International Trade Law - World Trading System - GATT Article XX

1. CELIA SANTHOSH
FIRST SEMESTER
SLS,CUSAT

2. G GENERAL
A AGREEMENT
T TARIFFS
T TRADE

3. WHAT IS GATT . . . .
1. W.T.O – agreement - trade in goods
2. liberalizing trade in goods
3. Reducing tariffs and other barriers
4. Eliminating discrimination

5. GENERAL EXCEPTIONS OF

6. G. A. T. T
4 PARTS
XXXVIII
ARTICLES
PART 2
ARTICLE
XX – G.E

7. Article XX
General Exceptions
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:
(a) Measures necessary to protect public morals
(b) Measures necessary to protect human, animal or plant life or health
(c) Measures relating to the importations or exportations of gold or silver
(d) Measures necessary to secure compliance with laws or regulations which are not
inconsistent with the provisions of GATT
(e)Measures relating to the products of prison labour
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8. (f) Measures imposed for the protection of national treasures of
artistic, historic or archaeological value
(g) Measures relating to the conservation of exhaustible natural
resources if such measures are made effective in conjunction with
restrictions on domestic production or consumption
(h) Measures undertaken in pursuance of obligations under any
intergovernmental commodity agreement
(i) Measures 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
(j) Measures essential to the acquisition or distribution of products in
general or local short supply

9. FRAMEWORK FOR INTERPRETING GATT ARTICLE XX
The proper sequence of steps is to first assess whether a
measure can be provisionally justified as one of the
categories under paras. (a)-(j), and, then, to further
appraise the same measure under the Art. XX chapeau.
DS58 US-GASOLINE

10. (a) PROTECTION OF PUBLIC MORALS
• Measures necessary to protect public morals
• Prohibits - import of narcotics, obscene materials for religious/ethical
reasons, etc.
• Example - import and export - pork and alcoholic beverages –are
prohibited in Islamic countries – on the basis on this measure
• GATS (Trade in services) Article XIV (14) - similar provision

11. REQUIREMENTS
THE POLICY OBJECTIVE
OF THE MEASURE IS TO
“PROTECT PUBLIC
MORALS”
THE MEASURE IS
NECESSARY FOR
ACHIEVING THE
POLICY OBJECTIVE

12. CASE LAW : DS285 US – GAMBLING
RELEVANT FACTS AND ISUUES
• In this case, Antigua and Barbuda challenged the US ban on cross border
supply of gambling and betting services and alleged that US has violated its
GATS obligation.
• US invoked the defence under Article XIV (a) of the GATS (similar to Art XX
(a) of GATT - protection of public morals) and argued that such Acts were
necessary to protect public morals and public order within the meaning of
Article XIV (a).
• There contention was that such ban was necessary as remote supply of
gambling and betting services posed serious threat for organised crime,
money laundering, fraud and other criminal activities including risk to
children and particularly health risks.

13. Observation of the Panel
• The Panel observed that in order to prove that measures is provisionally
justified under the exception clause, it first needs to satisfy that:-
§ The measure is designed to protect “public morals” or “to maintain
public order” and
§ Such a measure is “necessary” to protect public moral or to maintain
public order.
• While it was justified that the measure is to protect public morals under
Article XIV (a) of GATS
• The Panel ruled in favour of Antigua and observed that US failed to
provisionally justify that the trade restrictive measures were necessary to
protect public morals or public order
• As it should have exhausted the WTO consistent alternatives before
imposing a WTO consistent measure.

14. Observations of the Appellate Body
On appeal the Appellate Body upheld the Panel’s findings that the measures fall
within the scope of “public morals” or public order under Article XIV (a) of the
GATS.
- Different Reason -
The Appellate Body found that the measures were “necessary” as Antigua had
failed to identify any other alternative measures that might be “reasonably
available”.
The Appellate Body observed that the US ban has failed to satisfy the
requirements of the chapeau of the article as it did not demonstrate that the
prohibition embodied in the measure applied to both foreign and domestic
suppliers of gambling and betting services.

15. PROCESSES FOR DETERMINING THE NECESSITY
CHINA – PUBLICATIONS AND AUDIOVISUAL PRODUCTS (DS363)

16. (b) Protection of human, animal or plant life
or health
• It includes sanitary and phytosanitary (plant health) measures
• Typically import/export restriction and domestic regulation for the
purpose of protecting the safety of food and products and some
environmental regulations are covered here
• REQUIREMENTS
THE POLICY OBJECTIVE OF
THE MEASURE IS TO
“PROTECT HUMAN,
ANIMAL OR PLANT LIFE OR
HEALTH”
THE MEASURE IS
NECESSARY FOR
ACHIEVING THE POLICY
OBJECTIVE

17. THAILAND – CIGARETTES
• Thailand sought to justify its import restrictions on cigarettes by
saying that it aimed to protect the public from harmful ingredients
(had a problem with the ingredients used) in imported cigarettes, and
to reduce consumption of cigarettes in Thailand.
OBSERVATIONS OF THE PANEL
THE POLICY OBJECTIVE OF
THE MEASURE IS TO
“PROTECT HUMAN,
ANIMAL OR PLANT LIFE OR
HEALTH”
THE MEASURE IS
NECESSARY FOR
ACHIEVING THE POLICY
OBJECTIVE

18. WHY COZ…
• A measure will be “necessary” within the meaning of Article
XX(b) only when there are no alternative measures available.
• Alternatives - Non-discriminatory labelling and Ingredient
disclosure regulations which allowed governments to control
and the public to be informed of, the content of cigarettes where
available.
• The panel observed that a complete disclosure of ingredients,
coupled with a ban on unhealthy substances, would be an
alternative, consistent with the General Agreement.

19. • Therefore the Panel found that
Ø there were various measures consistent with the General Agreement
which were reasonably available to Thailand to control the quality
and quantity of cigarettes smoked and which, taken together, could
achieve the health policy goals that the Thai government pursues by
restricting the importation of cigarettes.
Ø Thailand’s practice of permitting the sale of domestic cigarettes while
not permitting the importation of foreign cigarettes was an
inconsistency with the General Agreement and not ‘necessary’
within the meaning of Article XX(b).

20. United States –Tuna/Dolphin
• The Panel conducted the following assessment to determine whether the
prohibition of yellowfin tuna caught with techniques that are harmful to
dolphins could be justified under Article XX(b).
• United States had not demonstrated to the Panel – as required of the party
invoking an Article XX exception – that it had exhausted all options
reasonably available to it to pursue its dolphin protection objectives
through measures consistent with the General Agreement

22. (d) Measures necessary to secure compliance with
laws or regulations which are not inconsistent with
the provisions of GATT
• TWO TIER TEST
Two questions need to be answered in order to determine whether
otherwise GATT-inconsistent measures can be provisionally justified
under Article XX(d).
1. The measure must be one designed to “secure compliance”
with laws or regulations that are not themselves inconsistent
with some provision of the GATT 1994.
2. The measure must be “necessary” to secure such compliance

23. DS308 MEXICO– TAX ON SOFT DRINKS
• COMPLAINANT – US
• RESPONDENT – MEXICO
• MEASURE AND PRODUCT AT ISSUE
- Measure at issue:
Mexico's tax measures under which soft drinks using non-
cane sugar sweeteners were subject to 20 per cent taxes on
(i) their transfer and importation; and
(ii) specific services provided for the purpose of transferring soft
drinks and bookkeeping requirements.

24. Product at issue:
Non-cane sugar sweeteners such as High Fructose Corn Syrup
(“HFCS”) and beet sugar and soft drinks sweetened with such
sweeteners.

25. GATT Art. XX(d) (exceptions – necessary to secure compliance with laws):
• The Appellate Body upheld the Panel's finding that Mexico's measures,
which sought to secure compliance by the United States with its
obligations under the NAFTA, did not constitute measures “to secure
compliance with laws or regulations” within the meaning of Art. XX(d).
• The Appellate Body stated that the terms “laws or regulations” under
Art. XX(d) refer to the rules that form part of the domestic legal order
(including domestic legislative acts intended to implement international
obligations) of the WTO Member invoking Art. XX(d) and do not cover
obligations of another WTO Member.

26. • The Appellate Body also held that a measure can be said to be designed
“to secure compliance” even if there is no guarantee that the measure
will achieve its intended result with absolute certainty, and that the use
of coercion is not a necessary component of a measure designed “to
secure compliance”.
https://www.wto.org/english/tratop_e/dispu_e/cases_e/1pagesum_e/ds308sum_e.p
df

27. (g) Measures relating to the Conservation of
Exhaustible Natural Resources
• Precedents have invoked restrictions on production/consumption of oil
and minerals for the purpose of resource conservation within the country
• Three-Tier Test
Three questions need to be answered under Article XX(g) to assess
whether the disputed measure is provisionally justified under Article
XX(g) :
Ø whether the measure relates to conservation of exhaustible
natural resources;
Ø whether the measure relates to conservation of exhaustible
natural resources;
Ø whether the measure is made effective in conjunction with
restrictions on domestic production or consumption.

28. Conservation of Exhaustible Natural Resources
• Exhaustible natural resources
Ø Includes minerals, non-living natural resources (coal, oil, natural
gas, etc.) as well as environmental resources such as “clean air”
(US - Gasoline (DS2)).
Ø Later in US – SHRIMP CASE the Appellate Body adopted an
“evolutionary” interpretation of Article XX(g) and said that the
element of “conservation of exhaustible natural resources”
includes both non-living and living species.

29. US – SHRIMP (DS58)
• In US – Shrimp, the United States aimed to protect sea turtles by
banning imports of shrimp and shrimp products from non-certified
countries (i.e. countries that had not used a certain net in catching
shrimp) which were harmful to sea turtles.
• However, the Appellate Body found that the objective of the measure
fell within the scope of Article XX(g), but found that the measure
ultimately failed to fulfill the requirement of the chapeau of Article
XX.(why…coming slides)

30. Relates to
• To satisfy the second element which requires that the measure
“relates” to conservation of exhaustible natural resources, the
measure at issue must be “primarily aimed at conservation”
• In US – Shrimp, the Appellate Body added that, not only must the
measure be “primarily aimed at conservation”, its relationship with
the environmental policy must be “observably a close and a real one”

31. DS2 US – GASOLINE
• Complainants – Brazil and Venezuela
• Respondent – US
The “Gasoline Rule” under the US Clean Air Act that set
out the rules for establishing baseline figures for gasoline
(petrol) sold on the US market (different methods for
domestic and imported gasoline i.e stricter rules on the
chemical characteristics of imported gasoline than it did
for domestically refined gasoline), to prevent air pollution.

32. Panel/AB Findings
• In respect of the US defence under Art. XX(g), the Appellate Body
modified the Panel's reasoning and found that the measure was
“related to” (i.e. “primarily aimed at”) the “conservation of
exhaustible natural resources” and thus fell within the scope of Art.
XX(g).
• However, the measure was still not justified by Art. XX because the
discriminatory aspect of the measure constituted “unjustifiable
discrimination” and a “disguised restriction on international trade”
under the chapeau of Art. XX.

33. Even - handedness
• Finally, with regards to the third element of the test under Article
XX(g) which requires that the measures be made effective in
conjunction with restrictions on domestic production or
consumption.
• The Appellate Body explained in US –Gasoline that this is a
requirement of “even-handedness” in the imposition of restrictions
on imported and domestic products, in the name of conservation

34. Chapeau of Article XX
• Objective
Ø The Appellate Body in US – Gasoline ruled that the chapeau
addresses not the measure at issue, but rather the manner in
which that measure is applied.(i.e it should not be
discriminatory)
Ø The purpose and objective of chapeau is to prevent abuse of the
exceptions of Article XX that would result in defeating the
objectives of the GATT 1994.
Ø Further, in US – Shrimp, the Appellate Body explained that the
chapeau of Article XX is an emanation (product) of the general
principle of good faith in international law.

35. CHAPEAU STATES THAT TWO TYPES OF
APPLICATION OF MEASURES ARE NOT
JUSTIFIABLE
IN A MANNER WHICH WOULD
CONSTITUTE A MEANS OF
ARBITRARY OR UNJUSTIFIABLE
DISCRIMINATION BETWEEN
COUNTRIES WERE SAME
CONDITIONS PERVAIL
DISGUISED RESTRICTION ON
INTERNATIONAL TRADE

36. Arbitrary or Unjustifiable Discrimination
• The application of measures sought to be exempted from the GATT
disciplines through Article XX must not constitute “discrimination”
that is “arbitrary” and “unjustifiable”.
• In order to determine whether the application of measures at issue
constitute arbitrary or unjustifiable discrimination, three elements
must be satisfied:
ü the application of the measure must result in discrimination;
ü the discrimination must be arbitrary or unjustifiable in
character;
ü the discrimination must occur between countries where the
same conditions prevail.

37. US – Shrimp
• In 1989, the United States enacted Section 609 of Public Law
... Section 609, in its application, imposes a single, rigid and
unbending requirement that countries applying for
certification...adopt a comprehensive regulatory program that is
essentially the same as the United States’ program, without
inquiring into the conditions prevailing in the exporting countries.
Furthermore, there is little or no flexibility in how officials make the
determination for certification pursuant to these provisions. In our
(panel’s) view, this rigidity and inflexibility also constitute “arbitrary
discrimination” within the meaning of the chapeau

38. Disguised Restriction on International Trade
The Appellate Body explained the following in US – Gasoline:
• “Arbitrary discrimination”, “unjustifiable discrimination” and
“disguised restriction” on international trade may, accordingly, be
read side-by-side; they impart meaning to one another.
• It is clear to us that “disguised restriction” includes disguised
discrimination in international trade.
• It is equally clear that concealed or unannounced restriction or
discrimination in international trade does not exhaust the meaning of
“disguised restriction.”
• We consider that “disguised restriction”, whatever else it covers, may
properly be read as embracing restrictions amounting to arbitrary or
unjustifiable discrimination in international trade.

39. • The fundamental theme is to be found in the purpose and object of
avoiding abuse or illegitimate use of the exceptions to substantive
rules available in Article XX