’ – contains a mutually exclusive series of valuation methods for determining the financial worth of imported goods for customs purposes33. The applicability of the methods according to the Article in which each is situated is as follows – proceeding to the next method only when the current one is judged to be unable to ascertain the relevant product’s customs value: 1, 2, 3, 5, 6, 734. Article VII of the GATT is entitled ‘Valuation for Customs Purposes’. Its main operative provision is as follows. The value for customs purposes of imported merchandise should be based on the actual value of the imported merchandise on which duty is assessed, or of like merchandise, and should not be based on the value of merchandise of national origin or on arbitrary or fictitious values35. ‘Actual value’ is “the price at which, at a time and a place determined by the legislation of the country of importation, such or like merchandise is sold or offered for sale in the ordinary course of trade under fully competitive conditions”36. Article 1 of the Customs Valuation Code pursues this theme further. The customs value of imported goods37 shall be the transaction value, that is the price actually paid or payable for the goods when sold for export to the country of importation38 adjusted in accordance with the provisions of Article 8 [of the Customs Valuation Code], provided: (a) … (b) … (c) … and (d) …39. Article 8 of the Code provides for additions “to the price actually paid or payable to for the imported goods”, including, for instance, the cost of containers and of packing40.

33 Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 (15 April 1994) LT/UR/A-1A/4 Annex I General Note: Sequential Application of Valuation Methods para 1; 33 ILM 1154 (1994). 34 ibid arts 2.1(a), 3.1(a), 4 and 7.1, and Annex I General Note: Sequential Application of Valuation Methods paras 1, 2 and 4. 35 General Agreement on Tariffs and Trade (15 April 1994) LT/UR/A-1A/1/GATT/1 art VII:2(a) ; 1867 UNTS 187; 33 ILM 1153 (1994). 36 ibid art VII:2(b). 37 The ‘customs value of imported goods’ is “the value of goods for the purposes of levying ad valorem duties of customs on imported goods” (Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 (15 April 1994) LT/UR/A-1A/4 art 15.1(a) ; 33 ILM 1154 (1994); emphasis added). n 69 in ch 1 defines ‘ad valorem’. n 70 in ch 1 defines ‘ad valorem duty’. 38 The ‘country of importation’ is the “country or customs territory of importation” (ibid art 15.1(b)). 39 ibid art 1.1. 40 ibid art 8.1(a)(ii)–(iii).

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The Agreement on Preshipment Inspection Some developing-country WTO Members use preshipment inspection41, the activities of which concern “the verification of the quality, the quantity, the price, including currency exchange rate and financial terms, and/or the customs classification of goods to be exported to the territory of the user Member”42. The Agreement confers several responsibilities on user Members, which include: (i) the obligations to make certain: “that preshipment inspection activities are carried out in a non-discriminatory manner”43, “that the procedures and criteria employed in the conduct of these activities are objective and are applied on an equal basis to all exporters affected by such activities”44, and “uniform performance of inspection by all the inspectors of the preshipment inspection entities45 contracted or mandated by them [the user Members]”46, (ii) the duty to ensure that Article III:4 of the GATT47 is respected “in the course of preshipment inspection activities relating to their [the user Members’] laws, regulations and requirements”48, (iii) the obligations to “ensure that quantity and quality inspections are performed in accordance with the standards defined by the seller and the buyer in the purchase agreement and that, in the absence of such standards, relevant international standards apply”49, (iv) the duty to “ensure that preshipment inspection activities are conducted in a transparent manner”50 and (v) the obligations to “ensure that preshipment inspection entities treat all information received in the course of preshipment inspection as business confidential to the extent that such information is not already … in the public domain”51 and “do not divulge confidential business information to any third party, except … the government entities that have contracted or mandated them”52. The Agreement imposes fewer responsibilities on exporter Members, including “that their laws and regulations relating to preshipment inspection activities are applied in a non-discriminatory manner”53.

41 Agreement on Preshipment Inspection (15 April 1994) LT/UR/A-1A/6 Preamble ; 33 ILM 1154 (1994). 42 ibid art 1.3. A ‘user Member’ is “a [WTO] Member of which the government or any government body contracts for or mandates the use of preshipment inspection activities” (ibid art 1.2). 43 ibid art 2.1. 44 ibid. 45 A ‘preshipment inspection entity’ is “any entity contracted or mandated by a [WTO] Member to carry out preshipment inspection activities” (ibid art 1.4). The text to n 42 describes ‘preshipment inspection activities’. 46 ibid art 2.1. 47 n 156 in ch 1 and accompanying text. 48 ibid art 2.2. 49 ibid art 2.4. 50 ibid art 2.5. 51 ibid art 2.9. 52 ibid art 2.11. This exception is “only to the extent that such information is customarily required for … payment or for customs, import licensing or exchange control purposes” (ibid). 53 ibid art 3.1.

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The Agreement on Import Licensing Procedures ‘Import licensing’ comprises “administrative procedures used for the operation of import licensing regimes requiring the submission of … documentation (other than that required for customs purposes) to the relevant administrative body as a prior condition for importation into the customs territory of the importing Member”54. Members of the WTO are to make sure that this import licensing observes “the relevant provisions of GATT 1994 … as interpreted by this Agreement … taking into account the economic development purposes and financial and trade needs of developing country Members”55. The rules for these procedures are to “be neutral in application and administered in a fair and equitable manner”56. Application and renewal forms and procedures are to “be as simple as possible”57. The Agreement does “not require any Member to disclose confidential information which would … be contrary to the public interest or would prejudice the legitimate commercial interests of particular enterprises”58. ‘Automatic import licensing’ is “import licensing where approval of the application is granted in all cases”59, and which is not “administrative in such a manner as to have [trade-]restricting effects on imports”60. These effects are deemed avoided if, amongst other things: all entities that satisfy “the legal requirements of the importing Member for engaging in import operations involving products subject to automatic licensing [are] equally eligible to apply for and to obtain import licences”61, applications “may be submitted on any working day prior to the customs clearance of the goods”62, and completed applications are approved within ten working days63. Import licensing that does not meet this definition of ‘automatic import licensing’ is ‘non-automatic import licensing’64, which must “not have trade-­ restrictive or [trade]-distortive effects on imports additional to those caused by the imposition of the restriction”65. In allocating licences, the Member must take the applicant’s “import performance” into account – including whether licences have recently been completely utilized66.

54 Agreement on Import Licensing Procedures (15 April 1994) LT/UR/A-1A/5 art 1.1; 33 ILM 1154 (1994). 55 ibid art 1.2. 56 ibid art 1.3. 57 ibid arts 1.5–1.6. 58 ibid art 1.11. 59 ibid art 2.1. 60 ibid art 2.2(a). 61 ibid art 2.2(a)(i). 62 ibid art 2.2(a)(ii). 63 ibid art 2.2(a)(iii). 64 ibid art 3.1. This Paragraph refers to “non-automatic import licensing procedures” (ibid). 65 ibid art 3.2. 66 ibid art 3.5(j).

WTO: Synopsis of Other Trade Agreements  117

The Agreement on Safeguards The Agreement applies to “safeguard measures”, i.e., “those measures provided for in Article XIX of GATT 1994”67. It applies to neither any other “measures sought, taken or maintained by a Member [of the WTO] pursuant to” the GATT nor to the other Multilateral Trade Agreements on Trade in Goods in Annex 1A to the Agreement Establishing the World Trade Organization “other than this Agreement”68. The main operative provision of Article XIX of the GATT is as follows. If, as a result of unforeseen developments and of the effect of the obligations incurred by a contracting party under this Agreement, including tariff concessions, any product is being imported into the territory of that contracting party in such increased quantities and under such conditions as to cause or threaten serious injury to domestic producers in that territory of like or directly competitive products, the contracting party shall be free, in respect of such product, and to the extent and for such time as may be necessary to prevent or remedy such injury, to suspend the obligation in whole or in part or to withdraw or modify the concession69. The Agreement on Safeguards uses this ‘if’ clause – with the omission of the ‘as a result of’ constraint and the addition of a phrase relating to ‘increased quantities’ – in order to set up its structure. A Member [of the WTO] may apply a safeguard measure to a product only if that Member has determined, pursuant to the provisions set out below, that such product is being imported into its territory in such increased quantities, absolute or relative to domestic production, and under such conditions as to cause or threaten to cause serious injury to the domestic industry that produces like or directly competitive products70. There must be an investigation. A Member [of the WTO] may apply a safeguard measure only following an investigation by the competent authorities of that Member pursuant to procedures previously established and made public in consonance with Article

67 Agreement on Safeguards (15 April 1994) LT/UR/A-1A/8 art 1 ; 33 ILM 1154 (1994). 68 ibid art 11.1(c). 69 General Agreement on Tariffs and Trade (15 April 1994) LT/UR/A-1A/1/GATT/1 art ­X IX:1(a) ; 1867 UNTS 187; 33 ILM 1153 (1994). For ‘contracting party’, read ‘Member’ (n 12 in ch 1). 70 Agreement on Safeguards (15 April 1994) LT/UR/A-1A/8 art 2.1 ; 33 ILM 1154 (1994); emphasis added.

118  WTO: Synopsis of Other Trade Agreements X of the GATT 199471. This investigation shall include reasonable public notice … and public hearings or other appropriate means in which … interested parties could present evidence and their views, … inter alia72, as to whether or not the application of a safeguard measure would be in the public interest. …73 In this investigation, it must be determined “whether increased imports have caused or are threatening to cause serious injury to a domestic industry” 74. This determination “shall not be made unless this investigation demonstrates, on the basis of objective evidence, the existence of the causal link between increased imports of the product concerned and serious injury or threat thereof”75. A WTO Member is to “apply safeguard measures only to the extent necessary to prevent or remedy serious injury and to facilitate adjustment”76. Furthermore, it is to apply them “only for such period of time as may be necessary to prevent or remedy serious injury and to facilitate adjustment”, up to a maximum of four years – unless this period is extended in accordance with the Agreement77. No safeguard measure may be applied – including provisionally – for more than eight years78.

The Agreement on Trade Facilitation79 Each WTO Member80 is to “promptly publish the following information in a non-discriminatory and easily accessible manner”81: “procedures for importation, exportation and transit … and required forms and documents”82, “applied 71 The first sentence of Paragraph 1 of Article X of the GATT states: “Laws, regulations, judicial decisions and administrative rulings of general application … shall be published promptly in such a manner as to enable governments and traders to become acquainted with them.” (General Agreement on Tariffs and Trade (15 April 1994) LT/UR/A-1A/1/GATT/1 art X:1 ; 1867 UNTS 187; 33 ILM 1153 (1994)). 72 n 296 in ch 1 defines ‘inter alia’. 73 Agreement on Safeguards (15 April 1994) LT/UR/A-1A/8 art 3.1 ; 33 ILM 1154 (1994); emphasis original. 74 ibid art 4.2(a). See the text to n 289 in ch 1, for this provision in full. 75 ibid art 4.2(b). 76 ibid art 5.1. 77 ibid art 7.1. 78 ibid art 7.3. 79 The Agreement on Trade Facilitation entered into force on 22 February 2017 (n 10 in ch 1 and accompanying text). 80 ‘Member’ includes its “competent authority” (Protocol Amending the Marrakesh Agreement Establishing the World Trade Organization (28 November 2014) WT/L/940 art 24.1 ). 81 ibid art 1.1. 82 ibid art 1.1(a). The Member is to make this information, together with “contact information on its enquiry point(s)”, accessible “through the internet”, available “in one of the official languages of the WTO … [w]henever practicable” (ibid art 2.1–2.2). The WTO Secretariat’s official working languages are English, French and Spanish (World Trade Organization, ‘Official Working Languages’ accessed 2 April 2018).

WTO: Synopsis of Other Trade Agreements  119 rates of duties and taxes” concerning “importation or exportation”83, “fees and charges” pertaining to “importation, exportation or transit”84, “rules for the classification or valuation of products for customs purposes”85, “laws, regulations, and administrative rulings of general application relating to rules of origin”86, “import, export or transit restrictions or prohibitions”87, “penalty provisions for breaches of import, export or transit formalities”88, “procedures for appeal or review”89, cross-border agreements concerning “importation, exportation or transit” 90, and “procedures relating to the administration of tariff quotas” 91. Each Member is to provide “any person to whom customs issues an administrative decision” 92 with the right to an administrative and/or judicial appeal or review 93, and is to “ensure that its procedures for appeal or review are carried out in a non-discriminatory manner” 94. “Fees and charges for customs processing” must “be limited in amount to the approximate cost of the services rendered on or in connection with the specific import or export operation in question” 95. Each Member is to make sure that a penalty for contravention of a customs rule or procedural requirement is “imposed only on the person(s) responsible” 96. The penalty must “be commensurate with the degree and severity of the breach” 97. Members of the WTO should “share information on best practices in managing customs compliance”, and “cooperate in technical guidance or assistance and support for capacity building for the purposes of administering [customs] compliance measures and enhancing their effectiveness” 98. This Agreement’s provisions on customs co-operation99 shall neither “prevent a Member from entering into or maintaining a bilateral, plurilateral or regional agreement for sharing or exchange of customs information and data”100, nor affect or change its rights and duties under those agreements101.

83 ibid art 1.1(b). 84 ibid art 1.1(c). 85 ibid art 1.1(d). 86 ibid art 1.1(e). 87 ibid art 1.1(f). 88 ibid art 1.1(g). 89 ibid art 1.1(h). 90 ibid art 1.1(i). 91 ibid art 1.1(j). 92 An ‘administrative decision’ is “a decision with a legal effect that affects the rights and obligations of a specific person in an individual case” (ibid fn 9 to art 4.1). 93 ibid art 4.1. 94 ibid art 4.3. 95 ibid art 6.2(i). 96 ibid art 6.3.2. 97 ibid art 6.3.3. 98 ibid art 12.1.2. 99 The Agreement’s wording is “Nothing in this Article”, i.e., Article 12 (ibid art 12.12.1–12.12.2). 100 ibid art 12.12.1. 101 ibid art 12.12.2.

120  WTO: Synopsis of Other Trade Agreements Members should provide help and support for capacity-building to developing-­ country and LDC Members102. Those LDCs are merely “required to undertake commitments to the extent consistent with their individual development, financial and trade needs or their administrative and institutional capabilities”103.

The Agreement on Agriculture This Agreement applies to Chapters 01 to 24 of the Harmonized System (other than fish and fish products), together with twenty-one additional Harmonized System Headings and four other Harmonized System Codes104. It refers to these goods as “agricultural products”105. WTO Members are not to “maintain, resort to, or revert to any … quantitative import restrictions, variable import levies, minimum import prices, discretionary import licensing, non-tariff measures maintained through state-trading enterprises, voluntary export restraints, and similar border measures other than ordinary customs duties [except for] measures maintained under … general non-agriculture-specific provisions of GATT 1994 or of the other Multilateral Trade Agreements in Annex 1A to the WTO Agreement”, subject to: (i) the concessions in Article 5 of the Agreement on Agriculture and (ii) the ‘special treatment’ which Annex 5 of that Agreement provides106. Part IV of each Member’s Schedule of Concessions107 “appl[ies] to all of its domestic support measures in favour of agricultural producers [except for] domestic measures which are not subject to reduction in terms of the criteria set out in this Article [i.e., Article 6] and in Annex 2 to this Agreement”108. These exemptions tend to favour developing countries, as thus. [I]nvestment subsidies which are generally available to agriculture in developing country Members [of the WTO] and agricultural input subsidies

102 ibid art 13.2. 103 ibid art 13.3. 104 Agreement on Agriculture (15 April 1994) LT/UR/A-1A/2 art 2 and Annex 1 para 1 ; 33 ILM 1154 (1994). 105 ibid art 2. Examples include Chapters 01 (Live animals) and 10 (Cereals), Heading 33.01 (Essential oils), and Code 2905.44 (Mannitol) (ibid Annex 1 para 1; United States International Trade Commission, ‘Harmonized Tariff Schedule (2018 HTSA Revision 2 (Posted 03-29-18))’ accessed 2 April 2018). In the 6-digit Harmonized System classification system, the first and second numbers correspond to the Chapter, the third and fourth numbers to the Heading, and the fifth and sixth numbers to the Code. Thus, the Heading ‘Essential oils’ is in Chapter 33, and the product ‘Mannitol’ is under Heading 05 of Chapter 29. The Harmonized System comprises Chapters 1 to 97, and Chapter 99 (n 24 in ch 4). 106 Agreement on Agriculture (15 April 1994) LT/UR/A-1A/2 art 4.2 and fn 1 to art 4.2 ; 33 ILM 1154 (1994). 107 The paragraph entitled ‘Schedules of Concessions’, in the subsection entitled ‘Article II: Schedules of Concessions’ in the section entitled ‘The GATT’, in Chapter 1, outlines the Schedules of Concessions. 108 ibid art 6.1.

WTO: Synopsis of Other Trade Agreements  121 generally available to low-income or resource-poor producers in developing country Members shall be exempt from domestic support reduction commitments that would otherwise be applicable to such measures, as shall domestic support to producers in developing-country Members to encourage diversification from growing illicit narcotic crops. …109 Annex 2 to the Agreement sets out “policy-specific criteria and conditions”, plus the following “basic criteria” that domestic support measures for which exemption is claimed must fulfil – in order to minimize their “trade-distorting effects [and] effects on production”110. [T]he support in question shall be provided through a publicly-funded government programme … not involving transfers from consumers111[.] [T]he support in question shall not have the effect of providing price support to producers112[.] The Agreement also requires stated reductions in specified export subsidies, which include, for instance, “the provision by governments or their agencies of direct subsidies … contingent on export performance”113. Least Developed Countries are not required to implement these reductions in domestic support and export subsidies114.

The ATC From the date on which the Agreement Establishing the World Trade Organization came into force (1 January 1995), the ATC regulated the cross-border quantitative restrictions that had previously come within the purview of the Arrangement Regarding International Trade in Textiles115. The ATC was intended to be a transitional arrangement, for the purpose of integrating trade in textiles and clothing into the GATT116. This Agreement and all restrictions thereunder shall stand terminated on the first day of the 121st month that the WTO Agreement is in effect, on which date the textiles and clothing sector shall be fully integrated into GATT 1994. There shall be no extension of this Agreement117. 109 110 111 112 113 114 115

ibid art 6.2. ibid Annex 2 para 1. ibid Annex 2 para 1(a). ibid Annex 2 para 1(b). ibid art 9.1(a). ibid art 15.2. Agreement on Textiles and Clothing (15 April 1994) LT/UR/A-1A/11 art 2.1 ; 33 ILM 1154 (1994). 116 ibid Preamble and art 1.1. 117 ibid art 9.

122  WTO: Synopsis of Other Trade Agreements The 121st month during which the Agreement Establishing the World Trade Organization was in effect was January 2005. The ATC duly expired on the first day of that month118.

The Agreement on Rules of Origin [R]ules of origin [are] those laws, regulations and administrative determinations of general application applied by any Member [of the WTO] to determine the country of origin of goods provided such rules of origin are not related to contractual or autonomous trade regimes leading to the granting of tariff preferences going beyond the application of paragraph 1 of Article I of GATT 1994 [i.e., the MFN Rule]119. Rules of origin, thus defined, are ‘non-preferential rules of origin’. Annex II to the Agreement regulates ‘preferential rules of origin’, delineating these as follows. [P]referential rules of origin [are] those laws, regulations and administrative determinations of general application applied by any Member to determine whether goods qualify for preferential treatment under contractual or autonomous trade regimes leading to the granting of tariff preferences going beyond the application of paragraph 1 of Article I of GATT 1994 120. Non-preferential rules of origin “include all rules of origin used in non-­ preferential commercial policy instruments, such as in the application of” MFN treatment, anti-dumping and countervailing duties, safeguard measures and ­origin-marking requirements under the GATT – plus “any discriminatory quantitative restrictions or tariff quotas”121. Whilst most of the responsibilities of WTO Members pertaining to non-preferential rules of origin are identical to those for preferential rules of origin122, the Agreement imposes responsibilities on Members in respect of non-preferential rules of origin that are absent with regard to preferential rules of origin123. As a result of the work programme that the WTO’s Ministerial Conference and Committee on Rules of Origin and the WCO’s Technical Committee on Rules of Origin have undertaken in order to 118 n 3 in ch 1. 119 Agreement on Rules of Origin (15 April 1994) LT/UR/A-1A/7 art 1.1 ; 33 ILM 1154 (1994). The MFN Rule is specified in the paragraph entitled ­‘Article  I:1: The MFN Rule’, in the subsection entitled ‘Article 1: General Most-Favoured-­ Nation Treatment’ in the section entitled ‘The GATT’, in Chapter 1. 120 ibid Annex II para 2. 121 ibid art 1.2. Non-preferential rules of origin “also include rules of origin used for government procurement and trade statistics” (ibid). 122 For instance, in both cases new rules of origin and changes to existing rules of origin may not be applied retroactively (ibid art 3(g) and Annex II para 3(e)). 123 See, for example, the text to n 125.

WTO: Synopsis of Other Trade Agreements  123 harmonize non-preferential rules of origin and increase certainty in the conduct of worldwide trade124, Members are to ensure that “they apply rules of all purposes as set out in Article 1”125, “under their [non-preferential] rules of origin, the country to be determined as the origin of a particular good is either the country where the good has been wholly obtained or, when more than one country is concerned in the production of the good, the country where the last substantial transformation has been carried out”126, “the [non-preferential] rules of origin that they apply to imports and exports are not more stringent than the [non-preferential] rules of origin that they apply to determine whether or not a good is domestic and [do] not discriminate between other Members”127, “the [non-preferential] rules of origin are administered in a consistent, uniform, impartial and reasonable manner”128, and “their laws, regulations, judicial decisions and administrative rulings of general application relating to [non-preferential] rules of origin are published as if they were subject to, and in accordance with [Article X:1 of the GATT]”129.

The GATS130 Article II:1 of the GATS contains the MFN Rule for services.

124 ibid arts 3, 4 and 9.1. Paragraphs 1 and 2, respectively, of Article 4 of the Agreement on Rules of Origin establish the Committee on Rules of Origin and the Technical Committee on Rules of Origin, the latter under the aegis of the WCO. Articles 4.2 and 9.1 of the Agreement refer to the Customs Co-operation Council (CCC), which was renamed the WCO in 1994 “to more clearly reflect its transition to a truly global intergovernmental organization” (World Customs Organization, ‘History’ accessed 3 April 2018). 125 ibid art 3(a). n 121 and accompanying text specify these purposes. 126 ibid art 3(b); emphasis added. 127 ibid art 3(c). 128 ibid art 3(d). 129 ibid art 3(e). n 71 contains the first sentence of Paragraph 1 of Article X of the GATT. This responsibility of WTO Members also applies to preferential rules of origin (ibid Annex II para 3(c)). n 122 contains a further responsibility of Members regarding non-preferential (and preferential) rules of origin. Paragraphs (f), (h) and (i) of Article 3 of the Agreement each specify another responsibility. 130 The GATS “applies to measures by Members [of the WTO] affecting trade in services” (General Agreement on Trade in Services (15 April 1994) LT/UR/A-1B/S/1 art I:1 ; 1869 UNTS 183; 33 ILM 1167 (1994)). ‘Trade in services’ is “the supply of a service: (a) from the territory of one Member into the territory of any other Member; (b) in the territory of one Member to the service consumer of any other Member; (c) by a service supplier of one Member, through commercial presence in the territory of any other Member; (d) by a service supplier of one Member, through presence of natural persons of a Member in the territory of any other Member” (ibid art I:2). ‘Measures by Members’ are those “taken by: (i) central, regional or local governments and authorities; and (ii) non-governmental bodies in the exercise of powers delegated by central, regional or local governments or authorities” (ibid art I:3(a)). ‘Services’ exclude those “supplied neither on a commercial basis, nor in competition with one or more service suppliers” (ibid art I:3(b)–(c)).

124  WTO: Synopsis of Other Trade Agreements With respect to any measure covered by this Agreement, each Member [of the WTO] shall accord immediately and unconditionally to services and service suppliers of any other Member treatment no less favourable than that it accords to like service and service suppliers of any other country131. A Member of the WTO may preserve a measure that is at variance with the MFN Rule, as long as that measure is listed in, and fulfils the conditions of, the Annex on Article II Exemptions132. These exemptions should be for ten years or less, and be negotiable in future trade-liberalizing rounds133. Each WTO Member is to make certain that each monopoly supplier of a service within its territory contravenes neither the Member’s duties under Article II of the GATS nor its “specific commitments”134. If the monopoly supplier competes in the provision of a service beyond the extent of its monopoly rights, this service being “subject to that Member’s specific commitments”, then the Member is to ensure that the supplier does not act within its domain in a way that breaches those commitments135. Each WTO Member is not to limit cross-border payments and transfers for current transactions that concern “its specific commitments”136, except “[i]n the event of serious balance-of-payments and external financial difficulties or threat thereof”137 in which case it “may adopt or maintain restrictions on trade in services on which it has undertaken specific commitments” – including on those payments and transfers138. Those restrictions must be non-­d iscriminatory between Members139, compatible with the IMF’s Articles of Agreement140, proportionate141 and temporary142, and circumvent unnecessary harm to every other Member’s “commercial, economic and financial interests”143. Articles XIV and XIV bis of the GATS contain the General Exceptions and Security Exceptions, respectively. The latter is identical to Article XXI of the GATT144, except for the wording of Clause 1(b)(i) – which is “relating to the supply of services as carried out directly or indirectly for the purpose of

131 132 133 134

135 136 137 138 139 140 141 142 143 144

ibid art II:1. ibid art II:2. ibid Annex on Article II Exemptions para 6. ibid art VIII.1. A WTO Member’s ‘specific commitments’ are those that it makes pursuant to the provisions of Part III of the GATS (entitled ‘Specific Commitments’). Part III comprises Articles XVI–XVIII of the GATS. ibid art VIII:2. ibid art XI:1. ibid arts XI:1 and XII:1. ibid art XII.1. ibid art XII:2(a). ibid art XII:2(b). ibid art XII:2(d). ibid art XII:2(e). ibid art XII:2(c). See n 546 in ch 1 and accompanying text, for Article XXI of the GATT.

WTO: Synopsis of Other Trade Agreements  125 provisioning a military establishment”145, and the addition of Paragraph 2 – which requires each Member of the WTO to fully inform the Council for Trade in Services of actions that it takes under Subparagraphs 1(b) and 1(c) and of their discontinuation146. The chapeau of Article XIV of the GATS is indistinguishable from the chapeau of Article XX of the GATT, other than the former’s use of the word “like”147 in place of “the same”148, and its reference to “a disguised restriction on trade in services”149. Paragraphs (a), (b) and (c) of Article XIV of the GATS are identical to Paragraphs (a), (b) and (d), respectively, of Article XX of the GATT, except that Article XIV(a) of the GATS specifies measures “necessary to protect public morals or to maintain public order”150, and that the examples of “laws and regulations” in Article XIV(c) of the GATS differ from those in Article XX(d) of the GATT. Paragraphs (a), (b) and (c) of Article XIV each require a necessity analysis, to which the case law for Paragraphs (a), (b) and (d) of Article XX, respectively, is relevant151. Paragraphs (d) and (e) of Article XIV of the GATS identify measures “inconsistent with” Article XVII, and Article II, respectively,

145 146 147 148

ibid art XIV bis:1(b); emphasis added. ibid art XIV bis:2. ibid art XIV. General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art XX ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. 149 General Agreement on Trade in Services (15 April 1994) LT/UR/A-1B/S/1 art XIV ; 1869 UNTS 183; 33 ILM 1167 (1994); emphasis added. See the text to n 534 in ch 1, for the chapeau of Article XX of the GATT. See n 475 in ch 1, for the AB’s comment on the chapeaux of Article XX of the GATT and Article XIV of the GATS, in United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services. 150 ibid art XIV(a); emphasis added. An accompanying footnote states: “The public order exception may be invoked only where a genuine and sufficiently serious threat is posed to one of the fundamental interests of society.” (ibid fn 5 to art XIV(a)). After using The Shorter Oxford English Dictionary to define ‘order’ and quoting that footnote, the WTO Panel in United States  – Measures Affecting the Cross-Border Supply of Gambling and Betting Services stated: “[T]he dictionary definition of the word ‘order’, read together with footnote 5, suggests that ‘public order’ refers to the preservation of the fundamental interests of a society, as reflected in public policy and law.” (United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services: Report of the Panel (10 November 2004) WT/DS285/R para VI.853 ). The AB in that case stated: “[T]he Panel expressly referred to footnote 5 [to Article XIV(a) of the GATS] in a way that demonstrated that it understood the requirement therein to be part of the meaning given to the term ‘public order’. … Having defined ‘public order’ to include the standard in footnote 5, and then applied that definition to the facts before it …, the Panel was not required, in addition, to make a separate, explicit determination that the standard of footnote 5 had been met.” (United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services: Report of the Appellate Body (7 April 2005) WT/DS285/ AB/R para 298 ). 151 See n 475 in ch 1 for the observation concerning the case law and for the AB’s comment on the term “necessary”, in United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services. The paragraph entitled ‘The Paragraphs of Article XX’, in the subsection entitled ‘Articles XX and XXI: Exceptions to the GATT’ in the section entitled ‘The GATT’, in Chapter 1, contains case law relating to Paragraphs (a), (b) and (d) of Article XX of the GATT.

126  WTO: Synopsis of Other Trade Agreements of the GATS152; each of these Paragraphs has one proviso – which substantially narrows the scope of the corresponding exception to specified issues concerning direct taxes and the avoidance of double taxation, respectively153. Article XIV of the GATS contains no further General Exceptions. In United States – ­Measures Affecting the Cross-Border Supply of Gambling and Betting Services, the AB guides WTO Panels to apply Article XIV of the GATS in broadly the same way as Article XX of the GATT154. Article XIV of the GATS, like Article XX of the GATT 1994, contemplates a “two-tier analysis” of a measure that a Member [of the WTO] seeks to justify under that provision. A panel should first determine whether the challenged measure falls within the scope of one of the paragraphs of Article XIV. This requires that the challenged measure address the particular interest specified in that paragraph and that there be a sufficient nexus between the measure and the interest protected. The required nexus – or “degree of connection” – between the measure and the interest is specified in the language of the paragraphs themselves, through the use of terms such as “relating to” and “necessary to”. Where the challenged measure has been found to fall within one of the paragraphs of Article XIV, a panel should then consider whether that measure satisfies the requirements of the chapeau of Article XIV 155. Article XVI:1 of the GATS applies the MFN Rule to the modes of service supply that Article I:2 of the GATS156 identifies. With respect to market access through the modes of supply identified in Article I [of the GATS], each Member [of the WTO] shall accord services and service suppliers of any other Member treatment no less favourable than that provided for under the terms, limitations and conditions agreed and specified in its Schedule [of Specific Commitments]157.

152 General Agreement on Trade in Services (15 April 1994) LT/UR/A-1B/S/1 art XIV(d)–(e) ; 1869 UNTS 183; 33 ILM 1167 (1994). 153 ibid. 154 The paragraph entitled ‘Article XX: General Exceptions – overview and structure’, in the subsection entitled ‘Articles XX and XXI: Exceptions to the GATT’, in the section entitled ‘The GATT’, in Chapter 1, contains guidance from the AB on the application of Article XX of the GATT. 155 United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services: Report of the Appellate Body (7 April 2005) WT/DS285/AB/R para 292 . 156 Article I:2 of the GATS defines ‘trade in services’ (n 130). 157 General Agreement on Trade in Services (15 April 1994) LT/UR/A-1B/S/1 art XVI:1 ; 1869 UNTS 183; 33 ILM 1167 (1994).

WTO: Synopsis of Other Trade Agreements  127 A footnote concerning the cross-border movement of capital accompanies this provision. If a Member [of the WTO] undertakes a market-access commitment in relation to the supply of a service through the mode of supply referred to in subparagraph 2(a) of Article I158 [of the GATS] and if the cross-border movement of capital is an essential part of the service itself, [then] that Member is thereby committed to allow such movement of capital. If a Member undertakes a market-access commitment in relation to the supply of a service through the mode of supply referred to in subparagraph 2(c) of Article I159, [then] it is thereby committed to allow related transfers of capital into its territory160. Article XVII:1 imposes a national treatment obligation with regard to services and service suppliers, subject to each WTO Member’s GATS Schedule of Specific Commitments. In the sectors inscribed in its Schedule [of Specific Commitments], and subject to any conditions and qualifications set out therein, each Member [of the WTO] shall accord to services and service suppliers of any other Member, in respect of all measures affecting the supply of services, treatment no less favourable than it accords to its own like services and service suppliers161. Each WTO Member may fulfil this obligation “by according to services and service suppliers of any other Member, either formally identical treatment or formally different treatment to that it accords to its own like services and service suppliers”162. However, such treatment “shall be considered to be less favourable if it modifies the conditions of competition in favour of services or service suppliers of the Member compared to the like services or service suppliers of any other Member”163. Members of the WTO may negotiate specific commitments that are “not subject to scheduling under Articles XVI and XVII [of the GATS]”164. These are added to its Schedule of Specific Commitments165. WTO Members are to “enter into successive rounds of negotiations”, which are “directed to the reduction or elimination of the adverse effects on trade in services of measures as a means of providing effective market access”166. This

158 159 160 161 162 163 164 165 166

n 130. n 130. ibid fn 8 to art XVI:1; emphasis added. ibid art XVII:1; emphasis added. ibid art XVII:2. ibid art XVII:3. ibid art XVIII. ibid. ibid art XIX:1.

128  WTO: Synopsis of Other Trade Agreements “progressive liberalization” is to “be advanced in each such round through bilateral, plurilateral or multilateral negotiations directed towards increasing the general level of specific commitments undertaken by Members under [the GATS]”167. Each WTO Member’s Schedule of Specific Commitments is to include “terms, limitations and conditions on market access”168, “conditions and qualifications on national treatment”169, “undertakings relating to additional commitments”170, and the implementation time-frame and effective date of its specific commitments171. These Schedules are “an integral part” of the GATS and annexed to it172. In addition to the Annex on Article II Exemptions and the WTO Members’ Schedules of Specific Commitments173, the GATS includes two Annexes on Financial Services and an Annex on each of the following: Movement of National Persons Supplying Services under the Agreement, Air Transport Services, Negotiations on Maritime Transport Services, Telecommunications, and Negotiations on Basic Telecommunications. The Annexes to the GATS are “an integral part” of that Agreement174.

The TRIPS Members of the WTO are to “give effect to the provisions of [the TRIPS]” by the method of their choice175. ‘Intellectual property’ comprises copyright, trademarks, “geographical indications”176, industrial designs, patents, layout-­ designs of integrated circuits and undisclosed information177. The TRIPS’ national treatment obligation is subject to limited exceptions. Each Member [of the WTO] shall accord to the nationals of other Members treatment no less favourable than it accords to its own nationals with regard to the protection of intellectual property, subject to the exceptions already provided in, respectively, the Paris Convention (1967)178, the Berne 167 168 169 170 171 172 173 174 175

ibid art XIX:4. ibid art XX:1(a). ibid art XX:1(b). ibid art XX:1(c). ibid art XX:1(d)–(e). ibid art XX:3. Text to n 172. ibid art XXIX. Agreement on Trade-Related Aspects of Intellectual Property Rights (15 April 1994) LT/ UR/A-1C/IP/1 art 1.1 . 176 ‘Geographical indications’ are “indications which identify a good as originating in the territory of a Member [of the WTO], or a region or locality in that territory, where a given … characteristic of the good is essentially attributable to its geographical origin” (ibid art 22.1). 77 ibid art 1.2. 1 178 This is the Paris Convention for the Protection of Industrial Property, which was adopted in 1883, revised in 1900, 1911, 1925, 1934, 1958 and 1967, and amended in 1979 (World

WTO: Synopsis of Other Trade Agreements  129 ­ onvention (1971)179, the Rome Convention180 or the Treaty on IntellecC tual Property in Respect of Integrated Circuits181. …182 Members may avail themselves of the[se] exceptions … in relation to judicial and administrative procedures … only where such exceptions are necessary to secure compliance with laws and regulations which are not inconsistent with the provisions of [the TRIPS] and where such practices are not applied in a manner which would constitute a disguised restriction on trade183. The TRIPS contains an MFN Rule in respect of its subject-matter. With regard to the protection of intellectual property, any advantage, favour, privilege or immunity granted by a Member [of the WTO] to the nationals of any other country shall be accorded immediately and unconditionally to the nationals of all other Members. …184 Exempted from this MFN obligation are “any advantage, favour, privilege or immunity” that a WTO Member accords which: “deriv[es] from international agreements on judicial assistance or law enforcement of a general nature”185, is “granted in accordance with the provisions of the Berne Convention (1971)186

179

180

181

182 183 184 185 186

Intellectual Property Organization, ‘Paris Convention for the Protection of Industrial Property’ accessed 7 April 2018; World Intellectual Property Organization, ‘Paris Convention for the Protection of Industrial Property of March 20, 1883’ accessed 7 April 2018). This is the Berne Convention for the Protection of Literary and Artistic Works, which was adopted in 1886, completed in 1896, revised in 1908, completed in 1914, revised in 1928, 1948, 1967 and 1971, and amended in 1979 (World Intellectual Property Organization, ‘Berne Convention for the Protection of Literary and Artistic Works’ accessed 7 April 2018; World Intellectual Property Organization, ‘Berne ­Convention for the Protection of Literary and Artistic Works of September 9, 1886’ www. wipo.int/treaties/en/text.jsp?file_id=283698> accessed 7 April 2018). This is the International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations, which was adopted at Rome in 1961 (World Intellectual Property Organization, ‘International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations’ accessed 7 April 2018). The Treaty on Intellectual Property in Respect of Integrated Circuits was adopted at ­Washington, D.C. in 1989 (World Intellectual Property Organization, ‘Treaty on Intellectual Property in Respect of Integrated Circuits’ accessed 7 April 2018). Agreement on Trade-Related Aspects of Intellectual Property Rights (15 April 1994) LT/ UR/A-1C/IP/1 art 3.1 . ibid art 3.2. ibid art 4. ibid art 4(a). n 179.

130  WTO: Synopsis of Other Trade Agreements or the Rome Convention187 authorizing that the treatment accorded be a function … of the treatment accorded in another country”188, concerns “the rights of performers, producers of phonograms and broadcasting organizations not provided under [the TRIPS]”189, or “deriv[es] from international agreements related to the protection of intellectual property which entered into force prior to the entry into force of the [Agreement Establishing the World Trade Organization], provided that such agreements are notified to the Council for TRIPS and do not constitute an arbitrary or unjustifiable discrimination against nationals of other Members”190. Part II of the TRIPS, entitled ‘Standards Concerning the Availability, Scope and Use of Intellectual Property Rights’, includes sections regulating each category of intellectual property that this Agreement covers191. For example, Section 2 of Part II is entitled ‘Trademarks’. Its main operative provision is as follows. The owner of a registered trademark shall have the exclusive right to prevent all third parties not having the owner’s consent from using in the course of trade identical or similar signs for goods or services which are identical or similar to those in respect of which the trademark is registered where such use would result in a likelihood of confusion. …192 Part III of the TRIPS is entitled ‘Enforcement of Intellectual Property Rights’. Section 1 is entitled ‘General Obligations’. It includes the following provisions. Members [of the WTO] shall ensure that enforcement procedures as specified in this Part are available under their law so as to permit effective action against any act of infringement of intellectual property rights covered by [the TRIPS]. These procedures shall be applied in such a manner as to avoid the creation of barriers to legitimate trade and to provide for safeguards against their abuse193. Procedures concerning the enforcement of intellectual property rights shall be fair and equitable. They shall not be unnecessarily complicated or costly, or entail unreasonable time-limits or unwarranted delays194. Decisions on the merits of a case shall preferably be in writing and reasoned. They shall be made available at least to the parties to the proceeding without undue delay. Decisions on the merits of a case shall be based only

187 188 189 190 191 192 193 194

n 180. ibid art 4(b). ibid art 4(c). ibid art 4(d). See the text to n 177, for these categories. ibid art 16.1. ibid art 41.1. ibid art 41.2.

WTO: Synopsis of Other Trade Agreements  131 on evidence in respect of which parties were offered the opportunity to be heard195. Parties to a proceeding shall have an opportunity for review by a judicial authority of final administrative decisions and … at least the legal aspects of initial judicial decisions on the merits of a case. …196 Sections 2, 3 and 4 of Part III are entitled ‘Civil and Administrative Procedures and Remedies’, ‘Provisional Measures’ and ‘Special Requirements Related to Border Measures’, respectively. Rules in these sections detail aspects of the judicial process. Although Part III “does not create any obligation to put in place a judicial system for the enforcement of intellectual property rights distinct from the enforcement of law in general”197, it is submitted that some of the less-­ sophisticated legal regimes amongst WTO Members may struggle to implement some of the requirements that those rules contain. Article 67 of the TRIPS assists these countries. In order to facilitate the implementation of this Agreement, developed country Members [of the WTO] shall provide, on request and on mutually agreed terms and conditions, technical and financial cooperation in favour of developing and least-developed country Members. Such cooperation shall include assistance in the preparation of laws and regulations on the protection and enforcement of intellectual property rights as well as on the prevention of their abuse …198. Section 5 of Part III – entitled ‘Criminal Procedures’ – requires WTO Members to introduce specified offences. Members [of the WTO] shall provide for criminal procedures and penalties to be applied at least in cases of wilful trademark counterfeiting or copyright piracy on a commercial scale. Remedies available shall include imprisonment and/or monetary fines sufficient to provide a deterrent, consistently with the level of penalties applied for crimes of a corresponding gravity. In appropriate cases, remedies available shall also include the seizure, forfeiture and destruction of the infringing goods and of any materials and implements the predominant use of which has been in the commission of the offence. Members may provide for criminal procedures and penalties to be applied in other cases of infringement of intellectual property rights, in particular where they are committed wilfully and on a commercial scale199. 195 196 197 198 199

ibid art 41.3. ibid art 41.4. ibid art 41.5. ibid art 67; emphasis added. ibid art 61.

132  WTO: Synopsis of Other Trade Agreements Article 73 of the TRIPS contains its Security Exceptions. These are identical to the Security Exceptions in Article XXI of the GATT 200.

The DSU The DSU’s rules and procedures apply to disputes arising from the Agreement Establishing the World Trade Organization or any of its annexed Agreements, other than the TPRM 201. If an Agreement contains “special or additional rules and procedures on dispute settlement”, then these precede the DSU’s rules and procedures202. For example, Article 11.2 of the Agreement on the Application of Sanitary and Phytosanitary Measures203 is a special rule204 that concerns any WTO Panel which adjudicates a dispute arising from that Agreement. In a dispute under this Agreement involving scientific or technical issues, a [WTO] panel should seek advice from experts chosen by the panel in consultation with the parties to the dispute. To this end, the panel may … establish an advisory technical experts group, or consult the relevant international organizations, at the request of either party to the dispute or on its own initiative205. The DSU established the Dispute Settlement Body to administer its rules and procedures – and “the consultation and dispute Settlement provisions” of the aforementioned Agreements, unless one of those Agreements provides otherwise206. The dispute settlement mechanism aims “to secure a positive solution to a dispute”207. In the absence of a solution compatible with these Agreements and acceptable to both parties, the mechanism’s main objective in normally “to

200 See n 546 in ch 1 and accompanying text, for Article XXI of the GATT. 201 Understanding on Rules and Procedures Governing the Settlement of Disputes (15 April 1994) LT/UR/A-2/DS/U/1 art 1.1 and Appendix 1 . With regard to the Plurilateral Trade Agreements, the DSU’s applicability “is subject to the adoption of a decision by the parties to each agreement setting out the terms for the application of the Understanding to the individual agreement … as notified to the DSB [Dispute Settlement Body]” (ibid Appendix 1). Paragraph 1 of Article XXII of the Agreement on Government Procurement states that the DSU applies to this Plurilateral Trade Agreement, subject to the provisions of that Article (Agreement on Government Procurement (15 April 1994) LT/UR/A-4/ PLURI/2 art XXII:1 ). 202 ibid art 1.2. 203 The section entitled ‘The Agreement on the Application of Sanitary and Phytosanitary Measures’ summarizes that Agreement. 204 ibid Appendix 2. 205 Agreement on the Application of Sanitary and Phytosanitary Measures (15 April 1994) LT/ UR/A-1A/12 art 11.2 ; GATT Doc. MTN/FA Ii-A1A-4; 33 ILM XXX. 206 Understanding on Rules and Procedures Governing the Settlement of Disputes (15 April 1994) LT/UR/A-2/DS/U/1 art 2.1 . 207 ibid art 3.7.

WTO: Synopsis of Other Trade Agreements  133 secure the withdrawal of the measures concerned if these are found to be inconsistent with the provisions of any of the covered agreements”208. If a Member of the WTO makes a request for consultations pursuant to an Agreement, then the Member that receives the request is to reply to it within ten days and to enter into consultations within thirty days; otherwise, the former may request the establishment of a WTO Panel 209. The Member seeking consultations must notify the Dispute Settlement Body “and the relevant Councils and Committees” of the request – which must be in writing, giving reasons for it, “including identification of the measures at issue and an indication of the legal basis for the complaint”210. Consultations must be confidential 211. If the consultations do not resolve the dispute within sixty days of receipt of the request – or earlier if both Members agree, then the Member that sought the consultations may request the establishment of a WTO Panel 212. This request must be in writing 213. It must specify the measures in question and whether consultations were held, and summarize “the legal basis of the complaint”214. Unless the parties to the dispute “agree otherwise within twenty days from the establishment of the panel”, WTO Panels have these terms of reference215. To examine, in the light of the relevant provisions in (name of the covered agreement(s) cited by the parties to the dispute), the matter referred to the DSB [Dispute Settlement Body] by (name of party) in document … and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in that/those agreement(s)216. The request is also to “include the proposed text of [any] special terms of reference”217. The WTO Panel is to comprise three panellists (or five if both parties agree within ten days of the Panel’s foundation)218, who are independent 219, well-qualified persons220, by citizenship different from the parties to the dispute 208 ibid. The DSU uses the term ‘covered agreements’ to refer to the Agreements that its Appendix 1 lists, i.e., the Agreement Establishing the World Trade Organization and all of its annexed Agreements other than the TPRM (ibid art 1.1 and Appendix 1). This section refers to these as the ‘Agreements’. 209 ibid art 4.3. 210 ibid art 4.4. 211 ibid art 4.6. 212 ibid art 4.7. 213 ibid art 6.2. 214 ibid. 215 ibid art 7.1. 216 ibid. 217 ibid art 6.2. 218 ibid art 8.5. 219 ibid art 8.2. The WTO Panel’s members should have “a sufficiently diverse background and a wide spectrum of experience” (ibid). 220 ibid art 8.1.

134  WTO: Synopsis of Other Trade Agreements and interested third parties221 – unless the former parties agree otherwise222. The WTO Secretariat presents nominations for panellists, which the parties to the dispute may only challenge “for compelling reasons”223. Panellists must “serve in their individual capacities” – free from the influence of WTO Members in respect of their duties of adjudication 224. As the WTO Panel’s function is to help the Dispute Settlement Body in undertaking its responsibility under the Agreements, it should objectively appraise the issue before it and otherwise assist that Body to make the recommendations or rulings for which those Agreements provide225. Panel discussions must be confidential226. Appendix 3 of the DSU provides a timeline of working procedures, which it should follow – “unless it decides otherwise after consulting the parties to the dispute”227. The WTO Panel’s work should not exceed six months – three months “[i]n cases of urgency”228. If the Panel is unable to issue its report within this time, then it is to inform the Dispute Settlement Body “in writing of the reasons for the delay” and project a date for this issuance229. The period from the Panel’s establishment to the report’s dissemination must never exceed nine months230. Within 60 days after the date of circulation of a panel report to the Members [of the WTO], the report shall be adopted at a DSB [Dispute Settlement Body] meeting unless a party to the dispute formally notifies the DSB of its decision to appeal or the DSB decides by consensus not to adopt the report. …231 Members having objections to a panel report shall give written reasons to explain their objections for circulation at least 10 days prior to the DSB meeting at which the panel report will be considered 232. The DSU empowers the Dispute Settlement Body to found a “standing Appellate Body”233 – i.e., the AB. The AB: (i) hears appeals from WTO Panel cases234, 221 Any Member of the WTO which has “a substantial interest in a matter before a panel and having notified its interest to the DSB [Dispute Settlement Body]” may “be heard by the panel and … make written submissions to the panel” (ibid art 10.2). 222 ibid art 8.3. 223 ibid art 8.6. 224 ibid art 8.9. 225 ibid art 11. 226 ibid art 14.1. 227 ibid art 12.1. 228 ibid art 12.8. 229 ibid art 12.9. 230 ibid. 231 ibid art 16.4. See n 549 in ch 1 and accompanying text, for the AB’s view in Japan – Taxes on Alcoholic Beverages on the status of adopted and unadopted Panel Reports in WTO law. 232 ibid art 16.2. 233 ibid art 17.1. 234 ibid.

WTO: Synopsis of Other Trade Agreements  135 (ii) comprises seven people, three of whom attend in rotation to each case235, (iii) consists of independent “persons of recognized authority, with demonstrated expertise in law, international trade and the subject matter of the covered agreements generally”236, (iv) must be “broadly representative of membership in the WTO”237, (v) must take no more than sixty days to disseminate its report from the appellant’s formal notification of the decision to appeal – informing the Dispute Settlement Body in writing of its reasons for any delay together with a projected date for circulation of the report, which must never exceed ninety days from the notification date238, (vi) must rule only on “issues of law covered in the panel report and legal interpretations developed by the panel”239, (vii) deliberates confidentially240, (viii) must address each matter raised in conformity with point (vi) during the appeal 241, and (ix) “may uphold, modify or reverse the legal findings and conclusions of the panel”242. The Dispute Settlement Body must adopt, and the parties unconditionally accept, the AB’s report, unless the former decides by consensus not to adopt it within thirty days following its distribution to Members of the WTO243. When a panel or the Appellate Body concludes that a measure is inconsistent with a covered agreement, it shall recommend that the [WTO] Member concerned bring the measure into conformity with that agreement[, and] may suggest ways in which the Member concerned could implement [its] recommendations244. Article 21.5 of the DSU gives a party to the dispute the opportunity to attempt to enforce the ruling of the WTO Panel or the AB against the other party – whose measures required alteration in order to comply with the relevant Agreement. Where there is disagreement as to the existence or consistency with a covered agreement of measures taken to comply with the recommendations and rulings such dispute shall be decided through recourse to these dispute settlement procedures, including wherever possible resort to the original panel. …245

235 236 237 238 239 2 40 2 41 2 42 2 43 2 44 2 45

ibid. ibid art 17.3. ibid. ibid art 17.5. ibid art 17.6. ibid art 17.10. ibid art 17.12. ibid art 17.13. ibid art 17.14. ibid art 19.1. ibid art 21.5.

136  WTO: Synopsis of Other Trade Agreements As for the original findings, the WTO Panel’s findings for the Article 21.5 procedure may be appealed. Chapter 1 refers to five Reports of the AB that are pursuant to invocation of Article 21.5 of the DSU246. A party can invoke Article 21.5 of the DSU in respect of a case that has already been subject to same procedure. Chapter 1 mentions the WTO Panel’s Report from one such case: Brazil – Export Financing Programme for Aircraft – Second Recourse by Canada to Article 21.5 of the DSU 247. If a WTO Member that is a party to a completed dispute-resolution process does not bring its measures-in-question into line with the relevant Agreement(s) as indicated by recommendations and rulings emerging from that process “within a reasonable period of time”, then any party that has invoked the dispute-­settlement procedures may seek compensation from that Member and, if this is not forthcoming, may request the Dispute Settlement Body “to suspend the application to the Member concerned of concessions or other obligations under the covered agreements”248. The Dispute Settlement Body is to provide authorization to suspend these “within 30 days of the expiry of the reasonable period of time unless [it] decides by consensus to reject the request”249. The extent of this authorized suspension “shall be equivalent to the level of the nullification or impairment”250. If that Member “objects to the level of suspension proposed” or claims that due process251 was not followed, then “the matter [is] referred to arbitration”252. The original WTO Panel conducts this arbitration “if members are available”, and, if not, an arbitrator that the Director-General appoints does so253. The parties must “accept the arbitrator’s decision as final”254. … The DSB [Dispute Settlement Body] shall be informed promptly of the decision of the arbitrator and shall upon request, grant authorization to suspend concessions or other obligations where the request is consistent with the decision of the arbitrator, unless the DSB decides by consensus to reject the request 255. In Brazil – Export Financing Programme for Aircraft, the complaining party – Canada – requested the Dispute Settlement Body to authorize its imposition of

2 46 These are WT/DS58/AB/RW, WT/DS108/AB/RW, WT/DS132/AB/RW, WT/DS264/ AB/RW and WT/DS381/AB/RW. 2 47 WT/DS46/RW2 . 2 48 ibid art 22.1-22.2. 2 49 ibid art 22.6. 250 ibid art 22.4. 251 Article 22.3 of the DSU specifies the principles and procedures that the complaining party must follow in seeking the suspension of concessions or other obligations in respect of the other party to the dispute. 252 ibid art 22.6. 253 ibid. 254 ibid art 22.7. 255 ibid.

WTO: Synopsis of Other Trade Agreements  137 countermeasures on Brazil, pursuant to the WTO Panel’s finding in Brazil – Export Financing Programme for Aircraft: Recourse by Canada to Article 21.5 of the DSU256 “that Brazil’s measures to comply with the recommendations and rulings of the DSB either did not exist or were inconsistent with the SCM Agreement”257. Brazil objected to the degree of suspension which Canada proposed, claiming that due process was not followed, and, therefore, requested that the issue be referred to arbitration pursuant to Articles 22.6 of the DSU258 and 4.11 of the SCM Agreement 259. The Dispute Settlement Body referred this matter to the original WTO Panel for arbitration 260. The arbitrator held that “the appropriate countermeasures” summed to 49% of the Canadian claim, and that Canada may request the Dispute Settlement Body to authorize suspension of the application of Canadian tariff concessions and other obligations to Brazil to a maximum of this amount under the GATT, the ATC and the Agreement on Import Licensing Procedures261. The Dispute Settlement Body authorized this extent of suspension of obligations on request, pursuant to Articles 22.7 of the DSU262 and 4.10 of the SCM Agreement 263. The DSU accommodates LDCs, for instance by offering specified ADR services264. In dispute settlement cases involving a least-developed country Member [of the WTO], where a satisfactory solution has not been found in the course of consultations the Director-General or the Chairman of the DSB [Dispute Settlement Body] shall, upon request by a least-developed country Member

256 WT/DS46/RW . 257 World Trade Organization, ‘Dispute Settlement: DS46: Brazil – Export Financing Programme for Aircraft’ accessed 9 April 2018. 258 Text to n 252. 259 ibid. Article 4.11 of the SCM Agreement states: “In the event a party to the dispute requests arbitration under paragraph 6 of Article 22 of the Dispute Settlement Understanding (“DSU”), the arbitrator shall determine whether the countermeasures are appropriate.” (Agreement on Subsidies and Countervailing Measures (15 April 1994) LT/UR/A-1A/9 art 4.11 ; 1867 UNTS 14). 260 World Trade Organization, ‘Dispute Settlement: DS46: Brazil – Export Financing Programme for Aircraft’ accessed 9 April 2018. 261 ibid. 262 Text to n 255. 263 ibid. Article 4.10 of the SCM Agreement declares: “In the event the recommendation of the DSB [Dispute Settlement Body] is not followed within the time-period specified by the panel, … the DSB shall grant authorization to the complaining Member to take appropriate countermeasures, unless the DSB decides by consensus to reject the request.” (Agreement on Subsidies and Countervailing Measures (15 April 1994) LT/UR/A-1A/9 art 4.10 ; 1867 UNTS 14). 264 This is besides the ADR framework that Article 5 of the DSU provides for all Members of the WTO.

138  WTO: Synopsis of Other Trade Agreements offer their good offices, conciliation and mediation with a view to assisting the parties to settle the dispute, before a request for a panel is made. …265 If both parties to a dispute agree266, they may opt for arbitration “as an alternative means of dispute settlement”267. Articles 21268 and 22269 of the DSU apply as appropriate to arbitration awards270.

The TPRM The TPRM’s purpose “is to contribute to improved adherence by all Members [of the WTO] to rules, disciplines and commitments made under the [WTO’s] Multilateral Trade Agreements and, where applicable, [its] Plurilateral Trade Agreements, and hence to the smoother functioning of the multilateral trading system, by achieving greater transparency in, and understanding of, the trade policies and practices of Members”271. The TPRM established the Trade Policy Review Body to conduct the reviews of each Member’s trade policy272. The trade policies and practices of the four WTO Members with the largest share of world trade are reviewed every two years, the next sixteen every four years, and other Members every six years273. From 1 January 2019274, these periods are lengthened to three275, five276 and seven 277 years, respectively. The Trade Policy Review Body grounds its work on a full report from the Member(s) under review and a report that the Secretariat of the WTO constructs278. These reports and the minutes of the review meeting are published swiftly after the review279, and forwarded to the WTO’s Ministerial Conference280. Between reviews, Members must provide short reports in respect of

265 Understanding on Rules and Procedures Governing the Settlement of Disputes (15 April 1994) LT/UR/A-2/DS/U/1 art 24.2 . 266 ibid art 25.2. 267 ibid art 25.1. 268 Text to nn 245–247 (paragraph 5 of Article 21 only). 269 Text to nn 248–263. 270 ibid art 25.4. 271 Trade Policy Review Mechanism (15 April 1994) LT/UR/A-3/TPR/1 para A(i) . 272 ibid para C(i). 273 ibid para C(ii). The trade policies and practices of LDCs may be reviewed less frequently (ibid). 274 General Council Decision of 26 July 2017: Amendment of the Trade Policy Review Mechanism WT/L/1014 para 2 . 275 ibid para 1(a) 276 ibid para 1(b). 277 ibid para 1(c). 278 Trade Policy Review Mechanism (15 April 1994) LT/UR/A-3/TPR/1 para C(v) . 279 ibid para C(vi). 280 ibid para C(vii).

WTO: Synopsis of Other Trade Agreements  139 “significant changes in their trade policies”281. They must also supply yearly updates of their trade statistics282.

The Agreement on Trade in Civil Aircraft This Plurilateral Trade Agreement was adopted on 12 April 1979283, and entered into force in states acceding to it on 1 January 1980284. Any Signatory may withdraw from the Agreement, with effect from one year after its written notice of withdrawal reaches the Director-General 285. The Agreement applies to ‘civil aircraft’, i.e., to all ground-flight simulators and non-military aircraft, and to their parts, components and sub-assemblies286. Signatories to the Agreement must abolish “all customs duties and other charges of any kind levied on, or in connection with, the importation of products … listed in the Annex 287, if such products are for use in a civil aircraft and incorporation therein, in the course of its manufacture, repair, maintenance, rebuilding, modification or conversion”288, and such charges “levied on repairs on civil aircraft”289. ‘Other charges’ has “the same meaning as in Article II of the GATT”290. Each Signatory must include in its GATT Schedule of Concessions291 “duty-free or duty-exempt treatment” for all these products and repairs292. Every Signatory must introduce an “end-use system of customs administration” to discharge all these obligations293, which “provides duty-free or 281 ibid para D. 282 ibid. 283 Agreement on Trade in Civil Aircraft (15 April 1994) LT/UR/A-4/PLURI/1 . 284 ibid art 9.3.1. 285 ibid art 9.6.1. 286 ibid art 1. 287 The Annex, which was revised in 2001 and which replaced the previous version on 1 January 2002 with the entry into force of the Protocol containing it, presents a table that comprises descriptions of products and the corresponding Harmonized System Heading and Code – for instance, “84.21 8421.19 Centrifuges” (Committee on Trade in Civil Aircraft – Protocol (2001) Amending the Annex to the Agreement on Trade in Civil Aircraft (23 November 2001) TCA/4 arts 1 and 3 ; Agreement on Trade in Civil Aircraft (15 April 1994) LT/UR/A-4/PLURI/1 Annex paras 2 and 4 ). 288 Agreement on Trade in Civil Aircraft (15 April 1994) LT/UR/A-4/PLURI/1 art 2.1.1 . 289 ibid art 2.1.2. 290 ibid fn 1 to art 2.1.1-2.1.2. The paragraph entitled ‘Article II.1: The application of the Schedules of Concessions’, in the subsection entitled ‘Article II: Schedules of Concessions’, in the section entitled ‘The GATT’, in Chapter 1, discusses the meaning of ‘other duties or charges’ in Article II:1 of the GATT. 291 The paragraph entitled ‘The Schedules of Concessions’, in the subsection entitled ‘Article II: Schedules of Concessions’, in the section entitled ‘The GATT’, in Chapter 1, provides information concerning the GATT Schedules of Concessions. 292 ibid art 2.1.3. 293 ibid art 2.2(a).

140  WTO: Synopsis of Other Trade Agreements duty-exempt treatment that is comparable to the treatment provided by other Signatories and is not an impediment to trade”294. Signatories should neither require nor pressurize “entities engaged in the purchase of civil aircraft” to obtain these from a specific supplier295, nor add inducements “to the sale or purchase of civil aircraft from any particular source”296. They accept that products which this Agreement covers should be bought only “on a competitive price, quality and delivery basis”297. Signatories should apply neither quantitative restrictions nor licensing requirements to limit imports or exports “in a manner inconsistent with applicable provisions of the GATT”298.

The Agreement on Government Procurement299 The Agreement was adopted on 15 April 1994, and was effective from 1 January 1996 for governments that had signed it by the former date and (as necessary) ratified it before the latter300. Any Party to the Agreement may withdraw from it, with effect from sixty days after its written notice of withdrawal reaches the Director-General301. This Agreement applies to any law, regulation, procedure or practice regarding any procurement by entities covered by this Agreement, as specified in Appendix I302. This Agreement applies to procurement by any contractual means, … including any combination of products and services303.

294 295 296 297 298

299 300

301 302 303

ibid art 2.2(b). ibid art 4.2. ibid art 4.4. ibid art 4.3. ibid art 5. Paragraph 1 of Article XI of the GATT comprises a prohibition on quantitative restrictions – see the paragraph entitled ‘Article XI:1: The prohibition on quantitative restrictions’, in the subsection entitled ‘Article XI: General Elimination of Quantitative Restrictions’ in the section entitled ‘The GATT’, in Chapter 1, for this provision and relevant case law. n 201 specifies the relationship between this Agreement and the DSU. Agreement on Government Procurement (15 April 1994) LT/UR/A-4/PLURI/2 art XXIV:1 . For the Agreement to be effective from 1 January 1996, the relevant government’s “agreed coverage” must be “contained in Annexes 1 through 5 of Appendix I” (ibid). This Appendix lays down the extent of the Agreement under the following titles: “Annex 1 Central Government Entities Annex 2 Sub-Central Government Entities Annex 3 All Other Entities that Procure in Accordance with the Provisions of this Agreement Annex 4 Services Annex 5 Construction Services” (Agreement on Government Procurement: Appendix I (2 January 2002) LT/UR/A-4/PLURI/2/Appendix 1 ). “Relevant thresholds” for each Party to the Agreement “are specified in [its] Annexes” (Agreement on Government Procurement (15 April 1994) LT/UR/A-4/PLURI/2 fn 1 to art I:1 ). ibid art XXIV:10(a). ibid art I:1. n 300 specifies the content of Appendix I of the Agreement on Government Procurement. ibid art I:2.

WTO: Synopsis of Other Trade Agreements  141 This Agreement applies to any procurement contract of a value of not less than the relevant threshold specified in Appendix I304. The Agreement imposes these non-discrimination obligations. 1 With regard to the laws, regulations, procedures and practices identified above305, each Party is to “provide immediately and unconditionally to the products, services and suppliers of other Parties … treatment no less favourable than: (a) that accorded to domestic products, services and suppliers; and (b) that accorded to products, services and suppliers of any other Party”306. 2 With regard to these laws, regulations, procedures and practices307, each Party must ensure that its entities do not: (a) “treat a locally-established supplier less favourably than any other locally-established supplier on the basis of degree of foreign affiliation or ownership”, and (b) “discriminate against locally-established suppliers on the basis of the country of production of the good or service being supplied …”308. 3 “Technical specifications” that specify “the characteristics of the products or services to be procured” must not be “prepared, adopted or applied with a view to, or with the effect of, creating unnecessary obstacles to international trade”309. 4 Entities must “not seek or accept” so as to prevent competition “advice which may be used in the preparation of specifications for a specific procurement from a firm that may have a commercial interest in the procurement”310. 5 Each Party is to “ensure that the tendering procedures of its entities are applied in a non-discriminatory manner”311. 6 Entities must not give any supplier information concerning a particular procurement in a way which prevents competition312. 7 Whilst “qualifying suppliers”, entities must “not discriminate among suppliers of other Parties or between domestic suppliers and suppliers of other Parties”313. 8 Entities are to choose which suppliers take part in the tendering procedure for each procurement “in a fair and non-discriminatory manner”314.

304 ibid art I:4. Although the relevant thresholds for each Party to the Agreement concerns the Annexes of Appendix I, these are identified in that Party’s Annexes (n 300). 305 Text to n 302. 306 ibid art III:1. 307 Text to n 302. 308 ibid art III:2. 309 ibid art VI:1. 310 ibid art VI:4. 311 ibid art VII:1. 312 ibid art VII:2. 313 ibid art VIII. 314 ibid art X:1.

142  WTO: Synopsis of Other Trade Agreements 9 Each Party must “provide non-discriminatory, timely, transparent and effective procedures enabling suppliers to challenge alleged breaches of the Agreement”315. Article V of the Agreement contains several provisions for the special and differential treatment of developing countries including, for instance, the following. Each developed country Party shall, upon request, provide all technical assistance which it may deem appropriate to developing country Parties in resolving their problems in the field of government procurement316. Paragraphs 1 and 2 of the Article XXIII of the Agreement on Government Procurement comprise Security Exceptions and General Exceptions, respectively. These are consistent with, although less extensive than, the Security Exceptions in Article XXI317, and the General Exceptions in Article XX318, of the GATT.

Comments Common themes within the WTO’s Agreements include the provision of MFN and national treatment to Members and products, a reduction in the frequency of permissible quantitative restrictions to a minimum, the prohibition of tariffs that are beyond bound levels – subject to as few exceptions as possible and on a temporary basis, the availability of a common judicial mechanism for the settlement of disputes that arise from the Agreements, and a supply of more-­ favourable terms for developing countries and, especially, for LDCs. The Members of the WTO, and, prior to this, the Contracting Parties to the GATT 1947, have steadily succeeded in evolving a comprehensive system of international trade law which, although punctuated by exceptions, is extensive enough to provide a holistic framework for them to conduct ongoing business with each other. This has been achieved through the efforts of many people from the 1940s until the present time – although, arguably, progress in the development of this law has been slower since the turn of the millennium than previously. Such is the legal background against which PTAs are to be considered. Those Agreements should provide an incremental trade benefit to their parties, without substantial detraction from the trade of WTO Members which are outside their geographic reach; i.e., PTAs should raise overall economic welfare. This situated is complicated by the needs of developing countries, which may gain from Agreements with advanced economies on non-reciprocal terms. It is perceivable that some of these PTAs may reduce overall economic welfare, whilst providing a framework for the alleviation of poverty and the integration of less-prosperous states into the

315 316 317 318

ibid art XX:2. ibid art V:8. Text to n 546 in ch 1. Text to nn 479, 487, 495, 497, 501, 503–504, 524 and 530–534 in ch 1.

WTO: Synopsis of Other Trade Agreements  143 worldwide trading system. With the absence of an official definition of ‘developing country’ for the purpose of international trade law, it is difficult to envisage that middle-income countries are going to want to relinquish this preferable status. Before considering PTAs, it is necessary to explore and review how these Agreements fit into the structure of global trade rules. This is the subject of the next chapter, which considers the Transparency Mechanism for notification of PTAs to the WTO and the legal provisions under which they may be notified.

Conclusion This chapter summarizes the non-GATT Multilateral and the Plurilateral Trade Agreements that are annexed to the Agreement Establishing the World Trade Organization and currently in force. These cover various areas of international trade some of which, such as trade-in-services – which the GATS regulates, are of much importance.

References Agreement on Agriculture (15 April 1994) LT/UR/A-1A/2 ; 33 ILM 1154 (1994). Agreement on Government Procurement (15 April 1994) LT/UR/A-4/PLURI/2 . Agreement on Government Procurement: Appendix I (2 January 2002) LT/UR/A-4/ PLURI/2/Appendix 1 . Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 (15 April 1994) LT/UR/A-1A/4 ; 33 ILM 1154 (1994). Agreement on Import Licensing Procedures (15 April 1994) LT/UR/A-1A/5 ; 33 ILM 1154 (1994). Agreement on Preshipment Inspection (15 April 1994) LT/UR/A-1A/6 ; 33 ILM 1154 (1994). Agreement on Rules of Origin (15 April 1994) LT/UR/A-1A/7 ; 33 ILM 1154 (1994). Agreement on Safeguards (15 April 1994) LT/UR/A-1A/8 ; 33 ILM 1154 (1994). Agreement on Subsidies and Countervailing Measures (15 April 1994) LT/UR/A-1A/9 ; 1867 UNTS 14. Agreement on Technical Barriers to Trade (15 April 1994) LT/UR/A-1A/10 ; 33 ILM 1154 (1994). Agreement on Textiles and Clothing (15 April 1994) LT/UR/A-1A/11 ; 33 ILM 1154 (1994). Agreement on the Application of Sanitary and Phytosanitary Measures (15 April 1994) LT/UR/A-1A/12 ; GATT Doc. MTN/FA Ii-A1A-4; 33 ILM XXX. Agreement on Trade in Civil Aircraft (15 April 1994) LT/UR/A-4/PLURI/1 . Agreement on Trade-Related Aspects of Intellectual Property Rights (15 April 1994) LT/UR/A-1C/IP/1 .

144  WTO: Synopsis of Other Trade Agreements Agreement on Trade-Related Investment Measures (15 April 1994) LT/UR/A-1A/13 ; 1868 UNTS 186. Committee on Trade in Civil Aircraft – Protocol (2001) Amending the Annex to the Agreement on Trade in Civil Aircraft (23 November 2001) TCA/4 . General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. General Agreement on Tariffs and Trade (15 April 1994) LT/UR/A-1A/1/GATT/1 ; 1867 UNTS 187; 33 ILM 1153 (1994). General Agreement on Trade in Services (15 April 1994) LT/UR/A-1B/S/1 ; 1869 UNTS 183; 33 ILM 1167 (1994). General Council Decision of 26 July 2017: Amendment of the Trade Policy Review Mechanism WT/L/1014 . Protocol Amending the Marrakesh Agreement Establishing the World Trade Organization (28 November 2014) WT/L/940 . Trade Policy Review Mechanism (15 April 1994) LT/UR/A-3/TPR/1 . Understanding on Rules and Procedures Governing the Settlement of Disputes (15 April 1994) LT/UR/A-2/DS/U/1 . United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services: Report of the Appellate Body (7 April 2005) WT/DS285/AB/R . United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services: Report of the Panel (10 November 2004) WT/DS285/R . United States International Trade Commission. ‘Harmonized Tariff Schedule (2018 HTSA Revision 2 (Posted 03–29-18))’ accessed 2 April 2018. World Customs Organization. ‘History’ accessed 3 April 2018. World Intellectual Property Organization. ‘Berne Convention for the Protection of Literary and Artistic Works’ accessed 7 April 2018. World Intellectual Property Organization, ‘Berne Convention for the Protection of Literary and Artistic Works of September 9, 1886’ accessed 7 April 2018. World Intellectual Property Organization. ‘International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations’ accessed 7 April 2018. World Intellectual Property Organization. ‘Paris Convention for the Protection of Industrial Property’ accessed 7 April 2018. World Intellectual Property Organization. ‘Paris Convention for the Protection of Industrial Property of March 20, 1883’ accessed 7 April 2018. World Intellectual Property Organization. ‘Treaty on Intellectual Property in Respect of Integrated Circuits’ accessed 7 April 2018. World Trade Organization. ‘Dispute Settlement: DS46: Brazil – Export Financing Programme for Aircraft’ accessed 9 April 2018. World Trade Organization. ‘Official Working Languages’ accessed 2 April 2018.

3 The Scope for Preferential Trade Agreements within the World Trade Organization’s Framework

The WTO’s notification system for PTAs is based on two complementary de­ ecember cisions of the Organization’s General Council – the Decision of 14 D 2006 on the Transparency Mechanism for Regional Trade Agreements and the General Council Decision of 14 December 2010 on the Transparency Mechanism for Preferential Trade Arrangements1. The 2006 Decision applies to “trade agreements of a mutually preferential nature”, which it refers to as ‘Regional Trade Agreements’ or ‘RTAs’2. The 2010 Decision concerns non-­reciprocal trade arrangements, which it labels ‘Preferential Trade Arrangements’ or ‘PTAs’3. Neither of these terms satisfactorily describes the preferential trade arrangements to which it refers4. The terms proposed there of ‘Reciprocal Preferential Trade Arrangements’ (abbreviated to ‘RPTAs’) for those agreements to which the 2006 Decision applies and ‘Non-Reciprocal Preferential Trade Arrangements’ (shortened to ‘NRPTAs’) for those understandings to which the 2010 Decision pertains are to be used in the text which follows5. Whilst the Decision of 14 December 2006 on the Transparency Mechanism for Regional Trade Agreements mentions Article XXIV of the GATT, the Understanding on the Interpretation of Article XXIV of the GATT, Article V of the GATS and the Enabling Clause6, it provides no further specification on 1 The 2006 Decision has WTO reference WT/L/671. The 2010 Decision is designated WT/L/806. 2 Decision of 14 December 2006 on the Transparency Mechanism for Regional Trade Agreements WT/L/671 Preamble . 3 General Council Decision of 14 December 2010 on the Transparency Mechanism for Preferential Trade Arrangements WT/L/806 para 1 . 4 See n 38 in ch 1, which provides an explanation. 5 n 38 in ch 1 specifies why these terms are introduced with reference to the 2006 and 2010 Decisions. 6 Decision of 14 December 2006 on the Transparency Mechanism for Regional Trade Agreements WT/L/671 Preamble and para 1 . The Enabling Clause is the Decision of 28 November 1979 on Differential and More Favourable Treatment Reciprocity and Fuller Participation of Developing Countries. The AB has classified the Enabling Clause as an exception to the MFN Rule (Chapter 1, section entitled ‘The GATT’, subsection entitled ‘Article 1: General Most-Favoured-Nation Treatment’, paragraph entitled ‘Exceptions to the MFN Rule: (i) the Enabling Clause’).

146  Preferential Trade Agreements: WTO Scope precisely what trade agreements it applies to – other than the fact that they are “trade agreements of a mutually preferential nature”7. The demarcation between that Decision and the General Council Decision of 14 December 2010 on the Transparency Mechanism for Preferential Trade Arrangements is determined by Paragraph 1 of the latter, which applies the 2010 Decision to: (i) PTAs that fall within Paragraphs 2(a), 2(b) and 2(d) of the Enabling Clause8, (ii) PTAs which extend preferential treatment to products from LDCs9, and (iii) other PTAs that the Agreement Establishing the World Trade Organization (including its Annexes) authorizes which provide such treatment to products on a non-reciprocal basis10. Thus, the 2006 Decision applies to PTAs that are notified to the WTO under Paragraph 2(c) of the Enabling Clause11, and to PTAs which are notified under Article XXIV of the GATT and/or Article V of the GATS – as long as these latter PTAs are mutually preferential (i.e., reciprocal).

The Decision of 14 December 2006 on the Transparency Mechanism for Regional Trade Agreements Members of the WTO are to inform the Organization of new discussions that are intended to result in the attainment of a RPTA 12, and are to convey to it information on such an Arrangement that they have recently signed – including the latter’s name, extent and date of signature, a timetable for its coming into effect, and appropriate contacts13. That information is to be promptly imparted to the WTO, preferably no later than the ratification of the RPTA or any party’s decision on its application of the relevant elements of the Arrangement14. The parties are to specify whether the RPTA is notified under Article XXIV of the GATT, Article V of the GATS and/or Paragraph 2(c) of the Enabling Clause15. They are to supply the full text of the RPTA and any connected annexes, schedules and protocols in one of the WTO’s official languages16. 7 ibid Preamble. 8 General Council Decision of 14 December 2010 on the Transparency Mechanism for Preferential Trade Arrangements WT/L/806 para 1(a) . See (a), (b) and (d) in the paragraph entitled ‘Exceptions to the MFN Rule: (i) the Enabling Clause’, in the subsection entitled ‘Article 1: General Most-Favoured-Nation Treatment’, in the section entitled ‘The GATT’, in Chapter 1, for Paragraphs 2(a), 2(b) and 2(d) of the Enabling Clause, respectively. 9 ibid para 1(b). 10 ibid para 1(c). 11 See (c) in the paragraph entitled ‘Exceptions to the MFN Rule: (i) the Enabling Clause’, in the subsection entitled ‘Article 1: General Most-Favoured-Nation Treatment’, in the section entitled ‘The GATT’, in Chapter 1, for Paragraph 2(c) of the Enabling Clause. 12 Decision of 14 December 2006 on the Transparency Mechanism for Regional Trade Agreements WT/L/671 para 1(a) . 13 ibid para 1(b). 14 ibid para 3. 15 ibid para 4. 16 ibid. English, French and Spanish are the official languages of the WTO (World Trade Organization, ‘General guidance on officially accepting WTO legal instruments’ accessed 27 November 2017).

Preferential Trade Agreements: WTO Scope  147 Procedures World Trade Organization Members are to consider whether a new RPTA is compliant with the provisions of the Organization’s multilateral trade agreements within one year of the date of its notification to that institution17. To help Members with this, the WTO Secretariat is to assemble a factual presentation of the RPTA 18, and the parties to that Arrangement are to provide to the WTO Secretariat the following data19: (a) for elements of the RPTA that concern goods – (i) a catalogue of each party’s preferential tariffs under the RPTA in the year(s) that the Arrangement comes into force, (ii) a complete listing of each party’s MFN duties applied in the year that the Arrangement enters into effect and the immediately preceding year, (iii) other applicable data (such as seasonal restrictions), (iv) preferential rules of origin as applied to each product, as described in the RPTA, and (v) import statistics for each party to the RPTA, covering the last three years20; (b) for components of the RPTA that concern services, the parties are to submit the following data (if available) for the past three years: (i) statistics on trade or the balance of payments, (ii) data on GDP or production, (iii) statistics on FDI, and (iv) data on the cross-border movement of people21. These data are to be supplied to the WTO Secretariat at the earliest possible moment – usually within ten weeks (or twenty weeks for Arrangements that comprise developing countries only) of the date of notification of the RPTA 22. A single meeting is dedicated to the WTO Members’ consideration of each notified Arrangement 23.

Implementation of the Transparency Mechanism The WTO’s Committee on Regional Trade Agreements is to implement the Transparency Mechanism in respect of R PTAs that are notified under Article XXIV of the GATT and/or Article V of the GATS24. The WTO’s Committee on Trade and Development is to put the Transparency Mechanism into effect with regard to R PTAs that are notified under Paragraph 2(c) of the Enabling Clause25.

17 Decision of 14 December 2006 on the Transparency Mechanism for Regional Trade Agreements WT/L/671 para 6 . 18 ibid para 7(b). 19 ibid para 7(a). 20 ibid Annex para 2. 21 ibid Annex para 3. If the RPTA comprises only developing countries, then “the data requirements specified above will take into account the technical constraints of the parties” (ibid, Annex para 4). 22 ibid para 8. 23 ibid para 11. 24 ibid para 18. 25 ibid.

148  Preferential Trade Agreements: WTO Scope

The General Council Decision of 14 December 2010 on the Transparency Mechanism for Preferential Trade Arrangements The General Council Decision of 14 December 2010 on the Transparency Mechanism for Preferential Trade Arrangements omits a statement on the announcement of NRPTAs to the WTO – i.e., equivalent to the first sentence of the above section entitled ‘The Decision of 14 December 2006 on the Transparency Mechanism for Regional Trade Agreements’26. Whilst providing, as in the case of the 2006 Decision, that notification is to take place as soon as possible27, the 2010 Decision requires this to happen within three months of the NRPTA coming into force28 – a condition which is absent from the earlier Decision. Unlike the 2006 Decision, the 2010 Decision defines a ‘Notifying Member’ – which is the party to the NRPTA that grants the non-reciprocal preferences under the Arrangement 29. The Notifying Member is to specify whether its NRPTA is notified under Paragraph 1(a), Paragraph 1(b) or Paragraph 1(c) of the 2010 Decision30 – whose contents are respectively described in points (i), (ii) and (iii) in the second paragraph of this chapter. That Member is to supply the full text of the NRPTA and its annexes, schedules and protocols in one of the official languages of the WTO31 – information that is also required for the notification of a RPTA under the 2006 Decision.

Implementation and Procedures The Committee on Trade and Development is to implement the Transparency Mechanism with regard to NRPTAs32. The Committee’s consideration of a NRPTA is to be concluded within one year of the date of its notification33 – which is the same length of time that the Decision of 14 December 2006 on the Transparency Mechanism for Regional Trade Agreements grants for the consideration of an RPTA. The General Council Decision of 14 December 2010 on the Transparency Mechanism for Preferential Trade Arrangements requires the notifying Member to furnish the WTO Secretariat with data for all parties to 26 Comparisons in this section (entitled ‘The General Council Decision of 14 December 2010 on the Transparency Mechanism for Preferential Trade Arrangements’) of that Decision with the Decision of 14 December 2006 on the Transparency Mechanism for Regional Trade Agreements, use information that is present in (or omitted from) the immediately preceding section (entitled ‘The Decision of 14 December 2006 on the Transparency Mechanism for Regional Trade Agreements’) as the comparator. 27 General Council Decision of 14 December 2010 on the Transparency Mechanism for Preferential Trade Arrangements WT/L/806 para 3 . 28 ibid. 29 ibid fn 2. 30 ibid para 4. 31 ibid. 32 ibid paras 5 and 20. 33 ibid para 6.

Preferential Trade Agreements: WTO Scope  149 the NRPTA that are similar to the goods-related data which the 2006 Decision necessitates the parties to a RPTA to supply to the Secretariat34. In addition, the notifying Member must provide “other general information as it deems [to be] appropriate for further clarification of the [NR]PTA”, or specify the URL at which it is found35. As for a RPTA under the 2006 Decision, the 2010 Decision requires the data that are requested in respect of a NRPTA to be submitted to the WTO Secretariat at the earliest possible time – typically within ten weeks (or twenty weeks for Arrangements which are notified by Members of the Organization that are developing countries)36. Whilst the 2006 Decision is silent with regard to the following requirement (in respect of RPTAs), the 2010 Decision calls for the WTO Secretariat to prepare a guide that shows the URLs at which particular types of information may be obtained – following the template in Annex 2 to the latter Decision “as appropriate”37. As the 2006 Decision specifies for RPTAs, the 2010 Decision instructs the WTO Secretariat to construct a factual presentation of each NRPTA 38. Whilst the earlier Decision does not particularize the items of information which the Secretariat should include in its presentation of a RPTA, the later Decision states that the Secretariat is to use the components of Annex 3 to that Decision as the foundation of its presentation of a NRPTA 39. The following information may also be 34 ibid para 7(a) and Annex 1, para 2; Decision of 14 December 2006 on the Transparency Mechanism for Regional Trade Agreements WT/L/671 Annex para 2 . 35 General Council Decision of 14 December 2010 on the Transparency Mechanism for Preferential Trade Arrangements WT/L/806 Annex 1 para 3 . 36 ibid para 8. 37 ibid para 7(b). Annex 2 to General Council Decision of 14 December 2010 on the Transparency Mechanism for Preferential Trade Arrangements requests the insertion of the URL at which each of the following items of information may be found: (i) the date on which the NRPTA came into force, (ii) the date on which the NRPTA was last renewed, (iii) the date on which the Arrangement was notified to the WTO, (iv) the date on which the NRPTA will expire, (v) the present number of beneficiaries under the Arrangement, (vi) the current number of eligible products, (vii) the law(s) within the notifying Member that enact the NRPTA – including related legislation and modifications to the Arrangement, (viii) the authority (or authorities) which accord(s) the beneficial treatment, (ix) the domestic authorities that manage this treatment, (x) the full list of beneficiaries, (xi) the eligibility criteria for beneficiaries, (xii) restrictions to eligibility, (xiii) criteria for amending the list of beneficiaries, (xiv) the entire list of eligible products, (xv) the complete list of ineligible products, (xvi) provisions that concern alterations to the list of eligible products, (xvii) measures within the NRPTA which relate to tariff treatment, (xviii) provisions of the Arrangement that refer to exceptions to this tariff treatment, (xix) clauses of the NRPTA which pertain to various kinds of preferential treatment, (xx) explanations that concern the procedures for seeking preferential treatment, (xxi) rules of origin, and (xxii) pertinent statistics with regard to the volume of trade in the last three years. 38 General Council Decision of 14 December 2010 on the Transparency Mechanism for Preferential Trade Arrangements WT/L/806 para 7(c) . 39 ibid para 9. Annex 3 to General Council Decision of 14 December 2010 on the Transparency Mechanism for Preferential Trade Arrangements is entitled ‘Factual Abstract to PTAs Currently in Force’, and requires the following information – together with the URL of the relevant source for each item (other than (i) and (ix)): (i) the name of the notifying Member, (ii) the date on which the NRPTA came into force or was last renewed, (iii) the date on which

150  Preferential Trade Agreements: WTO Scope used in the factual presentation of a NRPTA: the Arrangement’s background, its extent, its coverage of products and countries, exceptions, special and differential provisions, measures concerning the application of the NRPTA – such as graduation40 and eligibility for further preferences, rules of origin41, provisions that affect trade in goods, customs-related processes, the constitution of the imports of merchandise from one beneficiary to the NRPTA to another, the fulfilment of tariff-rate quotas, the relationship between the NRPTA and other Arrangements with the same notifying Member, and imports under the NRPTA over the most recent three years42. As under the 2006 Decision, the 2010 Decision allocates a single meeting for the consideration of each notified Arrangement43. Unlike the earlier Decision, the later Decision states which division of the WTO is to hold that conference – the Committee on Trade and Development44.

Comment on the 2006 and 2010 Decisions The Decision of 14 December 2006 on the Transparency Mechanism for Regional Trade Agreements and the General Council Decision of 14 December 2010 on the Transparency Mechanism for Preferential Trade Arrangements are broadly compatible. As the content of the immediately-preceding section shows45, there are differences between these Decisions, as well as alignments. The 2010 Decision is more detailed than the 2006 Decision – the latter is sometimes silent on issues that the former considers. The WTO may wish to review the 2006 Decision, adding clauses to and modifying provisions of this document in the light of the 2010 Decision in order to improve its completeness and

the Arrangement will expire, (iv) related WTO/GATT documents and national legislative instruments, (v) the current number of beneficiaries under the NRPTA and eligibility criteria for this status, (vi) the number of products that the NRPTA covers, and exceptions, (vii) provisions in the NRPTA which concern preferential treatment, (viii) rules of origin and (ix) preferential trade data for the last three years. 40 ‘Graduation’ in this context means the reclassification of a jurisdiction from a developing country to an advanced economy – which may result in the loss of any non-reciprocal trade preferences that the graduating state receives under the relevant NRPTA. A country that the UN removes from its list of LDCs (n 26 in ch 1) may be described as graduating to non-LDC status. 41 Rules of origin are listed in both Annex 3 to the 2010 Decision (n 39) – which contains compulsory elements of the WTO Secretariat’s factual presentation on each NRPTA, and Paragraph 9 – which states additional items of information that the Secretariat may choose to include in this factual presentation. 42 General Council Decision of 14 December 2010 on the Transparency Mechanism for Preferential Trade Arrangements WT/L/806 para 9 . 43 ibid para 11. 44 ibid. 45 This is the section entitled ‘The General Council Decision of 14 December 2010 on the Transparency Mechanism for Preferential Trade Arrangements’.

Preferential Trade Agreements: WTO Scope  151 consistency with the subsequent publication. On the basis of earlier remarks46, the WTO might also consider making a change in the terminology that it uses for the trade agreements to which it refers in the two Decisions.

Notification of PTAs to the WTO under Article XXIV of the GATT (Territorial Application, Frontier Traffic, Customs Unions and Free-Trade Areas) The purpose of a customs union47 or a free-trade area48: Article XXIV:4 Article XXIV of the GATT is an exception to the MFN Rule contained in Article I:1 of the GATT49. The former considers PTAs to be desirable to the extent that they increase the degree of free trade by “closer integration between the economies of the countries” which are parties to those Agreements50. WTO Members recognize that customs unions and free-trade areas have the following purposes: (i) to encourage trade between the countries which are party to them, and (ii) “not to raise barriers to the trade of” other Members51. In the creation or enlargement of a customs union or a free-trade area, the parties to it are to avoid as far as possible the generation of unfavourable effects on the trade of those other countries52.

46 See the opening paragraph of this chapter, and n 38 in ch 1, for these comments. 47 A ‘customs union’ is a trade agreement between two or more countries, in which those parties to the arrangement decide to eliminate or significantly reduce import tariffs on most or all of one another’s goods and services, and to charge common import tariffs on goods and services from countries that are not parties to the arrangement. 48 A ‘free-trade area’ is a group of countries whose members have ratified a free-trade agreement, i.e., an arrangement in respect of which the parties to it have decided to abolish or materially reduce tariffs and quotas on most or all of the imports of goods and services among themselves but without a common policy towards the imports of goods and services from states that are not parties to the arrangement. 49 This is stated in the paragraph entitled ‘Exceptions to the MFN Rule: (iv) PTAs’, in the subsection entitled ‘Article 1: General Most-Favoured-Nation Treatment’, in the section entitled ‘The GATT’, in Chapter 1. The MFN Rule is specified in the paragraph entitled ‘Article I:1: The MFN Rule’, which is also located in that subsection. 50 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art XXIV:4 ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. 51 ibid. The Understanding on the Interpretation of Article XXIV of the GATT reaffirms these objectives (Understanding on the Interpretation of Article XXIV of the General Agreement on Tariffs and Trade 1994 (15 April 1994) LT/UR/A-1A/1/GATT/U/4 Preamble ). 52 Understanding on the Interpretation of Article XXIV of the General Agreement on Tariffs and Trade 1994 (15 April 1994) LT/UR/A-1A/1/GATT/U/4 Preamble .

152  Preferential Trade Agreements: WTO Scope Article XXIV:4 and the chapeau of Article XXIV:5 as the AB holds in ‘Turkey – Textiles’ The chapeau of Article XXIV:5 of the GATT follows on from Article XXIV:4 of the GATT. The former states: “Accordingly, the provisions of this Agreement shall not prevent … the formation of a customs union or of a free-trade area …”53. In Turkey – Restrictions on Imports of Textile and Clothing Products, the AB connected Article XXIV:4 of the GATT to the chapeau of Article XXIV:5 of the GATT by stating that the purpose for Article XXIV, which Article XXIV:4 specifies, “informs the other relevant paragraphs of Article XXIV, including the chapeau of paragraph 5”, which means that the latter “must be interpreted in the light of the purpose of customs unions [and free-trade areas – to which the objectives in Article XXIV:4 of the GATT also apply] set forth in paragraph 4”54.

The AB’s interpretation of the chapeau of Article XXIV:5 The phrase ‘shall not prevent’ within the chapeau of Article XXIV:5 of the GATT means ‘shall not make impossible’; i.e., the inconsistency of a customs union or a free-trade area with provisions of the GATT – other than Article XXIV, which needs to be observed – may be compatible with its formation “under certain conditions”55. The word ‘formation’ in the chapeau directs the AB’s interpretation of the latter: “Article XXIV can justify the adoption of a measure which is inconsistent with certain other GATT provisions only if” it is instituted when a customs union (or free-trade area) is formed, and if the measure’s preclusion would prevent the customs union (or free-trade area) from being established56.

Putting Article XXIV:4 and the chapeau of Article XXIV:5 together to determine the conditions under which Article XXIV may justify a measure that is incompatible with other provisions of the GATT: The AB’s view with regard to a customs union The following conditions must be fulfilled for a measure to be justified by ­A rticle XXIV of the GATT: (i) “the party claiming the benefit of this defence [to the allegation of breach of the GATT, of compatibility of the measure with Article XXIV of that Agreement] must demonstrate that the measure at issue is introduced upon the formation of a customs union that fully meets the requirements of sub-paragraphs 8(a) and 5(a) of Article XXIV”, and (ii) “that party

53 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art XXIV:5 ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700; emphasis added. 54 Turkey – Restrictions on Imports of Textile and Clothing Products: Report of the Appellate Body (22 October 1999) WT/DS34/AB/R para 57 . 55 ibid para 45. 56 ibid para 46.

Preferential Trade Agreements: WTO Scope  153 must demonstrate that the formation of that customs union would be prevented if it were not allowed to introduce the measure at issue”57. Hence, even if the customs union satisfies the requirements of Article XXIV of the GATT, any particular rule within it may be struck down by the WTO dispute-settlement process if this item contravenes one or more provisions of that Agreement and if the rule’s exclusion from the terms of the customs union would not preclude the foundation of the latter. As the AB indicates, Subparagraphs 5(a) and 8(a) of Article XXIV of the GATT set out the requirements that a trade arrangement must satisfy in order for the WTO to classify it as a customs union. In meeting the conditions in Article XXIV:5(a), that arrangement may also be obliged by Article XXIV:6 of the GATT to make a compensatory adjustment for increases in duties by one or more parties to the arrangement which are necessitated by its imposition of common import tariffs on goods and services from countries that are not parties to it. The next subsection considers these issues. Subparagraphs 5(b) and 8(b) of Article XXIV of the GATT specify the requirements that a trade arrangement must fulfil in order for the WTO to designate it a free-trade area. These are covered in the subsection following the next one.

Requirements for a customs union: Subparagraph 5(a), Paragraph 6 and Subparagraph 8(a) of Article XXIV Article XXIV:5(a) This Subparagraph specifies that any “duties and other regulations of commerce” which a customs union places on Members of the WTO that are outside this arrangement “shall not on the whole be higher or more restrictive than the general incidence of the duties and regulations of commerce” that apply in the relevant countries before the foundation of the customs union58. The Understanding on the Interpretation of Article XXIV of the GATT specifies that: (i) ‘duties’ means “customs duties”59, (ii) ‘general incidence’ for customs duties, and for other regulations which may be quantified and summed, means “an overall assessment of weighted average tariff rates and of customs duties collected”, where “the duties and charges to be taken into consideration shall be the applied rates of duty” – rather than the bound rates (i.e., for each product, the maximum rate of tariff or duty that the relevant country may charge under the MFN Rule)60, and (iii) the overall evaluation of ‘general incidence’ for regulations of commerce that

57 ibid para 58. 58 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art XXIV:5(a) ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. 59 Understanding on the Interpretation of Article XXIV of the General Agreement on Tariffs and Trade 1994 (15 April 1994) LT/UR/A-1A/1/GATT/U/4 para 2 . 60 ibid.

154  Preferential Trade Agreements: WTO Scope are problematic to quantify and to aggregate may require “the examination of individual measures, regulations, products covered and trade flows affected”61. In Turkey – Restrictions on Imports of Textile and Clothing Products, the WTO Panel held that Article XXIV:5(a) of the GATT: (i) prohibits the new customs union from introducing “trade measures and policies” which are “more restrictive, overall, than were [its] constituent countries’ previous trade policies”62, and (ii) enables the Members of the WTO “as a whole” to undertake “an economic assessment … of the overall effect of the applied tariffs and other regulations of commerce” that derive from the establishment of the customs union63. The AB endorsed these findings64.

Article XXIV:6 This Paragraph requires “the procedure set forth in Article XXVIII” of the GATT to apply, in order to determine whether parties to the customs union are required to compensate Members of the WTO which are not parties to that arrangement, in the event that one or more of those parties raises their external tariffs inconsistently with the Schedules of Concessions which are annexed to the GATT65. The reason for this specific reference to Article XXVIII of the GATT is to permit the renegotiation of countries’ commitments to agreed maximum tariff rates “outside the time and prior notification constraints of Article XXVIII”, Article XXVIII bis of the GATT and the Understanding on the Interpretation of Article XVIII of the GATT66. If a Member of the WTO that is

61 ibid. 62 Turkey – Restrictions on Imports of Textile and Clothing Products: Report of the Panel (31 May 1999) WT/DS34/R para 9.121 . 63 ibid. 64 The AB agreed with point (i); although it did not specifically endorse point (ii), the AB expressed concurrence with the WTO Panel’s statement that this prohibition is “an ‘economic’ test for assessing whether a specified customs union is compatible with Article XXIV” (­ Turkey – ­Restrictions on Imports of Textile and Clothing Products: Report of the Appellate Body (22 ­October 1999) WT/DS34/AB/R para 55 ; Turkey – ­Restrictions on Imports of Textile and Clothing Products: Report of the Panel (31 May 1999) WT/DS34/R para 9.120 ). 65 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art XXIV:6 ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. These Schedules of Concessions are “an integral part” of Articles I and II of the GATT (ibid art II:7). Each Member of the WTO is to deal with the other Members at least as favourably as the treatment specified in the relevant part of the pertinent Schedule of Concessions (ibid art II:1(a)). The subsection entitled ‘Article II: Schedules of Concessions’, in the section entitled ‘The GATT’, in Chapter 1, considers elements of Article II of the GATT and the Schedules of Concessions. 66 Turkey – Restrictions on Imports of Textile and Clothing Products: Report of the Panel (31 May 1999) WT/DS34/R para 9.128 . In its findings on Article XXIV of the GATT at Paragraphs 42–63 of Turkey – Restrictions on Imports of Textile and Clothing Products: Report of the Appellate Body (22 October 1999) WT/DS34/AB/R, the AB does not mention Article XXIV:6 of the GATT.

Preferential Trade Agreements: WTO Scope  155 a party to the establishment of a customs union proposes to raise a bound rate of tariff or duty, then the procedure which Article VIII of the GATT sets out is to be started before tariff concessions are altered or removed upon the initiation of that arrangement67. In making provision for compensatory adjustment, due regard is to be taken of the compensation that is already given by the reduction in external tariffs that other parties to the custom union make in the process of establishing this arrangement68. In particular, proper account should be taken of rollbacks of duties on the same tariff line that those parties make upon the formation of the customs union69. If these decreases are insufficient to afford the requisite compensatory adjustment, then the customs union would propose compensation – which may comprise rollbacks of duties on other tariff lines70. If agreement in negotiations on compensatory adjustment is not able to be reached within a reasonable time from the start of those negotiations, then the customs union would be entitled to adjust or withdraw the concessions – which would enable Members of the WTO that are affected to remove “substantially equivalent concessions” in compliance with Article XXVIII of the GATT 71.

Article XXIV:8(a) This Subparagraph defines the term ‘customs union’, for application to the GATT, as “the substitution of a single customs territory for two or more customs territories”, such that: “(i) duties and other restrictive regulations of commerce (except, where necessary, those permitted under Articles XI, XII, XIII, XIV, XV and XX)” of the GATT are eradicated in respect of “substantially all the trade” betwixt the countries that are parties to the customs union, or at least as regards “substantially all the trade in products” which originate in those states, and (ii) subject to the content of Article XXIV:9 of the GATT 72, each party to

67 Understanding on the Interpretation of Article XXIV of the General Agreement on Tariffs and Trade 1994 (15 April 1994) LT/UR/A-1A/1/GATT/U/4 para 4 . 68 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art XXIV:6 ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. 69 Understanding on the Interpretation of Article XXIV of the General Agreement on Tariffs and Trade 1994 (15 April 1994) LT/UR/A-1A/1/GATT/U/4 para 5 . 70 ibid. 71 ibid. 72 Article XXIV:9 of the GATT declares: “The preferences referred to in paragraph 2 of Article I [of the GATT] shall not be affected by the formation of a customs union or a free-trade area but may be eliminated or adjusted by means of negotiations with contracting parties affected. This procedure of negotiations with affected contracting parties shall, in particular, apply to the elimination of preferences required to conform with the provisions of paragraph 8(a)(i) and paragraph 8(b) [of Article XXIV of the GATT]” (General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/GATT/2 art XXIV:9 ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700). For ‘contracting party’, read ‘Member’ (n 12 in ch 1).

156  Preferential Trade Agreements: WTO Scope the customs union applies “substantially the same duties and other regulations of commerce” to the trade of countries which are outside that arrangement73. ‘Substantially all the trade’ is less than ‘all the trade’ but “considerably more than” ‘some of the trade’74. The exceptions in Article XXIV:8(a)(i) to the requirement to eliminate ‘restrictive regulations of commerce’ is not an exhaustive list75. However, the WTO has neither specified criteria to determine what other provisions of the GATT might be included in that series beyond Articles XI to XV and XX of the GATT, nor defined the phrase ‘other restrictive regulations of commerce’ 76. In Turkey – Restrictions on Imports of Textile and Clothing Products, the WTO Panel considered the word ‘substantially’ in Article XXIV:8(a) “to provide for both qualitative and quantitative controls”77. The requirement in ­A rticle ­X XIV:8(a)(ii) for each party to the customs union to apply ‘substantially the same duties and other regulations of commerce’ to the trade of third countries “would appear to encompass both quantitative and qualitative elements, the quantitative aspect more emphasized in relation to duties”78. The AB agreed with these statements79. In addition, the AB endorsed the WTO Panel’s view that this standard in Article XXIV:8(a)(ii) permits flexibility in the construction of a common commercial policy by the parties to a customs union80. However, the AB considered the WTO Panel’s general assertion that “the qualitative dimension of the requirements of sub-paragraph 8(a)(ii)” of Article XXIV was fulfilled in an instance in which those parties have trade regulations that are ‘comparable’ – i.e., “having similar effects with respect to the trade with third countries”81, to be incorrect82. It held that the terms of Article XXIV:8(a)(ii) require “[a] higher degree of ‘sameness’” than the WTO Panel’s description of ‘comparable’, and

73 ibid art XXIV:8(a). Article I:2 of the GATT specifies historically based preferences, which are considered in the paragraph entitled ‘Exceptions to the MFN Rule: (ii) Article I:2, I:3 and I:4, and Annexes A–G’, in the subsection entitled ‘Article 1: General Most-Favoured-Nation Treatment’, in the section entitled ‘The GATT’, in Chapter 1. 74 Turkey – Restrictions on Imports of Textile and Clothing Products: Report of the Appellate Body (22 October 1999) WT/DS34/AB/R para 48 . 75 Petros Mavroidis, Trade in Goods (2nd edn, Oxford University Press 2012) 206. 76 ibid 205–207. 77 Turkey – Restrictions on Imports of Textile and Clothing Products: Report of the Panel (31 May 1999) WT/DS34/R para 9.148 . 78 ibid. 79 Turkey – Restrictions on Imports of Textile and Clothing Products: Report of the Appellate Body (22 October 1999) WT/DS34/AB/R para 49 . 80 ibid para 50; Turkey – Restrictions on Imports of Textile and Clothing Products: Report of the Panel (31 May 1999) WT/DS34/R para 9.148 . 81 Turkey – Restrictions on Imports of Textile and Clothing Products: Report of the Panel (31 May 1999) WT/DS34/R para 9.151 . 82 Turkey – Restrictions on Imports of Textile and Clothing Products: Report of the Appellate Body (22 October 1999) WT/DS34/AB/R para 50 .

Preferential Trade Agreements: WTO Scope  157 stated that this Subparagraph of the GATT necessitates “something closely approximating sameness”83.

Requirements for a free-trade area: Subparagraphs 5(b) and 8(b) of Article XXIV The definition of the term ‘free-trade area’ in Article XXIV:8(b) of the GATT (for application to that Agreement) is similar to the content of Article XXIV:8(a) (i) of the GATT, which is the ‘interior’ part of the definition of the term ‘customs union’ in Article XXIV:8(a) – stated above84. Article XXIV:8(b) describes a free-trade area as “a group of two or more customs territories” and provides for the elimination of “the duties and other restrictive regulations of commerce (except, where necessary, those permitted under Articles XI, XII, XIII, XIV, XV and XX)” of the GATT on “substantially all the trade” betwixt the members of that free-trade area which originates in those states85. It is submitted that this ‘substantially all the trade’ phrase in Article XXIV:8(b) is similar in its scope to the ‘substantially all the trade in products’ phrase in Article XXIV:8(a) – and of smaller extent than the ‘substantially all the trade’ between the parties to the customs union phrase in the latter Subparagraph, as it is the second of those constituent phrases of Article XXIV:8(a)(i) that refers to products originating within the customs union. For this reason, the ‘interior’ requirement for the customs union in Article XXIV:8(a)(i) is at least as stringent as the requirement for the free-trade area in Article XXIV:8(b). By contrast, the requirement in Article XXIV:5(b) of the GATT for the freetrade area is more exacting than that in Article XXIV:5(a) of the GATT for the customs union, which is considered above86. Article XXIV:5(b) specifies that any

83 ibid. However, the AB did not overrule the WTO Panel to extend the concept of ‘sameness’ to rights that the WTO legally provides to individual Members in their distinct circumstances (such as rights concerning import restrictions that the ATC has grandfathered – those rights being derived from the Arrangement Regarding International Trade in Textiles, which the ATC has superseded) or in particular situations (such as the “use of special trade measures” as permitted by Article XII, XIX, XX or XXI of the GATT); the WTO Panel stated: “[E]ven if the formation of a customs union may be the occasion for the constituent member(s) to adopt … similar policies, the specific circumstances which serve as the legal basis for one Member’s exercise of such a specific right cannot suddenly be considered to exist for the other constituent members.” (Turkey – Restrictions on Imports of Textile and Clothing Products: Report of the Panel (31 May 1999) WT/DS34/R para 9.184 ). 84 The definition of the term ‘customs union’ in Article XXIV:8(a) of the GATT is located in the first sentence of the paragraph entitled ‘Article XXIV:8(a)’, in the subsection entitled ‘Requirements for a customs union: Subparagraph 5(a), Paragraph 6 and Subparagraph 8(a) of Article XXIV’, in the current section. 85 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art XXIV:8(b) ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. 86 The statement of Article XXIV:5(a) of the GATT is situated in the first sentence of the paragraph entitled ‘Article XXIV:5’, in the subsection entitled ‘Requirements for a customs union: Subparagraph 5(a), Paragraph 6 and Subparagraph 8(a) of Article XXIV’, in the current section.

158  Preferential Trade Agreements: WTO Scope “duties and other regulations of commerce” which are maintained in each of the states that constitute a free-trade area, and which apply on the establishment of this arrangement to the trade of third countries, “shall not be higher or more restrictive than the corresponding duties and other regulations of commerce” that were present in those constituent states before the creation of that free-trade area87. The terms ‘on the whole’ and ‘general incidence’ are present in Article XXIV:5(a), but are absent from Article XXIV:5(b) – in the latter provision, ‘the corresponding duties and other regulations of commerce’ replaces ‘the general incidence of the duties and regulations of commerce’ in the former88. Thus, Article XXIV:5(b) of the GATT requires every trade regulation which countries within the free-trade area apply to states outside that region to be no more restrictive after the free-trade area is formed than before this moment89. The new free-trade area is to cause minimum disturbance to trade across its boundaries, which not only is in the spirit of Article XXIV:4 of the GATT but also applies that Paragraph to the letter 90.

Interim agreements leading to the establishment of a customs union or free-trade area Article XXIV:5(c) Subparagraphs 5(a)91 and 5(b)92, respectively, of the Article XXIV of the GATT include any interim agreement that leads to the establishment of a customs union or a free-trade area. Each of these agreements is to include a plan and a timetable for the creation of the customs union or free-trade area, which is to be scheduled to be formed “within a reasonable length of time” 93. This is to “exceed ten years only in exceptional cases” 94. If Members of the WTO which are parties to an

87 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art XXIV:5(b) ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. 88 See n 36. 89 Mavroidis states: “[T]he obligation assumed [under Article XXIV:5(b) of the GATT] is to ensure that each and every individual trade instrument will not become more restrictive, post-­ establishment of the FTA [free-trade area]” (Mavroidis, Trade in Goods (n 75) 208). 90 Article XXIV:4 of the GATT is specified in the subsection entitled ‘The purpose of a customs union or a free-trade area: Article XXIV:4’, in the current section. 91 Article XXIV:5(a) of the GATT is considered in the paragraph entitled ‘Article XXIV:5’, in the subsection entitled ‘Requirements for a customs union: Subparagraph 5(a), Paragraph 6 and Subparagraph 8(a) of Article XXIV’, in the current section. 92 Article XXIV:5(b) of the GATT is covered in the subsection entitled ‘Requirements for a freetrade area: Subparagraphs 5(b) and 8(b) of Article XXIV’, in the current section. 93 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art XXIV:5(c) ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. 94 Understanding on the Interpretation of Article XXIV of the General Agreement on Tariffs and Trade 1994 (15 April 1994) LT/UR/A-1A/1/GATT/U/4 para 3 .

Preferential Trade Agreements: WTO Scope  159 interim agreement leading to the foundation of a customs union or a free-trade area consider that ten years would not be enough time for this launch to take place, then they are to explain in full to the Council for Trade in Goods why an extended period is needed95.

Article XXIV:7 Any Member of the WTO that decides to become a party to a customs union, a free-trade area, or an interim agreement that leads to the establishment of a customs union or a free-trade area, is to notify the other Members and to provide them with relevant, useful information96. If, having scrutinized the plan and the timetable for the introduction of the customs union or free-trade area which such an interim agreement includes – in discussion with the parties to that ­accord – and taking into consideration the above information, the WTO Members find that the interim agreement is unlikely to result in the creation of the customs union or free-trade area within the period which those parties specify, or that this length of time “is not a reasonable one”, then the Members are to make proposals to the parties to the interim agreement for the modification of that arrangement 97. Those parties are to adopt the Members’ recommendations98. If the parties to the interim agreement alter this substantially, then they must notify the Members of the material change(s)99. The latter may request the former to consult with them, if the change appears likely to imperil or delay inordinately the creation of the customs union or free-trade area100.

Comment on the notification of PTAs to the WTO under Article XXIV of the GATT Article XXIV:5(b) of the GATT is significantly more demanding of applications for free-trade areas than Article XXIV:5(a) of the GATT is of those for customs unions. Although other provisions of Article XXIV are more stringent for customs unions than for free-trade areas – for which there may be no corresponding requirement – as in the case of Article XXIV:6, the difference between Subparagraphs 5(a) and 5(b) of Article XXIV is so large that, if the rules were to be

95 ibid. 96 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art XXIV:7(a) ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. The Decision of 14 December 2006 on the Transparency Mechanism for Regional Trade Agreements contains the terms that apply to this notification. This Decision is considered in the section entitled ‘The Decision of 14 December 2006 on the Transparency Mechanism for Regional Trade Agreements’. 97 ibid art XXIV:7(b). 98 ibid. 99 ibid art XXIV:7(c). 100 ibid.

160  Preferential Trade Agreements: WTO Scope strictly applied by the WTO, one would expect that many notifications for freetrade areas under Article XXIV would be rejected. Why might the WTO not align the standards contained in those two Subparagraphs of the GATT? There are many more free-trade areas than customs unions101. The WTO may be attempting to encourage more customs unions, whilst being concerned about the quality of the rules in prospective free-trade agreements. One way of rectifying this alignment difficulty is to require applicant Members that wish to form a customs union to submit to the WTO for recognition as a free-trade area. When this standard is reached, then those countries may then proceed to apply for acceptance by the WTO of their arrangement as a customs union.

Notification of PTAs to the WTO under Article V of the GATS (Economic Integration) Paragraph 1 of Article V of the GATS contains the main rule on PTAs that concern the cross-border provision of services, together with specified qualifications to that rule. Paragraphs 2, 3, 4 and 6 of Article V give further conditions, or explain those in Paragraph 1. The GATS is not to preclude any of the Members of the WTO “from being a party to or entering into an agreement liberalizing trade in services between or among the parties to such an agreement”, as long as that arrangement: (a) grants “substantial sector coverage”, and (b) prescribes “the absence or elimination of substantially all discrimination, in the sense of Article XVII [of the GATS]102, between or among the parties”, within those sectors, by means of: (i) the removal of current “discriminatory measures”, and/or (ii) the interdiction of “discriminatory measures” that are either new or more inequitable than the those presently in place, either when the PTA comes into effect “or on the basis of a reasonable time-frame” – other than measures that Articles XI, XII, XIV and 101 As a customs union requires an element of supranational decision-making over the area of the external customs policy – in order to determine the common customs tariff which is to apply to each product that the union covers, some state parties to that arrangement may be reluctant to relinquish this extent of national sovereignty. 102 Subject to conditions that the GATS Schedules of Specific Commitments contain, each Member of the WTO is to “accord to service and service suppliers of any other Member, in respect of all measures affecting the supply of services, treatment no less favourable than it accords to its own like services and suppliers” (General Agreement on Trade in Services (15 April 1994) LT/UR/A-1B/S/1 art XVII:1 ; 1869 UNTS 183; 33 ILM 1167 (1994)). Treatment is “less favourable if it modifies the conditions of competition in favour of services or service suppliers of the Member compared to like services or service suppliers of any other Member” (General Agreement on Trade in Services (15 April 1994) LT/UR/A-1B/S/1 art XVII:3 ; 1869 UNTS 183; 33 ILM 1167 (1994)). Thus, ­A rticle V:1 of the GATS requires the abolition or prohibition (as appropriate) of measures that alter competition in favour of the relevant Member’s national service providers and/or services of domestic origin – in respect of the services supplied by other countries that are parties to the PTA.

Preferential Trade Agreements: WTO Scope  161 XIV bis of the GATS allow103. In assessing whether the conditions in Subparagraph 1(b) of Article V of the GATS are satisfied, the Committee on Regional Trade Agreements, the WTO Panel or the AB (as appropriate) may consider the relationship of the PTA to a broader process of trade liberalization or economic integration among the relevant states104. In Canada – Certain Measures Affecting the Automotive Industry, the WTO Panel held that the measures in question were outside the ambit of the services liberalization rules of the NAFTA, and therefore not covered by Article V:1 of the GATS105. It also stated that, even if the former could be brought within the range of those rules, the import duty exemption is granted to only a few manufacturers and wholesalers of the USA to the exclusion of all the other producers and wholesalers of that country and of all those persons within Mexico – i.e., the Canadian exemption accords more favourable treatment to only some of the services and service suppliers located within the non-Canadian Contracting Parties to the NAFTA106. This aspect of the measures in question rendered them incompatible with Subparagraph 1(b) of Article V of the GATS107. The WTO Panel noted that, whilst Article V gives legal coverage for measures taken in accordance with an economic integration agreement which would otherwise be incompatible with the MFN Rule in Article II of the GATS108, Article V does not provide this coverage for the application of more favourable treatment to only a few selected service suppliers of Contracting Parties to that agreement – even if the maintenance of these measures is explicitly provided for within the agreement109. Consequently, Article V:1 did not, in this instance, exempt Canada from its MFN obligations under Article II110. If developing countries are parties to an agreement that liberalizes trade in services, then flexibility should be shown in respect of the conditions that Article V:1 of the GATS sets out – especially the second one (i.e., Article V:1(b)) – in

103 General Agreement on Trade in Services (15 April 1994) LT/UR/A-1B/S/1 art V:1 ; 1869 UNTS 183; 33 ILM 1167 (1994). 104 ibid art V:2. 105 Canada – Certain Measures Affecting the Automotive Industry: Report of the Panel (11 February 2000) WT/DS139/R WT/DS142/R para X.2258 . 106 ibid para X.2259. 107 The WTO Panel declared: “Although the requirement of Article V:1(b) [of the GATS] is to provide non-discrimination in the sense of Article XVII [of the GATS] (National Treatment), … once it is fulfilled it would also ensure non-discrimination between all service suppliers of other parties to the economic integration agreement [in this case, the NAFTA]. [T]he object and purpose of this provision is to eliminate all discrimination among services and service suppliers of parties to an economic integration agreement, including discrimination between suppliers of other parties to an economic integration agreement. …” (ibid para X.2260). 108 See the text to n 131 in ch 2, for the MFN Rule in Article II:1 of the GATS. 109 Canada – Certain Measures Affecting the Automotive Industry: Report of the Panel (11 February 2000) WT/DS139/R WT/DS142/R para X.2261 . 110 ibid para X.2262.

162  Preferential Trade Agreements: WTO Scope concurrence with the developmental level of the relevant states111. Any agreement which liberalizes trade in services shall be devised so as to ease trade between the parties to that agreement, and shall not for any other WTO Member raise the general “level of barriers to trade in services” in each relevant sector or subsector in comparison with the level that applied before the agreement was made112. A provider of services that is a legal person “constituted under the laws of a party to” the PTA but which is located within the jurisdiction of a Member of the WTO which is not a party to that agreement, is entitled to benefit from the terms of the PTA – as long as it conducts “substantive business operations” on the territory of the parties to the agreement113. “[M]ore favourable treatment” can be extended to legal persons that are owned or controlled by natural persons of a party to the PTA, in instances in which all the parties to that agreement are developing countries114.

Comment on the notification of PTAs to the WTO under Article V of the GATS Article V:4 of the GATS is consistent with Paragraphs 4 and 5 of Article XXIV of the GATT115 in so far as it prohibits a rise in barriers to trade between the area which the PTA covers and Members of the WTO that are not parties to the agreement, as a result of the introduction of the PTA. However, unlike Article XXIV of the GATT, Article V of the GATS does not apply differing requirements to free-trade areas and customs unions. In particular, Article V:4 contains a dissimilar description of impediments to trade from that in Article XXIV:5 – the former refers to “barriers to trade in services”, whilst the latter concerns “duties and other regulations of commerce”. Furthermore, the degree of precision used with regard to the measurement of obstacles to trade under Article V:4 of the GATS – i.e., the general level within each relevant sector or subsector – is greater than that applied to customs unions under Subparagraph 5(a) of Article XXIV of the GATT – which refers to ‘on the whole’ and ‘general incidence’116, 111 General Agreement on Trade in Services (15 April 1994) LT/UR/A-1B/S/1 art V:3(a) ; 1869 UNTS 183; 33 ILM 1167 (1994). 112 ibid art V:4. 113 ibid art V:6. 114 ibid art V:3(b). In introducing the phrase ‘more favourable treatment’, Article V:3(b) of the GATS does not specify what the comparator for that treatment is. It is submitted that the WTO should modify this Subparagraph to state ‘more favourable treatment than [a description of the alternative treatment]’. This provision is currently so unclear that any suggestion made as to its precise meaning as perceived by its drafters at the time of its construction would be likely to be erroneous. 115 These Paragraphs are covered within the section entitled ‘Notification of PTAs to the WTO under Article XXIV of the GATT (Territorial Application, Frontier Traffic, Customs Unions and Free-Trade Areas)’. 116 The paragraph entitled ‘Article XXIV:5(a)’, in the subsection entitled ‘Requirements for a customs union: Subparagraph 5(a), Paragraph 6 and Subparagraph 8(a) of Article XXIV’, in the section entitled ‘Notification of PTAs to the WTO under Article XXIV of the GATT

Preferential Trade Agreements: WTO Scope  163 but less than that which Subparagraph 5(b) of Article XXIV of the GATT employs for free-trade areas – i.e., every trade regulation which states within that area apply to countries outside the region is to be no more restrictive after the free-trade area is established than before this time117. Article V:3(b) of the GATS concerns PTAs that liberalize trade in services in which all the parties to the relevant agreement are developing countries. This description of the parties to the agreement renders the Enabling Clause an alternative route for notification of these PTAs to the WTO – a matter considered in the next section. The WTO should clarify the boundaries between the three routes for notification of PTAs, i.e., via Article XXIV of the GATT, Article V of the GATS and/or the Enabling Clause. At present, if the parties to a prospective or new PTA consider their agreement is such that it may be notified under more than one of these provisions, then they may potentially undertake ‘notification arbitrage’, in order to satisfy the WTO as easily as possible that the latter should recognize the arrangement.

Notification of PTAs to the WTO under the Enabling Clause118 The PTAs that may be notified to the WTO under the Enabling Clause are those which fit the description in Paragraph 2(c) of that Clause – to which the Decision of 14 December 2006 on the Transparency Mechanism for Regional Trade Agreements applies, and those that match the description in Paragraph 2(a), Paragraph 2(b), or Paragraph 2(d) of that Clause – to which the General Council Decision of 14 December 2010 on the Transparency Mechanism for Preferential Trade Arrangements applies119. Differential and more favourable treatment under the Enabling Clause is: (a) to be devised to ease and further the trade of developing countries120, and not to increase barriers to, or generate undue

117

118 119

120

(Territorial Application, Frontier Traffic, Customs Unions and Free-Trade Areas)’, describes and explains Article XXIV:5(a) of the GATT. The second paragraph in the subsection entitled ‘Requirements for a free-trade area: Subparagraphs 5(b) and 8(b) of Article XXIV’, in the section entitled ‘Notification of PTAs to the WTO under Article XXIV of the GATT (Territorial Application, Frontier Traffic, Customs Unions and Free-Trade Areas)’, describes and explains Article XXIV:5(b) of the GATT. n 6 specifies the official title of the Enabling Clause. The second paragraph of this chapter considers the demarcation between trade agreements that are within the scope of the 2006 Decision and those to which the 2010 Decision applies. See (a), (b), (c) and (d) in the paragraph entitled ‘Exceptions to the MFN Rule: (i) the Enabling Clause’, in the subsection entitled ‘Article 1: General Most-Favoured-Nation Treatment’, in the section entitled ‘The GATT’, in Chapter 1, for Paragraphs 2(a), 2(b), 2(c) and 2(d) of the Enabling Clause, respectively. The phrase ‘developing countries’ within the Enabling Clause includes ‘developing territories’ (Decision of 28 November 1979 on Differential and More Favourable Treatment Reciprocity and Fuller Participation of Developing Countries (L/4903) LT/TR/D/1 fn 1 ). Thus, an underdeveloped area within an economically advanced jurisdiction may fall within the compass of that Decision.

164  Preferential Trade Agreements: WTO Scope problems for, the trade of any other Members of the WTO121, (b) not to amount to an obstruction to the reduction or abolition “of tariffs and other restrictions to trade on a most-favoured-nation basis”122, and (c) to be formulated and (as necessary) adjusted to respond constructively “to the development, financial and trade needs of developing countries” – if this treatment is granted to those states by advanced WTO Members123. In respect of Paragraph 2(a) of the Enabling Clause (i.e., the Generalized System of Preferences), the tariff preferences are to be non-reciprocal, non-­ discriminatory and generalized124. ‘Generalized’ means ‘extended in application’, rather than given to specified developing countries125, and requires the Generalized System of Preferences’ schemes of preference-giving Members of the WTO to be “generally applicable”126. ‘Non-discriminatory’ requires ­preference-giving Members of the WTO to provide the same tariff preferences to all beneficiaries that are in a similar situation127, i.e., those beneficiaries of the Generalized System of Preferences which “have the ‘development, financial and trade needs’ to which the preference is intended to respond”128. In addition to providing these meanings for ‘generalized’ and ‘non-discriminatory’, the AB in European ­Communities – Conditions for the Granting of Tariff Preferences to Developing Countries found the measure in question to be discriminatory because it: (i) ­applied to a closed list of twelve specified beneficiaries129, and (ii) did not define the criteria or standards that a developing country was to fulfil in order to qualify for the tariff preferences130. In line with its description of the term ‘non-discriminatory’, the AB held that Paragraph 2(a) of the Enabling Clause does not preclude preference-granting countries from according separate tariff preferences to different classes of beneficiaries131. In European Communities – Conditions for the Granting of Tariff Preferences to Developing Countries, the AB stated that Paragraph 3(a) of the Enabling

121 122 123 124 125

126 127 128

129 130 131

ibid para 3(a). ibid para 3(b). ibid para 3(c). ibid fn 3. European Communities – Conditions for the Granting of Tariff Preferences to Developing Countries: Report of the Appellate Body (7 April 2004) WT/DS246/AB/R para 155 . ibid para 156. ibid paras 153 and 154. ibid para 173. Paragraph 3(c) of the Enabling Clause includes the phrase “development, financial and trade needs of developing countries” – see (c) in the immediately preceding paragraph. It is submitted that the AB may have used Paragraph 3(c) as the source of the expression ‘development, financial and trade needs’, although each of Paragraphs 5, 6 and 8 of the Enabling Clause also contain that term. Some of the AB’s comments on the interpretation of Paragraph 3(c) of the Enabling Clause are described in the next paragraph. ibid para 187. ibid para 188. ibid para 175.

Preferential Trade Agreements: WTO Scope  165 Clause132 requires any constructive response from a preference-giving state to the differing needs of developing countries to avoid the imposition of unwarrantable burdens on other Members of the WTO133. It considered that Paragraph 3(c) of the Enabling Clause134 authorizes preference-granting countries to react positively to requisites that are not necessarily common to all developing states135. These needs should be appraised against an objective standard, such as items contained in the Agreement Establishing the World Trade Organization or in multilateral instruments that international institutions have adopted136. Furthermore, to meet the requirements of Paragraph 3(c), a preference-giving country must respond to a development, financial or trade need that many acknowledge “with a view to improving137 the development, financial or trade situation of a beneficiary country, based on the particular need at issue” – and there must be enough connection between the preferential treatment and the probability of relieving that need138.

Developing countries and reciprocity The economically advanced states do not expect developing countries to make reciprocal commitments in negotiations to lower or eliminate barriers to their trade139. Thus, the former are not to look for, and the latter are not required to grant, concessions which are incompatible with the “development, financial and trade needs” of the latter140.

LDCs The advanced jurisdictions are to show “the utmost restraint” in attempting to obtain contributions or concessions for commitments that they have made to reduce or abolish barriers of trade of the LDCs – they are to consider “the special economic difficulties and the particular development, financial and trade 132 See (a) in the first paragraph of this section (entitled ‘Notification of PTAs to the WTO under the Enabling Clause’), for Paragraph 3(a) of the Enabling Clause. 133 European Communities – Conditions for the Granting of Tariff Preferences to Developing Countries: Report of the Appellate Body (7 April 2004) WT/DS246/AB/R para 167 . 134 See (c) in the first paragraph of this section (entitled ‘Notification of PTAs to the WTO under the Enabling Clause’), for Paragraph 3(c) of the Enabling Clause. 135 European Communities – Conditions for the Granting of Tariff Preferences to Developing Countries: Report of the Appellate Body (7 April 2004) WT/DS246/AB/R para 162 . 136 ibid para 163. 137 Emphasis original. 138 ibid para 164. 139 Decision of 28 November 1979 on Differential and More Favourable Treatment Reciprocity and Fuller Participation of Developing Countries (L/4903) LT/TR/D/1 para 5 . 140 ibid.

166  Preferential Trade Agreements: WTO Scope needs” of the latter141. The LDCs are not expected to make contributions or accord concessions which are not in keeping with their specific circumstances and difficulties142. “Particular account” is to be taken of the major handicap that the LDCs have in making contributions or granting concessions in the light “of their special economic situation and their development, financial and trade needs”143.

Developing countries and the objectives of the GATT The contributions and concessions that advanced and developing WTO Members make should further the fundamental aims of the GATT – including those in the Preamble144 and Article XXXVI145. The developing states would expect to take a greater part “in the framework of rights and obligations under the [GATT]” as their economies grow and their trade increases146. In European Communities – Conditions for the Granting of Tariff Preferences to Developing Countries, the AB referred not to the Preamble of the GATT, but to the Preamble to the Agreement Establishing the World Trade Organization and to the Preamble of the Decision of 25 June 1971 on the Generalized

141 142 143 144

ibid para 6. ibid. ibid para 8. The Preamble to the GATT comprises the following recitals: “The Governments of … Australia, … Belgium, … Brazil, Burma [now Myanmar], Canada, Ceylon [now Sri Lanka], … Chile, … China, … Cuba, the Czechoslovak Republic [now the Czech Republic and Slovakia], the French Republic, India, Lebanon, … Luxembourg, the … Netherlands, New Zealand, … Norway, Pakistan, Southern Rhodesia [now Zimbabwe], Syria, … South Africa, the United Kingdom of Great Britain and Northern Ireland, and the United States of America: [i] Recognizing that their relations in the field of trade and economic endeavour should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, developing the full use of the resources of the world and expanding the production and exchange of goods, [ii] Being desirous of contributing to these objectives by entering into reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international commerce, …” (General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/GATT/2 Preamble ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700; emphasis added). Although these recitals do not specifically mention developing countries, implicit in the italicized phrase is the need to include in the global system for trade those jurisdictions whose economic potential is far from being met. 145 Article XXXVI of the GATT is entitled ‘Principles and Objectives’, and is located in Part IV of that Agreement – which is entitled ‘Trade and Development’. The objectives within this Article include, for instance, the “rapid and sustained expansion of the export earnings of the less-­ developed contracting parties” (ibid art XXXVI:2), and the “need for positive efforts to ensure that the less-developed contracting parties secure a share in the growth in international trade commensurate with the needs of their economic development” (ibid art XXXVI:3). The references to ‘less-developed contracting party’ within GATT 1947 are deemed to read ‘developing country Member’ within the GATT (General Agreement on Tariffs and Trade (15 April 1994) LT/UR/A-1A/1/GATT/1 art 2(a) ; 1867 UNTS 187; 33 ILM 1153 (1994)). 146 This requirement is akin to the concept of ‘graduation’, which n 40 describes.

Preferential Trade Agreements: WTO Scope  167 System of Preferences147. The recital of the former to which the AB refers is that in which the parties to the Agreement recognize “that there is a need for positive efforts designed to ensure that developing countries, and especially the least developed among them, secure a share in the growth in international trade commensurate with their economic development”148, and that of the latter to which the AB refers is the one which recognizes “a principle aim of the Contracting Parties [to GATT 1947] is promotion of the trade and export earnings of developing countries for the furtherance of their economic development”149. Although neither of these recitals forms a part of the GATT, the second of them is contained in a Decision that predates the Enabling Clause and to which the drafters of the Enabling Clause would have referred – whilst the first postdates the drafting of the Enabling Clause. It is submitted that this temporal ordering gives the 1971 recital a degree of validity for use with Paragraph 7 of the Enabling Clause, whilst the 1994 recital has little or none150.

Comment on the notification of PTAs to the WTO under the Enabling Clause The Enabling Clause provides four heads of notification for prospective or new PTAs: Paragraphs 2(a), 2(b), 2(c) and 2(d). The WTO’s Committee on Trade and Development is to consider these notifications151. Whilst the provisions in Paragraph 3 of the Enabling Clause apply to all these heads of notification, the AB’s comments in European Communities – Conditions for the Granting of Tariff Preferences to Developing Countries concerns Agreements that are notified 147 European Communities – Conditions for the Granting of Tariff Preferences to Developing Countries: Report of the Appellate Body (7 April 2004) WT/DS246/AB/R para 168 . 148 Agreement Establishing the World Trade Organization (15 April 1994) LT/UR/A/2 Preamble ; 1867 UNTS 154; 33 ILM 1144 (1994). 149 Decision of 25 June 1971 on the Generalized System of Preferences L/3545 Preamble . 150 Whilst the judges may legitimately use the Preamble of the Agreement Establishing the World Trade Organization as an aid to interpretation of the purpose and/or the meaning of Paragraph 7 of the Enabling Clause, it is submitted that they should specify that this is what they are doing within their judgement. They should also include a similar statement with regard to the Preamble of the Decision of 25 June 1971 on the Generalized System of Preferences, explaining that this Decision offered a ten-year waiver with regard to the content of Article I of the GATT for the General System of Preferences and that it was succeeded by the Enabling Clause. 151 For PTAs notified under each of these heads of Paragraph 2 of the Enabling Clause, the Committee on Trade and Development puts the Transparency Mechanism into effect and, in the case of notifications under Paragraphs 2(a), 2(b) and 2(d) of the Enabling Clause, holds the meeting for the consideration of each notified Agreement (second sentence of the subsection entitled ‘Implementation of the Transparency Mechanism’, in the section entitled ‘The Decision of 14 December 2006 on the Transparency Mechanism for Regional Trade Agreements’; first, penultimate and final sentences of the subsection entitled ‘Implementation and Procedures’, in the section entitled ‘The General Council Decision of 14 December 2010 on the Transparency Mechanism for Preferential Trade Arrangements’).

168  Preferential Trade Agreements: WTO Scope under Paragraph 2(a) of the Enabling Clause. The part of the judgement that specifically concerns the interpretation of Paragraph 2(a) should be considered to be ratio decidendi152 for prospective notifications under that provision, but obiter dicta153 for potential notifications under Paragraph 2(b), Paragraph 2(c) or Paragraph 2(d) of the Enabling Clause. Until a WTO Panel rules on a case that requires interpretation of Paragraph 3 in respect of notifications of prospective or new PTAs under Paragraph 2(b), Paragraph 2(c) or Paragraph 2(d), the AB’s comments on the application of Paragraph 3 in European Communities – Conditions for the Granting of Tariff Preferences to Developing Countries should be taken as the law for all notifications of PTAs under Paragraph 2 of the Enabling Clause. Thus, to satisfy the requirements of Paragraph 3(c) of the Enabling Clause: (i) a preference-granting Member of the WTO must respond to a clearly identified development, financial or trade need of a beneficiary country with the intention of improving that state’s development, financial or trade circumstances based on that need, and (ii) there must be a sufficiently strong connection between the differential and more favourable treatment and the likelihood of alleviating the need154. Cases that come before a WTO Panel would not be considered to be res ­judicata155 if they related to notifications under Paragraph 2(b), Paragraph 2(c) or Paragraph 2(d) and involved interpretation of Paragraph 3. However, it is unclear how keen a WTO Panel would be to provide a hearing on similar facts to European Communities – Conditions for the Granting of Tariff Preferences to Developing Countries, especially as both the WTO Panel and the AB were expansive in their respective commentaries in that case.

Comments The standard that the WTO lays down in the provisions of the Enabling Clause is similar in some respects to those in Articles XXIV of the GATT and V of the GATS – such as the requirement in each of these not to raise barriers to the cross-border trade of Members of the WTO that are not parties to the PTA for which notification is being given. The Enabling Clause presents a dimension that is absent from Article XXIV and a supplementary aspect of Article V156 – the

152 ‘Ratio decidendi’ is “[t]he fundamental principle underlying a judgement or decision given by a judge” (Gavin McFarlane, The Layman’s Dictionary of English Law (Waterlow Publishers Limited 1984) 236). 153 ‘Obiter dicta’ are “[o]bservations made by a judge in the course of his judgement which are not fundamental to the principle on which he is passing judgement” (ibid 196). n 62 in ch 1 defines ‘obiter’. 154 This test is specified in the last sentence of the third paragraph in the current section (i.e., that entitled ‘Notification of PTAs to the WTO under the Enabling Clause’). 155 ‘Res judicata’ is “[t]he principle that a matter can no longer be questioned once a court has given its decision on it” (McFarlane, The Layman’s Dictionary of English Law (n 152) 246). 156 The relevant provisions are Subparagraphs 3(a) and 3(b) of Article V of the GATS, which are described in the first sentence of the fourth paragraph, and the second sentence of the fifth

Preferential Trade Agreements: WTO Scope  169 requirement to further the trade needs of developing countries and, for preferential treatment afforded by economically-advanced Members of the WTO, to promote the development and financial needs of those jurisdictions. As the development agenda of the Enabling Clause is so different to the preferential trade schedule of Article XXIV of the GATT and the trade-in-services liberalization programme of Article V of the GATS, it is arguable that any PTA between developing countries which has been notified to the WTO under Paragraph 2(c) of the Enabling Clause should be re-notified under Article XXIV or Article V (as appropriate) as soon as at least one of the parties to that Agreement has graduated to the status of an economically-advanced country. Moreover, notwithstanding the introduction of the Transparency Mechanism, the legal requirements that apply to the notification of prospective or new PTAs to the WTO remain disorganized – with serious scrutiny of these Agreements by WTO Committees (consequentially in part) rather a rarity. The whole system should be tightened up. The first step towards this might be to integrate Article XXIV of the GATT, Article V of the GATS and the Enabling Clause into a new multilateral trade law instrument entitled ‘Legal requirements for Preferential Trade Agreements’. Then, working groups and/or Committees of the WTO could progressively edit that document to provide equivalence between the three routes for WTO approval of PTAs and clarity of the demarcation lines between those avenues for the notification of these Agreements.

Conclusion This chapter describes the Transparency Mechanism for notification of PTAs to the WTO, as laid down by two of its Decisions in 2006 and 2010, and compares these Decisions. It considers the legal provisions under which these Agreements may be notified. The ‘Comments’ section of this chapter notes that, despite the introduction of the Transparency Mechanism, the requirements which those provisions specify remain disorganized, and suggests action that might be taken to introduce a greater degree of order into the approval process for prospective or new PTAs. Chapter 4 investigates the content of PTAs that involve two parties – BTAs. It identifies the types of provisions that tend to be included within these Agreements.

References Canada – Certain Measures Affecting the Automotive Industry: Report of the Panel (11 February 2000) WT/DS139/R WT/DS142/R .

paragraph, respectively, in the section entitled ‘Notification of PTAs to the WTO under Article V of the GATS (Economic Integration)’.

170  Preferential Trade Agreements: WTO Scope Decision of 14 December 2006 on the Transparency Mechanism for Regional Trade Agreements WT/L/671 . Decision of 25 June 1971 on the Generalized System of Preferences L/3545 . Decision of 28 November 1979 on Differential and More Favourable Treatment Reciprocity and Fuller Participation of Developing Countries (L/4903) LT/TR/D/1 . European Communities – Conditions for the Granting of Tariff Preferences to Developing Countries: Report of the Appellate Body (7 April 2004) WT/DS246/AB/R . General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. General Agreement on Trade in Services (15 April 1994) LT/UR/A-1B/S/1 ; 1869 UNTS 183; 33 ILM 1167 (1994). General Council Decision of 14 December 2010 on the Transparency Mechanism for Preferential Trade Arrangements WT/L/806 . Mavroidis, Petros, Trade in Goods (2nd edn, Oxford University Press 2012). McFarlane, Gavin, The Layman’s Dictionary of English Law (Waterlow Publishers Limited 1984). Turkey – Restrictions on Imports of Textile and Clothing Products: Report of the Appellate Body (22 October 1999) WT/DS34/AB/R . Turkey – Restrictions on Imports of Textile and Clothing Products: Report of the Panel (31 May 1999) WT/DS34/R . Understanding on the Interpretation of Article XXIV of the General Agreement on Tariffs and Trade 1994 (15 April 1994) LT/UR/A-1A/1/GATT/U/4 . World Trade Organization. ‘General guidance on officially accepting WTO legal instruments’ accessed 27 November 2017.

4 Bilateral Trade Agreements

BTAs are PTAs to which there are only two parties. Each party may be a country or a regional entity that is legally empowered to enter into international agreements, such as the EU1. In this chapter and the next, the recently-signed EU-Canada BTA is used as a benchmark to which other PTAs are compared. This approach is taken in order to attain a consistency in the commentary on BTAs and PPTAs. All the BTAs and PPTAs selected for observation are PTAs that cover both goods and services and which are notified to the WTO pursuant to both Article XXIV of the GATT and Article V of the GATS2. As the consideration of PTAs from a development perspective is beyond the scope of this book, Agreements that have been notified under the Enabling Clause3 are excluded. Chapter 3 covers the legal requirements of these PTAs4 and the procedure for their notification5.

1 The EU is legally empowered to enter into international agreements by virtue of the legal personality that the Treaty on European Union confers on it (Consolidated Version of the Treaty on European Union [2016] OJ C202/13 art 47). The EU may conclude international agreements over the area of the Common Foreign and Security Policy (ibid art 37). It has exclusive competence, amongst other things, with regard to its customs union and the common commercial policy (Consolidated Version of the Treaty on the Functioning of the European Union [2016] OJ C202/47 art 3(1)(a) and (e)). It has exclusive competence to enter into international agreements that are necessary to enable it to exercise those competences (ibid art 3(2)). Agreements that the EU concludes are binding upon the institutions of its Member States (ibid art 216(2)). 2 For each of these PTAs, two notifications are required – one for goods and the other for services. In each case, these two notifications are identical. 3 n 6 in ch 3 states the official title of the Enabling Clause. 4 These requirements are specified in the sections entitled ‘Notification of PTAs to the WTO under Article XXIV of the GATT (Territorial Application, Frontier Traffic, Customs Unions and Free-Trade Areas)’ and ‘Notification of PTAs to the WTO under Article V of the GATS (Economic Integration)’, in Chapter 3. 5 The Decision of 14 December 2006 on the Transparency Mechanism for Regional Trade Agreements contains this procedure. This Decision is described in the section entitled ‘The Decision of 14 December 2006 on the Transparency Mechanism for Regional Trade Agreements’, in Chapter 3.

172  Bilateral Trade Agreements A section is dedicated to each of the EU–Canada, Japan–Mongolia, China– Georgia and Chile–Thailand BTAs. The Japan–Mongolia BTA is a free-trade agreement and an economic-integration agreement with a long implementation period (twenty years) between two Members of the WTO within the same region (East Asia)6, one of which has fifteen PTAs in force7 and the other of which has concluded just this one8. The China–Georgia BTA is a free-trade and economic-integration agreement that crosses adjacent regions on the same continent 9, entering into force on 1 January 201810 with no implementation period specified therein11. The Chile-Thailand BTA is a trans-Pacific free-trade and economic-integration agreement with a substantial implementation period (eight years)12, between one WTO Member with many PTAs in force13 and another with several in effect14. The EU-Canada BTA is a trans-Atlantic free-trade and economic-integration agreement with a sizeable implementation period (seven years)15, between a significant regional entity which is a party to many PTAs in force and several under negotiation16 and a WTO Member with thirteen PTAs in force (including the NAFTA) and four under discussion17. The first section considers this Agreement.

6 World Trade Organization, ‘Japan - Mongolia: Basic Information’ accessed 28 April 2018. 7 World Trade Organization, ‘Japan’ accessed 28 April 2018. 8 WorldTradeOrganization,‘Mongolia’ accessed 28 April 2018. 9 World Trade Organization, ‘China - Georgia: Basic Information’ accessed 28 April 2018. 10 ibid. 11 Article 17.2 of the China–Georgia BTA states: “This Agreement shall enter into force 30 days after the receipt of the last written notification by which the Parties shall notify each other on the completion of internal procedures necessary for the entry into force of the Agreement.” (Free Trade Agreement between the Government of the People’s Republic of China and the Government of Georgia (signed 13 May 2017; entered into force 1 January 2018) UNTS I: (FTAGCGG) art 17.2). 12 World Trade Organization, ‘Chile - Thailand: Basic Information’ accessed 30 April 2018. 13 World Trade Organization, ‘Chile’ accessed 30 April 2018. 14 World Trade Organization, ‘Thailand’ accessed 30 April 2018. 15 World Trade Organization, ‘EU - Canada: Basic Information’ accessed 30 April 2018. 16 World Trade Organization, ‘European Union’ accessed 30 April 2018. 17 World Trade Organization, ‘Canada’ accessed 30 April 2018.

Bilateral Trade Agreements  173

The EU–Canada BTA General issues and trade in goods The Parties, which are Canada “of the one part” and the EU and each of its Member States “of the other part”18, institute a free-trade area in compliance with Articles XXIV of the GATT, and V of the GATS19. Each Party is to “accord national treatment” to the other Party’s goods in concurrence with Article III of the GATT 20 – which “[t]o this end … is incorporated into and made part of” the EU-Canada BTA 21. Each party is to lower its customs duties on goods that originate there22 in accordance with the Tariff Schedules in Annex 2-A to the EU-Canada BTA 23. This Annex requires the Parties to “eliminate all customs duties on originating goods, of Chapters 1 through 97 of the Harmonized System 24 that provide for a most-favoured-nation (‘MFN’) rate of customs duty, imported from the other Party” on the date on which the EU-Canada BTA comes into effect, unless it states otherwise25. According to the “staging category” in each Party’s Tariff 18 Comprehensive Economic and Trade Agreement (CETA) between Canada, of the one part, and the European Union and its Member States, of the other part [2017] OJ L11/23 (CETA) Preamble. 19 ibid art 1.4. The sections in Chapter 3 entitled ‘Notification of PTAs to the WTO under Article XXIV of the GATT (Territorial Application, Frontier Traffic, Customs Unions and Free Trade Areas)’ and ‘Notification of PTAs to the WTO under Article V of the GATS (Economic Integration)’ consider Articles XXIV of the GATT and V of the GATS, respectively. 20 The subsection entitled ‘Article III: National Treatment on Internal Taxation and Regulation’, in the section entitled ‘The GATT’, in Chapter 1, considers Article III of the GATT. 21 ibid art 2.3.1. With regard to each non-federal government in Canada and the government of every EU Member State, this national treatment comprises “treatment no less favourable than that accorded by that government to like, directly competitive or substitutable goods of Canada and the Member State, respectively” (ibid art 2.3.2). 22 The meaning of ‘originate’ is that which the EU-Canada BTA’s Protocol on rules of origin and origin procedures gives (ibid art 2.4.1). A product originates in the Party in which “the last production took place”, if it has been “wholly obtained”, or “produced exclusively from originating materials”, or has “undergone sufficient production”, “in the territory of” one or both of the Parties (ibid Protocol on rules of origin and origin procedures art 2.1). 23 ibid art 2.4.1. 24 The Harmonized System comprises Chapters 1 to 97, and Chapter 99 – which consists of “Commodities not specified according to kind” (United Nations International Trade Statistics Knowledgebase, ‘Harmonized Commodity Description and Coding Systems (HS)’ accessed 2 May 2018). n 105 in ch 2 outlines how the 6-digit Harmonized System classification system works. 25 ibid Annex 2-A para 2. The EU-Canada BTA provisionally entered into force on 21 September 2017 (Committee on Regional Trade Agreements/Council for Trade in Services – Notification of Regional Trade Agreement (21 September 2017) WT/REG389/N/1 S/C/N/896 ). Goods in staging category E (n 26) are subject to the ‘unless Annex 2-A states otherwise’ condition.

174  Bilateral Trade Agreements Schedule in Annex 2-A 26, these duties are to be removed immediately (A)27, in four equal amounts on the effective date and 1 January of the three subsequent years (B)28, in six equal steps on the effective date and 1 January of the five following years (C)29, in eight equal portions on the effective date and 1 January of the seven following years (D)30, or “in three equal stages beginning on the fifth anniversary of” the effective date – being duty-free from 1 January of the seventh subsequent year (S)31. Subject to three exceptions32, neither Party may raise the level of a customs duty that existed at the time at which33 the EU-­Canada BTA entered into force34. Except as otherwise provided in the EU-Canada BTA, neither Party may introduce or maintain a prohibition or restriction on the importation of any of the other Party’s goods, or on the exportation or sale for export of any product that is bound for the latter Party’s territory, except in concurrence with Article XI of the GATT35. “To this end”, that Article “is incorporated and made a part of” the EU-Canada BTA36. Notwithstanding this, if a Party institutes a prohibition or restriction on the importation from, or exportation to, a third country of a product, then this Party may circumscribe or ban the importation from the other Party’s territory “of a good of that third country”37, and/or38 curb or bar “the exportation of a good to that third country” via that territory39.

Anti-dumping and countervailing measures The Parties confirm their rights and duties under Article VI of the GATT, the AD Agreement and the SCM Agreement40. Each party is to apply antidumping and countervailing measures in observance of “the relevant WTO

26 Customs duties on originating goods within staging category E in the Schedule of each Party “are exempt from tariff elimination” (CETA (n 18) Annex 2-A para 3(g)). 27 ibid Annex 2-A para 3(a). 28 ibid Annex 2-A para 3(b). 29 ibid Annex 2-A para 3(c). 30 ibid Annex 2-A para 3(d). 31 ibid Annex 2-A para 3(e). 32 Each Party may: (a) alter a tariff that is beyond the EU-Canada BTA’s scope on a product for which no tariff preference is claimed therein, (b) raise a customs duty to the level determined in its Schedule in Annex 2-A after a unilateral decrease, or (c) preserve or increase a customs duty as authorised by the EU-Canada BTA “or any agreement under the [Agreement Establishing the World Trade Organization]” (ibid art 2.7.2). 33 n 25. 34 ibid art 2.7.1. 35 ibid art 2.11.1. The subsection entitled ‘Article XI: General Elimination of Quantitative Restrictions’, in the section entitled ‘The GATT’, in Chapter 1, considers Article XI of the GATT. 36 ibid. 37 ibid art 2.11.2(a). 38 The EU-Canada BTA reads “or”. 39 ibid art 2.11.2(b). 40 ibid art 3.1.1. The subsection entitled ‘Article VI: Anti-dumping and Countervailing Duties, the AD Agreement and the SCM Agreement’, in the section entitled ‘The GATT’, in Chapter 1,

Bilateral Trade Agreements  175 requirements”41, and following “a fair and transparent process”42. The EU-­ Canada BTA adds the following provisions to the WTO’s legal requirements. A Party shall ensure, after an imposition of provisional measures and … before a final determination is made, full and meaningful disclosure of all essential facts under consideration which form the basis for the decision whether to apply final measures. …43 Provided [that] it does not unnecessarily delay the conduct of the investigation, each interested party in an anti-dumping or countervailing investigation shall be granted a full opportunity to defend its interests44. Each Party’s authorities shall consider information provided in accordance with the Party’s law as to whether imposing an anti-dumping or countervailing duty would not be in the public interest45. After considering th[is] information, the Party’s authorities may consider whether the amount of the anti-dumping or countervailing duty to be imposed shall be the full margin of dumping or amount of subsidy or a lesser amount, in accordance with the Party’s law46. It is submitted that these items are minor additions to the content of the AD and SCM Agreements. Thus, the rules on anti-dumping and countervailing measures that the EU-Canada BTA introduces add little value for the EU and Canada over that provided by those Agreements.

Safeguard measures The Parties reaffirm their rights and obligations concerning global safeguard measures under Article XIX of GATT 1994 and the Safeguards Agreement47. Neither Article XIX of the GATT nor the Agreement on Safeguards mention the word ‘global’48. It is submitted, therefore, that the term ‘global safeguard measures’ is a non-WTO term that the Parties chose to use – perhaps based on its use in other PTAs.

considers selected provisions from Article VI of the GATT, the AD Agreement and the SCM Agreement. 41 Ch 1 includes some of these requirements and relevant case law (n 40). 42 ibid art 3.2.1. 43 ibid art 3.2.2. 44 ibid art 3.2.3. 45 ibid art 3.3.1. 46 ibid art 3.3.2. 47 ibid art 3.4.1. The section entitled ‘The Agreement on Safeguards’, in Chapter 2, quotes Article XIX:1(a) of the GATT and summarizes the Agreement on Safeguards. 48 Neither mentions the word ‘worldwide’, and the word ‘international’ is absent from Article XIX of the GATT and occurs only twice in the Agreement on Safeguards – both instances in its Preamble.

176  Bilateral Trade Agreements A Party that adopts these measures is to try to impose them in a manner which least influences bilateral trade49. The importing Party must offer to hold discussions with the exporting Party, in order to review this matter50. The former may only adopt measures after thirty days have passed from the date on which it made the offer51.

Technical barriers to trade The EU-Canada BTA incorporates Articles 2 to 9 of, and Annexes 1 and 3 to, the Agreement on Technical Barriers to Trade; these provisions are “made part of” the BTA52. The Parties are to reinforce their co-operation in the following areas: conformity assessment procedures, market surveillance, monitoring and enforcement activities, standards, and/or53 technical regulations, in order to ease trade between the Parties54. The Parties agree to co-operate extensively, to make sure that their technical regulations are compatible with each other55. A Party which has prepared a technical regulation that it considers to be equivalent to one of the other Party’s which has an accordant aim and product range, may ask that other Party to recognize the former as equivalent56. If the requestee holds that the requester’s technical regulation is not equivalent to its own, then that Party must give reasons for its decision57. The Parties are to encourage closer co-operation between the standardizing entities situated within their territories, with the aim of easing information exchange and the harmonization of standards58. If a Party impounds a good imported from the other Party’s territory on the ground that this product does not observe a technical regulation, then it must inform the importer of the reasons for this detention59.

Sanitary and phytosanitary measures These provisions comprise a chapter of60, and ten Annexes to61, the EU-­Canada BTA. That chapter’s objectives are to “protect human, animal and plant life or

49 ibid art 3.6.1. 50 ibid art 3.6.2. 51 ibid. 52 ibid art 4.2.1. The section entitled ‘The Agreement on Technical Barriers to Trade’, in Chapter 2, summarizes the Agreement on Technical Barriers to Trade. 53 The EU-Canada BTA reads “or”. 54 ibid art 4.3. 55 ibid art 4.4.1. 56 ibid art 4.4.2. 57 ibid. 58 ibid art 4.6.2. 59 ibid art 4.9. 60 Chapter 5. 61 Annexes 5-A – 5-J.

Bilateral Trade Agreements  177 health while facilitating trade”62, “ensure that the Parties’ sanitary and phytosanitary (‘SPS’) measures do not create unjustified barriers to trade”63 and advance the implementation of the Agreement on the Application of Sanitary and Phytosanitary Measures64. The Parties confirm their rights and duties under that Agreement65. The main provision on equivalence in the EU-Canada BTA follows that in the Agreement on the Application of Sanitary and Phytosanitary Measures66. The importing party shall accept the SPS measure of the exporting Party as equivalent to its own if the exporting Party objectively demonstrates to the importing Party that its measure achieves the importing Party’s appropriate level of SPS protection67. Annex 5-D to the EU-Canada BTA contains principles and guidelines to ascertain, recognize and preserve equivalence68. Annex 5-E69 specifies: (a) “the area for which the importing Party recognises that an SPS measure of the exporting Party is equivalent to its own”70, and (b) “the area for which the importing Party recognises that the fulfilment of the specified special condition, combined with the exporting Party’s measure, achieves the importing Party’s appropriate level of SPS protection”71. 62 ibid art 5.2(a). 63 ibid art 5.2(b). 64 ibid art 5.2(c). The section entitled ‘The Agreement on the Application of Sanitary and Phytosanitary Measures’, in Chapter 2, summarizes the Agreement on the Application of Sanitary and Phytosanitary Measures. 65 ibid art 5.4. The subsection entitled ‘Article VI: Anti-dumping and Countervailing Duties, the AD Agreement and the SCM Agreement’, in the section entitled ‘The GATT’, in Chapter 1, considers selected provisions from Article VI of the GATT, the AD Agreement and the SCM Agreement. 66 Text to n 15 in ch 2. 67 ibid art 5.6.1. 68 ibid art 5.6.2. At the time of writing, Annex 5-D to the EU-Canada BTA does not contain the guidance on “Determination and Recognition of Equivalence”, which is “To be agreed at a later stage”; it includes two paragraphs on “Maintenance of Equivalence” (ibid Annex 5-D). 69 Annex 5-E comprises “General Notes”, Section A entitled “Sanitary Measures”, and Section B entitled ‘Phytosanitary Measures” – the contents of which are “To be agreed at a later stage” (ibid Annex 5-E). 70 ibid art 5.6.3(a). For example, in the ‘Sanitary Measures’ table, title “Animal casings for human consumption”, subtitle “Cattle, sheep, goats and pigs”, both the EU and Canada as importing Parties recognize the former’s Regulations 852/2004, 853/2004 and 854/2004 to be equivalent to the latter’s Meat Inspection Act, Meat Inspection Regulations 1990, Food and Drugs Act, and Food and Drug Regulations (ibid Annex 5-E Section A). 71 ibid art 5.6.3(b). For example, in the above-mentioned category (n 70), Canada’s stated special condition for exports from the EU to Canada is “Compliance with Canadian rules on transmissible spongiform encephalopathy” (ibid Annex 5-E Section A). Thus, if Canada recognizes that the EU satisfies this condition, then it accepts EU Regulations 852/2004, 853/2004 and 854/2004 as providing a suitable level of protection with regard to goods of this category imported into the former from the latter.

178  Bilateral Trade Agreements A Party may “request technical consultations with the other Party”, if it “has a significant concern” regarding food safety, plant or animal health or a sanitary/phytosanitary measure that the other Party has proposed or applied72. Each Party must endeavour to supply the information necessary to circumvent a disturbance to trade and (as necessary) attain a mutually acceptable solution73.

Customs and trade facilitation This chapter74 of the EU-Canada BTA does not refer to the Agreement on Trade Facilitation75. The Parties must, as far as possible, co-operate and exchange information, in order to further the application and observance of the EU-Canada BTA’s trade facilitation measures76. Import, export and transit requirements and procedures shall be no more administratively burdensome or trade restrictive than necessary to achieve a legitimate objective77. Whilst ‘legitimate objective’ is not defined, it is mentioned in the next clause. Existing international trade and customs instruments and standards shall be the basis for the import, export and transit requirements and procedures, except if these instruments and standards would be an inappropriate or ineffective means for the fulfilment of the legitimate objective pursued78. Each Party is to publish its law and administrative policies that concern “requirements for the import or export of goods”79, and to try to announce planned regulations and administrative policies which relate to customs issues – with “interested persons” being given an opportunity to comment on these80. It is to institute or preserve “simplified customs procedures for the efficient release of goods”, so as to ease inter-Party trade and lower import and export costs81.

72 ibid art 5.12. 73 ibid. 74 Chapter 6. 75 The section entitled ‘The Agreement on Trade Facilitation’, in Chapter 2, summarizes the Agreement on Trade Facilitation. 76 ibid art 6.1.2. 77 ibid art 6.1.4. 78 ibid art 6.1.5. 79 ibid art 6.2.1. 80 ibid art 6.2.2. A ‘person’ is “a natural person or enterprise” (ibid art 1.1). n 98 defines ‘enterprise’. 81 ibid art 6.3.1.

Bilateral Trade Agreements  179 The Customs Valuation Code82 regulates customs valuation that is applied to mutual trade between the Parties83. The Parties are to co-operate with the intention of arriving at a common approach to matters concerning customs valuation84. The classification of goods in trade between the Parties under the [EU-­ Canada BTA] is set out in each Party’s respective tariff nomenclature in conformity with the Harmonized System85. The Parties are to continue to co-operate at global meetings to accomplish common goals – including those which the WCO Framework of Standards to Secure and Facilitate Global Trade contains86. They are to “regularly review relevant international initiatives on trade facilitation”, in order to identify areas over which additional joint action would ease trade between the Parties and further “shared multilateral objectives”87. The Parties are to co-operate, and to give each other mutual assistance in customs issues, in compliance with the Agreement between the European Community and Canada on customs co-operation and mutual assistance in customs matters88.

Subsidies A ‘subsidy’ is “a measure related to trade in goods, which fulfils the conditions set out in Article 1.1 of the SCM Agreement”89. The Parties confirm their rights and duties under Article VI of the GATT, the SCM Agreement and the Agreement on Agriculture90. 82 The section entitled ‘The Customs Valuation Code’, in Chapter 2, synopsizes the Customs Valuation Code. 83 ibid art 6.4.1. 84 ibid art 6.4.2. 85 ibid art 6.5. n 24 introduces the Harmonized System. 86 ibid art 6.13.1. 87 CETA (n 18) art 6.13.2. 88 ibid art 6.13.3–4. Under that Agreement, (i) the EU and Canada “undertake to develop customs cooperation of the widest possible scope” (Agreement between the European Community and Canada on customs cooperation and mutual assistance in customs matters [1998] OJ L7/38 art 2(1)), (ii) customs co-operation includes all issues that concern “the application of customs legislation” (ibid art 2(2)), and (iii) the customs authorities are to assist each other by supplying “appropriate information” that “helps to ensure the proper application of customs legislation and the prevention, investigation and combating of any breach of customs legislation” (ibid art 7(1)). 89 CETA (n 18) art 7.1.1. The text to nn 366–377 in ch 1 considers Article 1.1 of the SCM Agreement and related case law. A subsidy is subject to Chapter 7 of the EU-Canada BTA “only if it is specific within the meaning of Article 2 of the SCM Agreement” (ibid art 7.1.2). 90 ibid art 7.8. n 40. The section entitled ‘The Agreement on Agriculture’, in Chapter 2, summarizes the Agreement on Agriculture.

180  Bilateral Trade Agreements A Party shall not adopt or maintain an export subsidy 91 on an agricultural good that is exported, or incorporated in a product that is exported, to the territory of the other Party after the other Party has fully eliminated the tariff 92 … on that agricultural good in accordance with Annex 2-A (Tariff Elimination), including its Tariff Schedules93. On the basis of consultations between the Parties, the responding Party is to endeavour to remove or minimize any unfavourable effects of a subsidy, or a specific instance of government support, on the interests of the requesting Party 94. The Parties aim to work jointly to attain an agreement “to further enhance multilateral disciplines and rules on agricultural trade in the WTO” 95 and “to help [to] develop a global, multilateral resolution in fisheries subsidies” 96.

Investment97 A Party may not introduce or preserve a measure which imposes restrictions on the number of enterprises that may conduct a particular economic activity 98, 91 An ‘export subsidy’ is “as defined in Article 1(e) of the Agreement on Agriculture” (ibid art 7.5(1)(a)), i.e., a subsidy that is “contingent upon export performance” (Agreement on Agriculture (15 April 1994) LT/UR/A-1A/2 art 1(e) ; 33 ILM 1154 (1994)). 92 ‘Full elimination of a tariff’ is “the elimination of either the in-quota or over-quota tariff” (CETA (n 18) art 7.5.1(b)). 93 ibid art 7.5.2. The text to nn 25–31 provides information concerning Annex 2-A to the EU-Canada BTA and its Tariff Schedules. 94 ibid arts 7.3.3 and 7.4.3. 95 ibid art 7.4.1(a). 96 ibid art 7.4.1(b). 97 An ‘investment’ comprises “every kind of asset that an investor owns or controls, directly or indirectly, that has the characteristics of an investment, which includes a certain duration and other characteristics such as the commitment of capital or other resources, the expectation of gain or profit, or the assumption of risk” (ibid art 8.1). An ‘investor’ is “a Party, a natural person or an enterprise of a Party, other than a branch or representative office, that seeks to make, is making or has made an investment in the territory of the other Party (ibid). “For the purposes of this definition [of ‘investor’], an enterprise of a Party is … an enterprise that is constituted or organised under the laws of that Party and[: (a)] has substantial business activities in the territory of that Party[, or (b)] is directly or indirectly owned or controlled by a natural person of that Party or by an enterprise mentioned under paragraph (a)” (ibid; emphasis original). n 98 defines ‘enterprise’. 98 ibid art 8.4.1(a)(i). “For the purposes of [the EU-Canada BTA] and unless otherwise specified”, an ‘enterprise’ is “an entity constituted or organised under applicable law, whether or not for profit, and whether privately or governmentally owned or controlled, including a corporation, trust, partnership, sole proprietorship, joint venture or other association” (ibid art 1.1). “For the purposes of [Chapter 8 of the EU-Canada BTA]”, an ‘enterprise’ is “as defined in Article 1.1 [of the EU-Canada BTA, i.e., the definition in the previous sentence of this note,] and a branch or representative office of an enterprise (ibid art 8.1). The current subsection, entitled ‘Investment’, summarizes Chapter 8 of the EU-Canada BTA.

Bilateral Trade Agreements  181 the total value of assets or transactions99, the total number of transactions or the aggregate amount of output100, the percentage or value of foreign capital101, or the total number of individuals who may be employed in a specific sector or whom an enterprise may employ and who are required for and directly concerned with “the performance of economic activity”102, or which “restricts or requires specific types of legal entity or joint venture through which an enterprise may carry out an economic activity”103. Each Party shall grant to an investor of the other Party, and to a covered investment104, “treatment no less favourable than the treatment it accords, in like situations, [: (i)] to its own investors and to their investments[, and (ii)] to investors of a third country and to their investments[,] with respect to the establishment, acquisition, expansion, conduct, operation, management, maintenance, use, enjoyment and sale or disposal of their investments in its territory”105. Points (i) and (ii) are national treatment and MFN treatment, respectively, for investors and covered investments. Each Party must grant in its territory to the other Party’s investors and to their covered investments “fair and equitable treatment and full protection and security”106. A Party contravenes its duty of fair and equitable treatment if one or more of its measures constitutes: (i) refusal of justice in administrative, civil or criminal proceedings107, (ii) critical breach of due process108, (iii) evident arbitrariness109, (iv) specific discrimination on grounds that are clearly unjust110, (v) abusive behaviour to investors111, or (vi) a violation of any additional components of the obligation of fair and equitable treatment112.

99 ibid art 8.4.1(a)(ii). 100 ibid art 8.4.1(a)(iii). The prohibitions in the text to nn 98–100 “do not cover measures taken in order to limit the production of an agricultural good” (ibid fn 1 to art 8.4.1(a)(iii)). 101 ibid art 8.4.1(a)(iv). 102 ibid art 8.4.1(a)(v). 103 ibid art 8.4.1(b). Article 8.4.2 of the EU-Canada BTA lists six measures that are consistent with Article 8.4.1 of this Agreement (i.e., text to nn 98–103). 104 In respect of a Party, a ‘covered investment’ is an investment “in its territory” that is “made in accordance with the applicable law at the time the investment is made[,] directly or indirectly owned or controlled by an investor of the other Party[,] and existing on the date of entry into force of [the EU-Canada BTA – i.e., 21 September 2017 (n 25)], or made or acquired thereafter” (ibid art 8.1). n 97 defines ‘investment’. 105 ibid arts 8.6.1 and 8.7.1. 106 ibid art 8.10.1. 107 ibid art 8.10.2(a). 108 ibid art 8.10.2(b). 109 ibid art 8.10.2(c). 110 ibid art 8.10.2(d). 111 ibid art 8.10.2(e). 112 ibid art 8.10.2(f).

182  Bilateral Trade Agreements Neither Party may nationalize or expropriate a covered investment113, except “for a public purpose”114, “under the due process of law”115, in a way that is not discriminatory116, and with “prompt, adequate and effective compensation”117. This payment is to be the investment’s “fair market value”, at the earlier of “the time immediately before the expropriation or [the moment at which] the impeding expropriation became known”118. Each Party must allow all transfers concerning a covered investment to be freely and swiftly made in a readily convertible currency, at the exchange rate that applies on the transfer date119. It must neither demand that its investors transfer, nor punish them for not transferring, sums obtained from, or ascribed to, investments in the other Party’s territory120. These provisions may not be construed to stop a Party from applying specified areas of its law “in an equitable and non-discriminatory manner and not in a way that would constitute a disguised restriction on transfers”121.

Cross-border trade in services122 Whilst this chapter123 of the EU-Canada BTA is of broad application124, it excludes services provided “in the exercise of governmental authority”125, 113 ibid art 8.12.1. n 104 defines ‘covered investment’. Article 8.12 of the EU-Canada BTA “does not apply to the issuance of compulsory licences granted in relation to intellectual property rights, to the extent that such issuance is consistent with the TRIPS Agreement” (ibid art 8.12.5). Furthermore, “the revocation, limitation or creation of intellectual property rights, to the extent that these measures are consistent with the TRIPS Agreement and Chapter 20 [of the EU-Canada BTA] (Intellectual Property), do not constitute expropriation” (ibid art 8.12.6). 114 ibid art 8.12.1(a). 115 ibid art 8.12.1(b). 116 ibid art 8.12.1(c). 117 ibid art 8.12.1(d). 118 ibid art 8.12.2. The compensation is also to “include interest at a normal commercial rate from the date of expropriation until the date of payment”, and be promptly paid “to the country designated by the investor and in the currency of the country of which the investor is a national or in any freely convertible currency accepted by the investor” (ibid art 8.12.3). A ‘national’ is “a natural person who is a citizen as defined in Article 1.2 [of the EU-Canada BTA], or is a permanent resident of a Party” (ibid art 1.1). n 147 defines ‘citizen’. 119 ibid art 8.13.1. 120 ibid art 8.13.2. 121 ibid art 8.13.3. 122 ‘Cross-border trade in (or supply of) services’ is “the supply of a service: (a) from the territory of a Party into the territory of the other Party; or (b) in the territory of a Party to the service consumer of the other Party, but does not include the supply of a service in the territory of a Party by a person of the other Party” (ibid art 9.1). A ‘person of a Party’ is “a national or an enterprise of a Party” (ibid art 1.1). n 98 defines ‘enterprise’. 123 Chapter 9. 124 It “applies to a measure adopted or maintained by a Party affecting cross-border trade in services by a service supplier of the other Party” (ibid art 9.2.1). n 133 defines ‘service supplier’. 125 ibid art 9.2.2(a).

Bilateral Trade Agreements  183 audio-visual services (EU only)126, “cultural industries”127 (Canada only)128, financial services129, services that are provided “by means of air transport” (subject to five exceptions)130, “procurement by a Party of a good or services purchased for [non-commercial] governmental purposes”131 and government support concerning cross-border trade in services132. Each Party is to grant to the other Party’s services and service suppliers “treatment no less favourable than that it accords, in like situations, to its own service suppliers and services”133. This national treatment clause does not preclude a Party from introducing or preserving a measure which specifies formal requirements relating to the provision of a service134 – including, for instance, for a service supplier to use a local agent or keep a local address135, as long as these requirements are not applied in a way that would be “a means of arbitrary or unjustifiable discrimination”136. Each Party is to bestow on the other Party’s services and service suppliers “treatment no less favourable than that it accords, in like situations, to service suppliers and services of a third country”137. This MFN provision “does not apply to treatment accorded by a Party under an existing or future measure providing for recognition”, including, for example, “the accreditation of repair and maintenance services and service suppliers”138. Thus, either Party may introduce measures that are more restrictive of the accreditation of services and/or service suppliers from the other Party than from a country that is not a signatory to the EU-Canada BTA, without being in breach of this MFN obligation. A Party may not institute or maintain a measure which imposes limits on the number of service suppliers139, the total value of assets or service transactions140,

126 ibid art 9.2.2(b). 127 ‘Cultural industries’ comprises “persons” participating in “the production, distribution or sale of books, magazines, periodicals or newspapers, except when printing or typesetting any of the foregoing is the only activity[,] the production, distribution, sale or exhibition of film”, video recordings or video music recordings, “the production, distribution or sale of music”, and radio, television, cable and satellite broadcasting (ibid art 1.1). n 80 defines ‘person’. 128 ibid art 9.2.2(c). 129 ibid art 9.2.2(d). The subsection entitled ‘Financial Services’, below in the current section, considers Chapter 13 of the EU-Canada BTA (titled ‘Financial services’). 130 ibid art 9.2.2(e). These exceptions are aircraft repair and maintenance, “selling and marketing of air transport services”, computer reservation systems, ground handling, and airport operation (ibid). 131 ibid art 9.2.2(f). 132 ibid art 9.2.2(g). 133 ibid art 9.3.1. A “service supplier” is “a person that supplies or seeks to supply a service” (ibid art 1.1). n 80 defines ‘person’. 134 ibid art 9.4. 135 ibid art 9.4(b). 136 ibid art 9.4. 137 ibid art 9.5.1. 138 ibid art 9.5.3; emphasis original. 139 ibid art 9.6(a). 140 ibid art 9.6(b).

184  Bilateral Trade Agreements the aggregate number of service operations141 or the entirety of service output142. The Parties’ Schedules to Annexes I and II to the EU-Canada BTA contain items to which this market access provision143, the national treatment stipulation144 and the MFN requirement145 do not apply146.

Temporary entry and stay of natural persons for business purposes147 Each Party is to permit “temporary entry to natural persons for business purposes of the other Party”, who otherwise observe the former’s immigration measures that apply to temporary entry, in concurrence with this chapter148. Each Party is to apply those measures “so as to avoid unduly impairing or delaying trade in goods or services or the conduct of investment activities under [the EU-Canada BTA]”149.

Mutual recognition of professional qualifications150 Each Party is to support its pertinent authorities or professional bodies to submit “joint recommendations on proposed MR As” to the Joint Committee on Mutual Recognition of Professional Qualifications151. A recommendation is to give an evaluation of, and an appraisal of the Parties’ licensing or qualification systems’ compatibility with the approach to be followed for negotiating, an MR A152. The Committee is to assess the recommendation, in order to ensure

141 ibid art 9.6(c). 142 ibid. 143 Text to nn 139-142. 144 Text to n 133. 145 Text to n 137. 146 ibid art 9.7. Annex I to the EU-Canada BTA specifies the reservations for existing measures which each Party has taken, and commitments for prompt or future liberalization that each has made. These reservations are pursuant to the ‘reservations’ provision in Chapters 8, 9, 13 (EU only) and 14 of the EU-Canada BTA (ibid Annex I para 1). n 210 summarizes the content of Annex II to the EU-Canada BTA. 147 The phrase ‘natural persons for business purposes’ denotes “key personnel, contractual services suppliers, independent professionals [and] short-term business visitors who are citizens of a Party” (ibid art 10.1). A Canadian ‘citizen’ is “a natural person who is a citizen of Canada under Canadian legislation” (ibid art 1.2(a)). A ‘citizen’ of the EU is “a natural person holding the nationality of a Member State” (ibid art 1.2(b)). 148 ibid art 10.3.1. ‘This chapter’ refers to Chapter 10 of the EU-Canada BTA. 149 ibid art 10.3.3. 150 ‘Professional qualifications’ are “the qualifications attested by evidence of formal qualification and/or professional experience” (ibid art 11.1). ‘Professional experience’ is “the effective and lawful practice of a service” (ibid). 151 ibid art 11.3.1. This Joint Committee is established under Article 26.2.1(b) of the EU-Canada BTA (text to n 512). 152 ibid art 11.3.2.

Bilateral Trade Agreements  185 its consistency with “the requirements of this Chapter153” of the EU-Canada BTA154. If these requirements are fulfilled, then the Committee is to “establish the necessary steps to negotiate”155. Each Party is to apprise its respective pertinent authorities of those steps156. “The negotiating entities” then present a draft of the MR A to the Committee157, which reviews this to make sure that it observes the EU-Canada BTA 158. If the Committee considers that the MR A complies with the EU-Canada BTA, then it adopts the former, subject to each Party’s notifying it of the satisfaction of that Party’s “internal requirements”159. Following these notifications, the Committee’s decision binds the Parties160. If an MR A acknowledges a service supplier’s professional qualification, then that supplier may “practice professional activities in the host jurisdiction”, following the terms and conditions that the MR A contains161. If a Party recognizes the professional qualification of a service supplier of the other Party in accordance with an MR A, then the host jurisdiction is to grant this person “treatment no less favourable than accorded in like situations to a like service supplier whose professional qualifications have been certified or attested in the Party’s own jurisdiction”162. A Party is not to confer recognition in way that would form “a means of discrimination in the application of its criteria for the authorisation, licensing or certification of a service supplier, or that would constitute a disguised restriction on trade in services”163.

Domestic regulation This chapter164 of the EU-Canada BTA concerns licensing and qualification requirements and procedures for the cross-border supply of services165, excluding 153 Chapter 11. 154 ibid art 11.3.3. 155 ibid. 156 ibid. 157 ibid art 11.3.4. 158 ibid art 11.3.5. 159 ibid art 11.3.6. 160 ibid. 161 ibid art 11.4.1. n 133 defines ‘service supplier’. 162 ibid art 11.4.2. 163 ibid art 11.2.3. 164 Chapter 12. 165 ibid art 12.2.1(a). n 122 defines ‘cross-border supply of services’. The chapter also concerns licensing and qualification requirements and procedures for “the supply of a service or pursuit of any other economic activity, through commercial presence in the territory of the other Party” (ibid art 12.2.1(b)) and “the supply of a service through the presence of a natural person of the other Party in the territory of the Party” on a temporary basis “in accordance with Article 10.6.2 [of the EU-Canada BTA]” (ibid art 12.2.1(c)). Article 10.6.2 of the EU-Canada BTA states: “Articles 9.3 (National treatment), [9.5 (Most-favoured-nation treatment)] and 9.6 (Market access), subject to Articles 9.4 (Formal requirements) and 9.2 (Scope) but not Article 9.2.2(d), are incorporated into and made part of [Chapter 10 of the EU-Canada BTA]  …” (ibid art 10.6.2). The text to nn 147–149 delimits Chapter 10 of the EU-Canada BTA. For

186  Bilateral Trade Agreements specified items – which include cultural industries166 and aboriginal and minority affairs (Canada only)167, audio-visual services, education and health (EU only)168 and (for both the EU169 and Canada170) “social services, gambling and betting services, and the collection, purification and distribution of water”171. Each Party is to make certain that “licensing requirements, qualification requirements, licensing procedures, or172 qualification procedures [that] it adopts or maintains are based on criteria that preclude the competent authority from exercising its power of assessment in an arbitrary manner”173. These criteria are to be clear174, transparent175, objective176, instituted beforehand177 and made available to the public178.

Financial services179 This chapter180 of the EU-Canada BTA applies to a measure that a Party introduces or maintains concerning “financial institutions of the other Party”181, the latter Party’s investors and their investments in a financial institution in the

Articles 9.3.1, 9.5.1, 9.5.3 and 9.6 of the EU-Canada BTA, see the text to nn 133, 137, 138 and 139–142, respectively. For Articles 9.2.1, 9.2.2 and 9.4, see n 124, n 130 and the text to nn 125–126 and 128–132, and the text to nn 134–136, respectively. The text to n 129 corresponds to Article 9.2.2(d) of the EU-Canada BTA. 166 n 127 defines ‘cultural industries’. 167 ibid art 12.2.2(b)(i). 168 ibid art 12.2.2(b)(ii). 169 ibid. 170 ibid art 12.2.2(b)(i). 171 ibid art 12.2.2(b)(ii). 172 Whilst the EU-Canada BTA reads “or”, it is submitted that the authors of the document meant ‘and’. If this is correct, then the Parties should make this change to the Agreement. 173 ibid art 12.3.1. 174 ibid art 12.3.2(a). 175 ibid. 176 ibid art 12.3.2(b). 177 ibid art 12.3.2(c). 178 ibid. 179 A ‘financial service’ is “a service of a financial nature, including insurance and insurance-­related services, banking and other financial services (excluding insurance), and services incidental or auxiliary to a service of a financial nature” (ibid art 13.1). Article 13.1 of the EU-Canada BTA lists ‘insurance and insurance-related services’ and ‘banking and other financial services’. 180 Chapter 13. 181 ibid art 13.2.1(a). A ‘financial institution of the other Party’ is “a financial institution, including a branch, located in the territory of a Party that is controlled by a person of the other Party” (ibid art 13.1). A ‘financial institution’ is “a supplier that carries out one or more of the operations defined as being financial services in this Article, if the supplier is regulated or supervised in respect of the supply of those services as a financial institution under the law of the Party in whose territory it is located, including a branch in the territory of the Party of that financial service supplier whose head offices are located in the territory of the other Party” (ibid). nn 179 and 198 define ‘financial service’ and ‘financial service supplier’, respectively. A ‘person of a Party’

Bilateral Trade Agreements  187 former’s territory182, and “cross-border trade in financial services”183. National treatment and MFN treatment under Articles 8.6 and 8.7, respectively184, of the EU-Canada BTA, are “incorporated into and made a part of this Chapter185 [of that Agreement] and appl[y] to treatment of financial institutions and investors of the other Party and their investments in financial institutions”186. With regard to “a financial institution of the other Party or … market access through establishment of a financial institution by an investor of [that] Party”187, a Party is not to institute or preserve a measure that imposes limits on the number of financial institutions188, the total value of financial service assets or transactions189, the overall number of financial service operations190, the percentage or value of foreign capital in financial institutions191, or the total number of individuals who may be employed in a specific financial services sector or whom a financial institution may employ and who are required for and directly concerned with “the performance of a specific financial service”192, or that “restricts or requires specific types of legal entity or joint venture through which

excludes “a branch of an enterprise of a third country” (ibid), and is “a national or an enterprise of a Party” (ibid arts 13.1 and 1.1). nn 98 and 118 define ‘enterprise’ and ‘national’, respectively. 182 ibid art 13.2.1(b). n 97 defines ‘investment’ and ‘investor’. For Chapter 13 only, an ‘investment’ excludes “a loan granted by or debt instrument owned by a financial institution, other than [one that the latter issues which] is treated as regulatory capital by the Party in whose territory the financial institution is located” (ibid art 13.1). 183 ibid art 13.2.1(c). ‘Cross-border supply of (or trade in) financial services’ is “the supply of a financial service: (a) from the territory of a Party into the territory of the other Party; or (b) in the territory of a Party by a person of that Party to a person of the other Party; but does not include the supply of a service in the territory of a Party by an investment in that territory” (ibid art 13.1). nn 179 and 181 define ‘financial service’ and ‘person of a Party’, respectively. 184 Text to n 105. 185 n 180. 186 ibid arts 13.3.1 and 13.4.1. The treatment that a Party grants to its own investors and their investments under Article 8.6 of the EU-Canada BTA “means treatment accorded to its own financial institutions and investments of its own investors in financial institutions” (ibid art 13.3.2). The treatment that a Party bestows on investors of a third country and their investors under Article 8.7.1–2 of the EU-Canada BTA “means treatment accorded to financial institutions of a third country and investments of investors of a third country in financial institutions” (ibid art 13.4.2). Article 8.7.2 of the EU-Canada BTA states: “[T]he treatment accorded by a Party under [Article 8.7.1 of the EU-Canada BTA (text to n 105)], with respect to a government in Canada other than at the federal level, or with respect to a government of or in a Member State of the European Union, [means] treatment accorded, in like situations, by that government to investors in its territory, and to investments of such investors, of a third country” (ibid art 8.7.2). 187 ibid art 13.6.1(a). n 181 defines ‘financial institution’ and ‘financial institution of the other Party’. n 97 defines ‘investor’. 188 ibid art 13.6.1(a)(i). 189 ibid art 13.6.1(a)(ii). 190 ibid art 13.6.1(a)(iii). 191 ibid art 13.6.1(a)(iv). 192 ibid art 13.6.1(a)(v). n 179 defines ‘financial service’.

188  Bilateral Trade Agreements a financial institution may perform an economic activity”193. Articles 9.3194, 9.4195 and 9.6196 of the EU-Canada BTA “are incorporated into and made a part of this Chapter197 [of that Agreement] and apply to treatment of cross-­ border financial service suppliers198 providing the financial services specified in Annex 13-A [to the EU-Canada BTA]”199. Article 9.5200 of the EU-Canada BTA “is incorporated into and made a part of this Chapter201 [of that Agreement] and applies to treatment of cross-border financial service suppliers of the other Party”202. Each Party must not require “a financial institution of the other Party” to appoint individuals of any specified nationality to the board of directors or to senior management roles203. Article 13.10 of the EU-Canada BTA sets out reservations and exceptions to the application of parts of Chapter 13 of the Agreement, such as the following provision.

193 ibid art 13.6.1(b). Article 8.4.2 of the EU-Canada BTA (n 103) “is incorporated into and made a part of” Article 13.6 of this Agreement (ibid art 13.6.2). 194 The text to n 133 specifies Article 9.3.1 of the EU-Canada BTA. 195 Text to nn 134–136. 196 Text to nn 139–142. 197 n 180. 198 A ‘cross-border financial service supplier of a Party’ is “a person of a Party that is engaged in the business of supplying a financial service within the territory of the Party and that seeks to supply or supplies a financial service through the cross-border supply of that service” (ibid art 13.1). nn 179, 181 and 183 define ‘financial service’, ‘person of a Party’ and ‘cross-border supply of financial services’, respectively. A ‘financial service supplier’ is “a person of a Party that is engaged in the business of supplying a financial service within the territory of that Party but does not include a public entity” (ibid). n 133 defines ‘service supplier’. A ‘public entity’ is “a government, a central bank or a monetary authority of a Party or any entity owned or controlled by a Party, that is principally engaged in carrying out governmental functions or activities for governmental purposes, but does not include an entity principally engaged in supplying financial services on commercial terms”, or “a private entity that performs functions normally performed by a central bank or monetary authority when exercising those functions” (ibid). 199 ibid art 13.7.1. Annex 13-A to the EU-Canada BTA contains a Schedule for each Party, which specifies the financial services to which Article 13.7.1 of the Agreement applies. For instance, Paragraph 3 of the ‘Schedule of Canada’ states: “Article 13.7.1 [of the EU-Canada BTA] applies to the cross-border supply or trade in financial services, as defined in subparagraph (a) of the definition of cross-border supply of financial services in Article 13.1 [of the EU-Canada BTA (n 183)], with respect to the supply of the following services to a collective investment scheme in its territory: (a) investment advice; and (b) portfolio management services, excluding: (i) custodial services; (ii) trustee services; or (iii) execution services.” (ibid Annex 13-A Schedule of Canada para 3). 200 The text to nn 137 and 138 relates Paragraphs 1 and 3, respectively, of Article 9.5 of the EU-Canada BTA. 201 n 180. 202 ibid art 13.7.4. 203 ibid art 13.8. n 181 defines ‘financial institution’ and ‘financial institution of the other Party’.

Bilateral Trade Agreements  189 Articles 13.3204, 13.4205, 13.6206, 13.7207 and 13.8208 [of the EU-Canada BTA] do not apply to a measure that Canada adopts or maintains with respect to financial services as set out in Section B of its Schedule to Annex III [to the EU-Canada BTA]209, or to a measure that the European Union adopts or maintains with respect to financial services as set out in its Schedule to Annex II [to the EU-Canada BTA]210. Under terms and conditions that grant national treatment, each Party is to permit “a financial service supplier of the other Party”211 that is set up in its territory to access its payment and clearing systems, and “official funding and refinancing facilities available in the normal course of ordinary business”212. Each Party is to allow “a financial institution of the other Party”213 to provide any new financial

204 n 186 and accompanying text. 205 n 204. 206 Text to nn 187–193, and n 193, for Paragraphs 1 and 2, respectively, of Article 13.6 of the EU-Canada BTA. 207 Text to nn 199 and 202, for Paragraphs 1 and 4, respectively, of Article 13.7 of the EU-­ Canada BTA. 208 Text to n 203. 209 Annex III to the EU-Canada BTA sets out the reservations that Canada has taken pursuant to Paragraphs 1 and 2 of Article 13.10 to this Agreement “with respect to an existing measure that does not conform with obligations imposed by” Articles 13.3, 13.4, 13.6, 13.7 and 13.8 of the Agreement (ibid Annex III para 1(b)). It also specifies the reservations that Canada has taken in accordance with Paragraph 3 of Article 13.10 of the EU-Canada BTA (text to n 210) “for measures Canada may adopt or maintain that do not conform with obligations imposed by Articles 13.3”, 13.4, 13.6, 13.7 and 13.8 of this Agreement (ibid Annex III para 1(c)). One example of a reservation taken under Article 13.10.3 (text to n 210) is the following item – which Annex III declares to be inconsistent with Article 13.6 of the EU-Canada BTA, and is (it is submitted) incompatible with Clause 1(a)(iv) (text to n 191) and/or Subparagraph 1(b) (text to n 193) of that Article: “Canada reserves the right to adopt or maintain a measure stipulating that federally-regulated financial institutions having equity in excess of CAD$1 billion are required, within three years of having reached this threshold, to have 35 per cent of their voting shares widely-held and listed and posted for trading on a stock exchange in Canada.” (ibid Annex III Section B Reservation IIIB-C-1). 210 ibid art 13.10.3. Annex II to the EU-Canada BTA sets out the reservations for future measures that each Party has taken pursuant to the ‘reservations’ provision in Chapters 8, 9, 13 (EU only) and 14 of the EU-Canada BTA (ibid Annex II para 1). One example of a reservation taken under Article 13.10.3 (text to n 210) is the following item – which Annex II holds to be inconsistent with Article 13.6 of the EU-Canada BTA, and is (it is submitted) incompatible with Subparagraph 1(b) (text to n 193) of that Article: “The EU reserves the right to adopt or maintain any measure requiring a financial institution, other than a branch, when establishing in a Member State of the EU to adopt a specific legal form, on a non-discriminatory basis.” (ibid Annex II Reservations applicable in the European Union). 211 n 198 defines ‘financial service supplier’. 212 ibid art 13.13. 213 n 181 defines ‘financial institution’ and ‘financial institution of the other Party’.

190  Bilateral Trade Agreements service214 that it would allow its own financial institutions, in like situations, to furnish under its own law215. Subject to Articles 13.3 and 13.4 [of the EU-Canada BTA]216, a Party may, for prudential reasons, prohibit a particular financial service or activity. Such a prohibition shall not apply to all financial services or to a complete financial services sub-sector, such as banking 217. These ‘prudential reasons’ include: (i) “the protection of investors, depositors, policy-holders, or persons to whom a financial institution, cross-border financial service supplier, or financial service supplier owes a fiduciary duty”218, (ii) “the maintenance of the safety, soundness, integrity, or financial responsibility of a financial institution, cross-border financial service supplier, or financial service supplier”219 or (iii) “ensuring the integrity and stability of a Party’s financial system”220. Each Party may introduce or preserve “reasonable measures for prudential reasons”221 and “may require the registration of cross-border financial service suppliers of the other Party and of financial instruments”222. Whilst permitting the EU and Canada each to provide legal protection for stakeholders within the financial sector and for that regime’s stability and integrity is reasonable, these provisions fall short of introducing ‘passporting rights’223 for European and Canadian financial firms to provide their services in the territory of the other Party.

214 A ‘new financial service’ is “a financial service that is not supplied in the territory of a Party but that is supplied in the territory of the other Party and includes any new form of delivery of a financial service or the sale of a financial product that is not sold in the Party’s territory” (ibid art 13.1). n 179 defines ‘financial service’. 215 ibid art 13.14.1. That financial institution must supply the new financial service “on request or notification to the relevant regulator, if required” (ibid). A Party “may require authorisation for the supply of the service”, which “may only be refused for prudential reasons” (ibid art 13.14.2). The text to nn 218–220 specifies the prudential reasons that Article 13.16.1 of the EU-Canada BTA sets out. 216 n 186 and accompanying text. 217 ibid art 13.16.3. 218 ibid art 13.16.1(a). n 80 defines ‘person’. 219 ibid art 13.16.1(b). 220 ibid art 13.16.1(c). 221 ibid art 13.16.1. The text to nn 218–220 lists the designated prudential reasons (n 215). 222 ibid art 13.16.2. n 198 defines ‘cross-border financial service supplier of a Party’ and ‘financial service supplier’. 223 A ‘passporting right’ is the right of a firm that is authorized to provide a service in its home country to supply it, without requiring further authorization, in other countries whose governments have agreed to the granting of that right. This ‘passporting’ system applies to the cross-border supply of financial services across the EEA, within the framework of the EU’s internal market.

Bilateral Trade Agreements  191 International maritime transport services224 This chapter225 of the EU-Canada BTA applies to a measure that a Party institutes or preserves, concerning the provision of international maritime transport services226. Each Party must not introduce or maintain a measure with regard to a vessel of the other Party’s dispensing an international maritime transport service or “an international maritime transport service supplier of the other Party”, which grants “treatment that is less favourable than that accorded by that Party in like situations to its own vessels or international maritime transport service suppliers or to vessels of international maritime transport service suppliers of a third country” as concerns access to ports or customs facilities, the use of “maritime auxiliary services”227 or ports’ services and infrastructure, or the allocation of moorings and loading/unloading facilities228. Each Party is to allow the other Party’s international maritime transport service suppliers to reposition empty containers and provide “feeder services”229 between its ports230. It is not to adopt or preserve “a cargo-sharing arrangement with a third country concerning any international maritime transport services”231, “a measure that requires all or part of any international cargo to be transported exclusively by vessels registered in that Party or owned and controlled by” its nationals232 or “a measure that prevents international maritime transport service suppliers of the other Party from directly contacting with other transport service suppliers for door-to-door or multimodal transport operations”233. The provisions of this paragraph do not apply to current non-conforming measures of each Party234 or their continuance or swift renewal 235, or to measures which a

224 ‘International maritime transport services’ comprise “the transport of passengers or cargo by a sea-going vessel between a port of one Party and a port of the other Party or of a third country, or between a port of one Member State of the European Union and a port of another Member State of the European Union, as well as direct contracting with suppliers of other transport services to ensure door-to-door or multimodal transport operations, but not the supply of such other transport services” (ibid art 14.1). n 133 defines ‘service supplier’. 225 Chapter 14. 226 ibid art 14.2.1. It “does not apply to fishing vessels” (ibid fn 1 to art 14.2.1). 227 ‘Maritime auxiliary services’ comprise “cargo handling services, customs clearance services, container station and depot services, maritime agency services, maritime freight forwarding services, and storage and warehousing services” (ibid art 14.1). Article 14.1 of the EU-Canada BTA defines each of these services. 228 ibid art 14.2.2. 229 “Feeder services” are “the pre- and onward transportation by sea of international cargo … between ports located in the territory of a Party” (ibid art 14.1). 230 ibid art 14.3.1–2. 231 ibid art 14.3.3. 232 ibid art 14.3.4. 233 ibid art 14.3.5. 234 ibid art 14.4.1(a). 235 ibid art 14.4.1(b).

192  Bilateral Trade Agreements Party introduces or preserves concerning “sectors, subsectors or activities, as set out in its Schedule to Annex II 236 [to the EU-Canada BTA]”237.

Telecommunications This chapter238 of the EU-Canada BTA applies to a measure that a Party introduces or maintains, which concerns “telecommunications networks or services”239, subject to the reservations in its Schedule to Annex I 240 or II 241 to the Agreement 242. Each Party is to ensure that the other Party’s enterprises243 are granted access to, and use of, “public telecommunications networks or services244 on reasonable and non-discriminatory terms and conditions”245. Each Party is to “maintain appropriate measures” to stop suppliers that constitute a “major supplier”246 from participating or persisting in “anti-competitive practices”247. It is to make sure that every major supplier in its territory makes its essential facilities available to the other Party’s suppliers of telecommunications

236 n 210. 237 ibid art 14.4.2. 238 Chapter 15. 239 ‘Telecommunications services’ refers to “all services consisting of the transmission and reception of signals by any electromagnetic means but does not include the economic activity consisting of the provision of content by means of telecommunications” (ibid art 15.1). 240 n 146. 241 n 210. 242 ibid art 15.2.1. 243 “For the purposes of this Chapter [of the EU-Canada BTA, (n 238)] … enterprise means an ‘enterprise’ as defined in Article 8.1 [of the EU-Canada BTA, (n 98)]” (ibid; emphasis original). 244 A ‘public telecommunications transport network’ is “the public telecommunications infrastructure that permits telecommunications between and among defined network termination points” (ibid). A ‘network termination point’ is “the physical point at which a user is provided with access to a public telecommunications transport network” (ibid). A ‘public telecommunication transport service’ is “a telecommunications transport service that a Party requires … to be offered to the public generally that involves the real-time transmission of customer-­ supplied information between two or more points without any end-to-end change in the form or content of the customer’s information” (ibid). The immediately preceding definition gives examples of this service, which include (for instance) voice-telephone, telex, telegraph and facsimile services (ibid). 245 ibid art 15.3.1. ‘Non-discriminatory’ denotes treatment which is “no less favourable than that accorded to any other enterprise when using like public telecommunications transport networks or services in like situations” (ibid fn 1 to art 15.3.1). 246 A ‘major supplier’ is “a supplier which has the ability to materially affect the terms of participation, having regard to price and supply in the relevant market for public telecommunication transport networks or services, as a result of: (a) control over essential facilities; or (b) use of its position in the market” (ibid art 15.1). n 244 defines ‘public telecommunications transport network’ and ‘public telecommunications transport service’. 247 ibid art 15.4.1.

Bilateral Trade Agreements  193 services248 “on reasonable and non-discriminatory terms and conditions and cost-oriented rates”249. Each Party must ensure that every major supplier in its territory supplies interconnection 250 “at any technically feasible point in the network”251, under terms, conditions and rates that are non-discriminatory252, of a quality that is at least as favourable as that imparted to “its own like services or for like services of non-affiliated service suppliers or of its subsidiaries or other affiliates”253, opportunely254, “on terms, conditions … and cost-oriented rates that are transparent, reasonable, having regard to economic feasibility, and sufficiently unbundled”255 and “upon request, at points in addition to the network termination points offered to” most users256. Both parties “should ensure that the authorisation to provide telecommunications services, wherever possible, is based upon a simple notification procedure”257. Each Party is to make certain that its regulatory authority is legally separate from, and operationally independent of, any provider of telecommunication transport networks, equipment or services258. It is to ensure that this authority is adequately empowered to regulate the telecommunications industry259. To the extent that its law provides, each Party may forgo the application of a rule to a telecommunications service, if an examination of the market ascertains that there is “effective competition”260.

248 n 239 defines ‘telecommunications services’. 249 ibid art 15.5.1. The EU-Canada BTA provides each Party with some discretion in this matter: i.e., to “determine, in accordance with its laws, those essential facilities required to be made available in its territory” (ibid art 15.5.2; emphasis added). 250 ‘Interconnection’ refers to “linking suppliers providing public telecommunications networks or services in order to allow the users of one supplier to communicate with the users of another supplier and to access services supplied by another supplier” (ibid art 15.1). n 244 defines ‘public telecommunications transport network’ and ‘public telecommunications transport service’. A ‘user’ is “an enterprise or natural person using or requesting a publicly available telecommunication service”. n 243 – referring to n 98 – defines ‘enterprise’. 251 ibid art 15.6.1(a). 252 ibid art 15.6.1(b). 253 ibid art 15.6.1(c). n 133 defines ‘service supplier’. 254 ibid art 15.6.1(d). 255 ibid. 256 ibid art 15.6.1(e). nn 244 and 250 define ‘network termination point’ and ‘user’, respectively. 257 ibid art 15.7; emphasis added. The EU-Canada BTA’s use of the verb ‘should’ does not make it compulsory for either Party to introduce a straightforward notification procedure for the authorization of suppliers of telecommunications services; this usage makes the institution of such a procedure advisable in circumstances in which the procedure may, in practice, be successfully introduced. 258 ibid art 15.11.1. 259 ibid art 15.11.3. 260 ibid art 15.14.

194  Bilateral Trade Agreements Electronic commerce261 The Parties confirm that WTO law applies to electronic commerce262. They agree to advance its development “between them”, especially by co-operating on the issues that the provisions of this chapter263 of the EU-Canada BTA raise264. Neither Party may levy “a customs duty, fee or charge on a delivery transmitted by electronic means”265. Notwithstanding this, it may impose an internal charge on that delivery in a way which is compatible with the EU-Canada BTA 266. The EU and Canada “should adopt or maintain laws, regulations or administrative measures for the protection of personal information of users engaged in electronic commerce”267. The Parties agree to continue a dialogue on matters that electronic commerce raises268, which includes, for instance, “the protection of personal information and … of consumers and business from fraudulent and deceptive practices in the sphere of electronic commerce”269. They declare the significance of constructively participating in international meetings to further the growth of electric commerce270.

Competition policy The Parties are to “take appropriate measures271 to proscribe anti-competitive business conduct”272. They are to “cooperate on matters relating to the proscription of anti-competitive business conduct in the free trade area in accordance

261 ‘Electronic commerce’ is “commerce conducted through telecommunications, alone or in conjunction with information and communication technologies” (ibid art 16.1). 262 ibid art 16.2.1. 263 Chapter 16. 264 ibid. 265 ibid art 16.3.1. 266 ibid art 16.3.2. 267 ibid art 16.4; emphasis added. The use of the verb ‘should’ in Article 16.4 of the EU-Canada BTA indicates that this Agreement does not make it obligatory for the Parties to introduce these measures (n 257). However, each Party “when doing so, shall take into due consideration international standards of data protection of relevant international organisations of which both Parties are a member” (ibid; emphasis added). The use of the conjunction ‘when’ suggests that the EU-Canada BTA expects each Party to introduce as necessary, and to maintain, measures to protect users’ personal information. 268 ibid art 16.6.1. 269 ibid art 16.6.1(d). 270 ibid art 16.6.3. 271 These measures must observe “the principles of transparency, non-discrimination, and procedural fairness” (ibid art 17.2.4). n 287 defines ‘measure’. 272 ibid art 17.2.2. ‘Anti-competitive business conduct” comprises “anti-competitive agreements, concerted practices or arrangements by competitors, anti-competitive practices by an enterprise that is dominant in a market, and mergers with substantial anti-competitive effects” (ibid art 17.1). n 98 defines ‘enterprise’.

Bilateral Trade Agreements  195 with the Agreement between the European Communities and the Government of Canada Regarding the Application of their Competition Laws”273.

Monopolies and certain enterprises274 A Party may designate275 or maintain state enterprises and monopolies276. It may accord “special rights or privileges” to an enterprise277. Each Party is to make sure that, on its lands, a covered entity278 grants “non-discriminatory treatment”279 to the other Party’s service suppliers280 and goods, and to “covered investments”281, when goods and services are bought and sold 282. If the covered entity acts in conformity with the following obligation, then the Party in which it is situated is deemed to observe the duty in the immediately preceding sentence – with regard to that entity283. Each Party is to ensure that a covered entity in its domain behaves “in accordance with commercial considerations”284 with regard to purchasing and selling goods and services285.

Government procurement This chapter286 of the EU-Canada BTA applies to measures that concern a covered procurement 287. ‘Covered procurement’ is “procurement for governmental 273 ibid art 17.2.3. The Agreement’s purpose is “to promote cooperation and coordination between the competition authorities of the Parties and to lessen the possibility or impact of differences between the Parties in the application of their competition laws” (Agreement between the European Communities and the Government of Canada regarding the application of their competition laws [1999] OJ L175/50 art 1). 274 n 98 defines ‘enterprise’. 275 To ‘designate’ a monopoly is “to establish or authorise a monopoly, or to expand the scope of a monopoly to cover an additional good or service” (ibid art 18.1). 276 ibid art 18.3.1. 277 ibid. 278 A ‘covered entity’ includes “(a) a monopoly; (b) a supplier of a good or service, if it is one of a small number of goods or services suppliers authorised or established by a Party … and the Party substantially prevents competition among those suppliers in its territory; (c) any entity to which a Party has granted … special rights or privileges …; or (d) a state enterprise” (ibid art 18.1). 279 ‘Non-discriminatory treatment’ is “the better of national treatment and most-favoured-nation [(MFN)] treatment as set out in [the EU-Canada BTA]” (ibid). 280 n 133 defines ‘service supplier’. 281 n 104 defines ‘covered investment’, in the context of Chapter 8 of the EU-Canada BTA. 282 ibid art 18.4.1. 283 ibid art 18.4.2. 284 ‘In accordance with commercial considerations’ signifies “consistent with customary business practices of a privately held enterprise in the relevant business or industry” (ibid art 18.1). 285 ibid art 18.5.1. 286 Chapter 19. 287 ibid art 19.2.1. “For the purposes of this Chapter [of the EU-Canada BTA, (n 286)]” a ‘measure’ is “any law, regulation, procedure, administrative guidance or practice, or any action of a procuring entity relating to a covered procurement” (ibid art 19.1). This definition is a

196  Bilateral Trade Agreements purposes: (a) of a good, a service, or of any combination thereof: (i) as specified in each Party’s Annexes to its Market Access Schedule for this Chapter288; and (ii) not procured with a view to commercial sale or resale, or for use in the production or supply of a good or a service for commercial sale or resale; (b) by any contractual means …; (c) for which the value … equals or exceeds the relevant threshold specified in a Party’s Annexes to its Market Access Schedule for this Chapter289 …; (d) by a procuring entity290; and (e) that is not otherwise excluded from coverage in [Article 19.2.3 of the EU-Canada BTA 291] or a Party’s Annexes to its Market Access Schedule for this Chapter”292. A procurement to

variant of the EU-Canada BTA’s general definition of ‘measure’, which is as follows. “For the purposes of [the EU-Canada BTA] and unless otherwise specified”, a measure comprises “a law, regulation, rule, procedure, decision, administrative action, requirement, practice or any other form of measure by a Party” (ibid art 1.1). 288 n 286. Canada’s Market Access Schedule comprises Annexes 19-1 to 19-8 to the EU-Canada BTA, at [2017] OJ L11/318-L11/357. The EU’s Market Access Schedule consists of Annexes 19-1 to 19-8 to the EU-Canada BTA, at [2017] L11/358-L11/435. In these Schedules, Annexes 19-4, 19-5 and 19-6 to the Agreement are entitled ‘Goods’, ‘Services’, and ‘Construction services’ (for Canada)/‘Construction services and work concessions’ (for the EU), respectively. “For the purposes of this Chapter [of the EU-Canada BTA, (n 286)]”, construction services are included as ‘services’ “unless otherwise specified”, and a ‘construction service’ is “a service that has as its objective the realisation by whatever means of civil or building works, based on Division 51 of the United Nations Provisional Central Product Classification (CPC)” (CETA (n 18) art 19.1). The UN’s Central Product Classification comprises “a coherent and consistent classification structure for products based on a set of internationally agreed concepts, definitions, principles and classification rules”, and “presents categories for all products that can be the object of domestic or international transactions or that can be entered into stocks” (United Nations Department of Economic and Social Affairs, ‘Central Product Classification (CPC) Version 2.1’ ST/ESA/STAT/SER.M/77/Ver 2.1 (2015) paras 1 and 4). 289 nn 286 and 288. In these Schedules, Annexes 19-1, 19-2 and 19-3 to the EU-Canada BTA specify thresholds, in SDR, for each of goods, services, and construction services (plus, for the EU only, work concessions), for the central government entities, sub-central government entities and other entities, respectively, listed therein. 290 A ‘procuring entity’ is “an entity covered under Annexes 19-1, 19-2, or 19-3 of a Party’s Market Access Schedule for this Chapter” (CETA (n 18) art 19.1). nn 286, 288 and 289 provide information that supplements this definition. 291 This Paragraph states: “Except as otherwise provided in a Party’s Annexes to its Market Access Schedule for this Chapter, this Chapter does not apply to: (a) the acquisition or rental of … immovable property or the rights thereon; (b) non-contractual agreements or any form of assistance that a Party provides …; (c) the procurement or acquisition of fiscal agency or depository services, liquidation and management services for regulated financial institutions or services related to the sale, redemption and distribution of public debt …; (d) public employment contracts; (e) procurement conducted: (i) for the specific purpose of providing international assistance …; (ii) under the particular procedure or condition of an international agreement relating to the stationing of troops or relating to the joint implementation by the signatory countries of a project; or (iii) under the particular procedure or condition of an international organisation, or funded … if the applicable procedure or condition would be inconsistent with this Chapter.” (ibid art 19.2.3). 292 ibid art 19.2.2.

Bilateral Trade Agreements  197 which this chapter293 applies comprises all procurement that the Market Access Schedules294 of Canada and the EU cover295. Paragraphs 1 and 2 of Article 19.3 of the EU-Canada BTA contain security and general exceptions, respectively, that are essentially the same as those in the WTO’s Agreement on Government Procurement 296. Whilst ‘non-­ discrimination’ is a recurring theme in that Plurilateral Trade Agreement 297, the EU-­Canada BTA expressly dedicates two Paragraphs to this concept 298 – the core of which are as follows. With respect to any measure299 regarding covered procurement300, each Party, including its procuring entities301, shall act immediately and unconditionally to the goods and services of the other Party and to the suppliers302 of the other Party offering such goods or services, treatment no less favourable than the treatment [that] the Party, including its procuring entities, accords to its own goods, services and suppliers. …303 With respect to any measure regarding covered procurement, a Party, including its procuring entities, shall not: (a) treat a locally established supplier less favourably than another locally established supplier on the basis of the degree of foreign affiliation or ownership; or (b) discriminate against a locally established supplier on the basis that the goods or services offered by that supplier for a particular procurement are goods or services of the other Party304. Whilst the second of these quoted Paragraphs is substantially identical to Article III:2 of the Agreement on Government Procurement305, the first of those Paragraphs accords national treatment – but not MFN treatment – to the goods, services and suppliers of the other Party, which contrasts with Article III:1 of the Agreement on Government Procurement – whose coverage comprises the

293 n 286. 294 nn 288 and 289. 295 ibid art 19.2.4. 296 These Paragraphs correspond to Paragraphs 1 and 2, respectively, of Article XXIII of the Agreement on Government Procurement. The section entitled ‘The Agreement on Government Procurement’, in Chapter 2, summarizes the Agreement on Government Procurement. 297 Text to nn 306 and 308–315 in ch 2. 298 Article 19.4 of the EU-Canada BTA is entitled ‘General principles’. Its first subtitle is ‘Non-Discrimination’. The two quoted Paragraphs follow that subheading. 299 n 287 defines ‘measure’. 300 ‘Covered procurement’ is defined above in this subsection (text to n 292). 301 n 290 defines ‘procuring entity’. 302 “For the purposes of this Chapter [of the EU-Canada BTA, (n 286)]” a ‘supplier’ is “a person or group of persons that provides or could provide goods or services” (ibid art 19.1). A ‘person’ is “as defined in Article 1.1 [of the EU-Canada BTA (n 80)]”. 303 ibid art 19.4.1. This is a national treatment clause. 304 ibid art 19.4.2. 305 Text to n 308 in ch 2.

198  Bilateral Trade Agreements conferral of both national treatment and MFN treatment on the goods, services and suppliers of other Parties to that Agreement306. Canada and the EU might be concerned about the ready activation of any MFN clause added to this chapter307 owing to the substantial number of PTAs to which these Parties subscribe308. Therefore, they may have omitted this clause from the EU-Canada BTA. This claim is improbable, both because the EU-Canada BTA contains several MFN clauses and because the Agreement on Government Procurement – which includes an MFN clause309 – has nineteen Parties and ten countries that are in the process of acceding to it310 – i.e., a considerable number of signatories whose PTAs with Canada and/or the EU may trigger this clause, as Canada and the EU are Parties to the Agreement on Government Procurement311. A procuring entity312 is to restrict any conditions for involvement in a procurement to those that are crucial to making sure that a supplier313 is legally, financially, commercially and technically capable of undertaking that procurement314. A procuring entity is neither to require the supplier to have been awarded one or more procurement contracts by a procuring entity of either Party nor to necessitate previous experience in a Party’s territory as a condition for participation in a procurement315. However, it may demand pertinent prior experience, if this is key to satisfying the procurement’s requirements316. A Party may run a registration system for suppliers317. Each Party is to make certain that its procuring entities endeavour to minimize dissimilarities in their systems to determine whether suppliers are qualified to tender for the awarding of a procurement contract318. Neither Party’s registration system nor its qualification procedure may intentionally or effectively generate “unnecessary obstacles to the participation of suppliers of the other Party in its procurement”319. Furthermore, a procuring entity is not to “prepare, adopt or apply any technical

306 Text to n 306 in ch 2. 307 n 286. 308 Text to nn 16 and 17. 309 Clause (b), in the text to n 306 in ch 2. 310 World Trade Organization, ‘Agreement on Government Procurement: Parties, observers and accessions’ accessed 23 May 2018. 311 ibid. 312 n 290 defines ‘procuring entity’. 313 n 302 defines ‘supplier’. 314 CETA (n 18) art 19.7.1. 315 ibid art 19.7.2(a) and (c). 316 ibid art 19.7.2(b). 317 ibid art 19.8.1. 318 ibid art 19.8.2(a). Each Party is also to ensure that its procuring entities endeavour to minimize dissimilarities in their systems for the registration of suppliers (ibid art 19.8.2(b)). 319 ibid art 19.8.3.

Bilateral Trade Agreements  199 specification or prescribe any conformity assessment procedure with the purpose or the effect of creating unnecessary obstacles to international trade”320. A procuring entity shall receive, open and treat all tenders under procedures that guarantee the fairness and impartiality of the procurement process, and the confidentiality of tenders321. Unless a procuring entity determines that it is not in the public interest to award a contract, the entity shall award the contract to the supplier that the entity has determined to be capable of fulfilling the terms of the contract and that, based solely on the evaluation criteria specified in the notices and tender documentation, has submitted: (a) the most advantageous tender; or (b) if price is the sole criterion, the lowest price322. Each Party is to furnish “a timely, effective, transparent and non-­d iscriminatory administrative or judicial review procedure through which a supplier may challenge (a) a breach of the Chapter323; or … a failure to comply with a Party’s measures implementing the Chapter”, which emerges from a covered procurement324 in which the supplier is or was involved325. Each Party is permitted to “modify or rectify its Annexes326 to this Chapter”327. A ‘rectification’ is more minor than a ‘modification’; the EU-Canada BTA specifies a procedure for the latter328 and provides both a process for329, and instances of 330, the former – such as an alteration in the procuring entity’s name331.

Intellectual property The aims of this chapter332 of the EU-Canada BTA are to ease the manufacture and commercialization of original products and the supply of services between the Parties333, and to attain a sufficient and effectual degree of protection and application of intellectual property rights334. The chapter’s provisions enhance 320 ibid art 19.9.1. This Paragraph is similar to Article VI:1 of the Agreement on Government Procurement (text to n 309 in ch 2). 321 ibid art 19.14.1. 322 ibid art 19.14.5. 323 n 286. 324 ‘Covered procurement’ is defined above in this subsection (text to n 292). 325 ibid art 19.17.1. 326 nn 288 and 289. 327 ibid art 19.18.1. 328 ibid art 19.18.2–4. 329 ibid art 19.18.6–7. 330 ibid art 19.18.5. 331 ibid art 19.18.5(a). 332 Chapter 20. 333 ibid art 20.1(a). 334 ibid art 20.1(b).

200  Bilateral Trade Agreements the Parties’ rights and duties under the TRIPS335. As for WTO Members in respect of the TRIPS336, each Party to the EU-Canada BTA may decide upon the most suitable method to implement the latter’s provisions337.

Copyright The Parties are to observe Articles 2 to 20 of the Berne Convention for the Protection of Literary and Artistic Works338, Articles 1 to 14 of the WIPO Copyright Treaty339, Articles 1 to 23 of the WIPO Performances and Phonograms Treaty340 and Articles 1 to 22 of the International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations341. Most of the EU-Canada BTA’s provisions on copyright concern communication342 and phonograms343.

Trademarks Both Parties are to “make all reasonable efforts to” observe Articles 1 to 22 of the Singapore Treaty on the Law of Trademarks344, and to accept the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks345. Each Party is to establish a regime for the registration of trademarks

335 ibid art 20.2.1. The section entitled ‘The TRIPS’, in Chapter 2, summarizes the TRIPS. 336 Text to n 175 in ch 2. 337 ibid art 20.2.2. 338 ibid art 20.7.1(a). n 179 in ch 2. 339 ibid art 20.7.1(b). The WIPO Copyright Treaty was adopted at Geneva in December 1996 (World Intellectual Property Organization, ‘WIPO Copyright Treaty’ accessed 28 May 2018). 340 CETA (n 18) art 20.7.1(c). The WIPO Performances and Phonograms Treaty was adopted at Geneva in December 1996 (World Intellectual Property Organization, ‘WIPO Performances and Phonograms Treaty (WPPT)’ ­accessed 28 May 2018). 341 CETA (n 18) art 20.7.1(d). n 180 in ch 2. 342 For example, subject to two exceptions each Party is to grant an exclusive right to performers “to authorise or prohibit the broadcasting by wireless means and the communication to the public of their performances” (ibid art 20.8.1). 343 For instance, each Party is to “provide adequate legal protection and effective legal remedies against the circumvention of effective technological measures that are used by authors, performers or producers of phonograms in connection with the exercise of their rights in, and that restrict acts in respect of, their works, performances, and phonograms, which are not authorised by the authors, the performers or the producers of phonograms concerned or permitted by law” (ibid art 20.9.2). 344 The Singapore Treaty on the Law of Trademarks was adopted at Singapore in March 2006 (World Intellectual Property Organization, ‘Singapore Treaty on the Law of Trademarks’ accessed 28 May 2018). 345 CETA (n 18) art 20.13. The Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks was adopted at Madrid in June 1989; it was amended in October 2006 and November 2007 (World Intellectual Property Organization, ‘Protocol

Bilateral Trade Agreements  201 in which the regulator must communicate in writing to the applicant any refusal to register a trademark346, and is to provide such an applicant with a right to challenge that refusal and with a judicial appeal at last instance347. It is to make available “the fair use of descriptive terms” as a bounded exception to the rights that a trademark confers348.

Geographical indications349 Annex 20-A to the EU-Canada BTA contains two Schedules – one for Canada and the other for the EU – which give the product class and the territory, region or locality of origin of the indication350. For example, in the EU Schedule, the indication ‘Queso Manchego’ is within the product class ‘cheeses’ and originates in Spain351. Annex 20-C to the EU-Canada BTA lists the product classes that Annex 20-A to the Agreement uses, stating the Chapter(s) and/or the Heading(s) within the Harmonized System352 to which each class corresponds353. For instance, the product class ‘cheeses’ means “products falling under heading 04.06 of the Harmonized System”354. The text of the EU-Canada BTA links these Annexes to its relevant substantive provisions, as follows. This Sub-section [of Section B of Chapter 20 of the EU-Canada BTA, which is entitled ‘Geographical Indications’] applies to geographical indications identifying products falling within one of the product classes listed in Annex 20-C [to the EU-Canada BTA]355. For the purposes of this Sub-section: (a) the indications listed in Part A of Annex 20-A [to the EU-Canada BTA] are geographical indications which identify a product as originating in the territory of the European Union or a Relating to the Madrid Agreement Concerning the International Registration of Marks’ accessed 28 May 2018). 346 CETA (n 18) art 20.14. 347 ibid. 348 ibid art 20.15. Each Party may supply “other limited exceptions”, as long as these take into account the lawful interests of both the benchmark’s owner and third parties (ibid). 349 A ‘geographical indication’ is “an indication which identifies an agricultural product or foodstuff originating in the territory of a Party, or a region or locality in that territory, where a given … characteristic of the product is essentially attributable to its geographical origin” (ibid art 20.16; emphasis added). This definition is consistent with, but narrower than, the definition of ‘geographical indication’ in the TRIPS – compare the emphasized words in this note with the first occurrence of the word ‘good’ in Article 22.1 of the TRIPS (n 176 in ch 2). 350 ibid Annex 20-A Part A (European Union) and Part B (Canada). 351 ibid Annex 20-A Part A. 352 n 24 introduces the Harmonized System. 353 ibid Annexes 20-A and 20-C. 354 ibid Annex 20-C para 6. 355 ibid art 20.17.

202  Bilateral Trade Agreements region or locality in that territory; and (b) the indications listed in Part B of Annex 20-A are geographical indications which identify a product as originating in the territory of Canada or a region or locality in that territory 356. Each Party is to supply the legal apparatus for “interested parties” to stop: (a) “the use of a geographical indication of the other Party” that Annex 20-A to the EU-Canada BTA lists, “for a product which falls within the product class specified in Annex 20-A for that geographical indication”, and which either: (i) originates in a location other than that which Annex 20-A identifies for that geographical indication, or (ii) emerges from the place of origin which Annex 20-A specifies for that geographical indication, but was not made in conformity with the other Party’s laws and regulations which would apply if the product were to be used within that other Party357, (b) the use of a method in a good’s classification or presentation which shows or suggests that this product originates in a location that is not its place of origin, in a way which misleads the public as to that place of origin358, and (c) any other use that amounts to “an act of unfair competition” under Article 10 bis of the Paris Convention for the Protection of Industrial Property359. Each Party is to implement a prohibition on “manufacturing, preparing, packaging, labelling, selling or importing or advertising a food commodity in a manner that is false, misleading or deceptive or is likely to create an erroneous impression regarding its origin”360.

Designs Both Parties must “make all reasonable efforts to” join the Geneva Act of the Hague Agreement Concerning the International Registration of Industrial Designs361. Copyright law may protect a design’s subject-matter, if the conditions for this are fulfilled362.

356 ibid art 20.18. 357 ibid art 20.19.2(a). 358 ibid art 20.19.2(b). 359 ibid art 20.19.2(c). n 178 in ch 2 gives further information concerning this Convention. Under Article 10 bis of the Convention, ‘an act of unfair competition’ comprises “[a]ny act of competition contrary to honest practices in industrial or commercial matters” (Paris Convention for the Protection of Industrial Property (signed 14 July 1967, entered into force 26 April 1970) UNTS I:11851 art 10 bis (2)). 360 ibid art 20.19.4. 361 ibid art 20.24. The Geneva Act of the Hague Agreement Concerning the International Registration of Industrial Designs was adopted in July 1999, entering into force in December 2003 (World Intellectual Property Organization, ‘Hague Agreement Concerning the International Registration of Industrial Designs: Geneva Act (1999) (Authentic text)’ accessed 30 May 2018). 362 CETA (n 18) art 20.25. Each Party is to determine these conditions and the extent to which this protection is extended (ibid).

Bilateral Trade Agreements  203 Patents Both Parties are to “make all reasonable efforts to” adhere to Articles 1 to 14 and Article 22 of the Patent Law Treaty363. Each Party is to grant “a period of sui generis 364 protection” with regard to a product365 for which a basic patent366 is in force, at the patent-holder’s, or the successor-in-title’s, request, as long as the following conditions are satisfied: an authorization has been given to put the product onto that Party’s market as a pharmaceutical product367 (a ‘marketing authorization’)368, “a period of sui generis protection” has not hitherto been applied to the product369, and the marketing authorization is the earliest authorization to put the product on to that Party’s market as a pharmaceutical product370. If a Party connects the granting of marketing authorizations for generic pharmaceutical products with the presence of patent protection, then it must ensure that all litigants are provided with equal, efficacious rights of appeal371.

Data protection If a Party requires, as a condition for authorising the marketing of pharmaceutical products372 that utilise new chemical entities … the submission of undisclosed … data necessary to determine whether the use of those products is safe and effective, [then] the Party shall protect such data against disclosure … except where the disclosure is necessary to protect the public or unless steps are taken to ensure that the data are protected against unfair commercial use373. 363 ibid art 20.26. The Patent Law Treaty was adopted at Geneva in June 2000 (World Intellectual Property Organization, ‘Patent Law Treaty’ accessed 30 May 2018). 364 ‘Sui generis’ means “unique” or, strictly, “of its own kind” (Judy Pearsall (ed), The New Oxford Dictionary of English (Oxford University Press 1998) 1857), and is “[u]sed to indicate that something belongs to a particular category” (Gavin McFarlane, The Layman’s Dictionary of English Law (Waterlow Publishers Limited 1984) 281). 365 In Article 20.27 of the EU-Canada BTA, a ‘product’ is “the active ingredient or combination of active ingredients of a pharmaceutical product” (CETA (n 18) art 20.27.1). n 367 defines ‘pharmaceutical product’. 366 A ‘basic patent’ is “a patent which protects a product as such, a process to obtain a product or an application of a product, and which has been designated by the holder of a patent that may serve as a basic patent, as the basic patent for the purpose of the granting of sui generis protection” (ibid). nn 364 and 365 define ‘sui generis’ and ‘product’, respectively. 367 A ‘pharmaceutical product’ is “a product … that is manufactured, sold or represented for use in: (a) making a medical diagnosis, treating, mitigating or preventing disease, disorder, or abnormal physical state, or its symptoms, or (b) restoring, correcting, or modifying physiological functions” (ibid art 20.6). 368 ibid art 20.27.2(a). 369 ibid art 20.27.2(b). 370 ibid art 20.27.2(c). 371 ibid art 20.28. 372 n 367 defines ‘pharmaceutical product’. 373 ibid art 20.29.1.

204  Bilateral Trade Agreements Each Party is to decide upon “safety and efficacy requirements”, prior to authorizing the placement of “a plant protection product” on the market 374. It is to accord “a limited period of data protection” with regard to this good “for a test or study report submitted for the first time to obtain an authorisation”375.

Plant varieties The Parties are to co-operate to advance and strengthen the protection of plant varieties, based on the 1991 Act of the International Convention for the Protection of New Varieties of Plants376.

Enforcement of intellectual property rights377 Each Party is to make certain that its procedures for enforcing intellectual property rights are fair, equitable, straightforward and inexpensive, and do not necessitate “unreasonable time-limits or unwarranted delays”378. They are to be applied in a way that avoids the introduction of obstacles to licit trade and provides for protection against their misuse379. Each Party is to ensure that, with regard to an alleged breach of an intellectual property right that is perpetrated “on a commercial scale”, the judge has the authority to subpoena the production of pertinent information – as that Party’s law provides – subject to confidentiality requirements380. It must make sure that the judge may order swift, effective provisional measures to maintain relevant evidence concerning the alleged contravention – conditional upon confidentiality requirements381. Remedies which each Party must make available to

374 ibid art 20.30.1. 375 ibid art 20.30.2. This period must be ten years or more from the date of the product’s first authorization in the relevant Party, in respect of “the test or study report supporting the authorisation of a new active ingredient and data supporting the concurrent registration of the end-use product containing the active ingredient” (ibid art 20.30.4). 376 ibid art 20.31. The International Convention for the Protection of New Varieties of Plants was adopted at Paris in December 1961, and revised in November 1972, October 1978 and March 1991; ‘the 1991 Act’ of the Convention is the Convention as it reads after its revision of March 1991 (ibid; International Union for the Protection of New Varieties of Plants (UPOV), ‘International Convention for the Protection of New Varieties of Plants’ accessed 31 May 2018). 377 The term ‘intellectual property rights’ relates to all categories of intellectual property which Sections 1 to 7 of Part II of the TRIPS address (CETA (n 18) art 20.32.4). The text to n 177 in ch 2 lists these classes (n 191 in ch 2 and accompanying text). 378 CETA (n 18) art 20.32.1. 379 ibid. 380 ibid art 20.34. 381 ibid art 20.35.1.

Bilateral Trade Agreements  205 a judge include injunctions382 and orders for the infringer to compensate the right-holder in damages383 or remuneration384.

Border measures Each Party is to introduce or preserve procedures in respect of “import and export shipments”385 according to which a right-holder may ask its competent ­authorities – or those authorities may voluntarily act before this request – to ­detain, or postpone the release of, goods that could violate a copyright, a trademark or a geographical indication386. Each Party may institute or maintain these procedures as regards “transhipments and shipments in customs transit”387. Each Party may exclude from the application of these provisions “small quantities of goods of a non-commercial nature” that are carried in the personal luggage of travellers or sent in small batches388.

Co-operation The Parties agree to co-operate with each other, with the intention of aiding the implementation of the duties and commitments that they assume under this chapter of the EU-Canada BTA389. Fields of co-operation include the exchange of information and390 experience on protecting and enforcing intellectual property rights, and on instituting arrangements between the Parties’ “collecting societies”391. 382 ibid arts 20.37.1 and 20.39.1. 383 ibid art 20.40.1. 384 ibid art 20.40.2. The text to nn 713–716 describes the EU-Canada BTA’s provision of remedies of seizure, definitive removal and destruction of specified items in respect of breaches of intellectual property rights. 385 ‘Import shipments’ are “shipments of goods brought into the territory of a Party from a place outside the territory, while those goods remain under customs control” (ibid art 20.43.1). ‘Export shipments’ are “shipments of goods which are taken from the territory of a Party to place outside that territory” (ibid). Both definitions exclude “shipments in customs transit and transhipments” (ibid). ‘Shipments in customs transit’ are “shipments of goods that enter the territory of a Party from a place outside that territory and are authorised by customs authorities for transport under continuous customs control from an office of entry to an office of exit, for the purpose of exiting the territory” (ibid). “Transhipments” are “shipments of goods that are transferred under customs control from the importing means of transport to the exporting means of transport within the area of one customs office which is the office of both importation and exportation” (ibid). 386 ibid art 20.43.2, 4 and 5. Article 20.43.1 of the EU-Canada BTA defines ‘pirated copyright goods’, ‘counterfeit trademark goods’ and ‘counterfeit geographical indication goods’. 387 ibid art 20.43.7; emphasis added. n 385 defines ‘shipments in customs transit’ and ‘transhipments’. 388 ibid art 20.43.8. 389 ibid art 20.50.1. n 332. 390 The EU-Canada BTA reads ‘or’. 391 ibid. The EU-Canada BTA does not define ‘collecting societies’. It is submitted that this term includes the copyright collectives located with each Party. It may also encompass co-­ordinating bodies in respect of other categories of intellectual property, which are situated there.

206  Bilateral Trade Agreements Regulatory co-operation Both Parties confirm their rights and duties in respect of regulatory measures under the GATT, the Agreement on the Application of Sanitary and Phytosanitary Measures, the Agreement on Technical Barriers to Trade and the GATS392, and are dedicated to ensuring “high levels of protection of human, animal and plant life or health, and the environment”, in compliance with those Agreements and the EU-Canada BTA393. They are committed to advancing regulatory co-operation in order to avert and remove unnecessary obstacles to trade and investment394, improve the milieu for competition and innovation395 and foster clear, efficient and effectual regulatory processes396. Whilst a Party is not required to pursue any specific regulatory co-operation activity and may decline or withdraw from regulatory co-operation, it “should be prepared to explain the reasons for” this refusal or disengagement to the other Party397. The “objectives of regulatory co-operation” are398 to “contribute to the protection of human life, health or safety, animal or plant life or health and the environment”399, “build trust, deepen mutual understanding of regulatory governance and obtain from each other the benefit of expertise and perspectives”400, ease bilateral trade and investment401, and further the enhancement of industrial competition and efficiency402. The Parties endeavour to satisfy these objectives by accepting regulatory competition activities that may 403 include participating in bilateral discourses about regulatory governance404, consulting and exchanging information with each other during the regulatory development process405, sharing private information in accordance with each Party’s rules for

392 ibid art 21.2.1. The section in Chapter 1 entitled ‘The GATT’, and the sections in Chapter 2 entitled ‘The Agreement on the Application of Sanitary and Phytosanitary Measures’, ‘The Agreement on Technical Barriers to Trade’ and ‘The GATS’, consider the GATT, the Agreement on the Application of Sanitary and Phytosanitary Measures, the Agreement on Technical Barriers to Trade and the GATS, respectively. 393 ibid art 21.2.2. 394 ibid art 21.2.4(a). 395 ibid art 21.2.4(b). 396 ibid art 21.2.4(c). 397 ibid art 21.2.6. The use of the verb ‘should’ in Article 21.2.6 of the EU-Canada BTA suggests that this Agreement does not oblige a Party which repudiates or relinquishes regulatory co-operation to explain its reasons for that decision to the other Party (nn 257 and 267). 398 The EU-Canada BTA uses the verb ‘include’. It does not provide information on the scope of these objectives beyond the four specified. 399 ibid art 21.3(a). 400 ibid art 21.3(b). 401 ibid art 21.3(c). 402 ibid art 21.3(d). 403 It is submitted that the insertion of the word ‘may’ at this point in the EU-Canada BTA is to reinforce the voluntary nature of the commitments relating to regulatory co-operation that each Party takes on (text to n 397) under this chapter (n 424) of the Agreement. 404 ibid art 21.4(a). 405 ibid art 21.4(b).

Bilateral Trade Agreements  207 disclosing this to foreign governments406, promptly “sharing proposed technical or sanitary and phytosanitary regulations” which may affect inter-Party trade407, supplying a copy of a proposed regulation to the other Party on its ­request – conditional upon “applicable privacy law” – and permitting enough time for parties affected to furnish written comments408, expeditiously exchanging information as to “regulatory actions, measures or amendments under consideration”409, investigating possibilities for minimizing unnecessary differences in regulations410, co-operating on matters regarding “the development, adoption, implementation and maintenance of international standards, guides and recommendations”411, examining the possibility and suitability of collecting identical or like data concerning “the nature, extent and frequency of problems that may potentially give rise to regulatory action” – in situations in which this would accelerate the attainment of statistically significant conclusions about those difficulties412, regularly comparing practices for the collection of data413, exploring the feasibility and appropriateness of using identical or similar assumptions and methodologies to the other Party to examine data and evaluate the underlying matters that regulation is to address414, comparing with regularity assumptions and methodologies used in analysis415, exchanging information on the implementation, enforcement and management of regulations416, conducting coordinated agendas for research417, discharging reviews of regulations and/or418 policies after their implementation419, comparing assumptions and methods that those post-implementation reviews use420, divulging to each other synopses of the results of such reviews421, specifying the proper approach to lessening unfavourable effects of present regulatory differences on bilateral trade and investment in sectors that a Party identifies422, and interchanging expertise, experience and information concerning the welfare of animals423.

406 ibid art 21.4(c). 407 ibid art 21.4(d). 408 ibid art 21.4(e). 409 ibid art 21.4(f). 410 ibid art 21.4(g). 411 ibid art 21.4(h). 412 ibid art 21.4(i). 413 ibid art 21.4(j). 414 ibid art 21.4(k). 415 ibid art 21.4(l). 416 ibid art 21.4(m). 417 ibid art 21.4(n). 418 The EU-Canada BTA reads “or”. It is submitted that the authors of the document wished to enable the Parties to carry out post-implementation reviews of either policies or regulations or both – hence the substitution of ‘or’ with ‘and/or’ in the text. 419 ibid art 21.4(o). 420 ibid art 21.4(p). 421 ibid art 21.4(q). 422 ibid art 21.4(r). 423 ibid art 21.4(s).

208  Bilateral Trade Agreements The EU-Canada BTA establishes a Regulatory Co-operation Forum, to ease and advance regulatory co-operation between the Parties in fulfilment of this chapter424 of the EU-Canada BTA, which is to supply a forum to deliberate matters of regulatory policy which the Parties have identified425, help each regulator to locate potential partners of regulatory competition activities and furnish it with suitable tools for that purpose426, assess regulatory proposals which a Party believes may bear potential for co-operation427, support the development of regulatory co-operation activities428 between the Parties429, and review the advancement, accomplishments and best practices of initiatives in regulatory co-operation in particular sectors430. The Parties are to periodically exchange information about planned or continuing regulatory projects over their spheres of responsibility, in order to appraise regulatory proposals, monitor upcoming projects and discern possibilities for regulatory co-operation431.

Trade and sustainable development Both Parties confirm their commitment to advancing the development of worldwide trade in a manner that contributes to the goal of sustainable development432. As they wish to treat labour and environmental matters “as part of a global approach to trade and sustainable development”433 and agree that the rights and duties arising from Chapters 23 (entitled ‘Trade and labour’)434 and Twenty-Four (titled ‘Trade and environment’) 435 of the EU-Canada BTA “are to be considered in the context of this Agreement”436, through the implementation of those chapters the Parties aim to further sustainable development via the strengthened co-ordination and amalgamation of their respective trade, labour and environmental policies437, foster dialogue and co-operation between themselves with the intention of evolving their trade and economic associations in a way that reinforces their respective measures and standards for “labour and environmental protection” and maintaining their objectives for this protection 424 ibid art 21.6.1. ‘This chapter’ refers to Chapter 21 of the EU-Canada BTA. 425 ibid art 21.6.2(a). 426 ibid art 21.6.2(b). 427 ibid art 21.6.2(c). 428 Text to nn 404–417 and 419–423. 429 ibid art 21.6.2(d). 430 ibid. 431 ibid art 21.7.1. 432 ibid art 22.1.1. The EU-Canada BTA does not define ‘sustainable development’. 433 ibid art 22.1.2. 434 The subsection entitled ‘Trade and labour’, in the current section, summarizes Chapter 23 of the EU-Canada BTA. 435 The subsection entitled ‘Trade and environment’, in the current section, synopsizes Chapter 24 of the EU-Canada BTA. 436 ibid. 437 ibid art 22.1.3(a).

Bilateral Trade Agreements  209 “in a context of trade relations that are free, open and transparent”438, augment enforcement of their national labour and environmental law and regard for international labour and environmental accords439, encourage the exhaustive use of instruments (e.g., impact assessments, consultations with stakeholders) in the management of trade, labour and environmental questions440, support “business, civil society organisations and citizens to” institute practices which contribute to the attainment of sustainable development goals441, and nurture public consultation and participation in the deliberation of sustainable development topics that emerge from the EU-Canada BTA and in the establishment of pertinent law and policies442. Each Party will try to further “trade and economic flows and practices” which contribute to strengthening proper “work and environmental protection”, including by encouraging the institution and use of voluntary schemes that concern the sustainable manufacture of goods and services (e.g., eco-labelling, fair trade arrangements) 443 and discretionary best practices constituting corporate social responsibility444, “the integration of sustainability considerations in private and public consumption decisions”445, and the initiation, growth, maintenance and/or446 improvement of performance objectives and standards with regard to the environment447. The EU-Canada BTA founds a Committee on Trade and Sustainable Development448, which consists of Parties’ high-level representatives who are responsible for issues which this chapter449, Chapter 23450 and Chapter 24 451 of the EU-Canada BTA cover, supervises the implementation of Chapters 23 and 24, and addresses any point of common concern to the Parties in connection with “the interface between economic development, social development and environmental protection”452.

438 ibid art 22.1.3(b). 439 ibid art 22.1.3(c). 440 ibid art 22.1.3(d). 441 ibid. 442 ibid art 22.1.3(e). 443 ibid art 22.3.2(a). 444 ibid art 22.3.2(b). 445 ibid art 22.3.2(c). 446 The EU-Canada BTA reads “or”. 447 ibid art 22.3.2(d). 448 This Committee is established under Article 26.2.1(g) of the EU-Canada BTA (ibid art 22.4.1; text to n 516). 449 ‘This chapter’ refers to Chapter 22 of the EU-Canada BTA. 450 n 434 and accompanying text. 451 n 435 and accompanying text. 452 ibid art 22.4.1. The Committee on Trade and Sustainable Development may also fulfil its duties by means of dedicated meetings that comprise participants who are responsible for any issue that Chapter 23 or Chapter 24 covers (ibid).

210  Bilateral Trade Agreements Trade and labour453 Each Party is to attempt to ensure that its laws and policies cater for and foster “high levels of labour protection”, and is to endeavour to continue to better these rules and policies with the aim of providing such standards454. It must ensure that its labour law and practices include and furnish protection for the freedom of association455, the right to collective bargaining456, the abolition of forced labour457, the eradication of child labour458, and the removal of discrimination with regard to employment and vocation459. It must also make sure that its labour law and practices advance workers’ health and safety460, the institution of suitable minimum standards for employment461 and non-discrimination with regard to working conditions462. Disputes which arise under this chapter463 of the EU-Canada BTA are to be resolved by the rules and procedures that the chapter provides464. It includes Articles that enable consultations to be held between the Parties465 and, in the absence of an acceptable outcome to these466, a Panel of Experts to be convoked467.

Trade and environment468 Each Party will attempt to ensure that its laws and policies deliver and promote considerable environmental protection, and strive to further improve those rules and policies and the extent of such protection that they impart469. It confirms its commitment to effectually implement, in its entire territory, the multilateral environmental agreements that it has ratified470. 453 Chapter 23 (n 434). 454 ibid art 23.2. 455 ibid art 23.3.1(a). The ILO’s Conventions and Recommendations on the freedom of association, collective bargaining and industrial relations are considered at pages 208–218 of Graeme Baber, Essays on International Law (Cambridge Scholars Publishing 2017). 456 CETA (n 18) art 23.3.1(a). n 455. 457 ibid art 23.3.1(b). The ILO’s Conventions and Recommendations on forced labour are examined at pages 218–227 of Baber, Essays on International Law (n 455). 458 CETA (n 18) art 23.3.1(c). The ILO’s Conventions and Recommendations on the elimination of child labour and the protection of children and young persons are surveyed at pages 227–240 of Baber, Essays on International Law (n 455). 459 CETA (n 18) art 23.3.1(d). 460 ibid art 23.3.2(a). 461 ibid art 23.3.2(b). 462 ibid art 23.3.2(c). 463 n 453. 464 ibid art 23.11.1. 465 ibid art 23.9.1. Article 23.9 of the EU-Canada BTA governs inter-Party consultations. 466 ibid art 23.10.1. 467 ibid. Article 23.10 of, and Annexes 29-A and 29-B to, the EU–Canada BTA, regulate matters concerning the Panel of Experts (ibid art 23.10.2). 468 Chapter 24 (n 435). 469 ibid art 24.3. 470 ibid art 24.4.2.

Bilateral Trade Agreements  211 The Parties pledge to consult and co-operate, as suitable, with regard to matters of mutual interest that concern multilateral environmental agreements, especially trade-related questions471. Whilst preparing and implementing measures directed at environmental protection that may influence inter-Party trade and investment, each Party is to consider “relevant scientific and technical information and related international standards, guidelines, or recommendations”472. The Parties are determined to try to ease and advance trade and investment in environmental goods and services – including by attending to the curtailment of non-tariff impediments associated with those goods and services473. In a way that is compatible with their global obligations, the Parties commit to support trade in forest products from woodlands that are sustainably run474, exchange information and collaborate on initiatives to encourage the sustainable management of forests475, further the efficacious use of the Convention on International Trade in Endangered Species of Wild Fauna and Flora476 – in respect of species of timber that are deemed to be at risk477, and co-operate in international gatherings which address “the conservation and sustainable management of forests”478. In a way that is consistent with their worldwide commitments, the Parties promise to introduce or continue “effective monitoring, control and surveillance schemes” that are targeted at conserving stocks of fish and preventing overfishing479, co-ordinate and instigate or retain actions to address “illegal, unreported and unregulated (‘IUU’) fishing”480, co-operate with, and in, “regional fisheries management organisations”481 in order to accomplish “good

471 ibid art 24.4.3. 472 ibid art 24.8.1. 473 ibid art 24.9.1. 474 ibid art 24.10.2(a). 475 ibid art 24.10.2(b). 476 The Convention on International Trade in Endangered Species of Wild Fauna and Flora was adopted at Washington, D.C. in March 1973; it was amended in June 1979 and April 1983 (Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), ‘Convention on International Trade in Endangered Species of Wild Fauna and Flora’ accessed 8 June 2018). The Convention’s objective is “to ensure that international trade in specimens of wild animals and plants does not threaten their survival” (Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), ‘What is CITES?’ accessed 8 June 2018). 477 CETA (n 18) art 24.10.2(c). 478 ibid art 24.10.2(d). 479 ibid art 24.11.2(a). 480 ibid art 24.11.2(b). ‘Illegal, unreported and unregulated fishing’, abbreviated to ‘IUU’, “is fishing that is conducted contradictory to legal conservation and management measures currently in place around the world” (International Monitoring, Control and Surveillance (MCS) Network, ‘What is IUU Fishing?’ accessed 9 June 2018). 481 ‘Regional fisheries management organisations’ are “intergovernmental fisheries organizations or arrangements that have the authority to establish fisheries conservation and management measures on the high seas” (Royal Institute of International Affairs (Chatham House), ‘Recommended Best Practices for Regional Fisheries Management Organizations – Executive

212  Bilateral Trade Agreements governance”482, and encourage the growth “of an environmentally responsible and economically competitive aquaculture industry” 483. Disputes that originate from this chapter484 of the EU-Canada BTA are to be settled by the rules and procedures that the chapter supplies485. It includes Articles that provide for consultations between the Parties486 and, in the absence of a satisfactory conclusion to these487, a Panel of Experts to be convened488.

Bilateral dialogues and co-operation The Parties agree to enable co-operation on matters of mutual interest, including by means of reinforcing bilateral collaboration on biotechnology through the Canada-EU Dialogue on Biotech Market Access Issues489, nurturing and aiding bilateral dialogue and information exchange on issues concerning “trade in forest products” via the Bilateral Dialogue on Forest Products490, attempting to institute and preserve effectual co-operation with regard to raw materials491 via the Bilateral Dialogue on Raw Materials492, and supporting increased co-operation on issues relating to “science, technology, research and innovation”493. The CETA Joint Committee494 may choose to change or perform the

Summary: Report of an independent panel to develop a model for improved governance by Regional Fisheries Management Organizations’ (The Royal Institute of International Affairs, 2007) 1). 482 CETA (n 18) art 24.11.2(c). 483 ibid art 24.11.2(d). 484 n 468. 485 ibid art 24.16.1. 486 ibid art 24.14.1. Article 24.14 of the EU-Canada BTA governs inter-Party consultations. 487 ibid art 24.15.1. 488 ibid. Article 24.15 of, and Annexes 29-A and 29-B to, the EU-Canada BTA, regulate matters concerning the Panel of Experts (ibid art 24.15.2). 489 ibid art 25.1.1(a); European Commission, ‘Comprehensive Economic and Trade Agreement (CETA) – The tenth Meeting of Canada-EU Dialogue on Biotech Market Access Issues (26 April 2018): Agenda’ accessed 9 June 2018. Although this document is entitled ‘the tenth Meeting’, the event of 26 April 2018 to which it refers is named the first meeting of Bilateral Dialogue on Biotech Market Access Issues on another web page from the EU’s Europa website (European Commission, ‘News archive – Canada | Brussels 23 March 2018: CETA – Meetings and documents’ accessed 9 June 2018). Article 25.2.1 of the EU-Canada BTA specifies the scope of the Canada-EU Dialogue on Biotech Market Access Issues. 490 CETA (n 18) art 25.1.1(b). Article 25.3.1 of the EU-Canada BTA identifies the extent of the Bilateral Dialogue on Forest Products. 491 The term ‘raw materials’ embraces “minerals, metals and agricultural products with an industrial use” (ibid art 25.4.1). 492 ibid art 25.1.1(c). Article 25.4.2 of the EU-Canada BTA defines the ambit of the Bilateral Dialogue on Raw Materials. 493 ibid art 25.1.1(d). Article 25.5 of the EU-Canada BTA provides guidance concerning the increased co-operation on science, technology research and innovation. 494 Text to nn 498–505, 507–510 and 521–524.

Bilateral Trade Agreements  213 task allocated to a Dialogue495. It may disband a Dialogue496. This Committee’s consent is required for the Parties to participate in additional areas of bilateral co-operation497.

Administrative and institutional provisions The Parties established a CETA Joint Committee, which is to comprise representatives of both Canada and the EU498. The Committee meets annually, or at a Party’s request499. It is responsible for all matters that concern inter-Party trade and investment, and for the EU-Canada BTA’s implementation and application500. A Party may refer any point which relates to these issues to the Committee501. The CETA Joint Committee will supervise and ease the execution and application of the EU-Canada BTA and advance that Agreement’s general objectives502, oversee the work of all entities which have been founded under the BTA 503, pursue suitable ways and techniques of preventing difficulties that might occur in areas which the Agreement covers or of settling disputes that may emerge concerning its interpretation or use504, ratify its own procedural rules505, take decisions in accordance with Article 26.3506 of the EU-Canada BTA507, and review any subject which is associated with the BTA’s contents508. It may perform other listed duties, which include delegating duties to the specialized committees509 and adopting interpretations of the Agreement’s provisions510. The specialized committees established under the EU-Canada BTA comprise the Committee on Trade in Goods and its direct reports – the Committee on Agriculture, the Committee on Wines and Spirits, the Joint Sectoral Group on Pharmaceuticals511, the Committee on Services and Investment and its reportee – the Joint Committee on Mutual Recognition of Professional Qualifications512,

495 ibid art 25.1.4. 496 ibid. 497 ibid art 25.1.5. 498 ibid art 26.1.1. 499 ibid art 26.1.2. 500 ibid art 26.1.3. 501 ibid. This includes interpretation of the EU-Canada BTA (ibid). 502 ibid art 26.1.4(a). 503 ibid art 26.1.4(b). 504 ibid art 26.1.4(c). 505 ibid art 26.1.4(d). 506 Text to nn 521, 522 and 524. 507 ibid art 26.1.4(e). 508 ibid art 26.1.4(f). 509 ibid art 26.1.5(a). 510 ibid art 26.1.5(e). 511 ibid art 26.2.1(a). 512 ibid art 26.2.1(b).

214  Bilateral Trade Agreements the Joint Management Committee for Sanitary and Phytosanitary Measures513, the Committee on Government Procurement514, the Financial Services Committee515, the Committee on Trade and Sustainable Development516, the Regulatory Cooperation Forum517 and the CETA Committee on Geographical Indications518. The Joint Customs Cooperation Committee, which was founded under the Agreement between the European Community and Canada on customs co-operation and mutual assistance in customs matters519, “is granted authority to act under the auspices of the CETA Joint Committee”520. The CETA Joint Committee shall, for the purposes of attaining the objectives of [the EU-Canada BTA], have the power to make decisions in respect of all matters when this Agreement so provides521. The[se] decisions … shall be binding on the Parties … and the Parties shall implement them522. The CETA Joint Committee may also make appropriate recommendations523. The CETA Joint Committee shall make its decisions and recommendations by mutual consent524. Thus, the EU-Canada BTA is accompanied by a considerable institutional apparatus whose pinnacle is the CETA Joint Committee, which has the power to take decisions pursuant to the Agreement that are binding on the Parties. It is submitted that effective workings of this system will prove to be integral to the successful operation of the BTA.

Transparency Each Party is to make sure that its generally applicable “laws, regulations, procedures and administrative rulings” on issues that the EU-Canada BTA covers are

513 ibid art 26.2.1(d). 514 ibid art 26.2.1(e). 515 ibid art 26.2.1(f). 516 ibid art 26.2.1(g). The text to nn 448 and 452 gives information concerning the Committee on Trade and Sustainable Development. 517 ibid art 26.2.1(h). 518 ibid art 26.2.1(i). 519 ibid art 26.2.1(c). n 88 outlines the content of the Agreement on customs co-operation and mutual assistance and customs matters. The Joint Customs Cooperation Committee is concerned with “rules of origin, origin procedures, customs and trade facilitation” (ibid). The subsection entitled ‘Customs and trade facilitation’, above in the current section, summarizes Chapter 6 of the EU-Canada BTA – which is entitled ‘Customs and trade facilitation’. The BTA’s Protocol on rules of origin and origin procedures contains provisions on rules of origin and origin procedures. 520 ibid art 26.2.1. 521 ibid art 26.3.1. 522 ibid art 26.3.2. 523 ibid. 524 ibid art 26.3.3.

Bilateral Trade Agreements  215 swiftly published525. As far as possible, it must issue these items before it adopts them526 and extend “a reasonable opportunity” for the other Party and “interested persons” to comment on them527. Each Party is to found or retain “judicial, quasi-judicial or administrative tribunals or procedures” in order to promptly review and, as necessary, correct “final administrative actions” concerning matters that the EU-Canada BTA includes528. It is to ensure that its tribunals are independent, impartial and free from “substantial interest” in the results of their deliberations529, and that the parties to the proceeding at its tribunals and procedures are equipped with the right to “a reasonable opportunity to support or defend their respective positions”530 and a decision which rests on “the evidence and submissions of record”531. Each final decision is to be fully implemented in respect of “the administrative action at issue”532.

Exceptions The general exceptions are divided into those chapters of the EU-Canada BTA to which Article XX of the GATT applies533, and those chapters to which a bespoke version of these exceptions applies. These provisions are as follows. For the purposes of Article 30.8.5 (Termination, suspension or incorporation of other existing agreements), Chapters 2 (National Treatment and Market Access for Goods)534, Five (Sanitary and Phytosanitary Measures)535 and Six (Customs and Trade Facilitation)536, the Protocol on rules of origin and origin procedures and Sections B (Establishment of investment)537 and C (Non-discriminatory treatment)538 of Chapter 8

525 ibid art 27.1.1. 526 ibid art 27.1.2(a). 527 ibid art 27.1.2(b). 528 ibid art 27.4.1. 529 ibid. 530 ibid art 27.4.2(a). 531 ibid art 27.4.2(b). 532 ibid art 27.4.2(b). 533 The subsection entitled ‘Articles XX and XXI: Exceptions to the GATT’, in the section entitled ‘The GATT’ in Chapter 1, reviews Article XX of the GATT and pertinent case law. 534 The subsection entitled ‘General issues and trade in goods’, above in the current section, synopsizes Chapter 2 of the EU-Canada BTA. 535 The subsection entitled ‘Sanitary and phytosanitary measures’, above in the current section, summarizes Chapter 5 of the EU-Canada BTA. 536 The subsection entitled ‘Customs and trade facilitation’, above in the current section, abridges Chapter 6 of the EU-Canada BTA. 537 Section B of Chapter 8 contains Articles 8.4 and 8.5 of the EU-Canada BTA. The text to nn 98-103 covers Article 8.4.1 of this Agreement. 538 Section C of Chapter 8 comprises Articles 8.6-8.8 of the EU-Canada BTA. The text to n 105 relates Articles 8.6.1 and 8.7.1 of this Agreement.

216  Bilateral Trade Agreements (Investment)539, Article XX of the GATT 1994 is incorporated into and made part of [the EU-Canada BTA]. …540 For the purposes of Chapters 9 (Cross-Border Trade in Services)541, Ten (Temporary Entry and Stay of Natural Persons for Business Purposes)542, Twelve (Domestic Regulation)543, Thirteen (Financial Services)544, Fourteen (International Maritime Transport Services)545, Fifteen (Telecommunications)546, Sixteen (Electronic Commerce)547, and Sections B (Establishment of investment)548 and C (Non-discriminatory treatment)549 of Chapter 8 (Investment)550, subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between the Parties where like conditions prevail, or a disguised restriction on trade in services, nothing in this Agreement shall be construed to prevent the adoption or enforcement by a Party of measures necessary: (a) to protect public security or public morals or to maintain public order; (b) to protect human, animal or plant life or health; or (c) to secure compliance with laws or regulations which are not inconsistent with the provisions of [the EU-Canada BTA] including those relating to: (i) the prevention of deceptive and fraudulent practices or to deal with the effects of a default on contracts; (ii) the protection of the privacy of individuals in relation to the processing and dissemination of personal data and the protection of confidentiality of individual records and accounts; or (iii) safety551. This bespoke version of general exceptions in the EU-Canada BTA is almost identical to the chapeau and Paragraphs (a), (b) and (c) of Article XIV of the

539 The subsection entitled ‘Investment’, above in the current section, precises Chapter 8 of the EU-Canada BTA. 540 ibid art 28.3.1. 541 The subsection entitled ‘Cross-border trade in services’, above in the current section, condenses Chapter 9 of the EU-Canada BTA. 542 The subsection entitled ‘Temporary entry and stay of natural persons for business purposes’, above in the current section, outlines Chapter 10 of the EU-Canada BTA. 543 The subsection entitled ‘Domestic regulation’, in the current section, synopsizes Chapter 12 of the EU-Canada BTA. 544 The subsection entitled ‘Financial services’, in the current section, summarizes Chapter 13 of the EU-Canada BTA. 545 The subsection entitled ‘International maritime transport services’, in the current section, abridges Chapter 14 of the EU-Canada BTA. 546 The subsection entitled ‘Telecommunications’, in the current section, precises Chapter 15 of the EU-Canada BTA. 547 The subsection entitled ‘Electric commerce’, in the current section, condenses Chapter 16 of the EU-Canada BTA. 548 n 537. 549 n 538. 550 n 539. 551 ibid art 28.3.2.

Bilateral Trade Agreements  217 GATS552. Thus, goods and services within the EU-Canada BTA are subject to identical and very similar general exceptions, respectively, to those applying under international trade law. The EU reserves a right to protect its economic and monetary union, subject to a non-discrimination clause for Canada versus countries that are not parties to the EU-Canada BTA. This entitlement takes the following form. Where, in exceptional circumstances, capital movements and payments, including transfers, cause or threaten to cause serious difficulties for the operation of the economic and monetary union of the European Union, the European Union may impose safeguard measures that are strictly necessary to address such difficulties for a period not to exceed 180 days553. [These m] easures … shall not constitute a means of arbitrary or unjustifiable discrimination in respect of Canada or its investors compared to a third country or its investors554. The European Union shall inform Canada forthwith and present, as soon as possible, a schedule for the removal of such measures555. This right is narrowly constructed, i.e., ‘in exceptional circumstances’ and ‘strictly necessary’. Nevertheless, the EU’s negotiators’ insistence on including it unaccompanied by an equivalent entitlement for Canada – such as to provide a temporary safeguard to preserve the flow of funds between the provinces and territories of Canada – may suggest a sensitivity on their part to the ongoing economic weakness556 of the economic and monetary union. Where Canada or a Member State of the European Union that is not a member of the European Monetary Union experiences serious balance-of-­ payments or external financial difficulties, or threat thereof, it may adopt or maintain restrictive measures with regard to capital movements or payments, including transfers557. [These m]easures … shall: (a) not treat a Party less favourably than a third country in like situations; (b) be consistent with

552 The section entitled ‘The GATS’, in Chapter 2, considers Article XIV of the GATS – in relation to Article XX of the GATT. Differences between the bespoke version of general exceptions in Article 28.3.2 of the EU-Canada BTA and Article XIV of the GATS include the omission from the former of Paragraphs (d) and (e) of the latter, the deletion of the word ‘services’ in Subparagraph (c)(i) of the latter from before the word ‘contracts’ in Subparagraph (c)(i) of the former, replacement of the word ‘countries’ in the chapeau of the latter with the phrase ‘the Parties’ in the former, and the substitution of the expression ‘any Member’ in the chapeau of the latter with the phrase ‘a Party’ in the former. 553 ibid art 28.4.1. 554 ibid art 28.4.2. 555 ibid. 556 The European Central Bank sets the monetary policy of the euro area, whilst the each of the latter’s Member States conducts its own fiscal policy. 557 ibid art 28.5.1.

218  Bilateral Trade Agreements [the IMF’s Articles of Agreement558]; (c) avoid unnecessary damage to the commercial, economic and financial interests of a Party; (d) be temporary and phased out progressively as the situation … improves and shall not exceed 180 days. …559 These restrictive measures are required to satisfy more conditions than do the safeguard measures that the EU imposes pursuant to Article 28.4 of the EU-Canada BTA with regard to the euro area560. In particular, Article 28.4 contains no equivalent to the third proviso – unless ‘unnecessary damage’ in the latter can be equated to ‘strictly necessary’ in Paragraph 1 of the former. It is submitted that the second qualification in the immediately preceding quote is necessary in the light of that provision’s concern with balance-of-payments problems, which fall within the supervisory remit of the IMF561. Either Party may “adopt restrictive measures in order to safeguard its ­balance-of-payments or external financial position”562, in respect of trade in goods – provided that these measures are consistent with the GATT and with the Understanding of the Balance-of-Payments Provisions of the General Agreement on Tariffs and Trade 1994563, and with regard to trade in services – as long as those restrictive measures are accordant with the GATS564. The Parties must promptly hold consultations in respect of restrictive measures imposed under Article 28.5 of the EU-Canada BTA565. The national security exception in Article 28.6 of the EU-Canada BTA is similar to Article XXI of the GATT566. The former modifies the latter by replacing ‘any Member’ (or ‘any contracting party’) with ‘a Party’, rephrasing Paragraph (a) to read “to require a Party to furnish or allow access to information if that Party determines that the disclosure of this information would be contrary to its essential security interests”567, re-ordering Subparagraphs (i), (ii) and (iii) in Paragraph (b) to (iii), (i) and (ii) respectively, rewording its Subparagraph (b)(i) to read “connected to the production of or traffic in arms, ammunition and imple 558 A copy of the IMF’s Articles of Agreement (updated to 26 January 2016) is available from the website of the IMF at www.imf.org/external/pubs/ft/aa/pdf/aa.pdf. 559 CETA (n 18) art 28.5.2. 560 Text to nn 553–555. 561 The IMF’s purposes include: “(v) to give confidence to members by making the general resources of the Fund temporarily available to them under adequate safeguards, thus providing them with the opportunity to correct maladjustments in their balance of payments … and (vi) … to shorten the duration of and lessen the degree of disequilibrium in the international balances of payments of members” (International Monetary Fund, Articles of Agreement (International Monetary Fund 2016) art 1). 562 CETA (n 18) art 28.5.3–4. 563 ibid art 28.5.3. 564 ibid art 28.5.4. 565 ibid art 28.5.6. The text to nn 557, 559 and 562–564 concerns Article 28.5 of the EU-Canada BTA. 566 n 546 in ch 1 and accompanying text. 567 ibid art 28.6(a); emphasis added.

Bilateral Trade Agreements  219 ments of war and to such traffic and transactions in other goods and materials, services and technology undertaken, and to economic activities, carried out directly or indirectly for the purpose of supplying a military or other security establishment”568, and rephrasing Paragraph (c) to read “prevent a Party from taking any action in order to carry out its international obligations for the purpose of maintaining international peace and security”569. It is submitted that this exception is broader in its scope than Article XXI of the GATT.

Dispute settlement Each Party may resort to the establishment of a dispute settlement panel under the EU-Canada BTA, the DSU or “any other agreement to which the Parties are party”570, but may not seek redress for the contravention “of the substantially equivalent obligation” in a second forum, unless the first “fails, for procedural or jurisdictional reasons, other than termination under paragraph 20 of Annex 29-A571 [to the EU-Canada BTA], to make findings on that claim”572. Article 29.4 of the EU-Canada BTA provides for inter-Party consultations. The Parties may mediate their dispute “if the [disputed] measure adversely affects trade and investment between [them]”573. Following a non-conclusive outcome to the Parties’ consultations, “the requesting Party may refer the matter to an arbitration panel by providing its written request for the establishment of an arbitration panel to the responding Party”574, in which case the rules in Articles 29.6 to 29.15 of the EU-Canada BTA are followed. The dispute is “governed by the rules of procedure for arbitration in Annex 29-A [to the EU-Canada BTA], unless the Parties agree otherwise”575.

Final provisions The Parties are to consult each other with the intention of easing the flow of capital between them by persisting in the implementation of their policies 568 ibid art 28.6(b)(i); emphasis added. 569 ibid art 28.6(c); emphasis added. 570 ibid art 29.3.1. 571 That Paragraph states: “The arbitration panel shall suspend its work: (a) at the request of the requesting Party … and shall resume its work at the request of the requesting Party; or (b) … and shall resume its work at the request of either Party. If there is no request for the resumption of the arbitration panel’s work by the end of the period specified in the request for suspension, the proceeding shall be terminated” (ibid Annex 29-A para 20). 572 ibid art 29.3.2. 573 ibid art 29.5. Annex 29-C to the EU-Canada BTA sets out this Agreement’s mediation procedures (ibid). 574 ibid art 29.6.1. The requesting Party must make this request “within 45 days of the date of [the responding Party’s] receipt of the request for consultations [or] 25 days of the date of [the responding Party’s] receipt of the request for consultations” if the matter is urgent or involves “services that rapidly lose their trade value” (ibid arts 29.6.1 and 29.4.4). 575 ibid art 29.16.

220  Bilateral Trade Agreements concerning “the liberalisation of the capital and financial account”, and by underpinning “a stable and secure framework for long term investment”576. The EU-Canada BTA neither grants rights nor imposes duties on persons577, except for “those created between the Parties under public international law”578. Furthermore, a Party may not present a right of action in its national law versus the other Party on the basis that a measure introduced by the latter is incompatible with the EU-Canada BTA579. A Party may denounce the EU-Canada BTA by providing written notice of its cessation to both the General Secretariat of the Council of the European Union and Canada’s Department of Foreign Affairs, Trade and Development, and by supplying a copy of this notice of termination to the CETA Joint Committee580. This BTA is terminated 180 days following the date of the notice581. Notwithstanding this, the provisions of Chapter 8582 will remain in force for twenty years beyond the date of the Agreement’s termination, as regards investments made before that date583.

Comment The EU-Canada BTA fulfils expectations created by its title of ‘Comprehensive Economic and Trade Agreement’, covering trade in goods, investment, several categories of trade in services, and sustainable development – amongst other things. It relates to the WTO’s international trade agreements in several places, incorporating provisions from these into the BTA. Whilst many of the EU-­Canada BTA’s provisions impose obligations on the Parties, others are non-compulsory – which is reflected by use of the words ‘should’ or ‘may’. The employment of advisory language in some of the Agreement’s Articles tends to be constructive, as it may raise standards and approximate national laws and practices – which may, in turn, increase bilateral trade. The next sections consider three further BTAs, on a cumulative comparative basis.

The Japan–Mongolia BTA This BTA specifies an objective – “to create a new economic dynamism between the Parties by means of … liberalizing and facilitating trade in goods and

576 ibid art 30.5. 577 n 80 defines ‘person’. 578 ibid art 30.6.1. “Nothing in [the EU-Canada BTA] … permit[s it] to be directly invoked in the domestic legal system of the Parties” (ibid). 579 ibid art 30.6.2. 580 ibid art 30.9.1. 581 ibid. 582 The subsection of the current section entitled ‘Investment’ summarizes Chapter 8 of the EU-Canada BTA. 583 ibid art 30.9.2.

Bilateral Trade Agreements  221 services between the Parties584[,] facilitating movement of natural persons between the Parties585[,] increasing investment opportunities and strengthening protection for investments and investment activities in the Parties586[,] enhancing protection of intellectual property587[,] promoting cooperation and coordination for the effective enforcement of competition laws in each Party588[,] establishing a framework for further reinforcing, broadening and deepening bilateral cooperation in all fields relevant to trade and investment and improvement of the business environment589[,] and … creating effective procedures for the implementation and operation of [the Japan-Mongolia BTA] and for the prevention and resolution of disputes”590. This succinct presentation is helpful. The EU-Canada BTA does not list objectives for the whole Agreement – although some of its chapters contain them. In addition to stating this objective, the ‘General Provisions’ chapter of the Japan-Mongolia BTA contains principles, such as the following item. Unless otherwise provided for in this Agreement, the provisions of this Agreement shall not apply to any taxation measures591. Unlike the EU-Canada BTA, which devotes a chapter to exceptions592, the Japan-Mongolia BTA considers exceptions – predominantly the General and ­Security Exceptions in the GATT and the GATS – within Article 1.10. For the purposes of this Agreement593 except Chapters 7, 8 and 12, Articles XX and XXI of the GATT are incorporated into and form part of this Agreement, mutatis mutandis 594. For the purposes of Chapters 7, 8, 9 and 10, Articles XIV and XIV bis of the GATS are incorporated into and form part of this Agreement, mutatis mutandis 595.

584 Agreement between Japan and Mongolia for an Economic Partnership (signed 10 February 2015, entered into force 7 June 2016) UNTS I:54545 (AJMEP) art 1.1(a). 585 ibid art 1.1(b). The ‘Parties’ to the Japan-Mongolia BTA are Japan and Mongolia (ibid art 1.2(p)). 586 ibid art 1.1(c). 587 ibid art 1.1(d). 588 ibid art 1.1(e). 589 ibid art 1.1(f). 590 ibid art 1.1(g). 591 ibid art 1.9.1. 592 This is Chapter 28 of the EU-Canada BTA, which the subsection entitled ‘Exceptions’ in the section entitled ‘The EU-Canada BTA’ condenses. 593 ‘This Agreement’ is the Japan-Mongolia BTA. 594 ibid art 1.10.1. ‘Mutatis mutandis’ means “[t]he necessary changes being made” (McFarlane, The Layman’s Dictionary of English Law (n 364) 186), and is “used when comparing two or more cases or situations[,] making necessary alterations while not affecting the main point at issue”. (Pearsall (ed), The New Oxford Dictionary of English (n 364) 443). 595 ibid art 1.10.2.

222  Bilateral Trade Agreements Chapters 7 and 8 of the Japan-Mongolia BTA are entitled ‘Trade in Services’ and ‘Movement of Natural Persons’, respectively. These topics fall more under the ambit of the GATS than the scope of the GATT. Therefore, it is appropriate that the General and Security Exceptions in the former but not the latter apply to these chapters. Chapters 9 and 10 of the Japan-Mongolia BTA are entitled ‘Electronic Commerce’ and ‘Investment’, respectively. As the former may involve goods and services, and as the latter applies to both investments and investors, it is suitable that the General and Security Exceptions in both the GATT and the GATS apply to those chapters. This differs somewhat from the EU-Canada BTA. Whilst the General Exceptions in both the GATT and the GATS apply to Sections B and C of Chapter 8 (Investment)596 the General Exceptions in the GATT do not apply to Chapter 16 (Electronic Commerce)597. Chapter 12 of the Japan-Mongolia BTA, named ‘Intellectual Property’, is outside the scope of the General and Security Exceptions in both the GATT and the GATS. Notwithstanding this, Article 12.19 of this BTA states the following. For the purposes of this Chapter598, Article 73 of the TRIPS Agreement is incorporated into and forms part of this Agreement599, mutatis mutandis 600. As the Security Exceptions in Article 73 of the TRIPS are identical to those in Article XXI of the GATT601, the position for the General and Security Exceptions with regard to intellectual property is the same for both the Japan-­ Mongolia BTA and the EU-Canada BTA, i.e., the Security Exceptions apply602 but the General Exceptions do not603. Whilst both BTAs confirm their Parties’ rights and duties604 under the Agreement Establishing the World Trade Organization and any other agreements that they have ratified605, only the Japan-Mongolia BTA considers the ‘conflict of conventions’. 596 Text to nn 537-540 and 548-552. 597 Text to n 540. 598 ‘This Chapter’ refers to Chapter 12 of the Japan-Mongolia BTA. 599 n 593. 600 ibid art 12.19. n 594 defines ‘mutatis mutandis’. 601 Text to n 200 in ch 2. 602 Article 28.6 of the EU-Canada BTA (entitled ‘National security’) applies to the whole of that BTA – “Nothing in this Agreement shall be construed ….” (CETA (n 18) art 28.6). The text to nn 566–569 covers Article 28.6 of the EU-Canada BTA. 603 Text to nn 540, 551–552 and 594–595. 604 At this point, the EU-Canada BTA adds the words “with respect to each other” (CETA (n 18) art 1.5), which narrows the provision’s scope relative to that in the Japan-Mongolia BTA – from which the quoted phrase is absent (AJMEP (n 584) art 1.11.1). 605 AJMEP (n 584) art 1.11.1; CETA (n 18) art 1.5. The Japan-Mongolia BTA’s wording is “to which both Parties are party” (AJMEP (n 584) art 1.11.1; emphasis added). The EU-Canada BTA’s phrasing is “to which they are party” (CETA (n 18) art 1.5; emphasis added). It is submitted that the word ‘they’ could mean the sum of: the EU and not Canada, Canada and

Bilateral Trade Agreements  223 In the event of any inconsistency between this Agreement606 and the [Agreement Establishing the World Trade Organization], the [latter] shall prevail to the extent of the inconsistency607. In the event of any inconsistency between this Agreement and any agreement other than the [Agreement Establishing the World Trade Organization] to which both Parties are party, the Parties shall immediately consult with each other with a view to finding a mutually satisfactory solution, taking into consideration the general principles of international law608. It is submitted that ‘the general principles of international law’ in this context include the rule lex specialis derogat legi generali, lex posterior derogat legi priori 609, which the Parties might choose to apply in a situation in which the other Agreement does not specify whether or not it would take preference over international instruments in the event of a conflict over the same subject-matter. Notwithstanding this, and in view of the AB’s use of Articles 31 and 32 of the Vienna Convention on the Law of Treaties in the interpretation of the WTO Agreements pursuant to its understanding of the phrase “customary rules of interpretation of public international law” in the DSU610, the Parties might elect

not the EU, and both Canada and the EU. However, the term ‘they’ is probably limited to the third phrase only, i.e., both Canada and the EU, given the use of the word ‘both’ in the Japan-Mongolia BTA. 606 n 593. 607 AJMEP (n 584) art 1.11.2. 608 ibid art 1.11.3. It is submitted that the use of the phrase ‘the general principles of international law’ in Article 1.11.3 of the Japan-Mongolia BTA is unrelated to the reference which Article 30.6.1 of the EU-Canada BTA makes to ‘public international law’ (text to n 578). 609 The specialized law takes preference over the general law; the later law takes preference over the earlier law. 610 Understanding on Rules and Procedures Governing the Settlement of Disputes (15 April 1994) LT/UR/A-2/DS/U/1 art 3.2 . The second sentence of Article 3.2 of the DSU provides: “The Members recognize that [the WTO’s dispute settlement system] serves to … clarify the existing provisions of those agreements in accordance with customary rules of interpretation of public international law.” (ibid). Referring to Article 31.1 of the Vienna Convention on the Law of Treaties, in United States – Standards for Reformed and Conventional Gasoline the AB stated: “Th[e] general rule of interpretation [in Article 31.1 of the Vienna Convention] has attained the status of a rule of customary or general international law. As such, it forms part of the “customary rules of interpretation of public international law” which the Appellate Body has directed, by Article 3(2) of the DSU, to apply in seeking to clarify the provisions of the General Agreement [on Tariffs and Trade] and the other “covered agreements” of the Marrakesh Agreement Establishing the World Trade Organization (the “WTO Agreement”).” (United States – Standards for Reformed and Conventional Gasoline: Report of the Appellate Body (29 April 1996) WT/DS2/AB/R 17 ; emphasis original). In Japan – Taxes on Alcoholic Beverages, the AB continued: “Article 3.2 of the DSU directs the Appellate Body to clarify the provisions of GATT 1994 and the other “covered agreements” of the WTO Agreement “in accordance with the customary rules of interpretation of public international law”. Following this mandate, in United States – Standards for Reformulated and Conventional Gasoline we stressed the need to achieve such clarification by reference to the fundamental rule of treaty interpretation set

224  Bilateral Trade Agreements to apply Article 30 of the Vienna Convention in the event of a conflict of the Japan-Mongolia BTA with a non-WTO Agreement to which both Japan and Mongolia are parties – the relevant parts of which are as follows. When a treaty specifies that it is subject to, or that it is not to be considered as incompatible with, an earlier or later treaty, the provisions of that other treaty prevail611. When all the parties to the earlier treaty are parties also to the later treaty but the earlier treaty is not terminated or suspended in operation under Article 59 [of the Vienna Convention of the Law of Treaties]612, the earlier treaty applies only to the extent that its provisions are compatible with those of the later treaty613. The Parties to the Japan-Mongolia BTA614 “hereby establish a Joint Committee under this Agreement”615, whose functions comprise observing and reviewing its implementation and working616, contemplating and recommending to the Parties any revisions to it617, overseeing and co-ordinating the tasks of the all Sub-Committees that this BTA creates 618 – those on Trade in

out in Article  31(1) of the Vienna Convention. We stressed there that this general rule of interpretation “has attained the status of a rule of customary or general international law”. … Article 32 of the Vienna Convention, dealing with the role of supplementary means of interpretation, has also attained the same status.” (Japan – Taxes on Alcoholic Beverages: Report of the Appellate Body (4 October 1996) WT/DS8/AB/R WT/DS10/AB/R WT/DS11/ AB/R 10 ; emphasis original). The section entitled ‘The DSU’, in ­Chapter 2, summarizes the DSU. 611 Vienna Convention on the Law of Treaties (signed 23 May 1969, entered into force 27 January 1980) UNTS I:18232 art 30.2. The UNIDROIT Convention on International Financial Leasing contains a provision of this type: “This Convention does not prevail over any treaty which has already been or may be entered into; in particular it shall not affect any liability imposed on any person by existing or future treaties” (UNIDROIT Convention on International Financial Leasing (signed 28 May 1988, entered into force 1 May 1995) UNTS I:41556 art 17). 612 Article 59 of the Vienna Convention provides: “1. A Treaty shall be considered as terminated if all the parties to it conclude a later treaty relating to the same subject matter and: (a) It appears from the later treaty or is otherwise established that the parties intended that the matter should be governed by that treaty; or (b) The provisions of the later treaty are so far incompatible with those of the earlier one that the two treaties are not capable of being applied at the same time. 2. The earlier treaty shall be considered as only suspended in operation if it appears from the later treaty or is otherwise established that such was the intention of the parties.” (Vienna Convention on the Law of Treaties (n 611) art 59). 613 ibid art 30.3. i.e., subject to the earlier treaty being neither terminated nor suspended under Article 59 of the Vienna Convention on the Law of Treaties (n 612), lex posterior derogat legi priori (n 609 and accompanying text). 614 n 585. 615 AJMEP (n 584) art 1.13.1. 616 ibid art 1.13.2(a). 617 ibid art 1.13.2(b). 618 ibid art 1.13.2(c).

Bilateral Trade Agreements  225 Goods 619, Rules of Origin620, Customs Procedures and Trade Facilitation621, Sanitary and Phytosanitary Measures 622, Technical Regulations, Standards and Conformity Assessment Procedures 623, Trade in Services 624, Movement of Natural Persons 625, Electronic Commerce626, Investment627, Intellectual Property628, Government Procurement629, Improvement of the Business Environment630, and Cooperation631, approving the Operational Procedures for Trade in Goods and the Operational Procedures for Rules of Origin and “any necessary decisions”632 and conducting other activities upon which the Parties so agree633. These Sub-Committees are more numerous than, and differ to some extent from, the specialist committees that are founded under the EU-Canada BTA634. The functions of the Japan-Mongolia BTA’s Joint Committee are similar, but not identical, to those of the EU-Canada BTA’s CETA Joint Committee635. The first nine Sub-Committees listed (from Trade in Goods to Investment) correspond to the titles to Chapters 2 to 10 of the Japan-Mongolia BTA, respectively. There is no chapter on trade remedies in the Japan-Mongolia BTA – unlike what is in the EU-Canada BTA636. In the former, these are included in Section 2 (Safeguard Measures) and Article 2.17 (Anti-Dumping and Countervailing Measures) of Chapter 2 (Trade in Goods), which is concise. Nothing in this Chapter shall be construed to prevent a Party from taking any measure in accordance with the provisions of Article VI of the GATT 1994, the Agreement on Anti-Dumping and the Agreement on Subsidies and Countervailing Measures637. 619 ibid art 1.14.1(a). 620 ibid art 1.14.1(b). 621 ibid art 1.14.1(c). 622 ibid art 1.14.1(d). 623 ibid art 1.14.1(e). 624 ibid art 1.14.1(f). 625 ibid art 1.14.1(g). 626 ibid art 1.14.1(h). 627 ibid art 1.14.1(i). 628 ibid art 1.14.1(j). 629 ibid art 1.14.1(k). 630 ibid art 1.14.1(l). 631 ibid art 1.14.1(m). 632 ibid art 1.13.2(d). 633 ibid art 1.13.2(e). 634 Text to nn 511–518. 635 Text to nn 502–505 and 507–510. 636 This is Chapter 3 of the EU-Canada BTA, entitled ‘Trade remedies’, which includes sections on anti-dumping and countervailing measures (text to nn 40 and 42–46) and safeguard measures (text to nn 47 and 49–51). 637 ibid art 2.17. The subsection entitled ‘Article VI: Anti-Dumping and Countervailing Duties, the AD Agreement, and the SCM Agreement’, in the section entitled ‘The GATT’, in Chapter 1, considers aspects of Article VI of the GATT, the AD Agreement and the SCM Agreement.

226  Bilateral Trade Agreements Subsidies hardly feature within the Japan-Mongolia BTA – unlike the EU-Canada BTA, which dedicates a chapter to them638. Notwithstanding this, Article 2.6 of the former Agreement is compatible with WTO law – although not as sweeping as the combination of Articles 7.8639 and 7.5.2640 of the latter. Neither Party [to the Japan-Mongolia BTA] shall introduce or maintain any export subsidies, which are inconsistent with its obligations under the [Agreement Establishing the World Trade Organization], on any agricultural good, which is listed in Annex 1 to the Agreement on Agriculture641. As for the EU-Canada BTA642, both Parties to the Japan-Mongolia BTA are to “accord national treatment” to the other Party’s goods in compliance with Article III of the GATT643 – which “to this end … is incorporated into and forms part of [the Japan-Mongolia BTA], mutatis mutandis”644. Although, unlike the Japan-Mongolia BTA, the EU-Canada BTA lacks a chapter on rules of origin, the latter includes a ‘Protocol on rules of origin and origin procedures’. Both dedicate a chapter to customs and trade facilitation645, with some overlap in the content of the provisions contained therein. For example, similarly to Article 6.2.1 of the EU-Canada BTA646, Article 4.3.1 of the Japan-Mongolia BTA requires its Parties to “ensure that all relevant information of general application pertaining to its customs laws is readily available to any interested person”647. Whilst the Japan-Mongolia BTA’s Chapter 5 entitled ‘Sanitary and Phytosanitary Measures’ is shorter than its namesake in the EU-Canada BTA648, its main provision on equivalence is almost identical to that in the EU-Canada BTA649. An importing Party shall accept an exporting Party’s SPS [sanitary and phytosanitary] measure as equivalent, if the exporting Party objectively demonstrates to the importing Party that its measures achieve the importing Party’s appropriate level of SPS protection650. 638 This is Chapter 7 of the EU-Canada BTA. The text to nn 89–90 and 93–96 precises the contents of that chapter. 639 Text to n 90. 640 Text to n 93. 641 ibid art 2.6. 642 Text to n 21. 643 The subsection entitled ‘Article III: National Treatment on Internal Taxation and Regulation’, in the section entitled ‘The GATT,’ in Chapter 1, considers Article III of the GATT. 644 ibid art 2.3. n 594 defines ‘mutatis mutandis’. 645 In the EU-Canada BTA, this is Chapter 6 (n 74). The text to nn 76–81 and 83–88 summarizes the contents of that chapter. 646 Text to n 79. 647 ibid art 4.3.1. 648 Chapter 5 (n 60). The text to nn 62–65, 67–68 and 70–73 abridges the contents of that chapter. 649 Text to n 67. 650 ibid art 5.4.1.

Bilateral Trade Agreements  227 Chapter 6 of the Japan-Mongolia BTA (entitled ‘Technical Regulations, Standards and Conformity Assessment Procedures’) has the following objectives. [T]o: (a) increase and facilitate trade between the Parties, through the improvement of the implementation of the TBT Agreement [i.e., the Agreement on Technical Barriers to Trade]; (b) ensure that technical regulations, standards and conformity assessment procedures do not create unnecessary obstacles to trade; and (c) enhance joint cooperation between the Parties651. It corresponds to Chapter 4 of the EU-Canada BTA652. Whilst that BTA incorporates much of the Agreement on Technical Barriers to Trade653, the Japan-Mongolia BTA does not. Notwithstanding this, Japan and Mongolia “reaffirm their rights and obligations related to technical regulations, standards and conformity assessment procedures under the TBT Agreement [i.e., the Agreement on Technical Barriers to Trade]”654. Chapter 7 of the Japan-Mongolia BTA (entitled ‘Trade in Services’) is similar in content to Chapter 9 of the EU-Canada BTA (titled ‘Cross-border trade in services’)655 – both contain a national treatment clause656, an MFN obligation657 and a market access provision658. There are differences in the detail of these between the two BTAs – for example, with regard to market access, Chapter 7 of the Japan-Mongolia BTA prohibits local and national measures that restrict “the total number of natural persons that may be employed in a particular service sector or that a service supplier may employ and who are necessary for, and directly related to, the supply of a specific service”659 – a ban that is absent from Chapter 9 of the EU-Canada BTA. Chapter 7 also includes additional items – for instance

651 ibid art 6.2. 652 Chapter 4 of the EU-Canada BTA is entitled ‘Technical barriers to trade’. The text to nn 52 and 54–59 condenses the content of that chapter. 653 Text to n 52. 654 ibid art 6.4. 655 n 123. nn 124 and 130 and accompanying text, and the text to nn 125–126, 128–129, 131– 142 and 146, precis Chapter 9 of the EU-Canada BTA. 656 Articles 7.3.1 of the Japan-Mongolia BTA and 9.3.1 of the EU-Canada BTA (text to n 133) contain this national treatment commitment. 657 Articles 7.4.1 of the Japan-Mongolia BTA and 9.5.1 of the EU-Canada BTA (text to n 137) contain this MFN requirement. 658 Articles 7.5 of the Japan-Mongolia BTA and 9.6 of the EU-Canada BTA (text to nn 139–142) contain these market access commitments. 659 ibid art 7.5.2(d). Annex 6 to the Japan-Mongolia BTA, entitled ‘Schedules of Specific Commitments and List of Most-Favored-nation Treatment Exemptions’, contains tables that list: (i) restrictions on national treatment and on market access for specified services supplied by Japan to Mongolia, (ii) limitations on national treatment and on market access for identified services supplied by Mongolia to Japan, and (iii) MFN treatment exemptions for Japan with regard to services. This Annex lacks a table for MFN treatment exemptions for Mongolia in respect of services. The EU-Canada BTA includes Schedules that correspond to Annex 6 to the Japan-Mongolia BTA (text to n 146).

228  Bilateral Trade Agreements Article 7.13 of the Japan-Mongolia BTA is entitled ‘Restrictions to Safeguard the Balance of Payments’, which corresponds to (and partly differs from) Article 28.5.4660 of the EU-Canada BTA. Chapter 8 of the Japan-Mongolia BTA (entitled ‘Movement of Natural Persons’) is equivalent to Chapter 10 of the EU-Canada BTA, which is entitled ‘Temporary entry and stay of natural persons for business purposes’661. Notwithstanding its title, Chapter 8 does not concern the free movement of persons – although, analogously, Annex 9-A of the EU-Canada BTA exempts the Member States of the EU from extending the free movement of persons enjoyed under the Treaty on the Functioning of the European Union to Canadian nations from the national treatment commitment in Article 9.3662 of that Agreement663, with a reciprocal dispensation for Canada664. The commitments made in the Japan– Mongolia BTA concerning the cross-border movement of natural persons are cautious. The main provision is as follows. Each Party shall … make available to the other Party … information on requirements and procedures necessary for an effective application by natural persons of the other Party for the grant of: (a) entry into the former Party; (b) initial temporary stay in the former Party; (c) renewal of temporary stay in the former Party; (d) where applicable, permission to work in the former Party; and (e) change of status of temporary stay in the former Party665. Chapter 9 of the Japan-Mongolia BTA (entitled ‘Electronic Commerce’) is more extensive than its namesake in the EU-Canada BTA666. For example, the former states that “[n]either Party shall require the transfer of, or access to, source code of software owned by a person of the other Party, as a condition of the import, distribution, sale or use of such software, or of products containing such software, in its Area”667, subject to one exception668. The EU-Canada BTA lacks an equivalent prohibition. Japan and Mongolia are not to place customs duties on electronic communications between them669 – which also holds for those between the EU and Canada670. Japan and Mongolia “shall adopt or maintain measures, in accordance with their respective laws and regulations, to protect the

660 Text to n 564. 661 The text to nn 148 and 149 states two key provisions within Chapter 10 of the EU-Canada BTA. 662 n 656 and accompanying text. 663 CETA (n 18) Annex 9-A paras 2(b) and 3. 664 ibid Annex 9-A paras 2(a) and 4. 665 AJMEP (n 584) art 8.5.1. 666 This is Chapter 16 (n 263) of the EU-Canada BTA, which the text to nn 262 and 264–270 abridges. 667 ibid art 9.11.1. 668 This exclusion is “software used for critical infrastructure” (ibid art 9.11.2). 669 ibid art 9.3. 670 Text to n 265.

Bilateral Trade Agreements  229 personal data of electronic commerce users”671. This provision contrasts with its equivalent Article in the EU-Canada BTA, which specifies that the EU and Canada should adopt or maintain such measures672. Like Articles 8.6.1 and 8.7.1 of the EU-Canada BTA673, Articles 10.3.1 and 10.4 of the Japan-Mongolia BTA accord national treatment and MFN treatment, respectively, “to investors of the other Party and to their investments”674. Unlike the former provisions – which list transactions concerning these investments to which those treatments apply675, the latter extends the treatments “to investment activities”676. Like Article 8.10.1 of the EU-Canada BTA677, Japan and Mongolia in their respective territories are to grant to investments of the other Party’s investors “fair and equitable treatment and full protection and security”678 The EU-­ Canada BTA’s descriptor of ‘fair and equitable treatment’679 is more specific than that of the Japan-Mongolia BTA, which states the following. “Fair and equitable treatment” includes the obligations of the Party not to deny justice in criminal, civil or administrative adjudicatory proceedings in accordance with the principle of due process of law680. Article 10.9 of the Japan-Mongolia BTA prohibits the expropriation or nationalization of an investment in a Party’s territory made by the other Party’s investors, subject to four exceptions681. This prohibition and its exemptions are substantially the same as those in Article 8.12.1 of the EU-Canada BTA682. Moreover, the amount, timing and currency of the compensation to be paid to the investor 671 ibid art 9.6.3; emphasis added. 672 Text to n 267. n 267 explores the use of the word ‘should’ in that sentence. 673 Text to n 105. 674 ibid arts 10.3.1 and 10.4. 675 Text to n 105. 676 ibid. ‘Investment activities’ are “establishment, acquisition, expansion, operation, management, maintenance, use, enjoyment and sale or other disposal of an investment” (ibid art 10.2(e)). This list is identical to those in Articles 8.6.1 and 8.7.1 of the EU-Canada BTA (text to n 105), except for the omission of the word ‘conduct’ from, and the inclusion of the word ‘other’ in, the former. 677 Text to n 106. 678 ibid art 10.5.1. Unlike Article 8.10.1 of the EU-Canada BTA, Article 10.5.1 accords “treatment in accordance with international law, including fair and equitable treatment and full protection and security” (ibid; emphasis added). A footnote to that Paragraph states: “This paragraph prescribes the customary international law minimum standard of treatment of aliens as the minimum standard of treatment to be afforded to investments of investors of the other Party. The concepts of ‘fair and equitable treatment’ and ‘full protection and security’ do not require treatment in addition to or beyond that which is required by the customary international law minimum standard of treatment of aliens. …” (ibid fn 1 to art 10.5.1). 679 Text to nn 107–112. 680 ibid fn 2 to art 10.5.1. 681 ibid art 10.9.1. 682 Text to nn 113–117.

230  Bilateral Trade Agreements for the expropriation or nationalization of that investment683 are essentially the same as those which the EU-Canada BTA prescribes684. The requirement in the Japan-Mongolia BTA for each Party to permit all transfers concerning investments made by the other Party’s investors in its territory685, together with its accompanying conditions686, are almost identical to the corresponding provisions in the EU-Canada BTA687. However, the latter permits equitable and non-discriminatory application of its Parties’ laws concerning “financial reporting or record keeping of transfers when necessary to assist law enforcement or financial regulatory authorities”688, whilst the former omits this use of its Parties’ statutes689. Articles 11.1.1 and 11.2.1 of the Japan-Mongolia BTA require each Party to “in accordance with its laws and regulations, take measures which it considers appropriate against anticompetitive activities”690, and require them both to “in accordance with their respective laws and regulations, cooperate and assist each other for controlling anticompetitive activities within their available resources”691. These provisions are similar to Paragraphs 2 and 3, respectively, of Article 17.2 of the EU-Canada BTA692, although Paragraph 2 does not mention a Party’s ‘laws and regulations’693 and Paragraph 3 specifies co-operation in concurrence with a prior Agreement between the Parties694 – whereas Article 11.2.2 of the Japan-Mongolia BTA refers to the Implementing Agreement between the Government of Japan and the Government of Mongolia Pursuant to Article 1.12 695 of the Agreement between Japan and Mongolia for an Economic Partnership for “[t]he details and procedures concerning the implementation of cooperation under this Article”, i.e., Article 11.2. As under Article 17.2.4 of the EU-Canada BTA696, in the implementation of its competition measures each Party to the

683 ibid art 10.9.2–3. 684 n 118 and accompanying text. 685 ibid art 10.11.1. 686 ibid art 10.11.2–3. 687 Text to nn 119–121. 688 CETA (n 18) art 8.13.3(d). 689 AJMEP (n 584) art 10.11.3. 690 ibid art 11.1.1. ‘Anticompetitive activities’ comprise “any conduct or transaction that may be subject to penalties or relief under the competition laws and regulations of the respective Parties” (ibid art 11.1.2). 691 ibid art 11.2.1. 692 Text to nn 272–273. 693 Text to n 272. However, it does mention ‘measures’. The EU-Canada BTA’s general definition of a ‘measure’ includes a law and a regulation, amongst other things (n 287). 694 Text to n 273. 695 Article 1.12 of the Japan-Mongolia BTA states: “The Governments of the Parties shall conclude a separate agreement setting forth the details and procedures for the implementation of this Agreement, which thereby shall be complementary to this Agreement …” (ibid art 1.12). 696 n 271.

Bilateral Trade Agreements  231 Japan-Mongolia BTA must honour the principles of non-­d iscrimination697, procedural fairness698 and transparency699. Chapter 12 of the Japan-Mongolia BTA, entitled ‘Intellectual Property’, is less extensive than its namesake in the EU-Canada BTA 700. The former lacks provisions on data protection701 and plant varieties702, and is less substantial than the latter concerning patents703, industrial designs704, trademarks705, copyright706 and geographical indications707. Like the EU-Canada BTA, the Japan-­Mongolia BTA provides for the enforcement of intellectual property rights and border measures – although these rules are fewer in the latter708 than in the former709. For instance, the Japan-Mongolia BTA outlines criminal remedies.

697 ibid art 11.3. 698 ibid art 11.4. 699 ibid art 11.5. 700 This is Chapter 20 (n 332) of the EU-Canada BTA, which the text to nn 333–335, 337–343, 345–348, 350–351, 353–363, 368–371, 373–376, 378–384, 386–389 and 391 summarizes. 701 Articles 20.29 and 20.30 of the EU-Canada BTA consider data protection, which the text to nn 373–375 condenses. 702 Article 20.31 of the EU-Canada BTA covers the protection of plant varieties (text to n 376). 703 Articles 20.26–20.28 of the EU-Canada BTA consider patents, which the text to nn 363 and 368–371 abridges. Unlike Article 20.26 of the EU-Canada BTA, Article 12.7 of the Japan-Mongolia BTA does not refer to the Patent Law Treaty (n 363). 704 Articles 20.24 and 20.25 of the EU-Canada BTA cover designs (text to nn 361 and 362). The Japan-Mongolia BTA’s treatment of these is even shorter than that of the EU-Canada BTA: “Each Party shall provide adequate and effective protection of industrial designs of an article as a whole, and, where appropriate, of a part thereof.” (ibid art 12.8). 705 Articles 20.13–20.15 of the EU-Canada BTA consider trademarks, which the text to nn 345–348 synopsizes. Unlike Article 20.13 of the EU-Canada BTA, Article 12.9 of the Japan-­ Mongolia BTA mentions neither the Singapore Treaty on the Law of Trademarks (n 344) nor the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks (n 345). 706 Articles 20.7–20.12 of the EU-Canada BTA consider copyright, which the text to nn 338–341, and nn 342–343 and accompanying text, abbreviate. Article 12.10 of the Japan-­ Mongolia BTA mentions none of the four Conventions/Treaties to which Article 20.7 of the EU-Canada BTA refers (nn 338–341 and accompanying text). 707 Articles 20.16–20.23 of the EU-Canada BTA cover geographical indications, which the text to nn 350–351 and 353–360 abridges. Unlike Article 20.16 of the EU-Canada BTA, the ­Japan-Mongolia BTA does not define ‘geographical indication’. The latter merely states: “Each Party shall ensure adequate and effective protection of geographical indications in accordance with its laws and regulations and with the TRIPS Agreement.” (ibid art 12.11). The section entitled ‘The TRIPS’, in Chapter 2, summarizes the TRIPS. 708 Articles 12.14, 12.15, 12.16 and 12.17 of the Japan-Mongolia BTA are entitled ‘­Enforcement – Border Measures’, ‘Enforcement – Civil Remedies’, ‘Enforcement – Criminal Remedies’ (text to nn 710 and 711) and ‘Enforcement – In the Digital Environment’, respectively. 709 Articles 20.32–20.42 consider the enforcement of intellectual property rights, which the text to nn 378–384 condenses. Articles 20.43–20.49 of the EU-Canada BTA cover border measures. The text to nn 386–388 precises Article 20.43 of the EU-Canada BTA. n 385 contains definitions of ‘import shipments’, ‘export shipments’, ‘shipments in customs transit’ and ‘transhipments’, all of which originate in Article 20.43.1 of the EU-Canada BTA.

232  Bilateral Trade Agreements Each Party shall provide for criminal procedures and penalties to be applied at least in cases of willful trademark counterfeiting or copyright piracy on a commercial scale in accordance with Article 61 of the TRIPS Agreement710. With respect to the[se] offences …, each Party shall provide that its competent authorities have the authority in accordance with its laws and regulations to order the forfeiture or destruction of all infringing goods711. The remedy of “seizure, forfeiture and destruction of the infringing goods and of any materials and implements the predominant use of which has been in the commission of the offence” is required by Article 61 of the TRIPS “[i]n appropriate cases” for the crime of “wilful trademark counterfeiting or copyright piracy on a commercial scale”712. The EU-Canada BTA provides for seizure of “goods suspected of infringing an intellectual property right”713, and of “property of the alleged infringer … in the case of an alleged infringement of an intellectual property right committed on a commercial scale”714, and for “the definitive removal from the channels of commerce, or the destruction, of goods that they have found to be infringing an intellectual property right” on the applicant’s request715 and “if appropriate, destruction of materials and implements predominantly used in the creation or manufacture of those goods”716. It also specifies other actions that may be taken in response to alleged transgressions of intellectual property rights717. By contrast, the Japan-Mongolia BTA’s remedies for intellectual property offences are confined to the description in the immediately preceding quote718, which is less detailed than the specified remedies in the EU-Canada BTA. The Japan-Mongolia BTA’s chapter719 on government procurement is much briefer than that of the EU-Canada BTA 720. A substantial revision of the former is contingent upon Mongolia’s accession to the Agreement on Government Procurement721. Whilst the EU-Canada BTA expressly devotes two

710 ibid art 12.16.1. The text to n 199 in ch 2 quotes Article 61 of the TRIPS Agreement. 711 ibid art 12.16.2. 712 Text to n 199 in ch 2. 713 CETA (n 18) art 20.37.2. 714 ibid art 20.37.3. 715 ibid art 20.38.1. 716 ibid. 717 Text to nn 380–384. 718 Text to nn 710 and 711. 719 Chapter 13. 720 Chapter 19 (n 286). The text to nn 287, 292, 295-296, 298, 303–304, 314–322, 325 and 327–331 synopsizes the contents of that chapter. 721 AJMEP (n 584) art 13.3. The section entitled ‘The Agreement on Government Procurement’, in Chapter 2, summarizes the Agreement on Government Procurement. At the time of writing, Mongolia is an observer at the Agreement on Government Procurement Committee; whilst Mongolia is not in the process of acceding to the Agreement on Government Procurement, it has made a commitment in its Protocol of Accession to the Agreement Establishing the World Trade Organization to initiate this process (World Trade Organization,

Bilateral Trade Agreements  233 Paragraphs to the notion of ‘non-discrimination’ 722, the Japan-Mongolia BTA states the following723. In the event that … a Party offers a non-Party any advantages of access to its government procurement market or any advantageous treatment concerning the measures regarding government procurement, the former Party shall, upon request of the other Party, afford adequate opportunity to enter into negotiations with the other Party with a view to extending these advantages or advantageous treatment to the other Party on a reciprocal basis724. Although cautious in its language, this provision imposes an MFN obligation on the Parties to the Japan-Mongolia BTA. By contrast, there is no MFN clause in the EU-Canada BTA’s chapter on government procurement725. Notwithstanding this, unlike the latter Agreement726 the former does not require Japan or Mongolia to extend national treatment to the other Party in respect of government procurement – a situation that Mongolia’s accession to the Agreement on Government Procurement would bring an obligation to change727. Both Chapter 14 of the Japan-Mongolia BTA, and its corresponding provisions in Chapter 4 of the Implementing Agreement between the Government of Japan and the Government of Mongolia pursuant to Article 1.12728 of the Agreement between Japan and Mongolia for an Economic Partnership, provide fairly rudimentary coverage of their topic, ‘Improvement of the Business Environment’. A Sub-Committee on Improvement of the Business Environment is founded729 and tasked730, and each Party is required to “designate and maintain” a Liaison Office for the purposes of” Chapter 14731, to which duties are also assigned732. The EU-Canada BTA has no corresponding chapter733. ‘Agreement on Government Procurement: Parties, observers and accessions’ accessed 21 June 2018). 722 Text to nn 298 and 303-304. 723 Article 13.4 of the Japan-Mongolia BTA (text to n 724) is entitled ‘Negotiation on Non-Discrimination’. 724 ibid art 13.4. 725 n 720. The text to nn 305–311 observes and discusses the absence of an MFN clause there. 726 Text to n 303. 727 Article III:1(a) of the Agreement on Government Procurement requires each of its Parties to provide national treatment to the goods, services and suppliers of the other Parties to that Agreement (clause (a), in the text to n 306 in ch 2). Japan is one of these Parties (World Trade Organization, ‘Agreement on Government Procurement: Parties, observers and accessions’ accessed 21 June 2018). 728 n 695. 729 AJMEP (n 584) arts 1.14.1(i) and 14.2.1. 730 ibid art 14.2.2 and Implementing Agreement art 4.1. 731 ibid art 14.3.1. 732 ibid art 14.3.2 and Implementing Agreement art 4.2.1. 733 One of the EU-Canada BTA’s recitals specifies that the Parties “RECOGNISING that the provisions of this Agreement … are intended to stimulate mutually-beneficial business activity …” (CETA (n 18) Preamble; emphasis original).

234  Bilateral Trade Agreements Chapter 15 of the Japan-Mongolia BTA, entitled ‘Cooperation’, and its supplementary provisions in Chapter 5 of the Implementing Agreement between the Government of Japan and the Government of Mongolia Pursuant to Article 1.12734 of the Agreement between Japan and Mongolia for an Economic Partnership, together are more comprehensive than their closest equivalent in the EU-Canada BTA – the chapter entitled ‘Bilateral dialogues and cooperation’ 735, even though the provisions of the latter tend to be more detailed than those of the former. Chapter 15 commences as follows – which includes the Japan-­ Mongolia BTA’s only mention of the term ‘sustainable development’736, a topic to which one chapter in the EU-Canada BTA is dedicated737 and with which two further chapters of the latter Agreement are associated738. The Parties shall, in according with their respective laws and regulations, promote cooperation under this Agreement for their mutual benefit, in order to further liberalize and facilitate trade in goods and services as well as investment between the Parties and to promote the well-being of the people and sustainable development of the Parties. For this purpose, the Parties shall enhance further cooperation between their Governments, and encourage and facilitate mutual cooperation between relevant entities of the Parties … in the following fields …739. There follows a list of fourteen topics, each of which is accompanied by an ­A rticle in the Implementing Agreement, which specifies areas and forms of co-operation that the Parties may pursue740. If a subject is outside this list, then the Parties may still pursue co-operation over it by virtue of the “other fields to be mutually agreed upon by the Governments of the Parties” clause741. The EU-Canada BTA includes ‘trade-in-services’ specialist chapters entitled ‘Financial services’742, ‘International maritime transport services’743 and

734 n 695. 735 Chapter 25. The text to nn 489–490, 492–493 and 495–497 outlines the contents of that chapter. 736 This phrase also occurs once in the Implementing Agreement between the Government of Japan and the Government of Mongolia Pursuant to Article 1.12 of the Agreement between Japan and Mongolia for an Economic Partnership – “the areas of cooperation may include: … (ii) sustainable development of tourism; …” (AJMEP (n 584) Implementing Agreement art 5.9(a)). 737 Chapter 22 (n 449). The text to nn 432–433, 436–445, 447 and 452 summarize the contents of that chapter. 738 These are Chapters 23 (n 453) and 24 (n 468) of the EU-Canada BTA, which are entitled ‘Trade and labour’ and ‘Trade and environment’, respectively. 739 ibid art 15.1. 740 ibid art 15.2 and Implementing Agreement arts 15.1–15.14. 741 ibid art 15.1(o). 742 Chapter 13 (n 180). The text to nn 181–183, 186–193, 199, 202–203, 210, 212, 215 and 217–222 precises the contents of that chapter. 743 Chapter 14 (n 225). The text to nn 226, 228, 230–235 and 237 encapsulates the contents of that chapter.

Bilateral Trade Agreements  235 ‘Telecommunications’744. The Japan-Mongolia BTA lacks corresponding divisions. Notwithstanding this, the latter, together with the Implementing Agreement, give Japan and Mongolia the capacity to develop guidelines over these areas via the list of topics for mutual co-operation with regard to financial services745 and telecommunications746, and by means of the ‘other fields’ provision in respect of international maritime transport services747. Furthermore, the ­Japan-Mongolia BTA includes Annexes entitled ‘Financial Services’748 and ‘Telecommunications Services’749, which comprise material that could be placed in a specialist chapter on each of these subjects. For example, the former Annex contains the following provision. Under terms and conditions that accord national treatment, a Party shall grant to financial service suppliers of the other Party established in the Area of the former Party access to payment and clearing systems operated by public entities, and to official funding and refinancing facilities available in the normal course of ordinary business. …750 The EU-Canada BTA’s chapter on financial services751 incorporates a very similar provision to that articulated in the immediately preceding quote752. Likewise, the following Paragraph in the latter Annex is akin to – although broader than – the corresponding rule753 in the EU-Canada BTA’s chapter on telecommunications754. Each Party shall ensure that any service supplier of the other Party is accorded access to and use of public telecommunications transport networks and services in a timely fashion and on transparent, reasonable and non-­ discriminatory terms and conditions. …755 As for the EU-Canada BTA 756, the Japan-Mongolia BTA permits recourse for dispute settlement to the procedure that the latter provides757 or “any other

744 Chapter 15 (n 238). The text to nn 242, 245, 247, 249, and 251–260 synopsizes the contents of that chapter. 745 ibid art 15.1(g) and Implementing Agreement art 5.7. 746 ibid art 15.1(n) and Implementing Agreement art 5.14. 747 Text to n 741. 748 This is Annex 4 to the Japan-Mongolia BTA. 749 This is Annex 5 to the Japan-Mongolia BTA. 750 ibid Annex 4 art 5. 751 n 742 and accompanying text. 752 Text to n 212. 753 Text to n 245. 754 n 744 and accompanying text. 755 ibid Annex 5 art 3.1. 756 Text to n 570. 757 ibid art 16.1.

236  Bilateral Trade Agreements international agreement to which both Parties are party, including the WTO Agreement”758. As soon as the complaining Party has requested the formation of an arbitral tribunal, or a WTO Panel under the DSU759, this tribunal or Panel “shall be used to the exclusion of any other procedure for that particular dispute”760. The EU-Canada BTA provides similarly761, but uses the language “the substantially equivalent obligation”762 in place of “that particular dispute”763. The Japan-Mongolia BTA provides for inter-Party consultations764, good offices, conciliation or mediation of the dispute765, and arbitration of the dispute subject to non-occurrence or failure of the consultations within specified time limits and subject to the fulfilment of one of two specified conditions766. The remainder of the dispute settlement chapter767 in that Agreement describes its arbitration procedure768. Either Party may discontinue the Japan-Mongolia BTA by providing the other Party with written notice of one year769. This termination period is approximately twice as long as that of the EU-Canada BTA 770.

Comment The Japan-Mongolia BTA is characterized by: (i) a tendency to follow the WTO Agreements, (ii) a lack of detail in some of its provisions, (iii) the establishment of a Sub-Committee to administer the subject-matter of each of its chapters – for most of them, (iv) a substantial chapter on inter-Party co-operation, much of

758 ibid art 16.3.1. The complaining Party may choose the forum in which to resolve the dispute (ibid). 759 Text to n 212 in ch 2. 760 ibid art 16.3.2. 761 Text to n 572. 762 ibid. 763 Text to n 760. 764 ibid art 16.4.1. 765 ibid art 16.5.1. 766 ibid art 16.6.1. The time limits are forty days, or twenty days in urgent cases, “if … the Party complained against does not enter into consultations … after the date of receipt of the request for such consultations” (ibid art 16.6.1(a)), and sixty days from that date, or thirty days in urgent cases, “if … the Parties fail to resolve the dispute through consultations” (ibid art 16.6.1(b)). The specified conditions are as follows: “the complaining Party considers that any benefit accruing to it … under this Agreement is being nullified or impaired as a result of[: (i)] the failure of the Party complained against to carry out its obligations under this Agreement, or [(ii)] the application by the Party complained against of measures which are in conflict with [those] obligations” (ibid art 16.6.1). 767 Chapter 16. 768 The arbitration procedure runs from Article 16.6 of the Japan-Mongolia BTA (entitled ‘Establishment of Arbitral Tribunals’) to Article 16.11 of that Agreement (entitled ‘Implementation of the Award’), with three further Articles (entitled ‘Modification of Time Periods’, ‘Expenses’ and ‘Language’). 769 ibid art 17.5. 770 Text to n 581.

Bilateral Trade Agreements  237 the substance of which is to be determined, and (v) a similarity in the types of topic addressed to those in the EU-Canada BTA. It is a document that shows potential, but which is tentative – possibly because it is Mongolia’s first PTA, and, consequentially in part, because at the time of its drafting the Mongolian structures did not exist to be able to administer the provisions that the Parties wished it to contain. Nevertheless, it is plucky of Japan and Mongolia – the latter especially – to proceed with this Agreement. It would be a net gain to the international community if the Japan-Mongolia BTA were to be successful.

The China–Georgia BTA The China-Georgia BTA commences with the Parties’ declaration of the establishment of a free-trade area in accordance with Articles XXIV of the GATT and V of the GATS771, over “the entire customs area of China”772, and “the entire territory of Georgia”773. The Parties to the EU-Canada BTA also found a freetrade area over their territories774. China and Georgia are each to “accord national treatment” to the other Party’s goods in conformity with Article III of the GATT 775, which “[t]o this end … is incorporated into and made part of [the China-Georgia BTA], mutatis mutandis”776. The EU-Canada BTA 777 and the Japan-Mongolia BTA 778 each contain a corresponding statement. “Except as otherwise provided in” the China-Georgia BTA, each of its Parties are to remove customs duties on “originating goods” from the other Party, in concurrence with its Schedule to Annex I to this Agreement779. China’s Schedule applies three categories of customs duty to Georgian goods entering

771 FTAGCGG (n 11) art 1.1. The sections in Chapter 3 entitled ‘Notification of PTAs to the WTO under Article XXIV of the GATT (Territorial Application, Frontier Traffic, Customs Unions and Free Trade Areas)’ and ‘Notification of PTAs to the WTO under Article V of the GATS (Economic Integration)’ consider Articles XXIV of the GATT and V of the GATS, respectively. 772 ibid art 1.3.1. 773 ibid art 1.3.2. 774 Text to n 19. 775 The subsection entitled ‘Article III: National Treatment on Internal Taxation and Regulation’, in the section entitled ‘The GATT’, in Chapter 1, considers Article III of the GATT. 776 ibid art 2.3. n 594 defines ‘mutatis mutandis’. 777 Text to n 21. 778 Text to n 644. 779 ibid art 2.4.1. ‘Originating goods’ comprise “goods wholly obtained or produced in a Party”, “goods produced in a Party exclusively from originating materials” and “goods produced from non-originating materials in a Party, provided that the goods conform to a regional value content of no less than 40%, except for the goods listed in Annex II-A [to the EU-Canada BTA – entitled ‘Product Specific Rules of Origin’] which must comply with the requirements specified therein” (ibid art 3.2). The classification of goods is that which each Party’s tariff nomenclature sets out in accordance with the Harmonized System (ibid art 2.5). n 105 in ch 2, and n 24, convey information concerning the Harmonized System.

238  Bilateral Trade Agreements China –category A in which the customs duty is eliminated immediately at the date that the BTA enters into force780, class B in which the customs duty is removed through five consecutive equal, annual reductions, and category C in which the customs duty remains at the MFN tariff rate781. Georgia’s Schedule only applies class A or class C to Chinese goods entering Georgia782. Neither Party may raise any extant customs duty or institute a new customs duty on imports of the other Party’s originating goods, other than in conformity with the ­China-Georgia BTA 783. These rules are similar to their parallel provisions in the EU-Canada BTA 784. Unless the China-Georgia BTA so provides, neither Party is to introduce or preserve a prohibition or restrictive measure on the importation of a product that originates in the other Party’s territory, or on the exportation or sale for export of a product that is bound for that area, except in agreement with Article XI of the GATT 785. “To this end”, Article XI “is incorporated into and made part of [the China-Georgia BTA], mutatis mutandis”786. The EU-Canada BTA also contains such rules787. Chapter 3 of the China-Georgia BTA is entitled ‘Rules of Origin’. The EU-Canada BTA and the Japan-Mongolia BTA also cover rules of origin concerning their Parties’ products – the former in a Protocol to the Agreement. Each Party to the China-Georgia BTA is to “ensure that its customs procedures and practices are predictable, consistent and transparent” – in order to ease trade788, and employ orderly customs procedures that are founded on international standards – especially those of the WCO – including the amended International Convention on the Simplification and Harmonization of Customs Procedures 789. China and Georgia are to publish their laws, regulations and “administrative rules or procedures of general application” that concern trade in goods between them790. The EU-Canada and Japan-Mongolia BTAs contain similar publication requirements791. 780 Text to n 10. 781 ibid Annex I Part 1 paras 3 and 4; ibid Annex I Part 2 Section A paras 2 and 3. 782 ibid Annex I Part 2 Section B paras 2 and 3. 783 ibid art 2.4.2. n 779 defines ‘originating goods’. 784 Text to nn 23, 25, 27–31 and 34, and nn 22, 26 and 32. 785 ibid art 2.6. The subsection entitled ‘Article XI: General Elimination of Quantitative Restrictions’, in the section entitled ‘The GATT’, in Chapter 1, considers Article XI of the GATT. 786 ibid. n 594 defines ‘mutatis mutandis’. 787 Text to nn 35–36. 788 ibid art 4.3.1. 789 ibid art 4.3.2. This Convention, also known as the ‘Kyoto Convention’, was adopted at Kyoto in May 1973, and amended in Brussels in June 1999 (World Customs Organization. Protocol of Amendment to the International Convention on the Simplification and Harmonization of Customs Procedures of 18 May 1973 (World Customs Organization, 1999). The Convention came into force in 1974, and the amended version superseded it in February 2006 (World Customs Organization, ‘The Revised Kyoto Convention’ accessed 24 June 2018). 790 FTAGCGG (n 11) art 4.4.1. 791 Text to nn 79 and 647.

Bilateral Trade Agreements  239 The Parties to the China-Georgia BTA are to ascertain the customs value of products that they trade between them in conformity with Article VII of the GATT 792 and the Customs Valuation Code793. This EU-Canada BTA also defers to the Code794. China and Georgia are to apply the International Convention on the Harmonized Commodity Description and Coding System to their reciprocal trade in goods795. The Parties to the China-Georgia BTA confirm their rights and duties “with respect to each other under the [Agreement on the Application of Sanitary and Phytosanitary Measures]”796. They will strive to found their sanitary and phytosanitary measures on prevailing “international standards, guidelines or recommendations”797. The China-Georgia BTA’s equivalence provision is very similar to that in the Agreement on the Application of Sanitary and Phytosanitary measures798, and is consistent with the corresponding provision in both the EU-­ Canada BTA 799 and the Japan-Mongolia BTA800. Each Party shall accept the SPS [sanitary and phytosanitary] measures of the other Party as equivalent to its own if the exporting Party demonstrates to the other Party that its measure achieves the other Party’s appropriate level of protection. For this purpose, reasonable access shall be given, upon request, to the importing Party for inspection, testing and other relevant procedures801. Chapter 6 of the China-Georgia BTA, entitled ‘Technical Barriers to Trade’, equates to Chapter 4 of the EU-Canada BTA802 and Chapter 6 of the ­Japan-Mongolia BTA803. The Parties to the China-Georgia BTA “affirm their rights and obligations with respect to each other under the [Agreement on

792 The text to nn 35 and 36 in ch 2 covers Subparagraphs 2(a) and 2(b) of Article VII of the GATT. 793 ibid art 4.5. The section entitled ‘The Customs Valuation Code’, in Chapter 2, summarizes the Customs Valuation Code. 794 Text to n 83. 795 ibid art 4.6. This Convention requires its Contracting Parties to align its “[c]ustoms tariff and statistical nomenclatures” with the Harmonized System (International Convention on the Harmonized Commodity Description and Coding System, as amended by the Protocol of Amendment of 24 June 1986 (signed 14 June 1983, entered into force 1 January 1988) UNTS I:25910 art 3.1(a)). n 105 in ch 2, and n 24, contain information about the Harmonized System. 796 FTAGCGG (n 11) art 5.4. The section entitled ‘The Agreement on the Application of Sanitary and Phytosanitary Measures’, in Chapter 2, summarizes the Agreement on the Application of Sanitary and Phytosanitary Measures. 797 ibid art 5.6.1. 798 Text to n 15 in ch 2. 799 Text to n 67. 800 Text to n 650. 801 ibid art 5.8. 802 Text to nn 52 and 54–59. 803 Text to nn 651 and 654.

240  Bilateral Trade Agreements Technical Barriers to Trade]”804. This is a similar commitment to that which the Japan-Mongolia BTA contains805, although the phrasing used in each differs – which may contribute to differing interpretations. The objectives of Chapter 6 of the China-Georgia BTA are akin to, but more fulsome than, those of Chapter 6 of the Japan-Mongolia BTA806, and are as follows. [T]o: (a) facilitate and promote trade in goods between the Parties by ensuring that technical regulations, standards, and conformity assessment procedures do not create unnecessary technical barriers to trade; (b) strengthen cooperation, including information exchange in relation to the preparation, adoption and application of standards, technical regulations, and conformity assessment procedures; (c) promote mutual understanding of each Party’s standards, technical regulations, and conformity assessment procedures; and (d) facilitate implementation of the principles of the WTO Agreement on Technical Barriers to Trade807. Chapter 7 of the China-Georgia BTA, entitled ‘Trade Remedies’, equates to the identically named Chapter 3 of the EU-Canada BTA. As in the latter Agreement808, the Parties to the former confirm their rights and obligations under the AD and SCM Agreements809. Unlike the latter, the China-Georgia BTA excludes from this affirmation810 the right to “use a methodology based on surrogate value of a third country for the purpose of determining normal value when calculating dumping margin in an anti-dumping investigation”811. This exception removes one of the two alternatives that Article VI:1(b) of the GATT812 and Article 2.2 of the AD Agreement 813 provide in the absence of a domestic price for the calculation of a product’s normal value and the margin of dumping. Unlike the EU-Canada BTA814 and the Japan-Mongolia BTA815, the China-­ Georgia BTA does not expressly require China and Georgia to act in conformity with Article VI of the GATT in their inter-Party dealings. Most of Chapter 7 of the China-Georgia BTA concerns transitional safeguard measures816.

804 ibid art 6.4. The section in Chapter 2 entitled ‘The Agreement on Technical Barriers to Trade’ summarizes the Agreement on Technical Barriers to Trade. 805 Text to n 654. 806 Text to n 651. 807 ibid art 6.1. 808 Text to n 40. 809 ibid art 7.1.1-2. 810 ibid art 7.1.1. 811 ibid art 7.1.3. 812 Text to n 238 in ch 1. 813 Text to n 242 in ch 1. 814 Text to n 40. 815 Text to n 637. 816 ‘Most of Chapter 7’ comprises Articles 7.3–7.8.

Bilateral Trade Agreements  241 Like the EU-Canada817 and Japan-Mongolia818 BTAs, the China-Georgia BTA contains a chapter on cross-border trade in services819 that includes national treatment820, market access821 and MFN treatment822 provisions. The latter’s variants of these standards differ to some extent from those of the other two Agreements – although its national treatment and market access rules are almost identical to those in the Japan-Mongolia BTA. For example, both contain the following statement with regard to national treatment for the movement of services between the Parties. Formally identical or formally different treatment by a Party shall be considered to be less favourable if it modifies the conditions of competition in favour of services or service suppliers of that Party compared to the like service or service suppliers of the other Party823. Annexes 8-E and 8-F of the China-Georgia BTA list specific services and any restrictions of national treatment and/or market access that apply to each of these, and also measures limiting MFN treatment (in a separate table), for China and Georgia, respectively. The EU-Canada BTA includes Schedules that are equivalent to those Annexes824. Annex 6 to the Japan-Mongolia BTA contains corresponding particulars in respect of Japan and Mongolia825. In addition to Annexes 8-E and 8-F, the China-Georgia BTA includes the following Annexes to Chapter 8: Annex 8-A – entitled ‘Financial Services’, Annex 8-B – titled ‘Movement of Natural Persons’, Annex 8-C – headed ‘Transport and Related Services’ and Annex 8-D – named ‘TCM Cooperation’826. ‘Movement of Natural Persons’ concerns the movement of individuals from one Party into the territory of the other, “under any of the categories referred to in Annex 8-E and 8-F”827. It does not concern the free movement of persons828. Chapter 9 of the China-Georgia BTA, entitled ‘Environment and Trade’, is a fairly nominal chapter – unlike its substantial counterpart829 in the EU-Canada 817 Text to nn 133, 137 and 139–142. 818 nn 656–658 and 823, and accompanying text. 819 This is Chapter 8 of the China-Georgia BTA, which is entitled ‘Trade in Services’. 820 Article 8.4.1 of the China-Georgia BTA contains this national treatment clause. 821 Article 8.5 of the China-Georgia BTA contains these market access commitments. 822 Article 8.6.1 of the China-Georgia BTA contains this MFN requirement. 823 ibid art 8.4.3. Article 7.3.3 of the Japan-Mongolia BTA is identical to the quoted provision, except for the former’s use of ‘favorable’ and ‘favor’ in place of ‘favourable’ and ‘favour’, respectively. Article 9.3 of the EU-Canada BTA omits an equivalent statement. 824 Text to n 146. 825 n 659. 826 ‘TCM’ stands for ‘Traditional Chinese Medicine’ (ibid Annex 8-D). 827 ibid Annex 8-B art 1.1. 828 ibid Annex 8-B art 1.2. The text to nn 148–149 and 661–665 considers the EU-Canada and Japan-Mongolia BTAs’ treatment of the cross-border movement of natural persons. 829 This is Chapter 24 of the EU-Canada BTA (n 468). The text to nn 469–475, 477–480, 482–483 and 485–488 summarizes the contents of that chapter.

242  Bilateral Trade Agreements BTA. Similarly to the latter Agreement830, the Parties to the former confirm their commitments to the efficacious implementation of the multilateral environmental agreements to which they are party831. On a literal interpretation, this affirmation is narrower than that in the EU-Canada BTA, as it only includes those agreements to which both China and Georgia are party. Like the Japan-Mongolia BTA832, but unlike the EU-Canada BTA833, the term ‘sustainable development’ is a minor component of the China-Georgia BTA. There are two mentions of Georgia’s “Ministry of Economy and Sustainable Development”834, and the phrase’s inclusion in the following recital and article. [T]he Parties … Reaffirming their commitment to pursue the objective of sustainable development835. Recognizing the importance of cooperation in the field of environment in achieving the goals of sustainable development, the Parties commit to conducting cooperative activities in areas of common interest as appropriate836. Under the China-Georgia BTA, each Party is to “maintain or adopt competition laws that promote and protect the competitive process in its market by proscribing anticompetitive business practices”837 – which is consistent with a similar obligation under both the EU-Canada BTA838 and the Japan-Mongolia BTA839. They are to “recognize the importance of cooperation and coordination in [the] competition field to promote fair competition”840 – a requirement with corresponding but non-identical provisions in the latter two Agreements841. Although most of the types of intellectual property for which the EU-Canada BTA provides842 are considered individually in the China-Georgia BTA, the latter Agreement tends to be less thorough in its coverage of these items than the former. In particular, whilst Article 20.7.1 of the EU-Canada BTA requires its Parties to observe a substantial part of four treaties/conventions on copyright and related rights843, the China-Georgia BTA does not refer to these Accords. 830 Text to n 470. 831 ibid art 9.4. 832 n 736 and accompanying text; text to n 739. 833 nn 737 and 738, and accompanying text. 834 ibid arts 6.11.1(b) and 14.3(b). 835 ibid Preamble; emphasis original. 836 ibid art 9.5. 837 ibid art 10.3.1. 838 Text to n 272. 839 Text to n 690. 840 ibid art 10.6.1. 841 n 273 and accompanying text; text to n 691. 842 These are copyright, trademarks, geographical indications, designs, patents, data protection and plant varieties. 843 Text to nn 338–341.

Bilateral Trade Agreements  243 Each Party shall foster the establishment of appropriate bodies for the collective management of copyright and shall encourage such bodies to operate in a manner that is efficient, publicly transparent and accountable to their members844. Notwithstanding this, the China-Georgia BTA includes a comprehensive definition of the term ‘intellectual property rights’845, and confirms its commitment to both the TRIPS “and any other multilateral agreement relating to intellectual property to which both Parties are party”846. The China-Georgia BTA is less forthcoming on the enforcement of intellectual property rights than is the EU-Canada BTA847, giving this topic a treatment that condenses its coverage in the TRIPS848. Each Party commits to implementing effective intellectual property enforcement systems with a view to eliminating trade in goods and services infringing intellectual property rights849. Each Party shall provide for criminal procedures and penalties in accordance with the TRIPS Agreement to be applied at least in cases of wilful trademark counterfeiting or copyright piracy on a commercial scale. Remedies available shall include imprisonment and/or monetary fines sufficient to provide a deterrent, and consistent with the level of penalties applied for crimes of a corresponding gravity850. Chapter 12 of the China-Georgia BTA provides for co-operation between China and Georgia only over the fields of foreign investment851 and electronic commerce852. This contrasts with Chapter 15 of the Japan-Mongolia BTA – which lists fourteen topics for co-operation between Japan and Mongolia853, and Chapter 25 of the EU-Canada BTA – which refers to co-operation between the EU and Canada concerning matters of mutual interest including through three specified bilateral dialogues854. 844 ibid art 11.15. 845 ‘Intellectual property rights’ comprise “copyright and related rights, rights in trade marks, geographical indications, industrial designs, patents and layout-designs (topographies) of integrated circuits, rights in plant varieties, and rights in undisclosed information, as defined and described in the TRIPS Agreement” (ibid art 11.2(a)). The section entitled ‘The TRIPS’, in Chapter 2, summarizes the TRIPS. 846 ibid art 11.4. 847 n 377; text to nn 378–383; n 384 and accompanying text. 848 Text to nn 193–197 and 199 in ch 2. 849 ibid art 11.17.1. 850 ibid art 11.17.2. 851 ibid art 12.1.1. The text to nn 916–917 quotes Article 12.1 of the China-Georgia BTA. 852 ibid art 12.2. 853 Text to n 740. 854 Text to nn 489–490 and 492–493.

244  Bilateral Trade Agreements Each Party to the China-Georgia BTA is to make sure that its generally a­ pplicable “laws, regulations, procedures and administrative rulings” which “may affect” an issue that this Agreement covers are quickly published855. The EU-Canada BTA contains a very similar provision856. The Japan-Mongolia BTA, which, unlike each of the former two Agreements, does not contain a chapter entitled ‘Transparency’857, also includes a like statement – although that includes “international agreements to which [each] Party is a party” as well as its generally applicable “laws, regulations and judicial decisions”858. Whilst the EU-Canada and Japan-Mongolia BTAs mention neither Article X of the GATT859 nor Article III of the GATS860, the China-Georgia BTA incorporates those provisions into that Agreement861. The Parties to the China-Georgia BTA “hereby establish the China-Georgia Joint Commission”862, which will consider issues concerning this Agreement’s implementation863 and items that China, Georgia or “the committees or working groups established under this Agreement” refer to it864, investigate any possibilities to extend trade and foster investment betwixt the Parties – in compliance with the BTA’s objectives865, contemplate a proposal to modify the Agreement “and make recommendations to the Parties”866, and consider any other matter which may influence the BTA’s functioning867. It may discharge other listed obligations, such as “further[ing] the implementation of [the C ­ hina-Georgia

855 ibid art 13.1.1. 856 Text to n 525. 857 This is Chapter 13 of the China-Georgia BTA, and is Chapter 27 of the EU-­Canada BTA. The text to nn 525–532 abridges the contents of the latter chapter. Article 1.3 of the Japan-­ Mongolia BTA contain that Agreement’s general provisions on transparency. 858 AJMEP (n 584) art 1.3.1. Unlike Article 27.1.1 of the EU-Canada BTA (text to n 525) and Article 13.1.1 of the China-Georgia BTA (text to n 855), Article 1.3.1 of the Japan-­Mongolia BTA does not mention each Party’s generally applicable procedures and administrative rulings. 859 n 71 in ch 2 contains the first sentence of Paragraph 1 of Article X of the GATT. That Article is entitled ‘Publication and Administration of Trade Regulations’. 860 Article III of the GATS is entitled ‘Transparency’. Paragraph 1 of Article III of the GATS states: “Each Member [of the WTO] shall publish promptly and, except in emergency situations, at the latest by the time of their entry into force, all relevant measures of general application which pertain to or affect the operation of this Agreement. International agreements pertaining to or affecting trade in services to which a member is a signatory shall also be published.” (General Agreement on Trade in Services (15 April 1994) LT/UR/A-1B/S/1 art III:1 ; 1869 UNTS 183; 33 ILM 1167 (1994)). 861 FTAGCGG (n 11) art 13.3. 862 ibid art 14.1.1. 863 ibid art 14.1.2(a). 864 ibid art 14.1.2(b). 865 ibid art 14.1.2(c). Whilst Articles 4.1.2, 5.1 and 6.1 of the China-Georgia BTA set objectives for Chapters 4, 5 and 6, respectively, of that Agreement, the BTA lacks a statement of objectives which is to apply to the entire Agreement. 866 ibid art 14.1.2(d). 867 ibid art 14.1.2(e).

Bilateral Trade Agreements  245 BTA] through implementing arrangements”868. These functions of the China-­ Georgia Joint Commission resemble those of the EU-Canada BTA’s CETA Joint Committee869 and the Japan-Mongolia BTA’s Joint Committee870, without their respective responsibilities being identical. Unlike the EU-Canada871 and Japan-Mongolia BTAs872, the China-Georgia BTA does not create any specialized committees. However, the latter empowers the China-Georgia Joint Commission to “establish additional committees”873. This broad commitment may enable the creation of an effective institutional structure to administer the China-Georgia BTA, as exists for the EU-­Canada BTA by virtue of its provisions on this matter874 – but clarification from the ­Chinese and Georgian governments regarding the specialized committees would be helpful. When a dispute regarding the same measure arises under [the China-Georgia BTA] and under other agreements including another free trade agreement to which both Parties are party or the WTO Agreements, the complaining Party may select the forum in which to settle the dispute875. [T]he forum thus selected shall be used to the exclusion of all other fora876. This position is substantially the same as the corresponding situation under each of the EU-Canada877 and Japan-Mongolia878 BTAs, although it uses the wording “regarding the same measure”879 in place of “the substantially equivalent obligation”880 in the former and “that particular dispute”881 in the latter. Like those two Agreements882, the China-Georgia BTA provides for inter-Party consultations to be held883. However, unlike those BTAs884, it does not offer the Parties the option of mediating the dispute. If those consultations do not resolve the issue within sixty days – or thirty days when urgent – after the responding Party receives the request for consultations, then the complaining Party may

868 ibid art 14.1.3(c). 869 Text to nn 502–505 and 507–510. 870 Text to nn 616–618 and 632–633. 871 Text to nn 511–518. 872 Text to nn 619–631. 873 ibid art 14.1.3(a). 874 Text to nn 498–505 and 507–524. 875 ibid art 15.3.1. 876 ibid art 15.3.2. 877 Text to n 572. 878 n 758 and accompanying text; text to n 760. 879 Text to n 875. 880 Text to n 572. 881 Text to n 760. 882 CETA (n 18) art 29.4; text to n 764. 883 FTAGCGG (n 11) art 15.4.1. 884 Text to nn 573 and 765.

246  Bilateral Trade Agreements call for the foundation of an arbitral tribunal to investigate the matter885. This is similar to the EU-Canada and Japan-Mongolia BTAs886, although the former involves shorter time periods887 and the latter requires the meeting of one of two specified conditions888. Much of the remainder of the China-Georgia BTA’s Chapter 15, entitled ‘Dispute Settlement’, together with Annex 15-A, entitled ‘Rules of Procedure of Arbitral Tribunal’ concerns the arbitral proceedings889. This is similar to the EU-Canada890 and Japan-Mongolia891 BTAs. Annex 15-A to the China-Georgia BTA is more succinct than the extensive arbitral rules of procedure that Annex 29-A to the EU-Canada BTA contains. For the purposes of Chapter 2 (Trade in Goods), Chapter 3 (Rules of Origin and Implementation Procedures), Chapter 4 (Customs Procedures and Trade Facilitation), Chapter 5 (Sanitary and Phytosanitary Measures), Chapter 6 (Technical Barriers to Trade), Chapter 7 (Trade Remedies) and the Annexes to the Chapters abovementioned, Article XX of the GATT 1994, including its interpretative notes, is, incorporated and made part of [the China-­Georgia BTA], mutatis mutandis 892. For the purpose of Chapter 8 (Trade in Services) and its Annexes, Article XIV of the GATS, including its footnotes, is incorporated into and made part of this Agreement, mutatis mutandis 893. This coverage is consistent with that in the EU-Canada BTA894, although there is no mention of investment in the above quote, as, unlike that Agreement895, the China-Georgia BTA does not dedicate a chapter to this topic. It is submitted that the ‘interpretative notes’ to Article XX of the GATT means Ad Article XX of the GATT896. The ‘footnotes’ to Article XIV of the GATS comprise one concerning its public order exception897, and another that lists categories of

885 ibid art 15.5.1. 886 Text to nn 574 and 766. 887 n 574. 888 n 766 and accompanying text. 889 ‘Much of the remainder’ comprises Articles 15.5–15.12 of the China-Georgia BTA. Articles 15.13–15.15 of that Agreement concern the compliance review with regard to the implementation of the arbitral tribunal’s report, and any resulting suspension of obligations. 890 Text to n 575, and the immediately preceding sentence. 891 n 768 and accompanying text. 892 ibid art 16.2.1. n 594 defines ‘mutatis mutandis’. The subsection entitled ‘Articles XX and XXI: Exceptions to the GATT’, in the section entitled ‘The GATT’, in Chapter 1, examines Article XX of the GATT and relevant case law. 893 ibid art 16.2.2. The section entitled ‘The GATS’, in Chapter 2, considers Article XIV of the GATS. 894 Text to nn 540 and 551; n 552 and accompanying text. 895 Chapter 8 in the EU-Canada BTA is entitled ‘Investment’. The subsection entitled ‘Investment’, in the section entitled ‘The EU-Canada BTA’, summarizes that chapter. 896 Text to n 525 in ch 1. 897 n 150 in ch 2.

Bilateral Trade Agreements  247 “[m]easures that are aimed at ensuring the equitable or effective imposition or collection of direct taxes”898. For the purposes of [the China-Georgia BTA], with respect to security exceptions, Article XXI of GATT 1994899 and Article XIV bis of GATS900 are incorporated into and made part of this Agreement, mutatis mutandis 901. The China-Georgia BTA’s incorporation of both Article XXI of the GATT and Article XIV bis of the GATS differs from the national security exception in each of the EU-Canada and Japan-Mongolia BTAs – the first of which uses a bespoke version of Article XXI902. The other absorbs each of these Articles into the Japan-Mongolia BTA “[f]or the purposes of” specified chapters of that Agreement 903. Like the EU-Canada904 and Japan-Mongolia905 BTAs, the China-Georgia BTA provides for its Parties to impose restrictive measures to safeguard their Parties’ balance-of-payments906. These provisions are similar but not identical – for instance, the EU-Canada BTA permits Parties under specified circumstances to “adopt or maintain restrictive measures with regard to capital movements or payments” 907, which is a class of measure to which the China-Georgia BTA does not refer. A Party to the China-Georgia BTA may terminate that Agreement by notifying the other Party in writing of its intention to discontinue the BTA 908. This cessation takes effect 180 days after the date when the latter Party receives the former’s notification909. Notwithstanding this, either Party may, within thirty days of that proclamation, request consultations concerning whether the discontinuance of any provision of the China-Georgia BTA should take effect on a subsequent date to that of the Agreement’s cessation910. The EU-Canada and Japan-Mongolia BTAs also require written notice of their termination911, of 180

898 General Agreement on Trade in Services (15 April 1994) LT/UR/A-1B/S/1 fn 6 to art XIV(d) ; 1869 UNTS 183; 33 ILM 1167 (1994)). The text to nn 152 and 153 in ch 2 briefly comments on Paragraphs (d) and (e) of Article XIV of the GATS. 899 Text to n 546 in ch 1. 900 n 144 in ch 2 and accompanying text; text to nn 145 and 146 in ch 2. 901 FTAGCGG (n 11) art 16.3; emphasis original. n 594 defines ‘mutatis mutandis’. 902 Text to nn 566–569. 903 Text to nn 594 and 595. 904 Text to nn 557, 559 and 562–564. 905 AJMEP (n 584) arts 2.18.1, 7.13 and 10.14. 906 FTAGCGG (n 11) art 16.6. 907 Text to n 557. 908 ibid art 17.4.1. 909 ibid. 910 ibid art 17.4.2. These consultations shall begin within thirty days of the conveyance of this request to the other Party (ibid). 911 Text to nn 580 and 769.

248  Bilateral Trade Agreements days for the former 912 and one year for the latter 913. Neither of those BTAs offers an equivalent to the China-Georgia BTA’s subsequent consultations914 – although the EU-Canada BTA requires the provisions of its chapter on investment to remain in force for twenty years beyond the date on which rest of the Agreement ends915.

Comment Although the China-Georgia BTA shows several similarities to the EU-Canada and Japan-Mongolia BTAs, it has areas of more cursory coverage than those Agreements. Unlike them, it contains no chapter on investment. Its treatment of this topic is limited to the following Article. Each Party shall, subject to its general policy in the field of foreign investment, promote in its territory investments by investors of the other Party, and shall admit such investment in accordance with its applicable laws and regulations and the international commitments entered into between the Parties916. The Parties shall further assess and, if necessary, endeavour to conduct negotiations with a view to revising the Agreement between the Government of the People’s Republic of China and the Government of the Republic of Georgia Concerning the Encouragement and Reciprocal Protection of Investments 917. The Investment Agreement includes the following provisions on the standard of treatment to be granted to investments of investors of the other Party. Investments and activities associated with investments of investors of either Contracting Party shall be accorded fair and equitable treatment and shall enjoy protection in the territory of the other Contracting Party 918. Th[is] treatment and protection … shall not be less favourable than that accorded to investments and activities associated with such investments of investors of a third State919. Th[is] treatment and protection … shall not include any preferential treatment accorded by the other Contracting Party to investments of investors of a third State based on customs union, free trade zone,

912 Text to n 581. 913 Text to n 769. 914 n 910 and accompanying text. 915 Text to n 583. 916 ibid art 12.1.1. 917 ibid art 12.1.2; emphasis original. 918 Agreement between the Government of the People’s Republic of China and the Government of the Republic of Georgia Concerning the Encouragement and Reciprocal Protection of Investments (signed 3 June 1993, entered into force 1 March 1995) UNTS I: art 3.1. 919 ibid art 3.2.

Bilateral Trade Agreements  249 economic union, agreement relating to avoidance of double taxation or facilitating frontier trade920. There is no extension of national treatment to those investments. Furthermore, the Agreement defines neither “fair and equitable treatment” nor “protection” 921. The MFN clause is limited in its scope, with economic unions, customs unions and free-trade zones excluded as sources of more-favourable treatment 922. Whilst the lack of national treatment should not result in discriminatory, non-­ compensatory expropriation of the foreign investor’s assets923, there is uncertainty from the above quote as to what the actual standard of treatment of those assets and the payments due on them will be. Thus, there is room to upgrade investment relations between China and Georgia – whether this is done by adding a carefully written chapter on investment to the China-Georgia BTA or, as that BTA suggests924, revising the Investment Agreement between those countries. Foreign investment is only one of two areas of co-operation for which the ­China-Georgia BTA provides925. This Agreement bestows perfunctory treatment of inter-Party co-operation relative to that which the EU-Canada and ­Japan-Mongolia BTAs furnish926. China and Georgia should amend their BTA in order to provide for both other fields of co-operation between them and more detail on the arrangements for co-operation that are to apply over those spheres927. One way of contributing to such a broader and deeper basis for inter-Party co-operation is by establishing specialized committees, of which the China-­ Georgia BTA creates none – a third area of weaker coverage than that which the EU-Canada and Japan-Mongolia BTAs supply 928. Given that the China-Georgia BTA only recently entered into force929, the China-Georgia Joint Commission 920 ibid art 3.3. 921 Text to n 918. 922 Text to n 920. 923 ibid art 4. 924 Text to n 917. 925 Text to n 851. The second topic is electronic commerce (text to n 852). 926 Text to nn 853–854. 927 Prior research conducted jointly by institutions based in China and Georgia is consistent with this view. Their Final Report concludes: “This study also discussed the possible cooperation in finance, hydropower, telecommunication and IT, transportation infrastructure as well as E-commerce. All of these are beneficial to strengthen bilateral economic and trade cooperation between China and Georgia.” (University of International Business and Economics (UIBE)/Policy Management and Consulting Group (PMCG). ‘Joint Feasibility Study on China-Georgia Possible Free Trade Agreement: Final Report’ (UIBE/PMCG, 2015) 113). There are Annexes to Chapter 8 of the China-Georgia BTA entitled ‘Financial Services’ and ‘Transport and Related Services’, the latter of which includes transportation infrastructure development (FTAGCGG (n 11) Annex 8-C arts 1.1 and 2). That Agreement specifies electronic commerce as an area of co-operation (n 925 and accompanying text). The China-Georgia BTA does not specifically provide for co-operation over the fields of hydroelectricity, telecommunications and information technology. 928 nn 871–872 and accompanying text; text to n 873. 929 Text to n 10.

250  Bilateral Trade Agreements would not yet have had an opportunity to address this matter in accordance with the authority that the BTA grants to it 930. The publication of the Commission’s work is awaited with interest.

The Chile–Thailand BTA Whilst the EU-Canada and Chile-Thailand BTAs do not set objectives that apply to the entire Agreement and the Japan-Mongolia BTA provides one such aim931, the Chile-Thailand BTA’s goals are to “liberalise and facilitate trade in goods and services” betwixt Japan and Mongolia932, ease “the mutual recognition of the results of conformity assessment procedures for products or processes” 933, “liberalise, encourage and promote investment” 934, make sure that investments and investment activities in Japan and Mongolia are protected935, enable the cross-­ border movement of individuals936, ensure and strengthen sufficient, effectual and non-discriminatory continuance of inter-Party trade937, augment co-­operation for the Parties’ joint benefit 938, and further transparency in the application of laws and regulations concerning issues that the Chile-Thailand BTA covers939. Chile and Thailand “hereby establish a free trade area”, in line with Articles XXIV of the GATT and V of the GATS940, as do the Parties to the EU-Canada941 and China-Georgia942 BTAs. The Parties to the Chile-Thailand BTA “reaffirm their existing rights and obligations with respect to each other under the [Agreement Establishing the World Trade Organization] and other agreements to which both Parties are party”943. This is consistent with a similar commitment in the EU-Canada944, Japan-Mongolia945 and China-Georgia946 BTAs. 930 Text to n 873. 931 Text to nn 584–590. 932 Free Trade Agreement between the Government of the Republic of Chile and the Government of the Kingdom of Thailand (signed 4 October 2013, entered into force 5 November 2015) UNTS I: (FTAGCGT) art 1.1(a). 933 ibid art 1.1(b). 934 ibid art 1.1(c). 935 ibid. 936 ibid art 1.1(d). 937 ibid art 1.1(e). 938 ibid art 1.1(f). 939 ibid art 1.1(g). 940 ibid art 1.2. The sections in Chapter 3 entitled ‘Notification of PTAs to the WTO under Article XXIV of the GATT (Territorial Application, Frontier Traffic, Customs Unions and Free Trade Areas)’ and ‘Notification of PTAs to the WTO under Article V of the GATS (Economic Integration)’ consider Articles XXIV of the GATT, and V of the GATS, respectively. 941 Text to n 19. 942 Text to nn 771–773. 943 ibid art 1.3. 944 n 605 and accompanying text; n 604. 945 n 605 and accompanying text. 946 The China-Georgia BTA’s wording is as follows: “The Parties confirm their rights and obligations under the [Agreement Establishing the World Trade Organization] and the other

Bilateral Trade Agreements  251 The Chile-Thailand BTA requires each Party to grant national treatment to the other Party’s goods in observance of Article III of the GATT 947 “including its interpretative notes”, which “[t]o this end … are incorporated into and made part of this Agreement, mutatis mutandis” 948. It is submitted that the ‘interpretative notes’ to Article III of the GATT are the provisions of Ad Article III of the GATT 949. The EU-Canada950, Japan-Mongolia951 and China-Georgia952 BTAs each contain a similar national treatment provision in relation to trade in goods. Except as otherwise provided in this Agreement [i.e., the Chile-Thailand BTA], and subject to a Party’s Schedule as set out in Annex 3.4 [to the Chile-Thailand BTA], as at the date of entry into force of this Agreement 953, each Party shall eliminate all customs duties on originating goods of the other Party 954. Both Chile’s Schedule and Thailand’s Schedule in Annex 3.4 to the China-­ Thailand BTA rely on the Harmonized System955 for classifying products, and lay down immediate (15 November 2015), 4-step (15 November 2015, 1 January 2016, 1 January 2017, 1 January 2018), 6-step (as 4-step, 1 January 2019, 1 January 2020) and 9-step (as 6-step, 1 January 2021, 1 January 2022, 1 January 2023) timetables for tariff elimination on their goods, as specified therein956. Chile applies a reduction of its MFN tariffs to zero in equal amounts at each step957. Thailand applies a linear reduction for products on which it has a substantial MFN tariff and a delayed diminution for goods on which that duty is small, except for its 9-step tariff elimination process in which a substantial charge is decreased by 50% on 1 January 2019 and abolished four years later

agreements negotiated thereunder to which both Parties are party, and any other international agreement to which both Parties are party.” (FTAGCGG (n 11) art 1.2). 947 The subsection entitled ‘Article III: National Treatment on Internal Taxation and Regulation’, in the section entitled ‘The GATT’, in Chapter 1, considers Article III of the GATT. 948 FTAGCGT (n 932) art 3.3. n 594 defines ‘mutatis mutandis’. 949 This is consistent with the author’s explanation of the term ‘interpretative notes’ in relation to Article XX of the GATT (text to n 896). The text to nn 83 and 115–116 in ch 1, and n 118 in ch 1 and accompanying text, consider Paragraph 2 of Ad Article III of the GATT. For the first sentence of Paragraph 5 of Ad Article III of the GATT, see n 196 in ch 1 and accompanying text. 950 n 21 and accompanying text. 951 Text to n 644. 952 Text to n 776. 953 The Chile-Thailand BTA entered into force on 5 November 2015 (Committee on Regional Trade Agreements/Council for Trade in Services – Notification of Regional Trade Agreement (12 September 2017) WT/REG387/N/1 S/C/N/895 ). 954 FTAGCGT (n 932) art 3.4.3. 955 n 105 in ch 2, and n 24, contain information concerning the Harmonized System. 956 n 953; text to n 12; ibid Annex 3.4 Section A para I and Section B para I. 957 ibid Annex 3.4 Section A para I.

252  Bilateral Trade Agreements and a small duty is only cut on 1 January 2023958. The EU-Canada959, Japan-­ Mongolia960 and China-­Georgia961 BTAs also include provisions and Schedules that concern tariff reduction and elimination on the goods which each Party sells to the other Party. Each Party to the Chile-Thailand BTA is not to introduce or maintain a prohibition or restriction on any of the other Party’s goods, other than in concurrence with its rights and duties under the WTO Agreements and the BTA 962. The EU-Canada963, Japan-Mongolia964 and China-Georgia965 BTAs contain statements similar to the immediately preceding sentence and, except for the Japan-Mongolia BTA 966, that which follows it (quoted here). To this end, Article XI of GATT 1994967 and its interpretative notes968 shall be incorporated into and shall form party of this Agreement, mutatis mutandis 969. Chapter 4 of the Chile-Thailand BTA is named ‘Rules of Origin’. The EU-­ Canada, Japan-Mongolia and China-Georgia BTAs also describe rules of origin concerning their Parties’ products – the first in a Protocol to that Agreement. Chile and Thailand are to ascertain the custom values of products traded between them in observance of Article VII of the GATT 970 and the Customs Valuation Code971. The China-Georgia BTA provides likewise for its Parties972.

958 ibid Annex 3.4 Section B para I. ‘Substantial’ means an ad valorem percentage of 5% or more, whilst ‘small’ means an ad valorem percentage of less than 5% (ibid). n 69 in ch 1 defines ‘ad valorem’. 959 Text to nn 23, 25, 27–31 and 34, and nn 22, 26 and 32. 960 Article 2.4 of, and Annex I to, the Japan-Mongolia BTA cover reduction and elimination of customs duties on goods traded with the other Party to the Agreement. 961 n 779 and accompanying text; text to nn 781–783. 962 ibid art 3.8.1. 963 Text to nn 35–36. 964 Article 2.7.1 of the Japan-Mongolia BTA contains its ban on import and export restrictions in respect of goods traded between the Parties to the Agreement. 965 Text to nn 785–786. 966 The Japan-Mongolia BTA does not specify that Article XI of the GATT is incorporated into and to form part of, that BTA. 967 The subsection entitled ‘Article XI: General Elimination of Quantitative Restrictions’, in the section entitled ‘The GATT’, in Chapter 1, considers Article XI of the GATT. 968 n 949 and accompanying text. n 457 in ch 1 contains Paragraph 2(c) of Ad Article XI of the GATT. The text to n 450 in ch 1 comprises the sentence that heads Ad Articles XI, XII, XIII, XIV and XVIII of the GATT. 969 ibid. n 594 defines ‘mutatis mutandis’. 970 The text to nn 35 and 36 in ch 2 covers Subparagraphs 2(a) and 2(b) of Article VII of the GATT. 971 ibid art 5.5. The section entitled ‘The Customs Valuation Code’, in Chapter 2, summarizes the Customs Valuation Code. 972 Text to n 793.

Bilateral Trade Agreements  253 Whilst the EU-Canada973 and Japan-Mongolia974 BTAs also apply the Code thus, neither defers to Article VII of the GATT. Like those three BTAs, the Chile-Thailand BTA includes a sizeable chapter on customs procedures and trade facilitation975. The Parties to the Chile-Thailand BTA confirm their rights and duties to one another 976 under the Agreement on the Application of Sanitary and Phytosanitary Measures977 – as under the EU-Canada978, Japan-Mongolia979 and ­China-Georgia980 BTAs. Whilst the former BTA lacks a statement of equivalence which mirrors that in the Agreement on the Application of Sanitary and Phytosanitary Measures981 and those in the other three BTAs982, its commitment is in accordance with the Agreement on the Application of Sanitary Measures983 and refers to the principle of equivalence contained therein984. Upon request, the Parties may enter into discussions with the aim of achieving bilateral recognition of the specified SPS [sanitary and phytosanitary] measures in line with the principle of equivalence in the [Agreement on the Application of Sanitary and Phytosanitary Measures] and other standards, guidelines or recommendations by the relevant international organizations985. Like the Japan-Mongolia and China-Georgia BTAs, the Chile-Thailand BTA lays down objectives for its chapter on technical barriers to trade986. These are to

973 Text to n 83. 974 The Japan-Mongolia BTA declares: “For the purposes of determining the customs value of goods traded between the Parties, the provisions of Part I of the Agreement on Customs Valuation shall apply mutatis mutandis.” (AJMEP (n 584) art 2.5). Part I of the Customs Valuation Code is entitled ‘Rules on Customs Valuation’ and comprises Articles 1–17 of that Agreement. n 594 defines ‘mutatis mutandis’. 975 This is Chapter 5 of the Chile-Thailand BTA, which is entitled ‘Customs Procedures’. 976 The phrase ‘with respect to each other’ is present in Article 5.4 of the China-Georgia BTA and Article 6.4.1 of the Chile-Thailand BTA, but missing from Article 5.4 of the EU-Canada BTA and Article 5.2 of the Japan-Mongolia BTA. Only the last one of these provisions includes the words “related to SPS measures” (n 979). 977 FTAGCGT (n 932) art 6.4.1. The section entitled ‘The Agreement on the application of Sanitary and Phytosanitary Measures’, in Chapter 2, synopsizes the Agreement on the Application of Sanitary and Phytosanitary Measures. 978 Text to n 65. 979 The Japan-Mongolia BTA states: “The Parties reaffirm their rights and obligations related to SPS [sanitary and phytosanitary] measures under the [Agreement on the Application of Sanitary and Phytosanitary Measures]” (AJMEP (n 584) art 5.2). 980 Text to n 796. 981 Text to n 15 in ch 2. 982 Text to nn 67, 650 and 801. 983 Text to n 14 in ch 2. 984 Text to n 15 in ch 2. 985 FTAGCGT (n 932) art 6.6.2. 986 This is Chapter 7 of the Chile-Thailand BTA, which is entitled ‘Technical Barriers to Trade’.

254  Bilateral Trade Agreements increase and ease trade by furthering the implementation of the Agreement on Technical Barriers to Trade, abolishing inessential technical barriers to trade and strengthening bilateral co-operation987. The Parties to the Chile-Thailand BTA “affirm their rights and obligations with respect to each other Party under the [Agreement on Technical Barriers to Trade]” 988 – language that is almost identical to the same commitment in the China-Georgia BTA 989. Chile and Thailand are to “work cooperatively in the fields of standards, technical regulations and conformity assessment procedures with a view to facilitating trade between the Parties” 990. This is similar to the Parties’ undertaking in the EU-Canada BTA 991, and is echoed in objective (b) of Chapter 6 of the China-Georgia BTA 992. Of Chile and Thailand, each “retains its rights and obligations” under: (i) Article VI of the GATT and the AD Agreement in respect of “the application of antidumping duties” 993, (ii) Article VI of the GATT and the SCM Agreement with regard to countervailing measures994, and (iii) Article XIX of the GATT and the Agreement on Safeguards995. This is consistent with the EU-Canada996, Japan-Mongolia997 and China-Georgia998 BTAs – the latter subject to one exception999. Most of the Chile-Thailand BTA’s chapter on trade remedies1000 is devoted to transitional and provisional safeguard measures. Like the EU-Canada1001, Japan-Mongolia1002 and China-Georgia1003 BTAs, the Chile-Thailand BTA includes a chapter on cross-border trade in services1004, 987 ibid art 7.2. 988 ibid art 7.4. 989 Text to n 804. The section in Chapter 2 entitled ‘The Agreement on Technical Barriers to Trade’ summarizes the Agreement on Technical Barriers to Trade. 990 ibid art 7.7. 991 Text to n 54. 992 Text to n 807. 993 ibid art 8.1.1. The subsection entitled ‘Article VI: Anti-Dumping and Countervailing Duties, the AD Agreement, and the SCM Agreement’, in the section entitled ‘The GATT’, in Chapter 1, considers aspects of Article VI of the GATT, the AD Agreement and the SCM Agreement. 994 ibid art 8.2.1. n 993. 995 ibid art 8.3.1. The section entitled ‘The Agreement on Safeguards’, in Chapter 2, quotes Article XIX:1(a) of the GATT and summarizes the Agreement on Safeguards. 996 Text to nn 40 and 47. 997 Text to n 637, and Article 2.14.1(a) of the Japan-Mongolia BTA, which states: “Nothing in this Section [i.e., Section 2 entitled ‘Safeguard Measures’ of Chapter 2 entitled ‘Trade in Goods’] shall prevent a Party from applying a safeguard measure to an originating good of the other Party in accordance with (a) Article XIX of the GATT 1994 and the Agreement on Safeguards ….” (AJMEP (n 584) art 2.14.1(a)). 998 Text to n 809, and Article 7.2 of the China-Georgia BTA, which declares: “Each Party retains its rights and obligations under Article XIX of the GATT 1994 and the WTO Agreement on Safeguards” (FTAGCGG (n 11) art 7.2). 999 Text to n 811. 1000 This is Chapter 8 of the Chile-Thailand BTA, which is entitled ‘Trade Remedies’. 1001 Text to nn 133 and 139–142. 1002 nn 656, 658 and 823, and accompanying text. 1003 nn 820 and 821, and accompanying text; text to n 823. 1004 This is Chapter 9 of the Chile-Thailand BTA, which is entitled ‘Trade in Services’.

Bilateral Trade Agreements  255 which contains national treatment1005 and market access1006 provisions. However, unlike those other BTAs1007, the chapter lacks an MFN clause. Whilst, unlike those of the other three BTAs, the trade-in-services Schedules of the Chile-Thailand BTA contain no MFN treatment exemptions, they are similar to the Schedules of the other BTAs in that they show restrictions on market access and on national treatment in respect of the provision of specified services by the other Party1008. Chapter 10 of the Chile-Thailand BTA is entitled ‘Trade in Financial Services’. It includes Articles on market access commitments1009 and national treatment1010, together with an Annex entitled ‘Schedule of Specific Commitments on Financial Services’1011. This chapter omits an MFN clause, as does Annex 4 to Chapter 7 of the Japan-Mongolia BTA 1012 and Annex 8-A to the ­China-Georgia BTA 1013. Nevertheless, financial services are within the scope of the cross-border trade-in-services chapter in both the Japan-Mongolia1014 and China-Georgia1015 BTAs, and in each case that chapter includes an MFN provision1016. Given this, together with the fact that the EU-Canada BTA’s chapter on financial services contains an MFN clause1017, such a provision applies to inter-Party trade in financial services under the EU-Canada, Japan-Mongolia and China-Thailand BTAs. Thus, only the Chile-Thailand BTA withholds MFN cover from the cross-border supply of financial services1018. Chapter 11 of the Chile-Thailand BTA, entitled ‘Economic Cooperation’, provides for co-operation between Chile and Thailand and “capacity building” over

1005 1006 1007 1008

009 1 1010 1011 1012 1013 1014 1015 1016 1017 1018

Article 9.4.1 of the Chile-Thailand BTA embraces this national treatment clause. Article 9.3 of the Chile-Thailand BTA comprises these market access commitments. Text to n 137; nn 657 and 822, and accompanying text. Annex 9.6 to the Chile-Thailand BTA, entitled ‘Schedule of Specific Commitments on Trade in Services’, places Chile’s Schedule in Section A and Thailand’s Schedule in Section B nn 824 and 825, and accompanying text, consider the trade-in-service Schedules for the EU-Canada, Japan-Mongolia and China-Georgia BTAs. Article 10.3 of the Chile-Thailand BTA contains these market access commitments. Article 10.4.1 of the Chile-Thailand BTA embodies this national treatment clause. This is Annex II to Chapter 10 of the Chile-Thailand BTA, which positions Chile’s Schedule in Section A and Thailand’s Schedule in Section B. n 748 and accompanying text. Text to n 826. AJMEP (n 584) art 7.1.2. FTAGCGG (n 11) art 8.1.2. nn 657 and 822 and accompanying text. n 186 and accompanying text. Whilst the Chile-Thailand’s chapter on the cross-border provision of services (n 1004) does not apply to financial services (FTAGCGT (n 932) art 9.2.2(a)), even if it did MFN protection would not be available in Chile to Thailand’s financial institutions or to investments from Thai investors in Chile’s financial institutions – nor in Thailand to Chile’s financial institutions or to investments from Chilean investors in Thailand’s financial institutions (n 186 and accompanying text), because, as stated in the immediately preceding paragraph, that chapter contains no MFN provision.

256  Bilateral Trade Agreements sixteen listed areas1019. This is similar to the Japan-Mongolia BTA, which specifies fourteen spheres of co-operation betwixt its Parties1020. It contrasts with the narrower approaches of the EU-Canada1021 and China-Georgia1022 BTAs to inter-Party co-operation. Articles 11.5 to 11.9 of the Chile-Thailand BTA select the environment, labour, electronic commerce, government procurement and geographical indications, respectively, for individual treatment with respect to inter-Party co-operation, which is an approach that differs to some extent from the EU-Canada, Japan-Mongolia and China-Thailand BTAs. A Cooperation Committee is established1023 to decide upon the subjects of co-­operation1024, supervise the how “the strategic collaboration agreed by the Parties” is applied1025, support the Parties to assume co-operation activities for which Chapter 11 of the Chile-Thailand BTA provides1026, and keep up-to-date information concerning “any cooperation agreements, arrangements or instruments between the Parties”1027. Whilst the Japan-Mongolia BTA creates a Sub-Committee on Cooperation1028 – whose functions differ1029 from those of the China-Thailand BTA’s Co-operation Committee1030, neither the China-Georgia BTA nor the EU-Canada BTA institutes a co-operation committee – although the latter establishes the Regulatory Cooperation Forum1031. Each Party to the Chile-Thailand BTA is to make sure “that its laws, regulations, procedures and administrative rulings of general application1032 in r­ espect 1019 ibid art 11.3. The language of this provision is “may include, among others” (ibid; emphasis added). Furthermore, “The Parties affirm the importance of all forms of cooperation, including, but not limited to, the fields of cooperation listed in Article 11.3 [of the Chile-Thailand BTA] and any other fields that the Parties agree or include.” (ibid art 11.2.1; emphasis added). Thus, co-operative programmes between the Parties are likely to include some or all of the listed areas, but may incorporate other fields as well. 1020 Text to n 740. 1021 Text to nn 489–490 and 492–493. 1022 n 851 and accompanying text; text to n 852. 1023 ibid art 11.10.1. 1024 ibid art 11.10.5(a). 1025 ibid art 11.10.5(b). 1026 ibid art 11.10.5(c). 1027 ibid art 11.10.5(d). 1028 Text to n 631. 1029 Article 15.4.2 of the Japan-Mongolia BTA lists seven functions of the Sub-­Committee on Cooperation, which also “carr[ies] out other functions as may be delegated by the [­Japan-Mongolia BTA’s] Joint Committee” (AJMEP (n 584) art 15.4.2). The text to nn 615–618 and 632–633 cover the establishment and functions of the Japan-Mongolia BTA’s Joint Committee. 1030 Text to nn 1024–1027. 1031 Text to n 517. 1032 An ‘administrative ruling of general application’ is “an administrative ruling or interpretation that applies to all persons and factual situations that fall generally within its ambit and that establishes a norm of conduct but does not include: (a) a determination or ruling made in an administrative proceeding that applies to a particular person, good or service of the other Party in a specific case; or (b) a ruling that adjudicates with respect to a particular act or practice” (FTAGCGT (n 932) art 12.1).

Bilateral Trade Agreements  257 of any matter covered by this Agreement are promptly published”1033. The EU-Canada BTA contains a corresponding provision which is almost identical to that in the Chile-Thailand BTA1034. The China-Thailand BTA also contains a very similar statement1035. The equivalent rule in the Japan-Mongolia BTA overlaps with, but is slightly different to, that in the other three BTAs1036. Whilst the China-Georgia BTA includes Articles X of the GATT and III of the GATS1037, the Chile-Thailand BTA – like the EU-Canada and Japan-Mongolia BTAs1038 – does not refer to those Articles. The Parties to the Chile-Thailand BTA “hereby establish a Free Trade Commission”1039, which will review this Agreement’s general operation1040, appraise, contemplate and determine specific issues concerning the BTA’s functioning and implementation1041, oversee and co-ordinate the work of committees, working groups and contact points created under the Agreement1042, furnish assistance in order to settle disputes that may result concerning “the interpretation, implementation or application” of the BTA 1043, and take other measures as the Parties may decide1044. The Free Trade Commission may set up, refer issues to, and delegate obligations to, any committee or working group1045, consider and adopt any amendments to the trade-in-goods Schedules1046 by accelerating the removal of tariffs, the product-specific rules of origin, and the listed geographical indications1047, publish interpretations of the Chile-Thailand BTA 1048, and request the opinion of individuals or groups outside government on matters which the BTA covers1049. There is overlap between the responsibilities of this Free Trade Commission and those of the CETA Joint Committee1050, the Japan-Mongolia BTA’s Joint Committee1051 and the China-Georgia Joint Commission1052.

1033 1034 1035 1036 1037 1038 1039 1040 1041 1042 1043 1044 1045 1046 1047 1048 1049 1050 1051 1052

ibid art 12.3.1. Text to n 525. Text to n 855. n 858 and accompanying text. Text to n 861. nn 859 and 860 concern Article X of the GATT and Article III of the GATS, respectively. Text to nn 859–860. ibid art 13.1.1. ibid art 13.1.3(a). ibid art 13.1.3(b). ibid art 13.1.3(c). ibid art 13.1.3(d). ibid art 13.1.3(e). ibid art 13.1.4(a). Text to nn 956–958. ibid art 13.1.4(b). ibid art 13.1.4(c). ibid art 13.1.4(d). Text to nn 502–505 and 507–510. Text to nn 616–618 and 632–633. Text to nn 864–868.

258  Bilateral Trade Agreements The Parties to the Chile-Thailand BTA have founded Committees on Trade in Goods1053, Rules of Origin1054, Customs Procedures1055, Sanitary and Phytosanitary Measures1056, Technical Barriers to Trade1057, Trade in Services1058, and Cooperation1059. These Committees are responsible to the Free Trade Commission, as indicated by the language concerning the functions of all but one of them, as follows: (i) Committee on Trade in Goods – “The functions of the Committee shall be … (e) carrying out other functions as may be delegated by the Commission … (g) addressing barriers to trade in goods between the parties … and, if appropriate, referring such matters to the Commission for its consideration; and (h) reporting the findings and the outcome of discussions to the Commission”1060; (ii) Committee on Rules of Origin – “The functions of the Committee shall be to … (e) carry out other functions as may be delegated by the Commission in accordance with Article 13.1.41061 [of the Chile-­ Thailand BTA]”1062; (iii) Committee on Customs Procedures – “The functions of the Committee shall be … (b) reporting the finding[s] of the Committee to the Commission; … (e) carrying out other functions which may be delegated by the Commission”1063; (iv) Committee on Technical Barriers to Trade – “… The Committee shall report to the Commission on its activities”1064; (v) Committee on Trade in Services – “The functions of the Committee shall be … (d) reporting the findings of the Committee to the Commission; and (e) carrying out other functions which may be delegated by the Commission pursuant to Article 13.1.41065 … .”1066; (vi) Cooperation Committee – “The Cooperation Committee shall report periodically to the Commission the results of its meetings. Consequently, the Commission may formulate recommendations regarding cooperation activities under this Chapter [i.e., Chapter 11 of the Chile-Thailand BTA 1067] in accordance with the strategic priorities of the Parties”1068. These Committees tend to cover wider fields than the specialized committees that are established under the EU-Canada BTA 1069. Although fewer, their general scope

1053 1054 1055 1056 1057 1058 1059 1060 1061 1062 1063 1064 1065 1066 1067 1068 1069

ibid art 3.9.1. ibid art 4.14.1. ibid art 5.18.1. ibid art 6.11.1. ibid art 7.13.1. ibid art 9.13.1. Text to n 1023. The text to nn 1024–1027 specifies functions of the Cooperation Committee. ibid art 3.9.3. Text to n 1045. Whilst the text to nn 1047–1049 also relates to Article 13.1.4 of the Chile-Thailand BTA, that provision’s Subparagraph (a) contains the relevant clause. ibid art 4.14.2. ibid art 5.18.2. ibid art 7.13.1. n 1061. ibid art 9.13.2. n 1019 and accompanying text; text to nn 1023–1027. ibid art 11.10.8. Text to nn 511–518.

Bilateral Trade Agreements  259 resembles that of the Japan-Mongolia BTA’s Sub-Committees1070. Thus, the Chile-Thailand BTA employs a supervisory structure with the Free Trade Commission at the centre – although the Committee on Rules of Origin discloses its findings to the Committee on Trade in Goods1071, which receives these reports and reviews the former’s work1072. Where a dispute regarding any matter arises under [the Chile-Thailand BTA] and under another free trade agreement to which both Parties are parties or the [Agreement Establishing the World Trade Organization], the complaining Party may select the forum in which to settle the dispute1073. Once [that] Party has requested a panel under [one of these] agreement[s] …, the forum selected shall be used to the exclusion of the others1074. This passage is consistent with the equivalent provisions in the EU-Canada1075, Japan-Mongolia1076 and China-Georgia1077 BTAs, although the scope of the phrase “regarding any matter”1078 is broader than the corresponding expression in each of the other three Agreements1079. Either Party to the Chile-­ Thailand BTA may request consultations with the other regarding any issue “on the implementation, interpretation or application of this Agreement”1080. The EU-Canada1081, Japan-Mongolia1082 and China-Thailand1083 BTAs also enable inter-Party consultations to be held. Like Parties to the Japan-Mongolia BTA1084, the Parties to the Chile-Thailand BTA may “at any time agree to good offices, conciliation or mediation”1085. The following provision has no equivalent in any of the other three BTAs. If the consultations fail to resolve the matter within forty (40) days of the delivery of a Party’s request for consultations …, or twenty (20) days in cases of urgency …, [then] the complaining Party may refer the matter to the [Free Trade] Commission by delivering written notification to the other

1070 1071 1072 1073 1074 1075 1076 1077 1078 1079 1080 1081 1082 1083 1084 1085

Text to nn 619–631. ibid art 4.14.2(b). ibid art 3.9.3(c). ibid art 14.2.1. ibid art 14.2.2. Text to n 572. n 758 and accompanying text; text to n 760. Text to nn 875 and 876. Text to n 1073. Text to nn 879–881. ibid art 14.3.1. n 882. Text to n 764. Text to n 883. Text to n 765. ibid art 14.4.1.

260  Bilateral Trade Agreements Party1086. The Commission shall endeavour to resolve the matter1087. [It] may: (a) call on such technical advisers or create such working groups or expert groups as it deems necessary; (b) have recourse to good offices, conciliation, mediation or such other dispute resolution procedures; or (c) make recommendations; as may assist the Parties to reach a mutually satisfactory resolution of the dispute1088. In addition to these remedies, the Parties to the China-Thailand BTA – like those to the EU-Canada1089, Japan-Mongolia1090 and China-Georgia1091 BTAs – may resort to arbitration. The complaining party that requested consultations … may request in writing the establishment of an arbitral panel, if the Parties fail to resolve the matter within: (a) forty-five (45) days after the date of receipt of the request for consultation if there is no referral to the [Free Trade] Commission under Article 14.5 [of the Chile-Thailand BTA]1092; (b) thirty (30) days of the Commission convening pursuant to Article 14.5, or fifteen (15) days in cases of urgency …; or (c) sixty (60) days after a Party has delivered a request for consultation …, or thirty (30) days in cases of urgency, … if the Commission has not convened a referral under Article 14.51093. The remainder of the Chile-Thailand BTA’s chapter entitled ‘Dispute Settlement’1094 is devoted to the arbitral proceedings1095 the implementation of the arbitral panel’s report1096, and any suspension of obligations under this Agreement following that report’s non-implementation1097. The EU-Canada1098, ­Japan-Mongolia1099 and China-Georgia1100 BTAs provide like coverage. Annex 14.10 to the Chile-Thailand BTA, entitled ‘Rules of Procedure for Arbitral Panels’, is more concise than Annex 29-A to the EU-Canada BTA 1101 and fuller than Annex 15-A to the China-Georgia BTA 1102. 1086 1087 1088 1089 1090 1091 1092 1093 1094 1095 1096 1097 1098 1099 1100 1101 1102

ibid art 14.5.1. ibid. ibid art 14.5.2. n 574 and accompanying text. n 766 and accompanying text. Text to n 885. Text to nn 1086–1088. ibid art 14.6.1. This is Chapter 14 of the Chile-Thailand BTA. Articles 14.6–14.12. Article 14.13. Article 14.14. Text to n 575, and its immediately preceding sentence. n 768 and accompanying text. n 889 and accompanying text. Text to n 575. Text to n 889.

Bilateral Trade Agreements  261 For the purposes of Chapters 3 to 7 (Trade in Goods, Rules of Origin, Customs Administration, Sanitary and Phytosanitary Measures, and Technical Barriers to Trade), Article XX of GATT 1994 and its interpretative notes are incorporated into and made part of [the Chile-Thailand BTA], mutatis mutandis. …1103 For the purposes of Chapter[] 9 (Trade in Services), Article XIV of the GATS, including its footnotes, is incorporated into and made part of [the Chile-Thailand BTA], mutatis mutandis1104. These provisions are almost identical to the corresponding rules in the ­ hina-Georgia BTA 1105. Consequently, the comments relating to the latter1106 C apply to the former. The security exceptions that Article 15.2.1 of the Chile-Thailand BTA contains are essentially the same as Article XXI of the GATT1107. Minor differences include the replacement of ‘any Member’ (or ‘any contracting party’) with ‘a Party’1108, and the addition of the words ‘or provisioning’ between ‘supplying’ and ‘a military establishment’1109. Unlike the Japan-­Mongolia1110 and ­China-Georgia1111 BTAs, Article XIV bis of the GATS1112 is not mentioned in relation to either the EU-Canada BTA’s1113 or the Chile-­Thailand BTA’s security exceptions. The modifications that Article 15.2.1 of the Chile-Thailand BTA makes to Article XXI of the GATT are less extensive than the changes which Article 28.6 of the EU-Canada BTA makes to that provision of the GATT1114. The Chile-Thailand BTA expires 180 days after the date on which one of its Parties notifies the other in writing of its termination1115. Whilst the EU-­ Canada1116, China-Georgia1117 and Japan-Mongolia1118 BTAs each require written notice of its cessation, only the former two Agreements expire 180

1103 ibid art 15.1.1. n 594 defines ‘mutatis mutandis’. The subsection entitled ‘Articles XX and XXI: Exceptions to the GATT’, in the section entitled ‘The GATT’, in Chapter 1, surveys Article XX of the GATT and pertinent case law. 1104 ibid art 15.1.2. 1105 Text to nn 892 and 893. 1106 Text to nn 894–898. 1107 n 546 in ch 1 and accompanying text. 1108 n 1107; ibid art 15.2.1. 1109 Text to n 546 in ch 1; ibid art 15.2.1(b)(ii). 1110 Text to n 595. 1111 Text to n 901. 1112 n 144 in ch 2 and accompanying text; text to nn 145 and 146 in ch 2. 1113 Text to n 566. 1114 Text to nn 567–569. 1115 ibid art 16.5.3. 1116 Text to n 580. 1117 Text to n 908. 1118 Text to n 769.

262  Bilateral Trade Agreements days following the notification1119 – the latter discontinues after one year1120. Like the Japan-Mongolia BTA 1121, but unlike the EU-Canada1122 and China-­ Georgia1123 BTAs, the Chile-Thailand BTA does not provide for any extensions to the specified period of notice1124.

Comment The main distinguishing feature of the Chile-Thailand BTA from the EU-­ Canada, Japan-Mongolia and China-Georgia BTAs is the absence of an MFN clause from the former Agreement’s chapter on trade in services. Notwithstanding this, the Chile-Thailand BTA is consistent with the other three Agreements taken as a whole. On the basis of this reflection and the above comparison from which it is drawn, geographical distance between Parties – largest between Chile and Thailand – does not have a substantial impact on the contents of the BTA.

Comments Much in the four BTAs studied in this chapter is consistent across them – for instance: (i) the presence of national and MFN treatment clauses with regard to trade in goods, plus accompanying tariff reduction/elimination schedules, (ii) the existence of national and, other than in the Chile-Thailand BTA, MFN treatment clauses and a market access provision in respect of trade in services, together with accompanying schedules that show exceptions to these rules, (iii) a chapter which provides for the resolution of disputes concerning matters relating to the BTA, and (iv) general and security exceptions, which incorporate Articles XX and XXI, respectively, of the GATT, into at least some of the chapters of the BTA – either exactly or with adjustments. The EU-Canada BTA is, as its full name suggests, more comprehensive than the other three Agreements – for instance, containing one chapter addressing, and two further chapters relating to, sustainable development. On investment, the Agreements in order of decreasing thoroughness are EU-Canada, Japan-Mongolia, China-Georgia and ChileThailand BTAs. Whilst investments are included in the objectives of the Chile-Thailand BTA1125, the main elements of their treatment therein are: (i) the inclusion of “Trade and Investment Promotion” as one of the spheres of co-operation between Chile and Thailand and “capacity building”1126, and (ii) the following provision, which is entitled ‘Future Work Programme’.

1119 1120 1121 1122 1123 1124 1125 1126

Text to nn 581 and 909. Text to n 769. Text to n 769. Text to nn 583 and 915. n 910 and accompanying text. ibid. Text to nn 934 and 935. ibid art 11.3(a).

Bilateral Trade Agreements  263 Unless otherwise agreed by the Parties [to the Chile-Thailand BTA], no later than two (2) years after the entry into force of this Agreement, the[y] shall initiate negotiations on investment and review relevant Articles of this Agreement as necessary1127. As the Chile-Thailand BTA came into force on 5 November 20151128, at the time of writing1129 these negotiations and their associated review should be under way.

Conclusion This chapter summarizes the EU-Canada BTA. It reviews the Japan-Mongolia BTA relative to the EU-Canada BTA, appraises the China-Georgia BTA considering the EU-Canada and Japan-Mongolia BTAs, and compares aspects of the Chile-Thailand BTA with the EU-Canada, Japan-Mongolia and China-Georgia BTAs. Inferences are drawn from these considerations. Chapter 5 assesses three PPTAs in the light of Chapter 4. In this evaluation, the EU-Canada BTA is used as a point of reference.

References Agreement between Japan and Mongolia for an Economic Partnership (signed 10 February 2015, entered into force 7 June 2016) UNTS I:54545. Agreement between the European Communities and the Government of Canada regarding the application of their competition laws [1999] OJ L175/50. Agreement between the European Community and Canada on customs cooperation and mutual assistance in customs matters [1998] OJ L7/38. Agreement between the Government of the People’s Republic of China and the Government of the Republic of Georgia Concerning the Encouragement and Reciprocal Protection of Investments (signed 3 June 1993, entered into force 1 March 1995) UNTS I:. Agreement on Agriculture (15 April 1994) LT/UR/A-1A/2 ; 33 ILM 1154 (1994). Baber, Graeme, Essays on International Law (Cambridge Scholars Publishing 2017). Committee on Regional Trade Agreements/Council for Trade in Services – Notification of Regional Trade Agreement (12 September 2017) WT/REG387/N/1 S/C/N/895 . Committee on Regional Trade Agreements/Council for Trade in Services – Notification of Regional Trade Agreement (21 September 2017) WT/REG389/N/1 S/C/N/896 . Comprehensive Economic and Trade Agreement (CETA) between Canada, of the one part, and the European Union and its Member States, of the other part [2017] OJ L11/23.

1127 ibid art 16.4. 1128 n 953. 1129 16 July 2018.

264  Bilateral Trade Agreements Consolidated Version of the Treaty on European Union [2016] OJ C202/13. Consolidated Version of the Treaty on the Functioning of the European Union [2016] OJ C202/47. Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). ‘Convention on International Trade in Endangered Species of Wild Fauna and Flora’ accessed 8 June 2018. Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). ‘What is CITES?’ accessed 8 June 2018. European Commission. ‘Comprehensive Economic and Trade Agreement (CETA) – The tenth Meeting of Canada-EU Dialogue on Biotech Market Access Issues (26 April 2018): Agenda’ accessed 9 June 2018. European Commission. ‘News archive – Canada | Brussels 23 March 2018: CETA  – ­Meetings and documents’ accessed 9 June 2018. Free Trade Agreement between the Government of the People’s Republic of China and the Government of Georgia (signed 13 May 2017, entered into force 1 January 2018) UNTS I:. Free Trade Agreement between the Government of the Republic of Chile and the Government of the Kingdom of Thailand (signed 4 October 2013, entered into force 5 November 2015) UNTS I:. General Agreement on Trade in Services (15 April 1994) LT/UR/A-1B/S/1 ; 1869 UNTS 183; 33 ILM 1167 (1994). International Convention on the Harmonized Commodity Description and Coding System, as amended by the Protocol of Amendment of 24 June 1986 (signed 14 June 1983, entered into force 1 January 1988) UNTS I:25910. International Monetary Fund. Articles of Agreement (International Monetary Fund 2016). International Monitoring, Control and Surveillance (MCS) Network. ‘What is IUU Fishing?’ accessed 9 June 2018. International Union for the Protection of New Varieties of Plants (UPOV). ‘International Convention for the Protection of New Varieties of Plants’ accessed 31 May 2018. Japan – Taxes on Alcoholic Beverages: Report of the Appellate Body (4 October 1996) WT/ DS8/AB/R WT/DS10/AB/R WT/DS11/AB/R . McFarlane, Gavin, The Layman’s Dictionary of English Law (Waterlow Publishers Limited 1984). Paris Convention for the Protection of Industrial Property (signed 14 July 1967, entered into force 26 April 1970) UNTS I:11851. Pearsall, Judy (ed), The New Oxford Dictionary of English (Oxford University Press 1998). Royal Institute of International Affairs (Chatham House). ‘Recommended Best Practices for Regional Fisheries Management Organizations – Executive Summary: Report of an independent panel to develop a model for improved governance by Regional Fisheries Management Organizations’ (The Royal Institute of International Affairs, 2007). Understanding on Rules and Procedures Governing the Settlement of Disputes (15 April 1994) LT/UR/A-2/DS/U/1 . UNIDROIT Convention on International Financial Leasing (signed 28 May 1988, entered into force 1 May 1995) UNTS I:41556.

Bilateral Trade Agreements  265 United Nations Department of Economic and Social Affairs. ‘Central Product Classification (CPC) Version 2.1’ ST/ESA/STAT/SER.M/77/Ver 2.1 (2015). United Nations International Trade Statistics Knowledgebase. ‘Harmonized Commodity Description and Coding Systems (HS)’ accessed 2 May 2018. United States – Standards for Reformed and Conventional Gasoline: Report of the Appellate Body (29 April 1996) WT/DS2/AB/R . University of International Business and Economics (UIBE)/Policy Management and Consulting Group (PMCG). ‘Joint Feasibility Study on China-Georgia Possible Free Trade Agreement: Final Report’ (UIBE/PMCG, 2015). Vienna Convention on the Law of Treaties (signed 23 May 1969, entered into force 27 January 1980) UNTS I:18232. World Customs Organization. Protocol of Amendment to the International Convention on the Simplification and Harmonization of Customs Procedures of 18 May 1973 (World Customs Organization, 1999). World Customs Organization. ‘The Revised Kyoto Convention’ accessed 24 June 2018. World Intellectual Property Organization. ‘Hague Agreement Concerning the International Registration of Industrial Drugs: Geneva Act (1999) (Authentic Text)’ accessed 30 May 2018. World Intellectual Property Organization, ‘Patent Law Treaty’ accessed 30 May 2018. World Intellectual Property Organization. ‘Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks’ accessed 28 May 2018. World Intellectual Property Organization. ‘Singapore Treaty on the Law of Trademarks’ accessed 28 May 2018. World Intellectual Property Organization. ‘WIPO Copyright Treaty’ accessed 28 May 2018. World Intellectual Property Organization. ‘WIPO Performances and Phonograms Treaty (WPPT)’ accessed 28 May 2018. World Trade Organization. ‘Agreement on Government Procurement: Parties, observers and accessions’ accessed 23 May 2018 and 21 June 2018. World Trade Organization. ‘Canada’ accessed 30 April 2018. World Trade Organization. ‘Chile’ accessed 30 April 2018. World Trade Organization. ‘Chile - Thailand: Basic Information’ accessed 30 April 2018. World Trade Organization. ‘China - Georgia: Basic Information’ accessed 28 April 2018. World Trade Organization. ‘EU - Canada: Basic Information’ accessed 30 April 2018. World Trade Organization. ‘European Union’ accessed 30 April 2018.

266  Bilateral Trade Agreements World Trade Organization. ‘Japan’ accessed 28 April 2018. World Trade Organization. ‘Japan - Mongolia: Basic Information’ accessed 28 April 2018. World Trade Organization. ‘Mongolia’ accessed 28 April 2018. World Trade Organization. ‘Thailand’ accessed 30 April 2018.

5 Plurilateral Trade Agreements1

Preferential Plurilateral Trade Agreements1(PPTAs) are PTAs to which there are more than two parties. As for BTAs2, each party may be a country or a regional grouping which is legally empowered to conclude international agreements. This chapter considers three PPTAs: the ASEAN-Aus-NZ PPTA, the Trans-Pacific PPTA3 and the EAEU4. The first two are free-trade and economic integration agreements, with considerable implementation periods – fifteen and eleven years, respectively5. The EAEU is a customs union and an economic integration agree 1 The abbreviation ‘PPTA’ – for ‘Preferential Plurilateral Trade Agreements’ – is used in referring to the items that are considered in this chapter. This reference is employed in order to distinguish these documents from the Plurilateral Trade Agreements that are in Annex 4 to the Agreement Establishing the World Trade Organization, which are summarized in Chapter 1 (nn 8 and 9 in ch 1, and accompanying text). 2 Text to n 1 in ch 4. 3 The original and current signatories to the Trans-Pacific PPTA are Brunei Darussalam, Chile, New Zealand and Singapore (World Trade Organization, ‘Trans-Pacific Strategic Economic Partnership: Basic Information’ accessed 30 April 2018). 4 The original signatories to the EAEU are Belarus, Kazakhstan and Russia; the current signatories to this PPTA are Belarus, Kazakhstan, Russia, Armenia and Kyrgyzstan (World Trade Organization, ‘Eurasian Economic Union (EAEU): Basic Information’ accessed 30 April 2018). Whilst the EAEU Treaty entered into force on 1 January 2015 (ibid), the Treaty On Accession of the Republic of Armenia to the EAEU Treaty and the Treaty on Accession of the Kyrgyz Republic to the EAEU Treaty came into effect on 2 January 2015 and 12 August 2015, respectively (World Trade Organization, ‘Eurasian Economic Union (EAEU) - Accession of Armenia: Basic Information’ accessed 30 April 2018; World Trade Organization, ‘Eurasian Economic Union (EAEU) - Accession of the Kyrgyz Republic: Basic Information’ accessed 30 April 2018). Whilst, at the time of writing, Belarus is not a Member of the WTO, it is currently in the middle of the accession process – with the Draft Report of the Working Party having been circulated in respect of its multilateral negotiations, and bilateral market access negotiations on goods and services in progress (World Trade Organization, ‘Current status of WTO accessions’ accessed 30 April 2018). 5 World Trade Organization, ‘ASEAN - Australia - New Zealand: Basic Information’ accessed 30 April 2018; World Trade Organization, ‘Trans-Pacific Strategic Economic Partnership: Basic Information’ accessed 30 April 2018.

268  Plurilateral Trade Agreements ment among countries in the same region, with an implementation period of ten years6.

The ASEAN-Aus-NZ PPTA Whilst the ASEAN-Aus-NZ PPTA is structurally similar to the BTAs that Chapter 4 considers, it differs from them in a few respects. First, whilst the EU-­ Canada BTA refers to the EU and each of its Member States as one Party7, each of the Member States of the ASEAN is a separate Party to the ASEAN-Aus-NZ PPTA and the ASEAN itself is not accorded this status8. This difference is notwithstanding the fact that, like the EU9, the ASEAN has legal personality10. Second, like the Chile-Thailand BTA 11 and unlike the EU-Canada12, ­Japan-Mongolia13 and China-Georgia14 BTAs, the ASEAN-Aus-NZ PPTA omits a statement of equivalence that is similar to that in the Agreement on the Application of Sanitary and Phytosanitary Measures15. Rather than matching the Chile-Thailand BTA in mentioning the principle of equivalence within the Agreement on the Application of Sanitary and Phytosanitary Measures16, the ASEAN-Aus-NZ PPTA specifies the Article of that Agreement in which the principle is located17. The Parties shall strengthen co-operation on equivalence in accordance with the SPS Agreement [i.e., the Agreement on the Application of Sanitary and Phytosanitary Measures] and relevant international standards, guidelines and recommendations, in order to facilitate trade among the Parties18. To facilitate trade, the competent authorities of the relevant Parties may 6 World Trade Organization, ‘Eurasian Economic Union (EAEU: Basic Information’ accessed 30 April 2018. 7 Text to n 18 in ch 4. 8 Agreement establishing the ASEAN-Australia-New Zealand Free Trade Area (signed 27 February 2009, entered into force 1 January 2010) UNTS I:47529 (AAANZFTA) art 1.3(o). 9 n 1 in ch 4. 10 The ASEAN Charter reads: “ASEAN, as an inter-governmental organisation, is hereby conferred legal personality.” (Charter of the Association of South-East Asian Nations (signed 20 November 2007, entered into force 15 December 2008) UNTS I:46745 art 3). Unlike the EU (n 1 in ch 4), the ASEAN Charter does not confer power on the ASEAN to conclude international agreements that bind its Member States. Those Member States are Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and ­V ietnam (ibid art 4). 11 Text to n 981 in ch 4. 12 Text to n 67 in ch 4. 13 Text to n 650 in ch 4. 14 Text to n 801 in ch 4. 15 Text to n 15 in ch 2. 16 Text to n 985 in ch 4. 17 Article 4.1 of the Agreement on Sanitary and Phytosanitary Measures comprises the principle of equivalence (n 15 in ch 2 and accompanying text). 18 AAANZFTA (n 8) art 5.5.1.

Plurilateral Trade Agreements  269 develop equivalence arrangements and make equivalence decisions, in particular in accordance with Article 4 of the SPS Agreement …19. Whilst the use of the emphasized word ‘may’ provides choice to the Parties on whether to pursue equivalence arrangements, the ASEAN-Aus-NZ PPTA follows the Agreement on the Application of Sanitary and Phytosanitary Measures20 in requiring each recipient Party to comply. A Party shall, upon request, enter into negotiations with the aim of achieving bilateral recognition arrangements of the equivalence of specified sanitary or phytosanitary measures21. Third, unlike the EU-Canada 22, Japan-Mongolia 23 and China-Georgia 24 BTAs, the ASEAN-Aus-NZ PPTA contains no MFN provision in respect of trade in services. In contrast to the Chile-Thailand BTA – which also lacks this clause25, the ASEAN-Aus-NZ PPTA enables consultations to be held with a view to introducing by stealth MFN treatment concerning this trade. [I]f … a Party enters into any agreement on trade in services with a nonParty in which it provides treatment to services or service suppliers of that non-Party more favourable than it accords to like services or service suppliers of other Parties under this Agreement, [then] any other Party may request consultations to discuss the possibility of extending, under this Agreement, treatment no less favourable than that provided under the agreement with the non-Party. The requested Party shall enter into consultations with the requesting Party bearing in mind the overall balance of benefits. …26 This opportunity does not automatically extend to every Party in respect of all new agreements covering trade in services. No Party shall be obliged to apply Paragraph 1 [i.e., Article 8.7.1 of the ASEAN-Aus-NZ PPTA 27] with respect to treatment provided under any bilateral or plurilateral agreement between an individual ASEAN Member State, or individual Member States, and non-Parties or Australia or New Zealand 28. 19 ibid art 5.5.2; emphasis added. 20 Text to n 14 in ch 2. 21 ibid art 5.5.3. 22 Text to n 137 in ch 4. 23 n 657 in ch 4 and accompanying text. 24 n 822 in ch 4 and accompanying text. 25 Text to n 1007 in ch 4. 26 ibid art 8.7.1. 27 n 26 and accompanying text. 28 ibid art 8.7.2.

270  Plurilateral Trade Agreements Fourth, whilst the EU-Canada BTA requires each Party to grant both national and MFN treatment to investors of the other Party and their investments29, the ASEAN-Aus-NZ PPTA contains a national treatment clause, as follows, but omits a corresponding MFN clause. Each Party shall accord to investors of another Party, and to covered investments30, in relation to the establishment, acquisition, expansion, management, conduct, operation, liquidation, sale, transfer or other disposition of investments, treatment no less favourable than that it accords, in like circumstances, to its own investors and their investments31. It is submitted that the ASEAN-Aus-NZ PPTA is reluctant to provide MFN clauses. That PPTA is similar to the Chile-Thailand BTA in this respect, and less generous than the EU-Canada BTA with regard to MFN provisions. Finally, whilst none of the provisions of the four BTAs which Chapter 4 reviews consider special and differential treatment32, this is an aspect of the ASEAN-Aus-NZ PPTA whose presence therein is necessitated by the economic inequality of the ASEAN Member States. In order to increase the benefits of this Chapter [i.e., Chapter 11 of the ASEAN-Aus-NZ PPTA, which is entitled ‘Investment’] for the newer ASEAN Member States33 …, the Parties recognise the importance of according special and differential treatment to the newer ASEAN Member States under this Chapter, through: (a) technical assistance to strengthen their capacity in relation to investment policies and promotion …; (b) access to information on the investment policies of other Parties, business information, relevant databases and contact points for investment promotion agencies; (c) commitments in areas of interest to the newer ASEAN Member States; and (d) recognising that commitments by each newer ASEAN Member State may be made in accordance with its individual stage of development34.

29 Text to n 105 in ch 4. 30 A ‘covered investment’ is “an investment in [a Party’s] territory of an investor of another Party, in existence as of the date of entry into force of this Agreement or established, acquired or expanded thereafter, and which, where applicable, has been admitted by the host Party, subject to its relevant laws, regulations and policies” (ibid art 11.2(a)). 31 ibid art 11.4. 32 Pages 177–181 of Graeme Baber, Essays on International Law (Cambridge Scholars Publishing 2017) discuss the development and presence of rules that provide for the special and differential treatment of developing countries, in particular LDCs, within the WTO’s Multilateral Trade Agreements. 33 The ‘newer ASEAN Member States’ are Cambodia, Laos, Myanmar and Vietnam (AAANZFTA (n 8) art 1.3(l)). n 10 lists the ASEAN Member States. 34 ibid art 11.15.

Plurilateral Trade Agreements  271 The Parties to the ASEAN-Aus-NZ PPTA have established a Committee on Investment35, one of whose functions is “to review the implementation of this Chapter”36, i.e., Chapter 11. Thus, the Committee would supervise the application of points (a) to (d) in the immediately preceding quote, which is a substantial, ongoing challenge.

The Trans-Pacific PPTA37 Like the ASEAN-Aus-NZ PPTA, the Trans-Pacific PPTA is structurally akin to the BTAs which Chapter 4 appraises. A few of its particular features are as follows. Whilst the Trans-Pacific PPTA is similar to the EU-Canada38, Japan-­ Mongolia39, China-Georgia40 and Chile-Thailand41 BTAs and the ASEANAus-NZ PPTA42 in forbidding prohibitions and quantitative restrictions on cross-border trade except in compliance with the WTO Agreements and the PPTA itself, it differs from all those PTAs43 bar the Japan-Mongolia BTA44 in not incorporating Article XI of the GATT45. The relevant provision of the Trans-Pacific PPTA is as follows. No Party shall adopt or maintain any non-tariff measures on the importation of any good of another Party or on the exportation of any good destined for the territory of another Party except in accordance with its rights and obligations under the WTO Agreement or in accordance with other provisions of this Agreement46. 35 ibid art 11.17.1. 36 ibid art 11.17.3(b). 37 n 3. 38 Text to n 35 in ch 4. The relevant provision of the EU-Canada BTA refers to Article XI of the GATT, rather than the WTO Agreements. 39 n 964 in ch 4. 40 Text to n 785 in ch 4. The pertinent rule of the China-Georgia BTA mentions Article XI of the GATT, not the WTO Agreements. 41 Text to n 962 in ch 4. 42 The relevant provision states: “No Party shall adopt or maintain any prohibition or quantitative restriction on the importation of any good of any other Party or on the exportation of any good destined for the territory of any other Party, except in accordance with its WTO rights and obligations or this Agreement. To this end, Article XI of GATT 1994 shall be incorporated into and shall form part of this Agreement, mutatis mutandis.” (ibid art 2.7.1). n 594 in ch 4 defines ‘mutatis mutandis’. 43 Text to nn 36, 786 and 969 in ch 4; n 42. 44 n 966 in ch 4. 45 The subsection entitled ‘Article XI: General Elimination of Quantitative Restrictions’, in the section entitled ‘The GATT’, in Chapter 1, considers Article XI of the GATT. 46 Trans-Pacific Strategic Economic Partnership Agreement (signed 18 July 2005, entered into force 28 May 2006) UNTS I:46151 art 3.8.1. Article 3.8 of the Trans-Pacific PPTA does not apply to the measures which Chile uses with regard to imports of second-hand vehicles (ibid art 3.8.2 and Annex 3.A).

272  Plurilateral Trade Agreements The Trans-Pacific PPTA contains a more comprehensive chapter on competition policy47 than does the EU-Canada BTA48. Whilst the latter recognizes that measures which its Parties take to prohibit anti-competitive business behaviour are to be transparent, fair and non-discriminatory49, the Trans-Pacific PPTA takes a more practical approach. [E]ach Party is committed to reducing and removing impediments to trade and investment including through: (a) application of competition statutes to all forms of commercial activity …; and (b) application of competition statutes in a manner that does not discriminate between or among economic entities, nor between origin and destination of the production50. … The Parties undertake to apply their respective competition laws in a manner consistent with this Chapter51 so as to avoid the benefits of this Agreement in terms of the liberalisation process in goods and services being diminished or cancelled out by anti-competitive business conduct 52. This PPTA also considers trade liberalization in the objective for its chapter on the cross-border provision of services53. The objectives of this Chapter are to facilitate expansion of trade in services on a mutually advantageous basis, under conditions of transparency and progressive liberalisation, while recognising the rights of Parties to regulate services … and the role of governments in providing and funding public services …54. This contrasts with the corresponding chapter of the EU-Canada BTA 55, which specifies no objective. Notwithstanding this, the list of services excepted from

47 This is Chapter 9 of the Trans-Pacific PPTA, which is entitled ‘Competition Policy’. 48 This is Chapter 17 of the EU-Canada BTA, which is entitled ‘Competition Policy’ (nn 271 and 272 in ch 4 and accompanying text; text to n 273 in ch 4). 49 Text to n 272 in ch 4; n 271 in ch 4. 50 ibid art 9.1.2. 51 n 47. 52 ibid art 9.1.3. 53 This is Chapter 12 of the Trans-Pacific PPTA, which is entitled ‘Trade in Services’. 54 ibid art 12.2. 55 This is Chapter 9 of the EU-Canada BTA, entitled ‘Cross-border trade in services’, which nn 124 and 130 in ch 4 and accompanying text, and the text to nn 125–126, 128–129, 131–142 and 146 in ch 4, summarize.

Plurilateral Trade Agreements  273 the Trans-Pacific PPTA56 is fairly similar to that of the EU-Canada BTA 57. In particular, both exclude financial services58 – which the ASEAN-Aus-NZ PPTA does not. Like the EU-Canada BTA59, but unlike the ASEAN-Aus-NZ PPTA60, the Trans-Pacific PPTA includes an MFN clause for trade in services. Each Party shall accord to services and service suppliers of another Party[,] treatment no less favourable than that it accords, in like circumstances, to services and service suppliers of a non-Party61. This MFN requirement, along with a national treatment clause62, a market access provision63 and a local presence rule64, applies neither to any current non-conforming measure which a Party maintains at “the central level of government” as its Schedule to Annex III to the Trans-Pacific PPTA specifies65

56 These are financial services, government procurement, “services supplied in the exercise of governmental authority”, subsidies and grants that a Party or a “state enterprise” issues, measures that affect individuals who seek to access a Party’s employment market, measures concerning “citizenship, nationality, residence or employment on a permanent basis”, and (subject to five specified exceptions) air transport services (ibid art 12.3.2–3). A ‘service supplied in the exercise of governmental authority’ is “any service which is supplied neither on a commercial basis nor in competition with one or more service suppliers” (ibid art 12.1). A ‘state enterprise’ is “an enterprise that is owned, or controlled through ownership interests, by a Party” (ibid). An ‘enterprise’ is “any corporation, company, association, partnership, trust, joint venture, sole-­proprietorship or other entity constituted or organised under applicable law …” (ibid art 2.1). “For the purposes of this Chapter” (n 53), an ‘enterprise’ also includes “a branch of an enterprise” (ibid art 12.1). 57 Text to nn 125–126 and 128–132 in ch 4. 58 Text to n 129 in ch 4; n 56 and accompanying text. 59 Text to n 137 in ch 4. 60 The text to nn 26–28 specifies the limited MFN treatment that the ASEAN–Aus–NZ PPTA provides in respect of trade in services. 61 ibid art 12.5. 62 Each Party to the Trans-Pacific PPTA is to “accord to services and service suppliers of another Party, treatment no less favourable than that it accords, in like circumstances, to its own services and service suppliers” (ibid art 12.4). 63 No Party to the Trans-Pacific PPTA is to “adopt or maintain: (a) limitations on the number of service suppliers …; (b) limitations on the total value of service transactions or assets …; (c) limitations on the total number of service operations or on the total quantity of service output …; (d) limitations on the total number of natural persons that may be employed in a particular service sector …; and (e) measures which restrict or require specific types of legal entity or joint venture through which a service supplier may supply a service” (ibid art 12.6). 64 No Party to the Trans-Pacific PPTA may require another Party’s service supplier “to establish or maintain a representative office or any form of enterprise, or to be resident, in its territory as a condition for the supply of a service” (ibid 12.7). n 56 defines ‘enterprise’. 65 ibid art 12.8.1(a)(i). The Headnote to Annex III to the Trans-Pacific PPTA states: “The Schedule of a Party sets out, pursuant to Article 12.8(1) [of the Trans-Pacific PPTA], a Party’s

274  Plurilateral Trade Agreements or at “a local level of government”66, nor to “any measure that a Party adopts or maintains with respect to sectors, sub-sectors, or activities, as set out in its Schedule to Annex IV” to this Agreement67. These Annexes lack Schedules for Brunei Darussalam68. Notwithstanding this, they are comprehensive – although less extensive than the Annexes to the EU-Canada BTA that contain its tradein-services Schedules69. Annex 12.A to the Trans-Pacific PPTA concerns financial services. Its content is limited to a definition of the term ‘financial service’ – “any service of a financial nature”70, and a description of activities that are included within the scope of that definition – “all insurance and insurance-related services, and all banking and other financial services (excluding insurance), as well as services incidental or auxiliary to a service of a financial nature” 71. The absence of substantial provisions from this Annex, and the exclusion of financial services from the scope of the Trans-Pacific PPTA’s trade-in-services chapter72, together render these services beyond the Agreement’s purview. However, the PPTA contains a mechanism that addresses this difficulty, which is as follows. Unless otherwise agreed, no later than 2 years after the entry into force of this Agreement the Parties shall commence negotiations with a view to including a self-contained chapter on financial services in this Agreement on a mutually advantageous basis73.

existing measures that are not subject to some or all of the obligations imposed by: (a) Article 12.4 (National Treatment); (b) Article 12.5 (Most-Favoured-Nation Treatment); (c) Article 12.6 (Market Access); or (d) Article 12.7 (Local Presence). For greater certainty, Article 12.6 refers to non-discriminatory measures.” (ibid Annex III para 2; emphasis original). Following the Headnote are the Schedules of Chile, New Zealand and Singapore. Annex III of the Trans-Pacific PPTA lacks a Schedule of Brunei Darussalam. 66 ibid art 12.8.1(a)(ii). 67 ibid art 12.8.2. The Headnote to Annex IV to the Trans-Pacific PPTA states: “The Schedule of a Party sets out, pursuant to Article 12.8(2) [of the Trans-Pacific PPTA], the specific sectors, sub-sectors, or activities for which that Party may maintain existing, or adopt new or more restrictive, measures that do not conform with obligations imposed by: (a) Article 12.4 (National Treatment); (b) Article 12.5 (Most-Favoured-Nation Treatment); (c) Article 12.6 (Market Access); or (d) Article 12.7 (Local Presence). For greater certainty, Article 12.6 refers to non-­ discriminatory measures.” (ibid Annex IV para 2; emphasis original). Succeeding the Headnote are the Schedules of Chile, New Zealand and Singapore. Annex IV of the Trans-Pacific PPTA is missing a Schedule of Brunei Darussalam. 68 nn 65, 67 and 74. 69 These are Annexes I (n 146 in ch 4), II (n 210 in ch 4) and III (n 209 in ch 4) to the EU-Canada BTA. 70 ibid Annex 12.A. 71 ibid. Annex 12.A lists activities that are included within ‘insurance and insurance-related services’ and ‘banking and other financial services’. 72 n 56 and accompanying text. 73 ibid art 20.2.

Plurilateral Trade Agreements  275 As the Trans-Pacific PPTA entered into force in 200674, the addition of a chapter on financial services to this Agreement would be expected soon75. The Trans-Pacific PPTA lacks a chapter on investment, with respect to which it is the sparsest of the PTAs studied hitherto. In a similar way to the Chile-­ Thailand BTA 76, the Trans-Pacific PPTA provides the possibility of improving its treatment of inter-Party investment. Unless otherwise agreed, no later than 2 years after entry into force of this Agreement the Parties shall commence negotiations with a view to including a chapter on investment in this Agreement on a mutually advantageous basis77. It is submitted that further developments on the Trans-Pacific PPTA may be eclipsed by the pending entry into force78 of its successor agreement, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. This new PPTA incorporates the text of the Trans-Pacific Partnership Agreement79 – which is redundant owing to the USA’s withdrawal from it in January 201780.

The EAEU The EAEU’s objectives are to: (i) “create proper conditions for sustainable economic development of [its] Member States in order to improve the living standards of their population”, (ii) “seek the creation of a common market for goods, 74 The Notification of Regional Trade Agreement to the WTO for the Trans-Pacific PPTA states: “The Agreement entered into force on 28 May 2006 between New Zealand and Singapore, on 12 July 2006 for Brunei and on 8 November 2006 for Chile. Negotiations between Brunei and the other Parties on the former’s services specific commitments are underway and expected to conclude by 2008.” (Committee on Regional Trade Agreements/Council for Trade in Services – Notification of Regional Trade Agreement (21 May 2007) WT/REG229/N/1 S/C/N/394 1 ). The second sentence of this quote explains why the Schedule of Brunei of Darussalam is absent from Annexes III and IV to the Trans-Pacific PPTA (text to n 68; nn 65 and 67), which would have been submitted to the WTO at the time of notification, i.e., May 2007. 75 But note the opinion below (text to n 78). 76 Text to n 1127 in ch 4. 77 ibid art 20.1. 78 n 79. 79 Comprehensive and Progressive Agreement for Trans-Pacific Partnership (signed 8 March 2018, entered into force) UNTS I: art 1.1. This PPTA comes into effect 60 days following the date on which the smaller of six signatories, and 50% of its total signatories, “have notified the Depositary in writing of the completion of their applicable legal procedures” (ibid art 3.1). The signatories – the current Parties to the Agreement – are Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore and Vietnam (United Nations Conference on Trade and Development, ‘Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)’ accessed 29 July 2018). 80 Letter to the Trans-Pacific Partnership Depositary from the Office of the United States Trade Representative (30 January 2017).

276  Plurilateral Trade Agreements services, capital and labour within the Union”, and (iii) “ensure comprehensive modernisation, cooperation and competitiveness of national economies within the global economy”81. The EAEU is composed of a Supreme Eurasian Economic Council82 – comprising “the heads of the Member States”83, a Eurasian Intergovernmental Council84 – whose participants are “the heads of governments of the Member States”85, a Eurasian Economic Commission86 – which “consists of a Council and a Board”87, and the Court of the Eurasian Economic Union88. The Commission’s Council comprises “the Deputy Head of the Government of” each Member State89. The Board of the Commission is “comprised of representatives of the Member States based on the principle of equal representation of the Member States” 90, and includes its Chairman91. Whilst the Eurasian Economic Commission’s objectives are to “enable the functioning and development of the Union” and “develop proposals in the sphere of economic integration of the Union” 92, the fact that the Supreme Eurasian Economic Council is authorized “to issue instructions to the Intergovernmental

81 Treaty on the Eurasian Economic Union (signed 29 May 2014, entered into force 1 January 2015) UNTS I:52764 (TEAEU) art 4. 82 ibid art 8.1. 83 ibid art 10.2. Whilst the EAEU does not define the ‘head’ of a Member State, the meeting of the Supreme Eurasian Economic Council of 14 May 2018 was attended by the Presidents of Belarus, Kazakhstan, Kyrgyzstan and Russia, and the Prime Minister of Armenia (Official Internet Resources of the President of Russia, ‘Meeting of Supreme Eurasian Economic Council’ accessed 30 July 2018). As there is a President of Armenia (President of the Republic of Armenia, ‘Armen Sarkissian the President of the Republic of Armenia’ accessed 30 July 2018), it is submitted that the Prime Minister of Armenia attended the meeting of the Council instead of the President, and that ‘head’ is synonymous with ‘President’ for a Member State of the EAEU which is a republic. 84 TEAEU (n 81) art 8.1. 85 ibid art 14. The heads of the delegations that participated in the meeting of the Eurasian Intergovernmental Council on 27 July 2018 were the Chairman of the Board of the Eurasian Economic Commission (text to nn 87 and 91; n 90 and accompanying text) and the Prime Ministers of Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia (Russian Government, ‘Meeting of the Eurasian Intergovernmental Council’ accessed 30 July 2018). Thus, for a Member State of the EAEU that is a republic, ‘head of government’ means ‘Prime Minister’. 86 TEAEU (n 81) art 8.1. 87 ibid art 18.1. 88 ibid art 8.1. 89 ibid Annex 1 para 23. 90 ibid Annex 1 para 31. The Board of the Eurasian Economic Commission has ten Members – two from each Member State of the EAEU (Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia), “one of whom is the Chairman of the Commission Board” (Eurasian Economic Commission, ‘About the Eurasian Economic Commission’ accessed 30 July 2018). 91 TEAEU (n 81) Annex 1 para 31. 92 ibid Annex 1 para 1.

Plurilateral Trade Agreements  277 Council and the Commission” 93 and also that the Intergovernmental Council is “to consider, when proposed by a Member State, any issues relating to the cancellation or amendment of a decision issued by the Commission” 94 and “to decide on suspension of decisions of the Council or the Board of the Commission” 95 suggests that the EAEU is principally an intergovernmental entity that is supervised by the Presidents and Prime Ministers of its Member States96 – even though the Commission “has supranational regulatory body status [and its d]ecisions are obligatory for execution on the territory of the EAEU Member States” 97. Notwithstanding this, the EAEU Treaty constructs the framework for an internal market and a common customs tariff over that territory. Within the Customs Union of the Member States: 1) an internal market for goods shall be in place; 2) the Common Customs Tariff of the Eurasian Economic Union and other common measures regulating foreign trade with third parties shall be applied; 3) a common trade regime shall be applied to relations with third parties; 4) Common customs regulations shall be applied; 5) free movement of goods between the territories of the Member States shall be ensured without the use of customs declarations and state control (transport, sanitary, veterinary-sanitary, phytosanitary quarantine), except as provided for by this Treaty 98. In alignment with the EAEU’s second objective99, the internal market’s economic space accommodates “free movement of goods, persons, services and capital ensured under the provisions of [the EAEU] Treaty”100. Thus, across this space EAEU Members states are not to “apply import and export customs duties (other duties, taxes and fees having equivalent effect), non-tariff regulatory measures, safeguard, anti-dumping and countervailing measures in mutual trade, except as provided for by [the EAEU] Treaty”101. The EAEU Treaty and its Protocols seldom refer to the Multilateral Agreements annexed to the Agreement Establishing the World Trade Organization. This necessitates a check of the contents of the provisions contained therein for compatibility with those of those Multilateral Agreements, which is essential to ensure the alignment of the EAEU Treaty with international trade law. For

93 ibid art 12.2.21. 94 ibid art 16.7. 95 ibid art 16.8. 96 nn 83 and 85 and accompanying text. 97 Eurasian Economic Commission, ‘About the Eurasian Economic Commission’ accessed 30 July 2018. 98 TEAEU (n 81) art 25.1. 99 Text to n 81. 100 ibid art 28.2. 101 ibid art 28.3.

278  Plurilateral Trade Agreements example, the following Paragraph resembles Articles VI:1 of the GATT102 and 2.1 of the Agreement on Safeguards103. Safeguard, anti-dumping or countervailing measure[s] on imports of a product may only be imposed pursuant to investigations conducted to determine: the existence of increased imports into the customs territory of the Union that causes or threatens to cause serious injury to the domestic industry of the Member States; the existence of dumped or subsidized imports into the customs territory of the Union that causes or threatens to cause material injury to the domestic industry of the Member States or materially retards the establishment of the domestic industry of the Member States104. The EAEU Treaty contains a conditional commitment on MFN treatment, as follows. With regard to foreign trade, most favoured nation treatment shall be applied within the meaning of the General Agreement on Tariffs and Trade 1994 (GATT 1994) in cases and under the conditions where the use of most favoured nation treatment is provided for by international treaties of the Union with a third party, as well as by international treaties of the Member States with a third party105. The EAEU Treaty defines ‘international treaties of the Union with a third party’ as “international treaties concluded with third countries, integration associations thereof and international organisations”106. The EAEU has “international legal personality”107, and may draft108, negotiate109, manage the implementation of 110

102 103 104 105 106 107 108

Text to nn 236–238 and 240 in ch 1. Text to n 70 in ch 2. ibid Annex 8 para 3. ibid art 34. ibid art 2. ibid art 1.2. The Board of the Eurasian Economic Commission drafts international treaties (ibid Annex 1 para 43(15)). 109 The Supreme Eurasian Economic Council negotiates international treaties with third parties (ibid arts 7.2 and 12.2.15). 110 The Board of the Eurasian Economic Commission’s functions include “monitoring and controlling the implementation of international treaties that form the [law of the EAEU] and … notifying the Member States of the requirement[s] for their implementation” (ibid Annex 1 para 43(4)). The Council of the Eurasian Economic Commission is responsible for “considering the results of monitoring and control of the implementation of international treaties that form the [law of the EAEU]” (ibid Annex 1 para 24(4)). EAEU law includes ‘international treaties of the Union with a third Party’ (ibid art 6.1).

Plurilateral Trade Agreements  279 and withdraw from111, international treaties with non-Member States112. For international treaties that correspond to the above description, to the extent that each of these contains MFN provisions, MFN treatment “within the meaning of” the GATT is provided113. It is submitted that ‘within the meaning of’ should be interpreted as matching any MFN provision in each international treaty with the most similar MFN provision in the GATT – including the MFN Rule in Article I:1 of the GATT114. Finally, the exceptions provision in the EAEU Treaty is a reduced form of the general and security exceptions in the GATT and the GATS115. The Member States shall be entitled to apply restrictions in mutual trade (provided that such measures are not a means of unjustifiable discrimination or a disguised restriction on trade) if required for: 1) protection of human life and health; 2) protection of public morals and public order; 3) environmental protection; 4) protection of animals, plants, or cultural values; 5) fulfilment of international obligations; 6) national defence and security of a Member State116. It is submitted that the insertion of this summary version of the general and security exceptions suggests that the drafters of the EAEU Treaty did not fully fathom the depth and breadth of WTO law. Belarus is not yet a Member of the WTO117. Armenia, Kazakhstan, Kyrgyzstan and Russia joined the WTO

111 The Supreme Eurasian Economic Council withdraws the EAEU from international treaties (ibid arts 7.2 and 12.2.15). 112 The EAEU may “independently or jointly with the Member States conclude international treaties therewith on any matters within its jurisdiction” (ibid art 7.1). 113 Text to n 105. 114 The MFN Rule is specified in the paragraph entitled ‘Article I:1: The MFN Rule’, in the subsection entitled ‘Article 1: General Most-Favoured-Nation Treatment’ in the section entitled ‘The GATT’, in Chapter 1. This Rule may not be the most similar MFN provision to that in the particular international treaty. For instance, if this treaty states that each Party is to accord goods in transit across its territory to or from the lands of another Party treatment that is no less favourable than that which it grants to goods in transit across its territory to or from any third country, then this MFN provision resembles Article V:5 of the GATT (text to n 220 in ch 1). Therefore, the MFN standard in Article V:5 of the GATT, Ad Article V of the GATT (text to n 222 in ch 1) and relevant WTO case law, is to be applied to situations that invoke the application of this provision of the aforementioned international treaty. 115 Articles XX of the GATT and XIV of the GATS contain general exceptions. Articles XXI of the GATT and XIV bis of the GATS comprise security exceptions. The subsection entitled ‘Articles XX and XXI: Exceptions to the GATT’, in the section entitled ‘The GATT’, in Chapter 1, examines Article XX of the GATT and relevant case law. nn 149–151 in ch 2 and accompanying text, and the text to nn 147 and 152–155 in ch 2, consider Article XIV of the GATS. n 546 in ch 1 and accompanying text state Article XXI of the GATT. The text to nn 144–146 in ch 2 describes Article XIV bis of the GATT. 116 ibid art 29.1. 117 n 4.

280  Plurilateral Trade Agreements in February 2003, November 2015, December 1998 and August 2012, respectively118. Furthermore, of the original signatories to the EAEU Treaty119, only Russia was a WTO Member when this Treaty was signed on 29 May 2014120 – and a recent admission to this institution at that time. If a check of the type described above in this section reveals disparities between the Treaty (including its Protocols) and international trade law, then the Supreme Eurasian Economic Council should be asked to administer a comprehensive redrafting of the former in the light of settled WTO law at the time of its review. Notwithstanding this, the creation of the EAEU is an ambitious project which has the potential to raise inter-Member trade flows to sustained higher levels than before its formation. Good luck to the Eurasian Economic Commission in its agenda for integration121.

Comments The ASEAN-Aus-NZ and Trans-Pacific PPTAs are similar in their form and content to the EU-Canada, Japan-Mongolia, China-Georgia and Chile-­Thailand BTAs, whilst all these PTAs differ considerably from the EAEU Treaty. Thus, the main distinction is between free-trade agreement and internal market – rather than betwixt BTAs and PPTAs. Nevertheless, PPTAs that are free-trade agreements covering both goods and services involve the completion of a greater number of Schedules for trade in goods and for trade in services than do BTAs with similar scope. The former also tend to require the establishment of a greater number of administrative structures than do the latter, as, in addition to the committees that the PTA creates, each Party to the Agreement needs to have in place the architectural capacity to put this into effect in its domain. The effectiveness of any PTA in the territories of its Parties is determined not only by the contents of its provisions, but also by the detail that is in the Parties’ Schedules which accompany that Agreement. A comprehensive analysis and cross-Agreement comparison of the contents of the Schedules of the PTAs that this book considers would help to provide an accurate picture of the relative depth of these Agreements. Much of the substance of these PTAs reinforces and builds upon the provisions of the Agreements annexed to the Agreement Establishing the World Trade Organization. It is easy to underestimate the value of the global system of WTO law to the countries, enterprises and individuals who use those rules, in an effort to concentrate on achieving optimal terms for PTAs. Chapter 7 assesses the value that PTAs add to the WTO’s legal framework.

118 World Trade Organization, ‘Members and Observers’ accessed 31 July 2018. 119 n 4. 120 The EAEU was “executed in the city of Astana on May 29, 2014, in a single copy in Belarusian, Kazakh and Russian languages” (TEAEU (n 81)). 121 ibid Annex 1 paras 1, 22, 24(2) and 43(1).

Plurilateral Trade Agreements  281

Conclusion This chapter considers aspects of the ASEAN-Aus-NZ PPTA, the Trans-Pacific PPTA and the EAEU Treaty and its Protocols in the light of the EU-Canada BTA and the other BTAs to which Chapter 4 devotes a comparative analysis. It determines that, whilst the ASEAN-Aus-NZ and Trans-Pacific PPTAs have particular features, they are similar to the BTAs studied in Chapter 4. The EAEU Treaty has a different form from those of the other PTAs, which tends not to incorporate WTO law into the body of the Agreement. Consequently, there may be issues of compatibility between specific provisions of that Treaty and corresponding items of the Multilateral Agreements annexed to the Agreement Establishing the World Trade Organization. A check of the content of the corresponding laws from each source is recommended. Chapter 6 considers the benefits and drawbacks of PTAs.

References Agreement establishing the ASEAN-Australia-New Zealand Free Trade Area (signed 27 February 2009, entered into force 1 January 2010) UNTS I:47529. Baber, Graeme, Essays on International Law (Cambridge Scholars Publishing 2017). Charter of the Association of South-East Asian Nations (signed 20 November 2007, entered into force 15 December 2008) UNTS I:46745. Committee on Regional Trade Agreements/Council for Trade in Services – ­Notification of Regional Trade Agreement (21 May 2007) WT/REG229/N/1 S/C/N/394 . Comprehensive and Progressive Agreement for Trans-Pacific Partnership (signed 8 March 2018, entered into force) UNTS I:. Comprehensive Economic and Trade Agreement (CETA) between Canada, of the one part, and the European Union and its Member States, of the other part [2017] OJ L11/23. Eurasian Economic Commission. ‘About the Eurasian Economic Commission’ accessed 30 July 2018. Letter to the Trans-Pacific Partnership Depositary from the Office of the United States Trade Representative (30 January 2017). Official Internet Resources of the President of Russia. ‘Meeting of Supreme Eurasian Economic Council’ accessed 30 July 2018. President of the Republic of Armenia. ‘Armen Sarkissian the President of the Republic of Armenia’ accessed 30 July 2018. Russian Government. ‘Meeting of the Eurasian Intergovernmental Council’ accessed 30 July 2018. Trans-Pacific Strategic Economic Partnership Agreement (signed 18 July 2005, entered into force 28 May 2006) UNTS I:46151. Treaty on the Eurasian Economic Union (signed 29 May 2014, entered into force 1 ­January 2015) UNTS I:52764. United Nations Conference on Trade and Development. ‘Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)’ accessed 29 July 2018.

282  Plurilateral Trade Agreements World Trade Organization. ‘ASEAN - Australia - New Zealand: Basic Information’ accessed 30 April 2018. World Trade Organization. ‘Current status of WTO accessions’ accessed 30 April 2018. World Trade Organization. ‘Eurasian Economic Union (EAEU) - Accession of ­A rmenia: Basic Information’ accessed 30 April 2018. World Trade Organization. ‘Eurasian Economic Union (EAEU) - Accession of the Kyrgyz Republic: Basic Information’ accessed 30 April 2018. World Trade Organization. ‘Eurasian Economic Union (EAEU): Basic Information’

­accessed 30 April 2018. World Trade Organization. ‘Members and Observers’ accessed 31 July 2018. World Trade Organization. ‘Trans-Pacific Strategic Economic Partnership: Basic Information’ accessed 30 April 2018.

6 The Benefits and Limitations of Preferential Trade Agreements

Kimberly Amadeo, on her tersely-written web page1, lists and briefly describes six advantages and seven disadvantages of free-trade agreements. As those arrangements “are designed to increase trade between two [or more] countries”, the benefits are placed under the interim heading “[i]ncreased international trade” and are “[i]ncreased economic growth”, “[m]ore dynamic business climate”, “[l]ower government spending”, “[f]oreign direct investment”, “[e] xpertise” and “[t]echology transfer”2. The drawbacks are “[i]ncreased job outsourcing”, “[t]heft of intellectual property”, “crowd[ing] out of domestic industries”, “[p]oor working conditions”, “[d]egradation of natural resources”, “[d]estruction of native cultures” and “[r]educed tax revenue”3. With regard to the advantages, there is a difference between a PTA being designed to raise international trade and actually increasing it. Other things being the same, the more trade which is diverted from that between Parties and non-Parties to that betwixt Parties to the PTA – due at least in part to reduced tariffs on goods moving between those Parties – the less the PTA increases international trade. This effect is called ‘trade diversion’. It is contrasted with ‘trade creation’, in which the PTA is responsible for raising the overall volume of international trade after the effects of trade diversion have been considered. Assuming that the PTA at issue does increase international trade – i.e., that there is trade creation as a result of the agreement coming into effect, the above-listed advantages can be reviewed thus. With regard to ‘increased economic growth’, Ms Amadeo states: “[t]he U.S. Trade Representative Office estimates that NAFTA increases U.S. economic growth by 0.5% a year”4. Whilst it would be difficult to isolate the causative impact of the NAFTA on the USA’s economic growth, it intuitively makes sense that the operation of substantial PTAs should correlate positively with economic growth – for instance, through the supply of domestic goods and services to foreign markets 1 n 2. 2 Kimberly Amadeo, ‘Free Trade Agreements Pros and Cons’ [2018] The Balance accessed 7 August 2018. 3 ibid. 4 ibid.

284  The Benefits and Limitations of PTAs via reduced tariffs, organized border formalities and market access provisions for cross-border trade in services. Ms Amadeo’s explanation with regard to the advantage of a ‘more dynamic business climate’ is that the removal of their “protection” by the free-trade agreement has given local businesses “the motivation to become truly global competitors”5. It is submitted that various businesses are placed differently before and after the coming into force of any given PTA. In an extreme case of localism, such as a suburban general store or a hairdressing business, it is highly unlikely that its managers will be driven by a motivation to make their concern a ‘truly global competitor’. Therefore, in this respect, the PTA is irrelevant to businesses of this type. But, even here, if the store or hairdressing firm is situated close to the border with a country with which their state is about to sign a comprehensive free-trade agreement, then that PTA’s tariff reductions on goods which the store stocks will reduce its costs if it receives some of its supplies from across the border, and the Agreement’s provisions on market access and temporary entry and stay of natural persons for business purposes may benefit the hairdressing enterprise with regard to the employment of nationals of the other Party to the PTA. Proceeding to the disadvantages, Ms Amadeo’s explanation for the ‘increased job outsourcing’ is as follows. Reducing tariffs on imports allows companies to expand to other countries. Without tariffs, imports from countries with a low cost of living cost less. [This] makes it difficult for U.S. companies in those same industries to compete, so they may reduce their workforce. Many U.S. manufacturing industries did, in fact, lay off workers as a result of NAFTA. One of the biggest criticisms of NAFTA is that it sent jobs to Mexico6.

5 ibid. 6 ibid. Results of a previous study by the author corroborate this claim about jobs moving to Mexico. In work that investigated the relation between development and the financial crisis, the author made the following comments: “In Mexico, the strong inverse relation [between the financial crisis and the rise in Baber’s Sustainable Development Index (BSDI)] is evident from the GDP [gross domestic product] per capita and the income share held by the lowest quintile, both of which decrease during the crisis and then resume their previous rise. It is submitted that the financial crisis may have had a considerable effect in Mexico, as the USA is Mexico’s leading trading partner, and the collapse started in the latter country. The BSDI in Mexico is sufficiently high to show that it is close to being a developed country – something for which its trade with the USA – the world’s largest economy – must have contributed. … With the exception of Mexico, the financial crisis is not a major factor in sustainable development, as measured by the BSDI. It is submitted that the scale of the effect of this collapse on development in any country may depend upon the extent to which the economy of that state is integrated with those of countries that have been severely affected. In this instance, Mexico and the USA are the relevant territories.” (Graeme Baber, ‘Development, the European Union and the financial crisis: assessing the picture’ (2016) 23 Journal of Financial Crime 441, 454 and 456).

The Benefits and Limitations of PTAs  285 Companies based in the USA could reduce their costs to the levels of their Mexican competitors, or, alternatively, ensure that their products are differentiated to be superior to the Mexican competitive offerings in a way which appeals to consumers. It is submitted that the threat of higher labour costs for the same work relative to other countries is not a sufficient reason in itself for a state’s government to inhibit, or to legislate against, cross-border integration, unless that nation is in dire circumstances or at least one of those other countries is unequivocally attempting to undermine it. This would have been unlikely in the USA/Mexico case. The disadvantages of ‘poor working conditions’ and ‘degradation of natural resources’ concern developing countries, which may have in place inadequate labour and environmental protections, respectively7. Ms Amadeo recognizes that these problems can be addressed from within the PTA. The best solutions are regulations within the agreements that protect against the disadvantages. Environmental safeguards can prevent destruction of natural resources and cultures. Labo[u]r laws prevent poor working conditions8. The EU-Canada BTA requires each Party to ensure that its laws and policies cultivate good standards of labour protection9. It also calls for the EU and Canada to make certain that these deliver and further substantial environmental protection10. Each PTA should contain such provisions, especially if the Parties to it include countries in which there have tended to be deficiencies in labour and/or environmental standards. Ms Amadeo elucidates the disadvantage of ‘destruction of native cultures’. It is submitted that this is a striking claim. As development moves into isolated areas, indigenous cultures can be destroyed. Local people are uprooted. Many suffer disease and death when their resources are polluted11. In so far as a PTA permits or encourages areas in which endogenous people live to be developed, the national and local governments should handle changes with the utmost care and sensitivity, in order to prevent severe, adverse effects on those groups and their culture. The drive for prosperity must relieve, rather than augment, suffering. 7 Kimberly Amadeo, ‘Free Trade Agreements Pros and Cons’ [2018] The Balance accessed 7 August 2018. 8 ibid. 9 Text to n 454 in ch 4. 10 Text to n 469 in ch 4. 11 ibid.

286  The Benefits and Limitations of PTAs Dr. Heribert Dieter identifies the erosion of the MFN Rule12 – which he refers to as “GATT’s fundamental non-discrimination principle”, as “[t]he most critical and widely recognized issue with regard to preferential agreements”13. Dr. Dieter states that the growing use of Article XXIV of the GATT14 and the Enabling Clause15 “is reducing the most favoured nation clause to the exception, rather than the rule”16. As some PTAs contain MFN clauses in relation to cross-border trade in services and investment, the concept of non-discrimination between countries extends beyond the WTO Agreements. Dr. Dieter highlights costs concerning the administration of rules of origin requirements in PTAs. Since only goods produced within the territory of the agreement qualify for duty[-]free trade, there have to be procedures that differentiate between goods produced within and goods from the rest of the world. … The administrative burden of issuing certificates of origin is … most problematic for those countries that have limited resources, i.e. developing ­countries. … [W]ith multiple agreements[,] companies are faced with diverging rules and procedures, which add to the costs of generating certificates of origin. The operational costs of meeting different requirements in different countries pose a major challenge, especially for small and medium-sized enterprises17. The harmonization of rules of origin requirements and procedures across all PTAs would reduce these costs. However, this standardization would restrict the autonomy of countries to enter into these Agreements on their preferred terms – given satisfaction of the requirements contained in Article XXIV of the GATT, Article V of the GATS and/or the Enabling Clause, as appropriate. To tackle this problem, the WTO could contemplate publishing a template for rules of origin as applicable to PTAs. If this rules-of-origin template proves to be helpful, then the Organization might decide to make compliance with it a compulsory requirement in respect of future PTAs.

12 The MFN Rule is specified in the paragraph entitled ‘Article I:1: The MFN Rule’, in the subsection entitled ‘Article 1: General Most-Favoured-Nation Treatment’, in the section entitled ‘The GATT’, in Chapter 1. 13 Heribert Dieter, ‘The Multilateral Trading System and Preferential Trade Agreements: Can their Negative Effects be Minimised?’ GARNET Working Paper 54/08 (University of Warwick 2008), 7. 14 The section entitled ‘Notification of PTAs to the WTO under Article XXIV of the GATT (Territorial Application, Frontier Traffic, Customs Unions and Free-Trade Areas)’, in Chapter 3, considers Article XXIV of the GATT. 15 The section headed ‘Notification of PTAs to the WTO under the Enabling Clause’, in Chapter 3, concerns the Enabling Clause. n 6 in ch 3 gives the Enabling Clause’s official title. 16 ibid. 17 ibid.

The Benefits and Limitations of PTAs  287 Dr. Dieter considers that the dispute-settlement mechanisms in PTAs tend to favour stronger countries – in particular the adjudication procedures in BTAs, owing to the bilateral nature of those processes. In many bilateral schemes, there is an option – either bilateral dispute settlement or multilateral dispute settlement18. [T]he bilateral route offers many possibilities for the more powerful partners to promote their case. … [I]n the WTO, (weaker) countries can form coalitions in dispute settlement, which both reduces costs and increases the bargaining influence19. Whilst this may be so, it is appropriate that dispute settlement should be performed using the apparatus which a PTA provides for this purpose in cases in which there is an alleged breach of the terms of this Agreement but not of WTO law. This difficulty may be addressed by including a provision in the PTA’s ­d ispute-settlement chapter that is similar to the following. The dispute settlement procedures contained in this chapter and its annex(es) are not to be used by any Party in order to exert undue influence on the outcome of the matter to be resolved. PTAs have other benefits over the existing state of affairs in their absence. These include greater access in respect of the cross-border supply of services to the markets of the other Party/Parties, the possibility of introducing an inter-Party investment framework – as the EU-Canada BTA does20, and the facilitation of supply chains for products whose construction takes place within the territories to which the relevant PTA applies. Chapter 7 considers the contribution that PTAs make to the promotion of supply chains – which are referred to therein as ‘global value chains’21. It discusses the relationship between PTAs and the easement of cross-border trade beyond that betwixt their Parties, which is known as ‘multilateral trade liberalization’. 18 This is true for all four of the Agreements that Chapter 4 considers, i.e. the EU-Canada (text to nn 570 and 572 in ch 4), Japan-Mongolia (n 758 in ch 4 and accompanying text, and text to nn 757 and 760 in ch 4), China-Georgia (text to nn 875 and 876 in ch 4) and Chile-Thailand (text to nn 1073 and 1074 in ch 4) BTAs. 19 ibid 8. 20 The subsection entitled ‘Investment’, in the section entitled ‘The EU-Canada BTA’, in Chapter 4, considers aspects of the EU-Canada BTA’s investment framework. Section F of Chapter 8 (entitled ‘Investment’) of the EU-Canada BTA is titled ‘Resolution of investment disputes between investors and states’, contains Articles 8.18–8.45 of that BTA, and concerns the resolution of disputes between an investor of a Party and the other Party – “where the investor claims to have suffered loss or damage as a result of the alleged breach” by the latter Party of Section C (entitled ‘Non-discriminatory treatment’) or D (entitled ‘Investment Protection’) of Chapter 8 of the BTA (Comprehensive Economic and Trade Agreement (CETA) between Canada, of the one part, and the European Union and its Member States, of the other part [2017] OJ L11/23 art 8.18.1). 21 n 1 in ch 7 states the difference between a value chain and a supply chain.

288  The Benefits and Limitations of PTAs In the light of these sections, an attempt is made to assess the value that PTAs add to the WTO’s system of international treaties.

References Amadeo, Kimberly. ‘Free Trade Agreements Pros and Cons’ [2018] The Balance accessed 7 August 2018. Baber, Graeme. ‘Development, the European Union and the financial crisis: assessing the picture’ (2016) 23 Journal of Financial Crime 441. Comprehensive Economic and Trade Agreement (CETA) between Canada, of the one part, and the European Union and its Member States, of the other part [2017] OJ L11/23. Dieter, Heribert. ‘The Multilateral Trading System and Preferential Trade Agreements: Can their Negative Effects be Minimised?’ GARNET Working Paper 54/08 (University of Warwick 2008).

7 An Assessment of the ValueAdded of the Preferential Trade Agreements to the World Trade Organization’s Framework Preferential trade agreements and global value chains A value chain is a series of steps over which a company attempts to generate value that exceeds the cost of supplying its product to customers1. These steps are inbound logistics, operations, outbound logistics, sales and marketing, and customer service2. Dr. Michele Ruta states that there is positive correlation between global-­valuechain trade – measured as trade in components and parts – and the depth of PTAs – measured as the number of policy areas that the Agreements cover3. He considers that the inclusion in PTAs of provisions which are beyond the scope of the WTO Agreements, such as those on competition policy and on labour law, are crucial drivers of global value chains for PTAs between advanced and developing countries, whilst the inclusion in PTAs of provisions that relate to the WTO Agreements but do not directly concern the reduction of tariffs, such as those on sanitary and phytosanitary measures and on anti-dumping, are essential drivers of global value chains for PTAs between developing states4. Dr. Ruta’s chapter concludes as follows. In the past 25 years governments signed deep preferential trade agreements and firms fragmented production. These decisions reinforced each other and sustained a cooperative equilibrium. In the next 25 years changing expectations for the course of policy could lead to a reversal and result in an inferior equilibrium where production is progressively renationalized and trade

1 Investopedia, ‘What is the difference between a value chain and a supply chain?’ accessed 13 August 2018. Whilst “a supply chain is the process of all parties involved in fulfilling a customer request, … a value chain is a set of interrelated activities [that] a company uses to create a competitive advantage” (ibid). 2 ibid. 3 Michele Ruta, ‘Preferential trade agreements and global value chains: Theory, evidence and open questions’ in World Bank (ed), Global Value Chain Development Report 2017: Measuring and Analysing the Impact of GVCs on Economic Development (World Bank 2017) 178. 4 ibid 183.

290  Value-Added of PTAs to the WTO’s Framework agreements undone. Continuing trust in the willingness of others to cooperate to preserve an open system is essential to the future of the relationship between preferential trade agreements and GVCs [global value chains]5. Thus, comprehensive, deep PTAs, such as the EU-Canada BTA, contain both provisions that go beyond the ambit of the WTO Agreements and those which relate to various parts of the latter. These PTAs are encouraging of inter-Party integration, including the instigation and growth of global value chains for products that the Parties manufacture.

Preferential trade agreements and multilateral trade liberalization The theoretical literature, and, increasingly, the empirical literature, contain studies on the relationship between PTAs and multilateral trade liberalization. In essence, the theoretical work considers whether these Agreements support or inhibit the furtherance of trade on a wider scale. If PTAs impede this trade, then they are considered to be ‘stumbling blocks’ to it. If they assist it, then they are deemed to be ‘building blocks’ for it.

PTAs as stumbling blocks to multilateral trade liberalization Three possible stumbling blocks are preference erosion/exploitation, the goodies bag and cherry picking.

Preference erosion/exploitation If a group of states is able to raise its collective welfare above that of free trade by establishing a trade bloc, then that alliance is a stumbling block to multilateral liberalization because its members would reject worldwide free trade as eroding their exploitation of third countries6. In a model that has a linear demand function, a small MFN tariff and a PTA with no internal tariffs provide gains for the Parties to the PTA which exceed those from free trade7. The PTA enables its Parties to take advantage of third countries – a general result that may be significant in the real world8. 5 ibid. 6 Richard Baldwin and Caroline Freund, ‘Preferential Trade Agreements and Multilateral Liberalization’ in Jean-Pierre Chauffour and Jean-Christophe Maur (eds), Preferential Trade Agreement Policies for Development: A Handbook (World Bank 2011) 124. 7 ibid. 8 ibid 125.

Value-Added of PTAs to the WTO’s Framework  291 The goodies bag Some Parties to PTAs enter into these Agreements in order to obtain non-­ economic benefits from other Parties in exchange for the economic benefits that they are able to provide to those latter Parties – the ‘goodies bag’ 9. For instance, the USA explains many of its PTAs with small, developing countries on the ground of non-economic aims – such as anti-terrorism or anti-drug policies10. As the extent of the non-economic benefits that can be acquired is correlated with the plenitude of the goodies bag, i.e., the margin of tariff preferences, Parties to a PTA have a reason to retain large preference margins by eschewing multilateral liberalization11.

Cherry picking Assume that the trading environment is marked by both intra[-]industry trade in differentiated products and inter[-]industry trade. [T]rade liberalization will produce gains from trade because of the variety effect in the differentiated product sectors … and because of comparative advantage effects. The comparative advantage gains, however, come bundled with politically difficult effects on domestic factor prices, which will be lower (e.g., lower wages). [If] two large nations [with] similar factor endowments … form a trade bloc, [then] they will win a large share of the variety gains that would come with global free trade, and because of their similarity, they will experience little pain from lower factor prices. [A] move to global free trade … would entail [for bloc members] a good deal of pain in terms of factor prices and only a modest amount of additional variety or comparative advantage gains12. The ‘cherry picking’ is the selection of one or more trading partners with a similar combination of labour, capital and land to the choosing country – which in itself may be difficult. For instance, the USA and Canada are of similar size – although with some differences in geography – so may be considered to be ‘similar’ from a land perspective. However, the population of the USA is larger than that of Canada, i.e., these two countries are dissimilar in terms of the endowment of labour.

9 ibid 125–126. 10 ibid 126. 11 ibid. 12 ibid.

292  Value-Added of PTAs to the WTO’s Framework PTAs as building blocks for multilateral trade liberalization Four possible building blocks are the trade liberalization juggernaut, Frankel and Wei momentum, the Kemp-Wan theorem and veto avoidance.

The trade liberalization juggernaut The ‘juggernaut’ is the effect of trade liberalization causing further trade liberalization. The logic is as follows. Starting from [a] situation of uncoordinated tariff setting, announcement of an MTN [multilateral trade negotiation] based on the principle of reciprocity alters the array of political forces inside each participating nation. [R]eciprocity … converts each nation’s exporters from bystanders  … to antiprotectionists. For exporters, lobbying against domestic tariffs becomes a means of lowering foreign tariffs. Because the MTN rearranges the ­political-economy forces inside each nation, all governments find it politically optimal to choose tariff levels that are lower than the unilaterally optimal tariffs.  … The [multilateral tariff] cuts make all nations more open: export sectors expand with the foreign tariff cuts, and importcompeting sectors contract with domestic tariff cuts. Assuming that political influence is linked to industry size, this economic relandscaping strengthens proliberalization forces and weakens antiliberalization forces in all nations, [i.e.,] the initial reciprocal tariff cuts start a liberalization juggernaut rolling. Because of the economic relandscaping that occurs during the phase-in of the initial tariff cuts, all governments find that their politically optimal tariff in the next MTN is below the levels that they found politically optimal during the previous MTN. These fresh tariff cuts continue the relandscaping, and the juggernaut continues to roll ­forward. … To the extent that regionalism can start the juggernaut rolling, PTAs can serve as building blocks. … PTAs reconfigure members’ economies, making export sectors larger and import-competing sectors smaller. Thus, the PTA can alter the member governments’ stance towards MFNs, making it politically optimal to cut MFN tariffs to levels that would not have been politically optimal without the PTA 13. It is submitted that this ‘trade liberalization juggernaut’ argument is simple but credible. Furthermore, this reasoning is beneficial in that it includes a place for PTAs.

13 ibid 126–127.

Value-Added of PTAs to the WTO’s Framework  293 Frankel and Wei momentum The following argument originates from work in the 1990s by Professors Jeffrey Frankel and Shang-Jin Wei14. [I]mperfect information makes workers uncertain as to whether they will win or lose from global free trade. Since a PTA is an intermediate form of liberalization, [it] could be politically feasible even when global free trade would not be. After the PTA is signed, the nation’s true comparative advantage is revealed, and workers now know whether they will win or lose from free trade. If the parameters are chosen carefully, [then] the certainty resolution may mean that global free trade is politically feasible only after the PTA. Thus, the PTA is a building block, and since it operates by altering the political-economy landscape, it [is] a momentum-generating mechanism.15 This mechanism is similar to the trade liberalization juggernaut16, but relies on certainty resolution in respect of comparative advantage rather than the expanse of export sectors and contraction of import-competing fields.

The Kemp-Wan theorem This proposition of Emeritus Professors Murray Kemp and Henry Wan dates from the 1970s17, and asks a question as follows. Starting from a world in which all nations have MFN tariffs, … can some group of nations always raise its collective welfare by forming a trade bloc? If the answer is “yes”, then a piecemeal enlargement of the bloc will raise bloc members’ well-being monotonically [i.e., always positively]. Bloc members attain the highest welfare when all nations are part of the bloc. In this world, the formation of a single bloc should trigger a domino effect that leads to worldwide free trade.18 The answer to this question is ‘yes’ when countries have access to global lumpsum transfers19. This is unlikely to pertain to the real world 20. 14 Jeffrey Frankel and Shang-Jin Wei, ‘Regionalization of World Trade and Currencies: Economics and Politics’ in Jeffrey Frankel (ed), The Regionalization of the World Economy (Chicago University Press 1998). 15 Baldwin and Freund (n 6) 128. 16 The paragraph entitled ‘The trade liberalization juggernaut’, in the current subsection, describes the trade liberalization juggernaut. 17 Murray Kemp and Henry Wan, ‘An Elementary Proposition Concerning the Formation of Customs Unions’ (1976) 6(1) Journal of International Economics 95. 18 Baldwin and Freund (n 6) 128. 19 ibid. 20 ibid.

294  Value-Added of PTAs to the WTO’s Framework [T]he assumption that such international transfers are a realistic possibility basically assumes away most of the core difficulties facing the international trading system …. Without international transfers, the logic of preference-­ erosion stumbling blocks21 and cherry-picking stumbling blocks22 suggests that in many blocs, some members would eventually veto some enlargements23. As the assumption on which the theorem is founded is unrealistic, the theorem is of limited value in explaining the relationship between PTAs and multilateral trade liberalization.

Veto avoidance The preference-erosion stumbling-block logic discussed above24 rests on the fact that bloc members can veto the move to global free trade. The veto-­ avoidance building-block logic points out that, although bloc members can veto multilateral trade liberalization, they cannot veto further PTAs that may eventually eliminate all tariffs globally25. Parties to PTAs are entitled to withdraw from those Agreements over a specified period by providing the written notice stated therein 26. This disengagement process renders the PTA in which it is situated a reversible phenomenon, and makes these Agreements almost as fluid as voluntary decisions as to whether to cut tariffs unilaterally when these are already at or below the relevant Bound Rate of Duty27.

Comment Empirical literature on the relationship between PTAs and multilateral trade liberalization is more supportive of the former as building blocks for the latter than as stumbling blocks.

21 The paragraph entitled ‘Preference erosion/exploitation’, in the subsection entitled ‘PTAs as stumbling blocks to multilateral trade liberalization’, in the current section, summarizes preference erosion/exploitation. 22 The paragraph entitled ‘Cherry picking’, in the subsection entitled ‘PTAs as stumbling blocks to multilateral trade liberalization’, in the current section, describes cherry picking. 23 ibid. 2 4 n 21. 25 ibid. 26 For EU-Canada, Japan-Mongolia, China-Georgia and Chile-Thailand BTAs, nn 1115–1124 in ch 4 and accompanying text contain details of their Parties’ conditions of withdrawal from the relevant Agreement. 27 n 48 in ch 1 defines ‘Bound Rate of Duty’.

Value-Added of PTAs to the WTO’s Framework  295 The findings of Foroutan (1998)28, Bohara, Gawande, and Sanguinetti (2004)29, Estevadeordal, Freund, and Ornelas (2008)30, and Calvo-Pardo, Freund and Ornelas (2009)31 – all of which imply that regionalism is a building block for external liberalization in developing countries – ­contrast sharply with those of Limäo (2006)32 and of Karacaovali and Limäo (2008)33, who find that the United States and the EU liberalized less during the Uruguay Round [of multilateral trade negotiations] in sectors in which preferences were granted. One reason for differing results is that the countries analyzed are very different. Since the multilateral system has not enforced much tariff reduction on developing countries, tariffs are relatively high among that group, creating a large potential for trade diversion34. Lower external tariffs moderate that loss. The results of the first group of researchers named above suggests that this force is important in explaining changes in MFN tariffs of developing countries involved in free trade areas. In contrast, Limäo’s work focuses on industrial countries. Tariffs were already quite low in the United States and the EU at the onset of the Uruguay Round, thus reducing the importance of this channel35. Accordingly, the higher level of MFN tariffs in developing countries than in advanced states is significant in explaining the greater positive input of PTAs to trade liberalization of the latter than of the former. This state of affairs is induced by Part IV (Trade and Development) of the GATT, and, in particular, the following provision therein. The developed contracting parties do not expect reciprocity for commitments made by them in trade negotiations to reduce or remove tariffs and other barriers to the trade of less-developed contracting parties36.

28 Faeseh Foroutan, ‘Does Membership in a Regional Preferential Trade Agreement Make a Country More or Less Protectionist?’ (1998) 21 The World Economy 305. 29 Alok Bohara, Kishore Gawande and Pablo Sanguinetti, ‘Trade Diversion and Declining Tariffs: Evidence from Mercosur’ 2004 64(1) Journal of International Economics 65. 30 Antoni Estevadeordal, Caroline Freund and Emanuel Ornelas, ‘Does Regionalism Affect Trade Liberalization toward Nonmembers?’ (2008) 123(4) Quarterly Journal of Economics 1531. 31 Hector Calvo-Pardo, Caroline Freund and Emanuel Ornelas, ‘The ASEAN Free Trade Agreement: Impact on Trade Flows and External Trade Barriers’ Policy Research Working Paper 4960 (World Bank 2009). 32 Nuno Limäo, ‘Preferential Trade Agreements as Stumbling Blocks for Multilateral Trade Liberalization: Evidence for the United States’ (2006) 96(3) American Economic Review 896. 33 Baybars Karacaovali and Nuno Limäo ‘The Clash of Liberalizations: Preferential vs. Multilateral Trade Liberalization in the European Union’ (2008) 74 Journal of International Economics 299. 3 4 ‘The opening paragraph of Chapter 6 describes ‘trade diversion’. 35 Baldwin and Freund (n 6) 135. 36 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art XXXVI:8 ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. For ‘contracting party’, read ‘Member’ (n 12 in ch 1). The first sentence of the accompanying Ad Note is also pertinent: “[T]he phrase ‘do not expect reciprocity’ means … that the less-developed

296  Value-Added of PTAs to the WTO’s Framework Whilst the advanced economies have lowered MFN tariffs, both in the setting of bound rates during multilateral trade negotiations and in the application of applied rates that are less than the former, developing countries – free from obligations of reciprocity to advanced states – have tended to apply higher MFN tariffs than do the latter. When developing countries have entered into PTAs, they have reduced/eliminated tariffs on goods to be exported to other Parties to those Agreements, which has precipitated diversion of trade with third countries to that with Parties to the PTAs. Those third countries, especially if they are developing states, would not have wished for this trade diversion to occur – so they would tend to reduce their MFN tariffs and to pressurize or persuade the developing country that is a Party to the PTA to do the same. Hence, the implementation of PTAs to which developing countries are Parties is a method of bringing about trade liberalization in respect of those states. Whilst this logic must be tested by empirical work, it makes intuitive sense that the WTO’s development agenda tends to drive advanced economies to conclude PTAs amongst themselves, and also with developing countries on equal – rather than developmental – terms. To the extent that developing states are Parties to these PTAs, the implementation of these Agreements should be an incentive for further trade liberalization.

How much value do preferential trade agreements add to the World Trade Organizations system of international treaties? Thus, PTAs are a valuable addition to the WTO’s system of international treaties and their interpretative aids. But the global law is itself worthwhile as a basis for the arrangements for countries to trade with each other – and should not be taken for granted when attempting to assess the additional contribution of PTAs. For example, most of the Agreements considered in this book incorporate Article III of the GATT37. If there were no GATT, there would be no Article III – and the PTA would need to reproduce the provisions and associated case law for this aspect of national treatment in order to attain the same level of protection as that which Article III accords, for goods imported from other Parties to the PTA. A concise inspection of provisions of the EU-Canada BTA – in the section with that title in Chapter 4 – yields the following. The ‘General issues and trade in goods’ subsection includes the declaration of a free trade area, reference to the Tariff Schedules for the EU and Canada, and incorporation of Article XI

contracting parties should not be expected, in the course of trade negotiations, to make contributions which are inconsistent with their individual development, financial and trade needs, taking into consideration past trade developments.” (ibid Annex I Ad art XXXVI para 8). 37 The text to n 21 in ch 4 specifies this for the EU-Canada BTA, for instance. The subsection entitled ‘Article III: National Treatment on Internal Taxation and Regulation’, in the section entitled ‘The GATT’, in Chapter 1, considers Article III of the GATT.

Value-Added of PTAs to the WTO’s Framework  297 of the GATT38 in respect of the prohibition of quantitative restrictions. The ­‘Anti-dumping and countervailing measures’ and ‘Safeguard measures’ subsections contain the Parties’ reaffirmation of their rights and duties under the Article VI of the GATT and the AD/SCM Agreements39, and Article XIX of the GATT and the Agreement on Safeguards40, respectively, but little else of significance. The ‘Technical Barriers to Trade’ subsection incorporates much of the Agreement on Technical Barriers to Trade41, and includes provisions on inter-Party co-operation and equivalence of technical regulations. The ‘Sanitary and Phytosanitary measures’ subsection includes the Parties’ confirmation of their rights and obligations under the Agreement on the Application of Sanitary and Phytosanitary Measures42 and reproduces the essence of the principle of equivalence that the latter contains. The ‘Customs and trade facilitation’ subsection contains provisions concerning co-operation and mutual assistance in these matters between the Parties. The ‘Subsidies’ subsection contains the Parties’ reaffirmation of their rights and responsibilities under Article VI of the GATT, the SCM Agreement and the Agreement on Agriculture43, and further provisions on the removal of subsidies affecting the other Party and their effects. It is submitted that, with the exception of the Tariff Schedules, the value-added of these provisions is small – a commitment to inter-Party co-operation being the next most important incremental gain on the position in WTO law. The ‘Investment’ subsection contains rules that require each Party to offer investors of the other Party and their covered investments national, MFN, and fair and equitable treatment, full protection and security, and safeguards for nationalization or expropriation of those investments. These are substantial additions to benefits accruing to the Parties to the EU-Canada BTA from international trade law – although they are tempered by reservations in the Schedules in Annexes I44 and II45 to the EU-Canada BTA. The ‘Cross-border trade in services’ subsection includes national treatment, MFN treatment and market access clauses, which are subject to the Schedules in Annexes I and II to the EU-Canada BTA. The ‘Financial services’ and 38 The subsection entitled ‘Article XI: General Elimination of Quantitative Restrictions’, in the section entitled ‘The GATT’, in Chapter 1, reviews Article XI of the GATT. 39 The subsection entitled ‘Article VI: Anti-dumping and Countervailing Duties, the AD Agreement and the SCM Agreement’, in the section entitled ‘The GATT’, in Chapter 1, considers selected provisions from Article VI of the GATT, the AD Agreement and the SCM Agreement 40 The section entitled ‘The Agreement on Safeguards’, in Chapter 2, quotes Article XIX:1(a) of the GATT and summarizes the Agreement on Safeguards. 41 The section entitled ‘The Agreement on Technical Barriers to Trade’, in Chapter 2, synopsizes the Agreement on Technical Barriers to Trade. 4 2 The section entitled ‘The Agreement on the application of Sanitary and Phytosanitary Measures’, in Chapter 2, precises the Agreement on the Application of Sanitary and Phytosanitary Measures. 43 The section entitled ‘The Agreement on Agriculture’, in Chapter 2, summarizes the Agreement on Agriculture. 4 4 n 146 in ch 4. 45 n 210 in ch 4.

298  Value-Added of PTAs to the WTO’s Framework ‘International maritime transport services’ subsections also include national and MFN treatment provisions, and the former includes a market access rule and several further regulations for the supply of financial services between the Parties. The reservations in the Schedules in Annexes I, II and III46 to the EU-Canada BTA limit the scope of those clauses. Notwithstanding these restrictions, the rules add good value to that provided by WTO law. The ‘Temporary entry and stay of natural persons for business purposes’, ‘Mutual recognition of professional qualifications’, ‘Domestic regulation’, ‘Telecommunications’ and ‘Electronic commerce’ subsections contain provisions on other aspects or areas of cross-border trade in services between the EU and Canada. The ‘Competition policy’ and ‘Monopolies and certain enterprises’ subsections include provisions that require the Parties to prohibit, and co-operate in issues concerning the proscription of, anti-business conduct, and to make sure that monopolistic, oligopolistic, state-funded and otherwise-privileged suppliers provide non-discriminatory treatment to the other Party’s service suppliers and goods and act consistently with customary private business practices, respectively. These safeguards add considerable value to the WTO framework. With the exception of the absence of an MFN provision therein, the rules in the ‘Government procurement’ subsection tend to follow the Agreement on Government Procurement47. The ‘Intellectual property’ subsection builds upon the TRIPS 48. For instance, the EU-Canada BTA contains more detail on criminal procedures and penalties for a breach of intellectual property rights49 than does the provision on ‘Criminal Procedures’ in the TRIPS50. The EU-Canada BTA’s comprehensive treatment of intellectual property rights adds much value for its Parties over and above that which international trade law provides. The ‘Regulatory co-operation’ subsection contains rules which provide a basis on which to exchange information about, and co-ordinate, regulatory initiatives, which may lead to improvements in bilateral trade and investment. The ‘Trade and sustainable development’, ‘Trade and labour’ and ‘Trade and environment’ subsections contain provisions that require the EU and Canada to uphold good governmental and corporate social standards, within their territories and towards each other. The ‘Bilateral dialogues and co-operation’ subsection introduces four areas over which the EU and Canada are to pursue bilateral collaboration. In all these areas, the EU-Canada provides value to its Parties over and above WTO law – although the Parties also face the costs of introducing and implementing the specified standards.

4 6 n 209 in ch 4. 47 The section entitled ‘The Agreement on Government Procurement’, in ch 2, synopsizes the Agreement on Government Procurement. 48 The section entitled ‘The TRIPS’, in Chapter 2, summarizes the TRIPS. 49 Text to nn 380–384 and 713–716 in ch 4. 50 n 199 in ch 2 and accompanying text.

Value-Added of PTAs to the WTO’s Framework  299 The ‘Administrative and institutional provisions’ subsection contains rules that establish the CETA51 Joint Committee and specialized committees which report to that body, and which empower the CETA Joint Committee to make decisions – binding on the Parties – and recommendations. As proposed in that subsection, the effective workings of this institutional system will prove to be integral to the successful functioning of the BTA. To the extent that this regime shows such efficacy, it adds value for the Parties to that which the international trade rules provide. The contents of the ‘Transparency’ and ‘Exceptions’ subsections are consistent with WTO law. The ‘Dispute Settlement’ subsection contains procedures for the resolution of disputes pertaining to the provisions of the EU-Canada BTA. The ‘Final provisions’ subsection contains assorted rules that clarify areas not addressed elsewhere in the Agreement. These items are mainly ancillary to the substantive provisions in other parts of the EU-Canada BTA, and therefore add limited value for the Parties to what WTO law provides. Taken as a whole, the EU-Canada BTA adds considerable value for its Parties beyond that which international trade law supplies. This Agreement’s extensiveness, depth, concern with detail and structural precision are together responsible for this happy position. The other PTAs which this book considers tend to be weaker than the EU-Canada BTA on at least one of these four dimensions. Notwithstanding this, those other Agreements are valuable. Each contributes benefits to their Parties that augment the advantages which the WTO’s framework of international treaties furnishes.

Comments The work in this chapter points to the primarily positive contribution that PTAs make to creating constructive conditions for bilateral, plurilateral and multilateral trade. These Agreements are not a substitute for the WTO and its international law, which provide the framework for a successful and dynamic environment for cross-border product exchange. Rather, the two components are additive. These may, with greater co-ordination between them, steadily lead to a situation in which free trade becomes more of a reality than its historic and current position of a welcome but ideological goal.

Conclusion This chapter considers the relationship between PTAs and global value chains, and that between PTAs and multilateral trade liberalization. Using the EU-­ Canada BTA as a template, the chapter attempts to assess the value that the provisions of a PTA add to the framework which the international treaties of the WTO establish. The next – and final – chapter discusses the future for the law of international trade. 51 ‘CETA’ is an abbreviation for ‘Comprehensive Economic Trade Agreement’, which refers to the EU-Canada BTA.

300  Value-Added of PTAs to the WTO’s Framework

References Baldwin, Richard and Caroline Freund. ‘Preferential Trade Agreements and Multilateral Liberalization’ in Jean-Pierre Chauffour and Jean-Christophe Maur (eds), Preferential Trade Agreement Policies for Development: A Handbook (World Bank 2011). General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. Investopedia. ‘What is the difference between a value chain and a supply chain?’ accessed 13 August 2018. Ruta, Michele. ‘Preferential trade agreements and global value chains: Theory, evidence and open questions’ in World Bank (ed), Global Value Chain Development Report 2017: Measuring and Analysing the Impact of GVCs on Economic Development (World Bank 2017).

8 The Future for the Law of International Trade

The provisions of paragraph 1 [of Article I of the GATT]1 shall not apply to preferences between the countries formerly a part of the Ottoman Empire and detached from it on July 24, 1923, provided such preferences are approved under paragraph 5 of Article XXV [of the GATT], which shall be applied in this respect in the light of paragraph 1 of Article XXIX [of the GATT]2.

This provision has two drawbacks. It is written in legalese, and is historic. International law and politics are no longer as they were in 1923, 1947 or even 2000. Therefore, this rule, the GATT as a whole, and other significant documents of the 20th century, should be carefully revised to reflect current needs whilst keeping in perspective their origins and development. The WTO was established on 1 January 1995. Since then, it has welcomed many new Members, and been responsible for the growth of a development agenda which, at least in theory, is accepted by the leaders of most countries. The number and complexity of PTAs have evolved during the period of the WTO’s existence. But there are tensions between the drive of advanced economies to each pursue its national interest – including through the conclusion of new PTAs with partner countries that they consider to be appropriate – and that of developing countries and the WTO’s management wishing to complete the WTO’s development agenda. Whilst these are legitimate aims on both sides of the argument, it is crucial that the ruthless pursuance of either or both does not lead to a fragmentation of the international trade system which, as the experience of the 1930s demonstrates, would be likely to result in protectionism, economic conflict and a reduction in the standard of living of many people around the world.

1 The paragraph entitled ‘Article I:1: The MFN Rule’, in the subsection entitled ‘Article I: General Most-Favoured Nation Treatment’, in the section headed ‘The GATT’, in Chapter 1, considers Paragraph 1 of Article I of the GATT. 2 General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 art I:3 ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700. For ‘contracting party’, read ‘Member’ (n 12 in ch 1).

302  Law of International Trade – the Future What measures can be taken to mitigate the risk of this unwanted outcome? First, the WTO might choose to draw up a system for the official graduation of developing countries to the status of advanced economy3. It is not in the shortterm interests of countries to graduate, because the privileges that they enjoy as developing states would cease. These graduates would need to hold their position in world trade much like the USA, Japan, Canada, Norway or any other advanced economy tends to do. But success as newly-recognized advanced states would benefit many people, both within their territories and further afield. Second, in the event of perceived trade threats to a country, the responsible officers of that state should initially raise the matter in dialogue both at the WTO, in bilateral or plurilateral meetings, or in any other forum for trade relations that is relevant to the issue-in-question. The formal pursuit of dispute resolution and, especially, the unilateral imposition of countermeasures, should be kept in reserve until talks appear to be stalling and/or the situation has deteriorated to such an extent as to be a serious and imminent economic threat to persons within the affected state(s). Third, as suggested in Chapter 5 in respect of the EAEU Treaty4, the contents of PTAs should be checked to ensure their compatibility with international trade law. The staff in the PTA divisions of the WTO are best-placed to perform this monitoring, which should be undertaken on a frequent, regular basis – as both the global rules and the contents of effective PTAs develop. If the WTO finds one or more non-compliant provisions within a PTA, then it should request the Parties to that Agreement to alter the relevant rules so as to observe the international law. Initially, this should be a voluntary process. However, if there prove to be persistent defaults in respect of any PTA, then it may be necessary for Members of the WTO to grant the latter the power to enforce correction of the identified anomalies, including the proportionate exercise of specified sanctions as required. Fourth, pursuant to the point made at the start of this chapter, the WTO’s international treaties should be regularly revisited and, as necessary, revised, in order to be appropriate for current needs and widely held opinions – without compromising their evolution. The greater the extent to which the majority of the WTO Members consider international trade law to be relevant to their circumstances, the less likely they are to pursue PTAs with each other that undermine the objectives, the policies and/or the projects of the WTO. If they consider the global law to be relevant, then they will ensure as far as they are reasonably able that the contents of their newly-agreed PTAs observe both the spirit and the content of this law. One issue that Chapter 6 does not raise, but which may come more into focus as PTAs increasingly abound, is their propensity to improve political relations between the Parties to them. Whilst the international law of trade – like any

3 n 40 in ch 3 describes graduation. 4 Text to nn 102–104 in ch 5.

Law of International Trade – the Future  303 reasonable law – has a subjectively compulsive element, i.e., one ought to obey it, WTO Members may consider that they are compelled to comply with it by virtue of being Members. By contrast, these countries freely enter into PTAs with other states of their choice on negotiated terms – which consider the particular preferences of each participant. Therefore, these nations may wish to uphold the terms of their PTAs in order to endorse the fact that they contributed to choosing contents of those Agreements. To enhance this effect, the Parties to a PTA may tend to treat one another with respect and to constructively pursue common interests. If an Agreement requires the establishment of a suitable bilateral architecture to discuss and advance its Parties’ mutual interests, then these Parties have a constructive forum in which to do so – thereby improving political relations between them. If a country enters into many PTAs, then it may struggle to abide by the terms of all of them, as a result of having insufficient resources to pay due regard to them – especially if some of its Agreements are deep and/or comprehensive. Furthermore, if that state is careless in its attention to the detail of one or more of its PTAs, then the other Parties to those PTAs may take offence – and relations between them and the former may deteriorate. Thus, once a country has signed a PTA and that Agreement has come into effect, this Party must be assiduous in its continuing attention to abide by the PTA’s requirements. The incremental benefit to that state in entering into more PTAs would tend to be smaller each time, as the overall workload for their ongoing implementation rises. It may become less expensive for the country to attempt to achieve more multilateral tariff reductions and other mutual trade benefits through the forum of the WTO, than to continue to enter into new PTAs and to upgrade existing ones. It may eventually prove to be necessary for all WTO Members to decide to start a new round of multilateral trade negotiations, putting to one side the unimplemented elements of outcomes from the Doha Round. This new Round would need to find a more equitable balance between the interests of advanced economies and those of developing countries than the Doha Round did – whilst still noting that LDCs remain poor and in need of continuing assistance. Let us hope that this point can be reached before long.

References General Agreement on Tariffs and Trade (30 October 1947) updated LT/UR/A-1A/1/ GATT/2 ; 5 UNTS 194; 61 Stat. pt. 5; TIAS 1700.

Index

AB (Appellate Body) 21–2, 134–6; on ‘directly competitive or substitutable’ products 20–1; on grouping of products 21; interpretation of the chapeau of Article XXIV:5 152 AB Reports: Mexico–Anti-Dumping Investigation of High-Fructose Corn Syrup (HFCS) from the United States 68; United States–Import Prohibition of Certain Shrimp and Shrimp Products– Recourse to Article 21.5 of the DSU by Malaysia 96 AD Agreement: Article 2 39–44; Article 3 44–54; Article 5 54–9; computation of costs 41–4; ‘injury’ 52 ad valorem 11n69, 12, 114n37 ad valorem duties 11–12, 114n37 administrative and institutional provisions under EU-Canada BTA 213–14 ‘administrative ruling of general application’ 256n1032 ADR (Alternative Dispute Resolution) 137–8 advanced economies: ‘graduation’ 150n40; pursuit of PTAs, conflict with WTO’s development agenda 301–3; see also developing countries advantages of free trade agreements 283 advantages of PTAs 287–8 Agreement on Agriculture 120–1, 180n91, 297 Agreement on Government Procurement 140–2; Article III:1(a) 233n727; nondiscrimination obligations 141 Agreement on Import Licensing Procedures 116, 137 Agreement on Preshipment Inspection 115 Agreement on Rules of Origin 122–3

Agreement on Safeguards 49, 50n292, 117–18, 254, 297 Agreement on Technical Barriers to Trade 112–13, 176, 206, 227, 254, 297 Agreement on the Application of Sanitary and Phytosanitary Measures 110–12, 132, 177, 206, 239, 253, 268, 297 Agreement on Trade Facilitation 1–2n10, 118–20, 178 Agreement on Trade in Civil Aircraft 139–40 alleged dumping, investigation into 54–9 Amadeo, Kimberly 283, 284, 285 Annex 2 to the General Council Decision of 14 December 2010 on the Transparency Mechanism for Preferential Trade Arrangements 149n37 Annex 2-A to the EU-Canada BTA 173–4 Annex 5-D to the EU-Canada BTA 177 Annex 5-E to the EU-Canada BTA 177–8 Annex 20-A to the EU-Canada BTA 201–2 anticompetitive activities 230n690 anti-dumping and countervailing measures: Chile-Thailand BTA 254; EU-Canada BTA 174–5 anti-dumping duties 40–1, 40n241, 59n347, 60–1 Anti-Dumping Duties on Angles, Shapes and Sections of Iron or Non-Alloy Steel and H-Beams from Poland 45, 46, 48, 55–6 application of the Schedules of Concessions 8–12, 139n290 Argentina–Measures Affecting Imports of Footwear, Textiles, Apparel and Other Items 11–12 Argentina–Measures Affecting the Export of Bovine Hides and the Import of Finished Leather 18, 73

306 Index Argentina–Measures Affecting the Importation of Goods 73–4 ASEAN Charter 268n10 ASEAN-Aus-NZ PPTA 268–71; Committee on Investment 271; crossborder trade in services 269; national treatment clause 270; sanitary and phytosanitary measures 269 ATC (Agreement on Textiles and Clothing) 1n3, 121–2 Baber, Graeme 270n32, 284n6 Base Rate of Duty 8n48 basic patents 203n366 Berne Convention for the Protection of Literary and Artistic Works 129n179, 200 bilateral dialogues and co-operation under EU-Canada BTA 212–13, 298 Board of the Eurasian Economic Commission 276n90, 278n110 border measures, EU-Canada BTA 205 bound tarrifs 7–8n43, 9, 11 Brazil–Export Financing Programme for Aircraft 63–4, 136–7 Brazil–Measures Affecting Desiccated Coconut 61–2 Brazil–Measures Affecting Imports of Retreaded Tyres 74, 84–5, 95n537, 97–8 BSDI (Baber’s Sustainable Development Index) 284n6 BTAs (Bilateral Trade Agreements) 171–2; Chile-Thailand BTA 172; China-Georgia BTA 172; EU-Canada BTA 172, 173–84, 184–95, 195–216, 216–20; Japan-Mongolia BTA 172; see also Chile-Thailand BTA; ChinaGeorgia BTA; EU-Canada BTA; Japan-Mongolia BTA building blocks for multilateral trade liberalization: Frankel and Wei momentum 293; Kemp-Wan theorem 293–4; ‘trade liberalization juggernaut’ argument 292; veto avoidance 294 Canada–Certain Measures Affecting the Automotive Industry 3, 161 Canada–Certain Measures Affecting the Renewable Energy Generation Sector 33 Canada–Certain Measures Concerning Periodicals 14, 17, 22–3, 33–4 Canada–Import Restrictions on Ice Cream and Yoghurt 79, 80n470

Canada–Measures Affecting Exports of Unprocessed Herring and Salmon 79, 86–7 Canada–Measures Affecting the Export of Civilian Aircraft 63 Canada–Measures Relating to the Feed-In Tariff Program 33 CETA see EU-Canada BTA chapeau of Article XX (GATT) 80, 94–8, 124 charges and regulations on traffic in transit 37–8 ‘cherry picking’ 291 Chile–Taxes on Alcoholic Beverages 23–4 Chile-Thailand BTA 172, 250, 252; anti-dumping and countervailing measures 254; co-operation 254, 256; cross-border trade in services 254–5, 255n1018; dispute settlement 259–61; economic co-operation 255–6; financial services 255; Free Trade Commission 257; national treatment 251; rules of origin 252; sanitary and phytosanitary measures 253; security exceptions 261; subcommittees 258–9; technical barriers to trade 253–4; termination of the Agreement 261–2 China–Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products 83 China–Measures Related to the Exportation of Various Raw Materials 72–3, 75, 76, 77, 99 China-Georgia BTA 172; Article 17.2 172n11; co-operation 243–5; crossborder trade in services 241; dispute settlement 246; envirormental protection 241–2; financial services 241; intellectual property 242–3; investment 248–9; national treatment 237–8; rules of origin 238; sanitary and phytosanitary measures 239; security exceptions 246–7; sustainable development 242; technical barriers to trade 239–40; termination of the Agreement 247–8; trade remedies 240; transparency 238–9 China-Georgia Joint Commission 244–5 Colombia–Indicative Prices and Restrictions on Ports of Entry 35–6, 38 Committee on Investment 271

Index  307 competition policy: anticompetitive activities 230n690; EU-Canada BTA 194–5; Trans-Pacific PPTA 272 Comprehensive and Progressive Agreement for Trans-Pacific Partnership 275n79 ‘contracting parties’ 79n469 Convention on International Trade in Endangered Species of Wild Fauna and Flora 211n476 co-operation: Chile-Thailand BTA 254, 256; China-Georgia BTA 243–5; EU-Canada BTA 205; Japan-Mongolia BTA 234 copyright, EU-Canada BTA 200 countervailing duties 39–41, 70–1 country of importation 114n38 covered agreements 133n208, 135, 136, 223n610 covered entities 195n278 covered investment 181, 182, 195, 270n30 covered procurement 195–9 criteria for ‘like products’ 14–18 cross-border supply of services 185–6n165, 287 cross-border trade in services 182n122; ASEAN-Aus-NZ PPTA 269; ChileThailand BTA 254–5, 255n1018; China-Georgia BTA 241; EU-Canada BTA 182–4; Trans-Pacific PPTA 271, 272–3 cultural industries 183n127, 186 customs and trade facilitation, EU-Canada BTA 178–9, 214n519 customs union 151–2, 151n47, 153–4, 157n84, 160n101; interim agreements leading to the establishment of 158–9; requirements for 153–7 Customs Valuation Code 114, 179, 252 customs value of imported goods 114n37 data protection under EU-Canada BTA 203–4 de facto quantitative restrictions 73–4 de jure quantitative restrictions 73–4 de minimis 21, 57n340, 58, 59 de minimis non curat lex 21n139 definition: of “moral” 82–3; of “order” 125n150; of “prohibition” 77; of “public” 82–3; of “restriction” 77 designating a monopoly 195n275 designs under EU-Canada BTA 202

‘destruction of native cultures’ as disadvantage of PTAs 285–6 determination of injury 44–54, 64 developing countries 163n120; ADR services 137–8; conflict between WTO’s development agenda and advanced economies 301–3; Enabling Clause 3–5; ‘graduation’ 150n40; LDC 4n26; LDCs 165–6; and the objectives of GATT 166–7; preference erosion/exploitation 290; preshipment inspection 115; and reciprocity 165 Dieter, Heribert 286, 287 ‘directly competitive or substitutable’ products 13–14, 19–25; AB’s comments on 20–1; elasticity of substitution 20; grouping 21 disadvantages of PTAs 285–7; ‘destruction of native cultures’ 285–6; erosion of the MFN rule 286; increased job outsourcing 285–6; poor working conditions 285 dispute settlement: under Chile-Thailand BTA 259–61; China-Georgia BTA 246; under EU-Canada BTA 219; under Japan-Mongolia BTA 235–6; in PTAs 287 Dispute Settlement Body 99, 132–7 disputes: Argentina–Measures Affecting Imports of Footwear, Textiles, Apparel and Other Items 11–12; Argentina– Measures Affecting the Export of Bovine Hides and the Import of Finished Leather 11–12, 18; Argentina–Measures Affecting the Importation of Goods 73–4; Brazil–Export Financing Programme for Aircraft 63–4, 136–7; Brazil–Measures Affecting Desiccated Coconut 61–2; Brazil–Measures Affecting Imports of Retreaded Tyres 84–5, 95n537, 97–8; Canada–Certain Measures Affecting the Renewable Energy Generation Sector 33; Canada–Certain Measures Concerning Periodicals 22–3, 33–4; Canada–Import Restrictions on Ice Cream and Yoghurt 79; Canada–Measures Affecting Exports of Unprocessed Herring and Salmon 79, 86–7; Canada–Measures Affecting the Export of Civilian Aircraft 63; Canada–Measures Relating to the Feed-In Tariff Program 33; Chile– Taxes on Alcoholic Beverages 23–4; China–Measures Affecting Trading

308 Index Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products 83; China– Measures Related to the Exportation of Various Raw Materials 72–3, 75, 76, 77, 99; Colombia–Indicative Prices and Restrictions on Ports of Entry 35–6, 38; Dominican Republic–Measures Affecting the Importation and Internal Sale of Cigarettes 30; Egypt–Definitive Anti-Dumping Measures on Steel Rebar from Turkey 44–5; European Communities–Anti-Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil 46, 48–9, 60–1, 66–7; European Communities–Conditions for the Granting of Tariff Preferences to Developing Countries 164–5, 166–8; European Communities–Customs Classification of Certain Computer Equipment 7; European Communities– Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China 43, 47; European Communities– Measures Affecting Asbestos and Asbestos-Containing Products 15–17, 26–8, 29; European Communities– Measures Affecting Trade in Commercial Vessels 34–5; European Communities– Measures Prohibiting the Importation and Marketing of Seal Products 94–6; European Communities–Regime for the Importation, Sale and Distribution of Bananas 25–6; Guatemala–Definitive Anti-Dumping Measures on Grey Portland Cement from Mexico 55–6, 57; India–Additional and Extra-Additional Duties on Imports from the United States 9–10; India–Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products 74–5, 76; Indonesia–Certain Measures Affecting the Automobile Industry 17, 34; Japan– Countervailing Duties on Dynamic Random Access Memories from Korea 65–6, 68, 70; Japan–Taxes on Alcoholic Beverages 12n74, 13–15, 21–2, 23, 24, 28, 35; Korea–Measures Affecting Imports of Fresh, Chilled and Frozen Beef 25, 29–30, 31, 76, 85–6; Korea–Taxes on Alcoholic Beverages 20, 21, 23, 25; Mexico–Anti-Dumping Investigation of High-Fructose Corn Syrup (HFCS)

from the United States 68; Mexico– Anti-Dumping Investigation of HighFructose Corn Syrup (HFCS) from the United States 52–3, 54, 56–7; Mexico– Definitive Anti-Dumping Measures on Beef and Rice 58; Mexico–Definitive Countervailing Measures on Olive Oil from the European Communities 67; Mexico–Tax Measures on Soft Drinks and Other Beverages 24, 86; Philippines– Taxes on Distilled Spirits 25; Thailand– Anti-Dumping Duties on Angles, Shapes and Sections of Iron or Non-Alloy Steel and H-Beams from Poland 45, 46–7, 48; Thailand–Customs and Fiscal Measures on Cigarettes from the Philippines 17; United States–Anti-Dumping Act of 1916 60; United States–Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan 45, 50–1, 52, 66–7; United States–Continued Dumping and Subsidy Offset Act of 2000 62; United States–Countervailing Duty Investigation on Dynamic Random Access Memory Semiconductors (DRAMS) from Korea 66; United States–Countervailing Measures Concerning Certain Products from the European Communities 62; United States–Final Countervailing Duty Determination with Respect to Certain Softwood Lumber from Canada 62–3; United States–Final Dumping Determination on Softwood Lumber from Canada 42–3, 44, 56–7; United States–Import Prohibition of Certain Shrimp and Shrimp Products 87–8, 89–90; United States–Imposition of Countervailing Duties on Certain Hot-Rolled Lead and Bismuth Carbon Steel Products Originating in the United Kingdom 70–1; United States– Investigation of the International Trade Commission in Softwood Lumber from Canada 53–4, 67–8; United States– Measures Affecting the Cross-Border Supply of Gambling and Betting Services 82, 126; United States–Prohibition of Imports of Tuna and Tuna Products from Canada 79; United States– Safeguard Measures on Imports of Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia 49–50; United States–Standards for Reformed

Index  309 and Conventional Gasoline 83–4; United States–Standards for Reformed and Conventional Gasoline 87, 88–9, 90, 96–7; United States–Subsidies on Upland Cotton 47–8, 47n278; United States–Tax Treatment for “Foreign Sales Corporations” 26 domestic regulation, EU-Canada BTA 185–6 Dominican Republic–Measures Affecting the Importation and Internal Sale of Cigarettes 9, 30–2 DSU (Dispute Settlement Understanding) 132–8; Article 3.2 223n610; covered agreements 133n208; see also disputes dumping 39–44; alleged, investigation into 54–9; Anti-Dumping Duties on Angles, Shapes and Sections of Iron or Non-Alloy Steel and H-Beams from Poland 55–6 duties 11–12; ad valorem 11–12, 11n70; anti-dumping 40–1, 40n241, 60–1; anti-dumping and countervailing measures 59n347; Base Rate of Duty 8n48; countervailing 39–41, 70–1; United States–Definitive Anti-Dumping and Countervailing Duties on 69–70 EAEU (Eurasian Economic Union): alignment with international trade law 277–8; exceptions provision 279; MFN Rule in 279n114; MFN treatment 278–9; objectives of 275–7; signatories 267n4 economic co-operation under the ChileThailand BTA 255–6 Egypt–Definitive Anti-Dumping Measures on Steel Rebar from Turkey 44–5 electronic commerce 194n261; EU-Canada BTA 194; Japan-Mongolia BTA 222, 228–9 Enabling Clause 3–5; notification of PTAs to the WTO under 163–8 enforcement of intellectual property rights, under EU-Canada BTA 204–5 enterprise of a Party 180n97, 186n181 environmental protection: China-Georgia BTA 241–2; under EU-Canada BTA 210–12 erosion of the MFN rule as consequence of PTAs 286 Essays on International Law 270n32 EU (European Union) 171n1; Market Access Schedule 196n288

EU-Canada BTA 172; administrative and institutional provisions 213–14; Annex 2-A 173–4; Annex 5-D 177; Annex 5-E 177–8; Annex 20-A 201–2; Annex II 189n210; Annex III 189n209; anti-dumping and countervailing measures 174–5; bilateral dialogues and co-operation 212–13; border measures 205; competition policy 194–5; co-operation 205; copyright 200; cross-border trade in services 182–4; customs and trade facilitation 178–9; data protection 203–4; designs 202; dispute settlement 219; domestic regulation 185–6; electronic commerce 194; enforcement of intellectual property rights 204–5; environmental protection 210–12; exceptions 215–19; final provisions 219–20; financial services 186–90; general exceptions 216–8; general issues and trade in goods 173–4; geographical indications 201–2; government procurement 195–9; intellectual property 199–200; international maritime transport services 191–2; investment 180–2; labour 210; monopolies and certain enterprises 195; mutual recognition of professional qualifications 184–5; patents 203; plant varieties 204; regulatory co-operation 206–8; safeguard measures 175–6; sanitary and phytosanitary measures 176–8; security exceptions 218–19; subsidies 179–80; technical barriers to trade 176; telecommunications 192–3; temporary entry and stay of natural persons for business purposes 184; trade and sustainable development 208–9; trademarks 200–1; transparency 214–15 European Central Bank 217n556 European Communities–Anti-Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil 46, 48–9, 60–1, 66–7 European Communities–Conditions for the Granting of Tariff Preferences to Developing Countries 164–5, 166–8 European Communities–Customs Classification of Certain Computer Equipment 7 European Communities–Definitive AntiDumping Measures on Certain Iron or Steel Fasteners from China 43, 47

310 Index European Communities–Measures Affecting Asbestos and Asbestos-Containing Products 15–16, 17, 26–8, 29 European Communities–Measures Affecting Trade in Commercial Vessels 34–5 European Communities–Measures Prohibiting the Importation and Marketing of Seal Products 94–6 European Communities–Regime for the Importation, Sale and Distribution of Bananas 25–6 exceptions: under EU-Canada BTA 215–19; to the GATT, general exceptions 80–90, 90–8; to the GATT, security exceptions 98–103; to the MFN rule 3–7 export shipments 205n385 export subsidies 63, 121, 180n91 exports: exceptions to the prohibition in Article XI.1 76–80; geographical indications 201n349; prohibition on quantitative restrictions 72–6 feeder services 191n229; under EU-Canada BTA 191 final provisions, EU-Canada BTA 219–20 financial services 186n179, 273n56; ChileThailand BTA 255; China-Georgia BTA 241; cross-border supply of 187n183; EU-Canada BTA 186–90; JapanMongolia BTA 235; ‘new’ 190n214; suppliers 188n189; Trans-Pacific PPTA 274–5 Frankel, Jeffrey 293 Free Trade Commission 257–9 freedom of transit: charges and regulations on traffic in transit 37–8; products which have been in transit 38; traffic in transit 35–6 free-trade area 151–2, 151n48; interim agreements leading to the establishment of 158–9; requirements for 157–8 GATS (General Agreement on Trade in Services) 123–8; Article III 244n860; chapeau of Article XIV 125–6; MFN Rule 126–7; notification of PTAs to the WTO under Article V 162–3 GATT (1947) 2n11; MFN Rule in 3n17 GATT (1994): Article I (General MostFavoured-Nation Treatment) 3–7; Article I:1 296–9; Article II (Schedules of Concessions) 7–12; Article III

(National Treatment on Internal Taxation and Regulation) 12–2, 23–8, 28–35; Article IIV:9 155n72; Article V (Freedom of Transit) 35–8; Article VI 39–44; Article VI:2 60–1; Article VI:3 61–72; Article XI (General Elimination of Quantitative Restrictions) 72–80; Article XI:2 76–80; Article XX 80–90, 90–98; Article XX(g) 5n28; Article XXI 98–103; Article XXIV:4 152; Article XXIV:5 152; Article XXIV:5(a) 153–4; Article XXIV:6 154–5; Article XXIV:8 155–7; Article XXXVI 166n145; chapeau of Article XX 94–8; interim agreements leading to the establishment of a customs union or free-trade area 158–9; objectives of 166–7; paragraphs of Article XX 82–94; Preamble to 166n144; requirements for a customs union 153–7; requirements for a freetrade area 157–8; Understandings 2n14 GATT Panel Reports, United States–Trade Measures Affecting Nicaragua 99–100 General Council Decision of 14 December 2006 on the Transparency Mechanism for Regional Trade Agreements 145–6, 150–1; implementation of the transparency mechanism 147; procedures 147 General Council Decision of 14 December 2010 on the Transparency Mechanism for Preferential Trade Arrangements 146, 148; Annex 2 149n37; implementation and procedures 148–50 general elimination of quantitative restrictions 72–80, 140n298, 297n38 general exceptions to the GATS 124–5 general exceptions to the GATT 80–90, 90–98 ‘General Provisions’ chapter of the JapanMongolia BTA 221 geographical indications 128n176, 201n349; EU-Canada BTA 201–2 global-value-chain trade, correlation with depth of PTAs 289–90 government procurement: EU-Canada BTA 195–9; Japan-Mongolia BTA 232–3 ‘graduation’ 150n40 grouping of products 21 Guatemala–Definitive Anti-Dumping Measures on Grey Portland Cement from Mexico 55–6, 57

Index  311 harmonization of rules of origin 286–7 Harmonized System 120, 173n24, 210, 237n779, 239n795, 251 IMF (International Monetary Fund) 218n561 import shipments 205n385 imports: country of importation 114n38; customs value of imported goods 114n37; exceptions to the prohibition in Article XI.1 76–80; geographical indications 201n349; licensing 116; prohibition on quantitative restrictions 72–6 increased job outsourcing as consequence of PTAs 285–6 India–Additional and Extra-Additional Duties on Imports from the United States 9–10 India–Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products 74–5, 76 India–Quantitative Restrictions report 75 Indonesia–Certain Measures Affecting the Automobile Industry 17, 34 ‘injury’ 44n258; in the SCM Agreement 67 intellectual property: China-Georgia BTA 242–3; EU-Canada BTA 199–200, 204–5; Japan-Mongolia BTA 222, 231–2; Treaty on Intellectual Property in Respect of Integrated Circuits 129n181; see also TRIPS (Agreement on Trade-Related Aspects of Intellectual Property Rights) intellectual property rights 204n377, 243n845 internal charges ‘in excess of’ those applied to ‘like domestic products’ 14–18 international commodity agreements 91n523, 92 International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations 129n180, 200 international maritime transport services 191n224; EU-Canada BTA 191–2 international trade law, alignment of EAEU with 277–8 International Trade Organization 92n527 investigation into alleged dumping 54–9 investment 180n97; China-Georgia BTA 248–9; covered 270n30; EU-Canada

BTA 180–2; Japan-Mongolia BTA 222, 229–30 investment activities 184, 221, 229n676, 250 ITO (International Trade Organization), Article 51 of the draft charter 92–3 Japan–Countervailing Duties on Dynamic Random Access Memories from Korea 65–6, 68, 70 Japan–Taxes on Alcoholic Beverages 12n74, 13–14, 15, 17–18, 19, 20, 21–2, 23, 24, 28, 35 Japan-Mongolia BTA 172, 220; co-operation 234; dispute settlement 235–6; electronic commerce 222, 228–9; exceptions 221; financial services 235; ‘General Provisions’ chapter 221; government procurement 232–3; intellectual property 222, 231–2; investment 222, 229–30; national treatment 226; provision for seizure of goods 232; sanitary and phytosanitary measures 226–7; security exceptions 222; subcommittees 224–5; subsidies 226; telecommunications 235; temporary entry and stay of natural persons for business purposes 228 Kemp, Murray 293–4 Kemp-Wan theorem 293–4 Korea–Measures Affecting Imports of Fresh, Chilled and Frozen Beef 25, 29–30, 31, 76, 85–6 Korea–Taxes on Alcoholic Beverages 14, 20, 23, 25 Kyoto Convention 238n789 labour protection, under EU-Canada BTA 210 LDCs (Least Developed Countries) 4n26, 165–6; Enabling Clause 3–5 legality of licensing regimes 75–6 “less favourable” treatment 160n102 lex specialis derogat legi generali, lex posterior derogat legi priori 223–4 licensing regimes 75–6; Agreement on Import Licensing Procedures 116 ‘like’ products 14, 41n243; internal charges ‘in excess of’ those applied to 14–18 major suppliers 192n246 maritime auxiliary services 191n227

312 Index Mexico–Anti-Dumping Investigation of High-Fructose Corn Syrup (HFCS) from the United States 52–3, 54, 56–7, 68 Mexico–Definitive Anti-Dumping Measures on Beef and Rice 58 Mexico–Definitive Countervailing Measures on Olive Oil from the European Communities 67 Mexico–Tax Measures on Soft Drinks and Other Beverages 18, 24, 86 MFN (Most-Favoured-Nation) Rule 3, 99–100; in the EAEU 279n114; in EAUE 278–9; exceptions to 3–5; of the GATS 126–7; in GATT (1947) 3n17; PTAs 6–7; in Trans-Pacific PPTA 273–4; of the TRIPS 129–130; waivers 6 monopolies: and certain enterprises, EU-Canada BTA 195; designating 195n275 Multilateral Trade Agreements: Agreement on Agriculture 120–1; Agreement on Import Licensing Procedures 116; Agreement on Preshipment Inspection 115; Agreement on Rules of Origin 122–3; Agreement on Safeguards 117–18; Agreement on Technical Barriers to Trade 112–13; Agreement on the Application of Sanitary and Phytosanitary Measures 110–12; Agreement on Trade Facilitation 118–20; Agreement on TRIMs 113; ATC 121–2; Customs Valuation Code 114; DSU 132–8; GATS 123–8; TPRM 138–9; TRIPS 128–32 multilateral trade liberalization: literature on relationship with PTAs 294–6; PTAs as building blocks for 292–4; PTAs as stumbling blocks to 290–1 mutual recognition of professional qualifications, EU-Canada BTA 184–5, 298 national treatment on internal taxation and regulation 12–13; Article III:4 25–32; Article III:5 32; Article III:8 32–5; ‘directly competitive or substitutable’ and ‘like’ products 13–14; ‘directly competitive or substitutable’ products not similarly taxes 19–25; internal charges ‘in excess of’ those applied to ‘like domestic products’ 14–18 Nicaragua, United States’ trade embargo with 99–100

non-discrimination obligations in the Agreement on Government Procurement 141–2 ‘non-discrimination’ provisions of the GATT 101; see also MFN (MostFavoured-Nation) Rule non-discriminatory treatment 192n245, 195n279, 298 non-preferential rules of origin 122–3, 122n121 notification of PTAs to the WTO: under Article V of the GATS 160–2; under Article XXIV of the GATT 151–160; under the Enabling Clause 163–8 NRPTAs (Non-Reciprocal Preferential Trade Agreements) 145; see also General Council Decision of 14 December 2010 on the Transparency Mechanism for Preferential Trade Arrangements obiter dicta 25, 168n153 originating goods 173, 237n779 paragraphs of Article XX (GATT) 82–94; measures imposed for the protection of national treasures 86; measures necessary to protect human, animal or plant life or health: 83–5; measures necessary to protect public morals 82–3; measures necessary to secure compliance with laws or regulations 85–6; measures relating to the conservation of exhaustible natural resources 86–90; measures relating to the importations or exportations of gold or silver 85; measures relating to the products of prison labour 86 Paris Convention for the Protection of Industrial Property 128–9n178 ‘passporting right’ 190n223 patents: basic 203n366; under EU-Canada BTA 203 pharmaceutical products 203n367 Philippines–Taxes on Distilled Spirits 25 plant varieties, EU-Canada BTA 204 Plurilateral Trade Agreements 142–3; Agreement on Government Procurement 140–2; Agreement on Trade in Civil Aircraft 139–40; notification system for 142–3 poor working conditions as consequence of PTAs 285 PPTAs (Preferential Plurilateral Trade Agreements) 171, 267–8, 267n1;

Index  313 ASEAN-Aus-NZ PPTA 268–71; DSU 132n201; EAEU 275; Trans-Pacific PPTA 271–5 Preamble to the GATT 166n144 preference erosion/exploitation 290 preshipment inspection 115 preshipment inspection entities 115n45 principle of equivalence in Agreement on the Application of Sanitary and Phytosanitary Measures 111 pro forma 8n46 procuring entities 196n290 prohibition on quantitative restrictions 72–6 ‘protection’ provisions of the GATT 101; see also exceptions to the GATT PTAs (Preferential Trade Agreements) 6–7, 6–7n38, 145, 171; advantages of 283, 287–8; as building blocks for multilateral trade liberalization 292–4; ‘cherry picking’ 291; depth of, correlation with global-value-chain trade 289–90; ‘destruction of native cultures’ as consequence of 285–6; disadvantages of 285–7; dispute settlement 287; erosion of the MFN rule as consequence of 286; and global value chains 289–90; as ‘goodies bag’ 291; increased job outsourcing as consequence of 285–6; literature on relationship with multilateral trade liberalization 294–6; notification of to the WTO under Article XXIV of the GATT 151–60; poor working conditions as consequence of 285; as stumbling blocks to multilateral trade liberalization 290–1; value added to the WTO system of international treaties 296–9 public telecommunications transport network 192n244 ratio decidendi 168n152 regional fisheries management organisations 211–12n481 regulatory co-operation, EU-Canada BTA 206–8 Regulatory Co-operation Forum 208 requests for consultation 133–4 res judicata 168n155 RPTAs (Reciprocal Preferential Trade Agreements) 145; see also General Council Decision of 14 December 2006 on the Transparency Mechanism for Regional Trade Agreements

RTAs (Regional Trade Agreements) 6–7n38, 145 rules of origin 122–3; Chile-Thailand BTA 252; China-Georgia BTA 238; costs of administration of 286; harmonization of 286–7; non-preferential 122n121 Ruta, Michele 289–90 safeguard measures 117; EU-Canada BTA 175–6 sanitary and phytosanitary measures: ASEAN-Aus-NZ PPTA 269; ChileThailand BTA 253; China-Georgia BTA 239; EU-Canada BTA 176–8; JapanMongolia BTA 226–7 Schedules of Concessions 7–8; application of 8–12; status of 7 SCM Agreement 39, 61–72; Article 4.10 137n263; Article 4.11 137n259; Article 10 64n381; Article 11 54–9; ‘injury’ 67; Part V 64 security exceptions: to Chile-Thailand BTA 261; to China-Georgia BTA 246–7; to EAEU 279–80; to EU-Canada BTA 218–19; to the GATS 124–5; to the GATT 98–103 seizure of goods, provision for under Japan-Mongolia BTA 232 services: cross-border supply of 185–6n165; cross-border trade in under EU-Canada BTA 182–4; financial 186n179, 273n56; major suppliers 192n246; mutual recognition of professional qualifications, EU-Canada BTA 184–5; trade in 123n130, 182n122; see also financial services; international maritime transport services standards 112n19 status of the Schedules of Concessions 7 subcommittees: Chile-Thailand BTA 258–9; Japan-Mongolia BTA 224–5 subsidies 62–3, 64–5, 65n393; EU-Canada BTA 179–80; export 180n91; Japan-Mongolia BTA 226; United States–Subsidies on Upland Cotton 47n278 sui generis 203n364 sustainable development: China-Georgia BTA 242; EU-Canada BTA 208–9 Tariff Analysis Online Facility 8n45 Tariff Download Facility 8n44

314 Index tariffs: bound 7–8n43, 9, 11; inherent discrimination against imports 10–11; Schedules of Concessions 7–8 technical barriers to trade: Chile-Thailand BTA 253–4; China-Georgia BTA 239–40; EU-Canada BTA 176 technical regulations 112, 112n21; and standards 112n19 telecommunications: EU-Canada BTA 192–3; Japan-Mongolia BTA 235 telecommunications services 192n239 temporary entry and stay of natural persons for business purposes: EU-Canada BTA 184; Japan-Mongolia BTA 228 Thailand–Anti-Dumping Duties on Angles, Shapes and Sections of Iron or Non-Alloy Steel and H-Beams from Poland 45, 46–7, 48 Thailand–Customs and Fiscal Measures on Cigarettes from the Philippines 17 third countries, preference erosion/ exploitation 290 TPRM (Trade Policy Review Mechanism) 138–9 trade in services 123n130 ‘trade liberalization juggernaut’ argument 292 trademarks, EU-Canada BTA 200–1 traffic in transit 35–6 Trans-Pacific PPTA 271–5; competition policy 272; cross-border trade in services 271, 272–3; financial services 274–5; Headnote to Annex IV 274n67; MFN clause 273–4 transparency 244n860; under ChinaGeorgia BTA 238–9; under EU-Canada BTA 214–15 Transparency Mechanism for notification of PTAs to the WTO see General Council Decision of 14 December 2006 on the Transparency Mechanism for Regional Trade Agreements; General Council Decision of 14 December 2010 on the Transparency Mechanism for Regional Trade Agreements; notification of PTAs to the WTO Treaty on Intellectual Property in Respect of Integrated Circuits 129n181 TRIMs (Trade-Related Investment Measures) 113 TRIPS (Agreement on Trade-Related Aspects of Intellectual Property Rights) 1n5, 128–32, 182n113, 222, 232, 243, 298

Understandings 2n14 UNIDROIT Convention on International Financial Leasing 224n611 United States–Anti-Dumping Act of 1916 60 United States–Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan 45, 50–1, 52, 66–7 United States–Continued Dumping and Subsidy Offset Act of 2000 62 United States–Countervailing Duty Investigation on Dynamic Random Access Memory Semiconductors (DRAMS) from Korea 66 United States–Countervailing Measures Concerning Certain Products from the European Communities 62 United States–Definitive Anti-Dumping and Countervailing Duties on Certain Products from China 69–70 United States–Final Countervailing Duty Determination with Respect to Certain Softwood Lumber from Canada 62–3 United States–Final Dumping Determination on Softwood Lumber from Canada 42–3, 44, 56–7 United States–Import Prohibition of Certain Shrimp and Shrimp Products 87–8, 89–90 United States–Import Prohibition of Certain Shrimp and Shrimp Products– Recourse to Article 21.5 of the DSU by Malaysia 96 United States–Imposition of Countervailing Duties on Certain Hot-Rolled Lead and Bismuth Carbon Steel Products Originating in the United Kingdom 70–1 United States–Investigation of the International Trade Commission in Softwood Lumber from Canada 53–4, 67–8 United States–Measures Affecting the CrossBorder Supply of Gambling and Betting Services 82, 126 United States–Prohibition of Imports of Tuna and Tuna Products from Canada 79 United States–Safeguard Measures on Imports of Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia 49–50 United States–Standards for Reformed and Conventional Gasoline 83–4, 87, 88–9, 90, 96–7

Index  315 United States–Subsidies on Upland Cotton 47–8, 47n278 United States–Tax Treatment for “Foreign Sales Corporations” 26 United States–Trade Measures Affecting Nicaragua 99–100 value chains 289–90 veto avoidance 292, 294 Vienna Convention, Article 59 224n612 waivers 6 Wan, Henry 293–4

Wei, Shang-Jin 293 Working Party on Border Tax Adjustments 14–16, 28 WTO: conflict between its development agenda and advanced economies 301–3; Tariff Analysis Online Facility 8n45; Tariff Download Facility 8n44; value added to system of international treaties by PTAs 296–9 WTO Panel 9–12, 17, 23, 33, 35–8, 42, 44, 47, 49, 55, 65, 74, 96, 125n150, 134–8, 156, 161, 236