14-11-03WTO Regional Seminar1 RTA Regulatory Provisions: The Boundaries of GATT Article XXIV Dr....

14-11-03 WTO Regional Seminar 1

RTA Regulatory Provisions:The Boundaries of GATT Article XXIV

Dr. James H. Mathis

Department of International Law

Amsterdam Law School

University of Amsterdam, NL.


Two Questions:

• Must an RTA member eliminate regulatory barriers to trade to form an Article XXIV compatible free trade area or customs union?

• Can an RTA member make a domestic regulatory requirement more restrictive as to other WTO Members?


Governing Legal provisions:

• XXIV, para. 8 - “definitional” and “internal” - FTA or CU understood to mean a formation whereby “other restrictive regulations of commerce (ORRCs) are eliminated…”

• XXIV, para. 5 - “operational” and “external” - exception provided that “other regulations of commerce (ORCs) not on whole more restrictive than general incidence prior to the formation.


Context of a legal test: (AB in Turkey-Textiles):

• Article XXIV is a conditional exception

– Part 1. Measure introduced on formation meeting the requirements of Article XXIV:8 and XXIV:5

– Part 2. Formation prevented if the party were not allowed to introduce the inconsistent measure.


ORRCs in paragraph 8 context:

• Refers backward to “the elimination of duties and other RRCs”, – (duties plus ‘something else’)

• forward to Articles listing, “except where necessary, Arts. XI-XV and XX…”– (suggesting examples of ORRCs)


Narrow view - ORRCs, limited to Article XI ‘Measures’

• GATT regime - internal and external

– N.T. III B QRs (XI)B Duties (II)

– TBT B– SPS B– MFN (I) B MFN (I)


ORRCs - narrow view (pro)

• Places para. 8 within GATT context of “border” measures. Art. XI cases apply

• Avoids inventory of domestic regulations as to plan and schedule

• Lower barrier to formation, but no XXIV defence for regulatory measures (Art. I)

• Avoids XXIV preemption of TBT recognition provisions. (compare GATS VII)


Problems with a narrow view:

• Why should ORRCs require elimination of what is already prohibited among all GATT parties by Article XI?

• Terminology. Art. XI does not use the term “regulation” nor “ORRCs”. – The term “regulation” is used by Article III for

internal treatment.

• CU practice, QR’s not eliminated (Benelux)


Broader view - ORRCs include “restrictive” domestic regulations

• “restricting commerce” is an “affecting” or “hindering trade” standard

– Compare TBT Art. 2.2 “unnecessary obstacles to international trade”

– ORRC standard is even higher if “restrictive” is more like “affecting” then “unnecessary”


Broader view: discussion

• What historical / state practice for elimination of regulatory ORRCs? – EC practice until Dassonville (1974)

• Viner - custom union is tariff removal• Havana - no regulatory mandates,

positive or negative • GATS V context. Non-discrimination

standard


ORRCs - alternative approaches

• Trachtman - “unnecessary” and “discriminatory” to cover by ORRCs

• Against whom? Paragraph 8 is internal, not external– Suggests ORRCs to capture less

favourable treatment to an RTA member…


“Protectionism” or commercial policy (Mathis approach)

• Articles listing: VI and XIX are not listed, IF these are ORRCs, then eliminate:

• 1. duties (legal but protectionist)• 2. Border measures of a protectionist

nature (not BOP, food shortages, Art. XX, etc)

• 3. Discriminatory regulations, dom/rta• 4. Rules of Origin?


GATT Regime:

• GATT regime - internal and external

– N.T. III B QRs (XI)B Duties (II)

– TBT B A.D. (VI) – SPS B Safeguards (XIX)– MFN (I) B MFN (I)


ORCs as in paragraph 5

• AB endorsed panel’s broad scope for this ORC term as,

• any trade or regulatory measure affecting the trade of other WTO Members. – regulations as covered by WTO (SPS,

valuation, A.D, technical barriers), and, – other trade related regulation, environment,

export credit schemes, and evolving.


ORCs equal to ORRCs?Consider the context

• Paragraph 5 proviso, provided no raising of new trade barriers for an RTA– Any trade barrier should be considered

• Paragraph 8 context, threshold level of liberalisation to reach– separates CUs and FTAs from all other

preferential schemes


Q: Single more restrictive ORC?

• Single ORC is more restrictive, but assessment of ORCs overall (on average) is not more restrictive? – Turkey test part 1 is met, measure upon

formation complying with paras. 8 and 5– Turkey test part 2 ? How could a formation

be prevented by non-introduction of a single measure?


For CUs: para. 5 and para. 8 ORCs

• Applying para 5, then anything “affecting” trade of third parties would require harmonisation

• Note. ECJ granted external competence for technical barriers in Opinion 1/94,

• Same term, different context


Conclusion

• XXIV and the ‘intricate’ draftmanship: Havana modifications with 29 subcommittee meetings

• XXIV purpose - not pure economic objective. “partial preferential systems”

• Distinct paragraph 8 and paragraph 5 analysis, in SEQUENCE

14-11-03WTO Regional Seminar1 RTA Regulatory Provisions: The Boundaries of GATT Article XXIV Dr....

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