This thesis aims to provide a thorough research on the applicability of GATT Art. XX in the Accession Protocol (the AP). This is a very controversial and complex issue because it concerns Members’ regulatory autonomy to promote non-trade interests, policy of the WTO, legal nature of the AP and relationship between the AP and GATT Art. XX. Unfortunately, not much research and attention are directed to this area. Accordingly, this thesis hopes to explore this uncharted territory and provide some thoughts.
This issue has grown more and more important in practice and thus studies on the applicability issue is desperately needed. As the AP starts to contain substantive obligations, not just a confirmation of compliance with the existing WTO rules, WTO Members start to bring claims under the AP and respondents often try to justify the breach by invoking GATT Art. XX. The AP of China and the AP of Russia are great examples. Given that China and Russia are active players in international trade, it is sure that the applicability of GATT Art.
XX in the AP will become a quite recurrent issue in the WTO dispute settlement system.
In fact, after a long technical avoidance, recently the WTO judiciary finally has decided to come face to face to this matter. In two recent cases, China – Publications and Audiovisual Products and China – Raw Materials, the WTO judiciary takes a stance on this matter. However, the reasoning and ruling of these two cases stir up lots of debate and discussion in academia. As a result, this thesis intends to analyze these two cases, provide a detailed account of scholars’ opinion and present its own view.
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Research on the applicability of GATT Art. XX in the AP has strong implication for other non-GATT agreements. Applying GATT Art. XX in other non-GATT agreements encounters similar predicaments. For example, when Members provide environmental subsidies that are inconsistent with the Agreement on Subsidies and Countervailing Measures (SCM Agreement), can such violation be justified by GATT Art. XX (g) as a measure relating to the conservation of exhaustible natural resources? Also, can Members invoke GATT Art.
XX (a), measures necessary to protect public morals, to justify a health or safety restriction that are in violation of Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement) or Agreement on Technical Barriers to Trade (TBT Agreement)? This thesis can also provide some guidance to the availability of GATT Art. XX in other non-GATT agreements.
Section 2 Research Method and Structure of the Present Thesis
A. Research Method
In Part I, this thesis conducts a research on the background knowledge of the applicability issue, such as the purpose and function of GATT Art. XX, obligations under the AP and the relationship between the GATT and the AP, by studying books, periodicals and publications from WTO.
Part II focuses on the only two cases in the current WTO judiciary, i.e. Chain – Publications and Audiovisual Products and China – Raw Materials. This Part closely analyzes and comments on the reasoning and rulings of the Panel and AB Reports in these two cases. This Part thoroughly includes comments and suggestions on these Reports from scholars. Considering these comments and suggestions, the thesis presents its own comments and suggestions.
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Part III proposes an overall solution to this issue. This Part are based on the studies of the prior parts, i.e. background knowledge of GATT Art. XX, the AP and the relationship between the GATT and the AP, two WTO cases and comments from scholars. This Part tries to put forth a proper treaty interpretation by analyzing interpretative methods listed in the Vienna Convention on the Law of Treaties (VCLT) Art. 31 and 32, such as textual interpretation, contextual interpretation, object and purpose of the treaty and circumstances of the conclusion.
B. Structure of the Present Thesis
This thesis is divided into three parts. Part I, which contains Chapter 2 and Chapter 3, aims to introduce basic knowledge of the AP and GATT Art. XX. Such understanding will help illuminate the applicability of GATT Art. XX in the context of the AP. Chapter 2 will provide background knowledge of the AP, including the formation of the AP, the unique nature of the obligations of the AP and the relationship between the AP and GATT Art. XX. In Chapter 3, GATT Art. XX will be introduced from the perspective of the AP. This Chapter will argue that GATT Art. XX is of systemic importance in the WTO regime and the application scope of GATT Art. XX is not limited to the violation of the GATT.
Part II will present and comment on the only two cases in WTO jurisprudence that deal with the applicability of GATT Art. XX in the AP. There are two Chapters in Part II, Chapter 4 and 5. Section 1 of Chapter 4 will make a detailed description of the Panel and AB Reports in China – Publications and Audiovisual Products. Section 2 will include critiques of China – Publications and Audiovisual Products, along with some suggestions. Chapter 5 also contains two sections. Section 1 will make a close account of China – Raw Materials and Section 2 will cover critiques of China – Raw Materials and make some suggestions.
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The last part, Part III, will propose a solution to the applicability matter. There is one Chapter in this Part, Chapter 6. This Chapter puts forth a proposal that GATT Art. XX is applicable when the AP obligations are related to or built upon the obligations under the GATT. Chapter 6 argues that interpreters should not solely rely on the text of the AP and a contextual reading is of crucial importance. Also, the object and purpose of the treaty and the circumstances of conclusion should be taken into consideration. Furthermore, conflicts of norms will not occur.
Chapter 7 is the last chapter, which includes a brief recap on all previous Chapters.
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Part I
BACKGROUND
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Chapter 2 WTO Accession Protocol
Section 1 Introduction
In order to determine whether GATT Art. XX is an available defense against violation of the AP, it is imperative to understand the nature and characteristic of the obligations under the AP. It is the unique nature of the AP obligations makes the applicability issue more complicated and controversial. This chapter aims to provide background knowledge of the formation of the AP and the origin of the AP obligations that deviate from the regular WTO law. Also, this chapter will provide a close scrutiny of the AP obligations by categorizing them into obligations that are more stringent than the regular WTO rules, so-called WTO-plus obligations, and obligations that are less stringent than the regular WTO rules, so-called WTO-minus obligations. This thesis will focus on WTO-plus and WTO-minus obligations under the AP because their deviation from general WTO law posts a great interpretative challenge to the applicability of GATT Art. XX. Importantly, this basic knowledge provided in this chapter will greatly help elucidate the relationship between the AP and the WTO Agreement and consequently provide guidance to the applicability of GATT Art. XX in the AP.
Section 2 WTO Accession Process – the Birth of the Accession Protocol
When a country wishes to accede to the WTO, the applicant government first needs to file an application to the Director-General of the WTO, stating its desire to accede to the WTO under Art. XII of the WTO Agreement. Art. XII lays down the basic rules for accession:
Article XII
Accession
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1. Any State or separate customs territory possessing full autonomy in the conduct of its external commercial relations and of the other matters provided for in this Agreement and the Multilateral Trade Agreements may accede to this Agreement, on terms to be agreed between it and the WTO. Such accession shall apply to this Agreement and the Multilateral Trade Agreements annexed thereto.
2. Decisions on accession shall be taken by the Ministerial Conference. The Ministerial Conference shall approve the agreement on the terms of accession by a two-thirds majority of the Members of the WTO.
3. Accession to a Plurilateral Trade Agreement shall be governed by the provisions of that Agreement.1
After receiving the application, the Director-General will consider the request and establish a Working Party.2 The Working Party consists of any interested WTO Members and mandates to examine the application and finally produces a Working Party Report and a draft AP. The Working Party will firstly examine the factual information provided by the applicant country on its trade regime. A series of questions will be addressed to the applicant country, if there is any unclarity on the factual situation of the trade regime. The questions raised by the Working Party and the answers provided by the applicant country will be documented as Factual Summary of Point Raised and this document will eventually form a part of the Working Party Report.3
1 Marrakesh Agreement Establishing the World Trade Organization art. XII, Apr. 15, 1994, 1867 U.N.T.S. 154 [hereinafter the WTO Agreement].
2 WORLD TRADE ORGANIZATION &ARIF HUSSAIN, AHANDBOOK ON ACCESSION TO THE WTO 3 (2008).
3 Id.
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After scrutinizing the trade regime of the applicant country, the Working Party will start to negotiate terms of accession with the applicant country. Thus, in addition to complying with the WTO Agreement and the Multilateral Trade Agreements annexed to the WTO Agreement, applicant country will need to abide by the terms of accession, which vary from country to country. Negotiation on terms takes place in three main parts. First, the commitments on rules are negotiated multilaterally with the Working Party itself. The results will be contained in the AP itself or in the relevant paragraphs in the Working Party Report, which will subsequently be incorporated by reference in the AP. These commitments might go beyond or fall behind the regular provisions of the WTO as there is no limitation or rule on the level of commitments. Second, agricultural domestic support and export subsidies commitments are discussed plurilaterally with interests Members in the Working Party and the results will be brought to the Working Party for approval. These results will be contained in Part IV of the Goods Schedule. Third, bilateral negotiation on concessions on goods and specific commitments on services will be conducted with interested Working Party Members.
The results of the bilateral negotiation will be reviewed by the Working Party and included in the Goods and Services Schedule.4 In addition, bilateral negotiation might be held to deal with issues that are normally discussed in a multilateral context. All the above-mentioned negotiation proceeds simultaneously.5
After the negotiation on terms of accession, the Working Party will produce a Working Part Report, covering the results of negotiation.6 The Report will summarize the discussion and commitments accepted by the applicant country and end with recommendations. The Report will include a draft AP as an annex setting out terms agreed by the applicant country to
4 Id. at 3–4.
5 Id. at 39.
6 Tokio Yamaoka, Analysis of China’s Accession Commitments in the WTO: New Taxonomy of More and Less Stringent Commitments, and the Struggle for Mitigation by China, 47 J.WORLD TRADE 105, 110 (2013).
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accede to the WTO and the obligations in the AP will be an integral part of the WTO Agreement. Also, the Report will annex a draft General Council/Ministerial Conference Decision inviting the applicant country to accede to the WTO.7 Furthermore, applicant’s Schedule of Concessions and Commitments on Goods and its Schedule of Specific Commitments on Services will be annexed to the AP. The AP provides that these Schedules shall become Schedules of the GATT and GATS, respectively.8
The Working Party Report will be submitted to the General Council/Ministerial Conference for adoption.9 After approving the text of the draft AP and the Decision, the General Council/Ministerial Conference will adopt the Decision and the Working Party Report as a whole, including the Schedules on Goods and Services.10 When the Decision is adopted, WTO Members offer terms of accession to the applicant country.11 Applicant country accepts those terms by accepting the AP.12 After accepting the AP, the applicant country will become a Member of the WTO thirty days after its acceptance.13
Section 3 Obligations in the Accession Protocol – Deviation from General WTO Law
There are mainly two types of obligations under the AP. One is the market access commitments and the other is the commitments on rules. Market access commitments consist of individual commitments to reduce trade barriers on goods and services and are contained in the Schedule of Concessions and Commitments on Goods and the Schedule of Specific Commitments on Services. These two Schedules are annexed to the GATT and GATS,
7 WORLD TRADE ORGANIZATION &HUSSAIN, supra note 2, at 44.
8 Id. at 45.
9 General council meets more frequently than Ministerial Conference. General Council meets once every six to eight weeks, while Ministerial Conference convenes at least once every two year. Id. at 13.
10 Id. at 46.
11 Id. at 4.
12 Id. at 47.
13 Id.
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respectively. Thus, the Schedules are an integral part of the GATT and GATS. Since market access commitments are inherently country-specific, the notion of WTO-plus or WTO-minus does not apply to such commitments.14 Also, market access commitments on goods are included in a Schedule annexed to the GATT, and thus are made an integral part of the GATT.
Therefore, the applicability of GATT Art. XX will not be a problem.15
On the other hand, commitments on rules refer to the general obligations to comply with the WTO rules, such as the WTO Agreement, the GATT and the GATS. To avoid a fragmented set of rules on trade and the consequences of grandfather clause in GATT era, the Uruguay Round established a single undertaking understanding.16 Thus, WTO Members all follow a uniform set of rules. WTO Members had made efforts to preserve this uniformity by using a standardized form of the AP.17 The standardized AP only contains market access commitments and confirmation on compliance with existing and uniform WTO rules and does not contain obligations that is different from the WTO rule.18 Thus, in early WTO era, the commitments on rule used to be quite unified, with very few and minor exceptions.19 However, the situation has significantly changed since the accession of China. Commitments on rules start to differ greatly in the acceding Member’s AP and cover various subject matters, which causes problems on interpretation and especially the application of general exceptions
14 Julia Ya Qin, The Challenge of Interpreting “WTO-PLUS” Provisions, 44 J.WORLD TRADE 127, 128 (2010).
15 The Panel in China – Raw Materials states that “[i]f China’s export duties commitments were part of China’s GATT 1994 Schedule, the general defences of Article XX of the GATT 1994 would be available to justify
17 Julia Ya Qin, “WTO-plus” Obligations and Their Implications for the World Trade Organization Legal System, 37 J.WORLD TRADE 483, 487–88 (2003).
18 Mitali Tyagi, Flesh on a Legal Fiction: Early Practice in the WTO on Accession Protocols, 15 J.INT.ECON. LAW 391, 420 (2012).
19 Qin, “WTO-plus” Obligations and Their Implications for the World Trade Organization Legal System, supra note 17, at 487.
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under the GATT. This thesis will focus on commitments on rules and refer to this type of commitments generally as the AP obligations.
Due to the lack of specificity in Art. XII of the WTO Agreement, many commitments on rules in the AP begins to deviate from the regular WTO rules. Art. XII provides that a State or a separate customs territory may accede to the WTO Agreement on terms to be agreed between it and the WTO. There is no limitation or rule on the construction of terms of accession. Thus, there is room to agree on terms that deviate from the ordinary WTO law.20 Moreover, a standardized provision of the AP further boosts this practice.21 That standardized provision makes reference to particular paragraphs in the Working Party Report and incorporates those paragraphs into part of the AP. Consequently, the commitments that go beyond the regular WTO rules under the Working Party Report become part of the AP obligations. Sometimes, the obligations are less stringent than the regular WTO law and are referred to as WTO-minus obligations. However, more often, the obligations extend beyond those in the WTO Agreement and are called WTO-plus obligations.22
The definitions of WTO-plus and WTO-minus obligations have been slightly different from scholar to scholar. While the common understanding of WTO-plus obligations is the obligations that go beyond what regular WTO law asks for and WTO-minus obligations refer to the obligations require less than the ordinary WTO law, this broad and general definition is far from clear. Thus, scholars try to specify and categorize these obligations. While assessing China’s AP, Qin considers provisions that impose more stringent disciplines than required by the Multilateral Trade Agreement WTO-plus commitments, whereas provisions that weaken
20 Id.; Yamaoka, supra note 6, at 111.
21 Qin, “WTO-plus” Obligations and Their Implications for the World Trade Organization Legal System, supra note 17, at 488.
22 See generally Cattaneo & Braga, supra note 16, at 18. This practice is subject to severe criticisms, see WORLD TRADE ORGANIZATION &HUSSAIN, supra note 2, at 50.
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the existing WTO disciplines and reduce the right of China WTO-minus commitments.23 With respect to China’s AP, WTO-plus commitments range from disciplines on transparency, judicial review, sub-national government, to foreign investment, national treatment of foreign investors, economic reform, government procurement, and compliance review.24 On the contrary, WTO-minus commitments cover primarily trade remedies. In sum, Qin understands WTO-plus obligations as those expand WTO rules of conduct and WTO-minus obligation as those revise the existing WTO rules.25
Yamaoka provides a more detailed classification on WTO-plus and WTO-minus obligations. Yamaoka finds the terms “plus” and “minus” unclear because they can have different meanings when viewed from different perspectives.26 That is, a WTO-plus obligation for an acceding Member may be a WTO-minus obligation for incumbent Members.27 Hence, Yamaoka sets forth four categories: 1. More stringent obligations to an acceding Member compared with the WTO Agreement. This category can be further divided into a.
commitments that are covered by the WTO Agreement, such as commitments on industrial subsidies in China’s AP, and b. commitments that go beyond the scope of the WTO Agreement, such as export concessions and liberalization on trading rights in China’s AP.28 2.
Less stringent obligations to an acceding Member compared with the WTO Agreement. This category aims to accommodate the situation in a transitional economy, such as a grace period to eliminate non-tariff measures or to apply national treatment on certain products.29 3. More stringent obligations to incumbent Members compared with the WTO Agreement. This
23 Qin, “WTO-plus” Obligations and Their Implications for the World Trade Organization Legal System, supra note 17, at 490.
24 See for a detailed examination on these commitments, id. at 491–509.
25 Id. at 490.
26 Yamaoka, supra note 6, at 117–18.
27 Id. at 118.
28 Id. at 126–36.
29 Id. at 136–37.
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commitments rarely occur.30 4. Less stringent obligations to incumbent Members compared with the WTO Agreement. This is a new type of obligations. Examples are the transitional
commitments rarely occur.30 4. Less stringent obligations to incumbent Members compared with the WTO Agreement. This is a new type of obligations. Examples are the transitional