RTA Regulatory Provisions: The Boundaries of GATT Article XXIV

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RTA Regulatory ProvisionsThe Boundaries of GATT
Article XXIV

• Dr. James H. Mathis
• Department of International Law
• Amsterdam Law School
• University of Amsterdam, NL.

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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?

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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.

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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 XXIV8 and XXIV5
• Part 2. Formation prevented if the party were not
  allowed to introduce the inconsistent measure.

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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)

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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)

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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)

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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, QRs not eliminated (Benelux)

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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

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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

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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

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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?

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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)

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ORCs as in paragraph 5

• AB endorsed panels 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.

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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

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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?

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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

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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