Interpretation of Silence of Treaty – Lessons from Argentina – Footwear

Scholars argue that the Panel and AB neglect the ruling in Argentina – Footwear, which demonstrates that omission of a phrase does not necessarily mean such phrase is deliberately excluded. It was argued in Argentina – Footwear that whether the requirement of unforeseen development is expressly omitted in applying safeguard measures. This debate arises from the discrepancy between GATT Art. XIX:1(a) and the Safeguards Agreement, Art.

2.1 in particular. GATT Art. XI:1(a) governs “Emergency Action on Imports of Particular Products” and stipulates that “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 concession.”³⁷⁰ Whereas, Art. 2.1 of the Safeguard Agreement provides conditions for applying safeguard measures, which reads “a Member 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

370 GATT art. XI:1(a).

84

directly competitive products.”³⁷¹ Comparing these two articles, the Panel and AB found that the phrase “as a result of unforeseen developments and of the effect of the obligations incurred by a contracting party under this Agreement” in GATT Art. XIX:1(a) was not mentioned in the Safeguards Agreement. With respect to this omission, the Panel and AB produced opposite interpretations.

The Panel of Argentina – Footwear considered that the criterion of unforeseen developments is expressly omitted in the Safeguards Agreement. The Panel reasoned that the Safeguards Agreement reflects the latest statement of WTO Members on the requirements of applying safeguard measures.³⁷² Also, the Panel found support from the object and purpose of the Safeguards Agreement.³⁷³ The object and purpose of the Safeguards Agreement, as stated in its preamble, recognize that the Safeguards Agreement intends to clarify and reinforce the disciplines of GATT Art. XIX in particular and to re-establish multilateral control over safeguards.³⁷⁴ Therefore, the Safeguard Agreements aims to re-establish a comprehensive set of rules on the application of safeguard measures.³⁷⁵ From the preamble, the Panel concluded that the Safeguards Agreements intends to modify and refine GATT Art. XIX.³⁷⁶ Hence, the omission of the unforeseen development criterion is a deliberate choice of the negotiators.³⁷⁷

However, the AB of Argentina – Footwear did not accept the Panel’s reading of the omission. The AB stated that according to Art. II of the WTO Agreement, the GATT and the

371 Agreement on Safeguards art. 2.1, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1A, 1869 U.N.T.S. 154 [hereinafter Safeguards Agreement].

372 Panel Report, Argentina – Safeguard Measures on Imports of Footwear, ¶ 8.58, WT/DS121/R (June 25, 1999) [hereinafter Argentina – Footwear Panel Report].

373 Id. ¶¶ 8.61-8.62.

374 Safeguards Agreement recital ¶ 2.

375 Safeguards Agreement recital ¶ 4.

376 Argentina – Footwear Panel Report, ¶ 8.62-8.63.

377 Id. 8.66-8.67.

85

Safeguards Agreement both are integral part of the WTO Agreement.³⁷⁸ Also, both the GATT and Safeguards Agreement enter into force at the same time.³⁷⁹ As a consequence, the GATT Art. XIX and Safeguards Agreement should apply equally to WTO Members.³⁸⁰ The AB also found support from Art. I and XI of the Safeguards Agreement. Art. I of the Safeguards Agreement states that Safeguards Agreement establishes rules for the application of safeguard measures, which shall be understood to mean those measures provided for in Article XIX of GATT 1994. The AB interpreted this provision to confirm that GATT Art. XIX is still in full force and establishes prerequisite requirements for safeguard measures.³⁸¹ Moreover, Art. XI of the Safeguards Agreement provides that a Member shall not take or seek any emergency action on imports of particular products as set forth in Article XIX of GATT 1994 unless such action conforms to the provisions of that Article applied in accordance with this Agreement.

From this provision, the AB confirms that safeguard measures should be taken in accordance with both GATT Art. XIX and the Safeguards Agreement.³⁸² Thus, GATT Art. XIX and the Safeguard Agreement should be read together as they represent an inseparable package of disciplines on safeguard measures.³⁸³ Based on the interpretative principle of effectiveness, the AB concluded that all relevant treaty provisions should be given meaning to harmoniously.³⁸⁴ Additionally, the AB asserted that if the drafters had intended to omit the unforeseen developments requirement, they would and could have said so in the Safeguards Agreement and they did not do so.³⁸⁵ As no evidence indicates that GATT Art. XIX is entirely

378 Appellate Body Report, Argentina – Safeguard Measures on Imports of Footwear, ¶ 81, WT/DS121/AB/R (Dec. 14, 1999) [hereinafter Argentina – Footwear AB Report].

379 Id. ¶ 81.

380 Id.

381 Id. ¶ 83.

382 Id.

383 Id. ¶ 81.

384 Id.

385 Id. ¶ 88.

86

superseded by the Safeguards Agreement, GATT Art. XIX and the Safeguard Agreement should apply cumulatively. ³⁸⁶ Hence, the unforeseen developments criterion is not intentionally omitted as the Panel ruled in its report, but rather, it should still govern the application of safeguard measures.³⁸⁷

Baroncini and Gu find Argentina – Footwear supporting their argument that omission does not necessarily mean exclusion.³⁸⁸ They rely on the reasoning of the AB report of Argentina – Footwear, which states that even if the requirement of unforeseen developments is omitted in the Safeguards Agreement, this does not mean the requirement is intentionally omitted and if the negotiators had intended to omit such requirement, it would have made that clear.³⁸⁹ Baroncini and Gu believe the WTO judiciary should apply the same reasoning in China – Raw Materials when interpreting the treaty silence.³⁹⁰ Thus, the omission of GATT Art. XX in paragraph 11.3 does not mean Art. XX is expressly excluded. If China and WTO Members had intended to exclude GATT Art. XX, they would have said so.³⁹¹ Liu also finds it more likely that if Chain and negotiating Members mean to prevent the invocation of GATT Art. XX, they would have said so.³⁹² Liu believes that if China and negotiating Members agree on such important preclusion of GATT Art. XX, it is unlikely that the preclusion is left unmentioned.³⁹³ Also, Liu considered it unfeasible to insert the introductory clause of paragraph 5.1 in every paragraph of the AP.³⁹⁴ Therefore, it would be more likely and possible

386 Id. ¶ 89.

387 Id. ¶ 97.

388 Elisa Baroncini, The Applicability of GATT Article XX to China’s WTO Accession Protocol in the Appellate Body Report of the China-Raw Materials Case: Suggestions for a Different Interpretative Approach, 1 CHINA-EU LAW J. 1, 21 (2013); Gu, supra note 47, at 10.

389 Baroncini, supra note 388, at 21; Gu, supra note 47, at 10.

390 Baroncini, supra note 388, at 21; Gu, supra note 47, at 10.

391 Baroncini, supra note 388, at 21; Gu, supra note 47, at 10.

392 Liu, supra note 47, at 153.

393 Id.

394 Id.

87

that if GATT Art. XX had been deliberately excluded, such exclusion would have been expressly stated in that paragraph.³⁹⁵

Baroncini and Gu also refer to reasoning in Argentina – Footwear that states the Safeguards Agreement and GATT are an integral part of the WTO Agreement and thus they constitute cumulative obligations.³⁹⁶ Baroncini and Gu believe this reasoning is applicable in China – Raw Materials because the AP and GATT are an integral part of the WTO Agreement, too. Therefore, the AP and GATT should be read cumulatively and GATT Art. XX is an available defense.³⁹⁷ In addition, Gu stated that cumulative reading is applicable among section 11 of the AP, too. As paragraph 11.1 and 11.2 contain the phrase “in conformity with the GATT 1994,” paragraph 11.3 should be read cumulatively with its preceding paragraphs.³⁹⁸ Hence, GATT Art. XX is an available defense. Unfortunately, the AB considered China’s export duties obligations arise exclusively from its AP and not from the GATT, and therefore the AB assumed that if GATT Art. XX defense had been intended, such language would have included in paragraph 11.3 or the AP.³⁹⁹ Baroncini and Gu criticizes this reasoning of the AB report for it disconnecting the AP from other WTO agreements.⁴⁰⁰

Even though not referring to Argentina – Footwear, similarly, Liu also proposes an argument that since the AP is an integral part of the WTO Agreement, it should be read together with the related agreements, the GATT in particular because paragraph 11.3 and the GATT both concern with the same subject matter, i.e. tariffs.⁴⁰¹ The lack of the phrase “in

395 Id.

396 Baroncini, supra note 388, at 21; Gu, supra note 47, at 10.

397 Baroncini, supra note 388, at 21; Gu, supra note 47, at 10.

398 Gu, supra note 47, at 11.

399 China – Raw Materials AB Report, ¶ 293.

400 Baroncini, supra note 388, at 21; Gu, supra note 47, at 9.

401 Liu, supra note 47, at 155.

88

conformity with the WTO Agreement” in paragraph 11.3 does not mean that China does not need to comply with other WTO obligations or the GATT.⁴⁰² Liu further finds support in dispute settlement proceedings. Even though the AP does not mention its judiciability in the dispute settlement proceedings, all WTO Members agree that Members can initiate a dispute on the basis of violation in the AP. This is because the AP constitutes an integral part of the WTO Agreement and becomes part of the covered agreements.⁴⁰³ Therefore, Liu suggests that the AP and the GATT should be read together and thus GATT Art. XX is an applicable defense.

This thesis observed some difficulties in applying the AB report of Argentina – Footwear to China – Raw Materials. In fact, it is not that straightforward as suggested by the scholars. The AB of Argentina – Footwear concluded that the Safeguards Agreement and the GATT Art. XIX create cumulative disciplines on safeguard measures for mainly three reasons:

1. the GATT and Safeguards Agreement are integral parts of the WTO Agreement pursuant to Art. II of the WTO Agreement;⁴⁰⁴ 2. GATT Art. XIX and the Safeguards Agreement both relate to the same thing, i.e. the application of safeguard measures;⁴⁰⁵ and 3. Art. I and XI of the Safeguards Agreement provides that safeguard measures should be applied in conformity with GATT Art. XIX and the Safeguards Agreement.⁴⁰⁶ It should also be noted that the AB of Argentina – Footwear narrowly tailored its reasoning. The AB carefully stated that “GATT Art. XIX” should be read in conjunction with the Safeguards Agreement and apply cumulatively, instead of referring to “the GATT.”⁴⁰⁷

402 Id.

403 Id.

404 Argentina – Footwear AB Report, ¶ 81.

405 Id.

406 Id. ¶ 83.

407 Id. ¶¶ 81-83.

89

With the above observations, one should apply the reasoning of Argentina – Footwear with caution. The first reason mentioned above appears itself in China – Raw Materials as paragraph 1.2 of the AP states that China’s AP is an integral part of the WTO Agreement. The second reason is not directly demonstrated in China – Raw Materials because paragraph 11.3 and GATT Art. XX do not govern the same subject matter and thus it is hard to argue that they create an inseparable package of obligations. However, like Liu proposes, paragraph 11.3 and the GATT both concerns with tariffs.⁴⁰⁸ Or, as proposed by Qin, China’s export duties obligations are intrinsically related to export restrictions obligations under the GATT.⁴⁰⁹ Therefore, this thesis proposes that when the AP obligations are related to or built upon the GATT obligations, the AP should be read together with the relevant obligations in the GATT, including its exceptions. This thesis argues that being an integral part of the WTO Agreement is not enough to confirm the applicability of GATT Art. XX because it would open the door too wide that all non-GATT covered agreements can resort to GATT Art. XX, which would seriously contradict with the text of GATT Art. XX and the intent of the drafters. Hence, this thesis proposes that GATT Art. XX is applicable when the infringed AP obligations are intrinsically related to or built upon the GATT obligation.

One might argue that this proposal also contradicts with the text of GATT Art. XX, which clearly states that GATT Art. XX can only justify violation under the GATT. Yet, this is not absolute and the AB report of China – Publications and Audiovisual Products is a case in point.⁴¹⁰ Instead of rigid textual linkage requirement set forth by China – Raw Materials, this thesis suggests a requirement of contextual linkage. Compared with some scholars’ arguments, which put forth that GATT Art. XX is an available defense because the AP is an integral part

408 Liu, supra note 47, at 155.

409 Qin’s proposal will be explained in detail later.

410 A more detailed discussion on this point is provided in Section 3 of Chapter 3.

90

of the WTO Agreement, meaning that any non-GATT and irrelevant to GATT violation can be justified by GATT exceptions, the viewpoint proposed by this thesis will greatly mitigate the conflict derived from the text of GATT Art. XX, i.e. the reference to “this Agreement”

because it still respects the text of GATT Art. XX and the drafters’ intent by allowing recourse to GATT Art. XX when the breached AP obligations are contextually connected to the GATT.